Q3 2019 Earnings Call
Good morning.
Welcome to the Nextera energy.
Partners Conference call.
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Now, let's turn the conference over to Mike Ross <unk> Director of Investor Relations. Please go ahead Sir.
Thank you Rocco good morning, everyone and thank you for join in our third quarter 2019, combined earnings conference call for Nextera energy and Nextera Energy partners.
With me this morning, or Jim Robo, Chairman and Chief Executive Officer of Nextera energy.
<unk> Executive Vice President and Chief Financial Officer Nextera energy.
John catch on President and Chief Executive Officer of Nextera Energy resources.
Mark accident Executive Vice President of Nextera energy all of them are also officers of Nextera energy partners as well as ARX, Elachi, President and Chief Executive Officer, Florida Power <unk> Light company.
Becker will provide an overview of our results and our executive team will then be available to answer your questions.
Well, we making forward looking statements. During this call based on current expectations and assumptions, which are subject to risks and uncertainties.
Actual results could differ materially from our forward looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release.
Comments made during this conference call in the risk factor section of the accompanying presentation.
Our latest reports and filings with the Securities and Exchange Commission each of which can be found on our web sites Nextera energy Dot com and Nextera energy partners Dot com.
We're not undertake any duty to update any forward looking statements.
Today's presentation also includes references to non-GAAP financial measures you should refer to the information contained in the slides accompanying today's presentation for definition, all information and reconciliations of historical non-GAAP measures sort of closest GAAP financial measure with that I will turn the call over to Rebecca.
Thank you bat and good morning, everyone Nextera energy delivered strong third quarter results and building upon the solid progress made in first half of the year remained well positioned to achieve our overall objective for 2019.
Nextera Energy's third quarter adjusted earnings per share increased by 22 cents or approximately 10% against the prior year quarter, reflecting strong execution at Florida power <unk> light Gulf power and energy resources.
Year to date, we have grown adjusted earnings per share by nearly 12% compared to the prior year comparable period.
We continue to execute well on a major initiatives, including continuing to capitalize on one of the best renewable development periods in our history.
I, Florida power <unk> light earnings per share increased three cents year over year, Oliver major capital projects, including one of the largest filled or extensions ever in the United States remains on track as we continue to advance our long term focus on delivering outstanding customer value.
Appeals typical residential bill renamed nearly 30% below the national average and the lowest among all the Florida Investor owned utilities, well FPL maintains best in class service reliability, and then emissions profile that is among the cleanest in the nation.
At Gulf Power, we continued to execute on the cost reduction initiatives and smart capital investments that we outlined at our June Investor Conference.
We remain focused on improving the Gulf power customer value proposition by providing lower costs higher reliability and outstanding customer service and clean energy solutions.
Along these lines the Blue Indigo Solar project, which is Gulf powers to first solar development project is expected to go in service in early 2020 and generate significant customer savings over its lifetime.
At energy resources, adjusted <unk> increased by roughly 19% year over year, that's contributions from new investments continue to drive growth.
Continuing the success of recent quarters since the last earnings call. Our renewables backlog increased by approximately 1375 megawatts, including 350 megawatts a battery storage projects as we further advance the next phase of renewables deployment that pairs low cost wind and solar energy with a low cost battery store.
Solution.
Overall with three quarters on three strong quarters complete in 2019, we're pleased with the progress we're making at Nextera energy and are well positioned to achieve the full year financial expectations that we have previously discussed of course subject to our usual caveats.
Now, let's look at the detailed results beginning with FPL.
For the third quarter of 2019, FPL reported net income of $683 million or dollar 40 per share an increase of 29 million or three cents per share respectively year over year.
Regulatory capital employed increased by approximately 8% over the same quarter last year and what's the principal driver of FPL is net income growth.
Appeals capital expenditures were approximately 1.4 billion in the third quarter.
We expect our full year capital investments to total between 5.7 billion and $6.1 billion.
I reported our lead for regulatory purposes will be approximately 11.6% for the 12 months ending September 2019, which is at the upper end up the allowed band of 9.6% to 11.6% under our current made agreement.
During the quarter, we restored 308 million up reserve amortization to achieve our target regulatory RMB, leaving FPL with the balance of $916 million.
All of our neighbor major capital projects at FPL are progressing well the 10 sold or sites totaling nearly 750 megawatts of combined capacity that are currently being built across I feel service territory are all on track and on budget to begin providing cost effective energy the FPL customers early in 2020.
Earlier this month FPL and a number of intervenors reached a settlement agreement for FPL has proposed solar together program, which now incorporates a 10% allocation at the residential capacity to low income customers.
We expect the Florida Public service Commission to make a decision about the proposed program by the end of the first quarter of next year.
Oh, the solar projects. We are currently constructing a part of the appeals groundbreaking 30 by 30 plan to install more than 30 million solar panels by 2030.
I will result in roughly 10000 megawatts of incremental filter capacity on FPL system in Florida.
The solar deployment will also help SPL achieved a 2030 C O two admission rate reduction target of 67% versus the 2005 U.S. electric industry average.
Beyond solar construction I'm highly efficient roughly 1200 megawatt Dania Beach clean Energy Center continues to advance towards its projected commercial operations date in 2022.
Well, Florida was fortunate to avoid significant harman damage from Hurricane Dorian residents of the promise were severely impacted by the effects of this dangerous and definitely storm our deepest sympathies are with those who have been impacted by the storms widespread destruction.
The storm approach the east coast at the United States Hurricane Dorian was forecast to make landfall within FPL service territory as a major hurricane which could have resulted in countless floridians and an estimated 4 million FPL customers suffering extensive damage.
In response to this threat and to ensure that we could quickly restore power to our customers should this devastating storm hit us FPL followed its well developed plan to respond to such an event, including pre staging approximately 17000 personnel.
Well I feel service territory was only hit by the strong outer bands at the storm hardening and automation investments that FPL is made since 2006 to build a stronger smarter and more storm resilient energy grid helped FPL restore service to the approximately 160000 customers who were impacted by Hurricane Dorian.
And to avoid additional outages.
Although FPL has now completed the final accounting.
Our preliminary estimate storm restoration costs, including pre staging of personnel is approximately $274 million.
Under the terms of FPL. Its current settlement agreement beginning 60 days following the filing other cost recovery petition with the Florida Public Service Commission and subject to review and prudent stir termination up the final storm costs FPL has authorized to recover storm restoration costs on an interim basis from customers through a surcharge.
Earlier this month, the Florida Public Service Commission issued proposed rules in response to the new law that allows for clause recovery, a storm hardening investments, including Undergrounding.
This new law will allow FPL to pursue these investments in a programmatic basis over the course of decades further strengthening FPL storm resilient energy grid against future threats, such as Hurricane Dorian We expect the final rules will be adopted next year.
Let me now turned to Gulf power, which is reporting third quarter 2019, GAAP and adjusted earnings of $76 million, an $80 million, respectively, or 16 cents per share.
As a reminder, during the first 12 months following the closing of the Gulf Power acquisition, we intend to exclude onetime acquisition integration costs from adjusted earnings.
Additionally, interest spent expense to finance the acquisition is reflected in corporate another and this expense offset a significant portion of the third quarter Gulf power adjusted earnings contribution.
Gulf powers reported or are we for regulatory purposes will be approximately 9.8% for the 12 months ending September 2019.
For the full year 2019, we continue to target a regulatory are we in the upper half of the allowed band of 9.25% to 11.25%.
During the quarter golf towers capital expenditures roughly $225 million, we continue to expect Gulf powers full year capital investments to total between 700 and $800 million and the execution of its overall capital program is it that advancing well.
All of these major capital investments, including the North, Florida, Brazil, and see connection and plant Crist coal to natural gas conversion continue to remain on track.
The Florida economy remains strong floridas seasonally adjusted unemployment rate was 3.2% in September below the national average and the lowest level in the last decade.
As an indicator of new construction building permits remain at healthy levels.
Most recent reading of the case Shiller index for South, Florida shows home prices up 3.9% from the prior year.
Overall, Florida's economy continues to grow with the latest readings Florida's consumer confidence remaining strong.
During the quarter Appeals average number of customers increased by approximately 100000 from the comparable prior year quarter, driven by continued solid underlying growth and the addition of your beaches roughly 35000 customers late last year.
I feel third quarter retail sales increased 2.1% year over year.
Partially offsetting customer growth was a decline in overall usage per customer of 1.6% as favorable weather was more than offset by an estimated 3.9% decrease and weather normalized usage per customer.
Including a small declining usage associated with hurricane Dorian.
We previously noted usage per customer tends to exhibit significant volatility from quarter to quarter, which can be more pronounced during periods of particularly warm weather conditions similar to those experienced during the third quarter.
For Gulf power. The average number of customers was roughly flat to the comparable prior year quarter, we're beginning to see recovery accelerate in the areas of the surface territory that were most impacted by hurricane Michael last year.
Gulf Power third quarter retail sales increased 2.3% year over year, primarily due to favorable weather.
Let me now turned to energy resources, which reported third quarter 2019, GAAP earnings of $367 million or 75 cents per share and adjusted earnings of $424 million or 87 cents per share.
This is an increase in adjusted earnings per share, a 14 cents or approximately 19% from last year's comparable quarter results.
New investments contributed 22 cents per share primarily reflecting continued growth in our contracted renewables program.
The contracted the contribution from existing generation assets declined one cent per share relative to the prior year comparable quarter as the improvement in wind resource was more than offset by a number of headwinds, including a onetime unfavorable state tax item.
After a week period that started the year wind resource improved during the third quarter and was 104% that's a long term average versus 94% in the third quarter of 2018.
Contributions from our gas infrastructure business, including existing pipelines increased by three cents year over year.
All other impacts reduced results by 10% by 10 cents per share driven primarily by the write off of costs related to a development project. Additional details are shown on the accompanying slide.
[laughter].
The energy resources development team continues to capitalize on what we believe is the best renewables development environment in our history with our backlog increasing by approximately 1375 megawatts since our last earnings call.
Since the last call. We've added 747 megawatts of solar and 340 megawatts a battery storage.
All of which will be paired with the new solar projects.
Year to date more than 50% of the solar megawatts that we have added to the backlog include a battery storage component as customers are increasingly interested in a mere from low cost renewable product that is specifically designed to meet their generation needs.
As a result of increased MISO transmission upgrade and Eric interconnection cost estimates that impacted approximately 1400 megawatts of industry projects, including some up around.
We have removed 339 megawatts from our when backlog.
Offsetting these reductions are 624 megawatts of new sign contracts since the second quarter call, resulting in a net increase of 285 megawatts to our when backlog.
Additionally, as a result of other customers being impacted by these same interconnection cost issues, we have seen new contracting opportunities develop that we hope to capitalize on over the coming quarters.
Through the first three quarters of 2019, we have added nearly 4200 megawatts to our renewables backlog, which now totals more than 12300 megawatts.
To put our new content, our current backlog into context. It is larger than energy resources operating renewables portfolio at the end of 2014, which took us more than 15 years to develop.
Following the terrific year to date origination success, we have now largely pivoted our development efforts to 2021 and beyond.
With nearly 5500 megawatts of projects already in our post to 2020 backlog, including more than 600 megawatts of wind for 2021 delivery.
At this early stage, we've made good progress towards our long term development expectations.
We expect that overall when demand in 2021 will be roughly the same levels as in 2019 and that solar demand will continue to increase through the early part of the next decade.
We continue to believe that by leveraging energy resources competitive advantages, we are well positioned to capture a meaningful share these markets going forward.
Beyond renewables, we continue to advance construction activities for mountain Valley pipeline and expect to be approximately 90% complete by the end of this year.
We were pleased that the Supreme Court agreed to hear oral arguments on the Atlantic Coast pipelines case related to its Appalachian Trail crossing authorization and are hopeful that the fourth circuit courts original decision will be overturned.
At this time, we do not expect the material impact on the construction schedule as a result of the FERC stop for can stop or quarter related Andy Pease biological opinion and incidental take statement.
Prior to the order much of mbps construction activities had scaled back as a result of a voluntary suspension.
And the upcoming winter season.
We've been working with our project partners to resolve all of the outstanding permit issues for MVP and we continue to make good progress with these efforts we continue to target a full in service date for the pipeline during 2020 and now expect an overall project cost estimate of approximately $5.4 billion.
Consistent with our focus on leveraging energy resources competitive advantages to identify and develop additional long term contracted projects today, we're pleased to announce that we assigned a proceeding agreement for the lumen pipeline.
The approximately 50 mile 16 inch intrastate pipeline would supply natural gas Andre 40 year from capacity agreement to power South energy cooperatives, roughly 700 megawatt low energy lumen Energy center in Southern Alabama.
We believe the project, which will support a coal to gas modernization will help provide meaningful benefits to both power south members through reduced energy costs entity environment through reduced emissions.
The project would you be wholly owned by energy resources is advancing through the development phase and as a targeted in service date in mid 2022 subject to the receipt of regulatory approvals.
Total capital investment for the pipeline is expected to be between 120 and $130 million, we look forward to providing additional details as the project advances.
Turning now to the consolidated results friend Nextera energy for the third quarter of 2019, GAAP net income attributable to an extra energy was $879 million or $1.81 per share.
Nextera Energy's 2019 third quarter adjusted earnings and adjusted EPS were 1.163 billion and $2.39 per share respectively.
Adjusted earnings from the corporate another segment declined 11 cents year over year, primarily as a result at the higher interest expense related to the Gulf power acquisition financing.
Nextera energy has also generated double digit percentage increase in year to date operating cash flow versus the comparable 2018 period.
During the quarter Nextera energy energy issued $1.5 billion of equity units as we continue to focus on opportunistic and prudent capital management to maintain the sprint the strength of our balance sheet.
The equity units will convert to common equity in 2022 and position us well for continued long term growth or providing additional cushion against our credit metrics.
The financial expectations, which we extended through 2022 earlier this year remain unchanged for 2019, we would be disappointed if we do not realize adjusted EPS growth at the top end of our 6% to 8% growth rate off of the 2018 base of $7.70 per share, which if achieved would result in a.
Adjusted EPS of $8 in 32 cents.
Well, we're pleased with our year to date results, which have benefited if an execution at Gulf power tracking ahead of our plan. We currently expect headwinds in the fourth quarter adjusted EPS due to a number of factors.
As we discussed on our second quarter earnings call. We plan to pursue pursue a number of refinancing activities do take advantage of the low interest rate environment.
And expect to incur financing breakage impacts associated with several wind repowering as well as energy resources share of the costs associated with the acquisition of the outstanding Genesis debt.
These initiatives could generate negative adjusted EPS impacts of as much as 10 to 15 cents in the fourth quarter before translating to favorable net income contributions in future years, and an overall improvement in net present value for our shareholders.
Looking further ahead, we continue to expect Nextera Energy's adjusted EPS compound annual growth rate to be in a range of 68% through 2021 off of our 2018 adjusted EPS $7.70.
Plus the accretion of 15, <unk> and 20 cents in 2020, and 2021, respectively from the Florida acquisitions.
For 2022, we expect to grow adjusted EPS in the range of 6% to 8% off of the 2021 adjusted D. P. S translating to a range of $10 to $10.75 per share.
Based upon the clear visibility into meaningful growth prospects across all of our businesses. We will be disappointed if we're not able to deliver growth at or near the top end of our adjusted EPS range in 2022.
From 2018 to 2022, we expect that operating cash flow will grow roughly in line with our adjusted EPS compound annual growth rate range.
We also continue to expect to grow our dividends per share, 12% to 14% per year through at least 2020 off of a 2017 base of dividends per share a $3 a 93 cents.
As always our expectations are subject to the usual caveats, including but not limited to normal weather and operating conditions.
In summary, Nextera energy continues to execute on its strong start to 2019 and remains well positioned to meet its 2019 expectations and long term growth prospects.
At SPL, we remain focused on operational cost effectiveness.
Additivity, and making smart long term investments to further improve the quality reliability and efficiency of everything we do.
Gulf Power, we continue to execute the Nextera energy playbook to create long term customer and shareholder value.
At energy resources, we maintained significant competitive advantages to capitalize on the continued strong market for renewable development.
We remain intensely focused on execution and believe Nextera energy remains well positioned to drive shareholder value over the coming years.
Let me now turn to Nextera energy partners, which delivered a strong third quarter results with year over year growth in adjusted EBITDA and cash available for distribution of approximately 55% and 81% respectively.
Excluding all contributions from the desert sunlight projects cash available for distribution increased approximately 54% from versus the prior year comparable quarter.
Yesterday, the Nextera Energy partners Board declared a quarterly distribution of 51.75 cents per common unit or $2.07 per common unit on an annualized basis, continuing our track record of growing distributions at the top end of our 12% to 15% per year growth range.
At the end of the quarter Nextera Energy partners announced an agreement to acquire Mead pipeline company, which owns in approximately 40% interest in central Penn line and intrastate natural gas pipeline in Pennsylvania that is backed by a minimum 14 year contract with a high credit quality customer and no volume metric risk.
The fixed payment structure of meat lease further diversifies, the nextera energy partners portfolio, well, helping mitigate any potential wind and solar resource variability.
Well in the attractive acquisition financing the transaction is expected to yield a double digit return to Nextera energy partners LP unit holders and to generate a kathy yield of roughly 14%.
Additionally, executing on third party acquisition helps extend Nextera energy partners already best in class runway for LP distribution growth.
We believe this acquisition is consistent with Nextera energy partners focus on investing in long term contracted clean energy assets with strong credit worthy counterparties and that natural gas will play an important role in the country and the country's clean energy future.
That said, where there were a very few pipelines that fit Nextera energy partners investment criteria are being long term contracted with creditworthy counterparties.
Following to meet acquisition Nextera energy partners expects the natural gas pipelines will contribute approximately 30% of year end 2019 run rate cash available for distribution.
With roughly 12000 megawatts of operating long term contracted wind and solar projects and the ongoing originations success at energy resources combined with the continued strength of the best renewables development environment in our history, we expect contribution percentage from pipelines to decline overtime.
We continue to believe that Nextera energy partners remains uniquely well positioned to capitalize on the ongoing disruption in the nations power generation fleet over the coming years.
The meat investment is expected to be financed with a combination of partially amortizing project financed at any new convertible equity portfolio financing as well as existing Nextera energy partners that capacity.
Beyond the need financing during the quarter Nextera energy partners took additional steps to further enhance its financing flexibility, which I will discuss in more detail later in the call.
As a result of the expected acquisition that financing initiatives last month Nextera energy partners introduced new year end 2019 run rate cash available for distribution expectations, assuming full contributions from P. Ginnie related projects, which at the midpoint represent approximately 60% growth from the comparable year end to 20.
18 run rate mid point.
With this strong year over year growth in cash available for distribution Nextera energy partners expects to be able to don't to achieve its long term distribution growth expectations without the need for additional asset acquisitions until 2021.
Overall, we're pleased with the year to date execution and Nextera energy partners and believe we are well positioned to continuing to continue delivering LP unit value going forward.
Now, let's look at the detailed results.
Third quarter, adjusted EBITDA was $315 million and cash available for distribution, including full contributions from our desert sunlight projects was $147 million up approximately 55% and 81% from the prior year comparable quarter, respectively, primarily due to portfolio growth.
New projects added $104 million of adjusted EBITDA and $59 million as cash available for distribution.
Existing projects also contributed favorably to significant year over year growth in adjusted EBITDA and cash available for distribution.
As wind resource was favorable at 107% of the long term average versus 94% in the third quarter of 2018.
Cash available for distribution from existing projects also benefited from a reduction in debt service payments as a result of the purchase of the outstanding Genesis holding company notes and the recapitalization of a portfolio of Nextera energy partners renewable assets earlier this year.
As a reminder, these results include the impact of IDR fees, which we treat as an operating expense.
For 2019, we previously reported cash available for distribution, including full contributions from our PGT related projects as we were working on resolving the ongoing financing issues related to the bankruptcy.
After finalizing our plans to release, the restricted cash or Genesis project, which I'll discuss in more detail in a moment. We believe it is unlikely that we will pursue remedies that would result in the release the trapped cash at the desert sunlight to 50, and 300 projects prior to P. Ginnies exit from bankruptcy.
Going forward, we will report cash available for distribution, excluding any contribution from desert sunlight projects until the events of default have been resolved.
For the third quarter cash available for distribution, excluding all contributions from desert sunlight projects with $125 million, an increase of approximately 54% year over year.
Year to date, the desert sunlight projects have generated $45 million of cash available for distribution.
Starting in early 2020 restricted cash will begin to be swept to pay down the outstanding principal balance and less this provision has waived by the projects lenders.
Let me now turn to Nextera energy partners recent financing initiatives.
Amit acquisition is expected to be financed with a total of $920 million of partially amortizing project financed at a roughly 170 million dollar convertible equity portfolio financing boasts the both of which we have from commitments for as well as the existing Nextera energy partners that capacity.
By leveraging the small the strong demand for high quality energy infrastructure assets in both the public and private capital markets Nextera Energy partners was able to secure attractive financing for the acquisition that enhances returns for LP unitholders by limiting downside risk.
During September Nextera energy partners launched a tender offer to purchase 100% of the outstanding operating company notes at our Genesis project.
Our current expectation is that by the end of this year, we will have acquired all the outstanding Genesis debt, resulting in an increase in run rate cash available for distribution from the project to approximately 100 million through the removal of project level debt service.
Following the expected purchase at the remaining Genesys debt Nextera energy partners expects to receive the approximately $59 million of distributions that have been restricted that the project at as of the ended the third quarter plus approximately $50 million that would have been <unk> restricted by year end.
The fund the purchase of the Genesis debt in September extra energy partners issued $500 million, a seven year senior unsecured notes at an attractive yield of 3.875%.
The transaction priced at historic lows, including the lowest spread for a non investment grade issuer in the power space for that tenor and the second lowest coupon across all industries for that tenor, reflecting nextera energy partners strong credit profile.
Let me now turn to Nextera energy partners expectations.
As we announced last month fund the following the completion at the meat acquisition, our expectations for yearend 2019 run rate cash available for distribution, including full contributions from the P.G. any related projects increased to a range of $560 million to $640 million, reflecting calendar year 2000.
20 expectations for the forecast and portfolio at the end of 2019.
We remain confident that our existing contracts with P. Ginny well, we ultimately upheld in P. genies bankruptcy process and note that both P. ginnies and the creditors plans of reorganization propose that all renewable <unk> are assumed by PGT post bankruptcy.
Excluding all contributions from the desert sunlight projects Nextera energy partners expects a year end 2019 run rate for cash available for distribution in the range of 505 million the $585 million.
Your end 2019 or run rate adjusted EBITDA expectations, which assume full contributions from P. Genie related projects as revenue is expected to continue to be recognized increased to 1.2 to 5 billion to $1.4 billion. Following the completion of the need acquisition.
We also introduced at December 30, Onest 2020 run rate expectations for adjusted EBITDA and cash available for distribution that are the same as the year end 2019 run rate expectations.
The midpoint of the new cash available for distribution range represents a two year a compound annual growth rate range of more than 25% from the comparable.
Your end 2018, Runrate midpoint, assuming full contributions from the desert sunlight projects supporting our long term distribution growth expectations without the need for additional asset acquisitions until 2021.
As a reminder, all of our expectations are subject to our normal caveats and include the impact of anticipated IDR fees as we treat this as an operating expense.
From a base of Nextera energy partners fourth quarter 2018 distribution per common unit at an annualized rate of $1.86 per common unit, we continue to see 12% to 15% per year gross and LP distributions as being a reasonable range of expectations through at least 2024 subject to our caveats.
For 2020, we expect to achieve these distribution growth objectives, while maintaining a payout ratio in the mid 70% range.
We're pleased with the progress Nextera energy partners has made in 2019 against its strategic and growth initiatives.
As we have previously highlighted Nextera energy partners has the flexibility to grow in three ways.
Organically acquiring assets from third parties or acquiring assets from energy resources portfolio.
By executing on the meat acquisition Nextera Energy partners has further enhanced its already best in class long term visibility into growth in through reduced near term acquisition needs from energy resources.
Without a need to sell common equity until 2021 at the earliest other than modest at the market issuances together with an attractive underlying asset portfolio favorable tax position and enhanced governance rights Nextera energy partners is well positioned to deliver long term L.P. unitholder value.
In summary, we continue to believe that both Nextera energy and Nextera energy partners have some of the best opportunity sets and execution track records in the industry and we remain as enthusiastic as ever about our future prospects.
That concludes our prepared remarks, and with that we will open up the line for any questions.
Thank you.
I'll begin the question answer session.
<unk> Star then one under telephone keypad.
<unk>.
Yes.
Synergies.
If it anytime we of course in husband <unk>.
Please press Star then too.
Today's first question comes from Gordon of Evercore.
Please go ahead.
Hey, good morning. Thank.
Good morning.
Congrats on a great quarters. So couple of questions. You know you did put out a press release recently talking about the sub potential for $25 billion to $35 billion of.
Necessary spending to get the.
The full underground rounding program completed <unk> can we talk can you talk about when that might go from.
You know sort of theoretical to actually being laid out at executed and over what timeframe you might be looking to execute that for the benefit of your customers.
Sure I'm, Greg some of this stems from a couple of things. One is as you know we've had a long program now over many years at Florida power <unk> light on to invest in storm hardening and resilience across the FPL grid infrastructure. This past legislative session or the Florida State legislature passed a new law.
Called storm secure that authorizes further investments, including an undergrounding, our electrical infrastructure, which all of the utilities in Florida will be able to file plans with the public service Commission honest start to make those investments and recover on those investments through a clause mechanism on what we said about it both at the Investor Conference.
Since which at that time, the law had not been signed by the Governor on and then in subsequent Investor materials is it. This represents a multi decade opportunity and tens of billions of dollars of of potential investment into our grid infrastructure.
It's going through the process now I'm. The next steps include a the public service Commission you finalizing a rule and having that fully I'm discuss through that process, and then FPL, a and Gulf power would start to file their plans and make those investments and start to recover through through a through the Clos.
Thank you to two more questions one.
With regard to NEP, obviously, the the prospects for that business.
Great but.
How do you addressed the like the perspective that even though these these gas infrastructure investments you're making.
Make a lot of economic sense provide good value to the customers that they're serving that.
It might all the margin be diluting the you know sort of the because the clean energy.
It was sort of U.S.G. related aspects of the profile of MDP.
Even though they do to your point a that you maybe it'll bring some benefits in terms diversification.
Yeah, I'm glad we try to cover some of this in the prepared remarks, yeah. We've long believed that what is really valuable from an any p. unitholder perspective is our investing in long term contracted clean energy assets, a with credit worthy Counterparties and we believe that gas infrastructure specific.
The pipelines to extent that they meet those criteria I could be a great fit for any P and of course as you know we executed on on an acquisition of some pipeline several years back on and that's out a tremendous value to to unit holders. This was a unique opportunity. We think the returns are particularly attractive on particularly when a win.
A couple that with the financing that we were able to execute and as I commented on the prepared remarks I'm, assuming that we are able to close the acquisition. The cap you related to all of the pipelines would be roughly 30% of the overall portfolio and as we look forward and particularly focusing on Nextera energy resources portfolio is an obvious.
Source of potential acquisition targets for Nextera energy partners, we have a significant amount of long term contracted renewables that could and likely will be sold into the next trendy partners over time, so that percentage of 30% assuming the close of the acquisition will likely go down overtime.
Particularly since this is a an unique opportunity to acquire the me pipeline.
Great. My last question is you know the delta between.
The you know the GAAP earnings on the operating earnings you know is pretty pretty significant this year more significant than it has been and it's from prior years and [noise].
Yeah, I understand a lot about is due to the transition and <unk>.
Some transitions related to the business, but can you just take us through.
As we moved from time to do you expect the difference between GAAP and operating results to tighten again, because we move into.
20, and beyond or are there going to be.
Continued structural reasons, why we should expect natural gas related or gas infrastructure related or interest rate related.
You know adjustments to continue.
Yeah, So glad to of course, there's a couple of things that are excluded from our adjusted earnings that flow through gap as you highlighted some of the hedges that we enter into for both our power portfolio as well as our gas infrastructure portfolio I'm. The marks related to those investments will flow through that but the bigger driver. This year has really been about.
Interest rates and interest rate complex going down has contributed to significant amount of marks that we excluded from adjusted earnings purposes.
So that will fluctuate over time, we think that the hedging activities that we enter into whether its hedging our our no gas and and and tower exposure or interest exposure makes sense, both for Nextera energy and Nextera energy partners to ensure that we have the ability to have low cost and and continued access to the.
Capital markets over long period of time.
Okay. Thank you have a good morning.
Thanks, Greg.
<unk> research. Please go ahead.
Okay.
Hi, good good morning, just wanted to clarify I think Rebecca you said that the.
You think that and the wind business that 2021 could be is.
Good years 2020, <unk> did you know is that correct, yeah as 19.
A couple garnered a 29 team no 2020 should be a very strong year is as our customers are working to take advantage at the last year of a of 100% PTC, but we do think it'll be more likely than not comparable to 2019 got it right that makes more sense and then on the.
Just a could you maybe talk a little bit more about what the MISO issue was that.
Caused affected these 1400 megawatts of.
Varying projects and just.
Maybe a little color on the opportunities that that you see maybe if gaining some market share there.
Sure.
Both MISO and SPP has had a significant amount of Q requests be put into their queues over the last couple of years I think is both a developers and those that might buy renewables I put in request ahead of the the the tax credits trying to phase down and so they face some tough modeling on issues.
Both for MISO in for SPP that resulted in what we think are some unusual outcomes and and high cost for a for interconnection requests which affected in particular about 1400 megawatts of industry wide projects as we commented on in the prepared remarks, you. This creates opportunities for us so set for some of those projects.
There had a had some obvious customers the wanted to buy some wind and solar projects, which will create opportunities for energy resources to help fill that supply.
It also creates the opportunity or incentive for us to optimize our existing Q positions and existing interconnection brights to maximize all the generation that could be filled for those interconnection request. So certainly a speed bump with respect to some of the things in our backlog, but in context of.
Now the substantial backlog that we have you know it really is is no more than a minor blip, but we wanted to comment on it given given the movement in the backlog.
Okay. Thank you.
Thank you.
<unk>.
From Stephen Byrd of Morgan Stanley . Please go ahead.
Hi, good morning.
Good morning.
I wanted to focus on a mountain valley and just a first cover just the process next steps both from a a legal perspective as well as with for which I'm just kind of talking through what we should be thinking about from a process point of view from here.
Sure one of the two things that are particularly notable one is the the Supreme Court has decided to take this up as you well no and we'll hear this in the first part of 2020 and ultimately render its decision by June of 2020, I'm. So then we'll understand whether.
Not the force circuit's decision in AC piece case, which obviously onset suppressed and also for mountain Valley pipeline crossing of the Appalachian Trail.
The second aspect is finishing up the permitting offer mountain valley pipeline, a the new biological opinion is expected to be issued in the early part of 2020 on that obviously would address on the current stop work order and set forward the process of finalizing the remaining permitting other than the Appalachian.
They'll crossing so as I commented in the script, we continue to believe that more likely than not on the pipeline will be I put into service in 2020, and again higher cost than we originally anticipated, but approximately <unk> $5.4 billion across all the partners.
Understood and then how much capital has nextera invested to date and if the project were to be canceled due to legal issues, what would the financing implications be for Nextera overall.
Ah So we've invested I'm, a little bit over a billion dollars I'm year to date and that's just our portion of it as opposed to that the whole project overall and and what was the second part of question Steven Oh, if its project work be cancelled or what would the financing implication speak for Nektar.
You know <unk>, we've got to a pretty sizable balance sheet at this point, Steve I'm. So you know not significant implications for us it certainly would be disappointing from a development standpoint, not to be able to complete it and I think at this point. That's you know much less likely than the alternative which is that we expect to bring it into service.
Understood. Thank you very much.
Thank you.
Oh, that's worsens social Julien Dumoulin Smith.
Please.
Hi, Good morning. This is a actually Richie since early here for Julien.
Good morning, Oh. This morning, I'll just wondering if you can comment on your regulated strategy for the rate case filing have you made a any decisions around consolidating a feeling goal.
It could that potentially provide a additional accretion if you consolidate the a capital structures there.
So Ritchie <unk>, we didn't make comments that our June Investor Conference that we were at the early stages of evaluating a merger and ultimately a joint rate case filing between FPL in golf and I'd I'd argue that this point, where it's probably still in the early stages. As we highlighted then and continue to highlight our best a information at this stage, which.
Could change, but our best information at this stage is that we would file in 2021 for new rates in 2022 and that was both for FPL and golf on as we get closer to that period of time, we certainly you might update that if things change or be able to give you more information, but we're still still at the preliminary stages that.
Got it. Thanks, that's helpful. And then can you just comment on the G. a process.
And I guess expectations for how long that well take the.
I guess complete.
So Ricky as we've commented a couple of times, we're certainly interested in doing more regulated M&A and you know the processes that are a very public both at Santi Cooper and Jay EA Weve indicated our interest but at this point out of respect for both processes that are entering more advanced stages. A were limited on what comments we may may.
Got it but I'd fall back to the fact that we've continued to be interested and of course is it you all know GE a Ah released its a list of folks that made it to the next you know next round and of course, we run there.
Got it thanks.
Thank you.
<unk>.
Hey, good morning Gosh.
Morning.
Just a quick follow up on on the the 21 GRC filings you guys sort of formulate your thoughts and get the process together. We're bucket can you just highlight maybe some of the arguments you <unk> you will present as far as the benefits to FPL customers to have emerged utility obviously the benefits for.
Golf as stated in it and that's but but just sort of as you guys think about as emerged entity, where you see the benefits flowing to FPL customers.
Sure I think its and I appreciate the the interest in it I think at this stage to talk specifically about any sort of rate case strategy would be a little bit premature.
But do you should expect that a lot of what we might talk about would be consistent with what we always talk about with you guys I'm, which is we really do focus on capital investments that makes sense for our customers that improve the reliability remove costs from the system a improve our emissions profile over the long term to make sure that what we provide.
Hi to our customers is really valuable to them on and we continue to focus on that and be very diligent on in those efforts throughout a long period of time in terms of our history with FPL and as we've laid out in great detail at our Investor Conference. The a the investment program that we have at Gulf power over the next couple of years investing.
Roughly $3 billion up capital to you'll have the costs of though an M. A substantially improved reliability substantially improved the emissions profile and substantially improve the safety profile or certain things that we're proud of and we think are really the right things to focus on from a customer standpoint, and ultimately from a regulatory standpoint.
Got it Okay and then just for about a one last topic here is just on the retail choice I mean, obviously the Supreme Court has started their review maybe just little bit of an updated thoughts on on when you expect the timing from from the Supreme Court and just the arguments Ron single issue, and then and items being on ambiguous.
And then as far as maybe just a quick update on the votes and and as we had the February deadline.
Yep, obviously, you're absolutely right. There are two at just like the last quarter conference call. There were two things that need to happen before I'm the initiatives could be put on the ballot. One the Supreme Court is doing its diligence, which as you rightfully highlighted its not a devaluation of the merits of the proposal it is simply whether or not in my words not necessarily the legal words, but.
My words that that its single subject and its unambiguous and can be easily understood by the average voter the hearings a we're at a number of weeks ago and the Supreme Court could render its decision that anytime there's not a specific statutory timeframe for for them to render their decision we think in the hearing.
That issues or that were brought up in effectively argued that both it is a ambiguous and is not single subject. So we're optimistic that the Supreme Court a might render a decision that would be favorable to us but of course, that's that remains to be seen animal and we'll hopefully no soon.
I'm on the votes, there roughly 500000 ish 460000, I rounded up relative to the 760 something thousand votes are signatures that they need to gather before February onest. The practical deadline really is is the very beginning of January there's some time frame for the state.
To evaluate and validate the signatures or it is not insurmountable, but they would need to significantly increase their rate of signature gathering in order to to get what they need in order to get on the 2020 ballot.
Got it and then just <unk> you don't envision a scenario, where the Supreme Court vendors a decision post the February Doug valid deadline.
Oh, we certainly.
It seems unlikely, but we don't know based on precedent on it it seems that you'd be more likely not in the next couple of months, but we don't know.
Got it thanks, guys congrats on the quarter.
Thank you.
Our next question.
Yes.
<unk>.
Hey, Rebecca I'm looking back at the Investor Day, DAC and the capital spend trajectory for F. PNM was about 5.6 to 6.2 billion each year through 2022.
That implies kind of if he continued on near the high end of the band that kind of the law a big numbers starts to kick in in the growth rate of Ftn L. would actually start to slow down what are the things that could keep you know what are things that are not in that 5.6 to 6.2 billion Capex budget.
It could make that a higher rate based growth trajectory.
So we we obviously laid out the plans for this period of time through 2020, so I'm I'm, assuming you're asking for kind of a post 2020 view and some of the things that we highlighted in the Investor Conference, which still remain very much true today, and we haven't talked about one of them at the very part at beginning of the Q in a two major capital programs that will last well be.
On the 2022 expectations period I'm first is storm secure continuing to harden the infrastructure that of course now is it even further authorize through the clause mechanism and has a a path for recovery of those investments near at the time of of having made those investments.
And then second is a continued build out of solar in F deals and a ankle service territory.
On the 2030 by 30 program by 2030 is about 10 gigawatts of capacity or if we execute on that exactly to that plan. It's roughly 20% of a FPL is generation will come from solar generation in in 2030, which obviously leaves a lot of opportunity for further expansion.
Of solar beyond that timeframe.
And then got it right in normal investments in in the infrastructure.
But it is most of that for the post 22 time frame. So if I think about the 2020 to 2022 time frame, there's not a lot that's kind of move that that 5.7 6.2 billion dollar number around.
So we have our expectations. They were the best information that we had at the time and continue to have obviously reserve the rights to change that investment plan over overtime, but we think it is a a terrific plan that we're excited about and that really focuses on developing the customer value that we think is so important.
Got it thanks much appreciated.
Thank you Michael.
<unk>.
<unk>.
Hi, guys.
One couple of questions.
Couple of questions about renewals.
I heard anything about possible extension of sexual one solar.
For tariffs.
Separately from that when conference.
The developers they were talking about zero percent returns through contract life.
I'm just wondering I mean, you guys are usually in better shape than other people I'm wondering what kind of returns you guys are safe.
Okay I'll start with it. The second question first you know our returns are not anywhere near that that that stated report you know we continued to be disciplined our and our in our investment plans and energy resources. Our returns of remain roughly consistent over a long period of time I'm on a levered base.
This and we continue to strongly believe that they're creating value for our shareholders relative to our to our cost of capital.
If you know we can't speak to what other people are investing in what we do know is that we have significant competitive advantages across this business certainly our experience in it is is extremely important. It is you know not only that we have a significant amount of scale, we're investing a substantial amount of capital we've got great relationships.
With our suppliers where were meaningful <unk> customer of theirs and of course, we've had continued significant investments in digital technologies to keep getting better at this business every every year.
So we are we loved the business, we think it's a terrific growth opportunity for us and as you look out you know over the next couple of years, you'll continue to see the returns a from energy resources, along the lines of what John highlighted at the Investor Conference a continued to be very attractive.
On the on the terrorists <unk> this changes minute by minute and day by day I'm. So what our supply chain team continues to focus on is working very closely with our suppliers I'm, obviously, that's where we might be a little different between wind and solar but they have obviously anticipated the uncertainty.
On that could be in the market in the coming years, and we've positioned ourselves appropriately. So that we can continue executing our development program that at attractive returns.
Great. Thanks very much.
Mmm <unk>, social Pavel Molchanov <unk>.
Thanks for taking my question I'm on the power storage front, you've talked about the kind of the mainstreaming of storage deployments I'm curious if youre odd business development efforts you found any storage technologies other than.
Lithium ion that you think or worse.
You know commercializing and scaling up and it in a serious way.
Yeah. We continue you just like we have been with the gas business. Before then the wind business then the solar business, we always remain technology agnostic and whatever becomes commercialize that we can deploy it scale with high confidence in the long term total cost of ownership, we would certainly be open to it.
That said, what we continued to see and what we are currently signing contracts with our customers is predominantly lithium ion but there is a lot of venture capital and a lot of private equity for further stage investments being invested in the face to see if we can find something even better than than lithium ion but with the.
Electric vehicle sector really focusing on lithium ion the you those that are producing lithium ion batteries are investing in the manufacturing scale, which is producing significant cost improvements and some technology improvements, it's making it very compelling. So as you look out in our materials and you look at what we think is low.
Like lead to happen I'm in the middle part of the next decade, you're talking about a five to $7 per megawatt hour at or to get to a nearly from wind or solar resource. That's a that's a pretty attractive price. So in order to beat that you'd have to see a pretty big step change in a where some of these other technologies are to truly be competitive.
<unk>.
Okay, and then kind of a corollary to that maybe on the flip side of the value chain easy charging any any update on the role that you guys are playing in that Florida build out you know that the state overall still lags behind a lot or the other coastal states in.
Eating infrastructure. So curious what would you guys are doing to resolve that.
It has been a focus I'm in Tallahassee at the at the state government level to really think about it and and think about what are you know what part different companies and organizations might playing it and we certainly have worked in a couple of pilot opportunities to think about how that infrastructure can be built out a there may be.
More to do at some point, but we're still evaluating whether or not that's a as you know what opportunity within the regulated utilities or potentially on the competitive side.
Okay appreciate it.
And ladies and gentlemen. This concludes today's question answer session answers conference call. We wish you all for joining todays presentation you may notice how much was wonderful.
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