Q4 2019 Earnings Call
Good morning, everyone and welcome to the Nextera energy and Nextera Energy Partners Conference call.
All participants will be in listen only mode.
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After today's presentation, there will be an opportunity to ask questions.
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Please also note today's event is being recorded and at this time I'd like to turn the conference call over to Mr., Matt Ross Scott Director of Investor Relations. Sir. Please go ahead.
Thank you Jamie.
Good morning, everyone and thank you for joining our fourth quarter and full year 2019, combined earnings conference call for Nextera energy and Nextera Energy partners.
With me this morning, our Jim Robo, Chairman and Chief Executive Officer of Nextera Energy, Rebecca Chialva Executive Vice President and Chief Financial Financial Officer, Nextera Energy, John catch President and Chief Executive Officer of Nextera Energy resources and more kicks in executive Vice President of Nextera energy all of whom are also officers of Nextera energy partners.
As well as Eric Silagy eat President and Chief Executive Officer of Florida Power <unk> Light company.
Jim will provide some opening remarks, and we'll then turn the call over to Rebecca for a review of our fourth quarter and full year results.
Thank you to team will then be available to answer your questions.
We will be 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 todays earnings news release in the comments made during this conference call in the risk factor section of the.
Accompanying presentation on 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 Dotcom.
We did 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 Definitionally information and reconciliations of historical non-GAAP measures. The closest GAAP financial measure with that I will turn the call over to Jim.
Thank you, Matt and good morning, everyone. Oh 29 team was a terrific year for both Nextera energy Nextera energy partners.
Nextera Energy's performance was strong both financially and operationally and we had outstanding execution on our initiatives to continue to drive future growth across the company.
By successfully executing on our plans.
Nextera energy extended its long track record of delivering value for shareholders.
With adjusted earnings per share of $8 in 37 cents up 8.7% from 2018.
Over the past 15 years, we've now delivered compound annual growth in adjusted EPS of nearly 8.5%, which is the highest among all top 10 power companies, who have achieved on average compound annual growth west and 4% over the same period.
And that's the significant growth the company's maintain one of the strongest balance sheets and credit positions in the industry.
In 2019, we delivered a total shareholder return of approximately 43%.
Significantly outperforming both the S&P 500, and the S&P 500 utilities index and continuing to outperform both indices in terms of total shareholder return on a 1357 and tenure basis.
Over the past 15 years, we've outperformed all of the other companies in the S&P utilities index and 85% of the companies in the S&P 500.
While more than tripling the total shareholder return to both indices.
Although we are proud of our long term track record of creating shareholder value. We remain utterly focused on the future and committed to continuing that track record going forward.
During 2019.
FPL successfully executed on its ongoing capital plan, including placing the highly efficient Okeechobee clean energy center and an additional 300 megawatts of cost effective solar in service on time and on budget.
Smart capital investments such as these help FPL improve its already best in class customer value proposition.
Despite customer bills that were already nearly 30% below the national average and among the lowest of all 54 electric providers in the state of Florida.
Earlier this month, the typical FPL residential customer bill decreased by nearly $4 or roughly 4%.
FPL had continued success with its cost savings initiatives, reducing its already best in class dollar per retail megawatt hour nonfuel own in costs by more than 5% year over year.
These ongoing cost savings combined with the flexibility afforded by FPL is current settlement agreement enabled FPL to avoid a customer surcharge for the roughly 260 million.
Of storm restoration costs related to Hurricane Dorian.
In addition to low bills FPL delivered its best ever service reliability performance in 2019 and was recognized for the fourth time in five years is being the most reliable electric utility in the nation.
Finally last quarter, we were pleased that following an extensive and thorough 18 month review.
The nuclear regulatory Commission granted Turkey point units three and four their second 20 year license extensions.
These units are the first nuclear power plants in the United States to achieve this milestone and this decision supports the continued production of clean zero emission reliable and affordable nuclear power and Florida for many years to come.
Beyond executing on its strategic initiatives during 2019, FPL positioned itself well for continued long term growth.
Early in the year FPL announced its groundbreaking 30 by 30 plan.
Which is one of the worlds largest solar expansions and will result in roughly 10000 megawatts of incremental solar capacity on FPL source system FPL system.
This store expansion.
Combined with low cost battery storage solutions, such as the Manatee energy storage center that was announced during 2019.
Represent the next phase of Appeals generation monetization efforts.
And are expected to further reduce appeals seo to emissions rates.
Which is already among the lowest in the nation and has declined more than 30% since 2005.
In addition to the terrific progress in generation.
During the year, Florida past the public utility storm protection plans wall that allows for clause recovery of storm hardening investments, including Undergrounding.
This new law supports continued hardening of Npls already storm resilient energy grid.
And allows FPL to pursue these investments in a programmatic manner over the course decades.
While deploying billions of dollars of incremental capital for the benefit of customers.
We expect the final rules related to the new law to take effect later this quarter and that FPL will seek to begin clause recovery of its storm hardening investments beginning in 2021.
With terrific visibility into significant investment programs such as these we remain as confident as ever about FPL his ability to sustain its long term growth trajectory, while further improving our customers value proposition.
The energy resources team also continued its long track record of strong execution in 2019.
The renewables origination success remain particularly strong with the team, adding more than 5800 megawatts to our backlog over the past year as we continue operating in what we believed to be the best renewables development environment in our history.
Our ongoing renewables origination success results from our ability to leverage energy resources competitive advantages, including our best in class development skills large pipeline of sites and interconnection Q positions strong customer relationships purchasing power best in class construction expertise resource assessment capabilities strong.
And access to and cost of capital advantages and World class operations capability.
More than 50% of the solar megawatts that were added to our backlog in 2019, including a bad included a battery storage component.
And the current backlog has more than 2000 megawatts of trifecta projects that combined wind solar and battery storage together.
We also increasing we see storage as an important standalone business in its own right. As we are reviewing a number of opportunities to add storage to our existing solar sites to take advantage of the ITC and enhance the value of our existing projects for customers.
This highlights the rapid transition to the next phase of renewables development that pairs low cost wind and solar energy with a low cost battery storage solution as well as energy resources unique skills to combine the three technologies into integrated near from low cost products.
Energy resources significant competitive advantages position at well to capitalize on the enormous disruption that is occurring to the nation's generation fleet.
We continue to expect that by the middle of this decade without incentives new near from wind is going to be a 20 to $30 per megawatt hour product and new Mnner near from solar is going to be a 30 to $40 per megawatt hour product.
At these prices new near from renewables will be cheaper.
And the operating costs of most existing coal nuclear or less efficient oil and gas fired generation units.
We were pleased by the 60% PTC extension that was passed in 2019.
And we expect that will support incremental when demand in 2023 in 2024.
Our confidence in renewables being the low cost generation alternative in the middle of this decade remains stronger than ever we expect a disruptive nature of renewables to be terrific for customers terrific for the environment and terrific for shareholders by helping to drive tremendous growth for this company over the next decade.
Let me now turn to Gulf power and highlight how we executed in 2019 against some of the long term objectives that we outlined last year.
As we've often discussed two of the key hallmarks of the Nextera energy playbook are reduced operating costs and using those savings to fund smart capital investments for our customers.
After one year of ownership, we're well on our way to executing this strategy a Gulf power.
In 2019, we reduced Gulf powers own them costs by approximately 20% year over year.
In addition to lowering costs. We've also identified smart investment opportunities to benefit customers in 2019 Gulf power invested approximately $730 million roughly two and a half times Gulf powers.
Average capital investment amount over the past five years.
It was able to grow regulatory capital employed at roughly 11% year over year.
Beyond realizing operating efficiencies in deploying smart capital in the past year Gulf power was able to meaningfully improve its customer value proposition Gulf power achieved its best ever service reliability year, which was approximately 20% better than its 2018 results.
Customer service was also better with notable improvements and speed of answer and Florida Public Service Commission complaints.
There was nothing more important in our company than the safety of our employees. We made significant improvements in this area in 2019 as well within approximately 40% reduction in our osha rate at Gulf power versus 2018.
As the major capital investments that we advanced during 2019 came into service come into service in 2020 and beyond they will help achieve the other key objectives that we have outlined a gulf power such as meaningful emissions reductions and perhaps perhaps most importantly, a significant reduction in customer bills in real terms.
In addition to creating tremendous customer value, we expect that execution of the plans we laid out a Gulf power will also generate great outcomes for our shareholders as well and our first year of ownership Gulf powers adjusted earnings increased by 25% year over year.
This outcome was even better than our plan at the start of the year and positions us well to deliver on the financial growth objectives that we outlined when we announced the acquisition.
This high level performance across the board would not have been possible without the hard work and commitment of all Gulf power employees.
While we're pleased with the results that we've achieved a Gulf power during 2019.
We remain focused on the significant execution ahead of us here to deliver even greater value to our customers and our shareholders.
Finally, we were once again honored to be named for the 13th time in 14 years number one and the electric and gas utilities industry on Fortune's list of most admired companies as well as ranked among the top 10 companies worldwide across all industries for social responsibility.
During 2019 alone Nextera energy made approximately $13 billion in capital investments in American energy infrastructure, making us one of the top capital investors in the U.S. in any industry.
None of these recognitions, nor our track record of success would be possible without the hard work and commitment to excellence of our people who live our core value of doing the right thing every day.
In the last year.
Theres been an increasing focus on MSG on the part of many of our stakeholders.
The fact is our company has been focused on all of the elements of the SG for more than 25 years.
We are proud of our track record here.
But there is still so much more to do in this country to decarbonize, the electric transportation and industrial sectors.
Nextera energy is living proof that you can be clean and low cost and financially successful.
All at the same time.
We will be at the Vanguard a building a sustainable energy era that is both clean and affordable and we're driving very hard to continue to be at the forefront of the disruption that is occurring within the energy sector.
We expect that the execution of our strategy will drive meaningful C O two emissions reductions across the country, while simultaneously lowering generation cost for customers.
And our continued investments in clean energy will help advance nextera energy toward its goal of reducing its cotwo emissions rate by 67% by 22020 by 2025 from a 2005 baseline.
In summary, I continue to remain as enthusiastic as ever about Nextera Energy's long term growth prospects.
In 2019, we extended our long term track record of executing for the benefit of customers and shareholders and further developed our best in class organic gross past growth prospects.
Based on the strength and diversity of our underlying businesses I will be disappointed if we're not able to deliver financial results at or near the top end of our adjusted earnings per share expectation ranges in 2020, 2021 and 2022.
While at the same time, maintaining our strong credit ratings.
We remain intensely focused on execution and continuing to drive shareholder value over the coming years.
Let me now turn to Nextera energy partners, which also had a terrific year of execution in 2019.
In the more than five years since the IPO.
Nextera energy partners has consistently delivered on its commitments.
That execute that history of execution is supported by Nextera energy partners outstanding portfolio of clean energy assets, which grew significantly and was further diversified and 29 gene.
During the year Nextera energy partners acquired a portfolio of more than 600 megawatts of wind and solar assets from energy resources.
Additionally, during the fourth quarter Nextera energy partners closed on the acquisition of Meade pipeline company, which owns and approximately 40% aggregate interest in central Penn line and intrastate natural gas pipeline in Pennsylvania is backed by a minimum 14 year contract with a high credit quality customer and no volume metric risk.
Finally during the year Nextera energy partners advancing additional organic growth opportunity announcing the repowering of 275 megawatts of wind projects.
We are proud that 2019 is the first year that Nextera energy partners successfully executed on all of the three ways we can grow.
Organically acquiring assets from third parties and acquiring assets from energy resources portfolio.
Highlighting the clear flexibility and visibility into growth going forward.
To support the ongoing growth investments and up and optimize the capital structure for the benefit of LP unitholders Nextera energy partners completed a number of financings and refinancings in 2019 as well.
At the start of the year Nextera energy partners.
Faced headwinds related to the PGT bankruptcy.
The team immediately focused on managing and mitigating the negative impacts of this event and we ended 2019, having favorably adjust addressed many of the challenges.
The energy resources portfolio acquisition and associated financing that we announced last March allowed Nextera energy partners to complete its original 2019 growth objectives, even after excluding PGT related project cash flows.
During the year Nextera Energy partners also purchased all the outstanding holding company in operating company notes at our Genesis project.
In addition.
To resulting in an increase in run rate cash available for distribution through the removal of project level debt service as a result of the purchase of the debt Nextera energy partners received approximately $128 million of distributions that had been or were expected to be restricted to the project.
The release of this cash was used to partially fund the debt repurchase.
I remain confident about a long term favorable resolution for our PG any related assets.
In addition to growing LP distributions by 15% year over year in achieving a run rate adjusted EBITDA range in excess of what was originally expected.
Nextera energy partners year end 2019 run rate cash available for distribution expectations, assuming full contributions from PGT related projects represents approximately 60% growth from the comparable year end 2018 run rate range.
With this strong year over year growth and cash available for distribution Nextera energy partners expects to be able to achieve its long term distribution growth expectations without the need for additional asset acquisitions until 2021.
As of year end 2020.
We expect to have achieved Nextera energy partners distribution growth objectives, while maintaining a trailing 12 month payout ratio in the mid Seventys range, even after excluding cash distributions from our desert sunlight projects.
Net delivered an attractive total unit holder return of approximately 28% in 2019.
Further advancing its history of value creation since the IPO.
I continue to believe that the combination of Neps clean energy portfolio growth visibility and flexibility to finance that growth offer LP unit holders in attractive investor value proposition.
As with Nextera energy, we remain focused on continuing to execute and delivering that unit holder value over the coming years.
I'll now turn the call over to Rebecca who will review the 2019 results in more detail.
Thank you Jim and good morning, everyone, Let's now turn to the detailed results beginning beginning with FPL.
The fourth quarter of 2019, FPL reported net income of $400 million or 81 cents per share down four cents per share year over year.
For the full year 2019, FPL reported net income of $2.33 billion or $4, an 81 cents per share an increase of 26 cents per share versus 2018.
Regulatory capital employed increased by approximately 8.3% for 2019 and with the principal driver at FPL is net income growth of roughly 8% at a full year.
During the fourth quarter growth from new investments was offset by a number of factors, including a contribution to our charitable foundation I can't find its operations for the next several years.
I feel it's capital expenditures were approximately $2 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $5.8 billion.
I feel as reported our E for regulatory purposes was 11.6% for the 12 month ending December 31st 2019, which is at the upper end of the allowed band at 9.6% to 11.6% under our current rate the granite.
During the fourth quarter, we utilized a total of $18 million F reserve amortization, including the approximate $260 million that was utilized to offset hurricane Dorian storm restoration costs, leaving FPL with a year end 2019 balance of $893 million.
We continue to expect at FPL, and a 2020 with a sufficient amount of reserve amortization to operate under the current base rate settlement agreement for one additional year and as a result expect to file a base rate case in the first quarter 2021 for new rates that are effective in January of 2022.
Well, we have not made a final decision based on our review, we expect that the emerging as FPL and Gulf power and making a single rate case filing will result in customer benefits and we therefore see this as a likely approach for the filing at this time.
I live in major capital projects at FPL are progressing well attended similar type totaling nearly 750 megawatts have combined capacity that are currently being built across FPL service territory. All on track non budget to begin providing cost effective energy FPL customers in early 2020.
To support the significant sell their expansion at FPL is leading across Florida, we have secured sites that could support 10 gigawatts future projects.
Earlier this month, Florida Public Service Commission health hearings on FPL has proposed seller together program. We continue to expect a decision about the proposed program at the end at the first quarter.
The until their construction on a highly efficient roughly 1200 megawatt Dania Beach clean Energy Center remained on schedule and on budget attic as it continues to advance towards its projected commercial operation date in 2022.
We continue to expect that FPL is ongoing smart investment opportunities will support a compound annual growth rate of regulatory capital employed approximately 9% from 2018, 320, 22, well further enhancing our best in class customer value proposition.
Let me now turn to Gulf Tower, which reported fourth quarter, 2019, GAAP and adjusted earnings of $23 million and $26 million, respectively or five cents per share.
For the full year golf town reported GAAP earnings of $180 million or 37 cents per share and adjusted earnings of $200 million, a 41 cents per share.
As a reminder, during the first 12 months following the closing out the acquisition, we excluded one time acquisition integration costs from adjusted earnings.
Additionally, interest expense to finance the acquisition is reflected in corporate and other.
Both powers reported our OE for regulatory purposes will be approximately 10.8% for the 12 month ending December 2019, which is in the upper half of the allowed band at 9.25% to 11.25% under its current rate agreement.
For the full year 2020, we expect to target a regulatory our Lee near the upper end up it's allowed band assuming normal weather and operating conditions.
As Jim discussed the overall execution of Gulf powers capital program is advancing well Gulf powers first solar development project at roughly 70, 75 megawatt Blue Indigo Solar Energy Center is expected to go into service later, this quarter and generate significant customer savings over its lifetime.
All the other major capital investments, including the North, Florida, resiliency connection and the plant crest coal to natural gas conversion continue to remain on track.
The Florida economy remains healthy at Floridas population continues to grow at one of the fastest rates in the nation.
According to recent I R. S data, Florida attracted a net gain of roughly $16 billion and personnel taxable income in 2018 by far the highest at any state in the country and the fastest rate of growth as well, which is a reflection of the attraction of Florida is low cat load tax pro business policies.
Florida's most recent seasonally adjusted unemployment rate was 3.1% below the national average and at the lowest level and the decade.
Florida has now added nearly 2 million private sector job over the last 10 years.
Leading indicators in the real estate sector have remained at a stable pace, reflecting continued strength at the Florida housing market.
Other positive economic data across the state include continued strength in retail taxable sales as well as the consumer confidence index, which remained near 10 year highs.
During the quarter FPL is average number of customers increased by approximately 100000 from the comparable prior year quarter, given by continued solid underlying growth and the addition of the or the chase roughly 35000 customers late last year.
2019, Appeals retail sales increased 1.7% from the prior year, driven primarily by a favorable weather comparison.
No weather normalized basis, I feels retail sales declined by 0.6% as customer growth was more than offset by a reduction in underlying usage per customer.
The decline in underlying usage was a reversal from their trend that I feel experienced in 2018, when underlying usage increased by 1.7%.
As we previously noted usage per customer tends to exhibit significant volatility, which can be more pronounced during periods of particularly strong weather conditions similar to those experience during 2019, which makes distinguishing between underlying usage changes and weather impacts challenging.
Well Gulf power the average number of customers increased slightly versus the comparable prior year quarter as it moves beyond the intact hurricane Michael in 2018.
But 2019 at Gulf towers retail sales declined slightly due to unfavorable weather and a small decline and underlying usage per customer.
Let me now turned to energy resources, beginning with reporting change in our segments.
Given the Transbay cable acquisition during 2019, we have reevaluated, our operating segments and made a change to reflect the overall scale of our competitive transmission business and the management of these projects within our company.
I reporting for energy resources now includes the results of our Nextera energy transmission projects, formerly reported in corporate and other segment.
Our 2018 results have been adjusted Accordingly for comparison purposes, resulting an increase in energy resources full year 2018, adjusted EPS of nine cents per share.
Incorporating the reporting change energy resources reported fourth quarter, 2019, GAAP earnings of $433 million or 88 cents per share.
Adjusted earnings for the fourth quarter with $326 million or 66 cents per share.
Energy resources contribution to adjusted earnings per share in the fourth quarter decreased one cents versus the prior year comparable period as strong underlying growth from new and existing investments was more than offset by a number of and that number that items, including the negative 14 cents adjusted EPS impact of our refinancing activities, which are prime.
Generally related to financing breakage costs associated with several wind repowering as well as energy resources share of cost associated with the acquisition at the outstanding Genesis debt.
As a reminder, while these financing refinancing activities created a reduction in fourth quarter adjusted earnings Air expected to translate the favorable net income contributions in future years, and an overall improvement in net present value for our shareholders.
For the full year energy resources reported GAAP earnings of $1.81 billion or $3.72 per share and adjusted earnings of $1.7 billion or $3.49 per share.
Energy resources full year adjusted.
Earnings per share contribution increased 35 cents or approximately 11% versus 2018.
For the full year growth was driven by continued additions to our renewables portfolio as contributions from new investments increased by 55 cents per share.
Contributions from our gas infrastructure business, including existing pipelines increased by 13 cents versus the prior year.
Also contributing favorably where the customer supply and trading business, where contributions increased by five cents versus 2018.
And Nextera energy transmission, which increased result, four cents year over year, primarily as a result at the Transbay cable acquisition that closed in the middle of 29 team.
These favorable results were partially offset by higher interest expense, reflecting the negative 14 cents adjusted EPS impact in the fourth quarter refinancing activities as well as growth in the business and lower contributions from the existing generation assets.
In 2019 wind resource was 96% of long term average down from 97% a year earlier.
Additional details are shown on the accompanying side.
In 2019 energy resources continue to advance its position as the leading developer and operator of wind solar and battery storage projects commissioning approximately 2700 megawatts of renewables projects in the U.S., including retiring.
Since the call we since last call. We have added 1609 megawatts of renewables projects to our backlog, including approximately 500 megawatts of combined new wind and retiring 700 megawatts of solar and 340 megawatts of battery storage all of which will be paired with new solar projects.
Energy resources has now place a total of approximately 3700 megawatts of Repowering projects in service since 2017, which represents approximately one third of its operating wind portfolio as of year end 2016.
We expect that by the end of 2020 more than 60% of energy resources operating wind projects will have been originally commissioned or re powered within the last five years, highlighting the young age of the overall fleet and the expected long date future value creation of the portfolio.
Following the terrific origination year end 2019, and with nearly three years remaining in the period. We're now within that 2019 to 2022 renewables development ranges that we introduced in the middle of last year.
For the post 20 to 2022 period, our backlog is already more than 2400 megawatts, placing us far ahead of our historical origination activity at this early stage.
The accompanying slide provides additional detail on where I renewables development program now stands.
Beyond renewables as of yearend 2019, and not in the valley pipeline was approximately 90% complete.
We have been working with our project partners to resolve all at the outstanding permit issues for the pipeline and we continue to make good progress on these efforts.
We expect that the issues related to NDP biological opinion and nationwide 12 permit will be resolved in the spring, allowing construction work along much of the route to resume.
We also remain hopeful that the Supreme Court will overturned the fourth Cercacor. Its original decision on Atlantic oppose <unk> coast pipelines case related to its Appalachian Trail crossing authorization resolving similar challenges for NVP.
We continue to target a full in service date for the pipeline during 2020 and an overall project cost estimate of approximately $5.4 billion.
Turning now to the consolidated results for Nextera energy for the fourth quarter 2019, GAAP net income attributable to Nextera energy was $975 million or $1.99 per share.
Nextera Energy's fourth quarter adjusted earnings and adjusted EPS were $706 million or a dollar at 44 per share respectively.
For the full year 2019, GAAP net income attributable to an extra energy $3.77 billion or $7 in 76 cents per share.
Adjusted earnings were $4 billion to $4.06 billion or $8.37 per share.
For the corporate another segment adjusted earnings for the full year decreased 35 cents per share compared to the 2018 prior comparable period. Prior merrily as a result of higher interest expense related to the Gulf power acquisition financing.
Nextera energy also delivered strong operating cash flow growth, which increased at a faster rate than the adjusted EPS growth rate.
As expected during 2019, we also maintained our strong credit position.
Based on the S&P methodology, we estimate that we ended the year at a 22.5% FFO to debt level versus our current downgrade threshold of 21%.
For Moody's, we expect 2019, CFO P. working capital to debt was 19.6% versus our current downgrade threshold of 18%.
Nextera Energy's cushion versus our credit metrics reflects the continued strength of our balance sheet and supports the record roughly $14 billion. That's capital investments that we expect to make and 2020.
The financial expectations that we extend extended last year through 2020 to remain unchanged. We continue to expect that Nextera Energy's adjusted EPS compound annual growth rate to be in a range of 6% to 8% through 2021 off of their 2018 adjusted EPS at $7 in 70 cents plus.
The accretion of 15 cents and 20 cents in 2020, and 2021, respectively from the Florida acquisitions.
For 2020, we continue to expect our adjusted EPS to be in the range at $8 in 70 cents to $9 in 20 cents and as Jim highlighted will be disappointed if we're not able to deliver financial results at or near the top end at this range.
This year, we do expect that our adjusted EPS growth will be more weighted towards the second half at the year.
For 2022, we expect to grow adjusted EPS in the range of 6% to 8% off 2021, Jesse Dps translating to a range of $10 to $10.75 per share.
In 2018 to 2022, we continue to expected operating cash flow will grow roughly inline with our adjusted EPS compound annual growth rate range.
As always Oliver expectations are subject to the usual caveats, including but not limited to normal weather and operating conditions.
Let me now turn to Nextera Energy partners, which also had a strong year of operational and financial performance in 2019.
Fourth quarter, adjusted EBITDA was $280 million and cash available for distribution was $101 million, an increase of 70% and a 130% respectively.
This strong growth was driven primarily by the significant year over year growth and Nextera energy partners portfolio, including a 2019 acquisitions at the energy resources assets and to me pipeline company as well as a full quarters contribution from the portfolio projects that were acquired in late 2018.
For the full year 2019, adjusted EBITDA was $1.1 billion up 25% year over year.
Cash available for distribution, excluding all contributions from our desert sunlight projects was 366 million an increase of 8% from the prior year.
Including full contributions from the desert sunlight projects Nextera energy partners achieve cafferty growth of 20% versus 2018.
Similar to the quarterly results full year growth in both adjusted EBITDA and Kathy was primarily driven by portfolio growth.
The benefit from new projects was partially offset by the divestiture of Canadian assets during 2018.
Cash available for distribution was also reduced by higher corporate level interest expense.
As a reminder, these results include the impact of IDR fees, which we treat as an operating expense.
Additional details are shown on the accompanying slide.
Yesterday, the Nextera Energy partners Board declared a quarterly distribution of 53.5 cents per common unit or $2 in 14 cents per unit on an annualized basis up 15% from the cop comparable quarterly distribution a year earlier and at the top end if the range, we discussed going into 2019.
As Jim mentioned during 2019, Nextera energy partners executed several financing for the benefit of LP unitholders.
In addition to raising approximately $1.2 billion of unsecured holding company notes, which priced at some of the lowest spreads ever in the sector Nextera Energy partners also raised $1.4 billion of low cost project finance that and executed $1.3 billion revolver extension.
Nextera Energy partners also raised $1.8 billion through three convertible equity portfolio financings with low initial coupons the convertible equity portfolio financings provide more cashed LP unit holders, allowing nextera energy partners to acquire fewer assets to achieve the same level of future distribution growth, which.
We'll also as a result, lower future financing needs.
In addition to reduce to future asset and equity needs. These financings provide nextera energy partners the flexibility to convert into common units at no discount over a long period of time.
It should be accretive to LP unit holders, who retain all of the unit price upside as Nextera energy partners executes on its expected distribution growth objectives.
These attributes combined with a significant flexibility that next Monday partners retains and financings, including the timing of conversion option to convert at any price option to pay the buyout and cash rather than units and the option to deploy the buyout amount into other assets.
Should generate significant value to LP unitholders will also providing significant downside protection.
Finally last quarter following the achievement of certain Nextera energy partners unit trading thresholds, we converted the second tranche of the convertible preferred securities that we issued in 2017 into Additionally, in additional roughly 4.7 million Nextera energy partners common units further supporting our ongoing goal of using low cost financing.
Products to layer in equity overtime.
The next R&D partners portfolio at year end 2019 supports the revised adjusted EBITDA and Kathy December 30, Onest 2019 run rate expectations that we announced at the time at the meat acquisition.
Since next year any partners long term distribution growth expectations are supported without the need of additional asset acquisitions until 2021.
At December 30, Onest 2020 run rate expectations for adjusted EBITDA and Kathy remain unchanged at the same levels as the year end 2019 run rate expectations.
Excluding feet full contribution spend a P.G. any related projects year end 2020, Runrate cash available for distribution is expected to be in a range at $560 million to $640 million, reflecting calendar year 2021 expectations for the forecasted portfolio at the end of 2020, and assuming normal weather and operating.
Additions.
Excluding all contributions from the desert sunlight projects Nextera Energy partners continues to expect a year end 2020 run rate for Kathy in the range of 505 million to $585 million.
Your end 2020 run rate adjusted EBITDA expectations, which I assume full contributions from PGT related projects as revenue is expected to continue to be recognized $1.2 billion to $5 billion to $1.4 billion.
As a reminder, all of our expectations are subject to our normal caveats and includes the impact of anticipated IDR fees as we treat these as an operating expense.
From an updated base of our fourth quarter 2019 distribution per common unit at an annualized rate of $2. In 14 cents, we continue to see 12% to 15% growth per year, and LP distributions as being a reasonable range of expectations to at least 2024.
We expect that the annualized rate of the fourth quarter 2020 distribution that is payable in February of 2021 to be in the range at $2.40 to $2.46 per common unit.
In summary, we continue to believe that both Nextera energy and Nextera energy partners have excellent prospects for growth FPL Gulf power energy resources, and Nextera energy partners each have an outstanding set of opportunities across the board.
The progress we made in 2019 reinforces our long term growth prospects and while we have a lot to execute on in 2020, we believe that we have the building blocks in place for another excellent year.
That concludes our prepared remarks, and with that we'll open up the line for questions.
Ladies and gentlemen at this time will begin the question answer session to ask your question you May Press Star then one if you are using a speaker phone. We do ask you place pick up your handset before pressing the keys to its all your questions you May press star into.
And that is star then one to ask your question.
Our first question today comes from Greg Gordon from Evercore ISI. Please go ahead with your question.
Thanks, Congratulations on another very very consistent your performance.
Thanks, Frank Good morning question couple of questions for you I'm you know based on my back of the envelope math. It doesn't look like you earned.
Got you know the maximum allowable or are we at Florida power <unk> light. This year can can you tell us what where you ended on a return on equity basis for fiscal year.
<unk>.
Yeah, Greg from a from a reported regulatory our OE standpoint, so what ultimately goes to the Florida Public Service Commission or we did around the 11.6% our OE has allowed under our or settlement agreement.
All right. We did have some below the line expenses, which is typical on it but those below the line expenses are excluded from that regulatory ROI calculation.
Gotcha understood.
And then when you.
You point out in your slide deck that.
Majority of your.
The majority of your.
Ptcs are now being allocated for tax equity.
There's a very clear slide in the in the appendix on that.
That means that we should be looking out there to see I on the balance sheet flowing through the income statement as the way that that's flowing through earnings now correct, Yes, that's correct.
Okay, and the average amortization of other tax equity deal for.
The wind project is worth approximately 10 years is that is that right. Yeah. It. The earnings recognition is roughly coincident with the 10 year PTC range that are up for all of our wind projects that that arent ptcs.
My first solar deal that would be slightly faster.
Yeah. It's typically you know relates to the recognition at the ITC periods that for many tax equity structures that over five years, a certain tax equity partners prefer a seven year on that structure and so then it would be over seven years as opposed to five.
Right and as you guys gear up for preparing for that for the for the rate case in 2021 are there any milestones or this year or will the majority of activity be happening I'm in early 21.
Well as you I'm certainly appreciate there's a ton of milestones that are largely internal a far teams as they get ready for it for any a rate proceeding on many of those up preparation effort started well before this year and are ongoing and and we have the incremental work. This year of doing all the analysis of thinking about bringing FPL and golf together.
But as I highlighted in the prepared remarks on based on what we know today. Our expectation is that we would file a rate case in early 21 for the new rates effective in 2022, and you know the first started that would be the filing of the test year letter, which we would expect to file in in early 21.
Great. My last question is you know the battery storage.
Backlog is obviously continuing to ramp.
Are you buying battery storage.
Sort of from you know are you buying the product from a from another vendor or are you buying the components from different Oems and building your own bespoke battery storage product.
In other words are you.
Using a vendor like fluence or one or the other you know you know sort of total total products companies are you sourcing <unk> components and building your own batteries.
It's much more the latter Greg I'm, we see tremendous amount of value on that are being able to have some nimbleness and where we procure the battery packs. But then we also are procuring separately as you suggested and things like that containers and the other equipment that you would ultimately used to assemble a the battery facility and then also we're designing or.
On management systems, we ultimately believe that some of the wheel value add that we're going to be able to add to customers that will likely differentiate us from others is that battery system management, because we've talked about with you guys and with others over time that there's probably not one value stream that creates the value for batteries, it's usually a couple.
Different applications within the same system and that management system, and and optimizing that it's going be part of the secret sauce of a battery. So we've invested a lot of time and energy and thinking through that not only on the energy resources deployments, but also for the deployments that we've had add at FPL and we've learned a tremendous now and we're really excited as.
We highlighted in his prepared remarks on about batteries as a as a terrific supplement to to further renewables deployment I certainly in the middle part of the next decade and thereafter as renewables are they kind of significant component of the generation stack in the U.S. power markets.
Thanks, a lot.
Thank you.
Our next question comes from its Steve Fleishman from Wolfe Research. Please go with your question.
Yeah, Hi, good morning [noise].
Just a question first if you could update us on the Sandy Cooper situation and your interest there.
And then secondly, with with J. now gone and stock, obviously doing very well just kind of overall thought process on a M&A strategy and opportunities right now.
Thanks.
So Steve this is Jim I'll take that you know obviously.
We're pretty limited in what we can say about the city Cooper situation other than what I've said previously which is we remain very interested.
Any group and we think South Carolina is a terrific poised to to to do business and ER.
And that's probably all I can say about that.
You know on the J front I would say, we're disappointed that the sale a process has been a terminated a we think we could have brought enormous value to the customers have a and the indices in the citizens will Jacksonville, and we think it's a unfortunate that the that's been terminated but it is it that is what it is and.
In terms of.
Terms of future M&A activity.
I will repeat what I've been pretty consistent a in terms of what our strategy is on that front, which is we you know in terms of what we like we've been very focused.
Oh, well first of all I don't think there's utility in the country that wouldn't benefit from the application of our playbook.
That said, we had been focused on opportunities in the southeast in the Midwest as well as FERC regulated opportunities. Those are the those are the oh from a regulatory standpoint or in the and other opportunities. What we think are the best fit for us.
And that remains our focus and you know and we continue to be a.
We continue to be very interested in trying to do something that said.
M&A is always hard and Ah you know there are water hurdles, we get over in the.
We will as always be extraordinarily financially disciplined you will never see us announced the deal that we say is strategic Jim has no accretion so anything that we do do we will have significant accretion associated with it so.
Great, probably you're probably though the sum total what I can say on them.
Okay. One quick technical question just is there a quick and easy way you can quantify easy.
The balance sheet capacity available through these FFO to debt and.
Okay.
Metrics that Moody's and.
S&P in terms of <unk> dollars.
Yeah, we <unk>, probably not going to quantify it exactly on you know Steve is we've heard us back quite a number of times over the years you know a strong balance sheet is incredibly important to us. We clearly have some room from our downgrade thresholds, a which is which is certainly terrific on and it's important to us as we think about how do we.
Make sure that we're prepared for making investments if you want to make an future, including especially this year setting aside the comments. It just Jim just made on M&A, just where our organic growth prospects alone we have $14 billion at planned capital investment around business and having a strong balance sheet as we and start to make those.
Investments is incredibly important.
Great. Thank you.
Our next question comes from Julien Dumoulin Smith from Bank of America. Please go with your question.
Hey, good morning, and here Rick.
Good morning, we can hear you just fine.
Excellent. So thanks again for all the commentary so perhaps kicking it off on the retiring front. We're just curious on your thoughts on the a 24 opportunity now given the PTC extension, how does that shift you're thinking and logic around incremental one car and I. I know you provided are ready some fairly detailed remarks are retiring already but I'm I want.
To dig in on that specific operating especially given that that's a year already after the timeline for the solar ITC here if you can elaborate.
Sure of course, our as we highlighted in our development expectations on that we laid out this summer for the 2019 through 2022 timeframe. You'll note that the repowering opportunities that we saw were heavily and at that time exclusively in the 2019 to 2020 timeframe I know we've continued to work on.
On opportunities to Repower assets at both an 80% PTC and 60% PTC onset first we'll focus on the on the 80% before we even think about the extensions of the if anything that's possible and 60%, but remember there's always that a trade off in in making these investment opportunities and part of the economic value.
With that is getting the new set as a ptcs and so there was a balance of the cost of the investment that you need to make inadequate and then and also ensuring that you can meet the IRS test of the 80 20 valuation and as the PTC value goes goes down it gets a little bit harder to to justify those those out.
In both of those requirements. So again, we thought it was a terrific repo program create a huge amount of shareholder value I'm really highlights the option value embedded in our portfolio and then we'll continue to be a creative and work towards creating more opportunities like that or things that are analogous to it in the future.
Got it actually I was just clarify my last question little bit you mentioning FERC regulated opportunities Jeff can you elaborate a little bit further on thought process. There are obviously, that's true transmission are requesting that and kinda lingering across sectors going to make sure. We heard you rightly said, how you're thinking about that very rare earth.
Asset classes, yeah. So.
So obviously, we did the Transbay acquisition, that's not in the Midwest or the for the or the or the southeast and we do you know on a long term basis.
Like FERC regulated assets you know notwithstanding the recent or are we decision on the on the MISO transmission owners I listen I think there there's there's been a.
You know obviously.
That's a open.
Open docket at FERC right now I, probably can't comment on what I think the outcomes are gonna be there, but other than to say I do believe.
Burke.
Regulation will be constructive in the long term and we think in the long term. It's a it's a good poised for us to deploy capital.
And then maybe Jim if I can one more quickly on S.G. as you think about establishing targets, becoming a perhaps more prescriptive and being a leader on this front. How do you think about being more specific on on carbon I know that's come up booklet, but I'm curious on about processor.
I know, it's also complicated too.
Sure.
You know I think we had been I think pretty specific about what are you know 2025 goal is which is.
Remember, they're all of these discussions or about <unk> percent reductions.
We started at a enormously lower level than the rest of the industry on just base CEO to emissions per megawatt hour generated right and so or any of the goals that we weigh out you know the which you know our goal is 67% reduction offer to.
2005 base by 2025, I think if you went back and you looked at the 20 did the 2005.
Average U.S. average.
That and compare to our Nextera rate in 2025 to that 2005 average I'm Gonna give you a number and everyone's going to go check me on it it's going to be that that would be in 85 or 90% reduction relative to the 2005 U.S. average CEO to mission.
It is right so.
We have a.
We're going to significantly de Carbonize or company and our emissions.
And the you know I'm really excited about the goals, we set I think there, they're very doable and what I'm. Most excited about is the role that we can play both in Florida in in the rest of the country in terms of leaving away.
To decarbonize not just the electric.
Not just the electric sector, but the transportation sector. So we have there's lots more to do as I said in my prepared remarks, I think the country has a lot more to do and.
The great news for the country in the economy is.
You can be Queen and low cost at the same time and whatever we do will be for the benefit of customers and will drive it will drive good economics, better GDP growth for the country lower costs.
And.
And ER.
And obviously, a better environmental profile.
But you got the time I appreciate it.
Yes.
Our next question comes from Shar Pourreza from Guggenheim Partners. Please go ahead with your question.
Hey, good morning, guys.
Just on <unk>. So just on the near backlog. It's it's obviously very strong again, some I'm just trying to get a sense Rebecca on sort of how much of that backlog increase mainly on the when side was attributed to a pull forward of projects with a modest PTC extension versus the versus like Akshay.
No incremental opportunities you're seeing as we think about modeling forward.
Yeah, I don't think it's very much I think it's early <unk>.
Obviously, the PTC extension happened very very late in 2019. So I don't think we've seen any impacts from that whatsoever, coupled with the fact that it's quite a number of years down the road on and it doesn't affect the profile of the PTC and in the next three years, which is really what was driving a lot of our customers actions on in terms of you know.
The overall demand and and how that's reflected and as we've said in the past we thought now on 2020 was going to be a significant development here clearly it is for wind and that 2021, its more likely than not to be roughly comparable with where we were in on in 2019, and we continue to see really stay.
Wrong interest from our customers about wind in the long term as they should be this is Jim highlighted the the cost of wind and solar projects out in the mid 20, Twentys, assuming there are not any meaningful extensions as the incentives, which is an assumption at this point that that should be checked, but assuming those incentives are not extended a very competitive.
Versus existing coal and nuclear plants, and some less efficient gas fired plants to economic should continue to drive on decisions for our customers for many many years to come.
Got it and then just lastly, thanks for the incremental disclosures around golf is there anything you can like maybe provide directionally on sort of the base assumptions, you're assuming and 22 is we're thinking about your EPS guidance you maybe from a regulatory construct or you have in addition to spending opportunities like the extension of sober.
Is there anything you can provide directionally, how you're thinking about this.
Yeah, not much beyond what we've already talked about in terms of everything that's built into our expectations for 2023 2022, and as you recall from the Investor Conference materials, we did to lay out a lot of the detail on for both businesses through 2021 and of course more detail for for energy resources.
<unk> and 22, but the fundamentals of very consistent with what we've been doing for a long time I'm on the on the regulated businesses again, focusing on a good capital investment that adds value for our customers on taking cost out of the business to ensure that we have on very thoughtful views on customer bills and then the cases us Gulf.
Power, you know targeting a meaningful decline in in the deals out to 20, the mid 20 twentys on to keep doing what we're doing and we couldn't be more excited about the growth opportunities offer all the businesses that lay out in front of us.
So stay tuned around the cap structure and a the reserve amortization, how you're thinking about chewing up between the two utilities.
Absolutely okay.
Okay, great Congrats guys.
Thank you.
Our next question comes from Michael Weinstein from Credit Suisse. Please go with your question.
Hi, just my appeared on behalf of Mike Thanks for taking my questions.
So she can be battery or the growth you're talking about no can you talk about these reductions so seeing on the battery systems Oh for the projects a into five and wherever possible to quantify the scale of opportunity for retrofits on existing sites, either at or near all that Uh huh anyway.
<unk>.
In terms of battery costs, we've laid out some of our soften expectations I think most recently in in our E. I investor presentation, we haven't broken that out between ever broken out a lot of that detailed between battery pack and the rest of the balances system costs, but everything that we've laid out in terms of where we've seen the market.
Clients coming from in aggregate is really started to materialize.
And you know, whereas two years ago, we were surprised at how much faster costs are coming down we've gotten more aggressive with our assumptions and now the roughly consistent with what we were thinking.
We continue to be very optimistic longer term about batteries and as you know the whole industry has talked about it's really not about the power sector, it's being driven much more by the electric vehicle sector on and those drivers appeared to be pretty clear offer quite a number of years down the road, which is really driving the manufacturing efficiencies and scale.
Now that we're seeing on a battery pack side, and so really excited and and optimistic about where that where that business is headed.
Got it and could you just touched upon the retrofit opportunity for either <unk> or any fee for batteries.
And would it be possible to get the tax credits on a big stories to an existing solar projects. Yes, you know it it could obviously be a significant opportunity I'm you know coincident with you know the significant deployment of rule is particularly where the penetration as high adding you know batteries to existing soldiers.
Hi, its could be very advantageous on to the extent that Dave I'm, you know elected the ITC and ultimately our charge you are being used to charge. The battery system, yes. They would qualify for for Itcs omni as long as we meet certain I'm certain conditions on so it's a terrific opportunity for the team on but it it's really consistent with what we've been thinking about further.
For the overall market opportunity and what we've been highlighting for you know quite quite some time now to to investors.
Got it I'm just one last question from me I forgot to talk about the.
Impact on interest rates on a any piece ability to execute the convertible refinancings. Thank you.
Its its been terrific on low interest rate environment is obviously terrific for both of our businesses, we love low cost of capital to be able to deploy these solutions is economically as possible for for both our customers I'm on the energy resources side is as well as Ah you know the regulated utilities and of course, a also for an extra energy.
Partners said, it's been a than it's been terrific.
Thanks.
And ladies and gentlemen, with that we will conclude today's question and answer session and as well as today's conference. We do thank you for attending today's presentation. You may now disconnect your lines.