Q4 2019 Earnings Call

Finally last quarter. We were pleased that following an extensive and thorough eighteen months review the nuclear Regulatory Commission granted Turkey Point units, three and four. There's a twenty-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 Mission a viable and affordable nuclear power in Florida for many years to come.

And 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 Thursday, which is one of the world's largest solar expansions and will result in roughly 10,000 megawatts of incremental solar capacity on FPL solar system system is solar 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 fpl's generation modernization efforts

and are expected to further reduce CO2 emissions rates.

Which is already among the lowest in the nation and is declined more than 30% since 2005.

in addition to the terrific progress in generation

during the year Florida passed the public utility storm protection plans law that allows for cost recovery of storm hardening Investments, including undergrounding this new law supports chewed hardening of fpl's already storm resilient energy grid

in a while to pursue these investments in a programmatic manner over the course of decades while deploying billions of dollars of incremental capital for the benefit of customers. We expect the final rule waited to the new law to take effect later this quarter and that will seek to begin Claus recovery of its storm hardening Investments beginning in 2021 with terrific visibility into significant investment projects such as these we remain as confident as ever about 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 5,800 megawatts to our backlog over the past year as we continue operating in what we believe to be the best Renewables development environment in our history our ongoing Renewables origination success wage 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 with purchasing power best-in-class construction expertise resource assessment capabilities strong 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 battery included a battery storage component.

and the current backlog

More than 2,000 megawatts of Trifecta projects that combined wind solar and battery storage together.

We also increasingly see storage as an important stand-alone 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 iPhone SE 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. Just fine. The three Technologies into integrated near firm low-cost products.

Energy resources significant competitive advantages position it well to capitalize on the enormous disruption that is occurring to the nation's generation Fleet. We continue to expect that by the end of this decade without incentives new near firm wind is going to be a 20 to $30 per megawatt-hour products and noon near firm solar is going to be a 30 to $40 per megawatt-hour product and Thursdays prices new near firm Renewables will be cheaper than the operating costs of most existing coal nuclear and less efficient oil and gas-fired generation units.

Pleased by the 60% PTC extension that was passed in 2019. And we expect that will support incremental Wyndham and in 2023 and 2024 our confidence in Renewables the low-cost generation alternative in the middle of this decade remains stronger than ever we expect the disruptive nature of Renewables to be terrific for customers terrific for the environment and terrific for shareholders by helping to drive. This growth for this company over the next decade.

Let me now turn to Gulf Power and highlight how we execute it in 2019 against some of the long-term objectives that we outlined at 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 month.

After one year of ownership, we are well on our way to executing this strategy at Gulf Power in 2019. We reduce Gulf Powers own and 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 $730,000 roughly 2 and 1/2 x golf Powers average capital investment amount over the past five years and was able to grow regulatory Capital employed at roughly 11% year-over-year.

Beyond real

Operating efficiencies and 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 is approximately 20% better than its 2018 results customer service was also better with notable improvements in speed of answer in Florida Public Service Commission complaints. There is nothing more important in our competition 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 in to 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 wage reductions and perhaps perhaps most importantly a significant reduction customer bills in real terms.

In addition to creating tremendous customer value, we expect that execution of the plans. We laid out at Gulf Power will also generate great outcomes for our shareholders as well. And our first year of ownership Gulf Powers adjust wage is increased by 25% year-over-year. This outcome was even better than our plan at the start of the year and positions as well to deliver on the financial growth objectives that we outlined when we announced the acquisition wage 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 are pleased with the results that we've achieved a gulf power during 2019.

We remain focused on.

Significant execution ahead of us here to deliver even greater value to our customers in our shareholders.

Finally, we were once again honored to be named for the 13th time and fourteen years number one in the Electric and Gas Utilities industry on Fortune's list of most admired companies as well as often among the top 10 companies worldwide across all Industries for social responsibility.

During 2019 alone. Nextera energy made approximately $13 billion dollars in capital investments in American Energy infrastructure making us one of the top Capital investors involved 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. There's been an increasing focus on ESG on the part of many of our stakeholders. The fact is our company has been phone noticed on all of the elements of the SG for more than 25 years.

we are proud of our

But there is still so much more to do in this country to decarbonise the electric transportation and Industrial sectors. Nextera energy is living proof that you can be cleaned and low-cost and financially successful all at the same time. We will be at the Vanguard of building a sustainable energy era that is both clean and affordable and we are drives 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 CO2 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 missions rate by 67% by 2020 by $25 from a 2005 Baseline.

In summary, I continue to remain as enthusiastic as ever about nextera energy as long-term growth prospects in 2019. We extended our long-term track record of excellent 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 20, 20, 21 and 20 22 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 next door Energy Partners has consistently delivered on its commitments that executes that history of execution is supported by Next Door Energy Partners outstanding portfolio of clean energy assets which grew significantly and was further Diversified in 2019 during the year next year. Our Energy Partners acquired a portfolio of month six hundred megawatts of wind and solar assets from energy resources additionally during the fourth quarter next to her Energy Partners closed on the acquisition of need pipeline company, which owns and approximately 40% interest in Central Penn line and Interstate natural gas pipeline in Pennsylvania, which is backed by a minimum fourteen year contract with a high credit quality customer and no volumetric risk-off finally during the year, nextera Energy Partners Advanced an additional organic growth opportunity announcing the repowering of 275 megawatts of wind projects.

We're proud that.

Is the first year that nextera Energy Partners successfully executed on all of the three ways. It can grow organically acquiring assets from third parties and acquiring assets from energy resources page highlighting the clear flexibility and visibility into growth going forward.

To support the ongoing growth investments in and optimize the capital structure for the benefit of LP unit holders. Nextera Energy Partners completed a number of financing and refinancing home as well.

At the start of the Year, nextera Energy Partners face headwinds for waited to the PG&E bankruptcy the team immediately focused on managing and mitigating the negative impacts of this event and June 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 the the original 2019 growth objectives. Even after excluding PG&E related project cash flows during the year next to her Energy Partners also purchased all of the outstanding whole company and operating company notes that our Genesis Project in addition to result in 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 next to her Energy Partners received approximately 128 million dollars of distributions that had been or were expected to be restricted at the project.

the release of

Cash was used to partially fund the debt repurchase. I remain confident about a long-term favorable resolution for our PG&E 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 RAM available for distribution expectations, assuming full contributions from PG&E related projects represents approximately 60% growth from the comparable year end 2018 run right off 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 acid Acquisitions until 2021.

As of year-end 2020 we expect to have achieved nextera Energy Partners distribution growth objectives while maintaining a trailing-twelve-month payout ratio in the mid-seventies range, even after excluding cash distributions from our desert sunlight projects.

Yep, delivered an attractive total unit hold the return of approximately 28% in 2019 further advancing its history of value creation since the IPO. I continue to believe that the, a clean energy portfolio growth visibility and flexibility to finance that growth offer LP unit holders and attractive investor value proposition as with nextera energy. We remain focused on continuing to execute and delivering that unit hold their value over the coming years. I'll now turn the call over to Rebecca who review the 2019 results in more detail.

Thank you, Jim and good morning everyone. Let's now turn to the detailed results because beginning with FPL for the fourth quarter of 2019 income of $400 or $0.81 per share down four cents per share your every year for the full year 2019 FPL reported net income of 2.33 billion dollars or $4.81 per share an increase of twenty cents per share versus 2018.

regulatory

Employed increased by approximately 8.3% for 2019 and was a principal driver of FPL net income growth of roughly 8% for the full year during the fourth quarter gross Investments was offset by a number of factors including a contribution to our charitable Foundation. That should fund its operations for the next several years of capital expenditures were approximately two billion dollars in a quarter bringing its full-year capital Investments to a total of roughly five point eight billion dollars.

Appeals reported r o e for regulatory purposes was 11.6% for the 12 months ending December 31st, 2019, which is at the upper end of the allowed band of nine thousand six to 11.6% under a current rate agreement during the fourth quarter. We utilize a total of $18 of Reserve amortization including the approximately $260,000 that was utilized to offset hurricane Dorian Storm Restoration costs leaving FPL with a year end 2019 balance of $893. We continue to expect the dead-end twenty-twenty 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 of 2021 for new rates that are affected in January of 2022.

Well, we have not.

Made a final decision based on our review we expect that the merging of 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.

All of our major capital projects at FPL are progressing. Well, the 10 solar sites totaling nearly 750 megawatts have combined capacity that are currently being built across FPL service territory off all on track non-budget to begin providing cost-effective energy to fpl customers in early 2022 support the significant solar expansion that FPL is leading across Florida. We have secured that could support 10 gigawatts a future projects earlier this month, Florida Public Service Commission held hearings on the proposed solar together program. We continue to expect a decision about the proposed program at the end of the first quarter.

Beyond solar construction on the highly-efficient roughly 1,200 megawatts Dania Beach clean energy center remains on schedule and on budget as it continues to advance towards its projected combat operations date in 2022.

We can.

Can you to expect that fpl's ongoing smart investment opportunities will support a compound annual growth rate of regulatory Capital employed approximately 9% from 2018 through 2022, further enhancing our best-in-class customer value proposition.

Let me now turn the Gulf Power which reported fourth-quarter 2019 and adjusted earnings of $23 and $26 respectively or five cents per share for the full year off power reported gaap earnings of $180 or $0.37 per share and adjusted earnings of $200 or $0.41 per share as a reminder during the first twelve months following the closing of position. We excluded one-time acquisition integration cost from adjusted earnings additionally interest expense to finance. The acquisition is reflected in corporate and other

Gulf Power is reported r o e for regulatory purposes will be approximately 10.8% for the 12 months ending December 2019, which is in the upper half of the allowed band of 9.25% to 11.25% under its current agreement for the full year twenty-twenty. We expect a target a regulatory r o e near the upper end of this allowed band, assuming normal weather and wage and conditions as Jim discussed the overall execution of golf Powers. Capital program is advancing. Well both Powers First Solar Development project the roughly seven hundred seventy-five megawatt solar energy center is expected to go into service later this quarter and generate significant customer savings over to Lifetime.

all the other

Capital Investments including the north Florida resiliency connection and the plant crisp cold and natural gas conversion continue to remain on track.

The Florida Healthy As Florida's population continues to grow at one of the fastest rates in the nation according to recent data Florida attracted and net gain of roughly $16,000 in personal taxable income in 2018 by far the highest of any state in the country and the fastest rate of growth as well, which is a reflection of the attraction of Florida's local wage tax pro-business policies.

Florida's most recent seasonally adjusted unemployment rate was 3.1% below the national average and at the lowest level in the decade Florida has now added nearly 2,000 private-sector jobs over the last ten years leading indicators in the real estate sector have remained at a stable Pace reflecting continued strength of the Florida housing market other positive economic sneak across the state include continued strength and retails taxable sales as well as the consumer confidence index which remains near ten-year hives.

During the quarter average number of customers increased by approximately 100,000 from the comparable prior-year quarter driven by continued solid underlying growth and the addition of Euro beaches roughly 30,000 customers late last year for 2019 retail sales increased 1.7% from The prior-year Driven primarily by a favorable weather comparison on a weather normalized basis. I feel retail sales declined by 6% as customer grows was more than offset by a reduction and underlying usage per customer.

The decline an underlying usage was a reversal from the trend that FTL 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 experienced during 2019, which makes distinguishing between underlying usage changes and weather impacts challenging.

For Gulf Power the average number of customers increase slightly versus the comparable prior-year quarter as it moves beyond the impact of hurricane Michael in 2018.

420

19 Gulf Powers retail sales declined slightly due to unfavorable weather and a small Decline and underlying usage per customer.

Let me now turn to energy resources beginning with reporting change in our segments given the transbay cable acquisition during 2019. We have re-evaluated 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 are reporting for energy resources now includes the results of our next energy transmission projects often incorporate in other segments. Our 2018 results have been adjusted accordingly for comparison purposes resulting in 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 or eighty eight cents per share adjusted range for the fourth quarter with $326 or $0.66 per share.

energy

resources contributions to adjusted earnings per share in the fourth quarter decreased $0.01 versus the prior-year comfortable. As strong underlying growth from new and existing Investments was more than offset by number of number of items, including the negative $0.14 adjusted EPS impact of a refinancing activities, which were primarily related to financing breakage costs associated with several Windridge rings as well as energy resources share of costs associated with the acquisition of the outstanding Genesis death

As a reminder while these financing refinancing activities created a reduction in fourth quarter adjusted earnings. They are expected to translate to favorable net income contributions in future years and an overview in net present value for our shareholders.

For the full-year energy resources reported gaap earnings of 1.81 billion dollars or $3.72 per share and adjusted earnings of one point seven billion dollars or $3.49 per share energy resources full year adjusted earnings-per-share contribution increased $0.35 or approximately 11% versus 2018 Dodge the year growth was driven by continued additions to our Renewables portfolio as contributions from new Investments increased by $0.55 per share.

contributions from our gas

Infrastructure business including existing pipelines increased by $0.13 versus the prior-year also contributing favorably where the customer Supply and trading business where contributions increased by $0.05 off of 2018 and extra energy transmission, which increased results $0.04 year-over-year primarily as a result of the transbay cable acquisition that closed in the middle of 2019.

These favorable results were partially offset by higher interest expense reflecting the negative $0.14 adjusted EPS impact in the fourth quarter refinancing activities as well as gross in the business office and lower contributions from the existing generation assets.

In 2019 wind resource was ninety 6% of the long-term average down from 97% a year earlier additional details are shown on the accompanying slide.

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 Life projects in the US including repowering since the call. We since the last call we have added 1609 megawatts of Renewables projects to our backlog including a 2,500 megawatts of combined new wind and repowering 700 megawatts of solar and 340 megawatts of battery storage. All of which will be paired with new solar projects.

energy

Has now placed a total of approximately 3700 megawatts of repowering projects in service since 2017, which represents approximately one-third of its operating win portfolio of your 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 repowered within the last five years by letting the young age of the overall Fleet and the expected long date future value creation of the portfolio.

Following the terrific origination year in 2019. And with nearly three years remaining in the. We are now within the 2019 to 2022 Renewables development ranges that we introduced off in the middle of last year.

for the Post 22 22. Our backlog is already more than two thousand four hundred megawatts placing us as far ahead of our historical origination activity at this early stage the accompanying slide provides additional detail on where our Renewables development program now stands

Yeah.

As of year-end 2019 the Mountain Valley pipeline was approximately 90% complete. We have been working with our project Partners to resolve all of the outstanding permit issues for the pipeline and he continued to make good progress on these efforts. We expect that the issues related to MVPs biological opinion and Nationwide 12 permit will be resolved in the spring allowing construction work along much of the route to reserve. We also remain hopeful that the Supreme Court will overturn the fourth circuit courts original decision on Atlantic Coast pipeline case related to its Appalachian Trail Crossing authorization resolving similar challenges for MVP. 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 months.

Turning out to the Consolidated results for nextera energy for the fourth quarter of 2019 gaap. Net income attributable to nextera energy was nine hundred and seventy-five million dollars or a dollar ninety-nine per month extra energies fourth quarter adjusted earnings and adjusted EPS were 706 million dollars or a dollar forty four per share respectively for the full year 2019. Net income attributable to an extra energy was three point seven seven billion dollars or $7.76 per share adjusted earnings were four. Four point zero, six billion dollars or $8.37 per share.

Corporate and other segments adjusted earnings for the full year decreased thirty-five cents per share compared to the 2018 prior comfortable. Prior maralee as a result of higher interest expense related to the Gulf Power in 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% off vs. Our current downgrade threshold of 21% for Moody's we expect 2019 CFO pre working capital to debt was 19.6% versus our current downgrade threshold of 18%

Nextera energy is cushioned versus our credit metrics reflects the continued strength of our balance sheet and supports the record roughly $14 of capital Investments that we expect to make in 2020.

The financial expectations that we expend extended last year through 2022 remain unchanged we continue to expect that nextera energy adjusted EPS compound annual growth rate to be in a Range 68% 321 off of the 2018 adjusted EPS of $7.70 plus the accretion of $0.15 and twenty cents in 2020 and 2021 respectively from the Florida Acquisitions for 2020. We continue to expect our adjusted EPS to be in the range of $8.70 to $9.20 and is Jim hi life will be disappointed. If we are not able to deliver Financial results at or near the top end of this range.

This year we do expect that our adjusted EPS growth will be more weighted towards the second half of the year.

422 we expect to grow adjusted EPS in the range of 6 to 8% off 20 21 just edps translating to a range of $10 to $10.75 per share.

18 to 20 22 we continue to expect that operating cash flow will grow roughly in line with our adjusted EPS compound annual growth rate range, as always all of our expectations are subject to the usual caveats, including but not limited to normal weather and operating conditions.

Let me now turn tuned extra Energy Partners, which also had a strong year of operational and financial performance in 2019. Fourth quarter adjusted ebitda was $280 and cash available for distribution was 101 million dollars an increase of 70% and 130% respectively the strong growth was driven primarily by the significant year-over-year growth in next Thursday Partners portfolio, including the 2019 Acquisitions of the energy resources assets and the meat pipeline company as well as a full quarter's contribution from the portfolio projects that were required off 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 deserts projects was 366 million an increase of 8% from the prior-year including full contributions from the desert sunlight projects next Energy Partners achieve growth of 50% versus 2018.

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 next Energy Partners board declared a quarterly distribution of 53.5 cents per common unit or two dollars and fourteen cents per unit on an annualized basis up 15% from the same comparable quarterly distribution a year earlier and at the top end of the range we discussed going into 2019 as Jim mentioned during 2019. Next Energy Partners executed several financing the benefit of unit orders in addition to raising approximately 1.2 billion dollars of unsecured holding company notes which priced at some of the lowest spreads ever in the sector next Energy Partners. Also raised one point four billion dollars of low-cost project Finance debt and executed one point three billion dollar revolver extension.

next Energy Partners also

Is 1.8 billion through 3 Convertible Equity portfolio financing with low initial coupons the convertible Equity portfolio financing provide more cash to unit holders Home allowing. Next Energy Partners to acquire fewer assets to achieve the same level of future distribution growth, which will also as a result lower future financing needs in addition to reduce your asset and Equity needs these financing provide an extra Energy Partners the flexibility to convert into common units at no discount over a long period of time. This should be a creative 2-lp unit holders office Jane all of the unit price upside as next Energy Partners executes on it's expected distribution growth objectives.

These attributes combined with the significant flexibility that next Energy Partners retains with financing including the timing of conversion option to convert at any price option to pay the buyout cash rather than units and the option to deploy the buyout amount into other assets should generate significant value to unit holders will also providing significant downside protection.

finally

Following the achievement of certain extra Energy Partners unit trading thresholds. We converted the second tranche of the convertible Preferred Securities that we issued in 2017 into additionally an additional roughly 5.7 million next Energy Partners common units further supporting our ongoing goal of using low-cost financing products to layer in equity over time.

The next Energy Partners portfolio at year end 2019 supports the revised adjusted ebitda and December 31st, 2019 run-rate expectations that we announced at the time of the meat acquisition long since next year in your partner's long-term distribution growth expectations are supported without the need of additional asset Acquisitions until 2021 the December 31st, 2028 expectations for adjusted ebitda and caste remain unchanged at the same levels as the year-end 2019 run right expectations, including full contributions from the PG&E related projects. Your run rate cash available for distribution is expected to be in a range of $560 to $640 reflecting calendar year 2021 expectations for the forecasted portfolio at the end of 2020 and assuming normal weather and operating conditions.

excluding all contributions

The deserts on my projects next Energy Partners continues to expect a year end 2020 run rate for caste in the range of 505 million to 585 million dollars.

Your adjusted ebitda expectations which assume full contributions from PG&E related projects as revenue is expected to continue to be recognized are one point two five billion dollars off one point four billion dollars as a reminder. All of our expectations are subject to our normal caveats and include the impact of anticipated IDR fees as we treat these as an operating expense.

An updated base of our fourth quarter 2019 distribution for common unit at an annualized rate of $2.14. We continue to see 12 to 15% growth per year in l p distributions as being a reasonable range of expectations through at least 2024. We expect that the annualized rate of the fourth quarter 2020 distribution. That is payable February of 2021 to be in the range of $2.40 to $2.46 per common unit.

In summary, we continue to believe that both nextera energy and next Energy Partners have excellent prospects for growth FPL Gulf Power energy resources and next Energy Partners each have an outstanding set of opportunities across the board the progress made in 2019 reinforces our long-term growth prospects. And while we have a lot to execute on in 2020, we believe that the building blocks in place for another excellent year that concludes our prepared remarks and with that will open up the line for questions. Ladies and gentlemen at this time will begin the question-and-answer session to ask a question. You may press star and then one if you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to answer all your questions. You may press star into

And that is starring then one to ask a question.

Our first question today comes from Greg Gordon from evercore is I please go ahead with your question.

Thanks. Congratulations on another very very consistent your performance. Thanks for holding a couple of questions for you, you know based on Thursday. It doesn't look like you earned.

The maximum allowable that sort of Power and Light this year. Can you tell us what where you landed on our return on Equity basis for fiscal year nineteen?

Yeah, Greg from from a reported regulatory standpoint. So what ultimately goes to the Florida Public Service Commission we did earn the 11.6% r o e as allowed under our wage settlement agreement you all right. We did have some below-the-line expenses, which is typical, but those below the line expenses are excluded from that regulatory r o e calculation.

Gotcha, understood and then when you you point out in your slide deck that the majority of your off the majority of your fees are now being allocated from tax Equity. There's a very clear slide in the in the appendix on that month. That means that we should be looking at and see eye on the balance sheet flowing through the income statement as the way that that's flowing through earnings. Now that correct. Yes. That's correct. Okay, and the average wage ization of a of a tax Equity deal for a wind project is what approximately ten years. Is that is that right? Yeah it the earnings recognition is roughly coincident with the ten-year range that are for all of our wind projects that that are in ptc's and First Solar deal. It would be slightly faster.

Yeah, it's typically, you know relates to the recognition of the ITC. So for many tax Equity structures.

That's over five years certain tax Equity Partners prefer a 7-year, uh structure and so then it would be over seven years as opposed to 5 and as you guys are up for preparing for the for the case in 2021, are there any Milestones or this year or will the majority of the activity be happening in early 21?

Well, you certainly appreciate their a ton of Milestones that are largely internal for our teams as they get ready for for any rate proceeding and many of those preparation efforts started off this year in our ongoing and and we have the incremental work at this year of doing all the analysis of thinking about bringing FPL and golf together but as I highlighted in the prepared remarks based on what we need today or expectation is that we would file a rate case in early 21 for the new rates effective in 2022 and you know, the first start of that would be the filing of the test your letter which we would expect to file an early twenty one, right my last question is you know the battery storage

Backlog is obviously continue.

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 off buying the components from different oems and and building your own bespoke battery storage product that in other words. Are you?

Using a vendor like fluence or one of the other, you know, you know sort of total total products companies or or use sourcing components and building your own battery dead. It's much more the latter Greg. We see tremendous amount of value in our being able to have some nimbleness and where we you know procure the battery packs, but then we also are procuring separate as you suggested. It seems like the containers and the other equipment that you would ultimately use to assemble the battery facility and then also were designing our own Management Systems. We ultimately believe that some of the same value ad that we're going to be able to add two customers that will likely differentiate us from others. Is that battery system management cuz we've talked about with you guys and and with others over time that there's probably not one value stream that creates the value for Batteries. It's usually a couple of different applications within the same system and that management system and and optimizing that is going to be part of the Secret Service.

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 at at all, and we've learned a tremendous amount and we're really excited as we highlighted in the prepared remarks about batteries as a as a terrific supplement money to further Renewables deployment certainly in the middle part of the next decade and thereafter as Renewables become a significant component of the generation stack in the US power markets.

Thanks a lot. Thank you.

Our next question comes from Steve freshman from Wolf research, please go ahead with your question.

Yeah, hi. Good morning. Just question first if you could update us on the Santee Cooper situation and your interest there and then secondly with with JEA now gone and stock obviously doing very well. Just kind of overall thought process on m&a strategy and opportunities right now. Thanks. So Steve, this is Jim. I'll I'll take that you know, obviously we're pretty Limited in what we can say about the Santee Cooper situation other than what I've said previously which is weird main very interested and see any coupon. We think South Carolina is a terrific place to to to do business and and that's probably all I can say about that long, you know on the front I would say we're disappointed that the sale process has been terminated. We think we could have brought enormous value to the customers off.

of in the in the in the citizens of Jack

Anvil and we think it's unfortunate that that it's been terminated but it is it that is what it is. And in terms of terms of future m&a activity, you know, I will repeat what I've been pretty consistent 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 off. First of all, I don't think there's a utility in the country that wouldn't benefit from the application of our Playbook that said we had been focused on Thursday in the Southeast in the midwest as well as ferc regulated opportunities. Those are the those are the from a regulatory standpoint and the and and other job opportunities. What we we think are the best fit for us and that remains our focus and you know, and we continue to be you know, we continue to be very interesting job.

And trying to do something that said.

M&a is always hard and you know there there are a lot of hurdles to get over and you know, we will as always be extraordinarily Financial disciplined you will never see us announce the deal that we say is strategic and has no accretion. So anything that we do will have significant accretion associated with it. So, great. Probably probably the the sum total of what I can say on that. Okay one quick technical question. Just is there a quick and easy way you can quantify the off the balance sheet capacity available for these ffo to debt and you know metrics at Moody's and S&P in terms of just dollars.

Yeah, we probably not going to quantify it. Exactly. You know, Steve is we've heard us say quite a number of times over the years, you know, a strong balance sheet is incredibly important to us. We clearly wage have some room from our downgrade thresholds, which is which is certainly terrific and it's important to us as we think about how do we make sure that we're prepared for making Investments that we want to make in the future, including especially this year setting aside the the comments that just Jim just made on m&a just were organic growth prospects alone. We have fourteen billion dollars a planned outage investment or our business and having a strong balance sheet as we start to make those Investments is incredibly important.

Great. Thank you.

Our next question comes from Julian dumoulin-smith from Bank of America. Please go with your question.

Hey, good morning. Can you hear me? Good morning, we can hear you just fine. Thanks again for all the commentary on retiring front would just be curious on your thoughts the 24 opportunity now given the PTC extension. How does that shift your thinking and logic around incrementally power and I know you provided already some fairly detailed remarks on retiring already dead, but I want to Dig Inn on that specific opportunities, especially given that that's a year already after the timeline for the the solar ITC here if you can elaborate Drive quick shower is we highlighted in our development of Minds that we laid out this summer for the 2019 through 2022 time frame, you'll note that the repowering opportunities that we saw were were heavily and at that time exclusively in the 2019 to 2020 timeframe, and we've continued to work on opportunities to repower assets at both and 80% PTC and a 60% off.

And the first will focus on the on the 80%

And before we even think about the extensions of of the of anything, that's possible and in 60% Remember, there's always a a trade-off in in making these investment opportunities, you know part of the economic value of that is getting the new set of and so there's a balance of the cost of the investment that you need to make in that equipment and also ensuring that you can meet the IRS Tesco value ation. And is the PTC value goes goes down it gets a little bit harder to to justify those those, you know, both of those requirements. So again, we thought it was a terrific program create a huge amount of shareholder value really highlights the option value embedded in our portfolio and will continue to be creative and and work towards creating more opportunities like that or you know things that are analogous to it in the future.

Got it. Excellent. Just clarifying the last question little bit. You mentioned Fork regulated opportunities. Can you elaborate a little bit further on top process there? Obviously this transmission are we question has been kind of lingering across the sector. Just want to make sure we heard you right just how you're thinking about that very asset classes so long, so obviously we did the transbay acquisition. That's not in the midwest or the or the or the or the southeast and we do, you know on a long-term basis off-white for regulated assets, you know, notwithstanding the recent or we decision on the on the my sucky owners. Listen, I think there there's there's been

you know, obviously a

You know that that's a open open docket at ferc right now. I probably can't comment on what I think the outcomes are going to be there. But other than Thursday, I do believe Brooke regulation will be constructive in the long-term and we think in the long term. It's it's a good place for us to deploy capital.

And maybe if I can one more quickly on ESG as you think about establishing targets and becoming a perhaps more prescriptive and and being a leader on the front. How do you think about be more specific on on carpet? And I know this come up a little bit, but I'm curious about process there. I know it's also complicated to

Sure.

You know, I think we have been I think pretty specific about what are you know, twenty twenty-five goal is which is remember there were all of these discussions were about percent reductions. We started at a enormously lower level than the rest of the industry on just based off CO2 emissions per megawatt-hour generated, right and so any of the goals that we lay out, you know the which you know, our goal is 67% reduction off our 2005 Base by Twenty twenty-five. I think if you went back and you looked at the 20 the 2005 average average that off and and compared our next error rate in 20-25 to that 2005 average. I'm going to give you a number and everyone's going to go check me on it. It's going to be that would be an ATM.

90% reduction relative

To the 2005 us average CO2 emissions rate. So we have a we're going to significantly decarbonise our company and our missions and you know, I'm really excited about the goals. We set I think they're they're very doable. And and what I'm most excited about is the role that we can play both in Florida and in the rest of the country in terms of leading the way to decarbonise not just Berg electric not just the electric sector about 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 with and

The great news for the country and the economy is you can be clean and low cost at the same time and whatever we do will be for the benefit of Club Drive. It'll drive good economics better GDP growth for the country lower costs and and in in obviously better environmental profile.

Thank you. Got the time. I appreciate it.

Our next question comes from from Guggenheim Partners, please go ahead with your question. Hey, good morning guys. Just took just on the near backlog. It's it's obviously very strong again. So I'm just trying to get a sense Rebecca Cohn sort of how much of that backlog increase mainly on. The Wind side was attributed to wage war two projects with the modest PTC extension versus the versus like actual increments of opportunities. You're seeing is we think about modeling forward.

Yeah, I don't think it's very much. I think it's early. Obviously the extension happened very very late in in 2019. So I don't think we've seen any impact from it whatsoever coupled with the fact that it's you know, quite a number of years down the road 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 in terms of you know, the overall demand and and how that's reflected as we've said in the past. We saw it on 20/20 was going to be a significant development year clearly it is for wind and that 21 is more likely than not to be roughly comparable with where we were in in 2019. And we continue to see really strong interest from our customers about wind in the long-term as they should be there's Jim highlighted the the cost of wind and solar projects out in the mid 2020s assuming there are not any meaningful extensions of the incentives, which is an assumption of this page.

that that should be checked but it's

I mean those incentives are not extended are very competitive versus existing coal and nuclear plants and and some less efficient gas-fired plants. So economic should continue to drive 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 in in in 22 is we're thinking about your EPS guidance maybe from a regulatory construct or even addition to spending opportunities like the extension of sobre. Is there anything you can provide directly in how you're thinking about this month?

You know, not much beyond what we've already talked about in terms of everything that's built into our expectations for for 2020 through 2022. And as you recall from the investor conference materials wage lay out a lot of the detail for both businesses through 2021. And of course more detail for for energy resources out in twenty two, but the fundamentals are very consistent with what we've been doing for a long time on the on the regulated businesses again, focusing on good capital investment that adds value for our customers and taking cost out of the business to ensure that I have very thoughtful views on customer bills. And in the case of of Gulf Power, you know, targeting a meaningful decline in in the bills out to the mid 2020s to keep doing what I'm doing and we couldn't be more excited about the growth opportunities for all the businesses that lay out in front of us gotta stay tuned around the cap structure and the reserve amortization now you're dead.

Chewing up between the two utilities.

Absolutely. Okay great. Congrats guys.

Thank you for next question comes from Michael Weinstein from credit Swiss. Please go ahead with your question.

Hi, this is my eighth. On behalf of Mike. Thanks for taking questions. Just click on the battery growth you talking about. Can you talk about these reductions off on the battery systems for the projects in the pipe? And would it be possible to quantify the scale of opportunity for retrofits on existing sites that near or at any be?

In terms of battery costs. We've laid out some of our thoughts and expectations. I think most recently in in our investor presentation. We haven't broken that out between broken out a lot of the detainees between battery pack and and the rest of the balance of system costs, but everything that we've laid out in terms of where we've seen the market declines coming from in aggregate is really started to materialize and you know, whereas two years ago. We were surprised at how much faster costs were coming down. We gotten more aggressive with our assumptions and now the roughly consistent with what we were thinking we continue to be optimistic longer-term about batteries and is 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 and those drivers appear to be a pretty clear for quite a number of years down the road which is really driving the, you know manufacturing efficiencies and scale that we're seeing on a battery pack side. So really excited and and an Optima

about where that where that businesses had a

Go to could you just touch upon the retrofit opportunity for either near or any be for batteries? And would it be possible to get the tax credits on adding storage to an existing solar project? Yes, you know it it could obviously be a significant opportunity, you know coincident with you know, the significant deployment of rules particularly where the penetration of high adding, you know batteries to existing solar sides could be very advantageous to the extent that they've you know elected the ITC and and ultimately our charge or being used to charge the battery system. Yes, they would qualify for variety, you know, as long as we meet certain certain conditions, so it's a terrific opportunity for the team. But it it's really consistent with what we've been thinking about for the overall Market opportunity and and what we've been highlighting for, you know quite quite some time now to to investors.

Got it. Just one last question from me if you could talk about the

Impact on interest rates on any piece ability to execute the convertible refinancings. Thank you.

It's it's been terrific low interest rate environment is obviously horrific for both of our businesses. We love low cost of capital to be able to deploy these Solutions as economically as possible for both. Our customers on the energy resources side is as well as you know, the regulated utilities and of course also for for next Energy Partners, so it's it's been 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.