Q2 2020 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call
[music].
Good morning, everyone and welcome to the Nextera energy Inc. and Nextera Energy Partners Conference call.
All participants will be in listen only mode. Gee, It's just it's nice to know conference specialist by pressing the Starkey followed by zero.
After today's presentation, there will be an opportunity to ask questions.
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Please note today's event is being recorded.
At this time I'd like to turn the conference call ever It's you Rob Rob Scott Director of Investor Relations. Sir. Please go ahead.
Thank you Jamie good morning, everyone and thank you for joining our second quarter 2020, combined earnings conference call Nextera Energy Nextera energy partners.
This morning, our Jumbo Chairman and Chief Executive Officer, Nextera Energy, Bakiba Executive Vice President and Chief Financial Officer, Nextera Energy, John catch them, President and Chief Executive Officer, Nextera Energy resources and markets and executive Vice President of Nextera energy all of whom are also officers of Nextera energy partners I suppose ARX <unk>.
<unk>, President and Chief Executive Officer, Florida Power <unk> Light company.
Rebecca will provide an overview of our results and our executive team will then be available to answer your questions.
Well 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, but because of other factors discussed in today's earnings news release in the comments made during this conference call in the risk factor section of the company 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.
Our energy partners Dotcom does 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 to accompany todays presentation for definition information and reconciliations of historical non-GAAP measures sort of closest GAAP financial measure that I will turn the call over the <unk> Rebecca.
Thank you, Matt and good morning, everyone Nextera energy delivered strong second quarter results and continue to perform well both financially and operationally while managing the ongoing impact at the cobot 19 pandemic.
As part of our core goal of safely delivering affordable and reliable power to our customers. We continue to operate under a pandemic plan that we activated last quarter.
Despite the challenges created by the pandemic Nextera Energys second quarter adjusted earnings per share increased by more than 11% versus the prior year comparable quarter, and we're well positioned to meet our overall objectives for the year.
I feel increased earnings per share by 15 cents year over year and its strong execution continues across the board.
During the quarter FPL set a new system peak load of more than 24500 megawatts.
Appeals transmission and distribution systems continue to operate in line with a high reliability standards and our highly efficient gas generating facilities remain available to serve our customers.
Appeals continued strong execution is the result of a smart capital investments that we have made over the past several decades to enhance our customer value proposition of low bills high reliability outstanding customer service and clean energy solutions.
Consistent with enhancing its best in class customer value proposition last month, FPL announced plans to retire share for its last remaining coal unit you.
Together with our joint interest owner GA and subject to certain approvals from the Florida Public Service Commission FPL intends to retire the 847 megawatt coal fired plant in early 2022.
The retirement of share for is projected to generate hundreds of millions of dollars in savings for FPL customers and prevent roughly 4 million tons of carbon dioxide emissions annually from this unit.
Sure for his retirement is the final step up the coal phase out strategy. The FPL launched in 2015 and that will complete the complete closure of approximately 2700 megawatts of coal capacity, including the highest greenhouse admitting gas <unk> power plants in Florida.
These transactions, which will make FPL one of the first utilities to eliminate all of the coal from a generation portfolio demonstrate FPL has continued commitment and position as a clean energy leader.
We remain proud of our environmental track record, particularly the CEO to emissions reductions that we have delivered throughout Florida and across the country and we continue to remain focused on building a sustainable energy era that is both clean and affordable.
Gulf Power also had a strong quarter of execution the focus on operational cost effectiveness at Gulf continues to progress well with year to date, when I'm costs, excluding specific cobot 19 related expenses that declining by nearly 10% versus the prior year comparable period and by approximately 25% relative to 2018.
Gulf Power also delivered further improvements in service reliability and continued its significant improvement in employee safely.
With no Osha recordables year to date through the end of June.
We remain committed to delivering on the objectives that we previously outlined the Gulf power and continue to expect to generate significant customer and shareholder value over the coming years.
During the quarter, we completed our annual storm drills, Pref P.L. and Gulf power to prepare for the unprecedented situation of restoring power after hurricane in the midst of the cobot 19 pandemic.
We spent two weeks drilling and challenging our teams to find ways to efficiently restore service to our customers without sacrificing safety.
Drills provided a number of lessons, including how to leverage technology to quickly and safely screen personnel at various staging sites to help offset some of the challenges that will inevitably occur and performing storm restoration in the midst of a pandemic.
Well, we hope that our service territories will avoid the impacts of Hurricanes. This year consistent with our culture that is focused on preparedness and execution. We continue to do everything we can to ensure that we will be there for our customers when they need us most.
At energy resources, adjusted EPS increased by 13 cents year over year.
The energy resources team continued to capitalize on the terrific market opportunity for low cost renewables, adding 1730 megawatts to a backlog since the last earnings call.
Discontinued origination success through the ongoing pandemic is a test testament to the energy resources significant competitive advantages, including our best in class renewables development skills.
Our engineering and construction team also continues to execute commissioning roughly 650 50 megawatts during the quarter and keeping the remaining approximately 4400 megawatts of wind and solar projects that we expect to complete this year on track. Despite the significant supply chain challenges that are occurring both globally and locally.
Well, we are monitoring the situation closely we continue to expect that all of our planned 2020 renewables projects will achieved there in service dates this year.
In response to increased investor focus on environmental social and governance issues or U.S.G. next week, we expect to publish Nextera Energys updated E.S.G. report, which includes reporting under the sustainability accounting standards board or SAS be disclosures.
Our company has been focused on all the elements of U.S.G. for more than 25 years.
Nextera Energy's approach to governance and risk oversight combined with the way that we treat our people our customers our communities and the environment are proof that accompany can be both sustainable and financially successful at the same time.
The New report highlights this alignment of our corporate strategy with a key tenants at DSG includes robust discussion of risk oversight and incorporates new disclosures such as diversity and inclusion metrics.
Diversity and inclusion matter deeply to us as a company both because we believe they're the right thing to do but also because diverse and inclusive teams to deliver better business results for the diverse communities that we serve.
Our commitment to having a diverse workforce and inclusive culture is not new and our diversity metrics are better than many of the companies in our industry.
However, consistent with our focus on continuous improvement, we're not satisfied and we'll continue our efforts to build an even more diverse and inclusive team going forward.
Overall, we're pleased with progress we've made an extra energy so far in 2020.
Headed into the second half the year, we believe we're well positioned to achieve the full year expectations that we have previously discussed even when accounting for a reasonable range of impacts and outcomes that may result from the current pandemic.
Now, let's turn to the detailed results beginning with FPL.
For the second quarter of 2020, FPL reported net income of $749 million or $1.52 per share, which is an increase of $86 million.15 per share respectively year over year.
Regulatory capital employed increased by more than 10% over the same quarter last year and was a principal driver of appeals net income growth of approximately 13%.
Appeals capital expenditures were approximately $1.8 billion in the second quarter and we now expect our full year capital investments to total between 6.5 billion and $6.7 billion.
I've reported or E for regulatory purposes will be approximately 11.6% for the 12 month ended June 2020, which is at the upper end of the allowed band of 9.6% to 11.6% allowed under our current rate agreement.
During the quarter, we utilized $7 million of reserve amortization to achieve our target regulatory RMB.
Leaving FPL with the balance of $736 million.
We continue to expect that FPL end 2020, with a sufficient amount of surplus to continue operating under the current base rate settlement agreement during 2021.
As we previously discussed we expect that FPL and Gulf will operate as a single larger, Florida utility company, which will create both operational and financial benefits for our customers.
As a result in May the company's filed an application with FERC for an approval of an internal reorganization whereby Gulf would merge into FPL.
Subject to FERC approval the companies will emerge in January of 2021.
However, during 2021 Gulf power will continue to operate as a separate operating division serving its existing customers under separate retail rates.
We continue to expect the companies to file a combined rate case in the first quarter of next year for new rates effective in January 2022.
Turning to our development efforts all of our major capital initiatives at FPL remain on track and on budget.
During the quarter. The final 300 megawatts of solar being built under the solar base rate adjustment or sober mechanism that feels base rate settlement agreement were placed into service.
The 1200 megawatts of cost effective solar constructed under the Super mechanism are expected to generate significant customer benefits and represent the early stages of appeals rapid solar expansion and the next phase of a generation modernization efforts.
The next six solar together projects totaling approximately 450 megawatts remain on track to be placed in service later this year.
The final 600 megawatts of the roughly 1500 megawatt community solar program are expected to be placed in service next year.
Beyond solar construction on the highly efficient roughly 1200 megawatt Dania Beach clean Energy Center remains on schedule and on budget as it continues to advance towards its projected commercial operation date in 2022.
Additionally, the 409 megawatt manatee storage facility, which will be one of the world's largest battery storage plans is on track and on budget could be complete next year.
Based on their ongoing analysis of the long term potential of low cost renewables, we remain confident as ever that wind solar and battery storage will be hugely disruptive to the energy's existing generation the country's existing generation fleet.
While reducing cost for customers and helping to achieve future cotwo emissions reductions.
However to achieve and emissions free future, we believe that other technologies will be necessary and we're particularly excited about the long term potential hydrogen.
Consistent with a toe in the water approach, we've previously utilized with solar and battery storage. We are planning to propose a hydrogen pilot project at FPL.
It's approximately 65 million dollar pilot project, which are subject to felt Florida Public Service Commission approval is expected to be in service and 2023.
We'll utilize solar energy that would have otherwise been clipped to produce 100% green hydrogen through roughly 20 megawatt electrolysis system.
The hydrogen will be used to replace a portion of the natural gas that is consumed by one of the three gas turbines at the Okeechobee clean Energy Center.
We believe that the project as a complement to our ongoing solar and battery storage development efforts and highlights F. Hills continued innovative approach to further enhance the diversity of the clean energy solutions available for its customers.
We continue to evaluate other potential hydrogen opportunities across our businesses.
And while our near term investments are expected to be small and context for overall capital program. We're excited about the technologies long term potential which should further support future demand for low cost renewables as well excel as accelerate the de carbonization of transportation fuel and industrial feedstocks.
We continue to expect that appeals ongoing smart investment opportunities will support a compound annual growth rate in the regulatory capital employed at approximately 9% from 2018 through 2022.
While further enhancing our best in class customer value proposition.
Let me now turn to golf Tower, which reported second quarter 2020, GAAP earnings of $55 million or 11 cents per share a decline of one cents per share relative to Gulf powers adjusted earnings per share in the prior year period.
This quarter results include the impact of roughly $5 million of after tax cobot 19 related to expenses, primarily reflecting the expected incremental bad debt expense as a result at the pandemic.
Earlier this month, the Florida Public Service Commission approved Gulf powers request to record costs attributable to covert 19, including bad debt expense as a regulatory asset on its balance sheet.
As a result, the cost recorded during the second quarter are expected to be reversed during the third quarter as the regulatory asset is recorded.
Both powers reported our OE for regulatory purposes will be approximately 10.4% for the 12 months ending June 2020.
For the full year 2020, we are targeting a regulatory our OE in the upper half of the allowed band of 9.25% to 11.25%.
During the quarter Gulf powers capital expenditures were roughly $170 million and we now expect our full year capital investments to total between 1.0 and $1.1 billion.
All of Gulf Major smart capital investments, including the North, Florida, resiliency connection and the plant Crist coal to natural gas conversion continue to progress well.
Similar to other parts of the country, the Florida economy is being impacted by the ongoing cobot 19 pandemic.
Recent economic data reflects an increase in Florida unemployment rate and a decline in consumer confidence that are roughly in line with the changes the national averages of each metric.
Well it is still unclear at this point, how severely the economy will ultimately be impacted.
We continue to believe that the financial strength and structural advantages with which Florida entered the crisis.
And that continued attraction of the state to both new residences residents and new businesses will support a rebound once the worst of the pandemic is behind us.
We remain deeply engaged in helping Florida returned from this stronger than ever.
We will continue to do our part to support that outcome, including pursuing or smart capital investment program and economic development efforts, which help create jobs provide investment in local communities and further enhance our best in class customer value proposition.
During the quarter Appeals average number of customers continued its recent trend a strong underlying growth increasing by approximately 75000 from the comparable prior year quarter.
I feel second quarter retail sales decreased by 0.8% year over year as customer growth and favorable weather were more than offset by a decline in underlying usage per customer.
Based on our analysis, the overall effects of the pandemic on underlying usage during the second quarter were relatively muted.
I feel benefits from having as retail sales being heavily weighted towards residential customers.
And approximately 40% of its load is cooling related and therefore important for both comfort and building maintenance.
During April and stay at home orders were broadly in effect at fields weather normalized retail sales were down approximately 4% relative to our expectations.
As the economy began reopening in early May weather normalized retail sales improved and were above our expectations in June.
Well the ultimate impacts of the pandemic on underlying usage remain unknown at this time, we continue to expect the flexibility provided by a reserve amortization mechanism to offset any fluctuation retail sales or bad debt expense and support regulatory are we at the upper end of the allowed band of 9.6% to 11.6% under our current.
Right agreement.
For Gulf power, the average number of customers increased approximately 1.3% versus the comparable prior year quarter.
Gulf Power second quarter retail sales declined by roughly 6.2% year over year as result of the under of the unfavorable weather comparison and a decline in underlying usage per customer.
Over the second quarter Gulf power experienced a more significant decline in underlying usage per customer than FPL, but also experienced an improvement as the economy began reopening in may and June.
As a reminder, unlike FPL Gulf power does not have a reserve amortization mechanism under its settlement agreement to offset fluctuations in revenue or costs.
Any variability with therefore have more impact to gulf's earnings in our OE then at FPL.
As a reminder, as we've often discussed weather normalization is in precise, particularly when evaluating short periods of time.
Additional details on on retail sales at FPL and Gulf Power are included in the appendix of today's presentation.
Let me now turn to energy resources, which reported second quarter 2020, GAAP earnings of $481 million or 97 cents per share and adjusted earnings of $531 million or dollar Oh eight per share.
This is an increase in adjusted earnings per share 13 cents or approximately 14% from last year's comparable quarter results, which have been restated to reflect the results of our Nextera energy transmission business, formerly reported in corporate and other.
New investments added eight cents per share contributions from existing generation assets increased five cents per share as improved wind resource and increased PTC volume from our Repowering projects were partially offset by the refueling outage at the Seabrook nuclear facility.
Second quarter fleet wide wind resource was 99% of long term average versus 93% during the second quarter of 2019.
Also contributing favorably with Nextera energy transmission, where contributions increased by three cents versus 29 team.
Contributions from our gas infrastructure business, including existing pipelines were flat year over year.
These favorable contributions were partially offset by lower contributions from our customer supply and trading business, which declined four cents versus the particularly strong second quarter last year.
All other impacts increased results by one cents per share.
As I mentioned earlier energy resources development team had another excellent quarter of origination success, adding 1730 megawatts to our backlog.
Since our last earnings call, we've added 708 megawatts of wind.
844 megawatts of solar and 178 megawatts of battery storage tour renewables backlog.
We also executed a build own transfer agreement for a 200 megawatt solar project, which is not included in a backlog additions.
All of the battery storage projects will be paired with either new or existing solar projects to take advantage of the ITC and provide a more from renewable product for our customers.
The continued strong demand for battery storage projects 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.
We continue to expect but by the middle of this decade without incentives new near from wind and new near from solar will be cheaper than the operating costs of most existing coal and nuclear facilities and less.
Fuel efficient oil and gas fired generation units producing significant long term renewables demand.
Our current backlog now totals approximately 14400 megawatts and is the largest we've ever had in a roughly 20 year development history.
To put our backlog into context, it is larger than the current operating in wind solar power folios of all but two other companies in the world as of yearend 2019, highlighting the Nextera energy continues to be at the forefront of disruption that is occurring within the energy sector.
Only halfway through 2020, we're pleased to have already signed nearly 3500 megawatts of contracts for delivery beyond 2022, which is a reflection of the continued strong economic demand for wind solar and battery storage.
To ensure that we can take advantage of this significant demand in the coming years. We had now has more than $2 billion, a safe harbor wind and solar equipment, which could support as much as $40 billion of wind solar and battery storage investments across all of our businesses from 2021 to 2024.
These purchases highlight the benefits of scale and the strength of our balance sheet that we leverage as a key competitive advantage in renewables development and position us well for continued long term growth.
The safe Harbor equipment also supports additional repowering opportunities, including several hundred megawatts of potential 2021, Repowering projects, which we are currently evaluating.
As I discussed earlier all of the 2020 renewables projects remain on track to achieve their targeted in service dates this year.
As a result, we do not expect these projects to rely on the updated treasury start of construction guidance that was released during the quarter.
Beyond renewables, we continue to make progress with mountain Valley pipeline and work with our project partners to resolve the outstanding permit issues required for the pipelines construction.
We were pleased with the Supreme Court's ruling regarding Appalachian Trail crossing authorization authority, which resolved similar shoes for MVP.
We were similarly pleased that the Supreme Court, partially stayed the Montana federal courts decision related to the nationwide 12 permit program and are working with the Army Corps of engineers on its reissuance of the projects permit.
Following comprehensive restudy by the relevant agencies, we expect issuance of mbps revised biological opinion shortly.
Assuming timely resolution of the outstanding permitting issues, we're now targeting a full in service date for the pipeline during early 2021 and expecting overall project estimate in the range of $5.4 billion to $5.7 billion.
Turning now to the consolidated results for Nextera energy for the second quarter of 2020, GAAP net income attributable to Nextera energy was 1.27 by $5 billion or $2.59 per share.
Nextera Energy's 2022nd quarter adjusted earnings and adjusted EPS were 1.286 billion and $2.61 per share respectively.
Adjusted earnings from corporate corporate and other declined by one cents year over year, primarily as a result of higher interest expense.
Nextera energy also delivered strong year to date operating cash flow growth and for the full year 2020 expects to generate roughly $8.5 billion in operating cash flow to help support its strong financial position.
Nextera energy maintains approximately $13 billion and liquidity. This is to support the largest capital investment program in our history.
Since last quarter's call, we completed roughly $3 billion in long term financings, it, including a $2.2 billion and capital Holdings debentures.
Over the course of the last few months, we repaid nearly all of the term loans that we issued during March and April and converted these commitments to bilateral revolving credit facilities.
Included in these facilities as a total of more than $1 billion in six month storm facilities at FPL and Gulf power, which is similar to previous years, we put in place to ensure sufficient liquidity in the event of hurricane.
Energy resources also closed two tax equity financings, including its first ever combined wind and solar portfolio financing and we expect to close on the balance of our tax equity financings as the renewable projects are placed in service later this year.
Our year to date financing activities are evidence of the great financial partnerships. We have built over time, which helped provide ample liquidity and continued access to capital to support our outstanding growth prospects.
Extra energys financial expectations remain unchanged, we continue to expect that Nextera Energy's adjusted EPS compound annual growth rate to be in a range at 6% to 8% through 2021 off as a 2018 just D. P. S a $7.70.
Plus the accretion of 15 cents and 20 cents in 2020, and 2021, respectively from the Florida acquisitions.
For 2020, we continue to expect or adjusted EPS to be in the range of $8.70 to $9 in 20 cents.
For 2022, we expect to grow adjusted EPS in the range of 6% to 8% off of the 2021, adjusted EPS translating to a range of $10 to $10.75 per share.
From 2018 to 2022, we continue to expect that operating cash flow will grow roughly inline with our adjusted EPS compound annual growth rate range.
We also continue to expect to grow our dividends per share at roughly 10% per year through at least 2022 off of a 2020 base.
While our expectations always assume normal weather in operating conditions as we consider reasonable range of impacts related to the current pandemic, we continue to feel comfortable with the expectations that we have outlined.
In summary, despite the challenges created by the Cobot 19 pandemic all of our businesses continue to perform well and maintain their excellent prospects for growth going forward.
We have a long term track record of delivering results for our customers and shareholders and we remain intensely focused on continuing that track record.
Based on the resiliency of our underlying businesses and their strong growth prospects, we 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 and 2020 2021 and 2022.
While at the same time, maintaining a strong credit metrics.
We continue to remain enthusiastic about our future and believe it nextera energy is well positioned to drive long term shareholder value over the coming years.
Let me now turn to Nextera energy partners, which continued its strong start to 2020 with gross growth in adjusted EBITDA and cash available for distribution of approximately 23% and 46% respectively from the prior year comparable quarter.
On a year to date basis, adjusted EBITDA and cash available for distribution have increased by 26% and 86% respectively versus 2019.
The strong operational financial performance that next R&D highlights an extra Angie partners remains well positioned to continue to deliver on its outstanding growth objectives.
Yesterday, the Nextera Energy partners Board declared a quarterly distribution of 57.75 cents per common unit or $2 and 31 per common unit on an annualized basis.
Continuing our track record of growing distributions at the top end of our 12% to 15% per year growth range.
We were pleased to CPG Annie's emergence from bankruptcy earlier this month.
As expected all of our existing contracts were assumed without modification.
Following pgts emergence from bankruptcy Nextera energy partners received a cash distribution of approximately $65 million from our desert sunlight to 50, and 300 projects, which represent current distributions and those previously withheld as a result of the bankruptcy.
The release of the desert sunlight trapped cash supplements Nextera energy partners liquidity, which was approximately $650 million, including cash on hand at the end of the second quarter.
The organic growth investments at Nextera energy partners continue to progress well the approximately 275 megawatts a win repowering and the Texas pipelines expansion both remain on track to be in service later this year.
We continue to expect to execute on additional attractive growth opportunities as next energy partners portfolio further expands.
Let me now review the detailed results for Nextera energy partners.
Second quarter, adjusted EBITDA was $349 million and cash available for distribution was $166 million up 23% and 46% respectively against the prior year comparable quarter.
Now that the BG any bankruptcy has been favorably resolved and distributions from our desert sunlight projects have resumed cash available for distribution includes all contributions from PGT related projects.
New projects added $51 million, and adjusted EBITDA and $36 million of cash available for distribution.
Existing projects also contributed favorably to the significant year over year gross and adjusted EBITDA and cash available for distribution as resource was favorable across the portfolio.
For the second quarter wind resource was 100% of long term average versus 94% in the prior year comparable quarter.
Cash available for distribution also benefited from a reduction in project level debt service, primarily as result of the early debt retirement to facilitate the when repowering.
The reduction in project level debt service was partially offset by higher corporate level interest expense.
As a reminder, these results are net of IDR fees since we treat these as an operating expense.
Additional details are shown on the accompanying slide.
Let me now turn to next energy partners expectations, which remain unchanged.
Next energy partners continues to expect December 31st 2020 run rate for adjusted EBITDA to be a range of 1.2 to 5 billion to $1.4 billion.
Cash available for distribution in the range of 560 million to $640 million, reflecting calendar year 2021 expectations for the portfolio at the end of 2020.
Now that the PGT bankruptcy has been favorably resolved, we will no longer provide kathy expectations, including contributions that excluding the contributions from the desert sunlight projects. As a reminder, these expectations include the impact of anticipated IDR fees as we treat these as an operating expense.
From a base of our fourth quarter 2019 distribution per common unit and annualized rate of $2.14. We continue to see 12% to 15% growth per year, and LP distributions as being a reasonable range of expectations through at least 2024.
We expect the annualized rate of the fourth quarter 2020 distribution that is payable in February of 2021 to be in a range of $2.40 to $2.46 per common unit.
Similar to Nextera energy, while our expectations always assumes normal weather and operating conditions.
As we consider a reasonable range of impacts related to the current pandemic, we continue to feel comfortable with our overall expectations.
With the resumption of cash distributions from the desert sunlight projects, we now expect to achieve Nextera energy partners 2020 distribution growth objectives, while maintaining a trailing 12 month payout ratio of approximately 70%.
Highlighting the significant flexibility, we believe Nextera energy partners has going forward.
As we previously discussed or we will continue to be opportunistic Nextera energy partners favorable positioning should give it flexibility to achieve its long term distribution growth objectives without the need to make any acquisitions until 2022.
We're pleased with Nextera energy partners year to date performance in 2020 and believe it continues to offer a best in class value proposition for investors.
The diversity and long term contracted nature of Nextera energy partners clean energy portfolio helps insulate it from the broader economic conditions, including impacts related to the cobot 19 pandemic.
With the flexibility to grow in three ways acquiring assets from energy resources organically for acquiring assets from third parties Nextera energy partners has clear visibility into its growth going forward.
Following another strong quarter of origination energy resources portfolio of renewable projects now totals more than 27, gigawatts, including the sign backlog of projects that energy resources plans to build in the coming years.
When combined with the prospects for future renewables development.
Nextera energy partners long term growth visibility remains as strong as ever.
Nextera energy partners cost of capital and access to capital advantages, including significant demand from various low cost private infrastructure capital provides flexibility to finance this growth over the long term.
These strengths together with Nextera energy partners favorable tax position and enhanced governance rights leave Nextera energy partners uniquely positioned to continue to deliver on its objectives going forward.
In closing, we believed that the fundamental value proposition of Nextera energy and Nextera energy partners remains as robust as ever.
Both companies remain resilient and well positioned to deliver on their commitments.
We continue to remain enthusiastic about our future and our continued it and are focused on delivering smart capital investments that enhance value for both customers and shareholders and expand our position as the world's leading clean energy provider.
That concludes our prepared remarks, and with that we will open up the line for questions.
Ladies and gentlemen at this time, if you would like to ask your question. Please press Star and then one using it touched on a telephone.
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A little class momentarily to assemble the roster.
And our first question today comes from Julian Smith from Bank of America. Please go ahead with your question.
Hey, good morning. This is a actually Richie here for Julien I'm, just not a question around new the capex raising axiall and gold look what was driving that is that more around.
Undergrounding grid hardening or is that more on the solar side and how should we think about the capex checked trajectory from 21 and beyond that more in line with what you disclose at your analyst day or should should we expect it to be more of these robust robust levels going forward.
[noise] Richie I'm good morning, and thanks for the question I think it really reflects Oh, you know consistency with what we've been talking about for a long time, which is we keep finding terrific projects for our customers and investment opportunities.
And we're starting to put those in place and as I highlighted in the prepared remarks, we do have a consistent and expectations for the growth rate between 2018, and 2022 of a 9% compound annual growth rate on solving sent some projects move from one year to another but at the at the heart of it it is terrific investments for.
The benefit of our customers.
As far as beyond 2022, you know similar to comments that we've made in the past the growth opportunities that we see across all of our businesses, but specific it at FPL and Gulf power include the modernization efforts, including the large deployment of solar over time as well as investments in grid hardening Amen undergo.
Rounding as highlighted by the storm protection plan, a that were in the process of going through approvals and and you know initial investments for that program. So we're super excited about the opportunities for investing and again stay very focused on ensuring that these are good projects for the benefit of our customers.
Got it. Thanks, that's very helpful. And then just or on your comments around hydrogen I think you disclose Ah 65 million for that pilot project. What what are you, saying there on that front is this more around transportation opportunities or is this.
All around like a pipeline and being able to like blend with the pipes.
So we're really excited about hydrogen in in in particular, when we think about getting to a I'm not a net zero emissions profile, but actually a zero carbon emissions profile and for when you know when we looked at this let's call. It 510 years ago, and we thought about what it would take to get to true.
So as euro emissions, we were worried that it was extraordinarily expensive for customers what makes us really excited about hydrogen, particularly in that 2030 and beyond timeframe is that that has the potential to supplement significant deployment of renewables, including wind and solar technologies complemented by.
Short and I'll call medium term duration batteries.
But then that last amount of emissions and that that you would take out of the system to get down to zero to be most economically served by hydrogen.
So that's what makes US excited about doing a pilot project. We're very excited about the opportunity to present that to the Florida Public Service Commission on as a way to further enhance FPL his ability to innovate and deliver these long term.
You know clean energy solutions to our customers.
And as part of that we'll learn about the technologies and we'll see what other opportunities there are a potentially for the industrial and transportation sectors.
You know in for us to be able to per.
Produce that the green energy to produce the green hydrogen is a potential cigna significant opportunity for us. We think we're at the early stages, which is you know kind of consistent with our toe in the water approach, we want to get some experience with it obviously do a lotta research and Ah talk to folks in the in the supply chain and get better equipped to deal.
You know take advantage these opportunities, but we're really excited about it.
All right. Thanks, that's all the questions I had.
Thank you Ritchie.
Our next question comes from shore Pariser from Guggenheim Partners. Please go ahead with your question.
Hi, good morning, it's actually causes and here for sure ours wall.
Congratulations on great quarter.
The Jorge some impressive numbers for the backlog additional contract.
Before.
22 timeframe, just kind of curious on kind of your thoughts around kind of linear growth trajectory and kind of contribution to the business mix.
It's kind of supply to the conversation report from the rating agencies about.
Just thoughts on kind of growing contributions from mirror that of versus balancing out from the regulator contributions it doesn't.
Are you thinking about bolt on acquisitions or kind of any kind of dropdowns accelerated from there.
Some thoughts around that.
I think Scott state. We appreciate a appreciate you dialing in this morning I'm, we're really excited about pursuing opportunities for investment across the board and of course, it at FPL and Gulf. That's focused on investments that you mean that you need to create value for our customers and energy resources. Its return focused along with new delivering things for.
Our customers there too so from a corporate perspective, we don't want to limit any of our businesses. When we find great investment opportunities, which you know again I can't highlight enough about how excited we are about the renewables development prospects said at energy resources. So we're not going to constrain them anyway, you know we will develop those opportunities that.
Great value for shareholders and to the extent that we want to maintain a balance over time, we've got a lot of opportunities to do that that are accretive for shareholders.
Including recycling of capital through Nextera Energy partners, which is obviously, a a willing and excited acquirer of energy resources projects, but energy resources has the ability to recycle capital to third parties as well. So there's plenty of ways to ensure that weekend create the real value accretive opportunities and still thinking.
Got it from a corporate perspective in a variety of different ways.
Thanks, that's all that's very helpful.
Preventing a little bit curve something over the longer term I guess.
So can we just some of your thoughts on the November election, and goes the buyback campaign has put out some plans on frameworks out there higher tax rate clean energy support.
How does the nextera position for out of the federal change of the federal level.
So so this is Jim you know we.
We always position or business to try to win regardless of the outcome of elections and and so you know, we Oh I think.
You can remember back three.
Of course to four years ago know do some turmoil around or stock a when president Trump was elected.
We've managed completely farm under this administration in terms of being able to continue to grow or renewal business. Because you know what it's all about economics right and.
And the time for renewables is now in that that kind of transcends Paul to its frankly, the economics and <unk> and the need to you know.
And really the.
The need to Decarbonize, a normal electric sector, but the rest of those sectors in the economy are really really frankly transcend what happens in elections. So.
I wish we watch them closely we think a good clean energy policies important in the road policy for food for America in the future.
No.
We continue our seemed to be positioned really well were girls who wins in November.
Okay that makes sense I'll I'll go back to you.
Thanks, so much perhaps.
Thank you [noise].
Our next question comes from Michael Weinstein from Credit Suisse. Please go ahead with your question.
Hi, good morning, guys.
Hey, I'm on the same question.
Jim.
Are you said what do you think is the most likely outcome from the Congress are these days tax credit extensions cash grants do you think over a national renewable portfolio standard is a possibility and I'm just wondering of all those different alternatives, what do you think might actually occur.
The next a four years.
You know so I think it's honestly.
Too soon ditto, Michael I think Oh.
You know walk is going to depend on what happens in the elections. There continued support government owners and wants to put government.
That will be I think a big driver.
Our policies happen and I.
I think.
All of those ideas roaming through but we've been consistent in what we said which is the.
You know, we think it's important to have.
Good and for clean energy policy going forward. We also have said that it's a good leasing Wyndham and rules were batteries will be.
Or very competitive Oh, you know wants the PG season, the Archdiocese.
Phase out in terms of competing against conventional generation. It's just honestly a really more matter of the speed with which you want to Decarbonize is what is going to ultimately drive the final Oh, I think Paul so choices and so.
We are wrong you know obviously, we're actively engaged in in the discussions and Oh I think it's premature really to say, what we think it's going to happen because I think you have an election.
And for four months and as you all know auctions have consequences and and we'll we'll see what happens post the election in terms of what's going to be.
Oh, the policy with good going for.
Great pay him on hydrogen or do you think it I noticed there's a lot of a lot more emphasis on renewables rather than.
Yes, turbans and your future construction plants at a feel and I'm just wondering if if hydrogen works out or is that a message. There do you think you could actually build more.
Put more gas turbines back into the plan if hydrogen production becomes a viable economic alternative of or do you think other alternative technologies are better suited such as fuel cells.
Mike I think you from a hydrogen perspective, a and specific to Florida power. Unlike company, we're talking about potential hydrogen opportunities really in the 2030 and beyond timeframe.
And then that intervening time, we deploy a significant amount of solar technology and then if we're right and if the cost come down for hydrogen and it is the best alternative for supporting getting too is zero emissions profile.
We would retrofit certain of our you know gas facilities to run on hydrogen or run on a portion of hydrogen.
So I think for Florida power enlightened Gulf power <unk>. It's at this point and again they were talking about along the way into the future you wouldn't necessarily need to build any new yeah.
Hydrogen flash gas turbines in that in that portfolio, because we've got a tremendously efficient fleet. That's already in service on the investments we would make for a really around conversion now whether or not that's true elsewhere in the country. I think is you know it might be a little bit different but we're talking about a long way down the road and a lot of things need to come together to have those two.
It's a conversation I think it's it's fairly preliminary.
Gotcha and one final question of just make a comment on M&A interest. These days, what's going on with Santi Cooper.
That's right.
Oh, So I think Oh, we.
Just won't be surprising we remain interested in M&A, a we think theres a lot. There we can bring to the table. We you know I continue to believe that theres not a utility in the country that we couldn't run more efficiently and Oh, a better for customers.
True Luisa and ER.
And so you know we continue to work our thinking in terms assumed Cooper of you know that process has been pushed him next year and we remain and we remain very interested in and continue to be focused on trying to make that happen.
Hey, Jim what regions of the country you focused on just curious.
We continue to be focused on the Midwest in the southeast.
Okay, all right. Thank you very <unk>.
Fourth FERC regulated assets pretty much any were at or.
Okay. Thanks, a lot.
Thank you.
Our next question comes from Stephen Byrd from Morgan Stanley. Please go with your question.
Hi, Thanks, It's Steve Arcaro on for Stephen Thanks for taking my question I had one quick follow up just on the hydrogen topic wondering if you see a potential path for this to be an opportunity at near.
And also in terms of kind of business model, but do you think that you would envision being involved in owning the electrolysis function within the supply chain.
And if so do you have kind of a vision or view on what technology is ahead of others at this point.
Thanks, Dave Yeah, I would say at this is this point, we're looking for opportunities across the portfolio. Obviously, we talked about the pilot project FPL today, but we are looking at other pilot type investment opportunities elsewhere in the portfolio consistent with the way that we approach sort of solar early on and of course batteries I'm more recently.
So I think there will be opportunities over time for those type of pilot projects. You know again, where you think of it it's actually being close to economic today are areas, where there is already significant penetration of renewables because as you well no. It's critical to find a low cost electricity supply in order to make.
Economic or close to economic.
And here in the U.S. you know the economic certainly have to factor in that today, there's a very low cost supply of natural gas I'm, making it you know the imperative that you find a a cheap electricity supply you know it's early you never say never on where we might find opportunities to invest in the business, but historically.
As you know weve not played in the spaces of owning a being a vertically integrated you owner of technologies are projects. We've typically I'm, taking the best of manufactured equipment from other folks I'm you know apply our scale in our ability to construct.
Own and operate over the long term effectively is where we create value. So again, it's early but at this point I wouldn't think that we would a focus on vertically integrating its more of you know applying a hydrogen is as a technology consistent the ways that we've created value in the past.
So the only thing I would add to the two things one is I'd be disappointed if in Jones business, we don't make some in some kind of pilot investment over the next year or working in a variety of things and and I'd be disappointed if we don't make some kinda powered investment next year are very very much tool in the water work, we did a decade ago when the battery storage, but.
<unk>.
Second we Oh, you know clearly, we're not gonna backward integrated into manufacturing or to realize is or anything like that but I wouldn't I wouldn't rule out awesome.
Owning them as part of the.
Integrated system that was integrated with renewables to manufacture hunters.
And is.
Our view around that would be if we had a long term contract and obviously, we don't need access to very fish capital, we know how to operate.
Shipment, we're you know and so a lot of that would would come to or Rob I think.
Or.
Because you can damages in terms of how we.
How we're able to create value for folks. So you know a a secret I think it's early were we are there's clearly an opportunity to you know five to five to 10 years from now to displace the last 10% or the carbon emissions out of the electric.
Dr Bug manufacturing hydrogen is with renewables that's clear I think there's also clearly an opportunity to make renewables.
The sport is diesel fuel and perhaps even other types of transportation fuel going forward and there's also I think clearly or an opportunity to make green hydrogen to.
To to replace other types of hydrogen the or and other feedstocks and industrial applications and so we're working at all of that and we're not you know we're not being a all of that in the end comes back to.
It's very important thing, which is this is going to drive gigawatts, and gigawatts and Gigawatts and gigawatts of renewable demand in this country.
And so there is no one better position than off to take advantage of that and we're gonna be just like we were in battery storage, we were going to be it. The vanguard, we're going to a and we're going to this is a big strategic initiative for us and we're going to drive it and it's going to be very important Oh for this company I think not you know over the next over the next.
Decade, we won't make any money on it in the next five years, just like we didn't make any money in batteries and the first five years and the next year would we're deploying a billion dollars a batteries or 10 years later and so that's that's the way I think about this I think about this is his help powering the long term growth for this company into it.
Back half of this decade in the in the next decade as well.
Got it that's really helpful. Thanks, so much for those comments.
I just had one other quick M&A follow up I was just wondering if is there any path for Texas to be a target of interest for you from an M&A perspective, or what would need to change there.
Thanks.
[laughter].
So we we Oh, we have spent a lot of time in Texas folks, who we own assets from Texas and so are we are great operator, and ER and and we feel like we would bring an enormous amount of state we own billions of dollars of assets in the state right and were great group.
For the state and so.
I would never say never obviously, we were extraordinarily disappointed in the encore decision. We think it was a a mistake and shortsighted, but you know that is what it is and.
So, it's probably going to take a bit to get pass that before route I'm Super excited about doing things in Texas from an M&A standpoint.
[music].
Understood understood. Thank you very much.
Our next question comes or Michael If you just from Goldman Sachs. Please go ahead with your question.
Hi, good morning, everybody. Thanks for taking my question.
I want to turn a Florida for a second you're supposed to file rate cases next year, a at both utilities and obviously the combination of that there will be a big step up that there are any potential or and able to delay or <unk> or the timing of the rate cases to AC what happens from a tax perspective.
I've been in DC from about policy perspective, just so you don't have to go back to the regulator two or three times over a two or three year period.
And be it is there any scenario, where you may not even ito rate case or week by week.
Good morning, Michael and and we appreciate the other question as I've commented the I think even in these prepared remarks, we do continue to believe that FPL and golf would file for a combined rate case in early 2021 for new rates effective in 2022.
As you highlighted there's there's some uncertainties in certain factors that can change, but that's the reality of operating any business I'm you know what you know those days and and you do the best Cantor for planning for uncertainties, and we certainly would contemplate changes that we're aware of at the time, but you've got to keep running your business.
And then what's most important from our perspective is continuing to have the ability to invest in Florida power <unk> light and invest at Gulf power in these great opportunities that we see a for the benefit of our customers. You know we continue to lead the industry Ano and M. costs, we continue to lead the industry in reliability and customer service.
And the best way, they keep doing that as execute and that means occasionally having rate cases, we are I'm excited about that prospect, we've been preparing for it for a long time and we think we have a great story to tell on and we welcome the opportunity to talk about the things that we've been doing it at FPL and golf.
So right for now and you know obviously things could change but for now we continue to have those plans to file and 21 for new rates that to 2022.
All right and one other question just on the quota utilities you you have been the industry leader in terms of cost management.
Do you think the pace of change and OEM cost declines will stay at this level of many being year over year change or declining rates would you think you're reaching a point, where it'll start to flatten out where the ability to continue to take out as much cost as you've done every year, we'll start to slow.
The surest answer to that Michael is we've got a very creative team and we've got a team that is focused on continuous improvement and not afraid if that but let it and let me also not underestimate what that requires and that requires the ability to identify those new technologies and take that cost out over a overtime. So there.
You know we have to work for it and so every year, we we pulled together and come up with our best ideas or do we think over the long period of time that we've exhausted every opportunity nope impart because I think technology will continue to enhance our ability to do that but it takes time to execute on those opportunities. So our discipline is there.
There are a creativity is their innovation our commitment to continuous improvement and we're going to do the best we can to create the best value for our customers.
Got it. Thank you went back up much appreciated.
And ladies and gentlemen that will take food todays question and answer session as well as today's conference call. We do thank you for joining todays presentation. You may now disconnect your lines.
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