Q4 2020 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call
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Good morning, and welcome to the next era energy and Nextera Energy partners fourth quarter and full year 2020 earnings conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded I would now like to turn the conference over to Jessica Aldridge Director of Investor Relations. Please go ahead.
Thank you Jason Good morning, everyone and thank you for joining our fourth quarter and full year 2020, combined earnings conference call for Nextera energy and Nextera Energy partners.
With me. This morning are Jim Robo, Chairman and Chief Executive Officer of Nextera Energy, Rebecca Kujawa Executive Vice President and Chief Financial Officer of Nextera Energy, John Ketchum, President and Chief Executive Officer of Nextera Energy resources, and Mark Hickson Executive Vice President of Nextera energy all.
All of whom are also officers of Nextera energy partners as well as Eric <unk>, President and Chief Executive Officer of Florida Power and light company.
Jim will provide some opening remarks and will then turn the call over to Rebecca for a review of our fourth quarter and full year results.
Our executive team will then be available to answer your questions.
We will be making forward looking statements. During this call based on current expectations and assumptions, which are subject to risks and uncertainties.
Actual results could differ materially from our forward looking statements if any of our key assumptions are incorrect or.
Cause of other factors discussed in today's earnings news release, and the comments made during this conference call in the risk factors section of the accompanying presentation or in our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website Nextera energy Dot com and Nextera energy partners.
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Do not undertake any duty to update any forward looking statements.
Today's presentation also includes references to non-GAAP financial measures.
You should refer to the information contained in the slides accompanying today's presentation for definitions information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure.
With that I will turn the call over to Jim.
Thanks, Jessica and good morning, everyone 2020 was a terrific year for both Nextera energy and Nextera energy partners.
Nextera energy performance was strong both financially and operationally, we had announced we had outstanding execution on our initiatives to continue to drive future growth across the company.
Ross all of our businesses, we successfully executed on our largest capital program in our history deploying more than $14 billion in 2020, as we read Americas clean energy transformation by.
By successfully executing on our plans Nextera energy extended its long track record of delivering value for shareholders with adjusted earnings per share of $2.31 up 10, 5% from 2019.
A key element of our value proposition of Nextera energy is a culture focused on delivering outstanding results for our shareholders.
Over the past 10 years, we've delivered compound annual growth in adjusted EPS of 8%, which is the highest among all top 10 power companies, who have achieved on average compound annual growth of less than 3% over the same period.
Amid this significant growth the company has maintained one of the strongest balance sheets and credit positions in the industry.
In 2020, we delivered a total shareholder return of approximately 30% Cigna.
Significantly outperforming both the S&P 500, and the S&P 500 utilities index and continuing to outperform both indices in terms of total shareholder return.
On a one year three year five year, seven year, and 10 year basis over.
Over the past 15 years, we've outperformed all of the other companies in the S&P 500 utilities index and 86% of other companies in the S&P 500, while more than tripling. The average total shareholder return of both indices.
While we are proud of our long term track record of creating shareholder value, we remain laser focused on the future and on delivering our commitments.
Nextera energy remains well positioned to capitalize on the disruptive forces reshaping our industry, which have expanded and accelerated over the past two years, even beyond what we had anticipated.
The combination of low cost renewables with low cost storage in the form of batteries today and hydrogen in the longer term.
Has substantially increased the total addressable market for Nextera energy, we now believe that a substantial and economic de carbonization of the electricity transportation and industrial sectors as possible, which represents the potential investment opportunity of trillions of dollars in the.
The coming decades.
In the electricity sector, we expect that older and more inefficient generation will continue to be retired and replaced with cleaner and more affordable alternatives.
In the transportation sector, we believe it will be increasingly economic to replace fossil fuel vehicles with vehicles powered by fuel cells and batteries charged with renewable energy.
And in the industrial sector Gray hydrogen and other high carbon feedstocks can be replaced with green hydrogen.
We believe these trends have already been put into motion driven by economics. In addition, we believe it is possible that the Biden administration supported by a significant shift in public support towards taking action to address climate change May Act to further accelerate these shifts through the extension of existing incentives as well as initiating other fee.
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Importantly, we believe that no company is better equipped to take advantage of these substantial and long term trends the nextera energy.
In fact, Nextera energy is already proof that you can be clean low cost and financially successful all at the same time.
We were at the Vanguard of building a sustainable energy era that is both clean and affordable and we are driving hard to continue to be at the forefront of the disruption that is occurring within the energy sector and broader parts of the U S economy.
We expect that the execution of our strategy will drive meaningful C O two emissions reductions across the country.
And we will help advance nextera energy towards its goal of reducing its C. O two emissions rate by 67% by 2025 from a 2005 baseline while simultaneously lowering generation costs for customers and maintaining best in class reliability.
We expect the disruptive nature of renewables to be terrific for customers terrific for the environment and terrific for shareholders by helping to drive tremendous growth for this company over the next decade and beyond.
FPL was already capitalizing on the disruption in our sector with continued focus on its grid and fleet modernization efforts. During 2020, FPL successfully executed on our strategic initiatives, including placing more than 1100 megawatts of cost effective solar and service on time.
And on budget in support of its ongoing capital plan. This.
Solar expansion as part of Fpl's solar together community Solar program and its groundbreaking 30 by 30 plan, which is one of the world's largest solar expansions in <unk> and <unk>.
Would result in roughly 10000 megawatts of total solar capacity on FPL system by 2030.
Additionally, the 409 megawatt manatee energy storage center, which will be the world's largest integrated solar powered powered battery system is on track and on budget to be placed in service later this year as part of the approximately $1 billion that Nextera energy is investing in battery storage projects in 2021.
Smart capital investments such as these help FPL improve its already best in class customer value proposition, while also maintaining an emissions profile that is among the cleanest in the nation.
FPL also had continued success with its cost saving initiatives, making even further reductions to its already best in class dollar per retail megawatt hour non fuel O&M costs from 2019 to 2020.
Through our unrelenting focus on cost savings and on making disciplined long term investments for the benefit of our customers.
<unk> has been able to maintain typical customer bills that are the lowest in the nation when compared to the 20 largest investor owned utilities in the country.
In addition to low bills.
FPL has continued to provide reliability that is by far the best in the state of Florida, achieving its best ever reliability rate in 2020.
<unk> investments to build a stronger smarter energy grid have resulted in best in state reliability for the last 14 years in a row as well as earning numerous National awards.
In 2020, FPL was recognized for the fifth time in six years as being the most reliable electric utility in the nation.
Let me now turn to Gulf power.
And the two years that has been part of the Nextera energy family Gulf Power has realized approximately 30% reduction in O&M costs, a 50% improvement in service reliability, a 93% improvement in safety and a nearly 20% reduction in cotwo emissions.
Power has grown regulatory capital employed at a 17% compound annual growth rate since 2018, and we are well on our way to achieving the objectives, we laid out at our Investor Conference in 2019.
In addition to the excellent operational execution that we delivered in 2020, we continued to progress our smart capital investment program that is expected to generate further customer benefits over the coming years.
In the fourth quarter, we completed the plant crist coal to natural gas conversion.
As a result, consistent with our commitment to remain a clean energy leader.
We were able to complete the accelerated shutdown of the coal units at plant Crist, which has now been renamed the Gulf Clean Energy Center.
With the retirement of Fpl's Indiantown cogeneration facility also occurring late last year 2021 is the first time in nearly 70 years that there are no coal fired power plants in Florida for either FPL Gulf power.
Earlier this month FPL.
<unk> filed the test year, whether with the Florida Public Service Commission to initiate a rate proceeding for new rates beginning in January 2020 to.
The four year plan that we intend to propose a designed to provide continued longer term cost certainty for customers, while allowing FPL to continue investing in clean energy storm harden infrastructure and other innovative technologies that are the foundation of our communities.
Stability of multi year rate plans allows FPL to focus on efficiency in the business, which is critical to keeping customer bills low while at the same time, enabling FPL to maintain strong credit ratings and balance sheet.
Which allows for consistent access to the capital markets.
We look forward to the opportunity to showcase our long term track record.
<unk> low bills high reliability and clean energy for Floridians.
Plans and our plans to build an even more resilient and sustainable energy future for Florida in the coming years.
Turning to energy resources in 2020, we continue to advance our position as the leading developer and operator of wind solar and battery storage projects commissioning approximately 5750 megawatts of new projects more than doubling the amount of total renewables commission versus the previous year.
This was also a record year for renewables origination at energy resources with the team, adding a net nearly 7000 megawatts to our backlog during the year.
As a result of the team's origination success and alongside the backdrop of the terrific market outlook I just outlined at the beginning of my remarks, we now expect to construct approximately 23 to 30 gigawatts of new renewables and the 2021% to 2024 time frame.
Which if we are successful with the midpoint would mean, adding a portfolio of generation projects that is approximately one and a half times the size of energy resources entire operating renewables portfolio as of year end 2019.
Energy resources execution success is reflective of our ability to leverage our significant competitive advantages.
Including our best in class development skills large pipeline of sites and interconnection queue positions strong customer relationships purchasing power best in class construction expertise resource assessment capabilities cost of capital advantages and world class operations capability to capitalize on the ongoing energy transition.
It is occurring in the nation's generation fleet.
We believe that we are in a terrific position to be able to capture a significant share of the market opportunities going forward and what we continue to believe is the best renewables development environment, we've ever seen.
Along with the broader public shift towards calls for action to fight climate change over the past few years, there's been an increased focus on environmental social and governance or ESG on the part of many of our stakeholders. While we expect this trend to amplify demand among our traditional customers and are in it and in our core renewables business. We also believe.
It is opening up significant new markets and business opportunities for energy resources we.
We anticipate we anticipate our development program to be further enhanced by an ability to attract new non traditional customers, particularly in the commercial and industrial sector is improving renewable economics are increasingly aligned with corporate objectives to procure energy from clean generation sources.
In summary, I continue to remain as enthusiastic as ever about Nextera energy as long term growth prospects in 2020, we extended our long track record of executing for the benefit of customers and shareholders and further developed our best in class organic growth prospects.
Based on the strength and resiliency 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 2021, 2022 and 2023.
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 delivered a total unit returns unitholder return of approximately 32% in 2020.
Further advancing its history of value creation since the IPO.
Nextera energy partners is uniquely positioned to take advantage of the disruptive factors reshaping the energy industry and benefit from the enormous market opportunity in the coming decades for renewables.
<unk> Energy partners also had a terrific year of execution in 2020 and continued to deliver on its commitments that history of execution is supported by Nextera energy Partners' outstanding portfolio of clean energy assets, which was further diversified in 2020.
During the year Nextera energy partners' inquired interests and approximately 1100 megawatts of high quality renewable energy assets.
<unk> the partnerships first battery storage project from energy resources.
Additionally, during the year Nextera energy partners successfully completed its first three organic growth prospects, including the Repowering of 275 megawatts of wind projects.
For 2020, Nextera energy partners grew its LP distributions by 15% year over year and delivered 40% year over year cash available for distribution growth highlighting the strength of its operating portfolio.
With this strong year over year growth in cash available for distribution Nextera energy partners achieved its distribution growth objectives, while maintaining a trailing 12 month payout ratio in the high 60% range as of year end 2020.
In the fourth quarter, we published our first Nextera energy Partners' ESG report highlighting its high quality clean energy portfolio visible opportunities for renewables growth and ability to leverage the operational expertise of Nextera energy resources.
The continued origination success at energy resources is expected to benefit Nextera energy partners in meeting its future growth objectives.
I continue to believe that the combination of Nextera energy partners' clean energy portfolio growth visibility and flexibility to finance that growth offers LP unit holders, a uniquely attractive investor value proposition.
As with Nextera energy, we remain intensely focused on continuing to execute and deliver that unitholder value over the coming years.
Finally, I would like to take a moment to thank all of Nextera Energy's employees for their continued dedication hard work and focus during the extraordinary circumstances of the past year.
Despite the significant disruption caused by the pandemic and in the midst of the most active hurricane season in the Atlantic Basin on record our employees' unwavering focus on our customers as one eight is what enabled yet another year of flawless execution in the business, while also delivering our best ever safety results across.
The company.
It is because of their commitment to excellence that we were able to deliver above and beyond our commitments in 2020.
And why I remain as confident as ever in our ability to deliver on all our expectations moving forward.
With that I'll now turn the call over to Rebecca who will review the 2020 results in more detail.
Thank you Jim and good morning, everyone, Let's now turn to the detailed results beginning with FPL.
In the fourth quarter of 2020, FPL reported net income of $502 million or 25 cents per share.
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For the full year 2020, FPL reported net income of $2 six $5 billion per $1 35 per share an increase of <unk> 15 per share versus 2019.
Regulatory capital employed increased by approximately 11% for 2020 and was the principal driver of Fpl's net income growth of more than 13% for the year.
Capital expenditures were approximately $2 2 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $6 $7 billion.
<unk> reported ROE for regulatory purposes was 11, 6% for the 12 months ended December 31, 2020, which is at the upper end of the allowed band of nine 6% to 11, 6% under our current rate agreement.
During the fourth quarter, we utilized approximately $100 million reserve amortization, leaving FPL with a year end 2020 balance of $894 million.
Approximately 206 million of reserve amortization was used to offset the restoration costs associated with hurricanes.
And tropical storm, Ada, which FBL elected not to recover from customers through a surcharge.
The other reserve amortization mechanism under its current settlement agreement combined with our aggressive cost cutting measures and the benefits of tax reform has provided significant customer benefits, including avoided surcharges for approximately $1 $7 billion in storm restoration costs since 2017.
I remember our capital program at FPL is progressing well, we continue to advance one of the nation's largest ever solar expansions.
The year, the Florida Public Service Commission approved Fpl's solar together program, which is the nation's largest community solar program that is expected to generate $249 million and total net cost savings from participating in nonparticipating customers over the program's life.
After commissioning over 1100 megawatts or more than three and a half times the amount of solar capacity in 2020 versus the prior year.
They all expect to commission roughly 670 megawatts of additional solar together capacity in 2021, and the customer customer demand for this innovative program across all customer classes remained strong.
Beyond solar construction of the highly efficient roughly 12 200 megawatt Dania Beach clean Energy Center remains on schedule and on budget as it continues to advance towards its projected commercial operations date in 2022.
It should be noted that all of these significant accomplishments, including the deployment of nearly $7 billion in capital. We're in the midst of not only a global pandemic, but also doing the most active hurricane season in the Atlantic Basin on record, we delivered our best ever reliability results when our customers needed us the most and we remain committed to supporting customers experience.
<unk> economic hardship as a result of the challenges caused by the pandemic.
To date FBL has provided customers with approximately $75 million in relief through various programs and initiatives as Florida recovers, we will continue to help our customers navigate this difficult time, while maintaining our best in class customer value proposition.
Let me now turn to Gulf power, which as a reminder, like legally merged into S. P. L. On January one 'twenty 'twenty, one but will continue to be reported as a separate regulated segment during 2021.
Gulf Power's reported fourth quarter, 2020, GAAP earnings of $353 million or three cents per share or two cents per share year over year.
For the full year Gulf power reported net income of $238 million or 12 cents per share an increase of two cents per share year over year unadjusted basis.
Based on O&M reductions were the primary driver of Gulf Power's, 19% year over year growth in adjusted earnings.
Gulf Power's reported ROE for regulatory purposes is expected to be approximately $11 one per cent for the 12 months ending December 2020, which is near the upper end of the allowed band of 9.25 per cent to 11.25 per cent under its current rate agreement.
So therefore for the full year 'twenty 'twenty, one we expect a regulatory ROE to be in the upper half of this allowed band assuming normal weather and operating conditions.
All of our major capital initiatives at Gulf Power are progressing well Gulf Power's first solar development project. The roughly 75 megawatt Blue Indigo Solar Energy Center went into service in 2020 and is expected to generate significant customer savings over its lifetime.
Gulf power anticipates, bringing another 150 megawatts of cost effective zero emission solar capacity online later this year.
The North, Florida, resiliency connection, which among other things will allow customers to benefit from greater diversity and sell the output across two different time zone is expected to be in service in mid 2022.
Continued smart capital investments such as these renewables and core infrastructure are expected to drive customer benefits for many years to come.
The Florida economy continues to recover from the ongoing impacts of the COVID-19 pandemic, a number of current economic indicators, including retail taxable sales new building permits and consumer confidence has meaningfully improved since the start of the pandemic in early 2020.
Additionally, Florida's most recent seasonally adjusted unemployment rate of $6 four per cent is below the national average.
While it is unclear at this point, how the economy will be impacted by the current wave of COVID-19 cases, we continue to believe that Florida offers a unique proposition in terms of housing affordability, great weather low taxes, and a pro business economy, all of which should support ongoing FPL customer growth and economic rebound once the worst other pinned down.
Nick is behind us.
We remain deeply engaged in helping Florida return from this stronger than ever and we will continue to do our part to support that outcome, including for scaling our 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 Fpl's average customer growth was strong increasing by nearly 76000 kind of a comparable prior year quarter.
Fourth quarter retail sales were up 9% versus the prior year period, largely driven by a two 3% year over year growth in underlying usage per customer.
'twenty 'twenty Fpl's retail sales increased one five per cent versus the prior year, driven primarily by ongoing strong growth in customers and a favorable weather comparison.
On a weather normalized basis Fpl's retail sales increased by <unk> seven per cent for the full year 2020 day.
Overall impacts of the pandemic on last years retail sales were relatively muted and FPL is underlying usage per customer was flat year over year.
For Gulf power, the average number of customers increased approximately 9% versus the comparable prior year quarter.
'twenty 'twenty Gulf Power's retail sales declined three 3%, primarily as a result of a more favorable weather in the prior year as well as lower usage per customer, which we attribute in part to the ongoing impacts of the pandemic on our commercial and industrial customers.
As Jim mentioned FPL is preparing to file a base rate adjustment proposal that would cover the next four years 2022 through 2025 and provide customers longer term visibility to the future cost of electricity.
Well the details are still being finalized we expect the proposal to include base rate adjustments of approximately $1 $1 billion starting in January of 2022, and $615 million starting in January of 2023.
Also expect the proposal to request support for continued deployment of cost effective solar with the continuation of our solar base rate adjustment or solar silver mechanism to recover the revenue requirement associated with up to 900 megawatts of cost effective solar projects in each of 2024 and 2025, which we currently estimate.
<unk> to be approximately $140 million each year.
For the period 2019 through the end of 2022 F. P. L is planning to have invested approximately $29 billion with additional significant investments expected in 2023 and beyond to meet the growing needs of Florida's economy and to continue delivering outstanding value for Florida customers by keeping reliability high and fuel.
And other costs low while.
While the benefits of building a stronger smarter and cleaner grid more efficient generation fleet are passed along regularly to customers through higher service reliability and lower bills.
We must periodically seek recovery for these long term investments supported by base rates.
As we've previously indicated we plan to request the commission authorized unified rates and capital structure from both FPL and Gulf power customers.
We believe the combination of the two businesses will result in approximately $2 $8 billion of savings for customers through both operational savings and overall system benefits.
<unk> expects to request, an 11, 5% ROE inclusive of a 50 basis point incentive for superior performance.
Paired with peer utilities in the south Eastern U S. F. B L has the most efficient most cost efficient operations, the highest reliability the lowest customer bills.
All of our remaining one of the cleanest utilities in the country and is widely regarded as the top overall performer in the industry, bringing exceptional value to customers.
We believe that the performance at or would reflect fpl's current superior value proposition and encourage strong continued strong performance.
In addition, we continue to believe that a strong balance sheet, including strong credit ratings remains critical to ensure FPL maintained uninterrupted access to the capital markets even.
Even in times of significant market disruption in the aftermath of hurricanes as well as to attract capital to support the investments FPL is making to further improve the value we offer our customers.
The total of these base rate increase request over the four year period from 2022 to 2025.
Salt and an estimated average increase in total revenues of about three 7% per year.
Today Fpl's typical residential bill is about 30% lower than the national average if the full amount of the request for granted under our proposal and assuming other utilities experienced bill increases only at their historical rate of increase Fpl's typical customer bills would remain significantly lower than the national average through 2025.
Five.
To put this proposal in context that proposal would result in a typical customer bill in January 2022 that is nearly 22% less than it was in real terms 15 years ago, even with our proposed base rate increases.
Even in nominal terms FPL bills would be only about three five per cent higher in 2022 than in 2006, a fraction of the nominal increases of 25% to 75 per cent and the cost of groceries medical care health insurance and housing over the past 15 years.
Moreover, through the consolidation of FPL and Gulf power that the typical 1000 kilowatt hour residential customer Bill in northwest, Florida is projected to be lower in 2025 than it was in 2019.
We look forward to the opportunity to present, the details of our case and expect to make our formal filing with testimony and required detailed data in March.
The timing for the proceeding will ultimately be determined by the commission, but we currently expect that we will have hearings in the third quarter and a final commission decision in the fourth quarter in time for new rates to go into effect in January of 2022.
As always we are open to the possibility of resolving our rate request you with their settlement agreement.
During the course of the past 22 years FPL has entered into six multi year settlement agreements that provide our customers with a high degree of rate stability and certainty and helped FPL execute to deliver its best in class customer value proposition.
Our core focus will be to pursue a fair and objective review of our case that supports continued execution of our successful strategy for customers and we will continue to provide updates throughout the process.
Energy resources reported fourth quarter, 2020, GAAP loss of $644 million or 33 cents per share.
Earnings for the fourth quarter were $342 million or <unk> 17 per share.
G Resources' contribution to adjusted earnings per share in the fourth quarter is flat versus the prior year comparable period as favorable results from the continued growth and performance in our renewables portfolio were roughly offset by a number of items, none of which are particularly noteworthy.
For the full year energy resources reported GAAP earnings of $531 million or 27 cents per share and adjusted earnings of $1 $95 billion or <unk> 99 per share.
Energy resources full year adjusted earnings per share contribution increased 12 cents or approximately 14% versus 2019.
For the full year growth was driven by continued new additions to our renewables portfolio as contributions from new investments increased by seven cents per share.
Contributions from existing generation assets increased three versus 2019, due primarily to increased production tax credit volume from our re powered wind projects and an improvement in wind resource, which were partially offset by the planned nuclear outages and retirement of our Duane Arnold nuclear facility.
Also contributing favorably with Nextera energy transmission, which increase results by two cents year over year, primarily as a result, our full year contributions from Trans Bay cable acquisition that closed in the middle of 2019.
Contributions from all other impacts were flat year over year.
Amid the disruption of the pandemic energy resources had one of its best years ever including successfully executing on the largest construction program in our history as well as delivering our best year ever for origination, adding a net nearly 7000 megawatts of new renewables projects to our backlog.
In 2020, Recommissioned, approximately 5750 megawatts of wind solar and storage projects on schedule and on budget.
In addition, since the last call. We have added approximately 2000 megawatts of renewables projects to our backlog Inc.
Moving approximately 1030 megawatts of new wind and wind Repowering.
670 megawatts of solar and 300 megawatts of battery storage, including 75 additional megawatts of capacity on Desert peak storage, which is now expected to total 400 megawatts and remains the worlds largest standalone storage project.
Following the terrific origination year in 2020, our renewables backlog now stands at approximately 13500 megawatts.
Despite a record year of megawatts placed in service energy resources grew its year end backlog by approximately 1500 megawatts a year over year, providing terrific visibility to the strong growth that lies ahead.
Since 2017, our backlog additions have grown at a roughly 25% compound annual growth rate.
As a result of our tremendous progress in 2020, and our strong continued origination success, we are raising our 2021% to 2022 renewables development expectations to a range of 10525 megawatts, the 12700 megawatts, which at the midpoint is approximately 3500 megawatts above our previous expectations.
Our expectations for 2021, and 2022 are now up more than 50% at the midpoint relative to the expectations that we laid out at the 2019 Investor conference, reflecting the significant acceleration of renewables activity over the past year and a half.
We're also introducing our 2023 to 2020 for renewables development expectations of 12150 megawatts to 17300 megawatts. This is by far the largest expected two year development program in our history and reflects our high level of confidence in energy resources ongoing leadership position in renewable energy developer.
The.
The accompanying slide provides some additional details.
As we've previously discussed we are optimistic about the expanded investment opportunities that the broad decarbonization of the U S economy presents for energy resources, and we are pursuing a number of pilot projects to rapidly develop our capabilities across this potential investment opportunity set.
Today, we are announcing a new innovative green hydrogen project in energy resources that includes a 12 megawatt solar array onsite hydrogen production and storage and a hydrogen fuel cell.
This emissions free project will utilize solar energy to create green hydrogen to power the fuel cell, which will be able to provide electricity to the local grid during periods of peak demand.
The final terms and regulatory approvals this approximately $20 million innovative green hydrogen project is expected to begin construction in 2022 with commercial operations in mid 2023.
Energy resources is also in advanced discussions with a number of potential customers across the industrial landscape, including food processing specialty chemicals and refineries to continue to develop clean energy solutions for a more efficient green production processes.
One potential project includes a solar tracker tracker combined with an electrolyzed or at a large industrial plant.
Project would deliver green hydrogen as an industrial feedstock for that facility and we're not producing hydrogen the solar power would offset a portion of the plant's energy consumption further decarbonising the facilities operations.
In addition, today energy resources announced a planned partnership to preserve pursue large school bus fleet conversions to electric and hydrogen with the nations largest school bus owner and operator and transportation services provider.
With its partner energy Resources' anticipates investing in bus electrification upgrades and charging stations as well as providing energy management services.
This transaction is consistent with our toe in the water approach as we explore potential opportunities in the electrification of the transportation sector.
We are excited about all of these opportunities as well as the previously announced hydrogen pilot project, we plan to propose that Fpl's Okeechobee clean energy center, which highlight the significant opportunities that the broad de carbonization of the U S economy presents.
Consistent with our long term track record Nextera energy will remain disciplined as we take steps to be at the forefront of these developing markets, while taking a leadership role in the clean energy transition.
Beyond renewables and storage since the last earnings call Mountain Valley pipeline made progress with its outstanding permitting issues, including receiving the Bureau of land management right of way grants, which authorizes N D. P to cross the Jefferson National Forest once the stream and wetland permitting is complete.
While the fourth circuit denied stay request on N V piece, new biological opinion. The court did grant a stay on the nationwide 12 permit and the project is now pursuing an alternate path forward to permit and complete stream and wetland crossings.
It is due to these continued legal and regulatory issues as well as a substantial delays in commercial operation and increase the saw increased costs associated with those delays the carrying value for our investment in M. D. P. Now exceeds its fair market value and as a result, we have reflected a one to $1 $2 billion after tax.
Pyramid, and our GAAP financial statements, which we have excluded from adjusted earnings.
While we are disappointed with the extended development and construction timeline due to the legal challenges that the project has faced we intend to continue pursuing completing the project with our partners.
Finally during 2020 Nextera energy transmission furthered its efforts to grow America's leading competitive transmission company and had its best year ever.
During the year the business delivered a record earnings contribution and realized constructive rate case outcomes at Trans Bay cable and Lone star transmission as well as entered into an agreement to acquire grid lines, which owns three for our regulated transmission utilities spanning six states.
We continue to expect to obtain all necessary regulatory approvals and close on the grid lines acquisition in the first half of this year.
Turning now to the consolidated results for Nextera energy for the fourth quarter of 2020, GAAP net losses attributable to Nextera energy were $5 million or zero cents per share nextera.
Nextera Energy's 2024th quarter adjusted earnings and adjusted EPS were $785 million or <unk> 40 per share respectively.
For the full year 2020, GAAP net income attributable to Nextera energy was $2 $92 billion or $1 48 per share.
Adjusted earnings were $4, five $5 billion or $2 31 per share as a reminder, all of our financial results have been adjusted to account for the four for one stock split which became effective in the fourth quarter.
For the corporate and other segment adjusted earnings for the full year decreased seven cents per share compared to the 2019 prior comparable period, primarily as a result of higher interest and refinancing costs associated with certain liability management initiatives completed during the fourth quarter to take advantage of the low interest rate environment.
In total for Nextera energy are refinancing activities reduced nominal adjusted net income by roughly $103 million during the fourth quarter inclusive of approximately $39 million associated with energy resources share of refinancing cost at Nextera energy partners.
We expect these initiatives to translate into favorable net income contributions in future years, and an overall improvement in net present value for our shareholders.
Long term financial expectations, which we increased and extended late last year through 2023 remain unchanged.
For 2021, Nextera energy expects adjusted earnings per share to be in a range of $2 40 to $2.54.
Our 2022, and 2023, Nextera energy expects to grow 6% to 8% off the expected 2021 adjusted earnings per share.
And we will be disappointed if we're not able to deliver financial results at or near the top end of these ranges.
From 2018 to 2023, we continue to expect that operating cash flow will grow roughly in line with our adjusted EPS compound annual growth rate range.
We also continue to expect to grow our dividends per share at a roughly 10 per cent per year rate through at least 2022 off of a 2020 base as always our expectations assume normal weather and operating conditions.
Let me now turn to Nextera Energy partners, which also had a strong year of operational and financial performance in 2024.
Fourth quarter, adjusted EBITDA was $308 million and cash available for distribution was $106 million, an increase of 10 per cent and 8% from the prior year period, respectively.
EBITDA growth was driven primarily by favorable resource across the portfolio and a full contributions from new projects acquired in late 2019, and it was slightly offset by a planned outage at our Genesis project late in the fourth quarter.
For the full year 2020, adjusted EBITDA was $1.263 billion up 14% year over year cash.
Cash available for distribution was $570 million, an increase of 40 per cent from the prior year.
Similar to the quarterly results full year growth in adjusted EBITDA was primarily driven by full year contributions from acquisitions in the prior year and favorable wind resource.
For the full year wind resource was 100 per cent of the long term average versus 97% in 2019.
Benefit to cash available for distribution from lower project level debt service was partially offset by higher corporate level interest expense as.
As a reminder, these results include the impact of I D R fees, which we treat as an operating expense.
Additional details are shown on the accompanying slide.
Yesterday, the Nextera energy Partners' Board declared a quarterly distribution of 61, and a half cents per common unit or $2 46 per unit on an annualized basis up 15% from the comparable quarterly distribution a year earlier and at the top end of the range, we discussed going into 2020.
During 2020, Nextera energy partners executed several financing to support its ongoing growth investments and optimize its capital structure for the benefit of LP unitholders.
As Jim mentioned during the quarter, we closed on an acquisition from energy resources of interest and an approximately 1100 megawatt portfolio of long term contracted renewables projects.
As part of this transaction Nextera energy partners raised a 10 year approximately $1 $1 billion convertible equity portfolio financing that includes the acquired assets plus four existing Nextera energy partners' wind and solar projects.
Combining this acquisition with the recapitalization of four existing Nextera energy partners assets through the longest dated and lowest cost convertible equity portfolio financing in the partnership's history is expected to provide significant benefits for unitholders.
By leveraging the strong demand for high quality clean energy assets next turnkey partners was able to secure financing for both the current transaction and future growth, while enhancing returns for LP unit holders and limiting downside risk.
Next energy partners expect to further strengthen its balance sheet and have access to approximately 242 $4 billion and available financing capacity, including capacity under its corporate revolving credit facility and commitments from investors to potential future convertible equity portfolio financings, which further supports the partnerships long term growth.
During the second half of the year Nextera <unk> partners completed the successful conversion of approximately $300 million of convertible debt and the remaining balance of the convertible preferred securities that were issued in 2017 into approximately $5 7 million and $4 7 million units a common units respectively.
These conversions help Nextera energy partners achieve its goal of using low cost financing products to efficiently issue equity overtime.
Finally next to energy partners raised approximately $600 million and new zero percent coupon convertible notes during the quarter and used the net proceeds from this offering to redeem a portion of its outstanding four in a quarter per cent senior notes due in 2024.
Coincident with the issuance of the convertible notes next John D partners entered into a capped call structure that will result in extra energy partners retaining up to 90 per cent of the upside and its unit price associated with the convertible note over the next five years.
Nextera energy partners run rate expectations for adjusted EBITDA and Kathy at December 31, 2021.
Main unchanged year end 'twenty 'twenty, one run rate adjusted EBITDA expectations of $144 billion to $1 six $2 billion.
And Kathy in the range of 600 million to $680 million.
As a reminder, all of our expectations are subject to our normal caveats and include the impact of anticipated idea our fees as we treat these as an operating expense.
From an updated base of our fourth quarter 2020 distribution per common unit at an annualized rate of $2.46. We continue to see 12 per cent to 15% growth per year in LP distributions as being a reasonable range of expectations through at least 2024.
We expect the annualized rate of the fourth quarter 2021 distribution that is payable in February of 2022 to be in a range of $2 76 to $2 83 per common unit.
In summary, we continue to believe that both Nextera energy and Nextera energy partners have excellent prospects for growth both in the near and longer term.
FPL energy resources, and Nextera energy partners, each have outstanding set of opportunities across the board.
The progress we made in 2020 reinforces our longer term growth prospects and while we have a lot to execute on in 2021, we believe that we have the building blocks in place for another excellent year.
That concludes our prepared remarks and with that we'll open up the line for your questions.
Thank you we will now begin the question and answer session to.
To ask a question you May press Star then one on you touched on phone.
<unk> phone please pickup your handset before pressing the keys to withdraw your question. Please press Star then two.
The first question is from Steve Fleishman from Wolfe Research. Please go ahead.
Yeah.
Yeah, a couple of questions just first.
Just a cleanup on the.
M. B P announcement could you just talk about maybe a little more color on.
What you need to get that done then and when.
And walk away from.
Sure Thanks, Steve and I appreciate I appreciate the question.
First you obviously that the project has taken longer and cost more than what we anticipated instead of the impairment is really related to reflecting not only that value that we have on our books, but really in relation to you. What we believe is the current fair valuation for the.
But given what we do still have to accomplish and obviously a lot changed in the fourth quarter, including the nationwide 12 permit stay that I mentioned in the prepared remarks as well as the the various things that have happened in January and against the backdrop of of obvious changes, including the change in the administration, including the change in our income.
Joel the Senate what's happened here in January.
So the impairment does reflect our view of what we still need to accomplish and the associated fair values related to the chances of being able to successfully execute on that.
But this wasn't an accounting exercise it it was a lot of due diligence that we needed to evaluate.
And it is we think we've made the appropriate changes, but it does not change our commitment to work with our partners to put this project into service.
As I noted in the comments, we do have now a path that we're going to pursue in terms of the day outstanding permitting work closely with closely with our partners to pursue that path, but we are we thought it was appropriate and obviously took the actions that we did with respect to the impairment.
Okay and then just on the the continued higher growth in renewables could you maybe just talk a little bit on our funding plans for that.
Over the period.
Hi, Robyn you know as a super high level as you know we've prided ourselves in a variety of other approaches to the capital markets to support our business retaining all of those options as circumstances change as one of the things that I think has been particularly successful for us over a long period of time.
One aspect of it at this point I wouldn't expect to change, particularly as it relates to financing and the projects that energy resources is that we will continue to execute on a significant amount of tax equity given our current position and a tax capacity, but I think it's all other tools in the toolbox that you would expect us to utilize to finance the business better.
Our commitment to our strong balance sheet remains unchanged and our and we will grow both profitably and maintaining a strong balance sheet.
Great and then last maybe a kind of a strategic question I guess for Jim just the as.
As we see the continued just dramatic ramp up in renewables growth and.
The revaluation of the company probably tied to that.
What does it mean for some of the statements you've made in the past on utility <unk>.
M&A does it make it more likely because you need to balance the mix or less likely because there's just so much opportunity.
This other side of the business.
So Steve.
You know it.
Obviously, the relative valuation of the two big businesses has changed over the last several years and that's just accelerated in particular over the last over the last 24 months.
I think what that means is it's changed a bit of our analytic framework of how we think about.
Utility M&A on the one hand I continue to believe there is enormous value creation that we can bring to the table and you only need to work and what we've been able to do with golf in the last 24, and a half months to see how much value creation, bringing our playbook and our operating platform to bear can create right. So.
That that is.
That I think remains clear and if anything is clear to me.
On the other I think it's also clear that.
Probably the sweet spot for us in terms of M&A as things in the you know things and.
Less than $20 billion range that we can pay cash and finance are through the normal course and.
At that point, if you do that.
You're not shifting the mix one way or in other all that all that tremendously and.
In our set of analytics, we're looking really more at how much value creation, we bring to the table when we do this and.
And so for example, I think Santee Cooper is a great example of that that's you know it's.
Roughly yeah.
Eight or $9 billion transaction and.
And you know something that we can finance in the normal course in a place where we think we can create enormous value very quickly and so that's that's the kind of things that we're focused on and but most importantly.
We're focused on.
Running the business and executing staying financially disciplined as we always have been and executing against the terrific growth prospects. We have energy resources and then executing at FPL as we always have for the benefit of our customers and continuing and for the benefit of the state. So that I think is just a.
Yeah, you know a little bit.
From an overview how are your current status of our thinking on.
Great. Okay. Thanks, so much.
The next question is from Julien Dumoulin Smith from Bank of America. Please go ahead.
Hey, good morning, Jim Thanks for the time I'll make a brief if I can.
Can you just tell me maxis below expectations, the redefined upsides expectations over the longer term here can you talk about a few factors here first C&I you guys havent been as involved it seems like that could be accelerating here can you talk about how that's filtered into your expectation.
Secondly, the new expectations explicitly do not include any future build on transfer how do you see that as incremental in any heuristics you might offer as to how to think about value creation there.
And the third one on that if I can just throw in there is the attach rates on storage. It seems like the bulk of the stores that you're talking about other futures probably tied to your solar assets. How do you think about standalone as being.
Incremental to what you've talked about already I'll leave it there.
Okay. Julian Thanks for the questions and you may need a prompt me if I forgot one or more aspects of the other the multipart question, Let me start with our C&I as I highlighted in the prepared remarks, John and his team across energy resources have really cultivated a nice suite of opportunities with C&I customers and if we look at our.
Core base of other major investor owned utilities are munis and co ops in our C&I business.
Yeah, and the other investor owned utilities, and Muni co ops are still larger overall, but the opportunity set with C&I customers is definitely growing not just in your standard.
P P a but more in the suite of types of opportunities that I mentioned as one of the pilot projects that John and his team are pursuing.
Kind of a more holistic energy solution provider to the C&I customers and I think what's really changed over the last year plus maybe it's even two years is the inbound request to C&I has really expanded Nam is they've really start to look at their own carbon footprint their own ESG messaging how do they.
The source of energy to do their business and how do they source that from a cleaner energy solutions has become a higher topic of of of interest in higher priority for them and therefore, a terrific opportunity set for us.
So I think that that's a growing opportunity for us is that we continue to be really excited about in terms of build own transfers. We will continue to present, our expectations, both our expectations and our signed contracts consistent the way that we've shown it in the past.
That there will be some build own transfer than energy Resources' pursues if it is a strict just sell the project to somebody else. We think there's a lot of value creation, there, but we wont necessarily incorporate in our backlog for purposes of reporting unless there is a long term operation and maintenance or other stream of revenue.
<unk> to us debt that we benefit from a well consistently report that I think the opportunity set is there for both.
Traditional build own transfers as well as build own transfers, where we provide some incremental long term value to our customers and then finally storage at the opportunity set is terrific.
We've had tremendous success and attaching storage two new solar facilities existing solar facilities and even some stand alone storage projects.
If there is a standalone storage incentive that Congress pursues obviously that would support our near term growth of standalone storage opportunities even beyond what we've seen but the growth is terrific and as we outlined back in 2019, we were surprised how fast the market evolved and I think we continue to be a re.
Really supportive of of that overall market and one last thing I'll highlight Julian is is really the innovative nature of the S. P. L team and working with them you know the solar together.
Together program to work with our commercial and industrial customers in Florida to support their needs to build the most cost effective solar and that's what the solar together program offered them is the ability to to really source clean energy solutions in the most profitable way for them and in a way that we structured it that Ben.
That's both those participating customers and nonparticipating customers to meet their their their needs. So let me stop there Julian did I Miss any aspect of it.
Just a standalone piece.
Incrementals that into what your view is here.
The standalone storage as a as an investment opportunity.
Absolutely.
Overtime Julian it could be it could be very significant in the short term is it imperative for renewables growth in certain pockets, yes broadly speaking no, but as you start to see what we referenced today trillions of dollars of renewables deployment over time, increasing storage deployment, both in the forms of batteries as well as other forms of long duration.
Storage, which we believe includes hydrogen will become not only increasingly important but a very large capital investment opportunity.
And just just added Julian onto what Rebecca said, I mean desert peak, which we announce today 400 megawatts largest stand alone.
Project in the World. So we are actively seeking out standalone opportunities and having the largest solar fleet.
North America positions us for storage add ons, so a tremendous.
Our leverage off the existing operating fleet with new origination I think of attach rates being roughly 60%.
All the new stuff that we do and then one more comment on C&I, we are positioning the business.
To be the preferred strategic partner with C&I customers and we are.
Looking at the business in a holistic way, where we can provide clean energy solutions across the board its wind and solar and storage it's hydrogen.
<unk> you know the first student transaction that we just announced today, it's an it's an energy management services capability it's analytics.
All the things we've done for decades, we can now offer to C&I customers and we've got a huge head start.
Great got it thank you.
John.
Thanks Julien.
The next question is from Shar <unk> from Guggenheim Partners. Please go ahead.
Hey, good morning, guys good.
Good morning Shar.
Just a couple of quick questions on.
On the rate case in particular, obviously, we have a march filing that's ahead of us and one other sort of the big moving pieces as the rate base, it's 11% year over year growth per FTE or 24% per golf as we sort of think about like the cap structure improvement, especially for <unk>, the ROE at or the capital plan request, how do we sort of.
Thinking about sort of the filings as it kind of relates to your current growth card.
Effective well within your current trajectory is like is the filing consistent with the top end and extends the runway is it better and more importantly, as we sort of think about your rolling forward. The plan into 'twenty four is that kind of a post DRC decision.
So thanks Shar I appreciate it and obviously, we're at the early stages of other rate case proceeding having only filed the test year letter. So there's a lot of additional information that we will provide to the commission and stakeholders and obviously go through a robust process as we should and as we look forward to do to go through the rate case process from a nextera.
Energy perspective, as you would expect and when we provide expectations, we do a variety of our scenario.
Planning analyses to feel comfortable with the expectations that we've laid out so theres not one answer to what what do you have in your assumptions that you've laid out for expectations. There's there's a range and we feel comfortable today as we that obviously reiterated those expectations are for the <unk> 'twenty 'twenty, one 'twenty, two and 'twenty three time frame.
So we look forward to presenting our case to the commission and stakeholders are we feel very confident in the decisions that we've made in terms of where are.
Where we've been investing where we plan to invest and obviously the results.
And to some measure obviously speak for themselves in terms of low bills high reliability terrific customer service and clean energy profile that is substantial and we're obviously looking forward to not only telling that story, but also the the Gulf no changes of the last couple of years that Jim highlighted so we'll have more as the process unfolds and.
And obviously when we have that we finally have clarity on the rate case outcome or a potential settlement. If we're so fortunate as to to reach a constructive agreement with with Intervenors will provide some updates once we have that information.
Got it and then just as we think about rolling the consolidated.
Look into 'twenty, one does that a post trc decision or settlement.
So 2020, not 2021, obviously assumes the current rate agreement since both for FPL and Gulf are they go see the 'twenty, one time frame and then 'twenty two and 'twenty three again all else.
Put it in context of a variety of scenarios that we assume for both FPL and energy resources to support the expectations that we've laid out.
Got it and then just maybe a quick strategy question for Jim.
Jim obviously with Santee Cooper in particular, the sales discussions have been steadily growing and interest from the legislator.
What are you sort of think will be different in 'twenty, one either from the legislator side or the east side are you would you sort of anticipate making a substantially similar bid the process comes up for sale and then just on FERC transmission. Obviously, you highlighted the grid Alliance acquisition last year.
How do you sort of see that opportunity set on the FERC transmission side, how large do you want nextera transmission to be as part of the business mix do you see any is there more to come there.
So.
You know first of all on Santee Cooper.
There is an offer on the table and that offer remains on the table and as does our $25 million deposits, which the state still has so it's you know the offers there and we are a we're ready to negotiate whenever the state is ready to get going and so.
We stand ready and.
Are hopeful that the.
We will move forward on that process and we'll know more obviously over the next 90 days or so.
On Nextera energy transmission, I think and you know Rebecca and her and her.
Prepared remarks.
Just a terrific year last year their best year ever as a company you remember we started that business from scratch a little over a little over 10 years ago and.
You know it is a business that made over $100 million of net income last year and we.
We think has the ability to grow mid teens double digit over the next over the next several years just organically with what they have in front of them.
Without doing any other acquisitions and.
Pursuing other acquisitions, there because we think.
We add an enormous amount of value through our operating model number one and then number two are you.
Probably the the.
The biggest and.
Inhibitor to renewables in this country is not consumer demand or or it is not there's not interest on the part of the federal government or state governments to get renewables built it's not that customers don't want it.
It is fundamentally broken processes with the ISO in terms of how they manage their the Qs in transmission and cute and just broadly transmission planning in this country and I think with the <unk>.
The administration and the new four there's a new opportunity to fix that and our transmission business. I think is a great example of what FERC order 1000 can do when you get competition are going in the transmission World and it is also I think are every bit of transmission, we build them.
That business is incremental and helpful to the renewable.
That we have and that it makes the delivery of lower cost renewables.
Even.
The more.
More fast to come onto the grid and the other than they otherwise would so.
I'm very excited about transmission business, we're going to continue to push it and I think it's got a lot of run rate of growth.
Terrific, thanks for that and congrats on the results.
The next question is from Michael Lapides from Goldman Sachs. Please go ahead.
Thank you for taking my question.
Actually I have two one is the posted a great 2020 with EPS growth North of 10%. Just curious do you think you could potentially come in above the high end of your range. So it's kind of 6% to 8% target.
Very modest target growth when you think about the next couple of years given the run rate.
Pass here.
So Michael I appreciate and I appreciate the the optimism and the support that that your question might have they might suggest where we're really proud of the results for 2020, a couple of things to remind you. One that does include some incremental contributions from golf and then obviously, we expected golf and the the overall.
Acquisitions, and we expect some incremental benefit from that for 2021 as we highlighted in our when.
When we laid out expectations initially and then as you also recall, we did raise our 'twenty 'twenty one expectations late last year, and then Rebased, our 6% to 8% off of that higher a higher base.
We're really excited about both the positioning of the regulated utilities as well as energy resources going into 2021 are we know what we need to accomplish and the teams are set out to go after and achieved achieve those objectives and of course, we'll update you over time as we go through the year, but for today, we have reiterated those.
Expectations of the $2 40 to $2 54 for 2021.
Got it and then a follow up one and it's more of a policy and I think it's more of a state policy one.
Theres still lots of coal generation in rate base and a lot of states.
Not all of which probably is economic.
But the owners of that and clearly your Florida utilities don't have exposure to this.
The owners of that benefit from having it in rate base.
How do you from an earnings perspective.
How do you think that dichotomy, Jim gets resolved over time.
And are there lessons that other states can learn from Florida that might be able to hasten the pace of fleet transformation.
So Michael I think you're being kind honestly to the to the book.
Regulated coal fleet in this country there is not a regulated coal plant in this country that is economic today.
Full period and the stop when it's dispatched on a on any any basis.
A single one okay and so.
Why having it I think you've hit on the crux of a on the crux of some of the issues. Obviously there have been in certain states.
You know our reluctance to wet.
Our utility customers retire the coal plant and then be able to recover their investment right and so of course.
If you run a utility you don't want to retire an asset that youre going to then either have to write off or not be able to earn on right. I think one other things that has been.
Really constructive and very smart about the Florida, a regulatory environment for the Commission's view on on modernizing the generation fleet is that they have.
You know, we've we've spread that capital recovery over a period of five or 10 years.
And that that his both I think moderated the impact to customer bills on the one hand and also on the other given us the right incentive to do the right thing by our customers and bring on lower cost generation. So.
I think it's about.
The other piece I think that's going to change.
Is.
There's no question. This administration through the EPA and other means is going to make the continued operation of coal plants very difficult in this country.
So you know there's going to be I think more pressure for federal pressure to to.
Celebrate that transition away from coal and there has been obviously over the last four years, where theres been in fact, the opposite of federal pressure, but.
A complete lack of federal pressure to do anything with your growth rate.
So I think the combination of that plus.
Yeah.
States, becoming.
It becoming clearer and clearer the economics.
As we go along that the operating cost of coal plants.
Our higher than the Newbuild cost of renewables with storage as that becomes even clearer as costs come down for renewables and costs continue to go up for operating cost continue to go up for for coal.
You know that's you know I mean, the bottom line in Florida, we've shown our called out and we've said customers literally billions of dollars of present value over the over the expected life of the new generation, we put in place so.
There's an enormous opportunity there are several states in the country theyre not taking advantage of that opportunity because of.
Some other regulatory approaches and honestly I think with the new administration from the policies there that's going to accelerate the replacement of coal in this country and it should be because theres no. It's costing customers money. We've aside the environmental benefits just on pure economics, it's costing customers money every day and that's.
It's bad for the country and let alone that it's terrible for the for the climate. It's it is and for the environment. It is bad for the for for customers because economics or are the coal economics are so.
So out of whack.
Got it. Thank you Jim much appreciated and maybe one last one from our backlog went back to the Gulf raised your renewable growth targets material like that implies higher capex, but obviously you can get the benefit of the attacks every year or so youll you all would utilize convertible financing or equity units.
Should we assume that is part of your EPS growth guidance that there is continued use of kind of new convertible units and the financing plan.
It may be that level grows in scale with the change in the Capex forecast.
Michael I appreciate it and I I was talking to a couple of comments that we've made in the past that that I know you know firstly, we keep all the tools in the toolkit.
And we believe that you know at various times various tools are more economic than others, but at the end of the day, our commitment to our balance sheet remains very strong and that we will finance it in a way that retains our our strong balance sheet. One additional thing I'll remind you of that overtime has certainly been very valuable to us.
Not only in maintaining the balance in our business, which we've talked about frequently but it's the recycling of capital as a source of proceeds to finance that new growth.
And is any P grows and or our recycling of capital grows to any P. M. The obviously that's also a source of financing from the new investments and energy resources is making.
If there's one thing that I know at the beginning of the year, we have a financing plan by the end of the year and ended up being different than what we what we originally thought but again that the most important thing to US is no matter. What we are we remain committed to that balance sheet and we'll finance it in a way that makes sense and it's ultimately profitable for our shareholders as well.
Got it thank you Rebecca and thank you Jeff.
Thank you very much Michael.
This concludes our question and answer session as well as the conference. Thank you for attending today's presentation. You may now disconnect.
Okay.
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