Q1 2021 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call
[music].
Good day, and welcome to the Nextera energy and Nextera Energy partners first quarter 2021 conference call.
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Please note this event is being recorded.
Now I'd like to turn the conference over to Jessica Eldridge Director of Investor Relations. Please go ahead ma'am.
Thank you Rocco good morning, everyone and thank you for joining our first quarter 2021 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 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.
Rebecca will provide an overview of our results and 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 because of other factors discussed in today's earnings news release and the comments made during this conference call and 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 websites Nextera energy Dot com and Nextera energy partners Dotcom.
We 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.
As a reminder, Gulf power legally merged into Florida power and light company effective on January one 2021.
Gulf Power will continue as a separate reporting segment within Florida power and light and Nextera energy through 2021, serving its existing customers under separate retail rates.
Throughout today's presentation, when we refer to FPL, we are referring to Florida power and light excluding Gulf power, unless otherwise noted or when using the term combined with that I will turn the call over to Rebecca.
Thank you Jessica and good morning, everyone Nextera energy is off to a terrific start in 2021 and has made excellent progress in the core focus areas that we discussed on the last call.
Adjusted earnings per share increased nearly 14% year over year, reflecting successful performance across all of the businesses.
The increased net income by approximately $78 million from the prior year comparable period, which was driven by continued investment in the business for the benefit of our customers.
During the quarter FPL successfully placed in service approximately 300 megawatts of additional cost effective solar projects built under its solar together program, which remains the largest community solar program in the nation.
F. P. L. Now owns and operates approximately 2640 megawatts of solar on its combined system, which is more than any other utility in the country.
That feels other major capital investments, including the 409 megawatt Manatee energy storage center and highly efficient 200 megawatt Dania Beach Clean Energy Center are also on schedule and on budget.
By executing on smart capital investments such as these FPL is able to maintain its best in class customer value proposition of clean energy low bills high reliability and outstanding customer service.
<unk> typical residential bill remains well below the national average and the lowest in the nation. Among the 20 largest U S investor owned utilities, while our service reliability has never been higher.
Gulf Power also had a strong quarter of execution the focus on the operational cost effectiveness at Gulf power continues to progress well with a 43% increase in net income year over year, primarily driven by year to date O&M costs declining by approximately 21% versus the prior year comparable period and by more than 34% relative to.
2018.
Both power also delivered further improvements in service reliability and employee safety with no Osha recordable is year to date through the end of March.
We remain committed to delivering on the objectives that we have previously outlined at Gulf power and continue to expect to generate significant customer and shareholder value over the coming years.
At energy resources adjusted earnings increased 13% year over year and it was another strong quarter of renewables origination with our backlog increasing by approximately 1750 megawatts since the last call.
We continue to see increased stakeholder focus on environmental social and governance or ESG factors, helping to drive accelerated demand for diversified clean energy solutions, among new non traditional customers, particularly in the commercial and industrial sector as an attractive source of incremental growth for energy resources in the coming years.
We have been encouraged by the by the administration's focus on clean energy and the emphasis they have placed on it and their budget and in the upcoming infrastructure package.
We continue to work with the administration on their important efforts around extensions of existing renewable credits new credits for transmission and storage, including hydrogen as well as a new clean energy standard for the electric sector.
We support a clean energy standard that accelerates the decarbonization of the electric grid and enables the de carbonization of the transportation and industrial sectors as well.
We believe that no energy company in the World has been more committed consistent and proactive in promoting smart investments in clean energy technology as we have been for over two decades.
As the push for action to address climate change and acceleration of progress towards the carbonization creates new and enhanced renewable incentives across our industry. We continue to believe that no company is better positioned than Nextera energy to continue to drive change and capitalize on these trends.
At this early point in the year, we are very pleased with our progress at FPL Gulf power and energy resources.
Now, let's turn to the detailed results beginning first with FPL.
For the first quarter of 2021, FPL reported net income of $720 million or <unk> 37 per share earned.
Earnings per share increased four cents year over year.
Regulatory capital employed growth of 10, 8% was a significant driver of Fpl's EPS growth versus the prior year comparable quarter.
<unk> capital expenditures were approximately $1 $4 billion for the quarter and we expect our full year capital investments to be between $6 6 billion and $6 8 billion.
Fpl's reported ROE for regulatory purposes will be approximately 11, 6% for the 12 months ending March 2021.
During the quarter, we utilized $316 million of reserve amortization to achieve our target regulatory Roe.
Leaving FPL with a balance of $578 million.
As we've previously discussed FPL historically utilizes more reserve amortization in the first half of the year given the pattern of its underlying revenues and expenses and we expect to continue this trend this year.
Let me now turn to Gulf power, which reported first quarter 2021, net income of $57 million or <unk> <unk> per share.
Gulf Power's capital expenditures were $170 million for the quarter as it continues to execute on smart capital investments for the benefit of customers and.
And we expect its full capital investments for the year to be between 800 and $900 million.
All of Gulf Power's major capital investments, including the North, Florida Resiliency connection that is expected to be in service in mid 2022 continue to progress well.
As a result of these ongoing investments regulatory capital employed increased by approximately 16% year over year.
Both Power's reported ROE for regulatory purposes is expected to be approximately $10 four per cent for the 12 months ending March 2021.
Turning to our development and planning efforts. We recently filed an updated 10 year site plan for FPL and Gulf power, which we expect will begin to operate as an integrated electric system in 2022.
The 10 year site plan projects that zero emission sources will provide nearly 40% of all energy produced across the combined FPL system in 2030, largely as a result of Fpl's continued rapid expansion of solar energy through the execution of its 30 by 30 plan and success in its coal phase out strategy.
STL expects to add 3800 megawatts of additional cost effective solar over the next four years and we now control all the land needed to meet our projected solar deployment of 11, seven gigawatts by 2030 for the combined FPL system.
The site plan also reflects an expected total deployment of more than 200 megawatts of storage capacity by 2030.
This plan is consistent with our belief that renewable generation and particularly solar paired with battery storage in Florida is an increasingly cost effective form of generation in most parts of the U S.
As we execute on these opportunities we project that Fpl's combined emissions rate will be 62% lower than 2030 than the industry average was in 2005 and 20% lower than the U S Department of Energy's projected industry average in 2030.
Moreover, we continue to plan and invest in sustainable solutions to broaden how we serve customers and prepare for an even cleaner future during.
During the quarter FPL placed in service nearly 70, new electric vehicle charging ports and is now operating nearly 400 electric vehicle charging ports ports in the states as part of our goal to install more than 1000 charging ports and more than 100 locations across the combined Fpl's service area from 2019 through 2022.
As we've previously discussed we are also developing hydrogen electrolysis pilot project at Fpl's Okeechobee combined cycle unit as part of our efforts to introduce or further fuel diversity and resiliency into Fpl's generation system.
There are approximately 25 megawatt solar connected electrolyze or that will be used to generate clean hydrogen as part of the okeechobee pilot will be the largest of its kind in the U S to date.
While these projects are just a few examples of our advanced deployment efforts at FPL. We are excited about the immense opportunities that lie ahead, as our industry moves towards cleaner more sustainable future.
The Florida economy continues to recover from the early effects of the pandemic and is among the strongest in the nation.
The current unemployment rate of four 7% is well below the national average.
The real estate sector continues to grow with average building permits and the case Shiller index for South, Florida up approximately 6% and 10% respectively versus the prior year.
Florida's retail sales index continued its quarter over quarter improvement, which is a further indication of the ongoing health and our economy and bolsters, our confidence and our smart investment strategy required to serve anticipated demand growth.
During the quarter Fpl's average number of customers increased by approximately 71004 hundred for one 4% versus the comparable prior year quarter, driven by continued solid underlying population growth.
First quarter retail sales decreased one 7% from the prior year comparable period, which was primarily due to mild weather in the first quarter of this year versus 2020.
We estimate that approximately 3% of the decline can be attributed to weather related usage per customer.
On a weather normalized basis first quarter retail sales increased one 3% with continued strong underlying usage contributing favorably.
For Gulf power. The average number of customers grew one 1% versus the comparable prior year quarter, driven by continued economic growth in northwest, Florida.
Gulf Power's first quarter retail sales increased two 9% year over year, primarily due to favorable weather.
On March 12th we submitted testimony and detailed supporting information for Florida power and light 2021 base rate proceeding.
The overall proposal for our 2022 through 2025 base rate plan is substantially consistent with the test year letter filed in January.
We are requesting a base rate adjustment of approximately $1 $1 billion starting in January 'twenty two.
$607 million starting in January of 2023.
And solar base rate adjustments or sober mechanisms in 2024, and 2025 for up to 1788 megawatts of cost effective solar.
We are proud to offer our customers service that ranks among the cleanest and most reliable in the country with typical residential bills of approximately 13% below state average and importantly, nearly 10% lower than in 2006.
The four year base plan has been designed to support continued investments in long term infrastructure and advanced technology, which continues to improve our already best in class reliability and helps keep customer bills low.
With the proposed base rate adjustments and current projections for fuel and other costs. We believe that Fpl's typical residential bill will grow at an average annual rate of about three 4% from January 2021 through the end of 2025, which is expected to result in Fpl's typical residential bill being approximately 20% below the projected.
National average and more than 20% lower than our typical bills 15 years ago when adjusted for inflation.
Typical Gulf power residential bills are projected to decrease approximately 1% over the four year rate plan.
The Florida Public Service Commission has established a schedule for this proceeding beginning with the quality of service hearings in June and technical hearings in late August the.
The proceedings would conclude in the fourth quarter with the staff recommendation and commission rulings on revenue requirements and rates.
We look forward to the opportunity to present, our case to the commission this summer and our focus will be to pursue a balanced outcome that supports continued execution of our successful strategy for customers.
As always we are open to the possibility of resolving our rate request through a fair settlement agreement.
Energy resources reported first quarter 2021, GAAP earnings of $491 million or 25 per share.
Adjusted earnings for the first quarter were $598 million or <unk> 30 per share up 13% versus the prior year comparable period.
New investments added four cents per share, primarily reflecting gross in the renewables and storage business, including more than 2007 hundred megawatts of new contracted wind projects that were commissioned during 2020.
The extreme market conditions in Texas in February were the primary driver of the underperformance in our existing generation portfolio and customer supply and trading business as well as the favorable performance in the gas infrastructure business.
As a reminder, when weather events like this occur we operate our businesses in Texas as a portfolio and while there were pluses and minuses. During these events. We believe the end result is a testament to the strength of our large and well diversified business.
All other impacts increased results by <unk> <unk> versus 2020.
Yeah.
As I mentioned earlier energy resources development team had another strong quarter of origination we added 503 megawatts of new solar projects to our backlog, including 190 megawatts of solar that will be paired with approximately 100 megawatts of four hour battery storage capacity.
In 2020, our market share of signed contracts and co located solar plus storage assets in the U S was more than 35 per cent.
And we are excited about the continued trend in demand for co located storage solutions as we anticipate even further cost synergies by pairing low cost renewables with storage solutions in the coming decades as being an important part of de carbonization in our sector.
We also added 916 megawatts of new wind projects to our backlog for 2022.
In addition, our backlog increased by energy resources share of Nextera Energy Partners' planned acquisition of 391 megawatts of operating wind projects announced earlier this week.
With the approximately 1750 megawatts added this quarter, our backlog of signed contracts at energy resources now totals approximately 15250 megawatts supporting our industry, leading long term growth expectations.
We remain enthusiastic about the expanded investment opportunities that the broad de carbonization of the U S economy presents for energy resources, and we continue to evaluate pilot projects for industrial transportation and electric sector applications.
In addition to the pilots and partnerships we've discussed on prior calls we recently committed to make a minority investment in a clean energy technology company that has developed a proprietary process to essentially decarbonize the industrial production of hydrogen at economic prices.
This investment and the hydrogen pilots, we've announced to date show the promise of electrification across our economy and we are excited for the opportunity to participate in these new markets and build renewables to support future growth and demand for electricity.
Consistent with our long term track record, we will remain disciplined as we take steps to be at the forefront of this developing market, while taking a leadership role in the clean energy transition.
Beyond renewables and storage Nextera energy transmission furthered its efforts to build America's leading competitive transmission company with a closing of its acquisition of grid alliance occurring at the end of last month grid.
Grid lines, which owns three for our regulated transmission utilities spanning six states is an excellent complement to our existing operations and further expand nextera Energy's regulated business through the addition of attractive rate regulated assets.
Extra energy transmission now owns regulated assets in 10 states and six regional transmission organizations.
Gross in renewables means that there is also a growing imperative to build additional transmission across the U S to support this transmission to a low cost low carbon economy fueled by renewable energy.
Our incorporation of grid lines into our portfolio further art furthers, our strategy to be north America's leading competitive transmission provider boast to deploy capital profitably as well as to enable further renewables deployment.
Turning now to the consolidated results for Nextera energy for the first quarter of 2021, GAAP net income attributable to Nextera energy was $1 $67 billion or <unk> 84 per share nextera.
Nextera Energy's 2021 first quarter adjusted earnings and adjusted EPS were $1 $33 billion and 67 per share respectively.
Adjusted earnings from corporate and other segment were roughly flat year over year.
Long term financial expectations, which we increased and extended to late last year through 2023 remain unchanged.
For 2021 extra energy expects adjusted earnings per share to be in a range of $2 40 to $2 54 for 2022, and 2023, Nextera energy expects to grow 6% to 8% off of 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 in 2021, 2022 and 2023, while at the same time, maintaining our strong credit ratings.
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 dividends per share roughly 10% rate per year 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 delivered very strong first quarter results with year over year gross and adjusted EBITDA and cash available for distribution of approximately 20% and 36% respectively.
Yesterday, the Nextera energy Partners' Board declared a quarterly distribution of $63 75 per common unit or $2 55 per common unit on an annualized basis.
Up approximately 15% from a year earlier.
Inclusive of this increase Nextera energy partners has grown its distribution per unit by 240% since the IPO.
Further building on that strength Nextera energy partners recently announced that it had entered into an agreement to acquire an approximately 400 megawatt portfolio of long term contracted wind assets.
This transaction will be Nextera energy Partners' first third party acquisition of renewable energy assets and represents another step towards growing LP unit distributions in a manner consistent with our previously stated expectations of 12% to 15 per cent per year through at least 2024 I'll provide additional details on the transaction in just a few minutes.
Turning to the detailed quarterly results Nextera energy partners first quarter, adjusted EBITDA was $354 million and cash available for distribution was $184 million.
New projects, which primarily reflect the asset acquisitions that closed at the end of 2020 contributed $27 million of adjusted EBITDA and $13 million of cash available for distribution.
Existing projects added $39 million of adjusted EBITDA and $23 million of cash available for distribution.
This strong year over year increase in adjusted EBITDA and cash available for distribution includes favorable results from Nextera energy Partners' wind and natural gas pipeline investments in Texas. During the February winter storm, partially offset by the impacts of an accelerated outage at our Genesis project during the quarter.
Cash available for distribution also benefited from a reduction in corporate level interest payments, primarily as a result of certain refinancing activities completed in the fourth quarter of last year.
Additional details are shown on the accompanying slide.
As I previously mentioned, we continue to execute on our plan to expand Nextera energy Partners' portfolio and recently entered into an agreement to acquire an approximately 400 megawatt portfolio of long term contracted operating wind projects.
Folio has a cash available distribution weighted average contract life of approximately 13 years with high credit quality customers and further enhances the diversity of next energy partners' existing portfolio.
The transaction is expected to close in the third quarter of this year subject to customary closing conditions and the receipt of certain regulatory approvals and generate an attractive cash yields and be immediately accretive to LP distributions.
This transaction demonstrates the next energy partners' continued ability to execute on its long term growth plan and it's enhanced by our ability to take advantage of energy Resources' best in class operating platform to reduce operating expenses at the assets.
Energy resources continues to leverage our culture of continuous improvement to realize lower costs across the renewable assets that it operates.
Since 2017 energy resources have reduced fleet wide dollar per megawatt hour O&M costs and win and its wind fleet by more than 30% and we believe both energy Resources' wind and solar operating expenses are significantly better than its industry peers.
With energy resources operating the Nextera energy partners' renewable assets these cost advantages directly benefit L. P unitholders.
Over the coming years, we look forward to leveraging the benefits of energy resources operating portfolio platform for both next energy partners' existing portfolio as well as to add incremental value to future third party acquisitions.
In addition to providing attractive base returns. These projects are well situated in attractive markets that we anticipate will have significant long term renewables demand supporting asset re contracting or potential repowering opportunities. After the initial contract terms.
We continue to believe that the existing Nextera energy partners' portfolio has meaningful organic growth opportunities over the coming years and expect the portfolio. We are acquiring provides additional long term investment opportunities as well.
Nextera energy partners expect to acquire the portfolio for a base purchase price of approximately $733 million subject to closing adjustments.
The portfolio of assets is expected to contribute adjusted EBITDA and cash available for distribution of approximately $63 million to $70 million. Each on a five year average annual run rate basis, beginning in December of December 31, 2021.
We believe this transaction is an attractive investment in which to deploy the $345 million of Undrawn funds from the 2020 convertible equity portfolio financing, which we used to fund the acquisition along with existing Nextera energy partners debt capacity.
Following the recently announced transaction, we now expect to be in the upper end of our previously disclosed year end 2021 run rate adjusted EBITDA and cash the expectation ranges of $144 billion to $162 billion, and 600 million to $680 million respectively.
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 a base of our fourth quarter 2020 distribution per common unit at an annualized rate of $2.46. We continue to see 12% to 15% gross 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, after a strong start to the year, we remain as enthusiastic as ever about the long term growth prospects for both Nextera energy and Nextera energy partners.
At FPL, we continue to focus on delivering our best in class customer value proposition through operational cost effectiveness productivity and making smart long term investments.
Energy resources maintained significant competitive advantages and continues to capitalize on the best renewables development period in our history.
Combined with the strength of our balance sheet and credit ratings Nextera energy is uniquely positioned to drive long term shareholder value.
And we remain intensely focused on executing on these opportunities.
Nextera energy partners is well positioned to deliver on its already best in class runway for LP distribution growth.
Finally last month, we were honored that Nextera energy was ranked number one in this sector for fortune magazine's.
Most admired a world's most admired companies list for the 14th time in 15 years. Moreover.
Moreover, we were recognized for the 14th time as one of the world's most ethical companies by Ethisphere Institute, which is a testament to our team of nearly 15000 employees, who are committed to our core values well, helping to build a sustainable energy era that is affordable and clean.
In the coming weeks, we expect to publish Nextera Energy's 2021 E. S. G report, which we believe establishes our full alignment with the task force for climate related financial disclosures or T. C. F D recommendations.
Also excited to announce our commitment to participation in the carbon disclosure project survey later this year.
These enhanced disclosures highlight the alignment of our corporate strategy with a key tenants of ESG, which our company has been focused on for more than 25 years and remains key to execution of our strategy moving forward.
That concludes our prepared remarks, and with that I will open up the line for questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing.
From the keys to withdraw your question. Please press Star then two.
Today's first question comes from Shar <unk> with Guggenheim Partners. Please go ahead.
Hey, good morning, guys.
Good morning.
She just a couple of questions here first just on transmission opportunities. You. Obviously you closed great Alliance this quarter and there's been some proposals across the U S and Korea, California for transmission expansions can we maybe get a little bit of a refreshed view on your transmission growth strategy.
What kind of geographies, where you may see expand do you guys see more opportunities for acquisitions, perhaps from other PD type owners.
Just as a follow up here any thoughts on sort of the new FERC administration recent language.
I think the future transmission investment with potentially lower Roe's removals from some of the ROE adders. So just some thoughts there.
Perfect. Thanks, Shar and I appreciate all I can say the question, but I think it's multiple questions in there so I'll start.
John can I ask John or Jim can jump in if they want to add.
We are very excited about opportunity opportunities in transmission and it is founded on a couple of points that I highlighted in the script.
First is we couldn't be more excited as you well know about the renewables opportunities across the U S. In the coming decades, a key part of all of those opportunities or at least the there are a lot of those opportunities in the latter part of this decade going into the 2030 and beyond is some level of build out of <unk>.
<unk> mission in the U S beyond what's what's been accomplished so both to enable long term renewables development, but also to capitalize on those opportunities leaves us very interested in transmission.
Energy resources team has done a terrific job growing that business both through organic opportunities. So long term development efforts of identifying opportunities participating in processes, and ultimately securing opportunities to invest and build and bring successfully into line on into operations some of those lines.
As well as through acquisitions, obviously with grid lines being the most recent and Trans Bay cable and not being too much far behind it I expect that will grow the business through both going forward as well continued efforts on the development side as well as participating in opportunities to acquire invest.
<unk> as they as they are as they come to market.
On the FERC transmission side, we do think there are lots of opportunities.
To improve how our transmission is.
Cited and built across the U S and we're optimistic that this administration and this first all will start to to focus on those and I think it's both through <unk> as well as potential a focus on transmission and this infrastructure package. So a lot of opportunities to invest in the future.
Yeah, the only thing that I would add to what Rebecca said, there is and we love grid line think of our transmission presence of the donut, we had a hole in the middle of this gets us in the SPP and MISO, where now a member as a T O important for Cal ISO as well, it's strategic it's going to help him.
<unk> a lot of new renewable development for us so it lines up really well with what we see.
Renewable growth opportunities going forward and even with you know.
The news coming out of FERC on the ROE, what we will see what they ultimately do don't forget that we have been and are able to enter into in the long term settlement.
But you know on Lone Star.
As well and so our business is really an impact.
Got it perfect. Thank you and then just on the rate case, obviously, it's starting to pick up steam intervenors are starting together are you seeing any early indications for what's sort of the topics that maybe David I mean, obviously affordability is the obvious one cross subsidization between the two merged utility that could be another.
Rose.
So just maybe just thinking about the bid ask there.
At this juncture do you sort of feel there is a settlement path or does this case kind of needs to be more lit again, it just given the complexities of merging two utilities.
Thanks, Eric.
It's really early to comment on the on the rate case, we've just filed I think you've heard US comment a couple of times that these are U haul trucks are worth of filing requirements that we produce and supply to staff and Interveners and the commission itself to start the process. So we're very early and note.
They are all of the key stakeholders is trying to review that information and then we'll see the process unfolds really over over quite a number of months, culminating with the with the hearings in August.
We are very proud as I highlighted in the comments.
Both here and in other venues, we're really proud of of the case that the FPL team has put together not just the case itself, but it's built on a foundation of execution not just over the last five years during which we've operated under the settlement agreement, but of course of the years and years before that so we look forward the opportunity.
To articulating that that you know through this process as it relates to settlements as you know here in Florida. There is a great history of settlement agreements not just with Florida power and light company, but other utilities in the state. We do think that the opportunities to have a negotiated outcome that that meets the.
<unk> of all stakeholders and historically that has produced.
Consistent rates for many years in the future that provides tremendous value for customers. There's a great history of that we of course will be open to it but it's very early in this process and again, we look forward to being able to put Florida our case.
Perfect and then just last one from me on Santee Cooper I mean, obviously the no.
The discussions are picking up steam at the legislator anything we should be kind of watching for in the near term on the legislature side in your bids out there. So do you see any kind of changes with your offer or are you just kind of just standing firm at this point.
Sure. It's Jim obviously you saw.
Yes.
Got it.
<unk> asked for.
Folks too.
To refresh and interest I sent a letter last week are expressing our interest we've been pretty clear that we remain interested.
We haven't we have a very strong bid out there obviously things have changed in the west.
In the in the last year, we've seen.
Santee Cooper at base is different.
Their volumes are different.
Et cetera et cetera. So.
But you know fundamentally.
Our bid stands and we're ready, we're ready to get going and negotiating with.
With the state on a sale and ultimately.
The the most important thing is it remains very clear to me that the.
Best route through the state and its customers and the economy at this day is too.
As to as to D Municipalize, Santee Cooper and get it in the hands of.
The entity like ourselves that will run it in a best in class way and you know there is.
There's enormous value I think to bring to the state through our ability to bring to decarbonize, our ability to to have low bills over a long period of time and our ability to.
To really operate efficiently operate efficiently and bring great reliability to bear a you know one of them.
I think you've seen the progress we've made of golf and I think that's a great example of the kind of progress that we'd be able to make.
Cooper as well so.
Terrific. Thank you guys for revenue and good execution.
Sure.
And our next question today comes from Steve Fleishman with Wolfe Research from Shaw.
Hey, good morning.
Can you hear me okay.
We can hear you just fine.
Great.
So just curious first on the MVP acquisition as you mentioned for the most part historically you havent been able to make returns work on third party acquisitions.
So could you maybe talk about the returns you expect on this transaction and is this the suggestion that you're more optimistic that there'll be more third party acquisitions, but maybe the return hurdles.
Yeah.
We're really excited about the acquisition and as we highlighted both in terms of the financial characteristics of it one of the things that was particularly attractive about this portfolio. When we looked at it is our team's ability to add value I'm on the operations and maintenance cost side really think about it as we bring assets into the portfolio.
So it really gets leveraged on the platform that we already operate and so the team is really excited about how we can add incremental value.
Through the energy resources management of these assets at Nextera Energy partners.
We've been very excited about next energy partners our growth outlook for quite some time as we've always indicated it's well founded our excitement is well founded just simply looking at the backlog of both operating and signed contracts and then the potential for new contracts and energy resources, but I've always alluded to the fact that really are mark.
That opportunity is this broader market set and we'll continue to engage and look for opportunities I do think there are more opportunities out there from third party acquisitions on the renewable side. That's a it's an area of focus for us to continue to participate in.
But we've got the three ways to grow and to the extent that we can put opportunities together, great and we'll take advantage of them over time, but we also continue to have a terrific organic opportunities and any P, particularly as the portfolio grows and then of course the continued success of energy resources in the broader market is very Pos.
<unk>.
Okay, and just any sense on the returns you expect on the <unk>.
This acquisition.
Sure.
The the we've already highlighted the you know in terms of the Cathy.
Produced for the assets 60, plus million dollars relative to the to the acquisition price that we highlighted obviously that's subject to closing adjustments. So that's at the project level and then we'll optimize the financing over time, particularly as we think about the rest of the growth expectation.
<unk> for 2021 into 2022.
Okay.
And then just maybe a little bit more color on the buy than infrastructure.
And tax plan just.
I guess, maybe obviously you made it clear that the infrastructure side would be beneficial.
So your business I think.
How about how are you thinking on the tax side and are there any risks to you from that either just a higher rate all day.
For the.
The minimum book tax.
Issue. Thanks.
Steve It's Jim.
Obviously, there was a lot.
There was a lot to unpack in the plan, it's very early in the process.
This is a process that's going to play out.
Out over months not weeks, there's obviously.
Or what.
It's very positive from our renewables standpoint and.
As Rebecca said in the prepared remarks.
We are excited to work with the administration on.
On the plan that I think is really going to accelerate the de carbonization of the U S economy over the next over the next.
Several years in a way that as we've always said for a long time is going to be essentially free to customers I E not more expensive for customers right I mean, the thing about the thing about.
The Green economy is that it's it's cleaner, it's greener, but it's also.
It's also cheaper and you know that that is why it's that's why so powerful.
So what you know a lot of details obviously still to be worked out we're working them as you can imagine it's very early and probably too early for me to comment on any of the specific details that debt.
That that we feel like.
I need some work versus the ones that.
We work a lot.
On the tax front.
You know I think obviously that's.
There are a lot of puts and takes.
If taxes, particularly in.
A company that has both.
Utility assets as well as renewable assets and we're.
We're working through it.
So think about think about.
Think about the tax rate being tax rate going up something in the four to seven cents of headwinds or im not particularly not particularly worried or worried about that in the context of all the other things that would be positive for our company.
If the infrastructure Bill gets passed.
And.
So we continue to work, obviously that as well.
And lots of details still to be laid out on the minimum tax.
At issue and you know that.
That also.
Matters as to what the final corporate rate ends up being and I guess the last thing I would say is none of this is going to be easy to get done it's very narrow margins in both the Senate and the house.
Folks tend to focus on the Senate and extraordinarily narrow margin given kind of vacancies in the house right now as well and.
And you know there's the.
History on mid term elections.
Yeah.
Suggests that it's it's always a uphill battle for.
The current administration.
And mid term or you know for whatever partisan power in the midterm elections or.
From a presence here so.
You know that on the one hand, I think put some.
Its emergency I think around the.
Administration's push to get something done this year book the flip side is it also there is a you know a water risk from moderate Democrats too to take her to take a vote on some of these issues. So you know what it's going to be very <unk>.
Any change will be very hard and you know I.
I think we were very much a.
A part of the <unk>.
<unk> always been very active in terms of.
What happens around clean energy policy in Washington, and you can imagine.
But we're remaining very active on that front and.
And working it very hard, but I would just say in closing that we're very.
We're very much encouraged by the focus of the administration of Decarbonize. The economy, we feel that it's.
Absolutely the right thing to do right thing from the right thing for them.
For the planet and the right thing for customers and the right thing for the country.
But we stand ready to support it.
Infrastructure plan that accelerates de carbonization and I think.
Any acceleration of whats already going on just because of the amazing economics that renewables have relative to the other alternatives are plus what's going on with hydrogen and you saw there was a PTC hydrogen PTC as part of the <unk>.
Suggested as part of the infrastructure plan. So there's a lot a lot of very positive things in there that we're going to be working on to to build on over the next several months.
Great. Thank you very much.
Oh nice.
Question for the income from Stephen Byrd of Morgan Stanley. Please go ahead.
Hey, good morning, Thanks for taking my questions.
Steven.
I wanted to explore a green hydrogen and a little bit further you all have expressed a lot of enthusiasm about the potential for growth here and the potential for for joint venture activity and I was just curious your latest thinking there and I guess I guess broadly I've been thinking.
That's sort of combining best in class renewables that you have with you.
No significant capabilities and actually sort of.
Marketing distributing and selling et cetera hydrogen.
Would be critical to success in terms of supply and end use customers with green hydrogen and then just curious here your general outlook enthusiasm for the prospect for more JV announcement.
Perfect. Thanks, Steven let.
Let me start with the the longer term view first and then come back to the shorter term view, which would really tie into I think the latter part of your question and comment on the first part which is the latter term view is when we look at substantial deployment of renewables and battery storage and think about how do you.
Further decarbonize the U S electricity sector. When we previously ran that analysis I'm, just trying to add more renewables and add more battery storage. It became very burdensome for customers because you aren't getting a significant amount of value to the the more and more renewables and storage you add absent other actions.
So when we incorporated hydrogen into that thought which is effectively a form of long duration storage.
It's taking advantage of the cheap electricity production coming from renewables and in some cases excess renewable production at certain times of the day that substantially change the the the value equation for our customers to fully decarbonize in the electricity sector.
So that gives us great excitement about the potential for substantial renewables and battery storage deployment, knowing that you know as you continue to deploy more and you find economic forms of long duration storage that that continues to be very value accretive to customers both in cost and in the performance of clean energy.
So that's kind of the starting point, but then coming back to a little bit more nearer term. If you think about how do you decarbonize transportation and industrial sectors are the most exciting ways to do that that we see today is through electrification, whether that's in the form of electric vehicles fueled by.
Batteries or other type of fuel cells.
Or through hydrogen and in hydrogen probably more applicable in the industrial sector, particularly for applications that already exist today. So.
So.
And with as Jim highlighted the potential for a hydrogen production tax credits are being considered by the administration and by Congress as part of the infrastructure package in the nearer term, we could see a closing of the GAAP, perhaps fairly quickly to creating this as an economic alternative to other fuel sources today that are of fossil fuel based.
So yes, we we couldnt be more excited about it for both the opportunities for renewables.
You know for electricity sector, industrial and transportation, but also as you as you suggested potentially to participate in the hydrogen infrastructure itself, whether it's the electrolyze or or other.
Forms of of creating and distributing the the the molecules how.
How much and where we participate in that is really one of the things that we're focused on in all of these different pilots that both John and the energy resources team as well as Eric within Florida power and light our thinking through today.
How do we do that economically how do we leverage some of the scale benefits and opportunities that our business can bring to bear.
These opportunities you'll see us continue to to play small bets to get experience to build relationships to gain knowledge and over the in the short term that won't that up to a heck of a lot of capital investment opportunity but.
But it will add up to a tremendous amount of learning and continuing to focus our strategies on where we cannot add significant amount of value to the to the infrastructure end market and ultimately to our shareholders as well.
That's really helpful and then just separately thinking about.
The mix of growth that resources, obviously, theres a lot of solar activity a lot of solar megawatts.
That youll be deploying I just wanted to get your latest thinking on the outlook for returns between solar and wind I guess generally hear continued views that you saw the returns are certainly lower than when there is more competition there, but just curious your latest thoughts on solar versus wind return outlook even.
From a return standpoint, we do see a differential we have for for quite some time overall returns between wind and solar from a risk adjusted basis, We're happy with returns that we've seen in both sets of technologies in the short term in terms of backlog the that John and the energy resources team it certainly hasn't been.
Influenced by what I think that is the conventional wisdom for a long time that the step downs are for the the production tax credit on wind and the step down for the investment tax credit on solar where in fact likely to happen I think you know our customers now are thinking about that a little bit differently is discussions in Washington is has started to.
Heat up but as we look what our likely outcomes as Jim was talking through including the potential for extensions of those incentives I think the key takeaway is they remain both technologies are very likely to remain economic for our customers to deploy on behalf of their customers and ultimately leading to significant.
Cost savings for electricity buyers at the end of the day. So they remain attractive from our perspective, and we continue to focus our development efforts on wherever we can add value for for our customers.
Very good thank you very much.
Thanks Steven.
Our next question today comes from Michael Weinstein with Credit Suisse. Please go ahead.
Hi, good morning.
And Michael Holmes.
Could you work on the on.
On the subject of third party acquisitions for any P.
Could you comment on any opportunities you're seeing in Texas following winter storm Yuri.
We've heard some previous comments that there are lots of parties looking at distressed assets in the state and I'm wondering if that might be an opportunity for entity as well.
Yeah, Michael I think it's probably still a little bit too soon I think I'm. Most participants in the market are still working through a lot of the implications.
Implications and learnings from from Texas, So I'm not sure there's a lot to be to be commented on in the near term. It's obviously something we'll stay engaged in the market and participate where it makes sense, but at this point I think it's too soon.
Has.
Can you comment a little bit about how much it costs to weatherized from the state.
What actions you guys have been taking since the storm.
Yeah. So we've done a lot of deep dives across our portfolio to think about we're weatherizing makes sense as I've talked about in the past and you. All know we have a lot of interest across Texas across Texas, not only wind investments solar battery storage gas infrastructure investments and of course, the small retail business.
So we've been carefully thinking through all of of what are the opportunities to you know to learn and and you know.
Perhaps invest going forward, specifically to Weatherizing I don't know if you were talking exclusively around the renewables fleet or if you're talking about the gas infrastructure side, but on the renewable side keep in mind that weatherization really focuses on ambient temperature affects ah.
And ambient temperature at least for our fleet I can't speak for everybody's was not the real issue for any sort of a production shortfall versus you know a F. P 50 forecast it was really related to the fact that this in this extraordinary event that happened from multiple days.
It was preceded by an icing of that so ice was accumulating on our blades and when I say Cumulus on the blades, it's difficult for them to spend.
And because the temperatures remained low for several days in a row, a there was an opportunity for that ice to shed.
Typically our weatherization packages don't really address it ace accumulation on the blades.
This is something that the industry is focused on there are some of what at this point are very expensive solutions to try to address IC cumulation on the blades.
And given that they don't happen every year and certainly don't happen frequently across specific sites every year and ended up being very cost prohibitive for something that happens very sporadically.
So I'm not optimistic that there's a substantial amount due to at least today with respect to weatherization on Hum on the wind side to change them you know the events I do think there's opportunities across the gas supply side I'm too.
Improve our the ability for gas to flow, which obviously was really at the crux of the issues along with not on the natural gas you know supply shortages, but plant issues and issues in the coal fleet and issues in the nuclear fleet, so there's opportunities across the market to invest.
Yeah, and if I, if I could just add to that what Rebecca said this is John.
When you look at.
Eric cuts overall operating fleet, what they really do have to address at the end of the day as Weatherization of gas because you think about 80 788, gigawatts that were supposed to be available I mean renewables on an Mcf adjusted basis were only about three gigawatts of them and you know very much a rounding error in the problem.
That occurred.
In Texas, and so, Texas really needs to think through what are the right solutions for gas because when you have I seen conditions. It doesn't matter if it's blades on a turbine.
It's combustion gas turbine, it's a nuclear power plant. It's a coal plant. When you have severe I think conditions are all going to fail and that's what we saw in Texas and so from question is you know what what is going to be the right market construct going forward to provide the appropriate incentives for weatherization and for back of fuel.
Onsite to make sure that these facilities are capable of running and I think those are the kinds of issues that the Texas legislature is currently evaluating.
Gotcha and one last question from me.
Third party acquisitions at any T put any kind of pressure on <unk> payments and they already are.
Your a scheme going forward.
I'm not sure what you what you mean by buy pressure that ultimately the calculation for idea ours is one that's known and and you know relates to the overall growth in cash flow within any P.
So it's not specific to what the acquisition source was for the assets.
Okay, just wondering if if you've seen or if you see.
Big uptick in third party acquisitions, instead of dropdown cash going up that nextera.
Is there any kind of I don't know pressure, one way or another to change the audi or structure.
No there's not a difference in terms of of the structure and at this point in time next surgery partners and and Nextera energy, we remain happy with the idea of structure. That's our that's currently in place.
Great. Thank you.
Thanks, John.
Ladies and gentlemen. This concludes today's question answer session and today's conference call. We thank you all for attending today's presentation. You may disconnect your lines and have a wonderful day.
Eric.
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