Q2 2021 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call
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 can.
And each of which can be found on our websites Nextera energy Dot com and Nextera energy partners Dot com.
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 and 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 1.2021.
Gulf Power will continue as a separate reporting segment within Florida power and light and Nextera energy through 2020, 1 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 are when using the term combined with that I will turn the call over to Rebecca.
Thank you Jessica and good morning, everyone Nextera energy delivered strong second quarter results and is well positioned to meet its overall objectives for the year.
Adjusted earnings per share increased more than 9% year over year, reflecting continued strong financial and operational performance across all of the businesses.
FPL increased earnings per share by <unk> <unk> year over year, driven by continued investments and the business.
And that feels major capital initiatives remain on track and Fpl's focus continues to be on identifying smart capital investments to lower costs improve reliability and provide clean energy solutions for the benefit of our customers.
And June FPL demolished its last coal fired plant in Florida with plans to replace it with more clean emissions free solar energy facilities.
During the quarter FPL also successfully commissioned approximately 373 megawatts of new solar, including the FPL Discovery Solar Energy Center at Kennedy Space Center.
With these new additions fpl's surpassed 40% completion of its groundbreaking 30 by 30 plan.
To install 30 million solar panels by 2030.
<unk> expects to have installed more than 15 million panels by early 2022, which would put the company more than 50% on the way towards completing 30 by 30 plan and just over 3 years since the initial announcement.
To support its solar build out FPL recently began installing the first components of the worlds largest integrated solar powered battery system. The 409 megawatt FPL Manatee energy storage Center.
<unk> to begin serving customers later this year.
Gulf Power also continued to execute on its growth initiatives during the quarter with its strong financial performance driven primarily by continued investment and the business and further improvements and operational cost effectiveness.
Excluding the COVID-19 related expenses, which were subsequently reversed and booked into a regulatory asset and in the third quarter of 2020.
Gulf Power's year to date O&M costs declined by approximately 9% versus the prior year comparable period and a net declined by approximately 31% relative to 2018.
Gulf Power's operational performance metrics also continued to improve with the reliability of the generation fleet that we operate and service reliability, improving by 71% and 63% respectively year to date versus the first half of 2018.
We continue to expect that the cost reduction initiatives and smart capital investments that we've previously outlined will generate significant customer and shareholder value in the coming years.
At energy resources adjusted earnings per share increased by more than 7% year over year.
The energy resources team continues to capitalize on the terrific market opportunity for low cost renewables and storage, adding approximately 1840 megawatts to its backlog since the last earnings call.
This continued origination success is a testament to energy resources significant competitive advantages, including our large pipeline of sites and interconnection queue positions strong customer relationships purchasing power and supply chain execution.
Best in class construction expertise resource assessment capabilities cost of capital advantages and world class operations capability.
Moreover, energy resources advanced data analytics and machine learning capabilities allow us to utilize the nearly 40 billion operating data points. Our fleet provides every single day for predictive modeling.
Further extending our best in class O&M and development capabilities.
We continue to believe that no company is better positioned than energy resources to capitalize on the best renewables development period and our history.
We are pleased with the progress we've made at Nextera energy, so far and 2021 and headed into the second half of the year, we are well positioned to achieve the full year financial expectations that we've previously discussed subject to our usual caveat.
Now, let's look at the detailed results beginning with FPL for the second quarter of 2021, FPL reported net income of $819 million or <unk> 42 per share, which is an increase of $70 million.04 per share respectively year over year.
Regulatory capital employed increased by approximately 10, 7% over the same quarter last year and was the principal driver of Fpl's net income growth of more than 9%.
Fpl's capital expenditures were approximately $1.6 billion and the second quarter and we expect our full year capital investments to total between 6.6 and $6.8 billion.
Our reported <unk> for regulatory purposes will be approximately 11, 6% for the 12 months ended June 2021 during.
During the quarter, we utilized $100 million of reserve amortization to achieve our target regulatory Roe.
Leaving FPL with a balance of $473 million.
As a reminder, rather than seek recovery from customers of the approximately $240 million and Hurricane Dorian storm restoration costs and 2019 FPL utilized its available reserve amortization to offset and nearly all of the expense associated with the write off of the regulatory asset related to door and cost recovery.
Earlier in the year FPL and office of public counsel entered into a settlement regarding the prudence of Fpl's Hurricane Dorian storm restoration costs and activities, which was approved by the Florida Public Service Commission and Mei.
We were pleased by the Commission's determination that all of Fpl's Hurricane Dorian restoration costs were prudently incurred and we believe the settlement agreement fairly and reasonably balances the interest of FTE and its customers.
Earlier this month FPL responded to tropical storm Elsa with a restoration work force of approximately 7000, FPL employees and contractors.
Fpl's safely and quickly restored power to nearly 100000 customers who were impacted by Elsa as the hardening and automation investments that FPL has made since 2006 to build a stronger smarter and more storm resilient energy grid continued to benefit customers.
Also was the earliest that a fifth named storm has formed and the Atlantic Basin and we remain prepared in advance of what is forecasted to be another active hurricane season in 2021.
Let me now turn to Gulf power, which reported second quarter 2021, net income of $63 million or <unk> <unk> per share.
During the quarter Gulf Power's capital expenditures were approximately $150 million and we expect its full year capital investments to be between 800 and $900 million on.
All of the major capital and the Gulf power and capital projects, including the North Florida Resiliency connection that is expected to be in service and mid 2022 continue to progress well and Gulf Power's regulatory capital employed grew by approximately 17% year over year as a result of these smart capital investments for the benefit of customers.
Gulf Power's reported our OE for regulatory purposes will be approximately 10, 3% for the 12 months ended June 2021.
For the full year 2021, we continue to target a regulatory ROE E and the upper half of the allowed band of 9.5 to 11, 5%.
Earlier this month, Florida Public Service Commission also approved a settlement agreement between golf Tower and the office of public counsel for cost recovery of the approximately $13 million and COVID-19 related expenses, primarily reflected and incremental bad debt and safety expenses as a result from the pandemic.
We are pleased with this outcome and believe it demonstrates the continued constructive regulatory environment and the state of Florida, as we work to improve Gulf Power's value proposition of low cost high reliability excellent customer service and clean energy for our customers.
As we anticipated Florida's economic activity has rebounded since the onset of the COVID-19 pandemic last year as reflected by a wide range of positive economic indicators.
Florida's current unemployment rate is 5%, which remains well below the national average.
Rolling 3 month average and new building permits are up approximately 46% year over year, which is the highest growth rate and nearly 8 years and are the second highest new building permits and the nation.
And another indicator of health and Florida's economy, Florida retail sales index was up over 40% versus the prior year.
The case Shiller seasonally adjusted index for South, Florida home prices is up over 14% on an annual basis.
Recent population growth estimates indicate that Florida remains 1 of the top destinations for relocating Americans with Florida, adding nearly 330000, new residents between April of 2020 and April of 2021.
We expect this trend to continue with Florida's population projected to grow at an average annual rate of 1% through 2023 and.
And FPL, including Gulf power forecast, adding almost 500000, new customer accounts from 2018 through 2025.
During the quarter Fpl's average number of customers increased by approximately 78004 hundred from the comparable prior year quarter, driven by continued solid underlying population growth.
Sales second quarter retail sales increased <unk>, 1% from the prior year comparable period.
Partially offsetting customer growth was a decline and weather related usage per customer of approximately 2.8%.
On a weather normalized basis second.
Second quarter sales increased 2.9% with continued strong underlying usage contributing favorably.
For Gulf power and the average number of customers grew roughly 1.5% versus the comparable prior year quarter.
And Gulf Power's second quarter retail sales decreased 1% year over year, a strong customer growth was more than offset by an unfavorable weather comparison relative to 2020.
As we've previously stated on March 12, we initiated Florida power and light 2020, 1 base rate proceeding the 4 year base rate plan. We've proposed has been designed to support continued investments and clean energy generation long term infrastructure, and advanced technology, which improves reliability and keeps us to keep customer bills low.
Today Fpl's typical residential bills remain well below the national average and the lowest among the top 20 investor owned utilities and the nation.
With the proposed base rate adjustments and current.
Projections for fuel and other cost Fpl's typical residential bill is expected to be approximately 20% below the projected national average and typical Gulf power residential bills are projected to decrease approximately 1% over the 4 year rate plan.
And always we are open to the possibility of resolving our rate request through a fair settlement agreement and our core focus remains on pursuing a fair and objective review of our case that supports continued execution of our successful strategy for customers.
Energy resources reported second quarter, 2021, GAAP losses of $315 million or <unk> 16 per share adjusted.
Adjusted earnings for the second quarter were $574 million or 29 cents per share.
Energy Resources' adjusted earnings per share and the second quarter increased more than 7% versus the prior year comparable period.
The effect of Mark to market on non qualifying hedges, which is excluded from adjusted earnings was the primary driver of the difference between energy Resources' second quarter GAAP and adjusted earnings results.
Contributions from new investments added <unk> <unk> per share versus the prior year, and primarily reflects growth and our contracted renewables and battery storage program and <unk>.
<unk> earnings per share contributions from existing generation and storage assets increased 1 set year over year, which includes the impact of unfavorable wind resource during the second quarter.
And Nextera energy transmission adjusted earnings per share contribution also increased 1 cent year over year.
And our customer supply and trading business contribution was 3 cents lower year over year, primarily due to unfavorable market conditions.
All other impacts decreased results by <unk> <unk> per share versus 2020.
The energy resources development team continues to capitalize on what we believe is the best renewables development environment and our history during the second quarter with the team, adding approximately 1840 megawatts of renewables and storage projects to our backlog.
Since our last earnings call. We've added approximately 285 megawatts of new wind and wind Repowering.
1000, and 450 megawatts of solar and 105 megawatts of battery storage to a backlog of signed contracts.
With nearly 3 and a half years remaining before the end of 2024, we have already signed more than 75% of the megawatts needed to realize the low end of our 2021% to 2024 development expectations range.
Since the last call. We have also executed a 310 megawatt build own transfer agreement, which is not included in our backlog additions.
Our customer intends to use the solar plus storage project to replace existing coal generation and we are excited to be able to continue supporting the industry's transition away from old inefficient forms of generation and clean reliable and low cost renewables and storage.
Our engineering and construction team continues to perform exceptionally well commissioning approximately 330 megawatts during the quarter and keeping the backlog of wind solar and storage projects that we expect to build and 2021 and 2022 on track.
We are well positioned to complete our more than $20 billion capital investment program at energy resources for 2021 and 2022.
Last month, the IRS extended safe Harbor eligibility on production tax credits and investment tax credits, providing projects that begin construction between 2016 and 2019 with 6 years to complete construction and project that started construction in 2020 with 5 years to achieve their in service dates and qualify for federal tax credits.
We believe the extension reflects the strong support of the by the administration for new renewables and May enable and incremental 1 to 1.5 gigawatts of new wind and wind repowering opportunities.
We now have more than $2.2 billion of safe Harbor, wind and solar equipment, which could support as much as $45 billion of wind and solar and battery storage investments across all of our businesses from 2021% to 2024.
Yeah.
Turning now to the consolidated results for Nextera energy for the second quarter of 2021, GAAP net income attributable to Nextera energy was $256 million or <unk> 13 per share.
Nextera Energy's 2021 second quarter adjusted earnings and adjusted EPS from $1.4 billion and 71 per share.
Respectively and.
Adjusted earnings from corporate and other segment were roughly flat year over year.
Over the past few months Nextera energy issued nearly $3.3 billion and new financings under its innovative new Nextera Green bond structure.
<unk> raised with Nextera energy Nextera Green bonds are designated for specific renewable energy and storage projects under development across our businesses.
And its funds are not used to bring the renewable projects online within 2 years, there was a step up and the interest rate on the debt.
Our inaugural Nextera Green issuance was 4 and a half times oversubscribed price at a premium to the market and was well received by investors.
We believe that Nextera Green will set a new standard for Green issuances moving forward.
Nextera energy has raised more than $9 billion and new capital year to date on very favorable terms as we continue to execute on our financing plan for the year.
Finally, and June S&P affirmed all of its ratings for Nextera energy and lowered its downgrade threshold for its funds from operations or <unk> to debt metric.
From the previous level of 21% to the new level of 20 per cent.
We believe this favorable adjustment reflects the strength of our business as well as recognition of Nextera Energy's, leading position and the utility and renewable energy sectors on environmental social and governance or ESG factors.
I believe that this is the first time that S&P has formerly recognized the benefits the business risk profile related to ESG factors by allowing more constructive financial metrics. Since it began its practice of identifying the specific ESG metrics that drive our company's overall credit position.
Notably S&P also revised Nextera energy management and governance assessment from satisfactory to strong to reflect its views on our comprehensive enterprise wide risk management standards and successful track record of consistently implementing our strategic planning efforts.
Our long term financial expectations through 2023 remain unchanged for 2021, Nextera energy expects adjusted earnings per share to be and a range of $2.40.
The $2.54.
For 2022, and 2023, Nextera energy expects to grow 6% to 8% off of the expected 2021 address 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 and 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 our dividends per share and 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 net.
<unk> energy partners portfolio performed well and delivered financial results generally in line with our expectations after accounting for the below average renewable resource.
On a year to date basis, adjusted EBITDA and cash available for distribution have increased by roughly 9% and 11% respectively versus 2020.
This strong operational and financial performance highlights the Nextera <unk> partners remains well positioned to continue to deliver on its outstanding growth objectives.
Yesterday, the Nextera Energy partners Board declared a quarterly distribution of <unk> 66 to 5 cents per common unit or $2.65 per common unit on an annualized basis up approximately 15% from a year earlier.
Inclusive of this increase Nextera <unk> partners has now grown its distribution per unit by more than 250% since the IPO.
Further building on that strength today, we are announcing that Nextera energy partners has entered into an agreement to acquire approximately 590 net megawatts of geographically diverse wind and solar projects from Nextera energy resources.
I will provide additional details on the transaction and a few minutes.
And Exterran partners also completed multiple financings during the second quarter to secure funding for its recently announced 2021 acquisitions and further enhance its financing flexibility.
And June Nextera energy partners raised approximately $500 million in new zero percent coupon convertible notes and concurrently entered into a capped call structure that is expected to result, and Nextera energy partners retaining the upside from up to 50% appreciation and its unit price over the 3 years associated with the convertible notes.
Next energy partners also drew the remaining funds from its 2020 convertible equity portfolio financing, which was upsized by approximately $150 million during the quarter evidence and continued investor demand for exposure to the high quality long term contracted renewables projects and the underlying portfolio that assets that was and.
Stablish last year.
Finally, and next energy partners has successfully completed the sale of approximately 700000 net common units year to date due its recently expired at the market or ATM program, raising roughly $50 million and proceeds.
Going forward, we will continue to seek opportunities to use the ATM program, depending on market conditions and other considerations and in the near term Nextera energy partners intends to renew the program for up to $300 million and issuances over the next 3 years to permit additional financing flexibility.
And as a result of these financings and the strong cash flow generation of its existing portfolio extra and D partners ended the quarter with more than $2.2 billion and liquidity, which includes funds raised and the second quarter financing activities and existing partnership debt capacity to support its ongoing growth initiatives, including the acquisition of the.
<unk> 590, net megawatts of renewables from energy resources.
As well as its previously announced acquisition of approximately 400 megawatts of operating wind projects, both of which are expected to close later this year.
Let me now review the detailed results for Nextera energy partners second quarter.
Adjusted EBITDA of $350 million was roughly flat versus the prior year comparable quarter driven by favorable contributions from the approximately 500 megawatts of new wind and solar projects acquired in 2020.
Weaker wind and solar resource and the second quarter, which reduced this quarter's adjusted EBITDA contribution from existing projects by roughly $22 million was partially offset by positive contributions to adjusted EBITDA from last year's Repowering and the Texas pipelines.
Wind resource for the quarter was 93 per cent of the long term average versus 100 per cent and the second quarter of 2020.
Cash available for distribution of $151 million for the second quarter was also reduced from existing projects due to the distributions for the convertible equity portfolio financing entered into late last year.
As a reminder, this convertible equity portfolio financing recapitalized Nextera energy partners existing Genesis Solar project and other assets and the proceeds were used to fund last years acquisition from energy resources.
Additional details of our second quarter results are shown on the accompanying slide.
We remain on track for the strong full year growth consistent with our long term growth objectives of 12% to 15% distributions per unit growth through at least 2024.
And I previously mentioned, we continue to execute on our plan to expand Nextera energy partners portfolio and with an agreement to acquire assets and a diverse portfolio of long term contracted wind and solar projects from energy resources.
The portfolio consists of approximately 830 megawatts of renewables of which Nextera energy partners will be acquiring and approximately 590 megawatt net interest.
And Exterran partners interest in the portfolio will consist of approximately 510 megawatts of universal scale wind and solar projects and approximately 80 megawatts of distributed solar projects.
Which is next R&D partners first acquisition of distributed generation assets.
And the portfolio to be acquired by Nextera Energy partners has a cash available for distribution and weighted average contract life of approximately 17 years and a counterparty credit rating of B double a 1 and Moody's and triple B plus at S&P.
Additional details on the portfolio of assets to be acquired by Nextera energy partners can be found in the appendix of today's presentation.
Energy resources currently owns the country's largest portfolio of distributed generation assets with commercial and industrial customers and expects to triple its capital investment and distributed generation from 2020 through 2024.
Nextera energy partners expects to benefit from this expansion over the coming years through future acquisitions from energy resources.
Next energy partners expect to acquire the portfolio for a total consideration of $563 million subject to working capital and other adjustments.
Nextera energy partners' share of the portfolios debt and tax equity financings is estimated to be approximately $270 million at the time of closing.
The acquisition is expected to contribute adjusted adjusted EBITDA of approximately $90 million to $100 million and cash available for distribution of approximately $41 million to $49 million each on and 5 year average annual run rate basis, beginning on December 31, 2021.
The purchase price for the transaction is expected to be funded with existing liquidity and.
And the transaction is expected to close prior to year end and be immediately accretive to LP distributions.
Exterran partners continues to expect to be and the upper end of our previously disclosed year and 2021 run rate adjusted EBITDA and cap the expectation ranges of 144 billion to $1.62 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 <unk> 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% growth per year, and LP distributions as being a reasonable range of expectations through at least 2024.
We expect the annualized rate of the fourth quarter 2021 distribution that is payable in February of 2022 to be and the range of $2.76 to $2.83 per common unit.
In summary, we remain as enthusiastic as ever about the long term growth prospects for both Nextera energy and Nextera energy partners.
At Nextera energy, we were honored to be named on time magazines first ever list of top 100, most influential companies, which highlights businesses, making and extraordinary impact around the world.
We are proud to be leading the clean energy transformation and our sector and remained focused on executing upon the opportunities presented by the significant growth and wind solar and various forms of energy storage and the U S over the coming decades.
At S P L, including Gulf power and that means continuing to deliver on our best in class customer value proposition of low bills high reliability and clean energy solutions.
At energy resources, our competitive advantages position us well to capture a meaningful share of this significant and expanding market for renewables.
And at Nextera Energy partners with its continued access to low cost capital and accretive acquisition opportunities as well positioned as ever to take advantage of the clean energy transformation reshaping the energy industry.
That concludes our prepared remarks, and with that we will open up the line for questions.
Okay.
Ladies and gentlemen at this time, we will begin the question and answer session and once again to ask a question you May Press Star and then 1 using a touchtone telephone.
You are using a speaker phone and we do ask that you. Please pick up your handset before pressing the keys.
And all your questions you May press star and to.
Once again that is starting and 1 to ask a question.
Our first question today comes from Shar <unk> from Guggenheim Partners. Please go ahead with your question.
Hey, good morning, guys.
Good morning.
And just a question with sort of the infrastructure discussions going on at the federal level and all of us to Rebecca you highlighted opportunities on the wind and solar side.
Does nextera transmission and sort of see any upside from policy changes and obviously with the prior acquisitions closed do you feel like you have a big enough platform to grow organically or is there and interest to go up more standalone projects development entities.
Yeah. Thanks, Shar I. Appreciate the question you know from our perspective, and we're looking out decades and looking at the enormous renewables build opportunity across the U S.
It is clear that over time, new transmission needs to be built to support some of that build out.
And it's not necessarily imperative today for that transmission to be built but it certainly is important to start today to build the type of infrastructure that's needed overtime and.
So we're really excited about the opportunities that the Nextera energy transmission team has and I would.
Over time that we will grow both organically and continue to look for acquisition opportunities like we have over the last couple of years.
To supplement and build out that portfolio, we're thrilled with the Trans Bay cable acquisition that we closed a couple of years ago very excited to bring the grid Lions team on board and will continue to focus on opportunities and.
Both organically and through acquisition over time.
From a from a.
Broader policy standpoint, we started and important for FERC on and the regional ISO is to continue to focus on how do you support that transmission build out and we certainly are happy to see that too.
To start to be a focus and at FERC. This year in particular and and contemplating how do they support it going forward and I think theres, a receptive audience and the by the administration and making sure that they are support laying a foundation that's supportive of renewables.
Not just in the next couple of years, but and in the next couple of decades. So transmission moves slowly you know that so stay tuned, but we're optimistic both about our direct prospects and near term as well as longer term.
Got it and then the backlog additions look obviously more solid this quarter I'm just thinking about maybe the market dynamics. There was some slowdown in early 'twenty, 1 with input cost and commodity inflation.
Have you seen that or are the headwinds largely stabilized and.
Just as a follow up as energy storage still kind of a large component of the backlog and contract and conditions.
Has there been some pricing pressure.
You know our energy Resources' development team clearly as evidenced by not only the signings this quarter, but looking back at it quarters now going back quite a number of them have just had terrific origination success and I'd encourage everybody.
And everybody to not just focus on an individual quarter and look at a slightly broader trend and we're really pleased not only with what we've seen looking back and what the team has been able to execute on but also looking forward and and that's what gave us the confidence just early this year.
To not only increase but expand the horizon for our development expectations such that our 4 year periods, starting 'twenty 1 through 'twenty..4 is 23 to 30, Gigawatts, which is just the and exceptional and the number and and 1 that we're really excited and proud of the team for taking on and we're thrilled to be at 75 per cent already at the low.
And today.
In terms of our customer demand remains very strong across the board and and and we're certainly excited about bringing that into more sign contracts going forward in terms of of course as you know we'll continue to incorporate our latest expectations are and the industry's latest expectations for cost and we feel very comfortable.
<unk> with the returns that we see and excited about the opportunities going forward.
Got it and then just lastly on just the rate case, I mean, obviously youre on.
And conversations with Intervenors and your building and case record there.
And obviously you highlighted you always prefer settlement is there any moving pieces that you feel are and focus and where do you sort of think you have some flexibility for a constructive outcome.
This is a fully litigated case.
As we've talked about with with you all from an investor standpoint.
We are very focused on over years now leading up to the case as a matter of our strategy on.
And making sure that the best customer value proposition possible and you can see that and our execution on O&M on reliability on customer service and of course, the continued focused on on clean energy and generation because that's in our control.
It's also and our control is putting forward the best case possible to ensure that we're articulating that strategy.
Not only what the team has accomplished but what we plan to do and they're coming for years to support continued execution on.
So the team is very focused on continuing to go through the process.
And you'll culminating with the hearings in short order and a commission decision later this year, if we go that far.
But we're also always very interested and having a win win solution with stakeholders and we certainly appreciate the history of that and Florida, not just with us but with other utilities.
Utilities and broader stakeholder base and we will continue to remain very engaged and any sort of constructive outcome that we could bring forward with stakeholders and you think that's positive for our customers and and broader stakeholders are if we can accomplish it but.
But we're focused on the task at hand, and we will continue through the process and and and see where we are at the end of the year.
Terrific Congrats guys on the results. Thank you very much. Thanks.
Thanks Shar.
Our next question comes from Julien Dumoulin Smith from Bofa. Please go ahead with your question.
Hello, and good morning, Thanks for the time.
Maybe picking up maybe picking up were Charlotte at all.
Maybe a little bit more about some of this and inflation dynamic and especially from the elevated freight and logistics I mean, it seems like your 'twenty 1 'twenty 2.
And to 'twenty, 1 'twenty 2 outlook here is relatively and Todd can you speak to some of the dynamics, there and and just the confidence. It seems like you guys are certainly are staying on track of execution as you have historically.
But also in the same vein of inflation can you speak to what that does to your PPA off take prices right. I mean, how are you thinking about this being effectively pass through to your customers. If you will whether thats as a proxy for higher gas and power prices or simply just passing through your higher cost.
And at some goods here.
Yeah, Thanks, Julian and I will start with some kind of a near term near term thoughts and then think about the broader term second on near term as we talked about in the prepared remarks, we feel very comfortable with where we are are we with our backlog and what we plan to build and the 2021 and 2022 timeframe and and our comments.
Affected that and the and the prepared remarks, and it's a real credit to the way that we approached business and on.
Our engineering construction and integrated supply chain teams really working through.
And a variety of different circumstances over the last year and a half and we've secured the equipment that we need to build out those and those projects and of course and you'll have some contractual.
No agreements in place that help us feel comfortable about that position.
From a longer term standpoint, you know I think it still remains to be seen in some respects and you can see that and a broad set of discussions across the financial and and broader U S economy dialogue of whether or not this is temporary related to near term snap backs and demand and hurdles and the supply.
Chain that may not persist over time or if it is systemic and persisting.
So I think that remains a little bit to be seen 1 thing that's very fortunate.
For renewables as you all well know is that renewable energy projects are very much the least cost form of generation and me parse if not most of parts of the U S.
So even if there is a a change and pricing. If these cost increases are persistent and and systemic over a long period of time and the value proposition is still very clear for renewables relative to alternatives.
And then beyond that we also need to think about what implications if any there will be from from policy changes and.
So I think that the net takeaway is somewhat premised and your question is that we feel comfortable with where we are we're prepared for a variety of set of circumstances and and we're thrilled with our position of of renewables and the growth opportunities and honestly the decades ahead.
1 small add I would I would make Julian and to what Rebecca just said this is John.
Extra trading opportunities force, our supply chain capability.
And our ability to manage that supply chain and the buying power that we have spent on 11 billion and capex a year.
It's creating opportunities for us and the renewable space, because we can execute and deliver where others can't.
Okay.
And maybe to that point can you speak to how how much procurement you all have done against the full kind of for your outlook and you guys talked about here now how hedged up and for the lack of a better way to describe this are you against against these eventualities and I know you all do meaningful forward plan.
On here.
Yeah, pretty well hedged up Julian and I mean, we basically locked in and obviously 'twenty 1 we've locked in 'twenty, 2 making really good headway against 23 as well and so.
So that's put us on a on a great position when you look at where we stand against the rest of the market and.
And where others can't deliver particularly around commitments and 'twenty, 2 or 'twenty 3 'twenty 4.
They don't have the same supply chain leverage that we do it's really creating opportunities and those out years and you got to remember the.
And the customers a little bit concerned and so if they're dealing with smaller players that don't have the same supply chain leverage that are having to constantly go back to them for price ups or for C. O D extensions it really lowers the credibility of those types of players on the market and it creates more opportunities that fall on.
And so that's why I say, it's a real opportunity for us.
Got it and just to clarify that even further.
Suggesting that not only could you get awarded and future contracts are you, suggesting that you might be able to take over existing.
Or perhaps the funks ppas that have already been awarded.
Oh, you know not take over but if those opportunities fall away because the off taker of the customer can't.
Arrange a workout with that developer sometimes those are those get paid back out to RFP or sometimes it creates a bilateral opportunity for us.
Got it excellent.
And thank you for the time.
Yeah. Thanks Julien.
Our next question comes from Steve Fleishman from Wolfe Research. Please go ahead with your question.
Yeah.
Hey, good morning.
Good morning can you hear me and Rebecca.
And here you go on.
Great.
No.
First a question on the on the announced.
Backlog growth this quarter and a lot of solar as well.
Just a little bit of storage are you seeing if I recall <unk> been getting kind of 50.
And 50% roughly your adoption of storage with solar or is that.
Changing just happened to be more.
Just solar Standalone weighted this quarter.
Yeah, Steve I wouldn't read into it and kind of consistent with the overall backlog additions I think you need to look a little bit broader and just a 3 month period to get an indication of trends. What we see is not a slow down and in storage at all there's a lot of interest in and new storage opportunities.
Not just with our customers, but even from a regulatory standpoint, and certain jurisdictions, where you know storage can be particularly helpful. Given a.
Certain dynamics and in various markets.
So we're very excited about the storage opportunity and don't see a change and the overall dynamics of opportunities.
And 1 thing I would add to that Steve is with all the hot weather that youre seeing out in the west that's only going to drive more storage opportunity and I think we have a world competitive and.
And vantage as you've seen in the past.
And those markets.
Okay, great and.
Maybe just switching over to MEP.
So this this is the second drop I think and the last 6 months or so where the cash yields have been around 8% is that kind of a new range, we should be expecting for for MEP on on.
Drops of long term contracted.
And so.
Steve as you can appreciate we and and of course, the net board and energy resources and perspectives are constantly looking at what valuations are and and where third party transactions has have transacted.
Transacted on and we think about the devaluations and those light and it and those lights and I think with where cost of capital are and and demands for renewable projects. I think this transaction you know appropriately balances and and reflects those dynamics.
Okay.
And.
Yes <unk>.
Last question, just on and any thoughts on.
Some of the discussion and ERCOT, Texas on.
Renewables on market structure changes and.
And how they're discussing or chronic treatment of renewables there.
Is there a risk that debt.
Renewables need to end up paying for and stories.
I would characterize it Steve is a work in progress obviously the events that happened in February were pretty significant and it takes time to work through and properly account for where there are sources of pressure and what the appropriate responses are from obviously from a political but of course, the most chipotle from a regular.
Tori and and a policy standpoint, and I think theres still sorting through it.
Governor Abbott has asked for certain actions to be taken from the PUC T and ERCOT and there's a framework that the PUC T has started to lay out.
But I think there's still time to work through what those details look like.
From our perspective, you know you know well, we've been very active and a variety of aspects and ERCOT, we know that market well on and we certainly have a strong perspective on what needs to be addressed in particular to to focus on what really went wrong and in February including a massive amount of disrupt.
And across the the gas supply not only from supply, but transmission and ultimately a consumption I buy and users.
And we hope that a lot of the actions will be focused on that as opposed to things that they wont necessarily help and solve the fundamental problems and but I think the most important part is work on progress Yeah, and I think you know what.
And what I would add to that is trying to frame. The problem right you have and 82 Gigawatts system I mean renewables, let's face it we're.
A very small part of that you're on the MTF adjusted basis during your you're talking about 3 gigawatts.
And it really the way to address the problem, if you're really going to go after the problem and we have to focus on.
And gas fired units shift and focus on coal and focus on nuclear.
And you can't lose sight of the fact that the reason that ERCOT has low low power prices is because of renewables and renewables are what are really driving the efficiencies.
And the economics are.
That market. So there was a much bigger story to be book, that's what we're working through.
At the workshop level as Rebecca said this is going to take some time to play out.
Okay. Thank you.
Thanks, Steve.
Our next question comes from Stephen Byrd from Morgan Stanley. Please go ahead with your question.
Hi, good morning.
Good morning, Steven.
And wanted to talk about the outlook for.
Renewable and energy storage costs, but take it from a jetblue perspective, I know theres been a lot of attention on commodity cost dynamics, but on the more positive side I was interested in.
And your views on sort of innovations that could result in cost reduction breakthroughs and there's issued and article this week and the Wall Street Journal and storage and we're trying to make sure we're thinking through.
Potential areas of innovation and I was just curious at a high level.
Are there areas of innovation, whether it be and storage and solar hedge and just things that excites you in terms of the potential to have very significant impacts on cost or performance.
Well you know you know all of US Stephen We Love Technology, We love innovation and and we certainly are excited about a lot of changes that are happening across the energy sector I think the biggest driver.
Driver dynamic in our sector today is really the cost of renewables overall, even today.
And that that alone is stimulating a significant amount of change.
And that adoption over time will create the need for more storage like applications, whether it's lithium ion or I think the technology, we're referencing and the Wall Street Journal of course hydrogen and the longer term, which we're also very excited about those.
Those are all very interesting, particularly for the latter part of the 2000, Twenty's and into 2030 day and beyond which could help support the substantial build out that we're expecting and the short term I think the biggest dynamic as what we see at hand, which is the economic value proposition of renewables, what we think.
Could change that probably nearer term than even some of the innovations you are talking about is policy.
You all I know are following just like we are on.
And then participating and a variety of discussions in Washington.
But if the incentives are our addressed and in legislation that could be a big driver of change and the industry as well in terms of timing.
Yeah.
That's very helpful. And then I wanted to go back to the dropdown that you announced I was just curious what was the amount of gains from Nextera from the dropdown of assets don't get any day.
I'm not sure I understand the question, Steve I know you're talking about the proceeds.
Oh, well the proceeds relative to the call kick it off and I'm, just curious sort of what degree of premium nextera.
We're able to achieve relative to the cost of developing those assets.
We have and we haven't.
<unk> disclosed that yet Steve and as we go through the process of course, we will update the financial statements I'm, assuming that the transaction closes but.
But we are very pleased from and energy resources perspective, with these projects consistent overall returns with the types of returns that we see across wind and solar and and distributed generation projects.
On the DG side, we continue to be very excited about the business on and energy resources. The team has done a terrific job building it.
And as I commented in the prepared remarks, and we're expecting to triple the investment that we've made and the business and those tend to be a very attractive returns.
Understood. Thanks for asking and park I was just looking at.
The multiple of EBITDA.
And Steve Fleishman mentioned and the cash check and yield.
8% is not not surprising but the.
And the multiple of EBITDA looked relatively low, but there may be some almost day 1.
And I'm just missing.
Yeah.
And I don't think that I wouldn't think there was characterized and anything on unusual Steven were happy with your overall returns of the project and I do think that the the cap yields are reflective of market.
Market transactions that we see in the marketplace and really reflective of substantial demand for renewables and we said you know continue to be very excited about the prospects for any P.
Understood. That's all I had thank you so much.
Our next question comes from Mohit and away from Credit Suisse. Please go ahead with your question.
Hey, thanks for taking our questions.
Just following on the <unk> side.
Despite the drag on the adjusted EBITDA and GAAP guidance remains unchanged does that.
Because of timing or something else on that side.
I'm sorry, it was the guidance change what was the I missed that part.
Adjusted EBITDA and GAAP guidance.
And as the same as the last quarter, just wondering if the new Dropdowns, a ritchie tariff on 'twenty to 'twenty 2 levels.
And I understand and I'm, sorry about that from our expectations. If you look at our guidance expectations. Even at the end of last year, which is when we started talking about what the expectations for run rate at the end of this year. They were for and increase these transaction was something that we are anticipating as part of our growth expectations.
We do expect to be at the high end of the ranges as we've articulated for both adjusted EBITDA and cafe for for yearend.
Got it got it and.
On the in terms of Dropdowns.
Would this be comfortable for 2022 needs and.
Is that a fair statement that you might need more dropdowns for 2020.3.
Distribution growth.
We will continue to be opportunistic and theres a lot of flexibility within the <unk> portfolio. We continue to have a pretty low payout ratio if you recall about.
And about a year and a half ago. We took some actions you know to its first de lever, but also supplement the portfolio during the uncertainty of the the P. G any bankruptcy.
And continue to have and relatively low payout ratio.
1 of the advantages of that is his next energy partners can be opportunistic in terms of meeting its its distribution per unit growth targets of 12% to 15%, which is really the metric against for really managing and measuring the business to ensure that we can meet those expectations.
Provide the expectations for run rate adjusted EBITDA and Kathy to give a sense of how we're expecting to achieve them, but there is flexibility and and how we get there.
Got you on and so thanks, Robert and just maybe last 1 from me.
In terms of the on the news.
And so.
And just given the recent cost pressures on the input side, just having that safe Harbor and.
Meet any near term needs or is and you know.
Using some of that to point to bid on them.
Safe Harbor equipment upfront.
To avoid any higher costs and the near term.
There's a lot of flexibility inherent to that safe harbor portfolio, but we see it mostly as an option.
And to create the opportunity to realize the tax incentives.
Just as we've seen over the last couple of years, there been extensions in terms of Timeframes and.
And even and extensions in terms of the available percentage of of the of the tax credit and a given period and.
So maintaining flexibility and optionality as our first priority we.
We continue to feel very comfortable with the 2021 and 2022 build of being able to meet the equipment needs and ultimately bring them into service and time frames that are that are very attractive from an energy resources perspective.
I would think of a safe harbor extension as being certainly and incremental opportunity for us 1 of the advantages that we have is we're always careful on how we manage our safe Harbor vintages and we're fortunate because we were in good shape on our 2017 and vintage portfolio and so.
The Safe Harbor extension creates you know 1 to 1.5 gigawatts of opportunity.
For us on the on the wind side and.
If I could come back just for 1 second on Stephen Berg's question on the EBITDA multiples EBITDA multiples on this on this dropdown were consistent with what we've done in the past you've got to remember.
It always gets a little bit tricky with a tam.
Tax credits you also have to remember that even after the sale, but net we own E on and so.
And so a good.
A portion of any P. We get.
Cash distributions, we get out of yours, when you take all that into account on an EBITDA multiple basis.
We ended up with what we believe is a very competitive marker against where renewable assets trade today.
Thanks for the kind of free cash.
Our next question comes from Michael Lapides from Goldman Sachs. Please go with your question.
Hey, guys. Thanks for taking my question actually I have a couple first of all just broad big picture renewables.
Do you think you're taking share.
Meaning do you think your market share of renewable capacity and the U S is actually growing from here or are you, mostly benefiting from the dramatic tailwind that's happening to the overall space. That's that's question..1 question..2 is there are lots of new entrants every day someone a new entrant gets announced.
And well funded whether it's by pension funds, whether it's European big oil, whether it's by some of the large super well capitalized and well known and alternative asset managers.
And on announcement out of 1 of them yesterday or the day before about funding our solar and storage startup.
What's that doing of returns are you seeing that kind of flow in the cash flow returns yet of new projects, you're developing today versus what you may have done a year or 18 months ago.
So Michael I'll start with the middle of it and maybe expand to the to the right and the left the middle of it is this market is absolutely growing significantly and we expect it to continue to grow significantly for years to come so from our perspective. The pie absolutely is is getting bigger over a long period of time our market share is.
Remained very strong and the Twentyish percent a range for wind and probably in the mid teems occasionally a little bit higher and occasionally probably in the mid teens on on solar and storage has actually been higher than that both of those.
And as this market has grown significantly over the last couple of years and.
When we look out we focus on both maintaining market share and also and maintaining attractive returns and we think our competitive advantages have enabled us to do that over time, and we think both as important and balance among them is very important to John and his team are focused on getting the best of the projects that we see out in the marketplace.
This and and and ultimately being very happy with the projects that we put into the into the portfolio.
You know we get asked the question about new entrants a lot.
And you know this industry well if you look back and you stack you know power purchase agreement awards over many years, you'll see that you know very big bar to the left when we put the chart together and a couple of bars that are smaller of course, but still decent size and then a whole bunch of small players. They get 100 couple hundred megawatts, a given year and that.
Dynamic continues to be consistent.
That's for Greenfield and kind of in the more development oriented projects.
And there has been more capital coming in but that's mostly post C O D and when we think about capturing the value of developing renewables. It really is on that Twinkle and the I have a developer to C. O D is the enormous opportunity to create value and we continue to be very good at it and.
And enhance those competitive advantages to maintain that position over time. So we're really excited about and what we've been able to accomplish really excited about our position.
And really excited about the at the energy transformation overall and the opportunities that presents.
Got it and then 1 quick follow up just on any P. You still have the idea our structure at any P and as any growth at what point do you think that becomes.
And you've made a revision to it but it's been a while but.
At what point do you reevaluate the necessity of the idea or at any level and and especially given the fact that kind of RDR structures have has significantly gone away from some of the other industries that used to use them.
You know Michael we you know obviously, we've gotten that question before and in the past and of course from knees perspective, we continue to be happy with the relationship as it exists today between me and nap.
And Theres a lot of synergy between the 2 companies and value created from each from each of their perspective from the structure that's in place.
And that alignment of incentives remains important and we believe.
And to ensuring value creation from both Nextera energy and Nextera energy partners perspective.
We are excited about the opportunities for both businesses.
And and we'll see what the what the future brings but it continues to work and we're very pleased with the alignment of interest today.
Got it thank you much appreciated.
Thank you Michael.
Yeah.
And ladies and gentlemen, with that we'll conclude today's question and answer session and conference call.
We do thank you for attending today's presentation you may now disconnect your lines.
Yeah.