Q3 2021 Nextera Energy Inc and Nextera Energy Partners LP Earnings Call
Expenses that had occurred earlier in that year.
During the quarter Gulf Power's regulatory capital employed group grew by approximately 13% year over year.
Gulf Power's capital expenditures were approximately $200 million during the third quarter and we expect its full year capital investments to be roughly $800 million.
For.
2021, we continue to expect Gulf Power's regulatory ROE to be upper half of the allowed band of 9.25 to 11, 5%.
All of our major capital initiatives at Gulf power are progressing well Gulf.
Gulf power anticipates, bringing approximately 150 megawatts of.
For the full year cost effective zero emission solar capacity online within the next six months.
The North, Florida, resiliency connection, which among other things will allow customers to benefit from greater diversity in solar output across the two different time zones is expected to be in service in mid 2022.
Continued smart capital investments.
In renewables and core infrastructure are expected to drive customer benefits for many years to come.
During the quarter Gulf power was impacted by tropical storm, Fred which experienced an unexpected change in path before striking the service territory.
Through the restoration workforce of a roughly 1700 personnel Gulf power was.
As able to restore service to essentially all of the approximate approximately 20000 customers impacted by Fred in northwest, Florida, and less than 24 hours.
Moreover, the average customer outage was restored in less than two hours.
Our culture of a preparation, including our annual storm drills and the team's focused execution.
It helped ensure an efficient timely and safe response to the tropical storm.
The economy in Florida continues to grow at a healthy pace and remains among the strongest in the nation.
Florida is labor force participation rate has recovered to its highest level in nearly 18 months, reflecting the ongoing recovery following.
<unk> out of the COVID-19 pandemic last year.
The real estate sector in Florida also continues to grow with a three months average new housing starts up over 40% year over year.
In August alone. There are there were twice as many new housing starts in Florida than in the average over the last 10 years.
Neon, Florida building permits a leading indicator of residential new service accounts are up 47% year over year and have outpaced the nation's quarterly growth by 32%.
As another indicator of Florida's economic Health, Florida retail sales index is up nearly 60% versus the prior year.
During the quarter.
So the average number of customers increased by approximately 77500 or one 5% from the comparable year prior quarter, driven by driven by continued solid underlying population growth.
<unk> third quarter retail sales decreased one 4% from the prior year comparable period.
A decline in weather related usage per.
FBR of approximately two 7% offset the benefits of customer growth.
On a weather normalized basis third quarter sales increased one 3% with continued strong underlying usage contributing favorably.
For Gulf power, the average number of customers grew one 6% versus the comparable prior year quarter.
Customer Power's third quarter retail sales increased <unk>, 6% year over year with strong usage from increased customer growth contributing favorably.
As a reminder, on March 12, we initiated Florida highlights 2021 base rate proceeding for rate relief beginning in January of 2022.
After months of.
And Gulf position, we reached a proposed settlement agreement in early August with a number of intervenors in the preceding.
The office of public counsel, the Florida retail Federation, the Florida Industrial power users group.
Southern Alliance for clean energy vote solar the Clio Institute and the federal executive agencies, all joined the agreement.
Gaucher affecting a broad set of constituents across our customer base.
The four year proposed agreement, which begins in January 2022 provides for retail base revenue adjustments as shown on the accompanying slide.
It allowed regulatory return on equity of 10, 6% with a range of nine 7% to <unk>.
And 7%.
And no change to <unk> equity ratio from Investor sources for the combined system.
Should the average 30 year U S treasury yield the 2.49% or greater over any consecutive six months period. During the term of the agreement, Florida power and light allowed regulatory ROE He would increase.
11, 10, 8% with a range of nine 8% to 11, 8%.
Additionally, if federal or state permanent corporate income tax changes become effective during the term of the proposed agreement.
Florida power and light would be able to prospectively adjust base rates. After a review of the impacts on base revenue requirements.
The proposed agreement also includes flexibility over the four year term to amortize up to one point for a $5 billion of depreciation reserve surplus.
Consistent with the rate plan filed in March the proposed settlement agreement with unify the rates and tariffs of FPL and Gulf power by implementing a five year transition rider and credit.
<unk> to address the initial differences in cost of serving the existing FPL and Gulf power customers.
Additionally, the proposed settlement agreement also provides for solar base rate adjustments or sopra upon reaching commercial operations of up to 894 megawatts annually of new solar generation and each.
Each of 2024, and 2025 subject to a cost cap of $250 per month per kilowatt.
Showing of and overall cost effectiveness for Fpl's customers.
FPL would also be authorized to expand its solar together voluntary community solar program by constructing an additional 1000.
Mechanism of 188 megawatts of solar generation through 2025, which would more than double the size of our current solar together program and is expected to save our customers millions of dollars of the lifetime of the assets.
In addition to solar energy the settlement agreement with support Fpl's Green hydrogen pilot.
But project in Okeechobee County, this innovative technology could one day unlock 100% carbon free electricity, that's available 24 hours a day.
The proposed settlement agreement also introduces several electric vehicle programs and pilots designed to accelerate the growth of electric vehicle adoption and charging infrastructure.
<unk> investment across Florida, with a total capital investment of more than $200 million.
Under the proposed agreement FPL would continue to recover prudently incurred storm costs consistent with the framework and the current settlement agreement.
Future storm restoration costs would be recoverable on an interim basis, beginning 60 days from the.
Filing of a cost recovery petition.
But capped at an amount that could produce a surcharge of no more than $4 for every 1000 kilowatt hour of usage on residential bills. During the first 12 months of cost recovery.
Any additional costs would be eligible for recovery in subsequent years.
Storm restoration costs were to exceed.
<unk> $800 million in any given calendar year FPL could request an increase to the $4 surcharge.
We believe the proposed settlement is fair balanced and constructive and supports our continued ability to provide highly reliable low cost service for our customers through the end of the decade.
Fpl's typical residential bill is lower today than it was 15 years ago and is well below the national average the proposed agreement would keep typical residential bills well below the national average and among the lowest in Florida through 2025.
Let me now turn to energy resources, which reported third quarter 2021.
Non-GAAP losses of $428 million or <unk> 22 per share adjusted earnings for the third quarter were $619 million or <unk> 31 per share, which is an increase of $68 million and <unk> <unk> per share respectively year over year.
The effect of Mark to market on non qualifying hedges, which is excluded.
<unk> from adjusted earnings was the primary driver of the difference between energy Resources' third quarter GAAP and adjusted earnings results.
Contributions from new investments added <unk> <unk> per share relative to the prior year comparable quarter, primarily reflecting continued growth in our contracted renewables and battery storage program.
The contribution from existing genera.
Generation assets increased <unk> per share year over year.
Our customer supply and trading business contribution was <unk> higher year over year due to favorable market conditions, and our retail supply and power marketing businesses.
All other impacts decreased results by <unk> <unk> per share versus 2020, driven primarily by miscellaneous.
Tax items.
As I mentioned earlier energy resources development team had a record quarter of origination success, adding approximately 2160 megawatts to our backlog.
Since our last earnings call. We have added approximately 1240 megawatts of new wind projects 515 megawatts.
<unk> of new solar projects, and 345 megawatts of new storage assets to our renewables and storage backlog.
In addition, our backlog increased by energy resources share of Nextera Energy partners planned acquisition of an approximately 100 megawatts operating wind project that the partnership is announcing today.
Through the first three quarters of 2021, we have added more than 5700 megawatts to our renewables and storage backlog.
Energy Resources' backlog of signed contracts now stands at approximately 18100 megawatts.
At this early stage, we have made terrific progress towards our long term development expectations.
Spectation with more than 7600 megawatts of projects already in our post 2022 backlog.
Our backlog additions for the third quarter include a 500 megawatt wind project the majority of which is contracted with the hydrogen fuel cell company.
The projects customer intends to construct a nearby hydrogen.
Jin Electrolyze a facility that will use the wind energy production to supply up to 100% of the facility's load requirements.
The hydrogen manufactured by the facility would enable commercial and industrial end users to replace their current gray hydrogen and fossil fuel purchases with emissions free green hydrogen further accelerating.
The decarbonization of the industrial and transportation sectors.
Energy resources also add nearly 300 megawatts of battery storage projects in California, and we continue to experience significant demand from California, based utilities, and commercial and industrial customers for reliable energy storage solutions.
We.
<unk> the developing nearly 2400 megawatts of additional co located and Standalone battery storage projects in California, with a potential to be deployed in 2023, and 2024 to enhance reliability and help meet the state's energy storage capacity requirements and ambitious clean energy goals.
More.
We are currently years, we have been investing in clean energy in California and are proud to help the state lead the country to a carbon free sustainable future.
Consistent with our focus on growing our rate regulated and long term contracted business operations during the third quarter energy resources entered into an agreement to acquire a portfolio of.
And then third related water and wastewater utility assets and eight counties near Houston, Texas.
The proposed acquisition expands our regulated utility business in an attractive market with significant expected customer growth and furthers our strategy to build a world class water utility in the coming years.
Subject to regulatory approvals.
<unk> the acquisition is expected to close in 2022.
Energy resources is also currently in construction on an innovative water reuse and reclamation project that would help our customer achieve significant savings on its water supply needs and make its operations more efficient and sustainable while at the same time delivering attractive returns.
Right right energy resources.
While the roughly $45 million total equity investment for these transactions is small in context of our overall capital program. We are optimistic about the strong growth anticipated in this new market and the potential for clean water solutions to generate additional contracted renewables opportunities going forward.
Turning now to the consolidated results for Nextera energy for the third quarter of 2021, GAAP net income attributable to Nextera energy was $447 million or 23 per share.
Nextera Energy's 2021 third quarter adjusted earnings and adjusted EPS were 1.4 dollars $8 billion.75 per share respectively.
Adjusted results from corporate and other segment increased by one <unk> year over year.
Our long term financial expectations through 2023 remain unchanged for 2021, Nextera energy expects adjusted earnings per share to be in a range of $2 40.
To $2.54 and we would be disappointed.
Not to be at or near the high end of this range.
While we are pleased with our year to date results, which have exceeded the top end of our growth rate expectations. So far for the year, we expect our fourth quarter results to include impacts from certain liability management activities that we are currently reviewing to take advantage of the low interest rate environment.
These initiatives could generate negative adjusted EPS impacts of as much as eight to 10 cents in the fourth quarter before translating to favorable net income contributions in future years, and an overall improvement in net present value for our shareholders.
Looking further ahead for 2022 and 2023 next.
Nextera energy expects to grow 6% to 8% off of the expected.
2021, adjusted earnings per share and we would be disappointed if we're not able to deliver financial results at or near the top end of these ranges in 2022 and 2023.
Our earnings expectations are supported by what we believe is the most attractive.
<unk> organic investment opportunity set in our industry.
From 2018 to 2023, we continue to expect that operating cash flow will grow roughly in line with our adjusted EPS compound annual growth rate range.
We also continue to expect to grow our dividends per share at roughly 10% rate per year through at least.
22 off of a 2020 base.
As always our expectations assume normal weather and operating conditions.
Let me now turn to Nextera energy partners, which performed well and delivered third quarter results generally in line with our expectations.
Yesterday, the Nextera energy Partners' Board declared a quarterly.
<unk> of 68, and a half cents per common unit or $2 74 per common unit on an annualized basis, continuing our track record of growing distributions at the top end of our 12% to 15% per year growth range.
Inclusive of this increase Nextera energy partners has now grown its distribution per unit.
By more than 265% since the IPO.
Exterran partners continues to execute against its growth initiatives during the quarter since the last earnings call Nextera Energy partners closed on its previously announced acquisitions of approximately 400 megawatts of operating wind projects from a third party.
And approximately 500.
90, net megawatts of geographically diverse wind and solar projects from energy resources.
In addition, today, we are announcing an agreement to acquire an approximately 100 megawatt operating wind asset in California from a third party to further extend nextera energy partners' portfolio and enhance its long term growth visibility.
The project is located in a strategic market with strong expected growth in renewables demand and it offers also offer significant optionality to an extra Angie partners in terms of operational savings and long term value creation.
Nextera energy partners intends to purchase the asset for total consideration of approximately.
$280 million subject to closing adjustments.
Which includes the assumption of approximately $150 million in existing project finance debt estimated at the time of closing.
Nextera energy partners expects to recapitalize. This project finance debt in 2022 as it executes on its overall financing plan for the year.
We expect to fund the approximately $138 million balance of the purchase price using existing debt capacity.
Subject to regulatory approvals the acquisition is expected to close later this year or in 2022.
Following the project debt pay down next year, the asset is expected to contribute adjusted EBITDA and Unlevered cash available.
Distribution of approximately $22 million to $27 million each on a five year average run rate annual run rate basis, beginning December 31 2022.
Nextera energy partners continues to leverage its competitive advantages to be successful in third party M&A and extend its long runway of growth.
Eligible for consistent with our long term growth prospects. Today. We are also introducing year end 2022 run rate expectations, which are built upon its strong existing portfolio of cash generation and continued ability to access low cost capital to acquire accretive renewable energy projects.
Overall, we are pleased with year to date execution an extra.
Partners and we believe we are well positioned to continue delivering LP unit holder value going forward.
Now, let's look at the detailed results.
Third quarter, adjusted EBITDA was $334 million up approximately 7% from the prior year comparable quarter due to growth in the underlying portfolio.
Extra into new projects, which primarily reflect the asset acquisitions that closed at the end of 2020 and the recently closed acquisition of 391 megawatts of operating wind wind assets from a third party contributed $23 million.
Existing assets contributed $7 million, primarily driven by the wind repowering that occurred in the fourth quarter of.
Year, and an improvement in wind resource.
Wind resource for the third quarter was 101% of the long term average versus 96% in the third quarter of 2020.
These favorable impacts were partially offset by lower solar resource in the third quarter.
This year.
Cash available for distribution of 100.
Last year, the $8 million for the third quarter declined by $4 million versus the prior year, primarily as a result of lower year over year Paygo payments after a weaker wind resource period in the second quarter of this year.
As a reminder, nextera partners' recapitalized, its Genesis solar project and other existing assets at the end of last year.
And the.
Third to this new project level financing costs versus the prior year was offset by an associated reduction in corporate level interest expense as reflected in our other category.
Additional details of our third quarter results are shown on the accompanying slide.
On a year to date basis versus 2020, adjusted EBITDA and.
Impact available for distribution have increased by roughly 9% and 6% respectively.
And Nextera energy partners remains well positioned to continue to deliver on its outstanding growth objectives.
We continue to expect Nextera energy partners' portfolio to support an annualized rate of fourth quarter 2021.
<unk> cash that is payable in February of 2022 to be in a range of $2 76 to $2 83 per common unit.
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.
<unk> P distributions as being a reasonable range of expectations through at least 2024.
Nextera energy partners continues to expect to be in the upper end of our previously disclosed year end 2021 run rate adjusted EBITDA and cash available for distribution expectation ranges.
144 billion to.
At 1.62 billion.
And 600 million to $680 million respectively.
We expect to achieve our 2022 distribution growth of 12% to 15%, while maintaining a trailing 12 month payout ratio in the low 80% range.
By year end 2022, we expect the run rate.
<unk> and adjusted EBITDA to be in a range of $1 775 billion to $1 97, 5 billion and run rate for cash available for distribution to be in the range of 675 million to $765 million.
At the mid points. These revised expectations ranges reflect estimated gross.
Right for a good EBITDA and cash available for distribution of roughly 23% and 13% respectively from the comparable year end 2021 run rate expectations.
These growth rates are supported by our strong execution against our long term growth objectives in 2021 <unk>.
Including opportunistic third party transactions.
And it just not previously in our plan.
As a reminder, all of our expectations are subject to our normal caveats and include the impact of anticipated ICR fees as we treat these as an operating expense.
Finally during the quarter S&P updated its ratings methodology for Nextera energy partners and in particular, it will now evaluate nextera.
That werner's debt metrics on a funds from operations or <unk> to debt basis with a downgrade thresholds are 14% instead of a debt to EBITDA basis.
We believe that the combination of S&P's updated methodology, its assessment of and Exterran partners', improving diversity and its use of less conservative assumption.
Angie Park in the portfolios and renewable generation cash flows will allow for $700 million more a financing flexibility relative to our previous assumptions provided in the partnership with even greater flexibility going forward to finance accretive acquisition for the benefit of our unitholders.
In.
<unk>, we continue to believe that both Nextera energy and Nextera energy partners have some of the best opportunity sets and execution track records in the industry and we remain as enthusiastic as ever about our future prospects.
That concludes our prepared remarks, and with that we will open up the line for questions.
Summary.
Ladies and gentlemen at this time well begin the question and answer session to ask a question you May Press Star and then one on your touched on telephones.
If you are using a speaker phone would you ask you. Please pickup your handset before pressing the keys.
To withdraw your question you May press Star two.
Once again that is star and then one.
To ask a question.
We will pause momentarily to assemble the roster.
Yeah.
And our first question comes from Julien Dumoulin Smith from Bank of America. Please go ahead with your question.
Hey, good morning team. Thank you.
The time I appreciate it.
Impressive continued results here just if I can ask you at the outset here can you perhaps describe how you see the backdrop here given the litany of different policy efforts underway around the availability of a paddle imports and just how that positions you ability to execute right now I certainly hear equities.
To your comments, but I just wanted to speak to that a little bit more specifically, if we can and then subsequently on the origination side, obviously well done again, how do you think about just the elevated energy price backdrop that we're seeing today you know how quickly is that fermenting, a sort of a reinvigorated demand backdrop and when could that materialize as you think about that.
The backdrop in the 'twenty, three 'twenty four backdrop or beyond.
Thank you Julian and appreciate the questions and good morning, and he even prefaced in your set of questions and we're pretty excited about the opportunities for both of the major businesses, That's Florida power and light and energy resources.
And specifically on the renewable side and energy resources and the team just had an awesome origination quarter and that's kind of on the heels of other awesome origination quarters.
Going back now for quite some time setting us up for a tremendous growth in the coming years. So in terms of demand backdrop.
<unk> kind of answer the second question first it's terrific and we're really excited about the value proposition of renewables looking forward both in terms of being low cost and the ability to decarbonize Bose the electricity sector and other sectors as as we've talked about.
It's been an exciting.
18 months for for our integrated supply chain and engineering construction teams lots of opportunities to navigate a uncertainties are likes of which we and the industry probably havent seen in quite some time and it's also in the midst of enormous growth for US you know a record year of.
Renewables deployment last year and another terrific capital deployment year. This year, so both growth and opportunities to to show what we can do them you know, it's good to be us and we've highlighted that in the past in the sense of.
Being large in this industry I'm, having significant capital dollars to put.
Enables us to have strong relationships.
And extensive relationships with those in the supply chain to help navigate these uncertainties, we feel good about our ability to navigate them you know the plan does get iterate it from time to time as the circumstances change.
But we feel good about the long term view.
To Warner labels, and our ability to deliver on our expectations.
Okay.
Hey, Joe for Jim Jim just the only thing I'd add is.
I think people don't really appreciate.
The 10 year strip is.
You for rock since since January that's huge positive for the renewable business enormously positive right. So.
Our next question comes from Steve <unk>.
From Wolfe Research. Please go ahead with your question.
Okay.
And good morning.
Just could you maybe just give the name of the.
Who the counterparty is for the Green hydrogen project.
Yeah, I'd prefer not to Steve. We're obviously really excited about the opportunity to supply them and provide this this energy and we think it is a great start.
Start to the to the hydrogen economy.
Well, we'll leave that discussion.
A discussion for a later date.
Okay.
Then just on the different way to ask the supply chain question just within your.
Obviously, you had a lot to your backlog if you look at the existing backlog did anything move around meaningfully.
Thanks <unk>.
Not in the backlog.
No no I appreciate the question no nothing that I would consider to be meaningful at all there's a couple of projects that moved out in a couple of projects that moved in in terms of timeframes, but very much consistent with with our expectations are and as I highlighted at a very.
Very high level in response to Julians question, we feel good about our plans of bringing in the projects. We expect to bring into service in 2021 and have good line of sight for executing on the development plans thereafter.
Okay, and then last question just a.
Obviously, you have to ask you about the.
D C and the proposed clean energy credits and a reconciliation et cetera, maybe just latest thoughts on.
Whats most important to you.
The likelihood and pass to passage of how you are feeling about it.
So.
Steve It's Jim.
No I would say that.
We remain cautiously optimistic that that.
That something happens on that front I think.
I think I said.
Earlier, if there is a reconciliation bill I would be shocked.
If there isn't a long term extent.
And of the credits embedded in that.
And I think that's that's reasonably high odds if the.
Democrats can can come to terms amongst themselves around what would be in the reconciliation bill and and that's not an easy as we've seen play out over the last several weeks that's not an easy.
That's.
That's that's not easy and there is obviously within the caucus a lot of.
A lot of varying views across the board but.
Yes, I think so I remain cautiously optimistic that something happens there and then if something happens there.
We feel good about the.
The fact that there'll be.
A long term extension of the credits and.
There'll be support for other types of clean energy.
Such as <unk>.
Such as hydrogen as standalone storage ITC et cetera. So.
Yes, it would be very constructive for us we think it's a.
Important.
Part of the de carbonization of the U S economy to accelerate that and.
And you know I mean, we've increasingly as.
As we think about our own strategy going forward, we are increasingly thinking about ourselves as is the company that's going to lead.
Not.
Not only that clean energy transformation of the electric grid, but really the clean energy transformation of the U S economy, and the de carbonization of the U S economy, because the electric grid is going to be the key to decarbonising. The transport sector, it's going to be the key to decarbonising.
The industrial sector and so.
We are positioning ourselves to be the leader there and I feel very good about both the policy tailwind that we have as well as.
As well as how our business is executing along those goals.
And I'm, sorry, just wanted to follow up the.
Wind project for Green hydrogen.
Is it.
Does it depend on the hydrogen P. T C passing or has it happened either way.
No. It's a it's a contract with the customer.
Irrespective of any sort of subsequent policy changes.
Great. Thank you very much.
Thank you Steve.
Our next question comes from Shar <unk> from Guggenheim Partners. Please go ahead with your question.
Hey, good morning, guys.
Morning, Scott.
Okay I just wanted to maybe just drill down a little bit more on the backlog.
Can you just maybe talk a little bit about what youre seeing in terms of the hiring.
In court costs for projects and when we've seen some headwinds from developers and manufacturers recently amount of labor steel transportation et cetera, what he and we're hearing some commercial and utility scale projects are being pushed out.
What are you seeing are you seeing any impacts of the project economics.
Especially.
Especially for the ones that are marginal is anyone kind of with signed contracts, maybe bulking, especially if the PPA terms are somewhat flexible as we think about when they show up on needs to be put in the ground. So youre not seeing it right now but is there any inkling on potential projects potentially being shifted out as buyers wait for some input costs.
It's really.
I'm, sorry, I'm not sure I'm. Following completely. The question are you are you asking whether or not there are other projects not our projects to other projects that might be experiencing knows or are you asking for us cause I wasn't sure who the buyers were in that in that in your question.
Specifically for your projects.
We we are not having any.
Is anything notable from a buyer perspective and from our customers' perspective, we have a contract and we are expecting to execute against our near what you laid out in those contracts and from a supply chain standpoint, we're very well positioned to navigate these uncertainties and as I highlighted in your line of sight of.
Of bringing out the projects that we intend to bring in in 'twenty one into service.
And have great plans for executing against our 22 development program and and obviously beyond that one there's a lot still to be seen as to what those those conditions will ultimately be because now we're talking two plus years out.
But.
Great team and great position in the industry to be able to navigate those.
From a customer standpoint, we're continuing to see strong demand for new renewables I think that's obvious from the contract signings that we were able to announce today and John and his team have terrific.
In your backlog beyond that of opportunities that we have yet to sign and the team is really excited.
Being out in and out in the field and talking with our customers. It is a just a terrific time for renewables and in our industry.
Got it thank you for that thanks for the elaboration maybe just.
Quickly shifting to the regulated utility just wondering.
So how much more headroom from incremental O&M efficiencies do you still anticipate from the legacy Gulf asset.
How is that sort of headroom impacted from the recent run up in commodity costs mailing natural gas right. So a bit of an efficient team and one question.
With that.
Sure sure and obviously, we continue to work diligently at now what it's going to be F. P. O going forward, particularly assuming the settlement agreement is approved next week by the commission Gulf will be fully incorporated into the into the broader F. P. L enterprise it largely is today, but obviously.
From a regulatory standpoint operates.
Separately at least through the end of this year. We think there are continued opportunities to focus on on optimization.
Across the businesses, that's part of what we do as a company is look for those opportunities to take.
Take care.
Opportunities to bring efficiencies to the business.
And of course invest capital.
To take cost out and lower few caught fuel costs over time, one of the great ways that FPL and that includes Gulf as part of it will be to continue to deploy solar over the long term because as you all well know not only does it have the clean energy benefits, but it has low.
Low operating costs and no fuel cost, which will be a great offset in diversification and the state of Florida are from our existing generation set. So I think there's continued opportunities there's still a lot of work to be done we focus hard on that every day and and you know we think the team is all the cards in hand.
We'll continue executing.
Got it so I guess just to not to paraphrase, but the recent jump in gas and obviously, Jim highlighted the move in the forwards that shouldn't really impact sort of the bill headroom.
Just given the other levers you have at the business.
Yeah, So sorry, I I would think if.
If you look.
Look back at where we have taken the opportunity to invest capital historically, it really is on on bringing long term value to our customers, so being able to deliver lower cost over time higher reliability, greater resilience greater diversification and those clean energy benefits and it would be shortsighted to two.
To to stop investing in opportunities that are really clearly good for our customers. We're very mindful of customer bills, you hear that from us from everyday in all of our communications and it's what we focus on day to day is making sure we have a terrific value proposition for our customers and we will do everything we can to moderate those impacts.
Overtime.
Terrific. Thank you very much I appreciate it thank you.
Our next question comes from Michael Lapides from Goldman Sachs. Please go ahead with your question.
Guys. Thank you for taking my question have one or two here first of all the water and wastewater utility system acquisitions in Texas.
Can you talk about just the sky size and scale of the capital Youre employing there for that and then more long term kind of more strategic how do you think about the opportunity for growth in that business.
Is it more organic is it more kind of continuing to roll up neighboring systems are you thinking about a national strategy.
So severe.
Hey, Michael and good morning, and thanks for the question. We did include in the prepared remarks, the comment about the $45 million and that $45 million includes both the acquisition of the regulated utility assets.
Assets as well as.
Is that innovative mm water reuse and reclamation project that we talked about it and also at energy resources. So in terms of our capital program investing $15 billion, a year and more over time, it's pretty small.
But we we referenced it for a good reason and that's because we're excited about the opportunities I.
<unk> lot like transmission in the sense that it will be built.
Slowly over time.
And and create opportunities for us to continue to have that regulated long term contracted base of.
Value creation for shareholders on the other part of the kind.
Innovative use.
And reclamation project that we talked about on the energy resources side.
It was also bring clean energy renewable opportunities as we're able to bring this broad suite.
Of of clean energy and ESG focused investment opportunities for our commercial and industrial customers that gives us the opportunity to have a deep relationship with them.
I think it's I'll just bring one solutions that bring a portfolio of options to them. So we think it's a terrific opportunity for energy resources team to develop those meaningful relationships with our customers. So it's both an investment and a strategic opportunity from our perspective.
And then one question.
On C broke.
I'm not and I know in the Grand scheme of nears earnings powers, Hugh Brooks, while it's a large plant is nowhere near the biggest contributor to that but just curious how should we think about how much you financially hedged seabrook I'm just thinking about given the move in forward power prices and Jim referenced the move in natural gas the dollar one.
Broke the increase in the strip.
How we should think about whether she broke actually benefits from that materially or had you already significantly hedged it out prior.
Yeah, So we have and ongoing hedging program that we execute ratably.
Ratably over time executing our percentage of Seabrook's forward Jeff.
Dollar insurance I would characterize it as pretty well hedged in the next couple of years and then as you get out to the latter part of the 2000 twenty's and into the 'twenty three and beyond are less so.
So it obviously would benefit that if you mark to market that forward position clearly there has been upside with increase in natural gas.
Generators and some of the congestion you've seen in the in the northeast in terms of electricity prices.
Whether that last in the long term I think remains to be seen but certainly an opportunity for seabrook a.
We continue to believe Seabrook is very well placed and it is in our and particularly our advantageous load.
It's price, it's obviously in a region that values clean energy deeply and you think about broad de carbonization in any part of the U S, including the northeast well positioned nuclear assets will be a key part of making that happen.
We very much appreciate the nuclear team and think they do a terrific job every day and and Seabrook.
One is a key part of that.
Got it thank you much appreciated.
Thank you Michael.
Our next question comes from.
My Boy from Credit Suisse. Please go ahead with your question.
Hey, Thanks for taking our question actually.
Actually no.
One on the.
Multiple for the acquisition comes at around 11 times EBITDA versus the main times, we saw for the prior to acquisition so dropdown.
Wanted to understand.
Is that the new normal you're seeing for asset acquisitions or anything specific to these projects.
And just second one on the 2022.
As I walk.
Just wanted to confirm if it includes any repayment for the.
First Blackrock C P F closer in 2013.
So I'll come back to the second question in terms of the transaction as we highlighted it was a a third party transaction. So it reflects a negotiated outcome.
And we continue to believe that you know the renewable sector remains of high interest for a lot of folks and expect it to be competitive over time, but I think you can see with this transaction and with a prior third party transaction that we announced and closed earlier. This year there are some specific advantages.
As the Nextera energy partners has both in its ability to you'll find attractive financing, but also the relationship. It has with Nextera energy resources of being able to add value on the operating side and bring to.
To bear all of the scale benefits that we have so in terms of.
Of the the the second part of the question I think you were asking about the 2018 surface.
And ultimately the conversion that will happen in the very latter part of this year and we're still obviously some a significant part of that gets converted up to 70% of it in.
In NEP units and the balance is paid in cash are and where you are still working through what the full impacts are and how we will finance that over time, but as we've laid out in terms of our run rate expectations. We will expect that year end 'twenty two to be in the ranges that we outlined today.
Thanks for taking the questions.
Thank you.
Our next question comes from <unk> Chopra from Evercore ISI. Please go ahead with your question.
Hey, good morning team. Thank you for taking my question.
I wanted to go back.
I just wanted to go back to the water utility acquisition.
Strategy a bit.
Obviously this is in Texas, but there's obviously a ton of small municipal systems across the country.
You know what.
Or sort of owned by small mom and pop type.
Oh facilities, just are you going to sort of.
Be more aggressive throughout the country or theres.
Specific about Texas.
Think about you sort of competing.
Competing for these are the small water utility systems.
Yeah, I think it's a great question as we've highlighted I highlighted obviously in our prepared remarks and in Jim's highlighted elsewhere in recent months, we're really excited about building.
Some significant presence in the water business and we think there's a lot of skills and capabilities and of course, the broad platform. We have a that we can bring real value in these acquisitions, but as you highlighted are they tend to be very small and you know whether they are privately owned or owned by municipalities.
Almost.
Regardless of the ownership structure they tend to be small even the one I talked about today is incorporated with something else and it totals up $45 million in context of our $15 billion capital program.
So I expect us to be active on there's probably some regions of the U S for the team in the near term will be more active than.
Six are for a variety of reasons, but it's probably not exclusively Texas and it'll build overtime and and well, let you know as that as the team continues to have success.
Understood. Thank you for the time.
Thank you.
Our next question comes from Jeremy Tonet from Jpmorgan. Please go ahead with your question.
Others Hi.
Hi, good morning, but more than just thanks, I just wanted to pivot back to hydrogen for a minute if we could here.
And just wanted to see on what timeline do you see green hydrogen being competitive and how much money is not currently spending on hydrogen and.
Hydrogen projects and where could that ramp to over time.
I think it's a great question I think in the in the electricity sector. When it's going to be particularly relevant is the latter part of the 2000 twenty's into 'twenty thirties, and beyond and for the key reason of them for that being that.
And that you really need that they have the need for long duration storage and it is particularly attractive.
Time, when you have very very low cost energy input and particularly low cost renewables, which will inevitably have when you have substantial renewable deployment again, probably in the latter part of the 2000 Twenty's and beyond what may be different is in the transportation and industrial sector, where there is already built.
Built in use of great.
<unk> Virgin and other fossil fuels that can be supplanted with green hydrogen when it's competitive.
The big question, Mark would be whether or not there's a hydrogen production tax credit ultimately in a in the final reconciliation Bill clearly theres, one anticipated today and at $3 a kilogram no production tax credit.
Hyatt that really closes the gap between gray hydrogen.
And green hydrogen alternatives and so that's a terrific opportunity to see growth in the nearer term and what that would represent as using green hydrogen alternatives as a support to supplant great hydrogen from our perspective that's opportunities.
<unk> is clearly to build a lot of renewables and you saw the first step in that direction and our announcement today about a power purchase agreement that we've entered into but there would be more a lot more like that and not just the renewable side, but also an opportunity for us to invest.
And the actual.
Origin production equipments, such as the electric.
Credits or so we'll see them you know, we'll know a lot more in January once we've seen the the final package. If there is one as Jim highlighted Ah and and and it will develop over time in terms of opportunities. We think it's exceptionally likely it's really just a matter of timing.
Got it that's very helpful.
Maybe just pivoting over real quick towards transmission, obviously to optimize and maximize renewables deployment for the country.
Transmission build out is a key ingredient there yet.
As you well know, it's a difficult and timely to complete just wondering I guess your latest thoughts on <unk>.
What expectations you might have for transmission.
And then build out and what role you can play there.
Yeah, we're really excited about transmission opportunities our nextera energy transmission team has built a terrific business over the last decade with a number of organic wins as well as some acquisitions as we've talked about in the past of not only Trans Bay cable.
Michelle grid lines more recently, and we see a ton of opportunities going forward for us to be successful in.
Winning some of those big opportunities to invest realizing great returns.
Also the strategic side of it of ensuring that it happens so that we can continue to realize the substantial renewables.
Cabled that we already are seeing and we expect to only continue to grow and its opportunity size over time.
It's it may not be imperative today to have new transmission, but it's really really important to start today, because it will be imperative in the next decade.
And and some of the policy considerations are there.
<unk> is undertaking today.
That could be helpful to bringing that to reality.
Overtime.
Great. Thank you so much for the color.
Great. Thank you.
Ladies and gentlemen that will conclude today's question and answer session as well as today's conference call. We do thank you for attending the presence.
Hey.
You may now disconnect your lines.
Yeah.
Yeah.