Q4 2023 NextEra Energy Partners LP Earnings Call
Good morning, and welcome to the Nextera Energy, Inc, and Nextera Energy partners L. P fourth quarter 2023 earnings conference call.
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I would now like to turn the conference over to you Kristian Rose director of Investor Relations. Please go ahead.
Kristian Rose: Thank you Andrea good morning, everyone and thank you for joining our fourth quarter and full year 2023, combined financial results conference call for Nextera Energy and Nextera Energy partners with me. This morning are John Ketchum, Chairman, President and Chief Executive Officer of Nextera Energy Kirk crews executive Vice President and.
Kristian Rose: Chief Financial Officer of Nextera Energy, Rebecca Kiana, President and Chief Executive Officer of Nextera Energy resources, and Mark Hickson Executive Vice President of Nextera energy all of whom are also officers of Nextera energy partners as well as Armando Pimentel.
Armando Pimentel: President and Chief Executive Officer of Florida Power and light company.
John will provide some opening remarks and will then turn the call over to Kirk for a review of our fourth quarter and full year results. Our executive team will then be available to answer your questions.
John W. Ketchum: We will be making forward looking statements. During this call based on current expectations and assumptions, which are subject to risks and uncertainties.
John W. Ketchum: Actual results could differ materially from our forward looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release and the comments made during this conference call and the risk factors section of the accompanying presentation or in our latest reports and filings with the Securities and Exchange Commission each of which can be found on our websites www.
John W. Ketchum: W Dot Nextera energy Dot com and Www 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 definitional information and reckon.
John W. Ketchum: Filiation of historical non-GAAP measures to the closest GAAP financial measure with that I will turn the call over to John.
John W. Ketchum: Thanks, Kristen and good morning, Nick.
John W. Ketchum: Nextera energy had strong operational and financial performance at both FPL and energy resources in 2023.
Nextera energy delivered full year adjusted earnings per share of $3.17 up over 9% from 2022 exceeding the high end of our adjusted EPS expectations range.
From solar supply chain challenges to higher inflation and interest rates Nextera energy navigated through a challenging environment. The last two years delivering compound annual adjusted EPS growth of roughly 11, 5% since 2021.
Kristen Smith: These were unprecedented.
Kristen Smith: Precedented events for our sector and clear headwinds for renewables, but disruption often presents opportunity.
At Nextera energy, we relied on our 25 years of renewables experience and our culture of execution to navigate this tough environment on the strengths of our scale and competitive advantages our world class supply chain capabilities customer relationships access to and cost of capital advance.
James L. Robo: <unk> the strength of our balance sheet, our data driven development playbook and our team just to name a few we successfully managed through the disruption.
James L. Robo: Our scale and competitive advantages served as key differentiators and allowed us to continue to deliver for our customers and extend our long track record of earnings and dividend growth.
James L. Robo: Over the past 10 years, we have delivered compound annual growth and adjusted EPS of roughly 10%.
James L. Robo: Which is the highest among all top 10 power companies.
James L. Robo: Over that same period, the remaining top 10 power companies have achieved on average compound annual growth and adjusted EPS of roughly 2%.
James L. Robo: Notwithstanding the strong adjusted EPS results, we recognize and are disappointed by the underperformance in the share price and as we start 2024, we remain steadfast in our continued focus on execution and creating long term value for shareholders.
James L. Robo: We believe the disruption over the last two years has made nextera energy, an even stronger company. Our business model is more resilient. Our development platform is even more advanced and our supply chain is more diversified than it has ever been.
James L. Robo: Line, we believe Nextera energy is well positioned headed into 2024.
James L. Robo: And there is good reason for optimism at Nextera energy, although nobody can predict with certainty where 'twenty 'twenty four will bring inflation and interest rates have declined from their peak and Nextera energy has taken steps to mitigate its exposure to interest rate volatility through its interest rate hedging program the.
James L. Robo: The Commerce Department has provided the final determination around circumvention, providing solar suppliers with more certainty around the rules and expectations.
James L. Robo: Of importing solar equipment.
James L. Robo: New solar supply chains have been established in the U S and internationally, leading to lower solar panel prices and we see the continued long longer term push towards evs as being incrementally positive for continued reductions in battery prices.
Solar panel of battery prices have already declined by roughly 25% from their peak over the last 24 months heading into 2024, we are proactively procured critical electrical equipment to complete our renewable projects securing enough transformers breakers to cover our.
James L. Robo: <unk> build through 2027.
James L. Robo: And due to our scale and construction partnerships, we have not experienced any labor shortages impacting project type timelines.
James L. Robo: Ultimately all of these <unk> are great for customers and we believe should drive greater renewables to me into 2024 and beyond.
James L. Robo: All on the hills of consecutive record years for new renewables originations at energy resources in 2022, and 2023 totaling over 17 Gigawatts.
James L. Robo: Nextera energy offers a unique value proposition with two strong businesses that we believe are strategically positioned with outstanding prospects for future growth.
James L. Robo: F P L, which represents more than two thirds of our company as the nation's largest electric utility and continues to deliver what we believe is the best customer value proposition you know one of the fastest growing states in the U S M.
James L. Robo: Energy resources, the worlds renewables leader has differentiated itself in an industry in which scale experience.
James L. Robo: And being well capitalized matters.
James L. Robo: At Nextera energy. The plan is simple our two businesses are deploying capital in renewables and transmission for the benefit of customers, providing visible growth opportunities for shareholders.
James L. Robo: At FPL, we identify investment opportunities that drive value for customers and support Florida's growing economy, while keeping bills approximately 30% lower than the national average, we focus on running the business efficiently and continue to lead the industry with the lowest non fuel O&M.
James L. Robo: <unk> per megawatt hour of any large utility in the nation.
James L. Robo: Our emphasis on modernizing fpl's generation fleet to improve efficiency and reduce fuel costs.
James L. Robo: Save customers over $15 billion since 2001.
James L. Robo: We continue this trend in 2023 by placing into service approximately 200 megawatts of cost effective solar and expect to add roughly 4800 megawatts over the current rate agreement.
James L. Robo: And by 2032, we expect to increase Fpl's solar from 5% of our total generation today to roughly 35% by adding over 15000 incremental megawatts.
James L. Robo: We are also continuing to invest in fpl's grid to make it stronger and more resilient for customers almost all of Fpl's transmission system has been heartened with concrete or steel towers are poles, and we continue to invest in underground and our distribution system to further enhance reliability and <unk>.
James L. Robo: Zillions C for customers.
James L. Robo: The capital plan the current rate agreement of $32 billion to $34 billion extends our customer value proposition and provides clear visibility for growth through 2025.
James L. Robo: Beyond 2025, we continue to believe FPL is strategically well positioned as Florida remains one of the fastest growing states in the U S. With a population growth that is expected to roughly double the national average through 2030.
James L. Robo: Florida's economy is also growing and is now the 14th largest in the world, If Florida, where our country.
Armando Pimentel: <unk> is responsible for keeping the lights on for approximately $2 billion per day of Florida's GDP.
Armando Pimentel: These long term growth prospects, coupled with investment opportunities in renewables and transmission and distribution infrastructure enhance our best in class customer value proposition and support our belief that FPL has the highest quality rate regulated utility in the country.
Armando Pimentel: Energy resources deep expertise in renewables and transmission serves as a key differentiator with customers.
Kristian Rose: As a result of our data driven development playbook energy resources had a record year of new renewables and storage origination, adding approximately 9000 megawatts to our backlog.
Kristian Rose: Driven in part by the roughly 5600 megawatts placed in service in 2023 energy resources grew adjusted earnings almost 13% versus 2022.
Kristian Rose: Energy resources continues to see strong demand and is well positioned to realize its development expectations over the four year period ending 2026.
Kristian Rose: Assuming we achieve the midpoint of the range energy resources will be operating a roughly 63 gigawatt gigawatt renewable portfolio by the end of 2026 that would be larger than the installed renewables capacity of all but nine countries.
Kristian Rose: Energy resources also is extending its excellent track record of optimizing our existing footprint to create additional shareholder value to date, we have re powered six gigawatts of our existing 24 gigawatt wind operating fleet investing roughly 50% to 80% of the cost of a newbuild.
Kristian Rose: And starting a new 10 years of production tax credits, resulting in attractive returns for shareholders.
Kristian Rose: By 2026 energy Resources' wind footprint could be roughly 32 gigawatts.
Kristian Rose: And with over a decade to potentially qualify for repowering. It represents a great opportunity set.
Kristian Rose: We believe there are multiple opportunities to drive value from the existing footprint multiple wintry powers, adding solar underneath existing wind and co locating battery storage with existing wind and solar and we have dedicated teams leveraging our development playbook to optimize our existing and future fleet.
Kristian Rose: We can maximize existing land permits interconnection capacity and operations to provide enhanced value to customers and shareholders by.
Kristian Rose: By 2026 energy resources could operate up to 53 gigawatts of generation with a potential to co locate battery storage, which represents a great long term opportunity, especially considering the likely future capacity needs of customers.
Kristian Rose: Throughout 2023 energy resources also continued to build what we believe is the nation's leading competitive transmission business as.
Kristian Rose: As growth in renewables occurs throughout the U S. There is a growing imperative to build additional or upgrade existing transmission.
2023 was a record year for our competitive transmission business.
Kristen Smith: Nextera energy transmission was awarded projects to construct transmission in PJM, Cal ISO and SPP that would roughly double the investments made in the existing business.
Kristen Smith: We anticipate deploying approximately one $9 billion of capital through 2027 to complete these transmission projects, which we estimate could enable up to 12 gigawatts of new renewables.
Kristen Smith: Beyond 2026 energy resources is strategically positioned to benefit significantly from the irreversible shift towards electrification.
Kristen Smith: With renewables only comprising roughly 16% of the U S generating mix energy resources is just getting started renewable.
Kristen Smith: The renewable penetration is expected to double to over 30% by 2030 and energy resources is ready we have a substantial development pipeline, including roughly 150 gigawatts of interconnection queue positions for new renewables and storage projects, we believe energy re.
Kristen Smith: Sources has the most comprehensive renewable energy business in the world and is better positioned than ever to capitalize on long term growth prospects.
Kristen Smith: FPL and energy resources individually have executed well delivering value for our customers both businesses complement each other push one another to be better and together create scale and foster innovation, we have one of the sector's strongest balance sheets and constructed.
Kristen Smith: And placed into service roughly 6800 megawatts of new renewables and storage projects in 2023.
Kristen Smith: To put that into context 6800 megawatts of installed U S. Renewable generating capacity is enough on its own to rank as the fourth largest U S renewable energy company and the 14th largest utility.
Turning to Nextera energy partners, we continue to focus on executing against the partnership's transition plans and delivering an LP distribution growth target of 6% through at least 2026.
Kristen Smith: Last September we made the tough decision to reduce the target distribution growth rate to 6% with Nextera energy partners' no longer benefited from a competitive cost of capital with.
With a growth rate now comparable to its peers. We are focus on the partnerships cost of capital improving which is critical for its future success towards that end, we are evaluating alternatives to address the remaining convertible equity portfolio financings with equity buyout obligations in 2027 and beyond.
Kristen Smith: We are executing against the transition plans and with the closing of the Texas pipeline portfolio sale. The partnership has addressed two of the three near term convertible equity portfolio financings. The SPX midstream convertible equity portfolio financing has been extinguished.
And we have sufficient proceeds available to complete the NDP renewables to buyouts that are due in June 2024, and 2025, the third convertible equity portfolio financing associated with the Mead natural gas pipeline assets is expected to be addressed in 2025.
Kristen Smith: <unk>.
Kristen Smith: Looking ahead, the 2024 and beyond Nextera energy partners does not expect to need an acquisition in 2024 to meet the 6% growth in LTE LP distributions per unit target and.
Kristen Smith: And the partnership does not expect to require growth equity until 2027.
Kristen Smith: We are executing against the growth plans and have identified approximately 985 megawatts of wind repower through 2026, making progress against our expectations.
Kristen Smith: As we turn the page on 2023 and head into 2024, we are optimistic about the renewable sector, a better opportunity set about customer demand and about Nextera Energy's future de.
Kristen Smith: Demand for renewables has never been stronger and yet the challenges have never been more complex, making mistakes even higher for customers our scale and competitive advantages are enabling us to be the partner of choice with both power and commercial and industrial customers.
Kristen Smith: March 14th we will discuss energy Resources' development process in greater detail at our development Investor event, and Juno Beach, and illustrate how our proprietary tools differentiate energy resources with customers.
Kristian Rose: And then on June 11th we will hold our Nextera energy Investor Day in New York to discuss our long term plans for both energy resources and FPL.
Kristian Rose: Our optimism for Nextera Energy's future flows from the strength of our two world class businesses, FPL and energy resources that leverage our scale and competitive advantages to differentiate themselves as leaders.
Kristian Rose: Our optimism is driven from our proven playbooks of deploying capital in renewables and transmission to create value for customers, but I am most optimistic because we have spent the last two decades building a world class team at Nextera energy and it is by far our greatest competitive strength.
Kristian Rose: Our team lives and breathes a culture of continuous improvement working together to solve the tough challenges of the day, we drive innovation relying on data analytics and automation to make better decisions and we have developed and deployed smart low cost clean energy solutions that lead our industry.
Kristian Rose: Most importantly, our team remains hyper focused on continuing our long track record of execution, serving our customers with excellence and providing long term value for shareholders.
Kirk Crews: With that let me turn it over to Kirk who will review the 2023 results in more detail.
Kirk Crews: Thanks, Sean let's begin with Fpl's detailed results.
For the full year 2023, Fpl's adjusted earnings per share increased 22.
Kirk: Versus 2022.
<unk> adjusted earnings results exclude the approximately $300 million after tax gain on the sale of Florida City gas, which closed on November 32023.
Kirk: The principal driver of the 2023 full year performance with Fpl's regulatory capital employed growth of approximately 12, 5%.
Kirk: We continue to expect Fpl's average annual growth in regulatory capital employed to be roughly 9% over the four year term of our current rate agreement, which runs through 2025.
Kirk: For the full year 2023, Fpl's reported ROE for regulatory purposes will be approximately 11, 8%.
Kirk: During the full year 2023, we used approximately $227 million of reserve amortization, leaving FPL with a year end 2023 balance of roughly $1 2 billion.
Kirk: Fpl's capital expenditures were approximately $2 billion in the fourth quarter, bringing its full year capital investments to a total of roughly $9 4 billion.
Kirk: These capital investments supported the successful commissioning of roughly 1200 megawatts of solar in 2023.
Kirk: Continued hardening of the grid.
Kirk: And our efforts to underground our distribution system.
Kirk: During the fourth quarter of 2023, or 25 megawatt hydrogen pilot at the Okeechobee Clean Energy Center successfully achieved commercial operation.
Kirk: As a reminder, we plan to utilize this facility together with adjacent solar projects to create green hydrogen and blended with natural gas and our Okeechobee plant.
Kirk: Key indicators show that the Florida economy remains strong and Florida's population continues to be one of the fastest growing in the country.
Kirk: Florida's economy continues to trend upward and as GDP is now roughly one six trillion.
Kirk: An increase of nine 3% over last year.
Kirk: For the fourth quarter of 2023, Fpl's retail sales increased one 6% from the prior year on a weather normalized basis, driven primarily by continued strong customer growth, which increased by nearly 81000 from the prior year comparable quarter.
Kirk: For the full year 2023, FPL retail sales increased <unk>, 6% from the prior year on a weather normalized basis also driven primarily by the strong customer growth in our service territory.
Kirk: Now, let's turn to energy resources, which reported full year adjusted earnings growth of approximately 12, 9% year over year.
Kirk: Contributions from new investments increased by 35 per share due to strong growth in our renewables and storage portfolio.
Kirk: Contributions from our existing clean energy assets decreased results by <unk> 11 per share driven primarily by the impact of weaker wind resource.
Kirk: 2023 was the lowest wind resource on record over the past 30 years.
Kirk: Our customer supply and trading business increased results by <unk> <unk> per share primarily due to higher margins in our customer facing businesses.
Kirk: Other decreased results by <unk> 26 per share year over year.
Kirk: This decline reflects higher interest costs of 22 per share of which <unk> was driven by new borrowing costs to support new investments.
Kirk: Energy resources delivered our best year ever for origination, adding approximately 9000 megawatts of new renewables and battery storage projects to our backlog, which includes approximately 2060 megawatts since our last call.
Kirk: Our 2020 through 2023 origination performance reflects continued strong demand from power customers looking for the lease cost alternative to serve load and to replace uneconomic generation and commercial and industrial customers looking to help decarbonize their operation or <unk>.
Kirk: Their data center and AI demand.
Kirk: Our renewables backlog now stands at more than 20 gigawatt after taking into account roughly 2470 megawatts of new projects placed into service since our third quarter call.
Kirk: We believe our 20 gigawatt backlog provides clear visibility into energy resources' ability to deliver for shareholders through 2026 and beyond.
Kirk: Turning now to the consolidated results for Nextera energy for the full year adjusted earnings from our corporate and other segment decreased by <unk> <unk> per share year over year, primarily driven by higher interest costs.
Kirk: We successfully supported the growth in our underlying businesses from our strong operating cash flows, including the sale of tax credits as well as our historical funding sources.
Kirk: In 2023, we grew cash flow from operations well in excess of our adjusted earnings.
Kirk: We transferred approximately $400 million of tax credits, establishing relationships with numerous counterparties.
Kirk: We believe this will prove to be a competitive advantage as buyers look first to nextera energy given its size experience and the overall quality of its tax credit program.
Kirk: Overall, our funding plans for 2024 through 2026 remain consistent with the information we shared on the third quarter earnings call.
Kirk: Paul.
Kirk: We continue to believe Nextera energy is well positioned to manage the interest rate environment. While the recent decline in interest rates is encouraging we remain committed to managing the business to deliver value for customers and shareholders.
Paul: Overall, we believe we are well positioned with $18 5 billion of interest rate swaps and we will continue to closely monitor the interest rate environment as declines in rates certainly represent a tailwind for our sector and customers.
Paul: Our long term financial expectations remain unchanged, we will be disappointed if we're not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2020 for 2025 and 2026.
Paul: For the last 14 consecutive years Nextera energy has met or exceeded its financial expectation, which is a record we are proud of.
From 2021 to 2026, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range and we also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022.
Paul: Two base.
Paul: As always our expectations assume our caveat.
Paul: Now, let's turn to Nextera energy partners in terms of the transition plans Nextera energy partners closed the sale of the Texas pipeline portfolio in late December providing net proceeds of approximately $1 4 billion.
Kristen Smith: Thanks, Pierre Nextera energy partners expects to complete the NDP renewables to buyouts of roughly $190 million and $950 million on their stated minimum buyout dates of June 2024, and 2025, respectively. As the partnerships continued to benefit from the low cash coupon through.
Kristen Smith: <unk> 2025.
In terms of Nextera energy Partners' growth plan as a reminder, it involves organic growth specifically repowering of approximately one three gigawatts of wind projects through 2026, as well as acquiring assets at attractive yields.
Kristen Smith: Today, we are announcing plans to repower and additional approximately 245 megawatts of wind facilities through 2026.
The partnership has now announced roughly 985 megawatts of Repowering with strong cash available for distribution yield.
Kristen Smith: While the partnership does not expect to need an acquisition in 2020 for the LP distribution growth target of 6% is supported in part with roughly 175 megawatts of wind Repowering, which are expected to generate attractive cash available for distribution yield.
Kristen Smith: Finally, we were pleased with the high yield note issuance of $750 million, which was completed during the fourth quarter of 2023.
Kristen Smith: This opportunistic refinancing allowed the partnership to pay off as corporate revolver in mid December.
Kristen Smith: Let me now turn to the financial results for Nextera Energy partners.
Kristian Rose: Fourth quarter, adjusted EBITDA was $454 million and cash available for distribution was $86 million.
Kristian Rose: Adjusted EBITDA growth versus the prior year comparable quarter was primarily due to new asset additions and the incentive distributions right fee suspension, while cash available for distribution was also impacted by incremental debt service.
Kristian Rose: For the full year 2023, adjusted EBITDA was approximately $1 9 billion up 13, 6% year over year and was primarily driven by the contribution from new projects acquired in late 2022 and during 2023.
Kristian Rose: And the incentive distribution right fee suspension.
Kristian Rose: New investments added approximately $228 million and the incentive distribution right fee suspension added approximately $113 million of adjusted EBITDA year over year.
Kristian Rose: This growth was partially offset by a decline from existing projects driven primarily by weaker wind resource.
Kristian Rose: Cash available for distribution was $689 million for the full year.
Kristian Rose: And primarily driven by contributions from new projects of approximately $42 million and the incentive distribution right fee suspension of $130 million, while being partially offset by the weaker wind resource.
Kristian Rose: Yesterday, the Nextera energy Partners' Board declared a quarterly distribution of <unk> 88 per common unit or $3 52 per unit on an annualized basis, which reflects an annualized increase of 6% from its third quarter 2023 distribution per unit the.
Kristian Rose: The partnership.
Kristian Rose: LP distributions per unit by more than 8% year over year.
From an updated base of our <unk>.
Kristian Rose: Fourth quarter 2023 distribution per common unit, an annualized rate of $3 52.
Kristian Rose: We continue to see 5% to 8%.
Kristian Rose: St growth per year in LP distributions per unit with a current target of 6% growth per year as being a reasonable range of expectations through at least 2026.
We continue to expect the partnership's payout ratio to be in the mid 19th through 2026.
Kristian Rose: We expect the annualized rate of the fourth quarter 2024 distribution that is payable in February 2025 to be $3 73 per common unit.
Kristian Rose: Nextera Energy partners is introducing December 31, 2024 run rate expectations for adjusted EBITDA in a range of one 9% to $2 1 billion.
Kristian Rose: And cash available for distribution and a range of $730 million to $820 million, reflecting calendar year 2025 expectations for the forecasted portfolio at year end 2024.
Kristian Rose: As a reminder, our expectations are subject to a caveat.
Kristian Rose: That concludes our prepared remarks and with that we will open the line for questions.
Kristian Rose: We will now begin the question and answer session.
Kristian Rose: You ask a question you May press Star then one on your telephone keypad.
Kristian Rose: If you are using speakerphone, please pick up your handset before pressing the keys.
Kristian Rose: To withdraw your question. Please press Star then two.
Kristian Rose: At this time, we will pause momentarily to assemble our roster.
Kristian Rose: And our first question will come from Shar <unk> of Guggenheim Partners. Please go ahead.
Kristian Rose: Hey, good morning, guys.
Shar: Morning Shar.
Shar Pourreza: Good morning, just starting on NEP, if it's okay. Just on the higher Repowering opportunities you announced I guess, how are you sort of thinking about funding and really more importantly is there any specific status on the money pool that could be looking to buy in directly into projects, whether its dropdowns or organic growth at the NEP level.
Shar Pourreza: Could these sort of equity investors help solve the 26th growth in financing issues and I guess when do you plan to update on that.
Shar Pourreza: Sure so with respect to Repowering shar.
Shar Pourreza: We.
We look at that as an.
Shar Pourreza: The project level Theres really two options. There we can look at it from a project financing standpoint, and pair that with transferability or we can look at it is as tax equity. So we will look at both of those options and decide that at the time.
The repowering.
Shar Pourreza: With respect to your second question.
Shar Pourreza: There is.
Shar Pourreza: We're looking at all options right now as John said in the prepared remarks, we are exploring a number of opportunities and alternatives for addressing.
Shar Pourreza: The convertible equity portfolio financings that are coming due in 2027 and beyond.
Shar Pourreza: There's really not a timeframe in terms of the update now but.
Shar Pourreza: We are looking at all options with the goal of really maximizing unit holder value.
Shar Pourreza: Got it.
John W. Ketchum: And sure Shar. This is John just adding onto that.
John W. Ketchum: Then on the re powers just like we do at <unk> I mean, just think about it is tax equity and project finance.
John W. Ketchum: Got it and then again again, the private capital raises provide us with.
John W. Ketchum: A number of options, but we're looking at a lot of different alternatives that being one of them.
John W. Ketchum: Okay, Perfect and then lastly, John we haven't had.
John W. Ketchum: Any updates from the SEC has anything sort of been communicated to you regarding sort of the investigation. How quickly you would look to settle assuming they take up the case as it were.
John W. Ketchum: Thinking about the process right. It's confidential so curious on how you're going to update investors like would we see a press release or an 8-K from you confirming the SEC process and that you'll update investors in the future on next steps or could we see single communication on the FTC pickup and a concurrent.
John W. Ketchum: Settlement lets say I'm, just trying to assess how long this could be an overhang assuming the case moves forward and whether you've already laid the groundwork for all options to get this kind of passed US quick when a ruling comes out thank you.
Shar Pourreza: Yeah. Thanks, Thanks for the question Shar. So let me just take those in order first of all there is no update.
Shar Pourreza: We have not been contacted by the SEC and I think.
Shar Pourreza: Just to remind investors of the timing first of all these are just guidelines I'm going to give you I mean, there is no prescribed timeline in terms of the SEC.
Shar Pourreza: Providing a response to us, but as you may recall.
Shar Pourreza: We originally received the FEC.
Shar Pourreza: Complaint I guess is what you would call. It that had been filed by by a group called crew back in November of 2022, and if you follow the historical precedent of the FSC. It's usually 12 to 18 months. After you first are notified of a complaint having been filed that you.
Shar Pourreza: Would learn whether or not the SEC decides to.
Shar Pourreza: Fine that there's reason to believe that they ought to conduct an investigation.
Shar Pourreza: We have not heard anything from the SEC in that regard.
Shar Pourreza: The second thing I would remind investors of is this is not material.
Shar Pourreza: Again. These were were five allegations totally in political contributions of roughly one three to $1 $5 million. So we're talking about.
Shar Pourreza: Smaller.
Shar Pourreza: <unk> amounts.
Shar Pourreza: How and when we would update investors.
Kristen Smith: It would depend on what exactly we hear from the SEC.
Kristen Smith: Perfect. Thank you very much appreciate it guys see you soon and congrats on the results I appreciate it. Thank you shar. Thanks Shar.
Kristen Smith: The next question comes from Steve Fleishman of Wolfe Research. Please go ahead.
Steve Fleishman: Yes, hi, good morning. Thanks.
Steve Fleishman: I guess, a couple of big picture questions first obviously, a lot more focus in the elections now.
Steve Fleishman: In 'twenty four and.
Steve Fleishman: Curious your thoughts in the event of Republican Trifecta, so to speak.
Steve Fleishman: Just how youre thinking about the sustainability of IRR for efficiency.
John W. Ketchum: Sure Steve Let me go ahead and take that this is John <unk>.
John W. Ketchum: First of all.
John W. Ketchum: And the 21 years I've been at the company as we've changed administrations.
John W. Ketchum: And we've seen changes in Congress, we've never seen.
John W. Ketchum: Change or appeal of of tax credits.
John W. Ketchum: No matter what form they've taken as IRA is the form we're talking about here. So that's the first point I would make a second it's really hard to overturn existing law I think Obama care is a very good example of that is just it's just very difficult no matter, what the political wins or the <unk>.
John W. Ketchum: Third point I would make is that the IRA benefits both sides of the aisle.
John W. Ketchum: Got it.
John W. Ketchum: It certainly is.
Kristen Smith: As advantageous for obvious reasons for.
Kristen Smith: Democrats, but it's also has a big benefit.
Kristen Smith: Two Republicans because if you think about.
Kristen Smith: Ware.
Kristen Smith: The investments are being made around IRA and where a lot of the benefit of IRA is flowing it's flowing too.
Kristen Smith: Republican States and it's flowing to parts of those states that are really difficult to stimulate economically and we're talking about rural communities in these states and so when we come in and we build a wind project. We built a solar project, we build a battery storage project.
Kristen Smith: As a complete turnaround for these communities were provided.
Kristen Smith: And economic base in the form of jobs, we're providing.
Kristen Smith: An economic base in the form of spending that occurs in that community will provide an economic base in the form of property taxes and sales tax revenues.
Kristen Smith: Our 100 Eighty's for these rural communities and make a huge <unk>.
Kristen Smith: Difference on their viability going forward, just think about hospitals in staffing doctors at.
Kristen Smith: At County.
Kristen Smith: Hurdles or teach paying teacher salaries I mean, the property tax revenues.
Kristen Smith: Significant benefits and so for those reasons you know, we've always been able to work with.
Kristen Smith: With both sides of the aisle so see any repeal.
Kristen Smith: Of IRA as being unlikely.
Kristen Smith: Okay.
I guess, two big picture questions on games.
Kristen Smith: <unk>.
Kristen Smith: Renewables business just.
Kristen Smith: Any kind of new thoughts color on your data centers.
Speaker Change: <unk> and also your thoughts on hydrogen after the based on the proposed.
Speaker Change: Rules that came out.
Rebecca Jones Kujawa: Good morning, Steve It's Rebecca.
Rebecca Jones Kujawa: On data centers clearly there is an enormous amount of demand being driven across the U S economy by the growth in data centers driven by a lot of things of course, but specifically gendered at AI.
Rebecca Jones Kujawa: And that growth is pretty explosive at this point.
Rebecca Jones Kujawa: And the characteristics of that demand are a little bit unique.
Rebecca Jones Kujawa: And driving different.
Speaker Change: Weighs in approaching the marketplace for a number of these technology companies.
Speaker Change: Where it is imperative that these projects get built on time on budget and produce the energy that they are expecting because the opportunity cost for these customers has had a significant.
Speaker Change: Arent able to power that and then of course to meet the commitments that they've made.
Speaker Change: It to their own stakeholders, so we're seeing those relationships expand.
Speaker Change: And also deepen where it's not just signing the megawatts at the day, but also working with them collaboratively over a long period of time.
Speaker Change: To ensure that they get the energy and capacity that they need where they needed to support their projects just alone in our backlog that even counting what we have installed we have over three gigawatts of projects that we're building in the coming years. After these customers and I do believe that's the tip of the iceberg.
Speaker Change: Again, not even talking about what we already have installed so it's pretty exciting and our team is very ingrained and working with these customers.
Speaker Change: And we're excited about the years ahead.
Speaker Change: And then turning to hydrogen obviously the guidance that first came out the draft guidance in December is really hearing towards hydrogen projects that will be essentially from day. One on meeting can match on an hourly basis.
Speaker Change: That of course increases the ultimate cost of hydrogen and unfortunately, I think it stands.
Speaker Change: As currently drafted with limit to an extent how much will be built for the U S market.
Kristen Smith: We're obviously advocating for more of a relaxed matching requirement to more of an annual match for a period of time and then transitioning to hourly overtime.
Kristen Smith: Kickstart hydrogen market.
Kristen Smith: And hopefully the administration will hear that and know that that having a kickstarted hydrogen economy will certainly further their ambitious goals, which of course, we are very excited about meeting.
Kristen Smith: See the full de carbonization of the U S economy over time, so more work to be done and we're excited to pursue the marketplace.
<unk>, you'll probably end of the decade type projects.
Kristen Smith: So more of an investment in the near term for opportunities in the long term.
Okay, great. Thank you very much.
Kristen Smith: Steve.
Kristen Smith: The next question comes from David Arcaro of Morgan Stanley. Please go ahead.
David Arcaro: Hey, good morning, Thanks, so much for taking my question.
David Arcaro: Maybe on the on the renewables demand side of things could you give a little bit more detail on the origination trends that youre seeing I guess, it looked like solar and storage quite strong in the quarter, but then wind a little bit lower in terms of the new bookings added.
David Arcaro: What's your latest confidence in achieving those 25 and 26 targets.
David Arcaro: Particularly on the wind side of the business.
Rebecca Jones Kujawa: Hey, Dave its Rebecca.
Rebecca Jones Kujawa: Take a first cut at that we're obviously excited about the origination as John and corrective highlighted originating 17 gigawatts over the last two years in both years, serving as a record for this year topping last year's record is very exciting.
Rebecca Jones Kujawa: We also of course see the mix being more focused towards solar and storage and as I've commented in the past I think some of this is.
Kristen Smith: And after effects of the strong demand that we saw going into 2020, when we and others thought that the production tax credit would ultimately phased down and then ultimately go to zero over a period of time. So there was a pull forward of demand and then the second dynamics that I think has impacted the short term is that the cell.
Rebecca Jones Kujawa: The production tax credit clearly stimulated near term demand and deployments for our customers and obviously, we're very excited about that and.
Kristen Smith: Storage is growing at least as well as we thought perhaps exceeding even our expectations in terms of adoption not just in the western markets, but now really spreading in a very constructive way through the Midwest and we've got as John highlighted in the prepared remarks, I really advantaged position to be able.
Kristen Smith: Well to respond quickly to the demand characteristics that we're seeing where our customers need capacity quickly.
Kristen Smith: Hadn't anticipated the demand that they would see in the underlying business and so getting to market quickly is very much a premium and a priority and we're there to serve them well and that storage market as we've talked about from a returns characteristics standpoint, it's an awful lot like wind.
Kristen Smith: And it's certainly complex to deliver the value that our customers are looking for in the various various streams I'd say the other part that is at least as strong as we anticipated when we laid out the expectations is repowering.
Kristen Smith: And we're excited about the economics of that.
Kristen Smith: Economics, specifically in context to the value that it brings to our customers, bringing some incremental generation and extending the life of these projects often extending the contracts with our customers at the same time that we do repowering to overall.
Kristen Smith: All of those comments.
Kristen Smith: In context, I feel really good about meeting our development expectations in aggregate.
Kristen Smith: We'll continue to look at the mix in individual technologies over time.
Kristen Smith: But at this point you are obviously, leaving the ranges as we had them now for a couple of years in part to reflect what Im sure you recall when does a very short development cycle, maybe not the actual laying the groundwork to be able to build a project, but when we enter into a contract and acquire the chairman to put it into service can be as short as.
Kristen Smith: Nine months, so theres still a lot of time left between now and the end of 'twenty six to add more wind.
Kristen Smith: It's not only the backlog, but ultimately commission and when I look at the forward couple of quarters. There are a couple of chunky opportunities that our teams are working on and I feel good about that bringing them some.
Kristen Smith: This to fruition.
Kristen Smith: Excellent. Thanks for that very helpful. And then maybe secondarily just it sounds like the backdrop has gotten more challenging for small developers in the renewable space wondering if youre seeing opportunities for market share gains as a result in potentially.
Kristen Smith: Any development pipelines.
Pick up from developers that might be struggling right now.
Kristen Smith: Sure.
Kristen Smith: We always are out in the development rights acquisition market in the recent couple of years, we've really prioritized our greenfield portfolio.
Kristen Smith: Because of our ability to to work so closely with our customers and make sure that we're building the projects over the long term.
Kristen Smith: Where they need them, but we will always be opportunistic in the end.
Kristen Smith: The development project market to be.
Kristen Smith: To be selective and create opportunities where it may be particularly attractive.
Kristen Smith: The dynamic from a couple of years ago, where a number of the development portfolios were acquired by folks looking to.
Kristen Smith: Yeah, I would say compete with us, but it certainly has a bigger presence on the development side, we haven't seen those holistically come back to market I think that may change over time, I know the private equity cycle of wanting to be able to turnover a capital quickly and realize isn't necessarily completely aligned with the development cycle, where sometimes things are a little bit faster a little.
Kristen Smith: Bit slower than you anticipated.
Kristen Smith: To be patient.
Kristen Smith: Im optimistic there'll be opportunities, but most importantly, and this is one of the things that we'll focus on in March is we want to keep our feet our development opportunities in our own hands and I am Super excited about what our team is working on from a Greenfield development standpoint, and the competitive advantages that we're invest.
Kristen Smith: And to make sure that we can serve our customers well not just in the next two or three years as we often talk about with you all but next five 710 years plus down the road.
Kristen Smith: Okay, great. Thanks, so much for all the color.
Kristen Smith: The next question comes from Carly Davenport Goldman Sachs. Please go ahead.
Kristen Smith: Hey, good morning, Thanks, so much for taking the questions.
Carly Davenport: I wanted to just ask about transmission you highlighted the $1 9 billion of capital through 2007 at need and and as we look at the EBITDA contribution that Nir for 2024 that pieces is moving higher as well. So could you just talk a bit about what sort of growth you could see at <unk>.
Carly Davenport: Over the next several years and what that EBITDA contribution could be over time.
Carly Davenport: Good morning, Harley to the from the pipeline perspective is has no doubt appreciate transmission opportunities take a couple of years to come to fruition. So we're thrilled with the awards.
Carly Davenport: The team has been able to secure.
Carly Davenport: In the last year.
Carly Davenport: On one part of it building on investments that we already have some expansion opportunities that are significantly, enabling new renewables development headed into the California market.
Carly Davenport: And then and then other parts of the U S competitive opportunity is that.
Carly Davenport: We went through.
Carly Davenport: Competitive processes in terms of timing.
Carly Davenport: As we highlighted in our prepared remarks. The in service dates are out to 2027, so as we invest capital obviously that will start to become more of a material contribution over time.
Carly Davenport: We will give more more color as we get into the Investor Conference as we typically do that is more of a breakdown by by business and what those contributions will look like over time, but the momentum is terrific and as we've highlighted everybody understands maybe not to the extent that.
Carly Davenport: We think it's going to happen, but in order to unlock renewables opportunity that we and other see across the United States transmission needs to be built and we stand ready to be a part of the solution wherever we can be and being cost effective solutions to customers.
Carly Davenport: Great. Thank you for that and then maybe just one more on on the financing side for this year just based on what you've seen so far.
Carly Davenport: The market is how are you thinking about the mix of the different avenues that you can use to monetize tax credits whether.
Carly Davenport: Through tax equity or transferability, how do we think about the sort of magnitude of each of those in your financing plans for 'twenty four.
Carla: Yes Carla.
Carla: Carly.
Kirk: This is Kirk.
Carly Davenport: The financing plan as we shared in our prepared remarks is it's consistent with the information we shared on the third quarter call and.
Kirk: As we as we approach those options.
Kirk: <unk>.
Kirk: We will use.
Kirk: The historical approaches project finance and tax equity.
Kristen Smith: And but we're also very encouraged by what we're seeing with the transferability market.
Kristen Smith: We're having.
Having really good progress with those.
Kristen Smith: Those conversations we're seeing really good demand for the Nextera energy.
Kristen Smith: <unk> credit and.
Kristen Smith: And ultimately.
Kristen Smith: We look at all of those as options and we'll optimize between.
Kristen Smith: Finance and transferability and tax equity and we will we will use those within.
Kristen Smith: The ranges that we shared in the 24 to 26.
Kristen Smith: Funding plan that we provided.
Kristen Smith: Between those between the disclosure that we provided.
But we are we are seeing.
Kristen Smith: Really really good demand for the credits and expect to continue to utilize transferability as an option going forward.
Kristen Smith: Great I appreciate that color.
Kristen Smith: The next question comes from Jeremy Toney of J P. Morgan. Please go ahead.
Kristen Smith: Hi, good morning.
Jerry: Good morning, Jerry.
Jeremy Bryan Tonet: Just wanted to build off that a little bit when you were talking about before how do you balance I guess.
Jeremy Bryan Tonet: Looking forward the wealth of growth opportunities and funding needs relative to dividend growth do you look at industry trends for dividend growth at all and how that might change as utility capex increases and just a final point there just wondering how the E&P business competes for capital against everything else that you have in a lower gas price environment.
Jeremy Bryan Tonet: Sure so.
Jeremy Bryan Tonet: We when we look at capital allocation and you look at.
Jeremy Bryan Tonet: We shared on the third quarter call.
Jeremy Bryan Tonet: The returns that we see within the renewable business.
Jeremy Bryan Tonet: And as we as we shared then.
Kristian Rose: At <unk>.
Kristian Rose: Energy resources within.
Kristian Rose: For when we see returns in the low twenties on on a Levered Roe basis.
Kristian Rose: Solar we see returns in the mid teens and then storage is and also in.
Kristian Rose: The low twenty's and so.
Kristian Rose: It's great returns and we look to get capital allocated to the renewable business.
And that is.
Kristian Rose: As John discussed in the prepared remarks.
Kristian Rose: We are allocating capital across both businesses in renewables and transmission.
Kristian Rose: And so that is that since that is the priority.
Kristian Rose: With the way that we allocate capital.
Kristian Rose: And then in terms of.
Kristian Rose: The funding of that again, it's the way that we've traditionally funded the business is tax equity as project Finance and then we also use the transferability provisions.
Kristian Rose: Got it. Thank you for that and then maybe just pivoting a little bit towards the <unk>.
Kristian Rose: Backlog.
Kristian Rose: A lot of additions in the quarter, but.
Kristian Rose: There was a little bit to fill out I think 350, and then there's a little bit more on the post 2026 timeframe. That's in the backlog. So just wondering if you could talk a bit more on kind of some of the drivers the puts and takes within the portfolio addition composition overtime.
Sure I'll take that in terms of the obviously the backlog additions are quite strong and we're thrilled about that.
Kristian Rose: And for this quarter in terms of the.
The removal that we had it's really project specific items.
Kristian Rose: And one part is really related to <unk>.
Kristian Rose: Higher interconnection costs offer a particular project when we need to go back and do a little bit more work very likely on these project megawatts will come back into the backlog theyre good projects, but in the near term, we're removing them, while we work through the issues and are we.
Kristian Rose: It is important to keep in mind that as we.
Kristian Rose: Add something to the backlog its tremendous visibility.
Kristian Rose: And we're really excited about moving forward with the project based on what we know at the time, but this is still a development business and there are things that you have to work through before you commit significant capital to a project and occasionally.
Some of those things that we worked through our our better sometimes they're a little bit worse, and we need to make the decisions that are ultimately right for our shareholders at the time that we need to make them. So.
Kristian Rose: So in context of a 20 plus gigawatt portfolio I think it's de Minimis for what is kind of the normal run rate for.
Kristian Rose: Development type issues and Fortunately, we've worked through the issues that we had talked about over the last two years around antidumping countervailing duties and and the significant changes in the marketplace related to inflationary pressures and changes in the interest rates. So at this point I think we're in kind of like normal development every once in a while there.
Kristen Smith: Something that changes our view on a specific project and we were going to do the right thing from a shareholder perspective, only commit capital where it makes sense.
Kristen Smith: Got it that's helpful. Thank you for that.
Kristen Smith: Thank you.
Kristen Smith: Okay.
Kristen Smith: Okay.
Kristen Smith: This concludes our question and answer session. The conference has now also concluded. Thank you for attending today's presentation and you may now disconnect.
Kristen Smith: [music].
Okay.
Kristen Smith: Yeah.