Q4 2024 XPLR Infrastructure LP Earnings Call
[inaudible]
Speaker Change: Good day and welcome to the Explore Infrastructure Fourth Quarter and Full Year 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: Thank you Betsy and good morning, everyone and thank you for joining our call with me. This morning are John Ketchum Chairman of explore infrastructure I'm, Brian bolster Rebecca Kujawa, Mark Hickson members of explore infrastructures board of directors and Alan Lowe, President and Chief Executive officer of explore infrastructure.
Speaker Change: We will be making forward looking statements. During this call based on current expectations and assumptions, which are subject to risks and uncertainties actual results could differ materially from our forward looking statements. If any of our key assumptions are incorrect or because of other factors discussed in today's conference call and the comments made during this conference call and the risk factors section of the call.
Speaker Change: Presentation or in our latest reports and filings with the Securities and Exchange Commission each of which can be found on our website Www Dot X P. L. Our infrastructure Dot com, we do not undertake any duty to update any forward looking statements.
Speaker Change: 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.
Speaker Change: Please note that the name change to explore infrastructure became effective on January 23rd and trading on the New York stock exchange under the new stock ticker of X I S. R will become effective on February 3rd we will also be referring to convertible equity portfolio financings acceptance throughout todays call with that I will turn the call over to Brian.
Speaker Change: Yeah.
Brian: Thank you Mark and good morning, everyone. Today explore infrastructure is announcing a strategic repositioning of the company I will first outline the major elements of that repositioning I will then provide some background explaining how we have arrived at these changes.
Brian: A detailed strategic review of the company finally, I will discuss some of the related implications and opportunities.
Lou: Lou will conclude with details regarding explores priorities and path forward.
Speaker Change: Turning now to the broad outline.
Speaker Change: First the most important change explores making it to suspend for an indefinite period distributions to unit holders.
Speaker Change: Rather than issue equity to make investments, including investing in the step of buyouts.
Speaker Change: Floor will instead utilize its retained operating cash flow.
Speaker Change: As such today, we are transitioning from a model that focused primarily on acquiring assets and paying out substantially all of its ongoing cash flows.
Speaker Change: Which required constant access to equity markets.
Speaker Change: To a strategy that focuses on making investments funded by the cash flow cash flows and balance sheet capacity of the business growth will be an output.
Speaker Change: And to the extent, our free cash flow exceeds investment opportunities with an attractive return profile.
Speaker Change: We remain committed to returning capital to unit holders, which will ultimately be what each of our investment alternatives will be measured against <unk>.
Speaker Change: In short rather than seeking acquisitions to support our growing unitholder distribution explore will be focused on investing its free cash flow to provide value accretion to unit holders.
Speaker Change: Whether that is the cash burden of surplus funding wind repowering investing in the co location of storage at our renewable assets.
Speaker Change: Pursuing other growth investments or ultimately returning capital to unitholders.
Speaker Change: By taking this action today, we believe we have eliminated the need to issue equity.
Speaker Change: We've also created a path to self fund organic growth and other investment opportunities, while preserving our balance sheet and retaining the option to return capital to unit holders.
Speaker Change: Second to implement this new approach explore is putting in place a new management team all of whom are and will continue to be employees of Nextera energy.
Speaker Change: Management team led by Alan Lou will be looking broadly to create additional unit holder value both of the existing asset base and through ancillary opportunities all measured against returning capital to unit holders.
Speaker Change: Associated with these changes is a change to the name of the company, which we think appropriately captures the transition from a company that was primarily an acquisition vehicle.
Speaker Change: To an entity that will explore a broader suite of capital allocation and investment opportunities.
Speaker Change: Explore team will continue to leverage the existing relationship with their largest unitholder nextera energy.
Speaker Change: Through supplier and financing contracts meaningful board representation.
Speaker Change: Existing service agreements and access to investment opportunities adjacent to explore as clean energy assets.
Speaker Change: It's continued close relationship with Nextera energy.
Speaker Change: Floor will retain the same benefits and operational expertise that Nextera energy currently provides across its entire portfolio.
Speaker Change: Having given you the main elements of the changes we will be making let me now spend a few minutes on some background, which will give context for these changes.
Speaker Change: I will then turn to some of the implications of the changes and describe how we believe they will benefit the long term interests of unit holders.
Speaker Change: When it when explore was established in 2014.
Speaker Change: As expected its basic function to be to acquire contracted clean energy assets and to hold those assets in our portfolio. They delivered relatively low risk and growing cash flows.
Speaker Change: Other opportunities for growth of course, we're not ruled out.
Speaker Change: But this is expected to be the main path to growth at least for some years.
Explicit in this model of growth driven by acquisitions was the commitment to pay out a very high proportion of annual cash flows which.
Speaker Change: Which necessarily meant that every new acquisition would bring with it a need for new equity issuances.
Speaker Change: For many years. This model worked however, as distributions <unk> per unit grew.
Speaker Change: The partnership needed to acquire more assets.
Speaker Change: And thus issue more equity to support its distribution growth rate.
Speaker Change: As our equity needs grew the existing public equity market for yield coast proved to be more limited, creating the need for substantial discounting and thus increased dilution.
Speaker Change: Therefore, we look to two private capital as a financing source to help support our growing equity needs and maintain our distribution growth rate.
Speaker Change: When issued the step if offered a new equity offered new equity capital to support acquisitions.
Speaker Change: Unfortunately, as we began to buy out separate if obligations by issuing equity in 2021, there was significant downward solid selling pressure on the unit price.
Speaker Change: If we had continued to issue equity buyouts of surplus it would've resulted in significant dilution to unit holders.
Speaker Change: Over this time it has become clear that utilizing the significant cash available to explore to fund. These buyouts instead of distributing that cash and issuing new equity.
Speaker Change: And what we believe is a better economic value proposition for unit holders over the longer term.
Speaker Change: It's within this context that explore at reexamine its distribution policy and what level of adjustment to make going forward.
Speaker Change: As you're all aware, we have multiple opportunities for our cash one the buyout of surface to other growth opportunities, including but not limited to repower as an investment and co located storage.
Speaker Change: And three return of capital to unitholders.
Speaker Change: Either in the form of a distribution or common unit buybacks.
Speaker Change: We also need to maintain sufficient balance sheet flexibility to efficiently refinance capital obligations as they come due.
Speaker Change: For several reasons, we believe a full suspension of distribution gives us the clearest path to maximizing unit holder value.
Speaker Change: First we believe it isn't the best interest of unit holders to finance the buyout of selected separates with cash flow not equity.
Speaker Change: We believe buying out surplus at double digit unit holder returns is one of our most attractive investment opportunities.
Speaker Change: Second we expect to see attractive investments around our clean energy assets like wind Repowering and co located storage investments that we believe will create value for unit holders.
Speaker Change: These investments will generate incremental demand for cash which can be funded from retained cash flows.
Speaker Change: Third given the unprecedented demand for power, we expect to have many other attractive investment opportunities through our close relationship with Nextera energy.
Speaker Change: Finally, suspending the distribution today does not prevent a return of capital in the future and we will evaluate all of our investment opportunities against returning capital to unit holders.
Speaker Change: By fully suspending the distribution, we believe that explore will be able to adopt a business plan that does not contemplate equity issuances.
Speaker Change: In the face of attractive investment opportunities continuing as an acquisition vehicle, while paying out a distribution at a double digit yield is not the value maximizing path.
Speaker Change: Similarly, maintaining a token distribution as part of our near term capital allocation plan diverse cash flow from potential valuable investment opportunities.
Speaker Change: We believe a full suspension of distribution allows us to retain the ability to allocate capital back to unit holders over time.
Speaker Change: Rather than pay out a smaller distribution and potentially have to rely on the equity markets to fund buyouts or investments.
Speaker Change: That's why today, we announced the change in explores business model to one that focuses on the economic allocation of the cash flows generated by explores assets.
Speaker Change: Over the next two to three years that means explore plans to use a combination of its available cash flow and some balance sheet capacity to invest in the buyout of selected surplus at attractive returns and to advance our organic growth opportunities.
Speaker Change: The decision to buy the surface or not will be based on the return of the cash flows acquired from the buyout.
Speaker Change: Over the longer term.
Speaker Change: Floor plans to evaluate investment opportunities and other clean energy assets, including but not limited to co locating storage across its renewables portfolio.
Speaker Change: The return on these opportunities will continue to be measured against the value of returning capital unit holders <unk>.
Speaker Change: Including through common unit buybacks over time and potentially eventually restoring the distributions.
Speaker Change: At some point, we can either re initiate distributions engage in buybacks or both.
However, we do not expect to revert to a distribution policy of 90 plus percent payouts of available cash flows.
Speaker Change: The timing of unit buybacks or future distributions is impossible to predict right now.
Speaker Change: Will depend on the investment opportunities available at the time.
Speaker Change: We will keep you updated on our thinking and we are committed to the principle of returning to unit holders all capital in excess of that needed to fund only those investments that promise attractive risk adjusted returns.
Speaker Change: In the context of a dynamic capital allocation model explore will be putting a new management team in place.
Speaker Change: All of whom will continue to be employees of Nextera energy the.
Speaker Change: Explore management team will be led by Alan Lu who is on the call with me today and will serve as the partnership's Chief Executive Officer.
Speaker Change: Explore will retain his close ties the Nextera energy and again explore as board of directors remains unchanged.
Speaker Change: Alan and his team will be responsible for executing on the repositioning of the business.
Speaker Change: Explores new management team is committed to assessing and pursuing a disciplined capital allocation policy, which maximizes unitholder value.
Speaker Change: Through its multiple investment opportunities or by returning capital of unit holders over time.
Speaker Change: Alan is an industry veteran with a proven track record of leadership and has held senior positions in risk management and corporate development at Nextera energy.
Speaker Change: Joining nextera energy in 2021 Al was a managing director at Goldman Sachs, where he advised a broad range of companies public and private across the power utilities and renewable energy and infrastructure sectors.
Speaker Change: Alan brings to explore a diverse set of skills and nearly 20 years of electric infrastructure and financing experience that comes from helping companies think strategically about and execute on complex mergers acquisitions capital raise investments and other strategic and financial matters.
Speaker Change: With that I will turn it over Allen to discuss the strategic repositioning in more detail.
Alan: Thank you Brian.
Speaker Change: Everyone.
Speaker Change: Before I discuss the repositioning in greater detail I feel it's important to provide a brief overview of explores assets and key investment highlights.
Speaker Change: Well our infrastructure is one of the largest independent power producers and the third largest producer of wind and solar energy in the United States owning and operating a diverse set of high quality generation assets totaling 10 gigawatts in operation today.
Speaker Change: Our portfolio is diversified across generation technologies, with wind solar and storage assets and across customers with high credit quality.
Speaker Change: Geographically the portfolio is located in 31 states, including power markets that are projecting significant future load growth, which we think provides a number of opportunities, including re contracting repowering and other investment opportunities enabled by the existing assets.
Speaker Change: The portfolio generates most of its cash flows through long term contracts with a weighted average remaining contract life of 13 years 78 different customers that have an average credit rating of Triple B <unk>.
Speaker Change: This means we have long term visibility to our project level cash flows.
Speaker Change: As we have reviewed the universe of opportunities available to explore.
Speaker Change: <unk> cash flow, we have identified four priorities, which we believe will drive value for unit holders.
Speaker Change: The first priority is funding the cash buyout options are selected surface. We expect the buyout of selected SAP is to produce double digit returns, allowing us to retain ownership of assets, we believe will provide attractive opportunities well into the future.
Speaker Change: We expect the buyout of these investments will also simplify our capital structure by eliminating friction costs, such as change of control restrictions and make whole payments, which can limit strategic flexibility.
Speaker Change: I will provide more detail on the specifics of the surplus buyouts. After I finished outlining all of our capital allocation priorities, but I want to reiterate.
Speaker Change: We do not expect to need new equity issuance to address these buyouts.
Speaker Change: The second priority is investing in our existing assets, including wind repowering projects that may double digit return targets.
Speaker Change: Wind Repowering that we move forward on our expected to provide increased cash flows over the life of the asset which would enhance the value of our assets beyond the current contract period and create value for unitholders.
Speaker Change: Another investment opportunity in our existing assets through co located storage given the current market dynamics and demand for power one of the most important development assets as an interconnection position without an interconnected project cannot move forward.
Speaker Change: A typical site on average wind site on average produces energy approximately 40% of the time, which means the other 60% of the time. The interconnect is available for our co located battery.
Speaker Change: We have a multi gigawatt opportunity with unutilized interconnection capacity that could be used to colocate battery storage behind explores approximately 10 gigawatt renewable portfolio today.
Speaker Change: This is a valuable asset.
Speaker Change: Especially as times for interconnection continue to expand and the need for capacity solutions increases with growing power demands.
Speaker Change: Over the longer term, we plan to evaluate other investment opportunities adjacent to our clean energy assets. The guiding principle of our investment strategy will be defined areas, where explore has a differentiated market opportunity and can generate accretive returns for unitholders.
Speaker Change: We believe a logical place where we may find differentiate opportunities is in industries that are driving the fundamental seven by 24 low demand for.
Speaker Change: For power power demand growth is forecasted to increase six fold in the next 20 years versus the prior 20.
Speaker Change: U S data center demand alone is expected to increase substantially adding approximately 460 terawatt hours of new electricity demand at a compound annual growth rate of approximately 22% from 2023 to 2030.
Speaker Change: We believe explorer is well positioned to capitalize on this expected long term secular demand shift into power demand through its own assets and also through new opportunities that may become available through its close relationship with its largest unitholder nextera energy.
Speaker Change: Over the next two years, the buyout of selected surface and investments in our existing assets, including previously announced re powers will require approximately $4 4 billion of debt financing that includes approximately $1 5 billion of new debt and.
Speaker Change: In addition to funding. These initial two priorities we plan to expand the focus of our cash allocation to new growth opportunities as well as return of capital to unit holders of third and fourth priorities.
Speaker Change: We will measure growth opportunities in comparison to each other and relative to returning capital to unitholders with a goal of allocating capital to the highest returning opportunity.
Speaker Change: While we are raising new debt as part of our capital plan. We are also refinancing existing debt, including project debt and holding company debt for the $2 2 billion of holding company debt coming due through 2027, we plan to refinance those maturities at the holding company when they mature.
Speaker Change: In 2025, 26 and 27.
Speaker Change: We have approximately three $3 6 billion of interest rate hedges in place to Derisk those planned issuances, but consistent with our view on dilutive on the dilutive impact of issuing equity we do not plan to reissue convertible debt.
Speaker Change: We are committed to ensuring sufficient balance sheet strength and liquidity to <unk>.
Speaker Change: Militate, our refinancing activities, allowing us to extend the holding company maturities.
Speaker Change: The distribution suspension, we believe explore can pursue a number of opportunities as available to it including the step of buyouts, repower and select other growth opportunities without having a need to issue incremental equity.
Speaker Change: Haven't given you an overview of our capital plan.
Speaker Change: To provide more details on the SAP of buyouts today, we have <unk> in place, we intend to buy out three of these portfolios with cash and we intend to sell the assets at the other two to fund their buyouts.
Speaker Change: We have provided specific plans for each step up in the presentation, but in summary, and based on these assumptions for three SAP as we plan to buy out with cash we will invest approximately $945 million in 2025 one.
Speaker Change: $150 million in 2026 and $465 million in 2027.
Speaker Change: At the end of 2027, we expect to have only two remaining SAP is outstanding.
Speaker Change: We have also worked collaboratively with the Investor and one of these two remaining separately to create the option to restructure the approximately $1 billion buyout payment due in 2030, and just smaller distributor payments through 2034.
Speaker Change: This allows us to fund buyouts in that timeframe from cash flow.
Speaker Change: In summary, we believe we have a pathway to address all of the surface, which does not require us to issue equity.
Speaker Change: Switching gears to our financial results for the full year 2024, our adjusted EBITDA was approximately $1 96 billion very close to the midpoint of our run rate expectations range.
Speaker Change: Four to $1 25, assuming normal weather and operating conditions. Among other caveats, we expect our adjusted EBITDA to be roughly flat year over year.
Speaker Change: Although results may be impacted by the timing of the expected sale of the need pipeline investment that we currently expect in the fourth quarter of 2025.
Speaker Change: For calendar year 2026, we expect the portfolio to deliver adjusted EBITDA of $1 75 to $1 95 billion.
Speaker Change: The decline in adjusted EBITDA of approximately $105 million is due to the impact of the expected sale of the Meade pipeline investment in the fourth quarter of 2025.
Speaker Change: With the repositioning explore is changing its cashflow expectations metric to free cash flow before growth.
Speaker Change: Cash available for distribution is no longer meaningful for an entity suspending its distribution indefinitely.
Speaker Change: Referenced in our financial disclosures for the specific definitions.
Speaker Change: As with other companies, including independent power producers with meaningful free cash flow and multiple capital allocation opportunities. We believe free cash flow before growth will be a more appropriate metric to help a guy to help guide our capital allocation decisions.
Speaker Change: Given that 2025 as a transition year, which will have a partial impact of $945 million for vascepa buyouts, the expected Meade pipeline investment sale.
Speaker Change: On the Holdco financing, we believe 2026 represents a more appropriate baseline for our free cash flow before growth metric we.
Speaker Change: We expect free cash flow before growth to be in the range of $600 million to $700 million in 2026, and we expect it to remain relatively consistent through the end of the decade.
Speaker Change: As discussed earlier, we expect our cumulative free cash flow before growth will exceed our remaining sip of buyout options, which we expect will provide us optionality to allocate capital on the benefit of unit holders.
Speaker Change: We have provided a detailed walk from our midpoint 2023 run rate cash available for distribution expectations provided in the fourth quarter of 2023, two or 2026 free cash flow before growth expectations.
Speaker Change: After adding back debt pay down to get to free cash flow before growth. The main drivers between expected 2020 for free cash flow before growth in 2026 calendar your expectations.
Speaker Change: The estimated impact of the expected need pipeline sale and higher financing costs.
Speaker Change: Higher financing costs include the buyout of <unk> and the refinancing of zero coupon and other low cost converts with debt.
Speaker Change: <unk> cash flow is expected to decline as a function of these higher financing costs. We believe unit holders are meaningfully better off on a cash flow per unit basis relative to issuing equity at current prices.
Speaker Change: In summary, we are suspending the distribution and executing on a plan that enables explorer to pursue investment opportunities available to it and that does not contemplate issuing equity we.
Speaker Change: We believe investing in separate buyouts, as our best value maximizing opportunity for unit holders.
Speaker Change: Next we are going to opportunistically invest in growth opportunities, including Repowering and co located battery storage across our portfolio as well as other investment opportunities that arise, while maintaining sufficient balance sheet strength to address our maturities.
Speaker Change: All of these investments will be measured against returning capital to the unit holders over time, we expect that return of capital to take the form of either comment unit buybacks or potentially the re initiation of a distribution.
Speaker Change: In our view, we believe this repositioning will enable explore to unlock the value of the strong cash flows and the existing portfolio today and best position explore to allocate cash flow optimally for unit holders in the future.
Speaker Change: Focused on disciplined capital allocation is consistent with the capital allocation strategy deployed by high cash flow generating companies like independent power producers.
Speaker Change: We believe explore offers an attractive value proposition to existing and potential unit holders.
Speaker Change: Florida diverse assets and long term contracts with high quality customers provides long term visibility and our project level cash flows.
Speaker Change: The chart on slide 14 illustrates the range of theoretical potential unit prices based on a range of independent power producer trading levels in our 2026 free cash flow before growth expectations range of course, we cannot predict actual unit prices, but we do firmly believe explore represents a compelling long term investment.
Speaker Change: City due to the unprecedented demand for power, our close relationship with Nextera energy and the quality of our large diversified portfolio of renewable energy projects that uniquely position us for opportunities to create value for unit holders through a disciplined approach to capital allocation.
Speaker Change: That concludes our prepared remarks and with that we will open the line for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yes.
Shar: The first question today comes from Shar <unk> with Guggenheim Partners. Please go ahead.
Speaker Change: Hey, guys good morning.
Speaker Change: Good morning.
Speaker Change: Good morning, So just really quick one for me. Please just on the guidance as we're thinking about the free cash flow before growth how much of that is kind of driven by the ITC and PTC.
Speaker Change: Sure it's Alan so in the appendix of the presentation, we've given you the tax credits.
Speaker Change: Up to 2026.
Speaker Change: So the way I think about it is as we've said in the prepared remarks, our free cash flow before growth is relatively consistent through the end of the decade. So that's kind of what we're willing to share with you today.
Speaker Change: Okay perfect. That's all the questions I appreciate it and congrats on the new spot.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: The next question comes from Julien Dumoulin Smith with Jefferies. Please go ahead.
Speaker Change: Hey, good morning team. Thank you guys very much I appreciate the time and congrats and Allen maybe.
Speaker Change: Maybe just to follow up a little bit how do you think about what that run rate EBIT is in terms of the growth Capex that you guys are laying out here. So I E. How cheating, but that run rate growing and then how do you think about the net.
Speaker Change: As you say selling assets.
Speaker Change: Under the <unk>.
Speaker Change: You think about that over time I imagine, there's some puts and takes in probably for convenience youre talking about run rate, but can you talk about the gross up in the growth down there a little bit as you think.
Speaker Change: Great.
Speaker Change: Yes, so I think the way.
I look at it as let's where we're not going to talk about run rate on a go forward basis right I think what matters to my mind is going forward is what the actual cash flows that we're going to produce.
Speaker Change: That we can allocate on behalf of unit holders.
Speaker Change: And our project as we've stated our project level cash flows are relatively consistent.
Speaker Change: We've laid out here is a plan where you have significant movements in the capital structure.
Speaker Change: The change in the capital structure is primarily due to our decision not to issue equity. So you've got higher interest expense, but after you've kind of gotten your way through 2025.
Speaker Change: We're into 2026, we arrive at a free cash flow to cope with growth of $600 million to $700 million.
Speaker Change: That I think is the most important metric right, we're at that $600 million to $700 million of free cash flow that we can allocate on behalf of all of the capital allocation decisions of this company to drive unitholder value.
Speaker Change: Julien on the on the question with regard to EBITDA and I think we've shown you a page on that EBITDA is effectively flat during the period that we're talking about the one change to EBITDA will be Mead right and so you can see that step down and then on the Repowering. It's effectively flat. So we are spending the capital, but I think that is.
Speaker Change: Effectively extending the asset life of the asset so we're creating meaningful NPV, we're creating attractive irr's.
Speaker Change: But what are you seeing that and is it in the multiple more years of asset life that we've added to it.
Speaker Change: Got it and then just in terms of incremental interest expense. How do you think about whats you are targeting there beyond the 26 environment any kind of way to think about.
Speaker Change: No.
Speaker Change: How youre thinking about refinancing at the Holdco and interest expense there any kind of heuristics each Jeff just as you think about moving forward.
Speaker Change: I mean would you use.
Speaker Change: <unk> and other lower coupon structures again are you thinking about more traditional.
Speaker Change: Structures.
Speaker Change: Yeah.
Speaker Change: I think right now, we're obviously focused on straight debt because we like the value of our equity price and so we don't want to sell it through a convert.
Speaker Change: We will see where we are when the next set of maturities come due but but we're doing a lot of the refinancing in the in the 25 and 26 timeframe. So that is why we feel very confident about the cash flow number that we put in front of you today.
Speaker Change: Awesome and then if I can think about it in a different direction as you think about re contracting that portfolio here et cetera. Again. That's also contemplated in your run rate conversation I get Repowering, a net flat youre selling assets here, so presumably that pushes down.
Speaker Change: EBITDA relative to your run rate conversation are there other positive offsets are we should we not read your run rate EBITDA is being inclusive of the.
Speaker Change: All of this at this fall off over time.
Speaker Change: So Julien if I'm. Following the question I guess I'll just say a couple of things. One is we're going to eliminate conversations or run rate going forward. We're just going to talk about the EBITDA of the assets and if you look at the page that we've presented the EBITDA of the assets as effectively flat.
Speaker Change: Set for when we sell off the surface, which we're showing you that that step down over time.
Speaker Change: And then as Alan mentioned from a cash flow perspective, we've given you where we think we are in 2026, and we've said we think thats effectively flat. That's the right range to think about for through the end of the decade. So hopefully that answers your question, but wanted to make sure we're.
Speaker Change: Hitting it directly.
Speaker Change: No absolutely. Thank you guys very much for the details I appreciate the time a patient good luck alright look forward to it. Thanks. Thank you.
William: The next question comes from William <unk> with UBS. Please go ahead.
William: Hey, good morning, Thanks, very much for the time, just just one quick one for me.
William: Could you give us a little bit more color on sort of the quantum and timing of your expected growth investments or perhaps when we could get a little bit more color.
William: On how exactly you plan to.
William: To to make those investments.
William: Yeah. So I think we've laid out and the source of the uses in appendix right. The planned Capex expenditures are I would say.
William: You have most of it is going to be in the 2025 time frame and then you have some of it in 2026, but what we've laid out here today is really a 25% to 26 of our plan.
William: The current.
William: That's kind of how you think should think about it.
William: That answer your question or.
William: I guess, it well and then how do I think about that sort of in the context of guiding to flat.
William: Free cash through the end of the decade right sorry, So I think when you think about it is.
William: Obviously in the near term we're focused on two.
William: First priorities right, which is the type of buyouts.
William: And the Repowering projects.
William: The guidance does not contemplate growth beyond that at this point, obviously as we complete.
William: To complete our two priorities and we have access to their cash flows.
William: We think there's plenty of opportunities beyond that but the guidance today does not incorporate anything beyond that.
William: Got it thanks very much.
Speaker Change: The next question comes from Willard Granger with Mizuho. Please go ahead.
Willard Granger: Hi, good morning, everybody.
Speaker Change: Sure.
Speaker Change: A point of clarity do you expect there.
Speaker Change: With the expectation that the EBITDA from the one seven to $1 $9 billion of growth Capex.
Speaker Change: <unk>.
Speaker Change: You are offset.
Speaker Change: Any decline in EBITDA from asset sales is that how we should be thinking about it.
Speaker Change: Yes, I think the way you should think about re powers, which is where the money is going to over the next so we're spending money on two things.
Speaker Change: Element laid out one is we're gonna buyout selected surplus right and then two we're going to spend money on Repower and the way I would think about re powers is not.
Speaker Change: Not adding meaningful prompt to your cash flow, but adding extending the life of the asset and so we're adding meaningful NPV and meaningful IRR and so we are spending capital.
Speaker Change: And we're holding.
Speaker Change: EBITDA and the cash flow at a range that we've talked about but we are extending the life of the assets. Many years, which is adding NPV. That's why we've talked about them being positive IRR investments.
Speaker Change: Got it.
Speaker Change: The funding of the new Capex should we just think about that is a combination of equity and tax equity or is there a refinancing of the project level a bit or.
Speaker Change: Well a lot of that just be kind of pushed down from the holdco.
Speaker Change: Form of Holdco debt, how should we be thinking about that thanks.
Speaker Change: I think it's going to be a combination of project level and tax equity.
Speaker Change: Obviously.
Speaker Change: We think the majority of that financing will be at the project level.
Speaker Change: Yeah.
Speaker Change: Perfect I'll leave it there I would point you to slide 20 in the appendix, where we've actually laid out in detail our financing plan.
<unk> expectations on the financing plan for the next two years.
Speaker Change: The next question comes from Andrew Weisel with Scotiabank. Please go ahead.
Speaker Change: Okay.
Andrew Weisel: Hi, Thanks, Good morning, everyone. Appreciate all the details here and a lot to digest.
Speaker Change: My first question just to clarify that.
Speaker Change: EBITDA and free cash flow before growth guidance figures are those calendar guidance figures in the past you've talked about December 31 run rate figures is this a change or are these more traditional full year numbers.
Speaker Change: That is correct as stated what we think matters most in a go forward basis.
Speaker Change: How much cash do we have available in each calendar year to fund the different sources and the different capital allocation decisions that we intend to make.
Speaker Change: Okay, great. Thank you for clarifying and then secondly, Brian just to elaborate on what you were saying a moment ago, if I understand correctly. The one seven to $1 9 billion of growth Capex over 25% 26, primarily repowering and that should basically maintain the EBITDA and free cash flow before.
Speaker Change: Both that youre guiding to for 2026 that should be stable through the end of the decade. So my question is should we model out a similar level of growth capex each year in order to maintain that level or.
How do we think that I mean I think.
Speaker Change: Okay.
Yes.
Speaker Change: Again, the way I would think about Repower as is.
Speaker Change: As you said, we're putting money into the assets.
Speaker Change: To extend the life of the assets right. So on an NPV basis, we've added years of cash flow to the business because we've extended the life of the assets.
Speaker Change: That's where we're going to focus our money and in 25% and 26 as we look at other opportunities. We mentioned co located storage right. So that could be a different kind of capex, obviously that will come with incremental cash flow.
Speaker Change: And its own NPV. So the near term cash flow is invest in the assets extend the life of the assets, which we think is a very attractive IRR.
Speaker Change: Yes.
Speaker Change: And then we will look at other as Alan said, we'll look at other opportunities when we get out to the <unk>.
Speaker Change: 25, 26 in 2007 timeframe.
Speaker Change: Okay. So in the simplest simplest terms of modeling until we hear otherwise EBITDA and free cash flow should be flattish no growth Capex and no distribution is that kind of the way we should think about this until we hear otherwise.
Speaker Change: That's correct.
Speaker Change: Okay, great. Thank you and one last one.
Speaker Change: We mentioned I just want to point out as we've talked about in the presentation. There is obviously the expected drop in EBITDA from the sale of the Meade pipeline investment right. So you should factor that in as well.
Speaker Change: I should have said after 2026 right very clear on the near term changes, okay, great and my last one if I may you mentioned some additional changes coming on the management team congratulations to Alan again can you maybe elaborate on what other new faces, we might see coming into the picture here.
Speaker Change: Additionally, I might say.
Speaker Change: I think with this announcement today. We are also we have a new CFO Jessica Jaffray. Jessica has been a leader with Nextera fire for a number of years really a talented individual.
Speaker Change: Super excited to be going on this journey with so.
Speaker Change: She is going to be the other named Executive officer with US is a really talented team as well and Nextera and obviously as you heard today the relationship between explore.
Speaker Change: And.
Speaker Change: And Nextera energy isn't changing so obviously, we have continued support in <unk>.
Speaker Change: Opportunities to work with Nextera team, Andrew you might remember Jessica excuse a former head of IR. So may have interacted with her in that capacity.
Speaker Change: Yes, I do.
Speaker Change: Congratulations all around thank you everyone.
Speaker Change: The next question comes from Michael Sullivan with Wolfe Research. Please go ahead.
Michael Sullivan: Yeah, Hey, good morning, I think you mentioned.
Speaker Change: Rating agencies effectively signing off on the plan can you just give us a sense of what the credit metrics.
Michael Sullivan: It looked like over the next couple of years.
Michael Sullivan: Yeah, I think obviously, we've previewed this plan with all the three of the agencies that rate us right and.
Michael Sullivan: Our credit metrics.
Michael Sullivan: From from an <unk> perspective.
Michael Sullivan: Expect it to be kind of consistent with the levels that are consistent with our ratings.
Michael Sullivan: I think.
Michael Sullivan: That that's kind of.
Michael Sullivan: The expectation.
Michael Sullivan: Yes, so you'll get if you haven't seen their press releases I think there'll be coming out later this morning.
Michael Sullivan: So they are a firm their expectations in each of them has a slightly different way of going through the calculations, so rather than taking them agency by agency you can look at the reports, but you'll be able to see their guidance and where we sit within their guidance, but I think the important part for this conversation is that they've they've affirmed where where they are rare.
Michael Sullivan: Relative to where they were before this announcement.
Michael Sullivan: Okay very helpful. And then just on the Mead.
Sales so to confirm you expect to close it in the fourth quarter and.
Michael Sullivan: Process kicked off yet officially.
Michael Sullivan: Yes, I don't want to comment on the process more broadly, but I think the timing is consistent with the with the fourth quarter of this year.
Speaker Change: Okay, and any change to how much leverage is on that asset from prior disclosures.
Michael Sullivan: No change.
Michael Sullivan: Okay. Thank you.
Speaker Change: The next question comes from Christine Cho with Barclays. Please go ahead.
Christine Cho: Good morning. Thank you for taking my question I just have one.
Christine Cho: And I know you've kind of touched upon this but the repowering as you talk about it being NPV positive as you extend the terms, but is there any opportunity to negotiate that PPA rate, especially for the ones that don't have some sort of advair.
Christine Cho: We just think that given some of these professional PPA for 10 years ago that there could be some uplift in the PPA rate.
Christine Cho: Sure I mean listen as part of these conversations there is always an option to renegotiate the PPA and so it obviously depends on where the PPA was strong relative to where current prices are so we look at all those opportunities in the context of these repowering.
Christine Cho: This concludes our question and answer session.
Christine Cho: Our conference call today.
Christine Cho: Thank you for attending today's presentation you may now disconnect.
Christine Cho: Okay.
Christine Cho: Okay.
Christine Cho: Okay.
Christine Cho: Yes.
Christine Cho: Okay.
Christine Cho: [music].
Christine Cho: Yeah.