Nextera Energy Inc Q1 FY2023 Earnings Call

Good day, and welcome to the NextEra Energy and NextEra Energy Partners' First Quarter 2023 Earnings Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Kristen Rose, Director of Investor Relations. Please go ahead.

Thank you, everyone, and thank you for joining our first quarter 2023 combined earnings 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 Chief Financial Officer of NextEra Energy; Rebecca Kujawa, 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, President and Chief Executive Officer of Florida Power & Light Company. Kirk will provide an overview of our results and our executive team will then be available to answer your questions. We will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements, if any of our key assumptions are incorrect, or because of other factors discussed in today's earnings news release and the comments made during this conference call in 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.nexteraenergy.com and www.nexteraenergypartners.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 reconciliations of historical non-GAAP measures to the closest GAAP financial measure. With that I will turn the call over to Kirk.

Thank you, Kristen, and good morning everyone. NextEra Energy is off to a strong start in 2023. Adjusted earnings per share increased by approximately 13.5% year-over-year, building on the success of last year's strong execution and financial performance. During the quarter, we were honored that NextEra Energy was again ranked number one in our sector on Fortune's list of the world's most admired companies for the 16th time in 17 years. We are extremely proud of the team and culture we have built that has enabled us to deliver low-cost clean and reliable power to our customers, while also providing long-term value to our shareholders. FPL is the largest electric utility in the US and Florida is now officially the fastest-growing state in America. At FPL, our focus remains the same: deploying smart capital to deliver on what we believe is one of the best customer value propositions in our industry. Key to that strategy is keeping customer bills affordable. This quarter, we proposed using projected 2023 fuel savings to reduce unbilled fuel costs from 2022 to provide bill relief to customers. To further manage fuel price volatility, we are also helping customers by adding more solar to the FPL grid. This quarter, we placed into service approximately 970 megawatts of new low-cost solar. Putting FPL's owned and operated solar portfolio at nearly 4,600 megawatts, which is the largest solar portfolio of any utility in the country. We believe solar is now the lowest-cost generation option for Florida customers, but it represents only about 5% of FPL's delivered energy. In order to extend the benefits of low-cost solar to customers, FPL's recently filed 10-year site plan now includes nearly 20,000 megawatts of new solar. Energy Resources, the world's leader in renewables and a leader in battery storage, remains laser-focused on executing a strategy of decarbonizing the power sector and helping commercial and industrial customers outside the power sector reduce their energy costs and decarbonize their operations by moving to low-cost renewables and other clean energy solutions. This quarter, Energy Resources added approximately 2,020 megawatts of new renewables and storage projects to its backlog. Energy Resources also closed on its previously announced acquisition of a large portfolio of operating landfill gas-to-electric facilities, providing the foundation for our growing RNG business. We are also excited to announce a new memorandum of understanding with CF Industries to create green hydrogen, establishing what we expect will be a long-term relationship with the world's largest ammonium producer. And finally, Energy Resources continues to build what we believe is the nation's leading competitive transmission business to help support growth in renewables. We are pleased to announce that the California ISO recently recommended for approval approximately $400 million in new transmission and substation upgrades for NextEra Energy Transmission. We believe NextEra Energy continues to be anchored by two great businesses that leverage each other's expertise to make them even better. We do not believe anyone in our industry has our set of skills, scale, and breadth of opportunities. We believe NextEra Energy is able to buy, build, operate and finance cheaper with one of the strongest balance sheets in our sector. We also believe our best-in-class development skills and unparalleled data set enable us to provide innovative technology and low-cost clean energy solutions for the benefit of our customers. The opportunities and products demanded by the market are becoming more complex, requiring significant scale and a combination of skills that we believe few of our competitors can offer, further enhancing our competitive advantages and creating even more growth opportunities for our business going forward. We have a culture rooted in continuous improvement, always striving to be better. Along those lines, we just completed our annual employee-led productivity initiative, which we now call Velocity. For over 11 years, our employees have generated approximately $2.6 billion in annual run-rate savings ideas as part of this process. In 2023 alone, our team generated ideas expected to produce roughly $325 million in annual run-rate savings, which when combined with last year's results of over $400 million is the most productive two-year period in this program's history. We believe we have the best team in the industry, and these results are indicative of the breadth and depth of capabilities and the commitment to excellence that our team brings to our business every day and executing on behalf of our customers and shareholders. With that let's turn to the detailed results beginning with FPL. For the first quarter of 2023, FPL reported net income of $1.07 billion, or $0.53 per share, an increase of $0.09 year-over-year. Regulatory capital employed growth of approximately 11.2% was a significant driver of FPL's EPS growth versus the prior year comparable quarter. FPL's capital expenditures were approximately $2.3 billion for the quarter. We expect our full year 2023 capital investments at FPL to be between $8.0 billion and $9.0 billion as we continue to invest capital smartly for the continued benefit of our customers. FPL's reported ROE for regulatory purposes will be approximately 11.8% for the 12 months ending March 2023. During the quarter, we utilized $373 million of reserve amortization to achieve our targeted regulatory ROE, leaving FPL with a balance of $1.07 billion. As we've previously discussed, FPL historically utilizes more reserve amortization in the first half of the year, and we expect this trend to continue this year. Earlier this year, the Florida Public Service Commission approved FPL's proposed plan to recover approximately $2.1 billion of incremental fuel costs from 2022 partially offset by projected 2023 fuel savings of approximately $1.4 billion. Amid high natural gas prices in 2022, FPL's decades-long modernization of its generation fleet has saved customers more than $2 billion in fuel costs just in 2022 alone. The commission has also recently approved recovery of approximately $1.3 billion of hurricane costs from 2022 over a 12-month period. Taking all approved adjustments together, we anticipate that FPL's typical 1,000 kilowatt-hour residential customer bills will remain well below the projected national average and among the lowest of all Florida utilities. Turning to our development planning and efforts, FPL recently filed its annual 10-year site plan that presents our generation resource plan for the next decade. The 2023 plan includes roughly 20,000 megawatts of new low-cost solar capacity across our service territory over the next 10 years, which would result in nearly 35% of FPL's forecasted energy delivery in 2032 coming from cost-effective solar generation, up significantly from roughly 5% in 2022. Given the increasing customer benefits of low-cost renewables, FPL's post-2025 solar capacity additions and this year's plan are more than double last year's approved plan and also includes 2 gigawatts of battery storage over the next decade. We believe the expansion of cost-effective solar and storage will provide a valuable hedge for our customers against volatile natural gas prices and meet the electricity demand of FPL's growing customer base with a low-cost generation source. Finally, construction of our green hydrogen pilot at our Okeechobee Clean Energy Center is on track and projected to go into service later this year. Turning now to the Florida economy. Florida became the fastest-growing state in the nation in 2022, and its population continues to increase with over 1,000 people moving to Florida every day. Over the last five years, Florida's GDP has grown at a roughly 7% compound annual growth rate and is now approximately $1.4 trillion, which is up approximately 8% versus a year ago. Based on GDP, if Florida was a country, it would have the 14th largest economy in the world. FPL's first quarter retail sales increased 0.4% from the prior year comparable period driven by continued solid underlying population growth with FPL's average number of customers increasing by approximately 65,000, even after removing roughly 15,000 inactive customers due to Hurricane Ian. For the first quarter, we estimate that the positive impact of warmer weather was more than offset by a decline in underlying usage for our customers. As we have often pointed out, underlying usage can be somewhat volatile on a quarterly basis, particularly during periods when temperatures deviate significantly from normal, as we experienced this winter with average temperatures greater than four degrees above normal. Our long-term expectations of underlying usage growth continue to average between zero and approximately negative 0.5% per year. Energy Resources reported first quarter 2023 GAAP earnings of approximately $1.440 billion or $0.72 per share. Adjusted earnings for the first quarter were $732 million, or $0.36 per share, up $0.04 compared to the prior year comparable period. Contributions from new investments increased $0.07 per share year-over-year. Contributions from our existing Clean Energy portfolio were lower by $0.03 per share primarily due to less favorable wind and solar resource compared to the prior year. The contribution from our customer supply and trading business increased by $0.06 per share primarily due to higher margins in our customer-facing business compared to a relatively weaker contribution in the prior year comparable quarter. Gas infrastructure and all other impacts reduced earnings by $0.01 and $0.05 per share respectively versus 2022. Energy Resources had another strong quarter of origination capitalizing on a strong global demand environment. Since the last call, we added approximately 2,020 megawatts of new renewables and storage projects to our backlog including roughly 1,370 megawatts of solar, 450 megawatts of storage, and 200 megawatts of wind. With these additions, our renewables and storage backlog now stands at over 20.4 gigawatts net of projects placed in service and provides strong visibility into our future growth. With more than 1.5 years remaining before the end of 2024, we are now within the 2023 to 2024 development expectations range. Given the volatility in gas and power prices over the last 1.5 years, we continue to see economics driving long-term decision-making, and renewables remain the clear low-cost option for many customers. On the solar supply chain front, we continue to take constructive steps to mitigate potential future disruption. Nearly every one of our suppliers has repositioned their supply chains to manufacture solar panels in Southeast Asia using wafers and cells produced outside of China, and all our suppliers are expected to meet the criteria established in the Commerce Department's preliminary determination in the 2022 circumvention case by the end of 2023. Additionally, we are focused on further diversifying our supply chain and are currently advancing discussions to support the domestic production of solar panels. Finally, we are encouraged by the improvement in the flow of panels into the US as suppliers continue to provide the requested traceability documentation to US Customs and Border Protection. Also, during the quarter, we closed on the previously announced transaction to acquire a large portfolio of operating landfill gas-to-electric facilities that I mentioned earlier. The approximately $1.1 billion transaction represents an attractive opportunity for Energy Resources to realize double-digit returns on this investment while expanding its portfolio of renewable natural gas assets and growing its in-house capabilities in the rapidly expanding renewable fuel market. Turning to green hydrogen, we are excited about the role it is expected to play as a solution to help our customers cost-effectively lower emissions. As the world leader in renewables and a leader in battery storage, we believe we are the logical partner for green hydrogen with significant interconnection and land inventory positions and deep market expertise to help our potential partners optimize some of the best green hydrogen sites around the country. As a result, with the right regulation, we see hydrogen quickly becoming a significant technology for our customers and a new growth driver for Energy Resources given the number and size of the opportunities we are evaluating. Earlier this month, NextEra Energy joined a coalition of 45 other companies with a combined approximately $1 trillion in market capitalization and sent a letter to the Secretaries of Energy & Treasury and the White House advocating for programmatic policies for the implementation of the IRA's green hydrogen production tax credit. This coalition is advocating for prudent policy that will foster investment in green hydrogen technology, paving the way for the US to become the world leader in hydrogen technology. A key aspect of this policy is for the electricity consumed for green hydrogen production to be matched to its renewable power generation on an annual rather than an hourly basis. We believe that an annual matching construct has several benefits over hourly including lower green hydrogen prices, more renewables being built, a significant reduction in carbon emissions, and green hydrogen achieving cost parity with gray and blue hydrogen, both of which rely on fossil fuels for their production. This viewpoint is supported by numerous third-party studies from respected entities such as Wood Mackenzie, Rhodium Group, Energy Futures Initiative, Energy and Environmental Economics, and MIT Energy Institute. As we continue to work with the industry and government representatives to progress a smart hydrogen policy, we are also advancing our green hydrogen development efforts including a recently executed Memorandum of Understanding for a joint venture with CF Industries, the world's largest producer of ammonia, to deliver green hydrogen to an existing CF Industries ammonia production facility which it intends to expand and incorporate green hydrogen into its production process. The proposed facility includes an approximately 450-megawatt renewable energy solution, powering a 40 tons per day hydrogen facility. This project combined with other opportunities we are pursuing represents significant momentum for green hydrogen, which we believe will continue to be a driver of new renewables growth going forward. Our team continues to engage with multiple potential partners and customers on hydrogen projects, representing over $20 billion of capital investments and requiring more than 15 gigawatts of new renewables to support. As we focus on leading the decarbonization of the US economy, building additional transmission is essential to support long-term renewables deployment. We believe our ability to build, own, and operate transmission is a key competitive advantage for our renewables business in addition to being a terrific investment opportunity. We are pleased that the California ISO recently recommended for approval of approximately $400 million in transmission and substation upgrades for NextEra Energy Transmission, subject to approval by the CAISO Board of Governors in May. We believe these projects along with others could unlock up to 11 gigawatts of new renewable generation that could be built to support California's ambitious clean energy goals. Turning now to the consolidated results for NextEra Energy. For the first quarter of 2023, GAAP earnings attributable to NextEra Energy were $2.086 billion or $1.04 per share. NextEra Energy's 2023 first quarter adjusted earnings and adjusted EPS were approximately $1.678 billion and $0.84 per share respectively. Adjusted earnings for the Corporate and Other segment decreased results by $0.03 per share year-over-year, primarily driven by higher interest rates. In March, S&P affirmed all its ratings for NextEra Energy and lowered its downgrade threshold for its funds from operations or FFO to debt metric from the previous level of 20% to the current level of 18%. In making this favorable adjustment, S&P acknowledged improvement in Energy Resources business risk following the passage of the IRA, particularly noting the improved visibility and clarity into long-term cash flows. At the same time, S&P adjusted its treatment of non-recourse project debt associated with FERC Regulated investments to bring it back on credit. We believe this overall favorable adjustment, which creates roughly 50 bps of additional headroom against the downgrade threshold, highlights the attractive risk profile of renewables and acknowledges the long-term stable cash flows and Energy Resources business, particularly given the benefits of the IRA. Finally as we have discussed in the past, we actively enter into various interest rate swaps products to manage interest rate exposure on future debt issuance. Today, we have $21 billion of interest rate swaps at NextEra Energy to help mitigate the impact of potential future increases in rates, which exceeds the notional value of our 2023 and 2024 maturities. And as always, the current interest rate environment is taken into account in our financial expectations. Our long-term financial expectations, which we extended earlier this year through 2026, remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in each year from 2023 to 2026, while at the same time maintaining our strong balance sheet and credit ratings. From 2021 to 2026, we also 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. We also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022 base. As always, our expectations assume our usual caveats including normal weather and operating conditions. Turning to NextEra Energy Partners, we believe we have never had more visible growth opportunities than we have today. We have the ability to grow in three ways: acquiring assets from Energy Resources, growing organically, and buying assets from other third parties. With significant tailwinds from the IRA, Energy Resources' operating portfolio combined with its backlog of projects and development expectations through 2026 total approximately 58 gigawatts, providing terrific visibility for NextEra Energy Partners. Energy Resources is continuing to grow in innovative ways, adding new technologies and clean energy assets to its portfolio, such as RNG and hydrogen. In addition to acquiring assets from Energy Resources, NextEra Energy Partners also has the ability to repower its existing assets, with approximately 1,300 megawatts of potential wind repowerings already identified, and many more opportunities expected to come as well as the potential to locate storage at its existing renewable assets, given the new stand-alone storage investment tax credit. Finally, there are significant acquisition opportunities with renewable portfolios continuously being brought to market. NextEra Energy Partners also has numerous ways that can finance this growth and we believe it can do so efficiently, given its ample liquidity and access to capital. At the end of the first quarter, NextEra Energy Partners had $2.8 billion of liquidity and approximately $6 billion of interest rate swaps to manage future interest rate volatility on debt maturities through 2026. With regard to convertible equity portfolio financing, we can fund equity buyouts by delivering common units or utilizing our at-the-market or ATM program or a combination of both, and we believe we have ample liquidity to fund cash payments. Importantly, we have flexibility and we expect to leverage this flexibility to manage future buyouts to select the most efficient option. Using this flexibility, NextEra Energy Partners has now bought out 50% of the STX Midstream convertible equity portfolio financing through funds generated from a combination of the ATM program, where NextEra Energy Partners was able to be opportunistic and cash from a subsidiary's revolving credit facility. With the buyouts of the 2018 convertible equity portfolio financing and 50% of the STX Midstream convertible equity portfolio financing complete, we estimate that the convertible equity portfolio financing structure has resulted in approximately 55% and 64% respectively or 16 million fewer units being issued compared to raising capital with underwritten block equity, all for the benefit of unitholders. For the balance of the year, files are now expected to be limited to the remaining 50% of the STX Midstream convertible equity portfolio financing and 15% of the net renewables to convertible equity portfolio financing, with the equity portion of these buyouts requiring common units of approximately $280 million and $130 million respectively. Over the next eight months, we have flexibility and time to opportunistically manage these buyouts in the most efficient way. For each buyout, we have the flexibility to deliver common units to the convertible equity portfolio financing investor, utilize the ATM program, or some combination of the two. Ultimately, we will select the most efficient option. In any event, the potential unit issuance from these buyouts is not expected to exceed an average of three days of total trading volume per quarter, which we expect will make them quite manageable. Most importantly, NextEra Energy Partners' growth expectations through 2026 already factor in its financing plan, including convertible equity portfolio financing buyouts at current trading yields. Turning to distribution growth. Yesterday the NextEra Energy Partners Board declared a quarterly distribution of $0.8425 per common unit or $3.37 per common unit on an annualized basis, up approximately 15% from a year earlier. Inclusive of this quarter, NextEra Energy Partners has grown its LP distribution per unit up nearly 350% since the IPO. Today we are pleased to announce that NextEra Energy Partners has entered into an agreement with Energy Resources to acquire an approximately 690-megawatt portfolio of long-term contracted operating wind and solar projects and attractive cash available for distribution yield. The high-quality portfolio has a cash available for distribution weighted average remaining contract life of approximately 16 years, an average customer credit rating of BBB at S&P and Baa2 at Moody's Investors Service. NextEra Energy Partners is expected to acquire the portfolio for approximately $708 million, subject to closing adjustments and is inclusive of the portfolio's existing project debt and interest rate swaps which are estimated to be approximately $142 million. In addition to the approximately $708 million purchase price, NextEra Energy Partners is also expected to assume the portfolio's existing tax equity financing balance. The remaining purchase price is expected to be funded by a combination of new project finance debt and the corporate revolving credit facility. The portfolio of assets is expected to contribute adjusted EBITDA of approximately $110 million to $130 million and cash available for distribution prior to the existing project debt service of approximately $62 million to $72 million each on a five-year average annual run rate basis, beginning December 31, 2023. The transaction is expected to close in the second quarter of this year. Additional details on the portfolio of assets to be acquired by NextEra Energy Partners can be found in the appendix of today's presentation. NextEra Energy Partners will remain opportunistic pursuing acquisitions in 2023. And with the closing of the transaction announced today, NextEra Energy Partners expects to be well positioned to meet its year-end 2023 adjusted EBITDA and cash available for distribution run rate expectations. Turning to the detailed results. NextEra Energy Partners delivered first quarter adjusted EBITDA and cash available for distribution results in line with management's expectations. Adjusted EBITDA of $447 million increased by $35 million versus the prior year, driven primarily by favorable contributions from the approximately 1,200 net megawatts of new projects acquired in 2022. Both adjusted EBITDA and cash available for distributions were negatively affected by lower resource from existing projects. Additionally, cash available from distribution was lower versus the prior year comparable period due to incremental debt service and timing of payable payments. Looking forward in the second half of 2023, we expect strong double-digit growth in adjusted EBITDA and cash available for distribution to support NextEra Energy Partners' distribution per unit growth expectation range of 12% to 15% for the full year 2023. Additional details are shown on the accompanying slide. NextEra Energy Partners continues to expect run rate contributions for adjusted EBITDA and cash available for distributions from its forecasted portfolio at December 31, 2023, to be in the ranges of $2.22 billion to $2.42 billion and $770 million to $860 million respectively. As a reminder, year-end 2023 run rate projections reflect calendar year 2024 contribution from the forecasted portfolio at year-end 2023 and include the impact of IDR fees, which we treat as an operating expense. As always, our expectations are subject to our usual caveats including normal weather and operating conditions. From a base of our fourth quarter 2022 distribution per common unit at an annualized rate of $3.25, we continue to see 12% to 15% growth per year in LP distributions as being a reasonable range of expectations through at least 2026. We continue to remain comfortable with these growth expectations. In fact, even at the current trade yield, Energy Resources' portfolio alone is just one way NextEra Energy Partners believes it can meet its growth expectations through 2026. For 2023, we expect the annualized rate of the fourth quarter 2023 distribution that is payable in February 2024 to be in a range of $3.64 to $3.74 per common unit. We also continue to expect to achieve our 2023 distribution growth of 12% to 15%. In summary, we continue to believe that both NextEra Energy and NextEra Energy Partners are well-positioned to continue delivering on their long-term growth prospects. At FPL that means executing on smart capital investments to deliver on its customer value proposition of low bills, high reliability, and outstanding customer service. At Energy Resources that means leading the decarbonization of both the power sector and the non-power sector and leveraging its competitive advantages to capitalize on low-cost renewals and new emerging technologies like green hydrogen. In NextEra Energy Partners, we expect to capitalize on its unmatched growth visibility to further expand its best-in-class clean energy portfolio to provide long-term distribution growth for unit holders. With that, we are happy to address your questions.

Thank you. We will now begin the question-and-answer session. The first question comes from Steve Fleishman with Wolfe Research. Please go ahead.

Thank you. Good morning. I have a couple of questions regarding the NEP drop. It seems you're considering the CAFD yield at the midpoint of the CAFD range over the $708 million, which appears to be around 9.5%. If you were to gradually exclude the project debt from the base and the payments of the project debt, how would that affect the 9.5% yield?

Good morning, Steve. Thank you for the question. You are correct in your calculations. On an unlevered basis, we have a 9.5% CAFD yield at the midpoint of the CAFD we provided. This is because the debt included will be paid off in about three years, and we believed this was the right way to represent the CAFD yield. If we included the debt, the CAFD yield would actually be higher at 10.4%. However, we have typically shared that figure as an unlevered number.

Okay. Great. That's helpful. And then the amount of tax equity just to kind of round this out.

Sure. Sure. Yeah, the amount of tax equity is $165 million, and that will be disclosed in the 10-Q that we'll be filing either later today or tomorrow.

Okay. And Kirk, I think you said something about the growth through 2026 could just come from the I don't know if that was from the NEP portfolio or I guess maybe from the near portfolio. Could you just clarify what you said there?

Sure, happy to do that, Steve. As I mentioned in our prepared remarks, NextEra Energy Partners has outstanding growth visibility. The visibility has improved significantly thanks to the passage of the IRA. When we evaluate the growth avenues for NextEra Energy Partners, we can see three main aspects: first, we have the existing portfolio at Energy Resources; next is the current backlog of 20.4 gigawatts; and finally, there are development expectations of 58 gigawatts that we've disclosed. Additionally, with the organic growth opportunities available, the IRA has opened up new options within the portfolio at NextEra Energy Partners. We now have great potential for organic growth through repowerings, and we are currently pursuing 1.3 gigawatts in repowerings. We also have the capacity to incorporate storage co-located within our footprint. Moreover, there are many renewable portfolios entering the market, and NextEra Energy Partners has a strong track record of capitalizing on these opportunities due to our operational advantages and lower costs of capital. Therefore, we see significant growth potential. In response to your question, we believe that we can achieve the 12% to 15% LP distribution growth by focusing solely on the Energy Resources portfolio.

That's helpful. I'm sure others will have questions on that topic. I would like to know more about the overall renewable development environment. Rebecca, can you share your insights on the current stabilization of pressures from last year and the impact of lower gas prices? Could you provide some perspective on what you are observing and your confidence in meeting or even exceeding your development targets? Thanks.

Good morning, Steve. We are experiencing a very strong environment for renewable development. The addition of 2 gigawatts to our backlog is a clear indicator of this, showcasing a diverse mix of wind, solar, and battery storage in our portfolio. Our discussions with both power sector customers and those outside of it remain active and promising. My primary concern is ensuring that we, along with others, can meet the growing demand for renewables. We are preparing to ensure that all necessary projects are available for our customers in the long term. One notable change I’ve observed in our customer interactions over the past year is the heightened focus on partnerships with entities capable of execution. It is clear to everyone that the demand for renewables is strong, along with the challenges of successfully completing and operating projects for our customers' benefit. Our ongoing discussions now reflect this reality. We have engaged extensively with customers to ensure that we meet their significant long-term needs. Additionally, a major development over the past year, particularly in the last nine months following the Inflation Reduction Act, is around hydrogen. We wanted to share more insights into what we are observing. Currently, we have $20 billion in pipeline projects with partners and customers that we are actively working on, which is continuously growing. To support these $20 billion worth of projects, over 15 gigawatts of new renewables must be constructed. This situation is unprecedented in our industry and in our company’s history, giving us substantial visibility into remarkable growth and innovation. We are genuinely excited about these developments.

Okay. Thank you.

Thanks, Steve.

The next question comes from Julien Dumoulin-Smith with Bank of America. Please go ahead.

Hi. Good morning, team. Thank you for the time here. Just first following up with the backlog. Just can you elaborate a little bit on what you're seeing here? It seems like you're adding beyond 2026. How are you thinking about potential for acceleration here off of the numbers that you've articulated thus far in the four-year period? And then related how much of that is hydrogen in total if you can kind of give us at least some initial disclosure on that front.

Thanks, Julien. It's Rebecca. I'll take that. We continue to feel confident about our development expectations across the board. Currently, we're at the low end of the range for 2023 and 2024, but we believe we're well positioned to meet our long-term expectations over the next four years. With the comments I just made and what Kirk mentioned on the call, we are very excited about opportunities beyond the 2026 timeframe. I believe the hydrogen opportunity is mainly more relevant after 2026 for various practical reasons, particularly the need for clarity on treasury guidance, which impacts our current customer discussions. This clarity also influences how manufacturers are preparing to ramp up their production capabilities, especially for electrolyzers. As this guidance becomes clearer, particularly regarding the annual matching guidance for the hydrogen production tax credit, we expect acceleration in these areas. Additionally, we are witnessing remarkable innovation in the clean tech space. Over the past two years, Bloomberg New Energy Finance reported $100 billion invested in clean tech through venture capital, leading to exciting innovations that we anticipate will significantly impact the latter part of this decade.

Excellent. And just quickly going back to NEP quickly. How do you think about using ATM to buy out the remaining CPIF they come due? Further should we assume issuing new CPIF on a rolling basis as credit facilities are refinanced right again obviously right now this is temporary financing in some respects. And then ultimately how do you think about the IDR potential holidays and other tools in the current environment?

All right, Julien, I'll address all those questions and ensure the team covers everything. The first question pertains to the use of the ATM. As we mentioned in our prepared remarks, we have the flexibility to be strategic about using either units directly or the ATM for buyouts. You should expect us to take advantage of this flexibility and be opportunistic with these options. Sometimes, utilizing the ATM can be advantageous for delivering value, while there will be instances when delivering units directly is more beneficial. We have both strategies at our disposal. Regarding the use of unit CPIF in the future, as we discussed today, CPIF has provided significant benefits to unitholders. Compared to the alternative of doing an underwritten block equity deal, as shown in our slides, it has saved unitholders over 16 million units. That slide clearly outlines the advantages. As always, we will assess the best financing option when it’s time to fund an acquisition, considering all financing tools at our disposal. Our financing plan will incorporate our expectations for LP distribution growth, including the conversion of outstanding units. If we opt to utilize a new CEPF, we will factor that into the financing strategy to continue meeting expectations. I believe your third question was regarding the possibility of an IDR holiday or something similar. As I mentioned in response to Steve's comment, we have substantial growth opportunities and visibility at NextEra Energy Partners. We have considerable flexibility to finance that growth. The acquisition announced today serves as a strong indication of our ability to secure attractive assets for unitholders. We feel confident about acquiring assets and fostering growth, and we're dedicated to leveraging that growth visibility to deliver value to unitholders.

Julien, this is John. I want to provide some additional insights on the ATM and our capability to issue shares directly to CEPF investors. Our preferred approach is to issue shares directly to CEPF investors. We successfully utilized the ATM for the initial 50% of the STX buyout in a very strategic manner, executing it essentially at no discount, which was advantageous. It's wonderful to have the flexibility to act on such opportunities through the ATM. It's a valuable resource to have. However, we maintain ultimate flexibility; if attractive opportunities arise under the ATM, we can certainly consider them. Nevertheless, our priority is always to act in the best interest of unitholders by issuing shares directly to CEPF holders when efficient. In the presentation today, we highlighted the value of the CEPF, showcasing a 54% savings during the BlackRock conversion in 2018 and approximately 65-66% savings on the initial 50% STX buyout completed so far. Currently, at NEP, our focus is on executing the strategies Kirk discussed. We have excellent growth visibility and an appealing acquisition today offering a 9.5% CAFD yield. There are numerous ways to finance our business going forward, and currently, there is unprecedented capital seeking renewable investments. We have billions of dollars ready to be invested in renewable assets, making me confident in NEP's positioning. Additionally, NEP plays a crucial role for NEE, providing a means to recycle capital with tax optimization benefits. We continue to receive distributions from assets dropped into NEP, which strengthens the partnership between both companies and has proven successful. We have multiple avenues to pursue, and NEP is well positioned.

Thank you, guys.

The next question comes from Shar Pourreza with Guggenheim Partners. Please go ahead.

Hey, guys. Good morning. Just real quick on rounding out on NEP. So I guess the latest portfolio acquisition, the midpoint CAFD yield, 9.5%. It's a bit higher than some of the prior ones. I guess, do you still see attractive economics on new acquisitions? Is it enough to balance out the dilution from the legacy CEPF conversions. So I guess I'm kind of asking a question on accretive economics versus the cost of capital there?

Shar, I think the answer very simply is, yes. We think there are tremendously attractive acquisitions for NEP. And as John just highlighted, Energy Resources finds itself in a position of wanting to recycle capital. So there's a lot of synergy in that. I think we will always continue to focus on current market conditions when we're thinking about divestitures from a year perspective and acquisitions from a net perspective. And as Kirk highlighted and John emphasized, we factor all of that in as we think about the expectations for NEP going forward and remain very comfortable with NEP's ability to grow the 12% to 15% distributions per unit through 2026 as we reiterated. And having a tremendous amount of both financing flexibility and visibility to that growth through all the avenues that Kirk highlighted.

Got it. And then just on NextEra in general in terms of sort of the inputs we've seen, you guys have announced several earnings accretive data points since last year, right? You've got RNG acquisition hydrogen, organic transmission growth and some incremental visibility on FPL solar deployment. Do any of these investments kind of displace the CapEx you guys embedded in plan at the Analyst Day? Is there any sort of headwinds we should be thinking about? And ultimately, do you anticipate this to start being accretive to your plan from let's say 2025 to 2026 timeframe especially, as we're thinking about the six to eight.

So Shar, this is Kirk. Look, we are always – as you know capital is fungible. We're always looking at what all kinds of investment opportunities we have. We lay out – when we laid out the plan at the investor conference, that was certainly pre-IRA. The world has changed a little bit as a result of that. But fundamentally, we feel very good about executing and delivering on the adjusted EPS expectations that we laid out. We obviously are before – at the time of the Investor Day, hydrogen wasn't an economic product. Green hydrogen was not an economic product. It is today because of the IRA, and so we're running hard at it. But as Rebecca also outlined, the reality is that is probably a post-2026 realization in terms of what – how it's going to translate into benefits. So there's a lot that we're running after and a lot we're looking at. But most of this is things that we were evaluating and thinking about at the time of the investor conference or things that are going to really come to fruition post-2026 and really either part of the plans post plans but all things that are supporting ultimately the things that we laid out and feel comfortable about in terms of delivering adjusted EPS for 2026.

Terrific. Thank you guys. Appreciate it.

The next question comes from Jeremy Tonet with JPMorgan. Please go ahead.

Hi, good morning.

Hi, good morning.

Just wanted to touch base a little bit more on supply chain if you could. If you might be able to provide a bit more commentary on how flow panels stand today versus a few years back and also as well as bringing the supply chain onshore. Just wondering if you could provide a bit more color on how what time line you see that finalizing?

Sure. As we shared in our prepared remarks, we have spent a lot of time thinking about supply chain working with suppliers. It has been a very comprehensive effort. It's been looking both globally and then obviously here domestically as well. Look, there are lots of things to think through domestically. We're continuing to work through that as well. It is about trying to evaluate where in the supply chain there might be opportunities in terms of how to participate. But the way to think about that, Jeremy, is our view has always been we could be supportive through an anchor order; we could help provide support through that mechanism. That continues to be our preferred approach. And we're working with various potential partners in discussions that way, and that discussion continues to occur.

Got it. And just flow panels today, just wondering how that stacks up versus where it was a few years ago?

Yes, this is John. The flow of panels is progressing very well. We've been actively coordinating with Customs and Border Patrol, and panels are currently moving through the ports without any significant delays affecting our projects, which makes us feel positive about the situation. Our company, NextEra, benefits from a substantial capital expenditure and sophisticated global supply chain management, providing us with numerous diversified options that we are actively utilizing while also exploring new opportunities. There is significant interest in partnering directly with NextEra due to our substantial buying power, which positions us as a preferred customer. This scale enables us to negotiate favorable arrangements that enhance our competitiveness. We have initiated multiple efforts, both domestically and internationally, that will better position our business moving forward, allowing us to leverage our buying power within the supply chain effectively.

Got it. That’s helpful. I’ll leave it there. Thanks.

The next question comes from Durgesh Chopra with Evercore ISI. Please go ahead.

Hey good morning team. Thanks for taking my question. All my other questions have been asked and answered. Just quickly, I wanted to follow up on the 10-year pipeline. Maybe, can you just remind us, what are sort of the key milestones for us to watch from here on from a regulatory standpoint for you to get approvals, etc. etc.? And then, just second, would this be the spending here you mentioned post-2025. Would some of this spending investment be accretive to the current plan you have through 2026? Thank you.

It's Armando. For the duration of our settlement agreement at FPL, which extends until the end of 2025, the 10-year site plan reflects what is currently in our plans. There will be no additional amounts added to that capital expenditure. The focus will be on 2026 and beyond. Regarding approvals from the Public Service Commission, you will see that, as we provide information for our next rate case, most of the substantial generation included will be solar, along with some storage. There will be no additional capital expenditure through 2025, and most changes will be seen when we revise our expectations after 2026.

Got it. So the approval of this plan goes through the rate case process?

While the approval comes through either the rate case process, because we've got CapEx that we've invested just as general infrastructure or it will come through one of the two solar programs that we have today. So our Sombra solar program and also our SolarTogether solar program. The Sombra and SolarTogether solar program as long as we stick within the guidelines that we reached in the last settlement, those will get approved on an annual basis.

Got it. Thanks, so much. Much appreciated. Thank you, guys.

This concludes our question-and-answer session. The conference has also now concluded. Thank you for attending today's presentation. You may all now disconnect.