NextEra Energy, Inc.

Good morning and welcome to the NextEra Energy and NextEra Energy Partners fourth quarter and full year 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Jessica Aldridge, Director of Investor Relations. Please go ahead.

Thank you, Andrew. Good morning, everyone, and thank you for joining our fourth quarter and full year 2021 combined earnings conference call for Nextera Energy and Nextera Energy Partners. With me this morning are Jim Robo, Chairman and Chief Executive Officer of NextEra Energy, Rebecca Chiava, Executive Vice President and Chief Financial Officer of NextEra Energy, John Ketchum, 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 Eric Szilagyi, President and Chief Executive Officer of Florida Power and Light Partners. as well as Eric Szilagyi, President and Chief Executive Officer of Florida Power and Light Company. Jim will provide some opening remarks and will then turn the call, 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, in the comments made during this conference call, in the risk factors 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, NextEraEnergy.com and 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. As a reminder, Gulf Power legally merged into Florida Power & Light Company effective on January 1st, 2021. Gulf Power continued as a separate reportable segment within Florida Power & Light and NextEra Energy through 2021. serving its existing customers under separate retail rates. Throughout today's presentation, when we refer to FPL, we are referring to Florida Power and Light, excluding Gulf Power, unless otherwise noted or when using the term combined. With that, I will turn the call over to Jim.

Thanks, Jessica, and good morning, everyone. Both NextEra Energy and NextEra Energy Partners had an outstanding year in 2021 and are well-positioned to capitalize on the substantial opportunities that lie ahead. NextEra Energy's performance was strong both financially and operationally, and we executed the largest capital program in our history, investing approximately $16 billion in American energy infrastructure in 2021, which we expect will again place NextEra Energy among the top capital investors in the U.S. across all industries. Continuing our long track record of delivering value for shareholders, NextEra Energy achieved full-year adjusted earnings per share of $255 billion. up more than 10% from 2020. Over the past 10 years, we've delivered compound annual growth in adjusted EPS of approximately 9%, which is the highest among all top 10 U.S. power companies who have achieved on average compound annual growth of roughly 3% over the same period. Amid this significant growth, the company has maintained one of the strongest balance sheets and credit positions in the industry. In 2021, we delivered a total shareholder return of more than 23%, significantly outperforming the S&P 500 Utilities Index and continuing to outperform both the S&P 500 and the S&P 500 Utilities Index in terms of total shareholder return on a 3-, 5-, 10-, and 15-year basis. Over the past 15 years, we've outperformed nearly all of the other companies in the S&P 500 Utilities Index and quadrupled the average total shareholder return of the index. Over the same period, we've outperformed 80% of the companies in the S&P 500, while nearly tripling the average total shareholder return of the index. We are proud of our long-term track record of providing growth and value creation opportunities for our shareholders, and we remain intensely focused on execution and continuing to drive shareholder value over the coming years. At FPL, Net income increased nearly 11% year over year, while continuing to deliver on its commitment to making smart, long-term investments in innovative technology, clean energy, and strengthening our electric grid for the benefit of our customers. We were pleased the Florida Public Service Commission unanimously approved the settlement agreement in October, an agreement which we believe is a fair and balanced outcome in our base rate case. The 2021 settlement agreement supports continued smart capital investments, including the largest solar build-out by a utility in the U.S., while keeping FPL's typical residential bills well below the national average and among the lowest in Florida through the end of 2025. For customers in northwest Florida, typical customer bills are projected to decline over the next four years. Among the long-term infrastructure investments anticipated in the new agreement, new solar generation is expected to grow through the expanded Solar Together Community Solar Program, which is expected to more than double over the next four years, as well as through new base rate solar generation, including the nearly 1,800 megawatts to be recovered under Solar Base Rate Adjustments, or SOBRA, upon reaching commercial operations in 2024 and 2025. In total, our current solar build-out expectations are for approximately 4,800 megawatts of new solar over the term of the settlement agreement. In early 2019, FPL announced its groundbreaking goal to install 30 million solar panels in Florida by 2030. With the anticipated solar additions approved under the settlement agreement, I am pleased to announce that we now expect to reach this milestone by 2025, five years earlier than previously anticipated. Including the solar additions anticipated through 2025, this ambitious 30 by 30 initiative is expected to have generated approximately $2.5 billion in fuel cost savings for customers. and created more than 20,000 construction jobs while supporting the Florida economy with more than $700 million in property taxes over the life of the assets. During 2021, FPL successfully executed on its strategic initiatives, including placing another 671 megawatts of cost-effective solar in service, completing the first roughly 1500 megawatt phase of our solar together community solar program. Additionally, last month we commissioned the world's largest integrated solar powered battery system, the 409 megawatt Manatee Energy Storage Center, which will allow our customers to benefit from low cost solar energy even during times when the sun is not shining. FPL has also continued to provide exceptional service reliability, achieving its best ever reliability rate in 2021. And FPL was recognized for the sixth time in seven years as being the most reliable electric utility in the nation. Moreover, FPL was ranked number one in both residential and business customer satisfaction in the southern U.S. amongst large electric providers by J.D. Power in 2021. And we are completely committed to continuing to provide clean, affordable, and reliable service to our customers for many years to come. Energy Resources also had a terrific year in 2021, delivering adjusted earnings growth of 13% versus the prior year. The team also had an outstanding record year of renewables and storage origination, adding approximately 7,200 net megawatts to our backlog during the year as we continue to capitalize on the ongoing clean energy transition that is occurring at our nation's generation fleet. Our backlog additions have grown at a more than 20 percent compound annual growth rate since 2017, and we are well on our way to meeting our current development expectations for new signed contracts. With the significant additions to our backlog of signed contracts over the last year, we've now signed nearly 80 percent of the megawatts needed to realize the midpoint of our 2021 to 2024 development expectations range, with significant time remaining to sign additional power purchase agreements. Our supply chain and engineering construction teams also continue to execute in 2021, commissioning approximately 3,800 megawatts of new wind and wind repowerings, solar and storage projects. Over the past two years, Energy Resources has constructed more than 9,500 megawatts of renewables and storage projects, demonstrating the strength and resiliency of its execution expertise, even in the midst of a global pandemic and industry-wide supply chain disruptions. Finally, during 2021, NextEra Energy Transmission furthered its efforts to grow America's leading competitive transmission company and had its best year ever. During the year, the business delivered a record earnings contribution by increasing net income by nearly 20% over its previous earnings contribution record in 2020. Growth in renewables means that there is also a growing imperative to build additional transmission across the U.S. to support this transition to a low-cost, low-carbon economy fueled by renewable energy. We anticipate that NextEra energy transmission will continue to capitalize on the growing opportunity set to both deploy capital profitably as well as to enable further renewables deployment. The tremendous execution of both the major businesses in recent years, including 21, gives us great visibility to the longer-term outlook of next-door energy. Let me start with our opportunity set, which I would not trade with anyone in our industry. At Florida Power & Light, the settlement agreement allows us to focus on operating the business efficiently, reliably, and affordably for the benefit of our customers. Under the new agreement, we expect our average annual growth in regulatory capital employed to be between 8% and 9% over the four-year term through 2025. When you put it all together, low bills, best-in-class reliability, award-winning customer service, and a clean emissions profile are what help FPL provide what we believe is one of the best customer value propositions in the nation. At Energy Resources, our outlook for new renewables and storage development remains as strong as ever, and we are excited to be able to continue supporting the industry's transition away from old, inefficient forms of generation. and into clean, reliable, low-cost renewables and storage. We believe that the rapidly accelerating trend toward electrification and decarbonization of a broad range of sectors across the U.S. economy has significantly increased the total addressable market for new renewables and storage even beyond our expectations just a few years ago and is now measured in trillions of dollars of capital investment opportunity in the coming decades. We believe that Energy Resources is uniquely positioned to advance its market leadership position in this environment. We have been in the renewables business for more than 30 years and have the experience, resources, balance sheet, talent, and advanced data capabilities necessary to execute complex renewable energy generation and storage integration projects at scale. We believe we have an excellent opportunity set for continued growth ahead of us at Energy Resources, and we will further discuss our long-term plans for deploying renewables at both Energy Resources and Florida Power & Light and the associated impact to our overall emissions profile and future goals at our upcoming investor conference, which we plan to hold on June 14th in New York City. With the anticipated continued strength of the investment opportunities at both Florida Power & Light NextEra Energy Resources, I am pleased to announce that we are increasing our adjusted earnings per share expectations for 2022 and 2023 and introducing our expectations for 2024 and 2025. For 2022, we are now expecting our adjusted earnings per share to be in a range of 275 to 285, up from our prior range of 255 to 275. For years 23 through 25, we expect to grow our adjusted earnings per share by roughly 6% to 8% per year off the expected 2022 adjusted earnings per share. For 2023, this translates to a new range of 293 to 308, up from our prior range of 277 to 297. Our new adjusted earnings per share expectations for 2024 are 313 to 333, and for 2025 are 335 to 360. As always, our expectations assume our usual caveats, including normal weather and operating conditions. In summary, we continue to remain as enthusiastic as ever about NextEra Energy's long-term growth prospects. Based on the strength and resiliency of our underlying businesses, We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted earnings per share expectation ranges in each of 2022, 23, 24, and 2025, while at the same time maintaining our strong credit ratings. Let me now turn to NextEra Energy Partners, which delivered a total unit holder return of approximately 30% in 2021. bringing its two-year total unit hold of return up to more than 72% and further advancing its history of value creation since the IPO in 2014. For 2021, the NextEra Energy Partners grew its LP distributions per unit by 15% year over year and has now grown its distributions per unit by nearly 280% since the IPO. NextEra Energy Partners achieved its distribution growth objectives while maintaining a trailing 12-month payout ratio of approximately 80% as of year-end 2021. NextEra Energy Partners had a terrific year of execution in 21, and we are increasing our year-end 2021 financial expectations to reflect this better-than-expected growth execution. NextEra Energy Partners delivered year end run rate adjusted EBITDA and cash available for distribution in excess of our prior expectations, including delivering more than 13% year over year growth and run rate cash available for distribution at the midpoints. This execution is supported by NextEra Energy Partners outstanding portfolio of clean energy assets, which was further diversified in 2021. During the year, NextEra Energy Partners acquired interests in approximately 1,900 net megawatts of long-term contracted renewables and storage assets from Energy Resources. In addition, during the year, NextEra Energy Partners successfully completed two acquisitions of renewable energy assets from third parties, adding nearly 500 megawatts of operating wind projects to its portfolio. These transactions demonstrate NextEra Energy's ability to leverage the operational expertise of NextEra Energy Resources low-cost sources of capital, and our strong industry relationships to be successful in third-party acquisitions. The combination of a growing portfolio in energy resources and a growing set of opportunities to acquire renewables from third parties, as well as significant organic growth opportunities, further supports the partnership's long-term growth visibility. NextEra Energy Partners also continued to demonstrate its ability to access attractive sources of capital to finance its growth investments. including executing on the lowest cost convertible equity portfolio financing in its history. The roughly $820 million convertible equity portfolio financing carries a low implied cash coupon to the investor and partially funded NextEra Energy Partners acquisition of a 50% interest in a renewables portfolio consisting of approximately 2,520 megawatts of newly constructed or in-construction renewables projects, and approximately 115 megawatts of integrated battery storage. NextEra Energy Partners was able to demonstrate the benefits to LP unit holders of the convertible equity portfolio financing structure during the fourth quarter when the partnership exercised its right to purchase 100% of the outstanding minority equity interests in the portfolio of wind and solar assets, supporting its 2018 convertible equity portfolio financing. Relative to issuing the same amount of common equity in 2018 to fund our growth needs, this financing allowed us to reduce unit issuance by more than 50% and save more than $140 million, or roughly 75%, in nominal cash costs while retaining the more than 80% increase in the NEP unit price over the last three years. NextEra Energy Partners public float has increased approximately 50% since 2019. We believe our strategy of using low-cost convertible equity products to efficiently layer in common equity over time has created significant value for existing LP unit holders. I continue to believe that the combination of NextEra Energy's partners' clean energy portfolio, growth visibility, and financing flexibility offers LP unit holders a uniquely attractive investor value proposition. As with NextEra Energy, we remain intensely focused on continuing to execute and deliver that unit holder value over the coming years. Finally, I'd like to comment on some important organizational changes that we announced this morning. These changes are part of a long-term succession process undertaken by the board and me over the better part of the last six years. Effective March 1st, John Ketchum will price me as president and CEO of NextEra Energy. Rebecca will succeed John as president and CEO of NextEra Energy Resources. Kirk Cruz, currently vice president business management for NextEra Energy Resources, will succeed Rebecca as executive vice president and chief financial officer of NextEra Energy. John, Rebecca, and Kirk will also be appointed to the respective roles at NextEra Energy Partners. In addition, Eric Szilagyi, President and Chief Executive Officer of Florida Power & Light Company, has been named Chairman and Chief Executive Officer of Florida Power & Light. It has been an honor and a privilege to serve as CEO for nearly 10 years. I am as excited as I have ever been about the future prospects of NextEra Energy and NextEra Energy Partners. A big part of a CEO's legacy is the new leader in the next generation leadership team that follows. And I couldn't be more thrilled about turning over the CEO role of this great company to John. I know he will be as focused on creating value for you, our owners, as I have been over the last two decades. John has been an incredible partner to me and a senior leader in this company for more than 19 years. And I can think of no better person to succeed me as CEO. John's breadth of experience across all aspects of our company, including commercial, operational, financial, and legal, as well as his significant leadership capabilities and vision, positioned him exceptionally well to lead NextEra Energy to even greater heights in the coming years. I also want to congratulate Rebecca, Eric, and Kirk on their new roles. One of the defining characteristics of this company over the last 30 years has been the quality and strength of its leadership team. and I'm very proud of and excited for the team that will lead this company into the future. Most importantly, I want to thank my team and all our employees for all that they have done. Our team, the best in the business, has built this amazing company, and I can't thank them enough. As the announcement mentioned, I'm going to remain as executive chairman for a transition period to support John in his new role. I will now turn the call over to John, who would like to make some remarks.