NextEra Energy, Inc.

And welcome to the Nextra Energy and Nextra Energy Partners first quarter 2023 earnings call. All the 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. 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 Christian Rose, Director of Investor Relations. Please go ahead.

Thank you, Vishnavi. Good morning, 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 Kruse, Executive Vice President and Chief Financial Officer of NextEra Energy, Rebecca Chiava, 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 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 U.S. 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. And 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 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 Nexera 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, and that's after doing it for over a decade. 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 in 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 53 cents per share, an increase of 9 cents 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 $1.077 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 in 2022 alone. The Commission 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 in 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 per customer. 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 continues to average between zero and approximately negative half a percent per year. Energy Resources report first quarter 2023 gap earnings of approximately $1.440 billion, or 72 cents per share. Adjusted earnings for the first quarter were $732 million, or 36 cents per share, up 4 cents versus the prior year comparable period. Contributions from new investments increased 7 cents 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 margin in our customer-facing business and compared to a relatively weaker contribution in the prior year comparable quarters. 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 strong renewables 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 a year and a half 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 year and a half, 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 U.S. as suppliers continue to provide the requested traceability documentation to U.S. 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 and rapidly expanding renewable fuel markets. 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 regulations, 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 sending a letter to the Secretaries of Energy and 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 U.S. 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 approximately $400 million in transmission and substation upgrades for Nexera 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 84 cents per share, respectively. Adjusted earnings for the corporate and other segment decreased results by 3 cents 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 metrics, 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 Nexera 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. And 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 will 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 for 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 Nexera Energy Partners. and 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 standalone storage ITC. Finally, there are significant acquisition opportunities with renewable portfolios continuously being brought to market. Terra Energy Partners also has numerous ways it can finance its growth, and we believe it can do so efficiently, given its ample liquidity and access to capital. At the end of the first quarter, Next 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, Nexergy 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 unit holders. For the balance of the year, buyouts are now expected to be limited to the remaining 50% of the STX midstream convertible equity portfolio financing and 15% of the NEP Renewables II 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 are 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 84.25 cents 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 and average customer credit rating of BBB at S&P and BAA2 at Moody's Investors Service. NextEra Energy Partners expects to acquire the portfolio for approximately $708 million subject to closing adjustment 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, G 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 ASTIS 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 31st, 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 NexRNG partners can be found in the appendix of today's presentation. NextErinji Partners will remain opportunistic pursuing acquisitions in 2023, and with the closing of the transaction announced today, NextErinji 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, NextErinji 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 PAYGO payments. Looking forward in the second half of 2023 we expect strong double digit growth and adjusted EBITDA and cash available for distribution to support NextEra Energy Partners LP 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 contributions 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, and in fact, even at the current trading yield, energy resources portfolio alone is just one way Nexera 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 non-power sector and leveraging its competitive advantages to capitalize on low-cost renewals and new emerging technologies like green hydrogen. At Nexer and G 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. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Steve Fleshman with Wolf Research. Please go ahead.

Thank you. Good morning. First, a couple questions on the NEP drop. I think you're looking at the CAFTI yield as the midpoint of that CAFTI range over the $708 million, which I guess would be about 9.5%. If you were to over time exclude the project debt and exclude the the project debt from the base and exclude the payments of the project debt, how does that compare to the nine and a half yield?

Good morning, Steve. Thank you for the question. You're right. The math you're doing is correct. You're taking on an unlevered basis. it is a 9 1⁄2 CAFTI yield. So at the midpoint of the CAFTI that we provided is a 9 1⁄2 CAFTI yield. And the reason for that, Steve, is because the debt that is included is going to be paid off in about three years. And so we felt like that was the appropriate way to present the CAFTI yield if you included the debt, it would actually be a much higher CAFI yield. It would be a 10.4 CAFI yield. But as you're probably aware, we've typically provided that figure as an unlevered number.

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

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

Okay. And, Kirk, I think you said something about the growth through 26 could just come from the – I don't know if that was from the NEP portfolio or I guess maybe from the NEO portfolio. Could you just clarify what you said there? Sure.

Yeah, yeah, happy to do that, Steve. So, look, as I shared in our prepared remarks, we have, you know, NextEra Energy Partners, the growth visibility that NextEra Energy Partners has has never been better. And when you think about the visibility that has been enhanced really with the passage of the IRA and just take it through the three steps that we go through, the three ways that NextEra Energy Partners can grow, and energy resources, and you look at the existing portfolio that exists today at energy resources, and then you combine that with the current backlog, which today is 20.4 gigawatts, and then you combine that with the development expectations as we disclose, that's 58 gigawatts. And then you also consider the organic growth opportunities that NextEra NG Partners has. And the passage of the IRA has really unlocked that optionality that exists in the portfolio at NextEra NG Partners. And so we now have tremendous opportunity to grow organically through repowerings. And as we said, we're pursuing 1.3 gigawatts of repowerings now. And we also have the ability to look at co-locating storage within the footprint as well. And then obviously, as you know, Steve, there's just a tremendous number of renewable portfolios coming to the market. And And Next Energy Partners has had a history of being able to execute on those opportunities, those third-party opportunities because of many of the advantages that we have in terms of being able to operate and cost the capital advantages. So Next Energy Partners has tremendous, you know, growth visibilities. But with respect to your question, the statement we made is when we look at the ability to achieve the 12% to 15% LP distribution growth, We believe we can achieve that just at looking at energy resources portfolio alone. And that's based at the current trading yield as well. And includes our current financing plan that assumes the buyout of all the convertible equity portfolio financing as well.

Okay. That's helpful. I'm sure others will have questions on that topic. But One other thing, I guess, just on the overall renewables development environment, maybe, Rebecca, you could just talk to what the – you know, we've now seen, I think, some stabilization in a lot of the pressures last year, but we've also seen lower gas prices. Just when you look at the overall environment, could you give us some kind of color of what you're seeing and conviction on hitting the development targets that you have out there or or maybe hopefully better. Thanks.

Thanks, Eva. Good morning. So we continue to see a very strong renewables development environment, and I think the two gigawatts that we added to the backlog is a great sign of that, and it's a mix of wind, solar, and battery storage in that portfolio. And the conversations that we continue to have both with customers in the power sector as well as customers outside of the power sector remain quite robust. And if anything, I'm concerned about whether or not we have, we and everybody else have enough renewables in order to support the demand in short. And of course, longer term, we are planning accordingly to make sure that we have all the projects available for our customers. I'd say if there was one thing that I've seen change over the last year in our discussions with our customers, it's really an increased emphasis on partners that have the ability to execute. It's not lost on anybody inside the power sector or outside the power sector that the demand for renewables is really strong. And there are challenges to building projects successfully and ultimately operating them long-term for the benefit of customers. And our conversations with customers now reflect that, I think, appropriately. And we've had some terrific engagements with customers across the board about making sure that we are building what they need for the long term and their needs are quite significant. The other thing I would highlight that's been a very significant development over the last year and really in the last nine months since the passage of the Inflation Reduction Act is really around hydrogen. And I know we've talked about it a lot, and today we wanted to give you some additional color on what we're seeing. And I think that $20 billion of pipeline projects with partners and customers that we're now working on, and honestly, that's growing by day, and requires just for that $20 billion worth of projects, over 15 gigawatts of new renewables to be built to support them. This is unlike any time that we've seen in our industry and, of course, in our company's history of being able to have significant visibility, tremendous growth, and tremendous innovation across the board. We couldn't be more excited about what's ahead. Okay.

Thank you.

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

Hey, good morning, team. Thank you for the time. Nice to be down 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 discussion on that front.

Thanks, Julian. It's Rebecca. I'll take that. So we continue to feel – and I didn't directly answer Steve's question, so I appreciate you giving me another shot at it. I feel very good about our development and expectations across the board. Obviously, we're now – we're at the low end of the range for 23 and 24 – and continue to feel very well positioned to meet the longer term expectations across the four year period. And with the comments I just made and Kirk made on the call, we couldn't be more excited about what's beyond the 26 timeframe. I do think the hydrogen opportunity is probably more, not probably, it is definitively more past 2026 than in 26 for a lot of practical reasons, not least of which is needing clarity on the Treasury guidance, which of course affects the customer discussions that we're having today. It also affects the way manufacturers are committing to their ramp-up of their capabilities to produce electrolyzers in particular. And of course, as that clarity comes to fruition, and hopefully in particular we realize the annual matching guidance for the hydrogen production tax credit, all of that will start to accelerate. And then on top of that, we continue to see tremendous innovation across the clean tech space. Just over the last two years, I was looking at the numbers from Bloomberg New Energy Finance, and it's $100 billion invested in clean tech across the venture capital space. So just tremendously exciting innovations that we're seeing, and I think will really make a huge difference in the latter part of this decade.

Excellent. Thank you. And just quickly, going back to Neff quickly, how do you think about using ATM to buy out the remaining Cephas as they come due? Further, should we assume issuing new Cephas on a rolling basis as credit facilities are refinanced? Right again, obviously right now this is sort of 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, so Julian, I'll try to work off all those questions and team will make sure I get to them all. So the first question was around the use of the ATM. So look, as we shared in the prepared remarks, we have the flexibility to be opportunistic to use to deliver to the investor either directly units or to use the ATM on the buyouts. And so you should expect us to use that flexibility and to be opportunistic around those options. And so if we go to the ATM, there's some value to going to the ATM at times to to deliver, and there's also, there'll be times where it's just beneficial to deliver the units. So we have both those tools and we can use them. In terms of using in the future, as we share today, the CPFs have provided benefits for unit holders. And when you compare it to the alternative, which is doing an underwritten block equity deal, when you compare those two, as we presented on the slide, it has saved unit holders considerably. more than 16 million units. And when you compare those two, I think that slide does a really nice job laying out the benefits. And so as we've always done, we will look at what's the best financing option when it's time to finance an acquisition. And we look at all the different financing tools that we have. And as we shared today, When we build our financing plan and when we think about delivering on our LP distribution growths, we build a financing plan into those financing expectations. And that includes the conversion of the outstanding units. And certainly if we're going to use a new CPIF, we will build that into the financing plan and what that means in terms of being able to continue to deliver on the expectations. And I believe your third question was around what are the other – is there going to be something around an IDR holiday or something like that? Look, as I shared in responding to Steve's comment, we have tremendous growth opportunities and tremendous growth visibility at NextEra Energy Partners. We have a lot of flexibility in terms of being able to finance that growth. The acquisition that we announced today I think is a really strong indication of how we can acquire a very attractive set of assets for unit holders. And so we feel very good about being able to – acquire assets and support growth. We're focused on being able to tap into that growth visibility and deliver to unit holders that way.

Thank you, guys. This is John. Let me just add on a little bit about the ATM and the ability to issue shares directly to SEPF investors. You know, our first preference, I think, would be to issue shares directly to SEPF investors. This was a situation, you know, where we were able to use the ATM for the first 50% of the STX buyout very opportunistically. And we could do it basically at a zero discount. And it made a lot of sense to be able to do it that way. It's great to have the flexibility when you have opportunities like that that are presented by the ATM to be able to execute on them. So it's a nice tool to have in the toolkit. But again, we have ultimate flexibility in terms of if opportunities present themselves that are very attractive under the ATM, we can explore those opportunities. But again, we always have the chance to just give the shares directly to the CEPF holder. We're always going to do whatever is most efficient for uniholders. You know, we had a slide in the deck today that I think, you know, demonstrates the value of the CEPF, you know, the 54% savings on the BlackRock conversion back in 2018. 18, roughly the 65, 66% savings and the 50% STX buyout that we've accomplished so far today. But at NEP, right now, we're very focused on execution for the things that Kirk has already gone through. We've got great growth visibility, attractive acquisition today at a 9.5% CAFTA yield, and we have a lot of ways to finance the business going forward. There's never been more capital chasing renewables than there is today. There are billions and billions and billions of dollars sitting on the sidelines waiting to find a home around renewable assets. So feel very good about the way NEP is positioned. NEP is also very important in NEI. It's a great way to recycle capital, provides tax optimization benefits. We continue to get distributions. from assets that we dropped into NEP. So the relationship between the two companies is very strong, has been very successful for both. We've got a lot of levers. NEP is very well positioned. Thank you, guys. Thanks, John.

The next question comes from Char Poreza 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 CAFTI 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 CPF conversions? So I guess I'm kind of asking a question on accretive economics versus the cost of capital there.

Char, I think the answer very simply is yes. We think there are tremendously attractive acquisitions for NEP. And as John just highlighted, energy resources often finds itself in a position of wanting to recycle capital. So there's a lot of synergy in that. And I think we will always continue to focus on current market conditions when we're thinking about divestitures from a near 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've iterated, 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 and in terms of sort of the inputs we've seen, you guys have announced several earnings accreted data points since last year, right? You've got the R&G 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 your plan from, you know, let's say, twenty five to twenty six time frame, especially as we're thinking about the six to eight?

So so so sure is Kirk. Look, we we we are we are always, as you know, capital is it's fungible. We're always looking at what all kinds of investment opportunities we have. 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, you know, 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 how it's going to translate into benefits. 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, you know, really either, you know, part of the plans, post-plans, but all things that are, you know, supporting ultimately the things that we, you know, we laid out and feel comfortable about in terms of delivering adjusted EPS for, you know, 26. Terrific.

Thank you, guys. Appreciate it.

The next question comes from Jeremy Tonnet with JP Morgan. Please go ahead.

Hi, good morning. Hi, good morning. I just wanted to touch base a little bit more on supply chain, if we 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 little bit more color on what timeline you see that finalizing.

Sure. As we shared in our prepared remarks, we've 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 is 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 you know our view has always been we could be supportive through an anchor order We could help provide You know support through through that mechanism that continues to be our you know preferred approach and We're working with various, you know potential you know, potential partners in discussions that way. And that's, you know, that's the continued, you know, those discussions continue to, you know, continue to occur.

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

Yeah, this is John. So the flow of panels is going very well. As Kirk said, we've been active with Customs Border Patrol, and panels are now flowing through the ports. Really don't see any material delays to any of our projects, so feel good about that. And as Kirk said, I mean, we're an active – the great thing about – A company like Nextera with the capital spend that we have and the sophistication that we have around running a global supply chain, we have a lot of options, a lot of options, a diversified set of options globally. And we're exercising those options and we're exploring new opportunities as well. Obviously, there's a lot of interest in working directly with Nextera given the amount of buying power that we have. We will always be the preferred partner the preferred customer for each of these suppliers, just given the scale at which we purchase. And that allows us to drive attractive arrangements, which we think will really help make the business even more competitive going forward. And so we have launched a number of those efforts, both domestically and looking at some other diversification opportunities globally that will even better position the business than it's ever been before going forward to really capitalize on the competitive advantage we have in terms of the buying power around the supply chain. 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 answered. Just quickly wanted to follow up on the 10-year site plan. 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, et cetera, et cetera? 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.

So it's Armando. The way to think about it is for the rest of the time under the settlement agreement that we have at FPL, so through the end of 2025, what you see in the 10-year site plan is what we have in our plan, right? There's no additional amounts that will be added to that capex. So it's really about 26 moving forward in terms of approval at the Public Service Commission. You'll see that as we provide the information for our next rate case. Most of that, well all of that, all of the big generation in there is solar and there's also some storage in there. So there's no additional capex through 2025 and most of that you will see when we update our expectations at some point beyond 26. Got it.

So the approval, Armando, thank you for that. I appreciate it. The approval of this plan comes through the rate case process?

Well, 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 SOBRA solar program and also our Solar Together solar program. The SOBRA and Solar Together 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.

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.