Westinghouse Air Brake Technologies Corporation

Good morning and welcome to the NextEra Energy, Inc. and NextEra Energy Partners LP fourth quarter 2023 earnings conference call. All participants will be in 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 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 Kristen Rose, Director of Investor Relations.

Please go ahead. Thank you, Andrea. Good morning, everyone, and thank you for joining our fourth quarter and full year 2023 Combined Financial Results Conference Call for NextEra Energy and NextEra Energy Partners. With me this morning are John Ketchum, Chairman, President, and Chief Executive Officer of NextEra Energy, Kirk 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. John will provide some opening remarks and will then turn the call over to Kirk for a review of our fourth quarter and full year results. Our executive team will then be available to answer your questions. 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.nextairenergy.com and www.nextairenergypartners.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 John.

Thanks, Kristen, and good morning. NextEra Energy had strong operational and financial performance at both FPL and Energy Resources in 2023. NextEra Energy delivered full-year adjusted earnings per share of $3.17 per up over 9% from 2022, exceeding the high end of our adjusted EPS expectations range. From solar supply chain challenges to higher inflation and interest rates, NextEra Energy navigated through a challenging environment the last two years, delivering compound annual adjusted EPS growth of roughly 11.5% since 2021. These were unprecedented events for our sector and clear headwinds for renewables, but disruption often presents opportunity. At NextEra Energy, we relied on our 25 years of renewables experience and our culture of execution to navigate this tough environment. On the strengths of our scale and competitive advantages, our world-class supply chain capabilities, customer relationships, access to and cost of capital advantages, the strength of our balance sheet, our data-driven development playbook, and our team, just to name a few, we successfully managed through the disruption. Our scale and competitive advantages served as key differentiators and allowed us to continue to deliver for our customers and extend our long track record of earnings and dividend growth. Over the past 10 years, we have delivered compound annual growth and adjusted EPS of roughly 10%, which is the highest among all top 10 power companies. Over that same period, the remaining top 10 power companies have achieved, on average, compound annual growth and adjusted EPS of roughly 2%. Notwithstanding the strong adjusted EPS results, we recognize and are disappointed by the underperformance in the share price. And as we start 2024, we remain steadfast in our continued focus on execution and creating long-term value for shareholders. We believe the disruption over the last two years has made NextEra Energy an even stronger company. Our business model is more resilient. Our development platform is even more advanced. and our supply chain is more diversified than it has ever been. Bottom line, we believe NextEra Energy is well positioned headed into 2024. And there is good reason for optimism at NextEra Energy. Although nobody can predict with certainty what 2024 will bring, inflation and interest rates have declined from their peak, and NextEra Energy has taken steps to mitigate its exposure to interest rate volatility through its interest rate hedging programs. The Commerce Department has provided the final determination around circumvention, providing solar suppliers with more certainty around the rules and expectations of importing solar equipment. New solar supply chains have been established in the U.S. and internationally, leading to lower solar panel prices, and we see the continued longer-term push towards EVs, as being incrementally positive for continued reductions in battery prices. Solar panel and battery prices have already declined by roughly 25 percent from their peak over the last 24 months heading into 2024. We have proactively procured critical electrical equipment to complete our renewable projects, securing enough transformers and breakers to cover our expected build through 2027. Due to our scale and construction partnerships, we have not experienced any labor shortages impacting project timelines. Ultimately, all these tailwinds are great for customers and we believe should drive greater renewables demand in 2024 and beyond, all on the heels of consecutive record years for new renewables originations at energy resources in 2022 and 2023 totaling over 17 gigawatts. NextEra Energy offers a unique value proposition with two strong businesses that we believe are strategically positioned with outstanding prospects for future growth. FPL, which represents more than two-thirds of our company, is the nation's largest electric utility and continues to deliver what we believe is the best customer value proposition in one of the fastest-growing states in the U.S. Energy Resources, the world's renewables leader, has differentiated itself in an industry in which scale, experience, and being well capitalized matters. At NextEra Energy, the plan is simple. Our two businesses are deploying capital in renewables and transmission for the benefit of customers, providing visible growth opportunities for shareholders. At FPL, we identify investment opportunities that drive value for customers and support Florida's growing economy while keeping bills approximately 30% lower than the national average. We focus on running the business efficiently and continue to lead the industry with the lowest non-fuel O&M per megawatt hour of any large utility in the nation. Our emphasis on modernizing FPL's generation fleet to improve efficiency and reduce fuel costs has saved customers over $15 billion since 2001. We continue this trend in 2023 by placing into service approximately 1,200 megawatts of cost-effective solar and expect to add roughly 4,800 megawatts over the current rate agreement. And by 2032, we expect to increase FPL's solar from 5% of our total generation today to roughly 35% by adding over 15,000 incremental megawatts. We are also continuing to invest in FPL's grid to make it stronger and more resilient for our customers. Almost all of FPL's transmission system has been hardened with concrete or steel towers or poles, and we continue to invest in undergrounding our distribution system to further enhance reliability and resiliency for customers. The capital plan of the current rate agreement of $32 to $34 billion extends our customer value proposition and provides clear visibility for growth through 2025. Beyond 2025, we continue to believe FPL is strategically well-positioned as Florida remains one of the fastest-growing states in the U.S., with a population growth that is expected to roughly double the national average through 2030. Florida's economy is also growing and is now the 14th largest in the world if Florida were a country. FPL is responsible for keeping the lights on for approximately $2 billion per day of Florida's GDP. These long-term growth prospects, coupled with investment opportunities in renewables and transmission and distribution infrastructure, enhance our best-in-class customer value proposition and support our belief that FPL is the highest quality rate-regulated utility in the country. Energy Resources' deep expertise in renewables and transmission serves as a key differentiator with customers. As a result of our data-driven development playbook, Energy Resources had a record year of new renewables and storage origination, adding approximately 9,000 megawatts to our backlog. Driven in part by the roughly 5,600 megawatts placed in service in 2023, Energy Resources grew adjusted earnings almost 13% versus 2022. Energy Resources continues to see strong demand and is well positioned to realize its development expectations over the four-year period ending 2026. Assuming we achieve the midpoint of the range, Energy Resources will be operating a roughly 63 gigawatt renewable portfolio by the end of 2026 that would be larger than the installed renewables capacity of all but nine countries. Energy Resources also is extending its excellent track record of optimizing our existing footprint to create additional shareholder value. To date, we have repowered six gigawatts of our existing 24 gigawatt wind operating fleet, investing roughly 50 to 80 percent of the cost of a new build and starting a new 10 years of production tax credits, resulting in attractive returns for shareholders. By 2026, energy resources wind footprint could be roughly 32 gigawatts. And with over a decade to potentially qualify for repowering, it represents a great opportunity set. We believe there are multiple opportunities to drive value from the existing footprint. Multiple wind repowers, adding solar underneath existing wind, and co-locating battery storage with existing wind and solar. and we have dedicated teams leveraging our development playbook to optimize our existing and future fleet. We can maximize existing land, permits, interconnection capacity, and operations to provide enhanced value to customers and shareholders. By 2026, energy resources could operate up to 53 gigawatts of generation with the potential to co-locate battery storage which represents a great long-term opportunity, especially considering the likely future capacity needs of customers. Throughout 2023, energy resources also continue to build what we believe is the nation's leading competitive transmission business. As growth in renewables occurs throughout the U.S., there is a growing imperative to build additional or upgrade existing transmission, 2023 was a record year for our competitive transmission business. NextEra Energy Transmission was awarded projects to construct transmission in PJM, CalISO, and SPP that would roughly double the investments made in the existing business. We anticipate deploying approximately $1.9 billion of capital through 2027 to complete these transmission projects. which we estimate could enable up to 12 gigawatts of new renewables. Beyond 2026, energy resources is strategically positioned to benefit significantly from the irreversible shift towards electrification. With renewables only comprising roughly 16 percent of the US generating mix, energy resources is just getting started. Renewable penetration is expected to double to over 30 percent by 2030, and Energy Resources is ready. We have a substantial development pipeline, including roughly 150 gigawatts of interconnection queue positions for new renewables and storage projects. We believe Energy Resources has the most comprehensive renewable energy business in the world and is better positioned than ever to capitalize on long-term growth prospects. energy resources individually have executed well, delivering value for our customers. Both businesses complement each other, push one another to be better, and together create scale and foster innovation. We have one of the sector's strongest balance sheets and constructed and placed into service roughly 6,800 megawatts of new renewables and storage projects in 2023. To put that into context, 6,800 megawatts of installed U.S. renewable generating capacity is enough on its own to rank as the fourth largest U.S. renewable energy company and the 14th largest utility. Turning to NextEra Energy Partners, we continue to focus on executing against the partnership's transition plans and delivering an LP distribution growth target of 6 percent through at least 2026. Last September, we made the tough decision to reduce the target distribution growth rate to 6 percent when NextEra Energy Partners no longer benefited from a competitive cost of capital. With a growth rate now comparable to its peers, we are focused on the partnership's cost of capital improving, which is critical for its future success. Towards that end, we are evaluating alternatives to address the remaining convertible equity portfolio financings with equity buyout obligations in 2027 and beyond. We are executing against the transition plans, and with the closing of the Texas pipeline portfolio sale, the partnership has addressed two of the three near-term convertible equity portfolio financings. The STX midstream convertible equity portfolio financing has been extinguished. and we have sufficient proceeds available to complete the NEP renewables to buyouts that are due in June 2024 and 2025. The third convertible equity portfolio financing associated with the Mead natural gas pipeline assets is expected to be addressed in 2025. Looking ahead to 2024 and beyond, NextEra Energy Partners does not expect to need an acquisition in 2024 to meet the 6% growth in LP distributions per unit target. And the partnership does not expect to require growth equity until 2027. We are executing against the growth plans and have identified approximately 985 megawatts of wind repowers through 2026, making progress against our expectations. As we turn the page on 2023 and head into 2024, we are optimistic about the renewable sector, about our opportunity set, about customer demand, and about NextEra Energy's future. Demand for renewables has never been stronger, and yet the challenges have never been more complex, making the stakes even higher for customers. Our scale and competitive advantages are enabling us to be the partner of choice with both power and commercial and industrial customers. On March 14th, we will discuss energy resources development process in greater detail at our development investor event in Juneau Beach and illustrate how our proprietary tools differentiate energy resources with customers. And then on June 11th, we will hold our NextEra Energy Investor Day in New York to discuss our long-term plans for both energy resources and FPL. Our optimism for NextEra Energy's future flows from the strength of our two world-class businesses, FPL and Energy Resources, that leverage our scale and competitive advantages to differentiate themselves as leaders. Our optimism is driven from our proven playbooks of deploying capital and renewables and transmission to create value for customers. But I am most optimistic because we have spent the last two decades building a world-class team at NextEra Energy, and it is by far our greatest competitive strength. Our team lives and breathes a culture of continuous improvement, working together to solve the tough challenges of the day. We drive innovation, relying on data analytics and automation to make better decisions, and we have developed and deployed smart, low-cost, clean energy solutions that lead our industry. Most importantly, our team remains hyper-focused on continuing our long track record of execution, serving our customers with excellence, and providing long-term value for shareholders. With that, let me turn it over to Kirk, who will review the 2023 results in more detail.