Amanda Finnis - Director Investor Relations John W. Ketchum - Chief Financial Officer & Executive VP-Finance James L. Robo - Chairman, President & Chief Executive Officer Armando Pimentel - President and Chief Executive Officer, NextEra Energy Resources, LLC.

Julien Dumoulin-Smith - UBS Securities LLC Stephen Calder Byrd - Morgan Stanley & Co. LLC Greg Gordon - Evercore ISI Abe C. Azar - Deutsche Bank Securities, Inc. Matt Tucker - KeyBanc Capital Markets, Inc..

Good day, everyone, and welcome to the NextEra Energy and NextEra Energy Partners Conference Call. Today's conference is being recorded. At this time for opening remarks, I would like to turn the call over to Amanda Finnis. Please go ahead..

Thank you, Priscilla. Good morning, everyone, and thank you for joining our first quarter of 2016 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; John Ketchum, Executive Vice President and Chief Financial Officer of NextEra Energy; Armando Pimentel, President and Chief Executive Officer of NextEra Energy Resources; and Mark Hickson, Senior Vice President of NextEra Energy, all of whom are also officers of NextEra Energy Partners; as well as Eric Silagy, President and Chief Executive Officer of Florida Power & Light Company.

John 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, in the comments made during this conference call, in the risk factor 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 website, 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 certain non-GAAP measures to the closest GAAP financial measure. With that, I will turn the call over to John..

Thank you, Amanda, and good morning, everyone. NextEra Energy and NextEra Energy Partners are off to a strong start to 2016 and they made excellent progress against the core focus areas that we discussed on the last call.

NextEra Energy's first quarter adjusted earnings per share grew approximately 10% and the company continued to deliver significant growth in cash flow from operations against the prior year comparable quarter, reflecting strong performance of both Florida Power & Light and Energy Resources.

NextEra Energy partners grew per unit distributions by 55% versus the prior year comparable period and continued to add to the solid run rate with which it entered the year by successfully acquiring two new wind projects.

At Florida Power & Light growth was primarily driven by continued investment in the business to further advance our long term focus on delivering outstanding customer value.

Our major capital initiatives remain on track and I am pleased to report that the New Port Everglades Next Generation Clean Energy Center entered service on April 1 on budget and two months ahead of schedule. In addition, construction began on FPL's three 74.5 megawatt utility scale solar PV projects.

As a reminder, these projects leverage existing infrastructure in prior development work that cost effectively add more solar to our system and upon expected delivery by the end of the year will roughly triple FPL's solar capacity.

Not only will these projects help to further diversify FPL's fuel mix, but they also demonstrate FPL's commitment to providing customers low cost and reliable clean energy solutions.

Due in part to our efforts to modernize our existing generation at the end of the first quarter, we were pleased to deliver FPL's fourth rate decrease in the past 16 months. On March 15, we filed our formal request for rate relief beginning in January 2017 following the expiration of our current settlement agreement.

Our 2017 to 2020 base rate proposal is largely consistent with what we indicated in the test year letter.

Under this proposal, combined with current projections for fuel and other costs, FPL estimates its typical residential bill in 2020 will still be lower than it was in 2006 and will remain among the lowest in the state and nation based on current bill comparisons.

At Energy Resources contributions from continued growth in our contracted renewables portfolio and investments in natural gas pipelines grow strong financial results for the quarter. Since the last call, the team signed additional PPAs for additional for approximately 250 megawatts of U.S.

wind for post 2016 delivery and closed on an acquisition of a 100 megawatt wind facility located in New Mexico that began operations in 2009.

We continue to believe that the fundamentals for the North American renewables business have never been stronger, and I will provide an update on our latest expectations for a long-term contracted renewables development program later in the call.

In addition, earlier this month, we increased our participation in the Sabal Trail natural gas pipeline project through the incremental purchase of a 9.5% equity interest from Spectra Energy, bringing our total ownership share from 33% to 42.5%.

At NextEra Energy Partners, we continue to believe that a strong sponsor with a highly visible runway for future growth is a core driver of the NEP value proposition. During the quarter, NEP completed the acquisition of the Seiling I and II wind projects from Energy Resources, totaling approximately 300 megawatts.

Despite challenging capital market conditions, the full block of limited partnership units to be issued in connection with the acquisition was purchased by the underwriter at the time of announcement. The overallotment option was also subsequently exercised in full.

In addition to NEP's success in accessing the equity markets to continue to grow its renewables generation portfolio, first quarter operating performance was excellent, and cash available for distribution was slightly better than our expectations.

The NEP Board declared a quarterly distribution of 31.875 cents per common unit, or $1.275 per common unit on an annualized basis, up approximately 55% over the prior year. At this early point in the year, we're very pleased with our progress of both NextEra Energy and NextEra Energy Partners. Now let's look at the results for FPL.

For the first quarter of 2016, FPL reported net income of $393 million or $0.85 per share. Earnings per share increased $0.05 or approximately 6% year-over-year. The principal driver of FPL's earnings growth was continued investment in the business. Average regulatory capital employed grew roughly 8.6% over the same quarter last year.

During the quarter, we invested roughly $1.2 billion of the approximately $4.1 billion to $4.3 billion of capital expenditures that we expect for the full year. Our reported ROE for regulatory purposes will be approximately 11.5% for the 12 months ending March 2016.

As a reminder, under the current rate agreement we record reserve amortization entries to achieve a pre-determined regulatory ROE for each trailing 12 month period.

We entered 2016 with a reserve amortization balance of $263 million, and we utilized $176 million during the first quarter, in order to achieve the regulatory ROE of 11.5% that I just mentioned. This was slightly better than our expectations, leaving us with the balance of $87 million, which can be utilized in the remainder of 2016.

Since the start of our current rate agreement in 2013, we have utilized the larger proportion of reserve amortization during the first half of the year due to the pattern of our underlying revenues and expenses and we expect this year to be no different.

We continued to expect to utilize the balance of the reserve amortization this year to offset growing revenue requirements due to increased investments. We expect the reserve amortization balance along with our current sales, CapEx and O&M expectations to support regulatory ROE in the upper half of the allowed band of 9.5% to 11.5% in 2016.

As always, our expectations assume among other things normal weather and operating conditions. The Florida economy remained solid. A focus on economic development and an overall improvement in the business climate continued to encourage business expansion and additional hiring.

Florida's seasonally adjusted unemployment rate drop to an eight-year low of 4.9% in March down 0.7 percentage points from a year earlier and below the national rate of 5.0%. Over the same time period, the number of jobs increased 2.9% and over 1 million jobs have now been added in the state since December 2010.

As an indicator of new construction, new building permits have shown strong growth and the most recent reading of the Case-Shiller Index for South Florida shows home prices up 6.0% from the prior year. Overall, Florida's economy continues to grow, and the latest readings of Florida's consumer confidence remain near post recession highs.

During the first quarter, FPL's average number of customers increased by approximately 64,000 customers from the comparable prior year quarter, which had a favorable impact on sales of 1.3%. However, customer growth was more than offset by a 1.4% decline in sales due to mild weather during the quarter.

Also, compared to the same quarter last year, underlying usage per customer declined 0.4% on a weather-normalized basis. Looking ahead, we continue to expect year-over-year weather-normalized usage per customer to be between flat and negative 0.5% per year.

After accounting for these effects and the impact of a leap year day in 2016, first quarter retail sales increased 0.4% year-over-year. The number of inactive accounts reached its lowest levels in more than a decade and stronger growth in new service accounts during the quarter reflected healthy levels of construction.

As I mentioned earlier, on March 15, we submitted testimony and detailed supporting information for FPL's 2016 base rate proceeding. The overall proposal for our 2017 through 2020 base rate plan is substantially consistent with the test year letter filed in January.

We are requesting a base rate adjustment of approximately $866 million starting January 2017, $262 million starting January 2018 and $209 million upon commissioning of the Okeechobee Clean Energy Center in mid-2019, with no base rate adjustment in 2020.

We are proud to offer customer service that ranks among the cleanest and most reliable in the country with typical residential bills among the lowest in the nation and 15% lower than 2006.

The four-year base rate plan has been designed to support continued investments in long-term infrastructure and advanced technology which improves reliability and helps keep customer bills low.

With the proposed base rate adjustments and current projections for fuel and other costs, we believe that FPL's typical residential bill will grow at about 2.8% per year from January 2016 through the end of 2020, which is about the same as the expected rate of inflation.

The Florida Public Service Commission has established a definitive schedule for this proceeding, beginning with quality of service hearings in June, rebuttal testimony from interveners and staff in July, rebutting testimony from FPL in August, and technical hearings in late August and early September.

The proceedings would conclude in the fourth quarter with the staff recommendation and commission rulings on revenue requirements and rates.

The nearly 9,000 employees of FPL have worked hard and thoughtfully for many years following a consistent strategy that has led to FPL's current combination of low bills, high reliability and excellent customer service.

The 2013 settlement agreement has benefited customers by eliminating the need for a general base rate increase for four years, while at the same time providing stability and certainty around the level of customer bills.

We look forward to the opportunity to present our case to the commission this summer and our focus will be to pursue a balanced outcome that supports continued execution of our successful strategy for customers. As always, we are open to the possibility of resolving our rate request through a fair settlement agreement.

Let me now turn to Energy Resources, which reported first quarter 2016 GAAP earnings of $224 million or $0.48 per share. Adjusted earnings for the first quarter were $306 million or $0.66 per share, while adjusted earnings per share increased approximately 14% year-over-year.

As a reminder, our reporting for Energy Resources now includes the results of our natural gas pipeline projects, formerly reported in the corporate and other segment.

While our first quarter 2015 results have been adjusted accordingly for comparison purposes, the effects are minimal due to the prior immaterial contributions from these projects during early stages of development. Energy Resources' adjusted earnings per share contribution increased $0.08 from the prior year comparable quarter.

New investments added $0.14 per share, including $0.10 from continued growth in our contractor renewables portfolio. These results reflect approximately 1,840 megawatts of new renewables projects placed into service during or after the first quarter of 2015.

New investments in natural gas pipelines added $0.04 per share, reflecting the net addition of the Texas pipelines acquired by NEP, as well as continued development work on the Florida pipelines and Mountain Valley project.

Wind resource was 98% of the long-term average, versus 87% in the first quarter of 2015, and this favorable comparison was the principal driver of increased contributions from existing assets of $0.04 per share.

Partially offsetting these results were lower contributions from our customer supply and trading business, increased corporate expenses primarily related to growth in the business, and the impact of share dilution. Additional details are shown on the accompanying slide.

At Energy Resources, we continue to believe we are well positioned to capitalize on one of the best environments for renewables development in recent history. Over the last decade, we have invested roughly $23 billion in wind and solar generation.

Last year alone, the team signed contracts for a total of approximately 2,100 megawatts of new renewables projects, making 2015 our second best year ever for renewables origination performance.

With these additions, along with the 100 megawatt acquisition since the last call that I mentioned earlier, our total 2015 to 2016 renewables development program is over 4,000 megawatts.

This result is roughly 500 megawatts above the midpoint of the range for these years that we discussed at our Investor Conference last March, making 2015 and 2016 the most successful two-year period for renewables development in our history.

Energy Resources continues to benefit from growing demand for renewables and has built what we believe, is the largest and highest quality renewables development pipeline in the space. Driving that growth is a number of favorable trends. First, Congress at the end of last year provided increased certainty of U.S.

Federal Tax incentives for renewables through the extension of the 2014 Wind PTC and the 2016 Solar ITC programs over a five-year 'phase-down' period.

This form of policy support has been very important over the last decade, and with the extensions, we believe that renewables are well positioned to support a higher base opportunity set, than would otherwise have been the case, not only through 2018, but into the next decade.

Together with the extension, we expect that the IRS will provide start of construction guidance for both wind and solar.

For wind, the guidance is expected to be consistent with and perhaps more constructive than what has previously been in place, which would support an ability to continue to offer very attractive pricing to our customers into the next decade.

The start of construction guidance for wind is likely to be released by the IRS over the next few months, while solar guidance is expected to follow later on, given that the COD deadline for the first step of the phase-down of the solar ITC is not scheduled to occur until January 1, 2020.

In turn, we expect the added planning stability provided by tax incentives to serve as a bridge to further equipment cost declines and efficiency improvements that will enable renewables to compete on a levelized cost of energy basis with gas-fired technology when tax incentives are phased-down.

We have seen significant wind turbine efficiency improvements over the last several years and more are expected over the next few years. Likewise solar panel costs have fallen steadily, while efficiency has also improved substantially, with even more advances expected over the next few years.

Solar balance of system costs are also expected to experience significant reductions during the same period. Both wind and solar are well-positioned to compete head-to-head with gas-fired generation technologies now and as we head into the next decade.

Lower natural gas prices and environmental regulation are expected to continue to pressure existing coal facilities and renewables are well situated as the shift away from coal continues.

Not only do wind and solar continue to benefit from cost and efficiency improvements and the economic support of tax incentives, but renewables also help customers meet both state and potential federal environmental compliance obligations.

In addition, state level renewable portfolio standards are now in-place in 29 states and discussions of increase in the renewable requirements under these standards are continuing in certain of these states.

Despite the stay of the Clean Power Plan by the United States Supreme Court, we continue to believe that the regulatory trend in North America will continue to be towards supporting more renewable energy.

We expect resource planning activities for increasingly stringent environmental rules and potential carbon emissions regulations, whether at the state or federal level, will help further support demand.

For these reasons, we expect some of our potential customers to be motivated not only by the economics in new renewables, but also by the consideration of current or potential future environmental compliance obligations such as the Clean Power Plan. Due to the combination of these trends favoring the development of new renewables, the U.S.

wind and solar market is expected to grow significantly into the next decade. We will continue to leverage our core strengths in solar and wind and invest in related areas such as energy storage in order to offer our customers innovative, low-cost and high quality projects that we expect to further enhance our competitive position.

We believe that the capabilities of our development organization, together with our purchasing power, scale in operations, strong access to capital and cost of capital advantage places in an excellent strategic position to capture even more opportunities going forward.

In addition, we expect our development program to be further enhanced by an ability to attract new, non-traditional customers particularly in the form of commercial and industrial demand as improving renewable economics are increasingly aligned with corporate objectives to procure power from clean generation resources.

Based on everything we see now, we expect to bring into service roughly 2,400 megawatts to 3,800 megawatts of new U.S. wind projects over the course of the 2017 to 2018 timeframe.

The low end of that range matches what we expect to bring into service for 2015 to 2016, one of our most successful origination periods to date, and is roughly three times what we indicated at our March 2015 Investor Conference. On the U.S.

solar side, the ITC extension may cause some customers to wait to sign contracts since the 30% ITC is in place for 2019. As such, we believe that a range of 400 to 1,300 megawatts is reasonable for the 2017 to 2018 timeframe.

In part, this range reflects an expectation to continue to build upon our recent successes, as we've been positively surprised by the amount of demand we've seen for 2016 build.

As a reminder, our 2015 to 2016 solar development program consists of over 1,300 megawatts, reflecting outstanding origination results for Greenfield and early stage development projects. However, we believe that some of this recent success may reflect the pulling forward of demand from future years.

Overall, we expect a greater portion of new demand, particularly for solar to be for projects delivered in 2018 and beyond. Over the last eight years, we have successfully developed and acquired more than 880 megawatts of new renewables projects in Canada.

We continue to pursue development of new Canadian solar, wind and storage projects and see potential for up to 300 megawatts of new Canadian wind development opportunities, over the 2017 to 2018 period.

We are also contemplating repowering certain of our existing wind generation facilities, which would require new investments to be made to upgrade current equipment to the latest technology.

On a project level basis, the incremental earnings and cash flow generation potential from these repowering investments could be similar to a new build opportunity, given that we would be targeting projects that are not generating PTCs.

However, this effort is still in its early stages, and is contingent on IRS guidance that is expected to be released in the second quarter. We expect to be able to give a further update on where we are regarding this opportunity before the end of the year.

Energy Resources' expectations for capital expenditures to support the 2017 and 2018 renewables development program are $7 billion to $9 billion, reflecting a mid-point of 4,100 megawatts of new projects over this timeframe. These capital expenditure expectations are roughly the same as for our record-breaking 2015 and 2016 program.

While there is some uncertainty as to the timing of these new build opportunities, we expect a greater portion of new project demand and, in turn, a greater portion of our investment opportunities to be in 2018.

Although, we are optimistic about the prospects for new renewables growth, it is important to remember that forecasting 2017 and 2018 origination expectations, while only a quarter of the way through 2016 is subject to a number of uncertainties, including most importantly, the tenor of IRS start of construction guidance and its related impact on the timing of customer demand.

Similar to previous years, we remain committed to maintaining a strong balance sheet with a flexible and opportunistic financing plan and a focus on capital recycling opportunities that supports our overall corporate credit position. We currently don't expect our financing plan in 2016 to require equity to support our renewables build.

As we discussed on the last call, our enthusiasm about our renewable growth prospects was a major driver of the increased expectations for NextEra Energy's compound annual growth rate and adjusted earnings per share to 6% to 8% through 2018 off a 2014 base that we announced in the middle of last year.

We continue to expect our renewables development program to support those expectations and our longer-term growth prospects. It is important to keep in mind that the greatest potential contribution to earnings and cash flow growth from these 2017 and 2018 development projects are for 2019 and beyond. Let me now review the highlights for NEP.

First quarter adjusted EBITDA was $141 million and cash available for distribution was $38 million, up $71 million and $53 million respectively from the prior year comparable quarter, primarily due to portfolio growth. Before accounting for debt service, cash available for distribution was $112 million.

New projects added $78 million of adjusted EBITDA and $55 million of cash available for distribution. After accounting for the results of new project additions, the existing assets in the NEP portfolio operated well and benefited from a year-over-year improvement in wind resource.

For the NEP portfolio, wind resource was roughly 100% of the long term average versus 86% in the first quarter of 2015. Solar resource was also strong during the quarter, but the year-over-year impact was small. Adjusted EBITDA from existing projects increased by $5 million from the prior year comparable quarter.

The comparable increase in cash available for distribution was slightly greater due to favorable debt refinancing activities and the timing of tax equity contributions. As a reminder, these results are net of IDR fees, which we treat as an operating expense. IDR fees increased $6 million from the prior year comparable quarter.

The impact of other effects, including higher management fees and outside services are shown on the accompanying slide. Turning now to the consolidated results for NextEra Energy, for the first quarter of 2016, GAAP net income attributable to NextEra Energy was $636 million or $1.37 per share.

NextEra Energy's 2016 first quarter adjusted earnings and adjusted EPS were $715 million and $1.55 per share respectively. Adjusted earnings from the corporate and other segment increased 1% per share compared to the first quarter of 2015.

The sale of our Lamar and Forney natural gas generation assets located in ERCOT closed just after the end of the first quarter. This transaction generated net cash proceeds of approximately $456 million and a net after-tax gain on disposition of approximately $107 million that will be excluded from NextEra Energy's second quarter adjusted earnings.

We expect continued opportunities to recycle capital through potential additional sale opportunities of merchant and other non-strategic assets in our portfolio.

In addition, the strong renewables origination performance at Energy Resources continues to expand the pipeline of low risk, long-term contracted assets potentially available for sale to NextEra Energy Partners.

Our continued focus on recycling capital at Energy Resources, whether through third-party asset sales or drop-downs to NEP, together with what we believe is an outstanding regulated opportunity set at FPL, continue to support our ability to balance growth across our two main businesses.

Based on our first quarter performance at NextEra Energy, we remain comfortable with the expectations we have previously discussed for the full year. For 2016, we continue to expect adjusted earnings per share at NextEra Energy to be in the range of $5.85 to $6.35.

Looking further ahead, we also continue to expect adjusted earnings per share in the range of $6.60 to $7.10 for 2018, implying a compound annual growth rate off the 2014 base of 6% to 8%. As always, our expectations are subject to the usual caveats, including but not limited to normal weather and operating conditions.

Turning now to NEP, the acquisition of the Seiling I & II projects during the first quarter has added to what we already considered to be a solid run rate and has further increased NEP's flexibility for the balance of the year.

We expect the current portfolio post the acquisition of Seiling I & II to support a CAFD run rate of $210 million to $240 million, which is within the range of our December 31, 2016 portfolio run rate CAFD expectations of $210 million to $290 million.

Due to our ability to raise approximately $287 million in equity to acquire these projects, their contribution to cash available for distribution and the success we've had under the ATM program, we now have more liquidity and debt capacity than we had coming into the year.

We continue to evaluate the optimal long-term capital structure for NEP, and our current thinking is that the portfolio can support a holdco leverage ratio of approximately 3.5 times project distributions after debt service. Based on this metric, we expect our current incremental holdco debt capacity to be roughly $300 million to $400 million.

As a result, we have flexibility as to how we finance our next acquisition and can be opportunistic regarding our approach to further growth opportunities for the balance of the year. We have included a new slide in the appendix to today's presentation with additional details regarding NEP's current incremental holdco debt capacity.

The December 31, 2016 run rate expectations for adjusted EBITDA of $640 million to $760 million and CAFD of $210 million to $290 million are unchanged, reflecting calendar year 2017 expectations for the forecasted portfolio at year-end December 31, 2016.

Our expectations are subject to our normal caveats and are net of expected IDR fees, as we expect these fees to be treated as an operating expense.

From a base of our fourth quarter 2015 distribution per common unit, at an annualized rate of a $1.23, we continue to see 12% to 15% per year growth in LP distributions as being a reasonable range of expectations through 2020, subject to our usual caveats.

As a result, we expect the annualized rate of the fourth quarter 2016 distribution to be in a range of a $1.38 to a $1.41 per common unit, meeting the fourth quarter distribution that is payable in February 2017. In summary, we continue to believe that NEE and NEP offer some of the best value propositions in the industry.

We remain very focused on the execution objectives for the year and we're off to a good start. That concludes our prepared remarks and with that, we will now open the line for questions..

Thank you. We'll take our first question from Julien Dumoulin-Smith with UBS. Your line is open..

Hi. Good morning and congratulations..

Thank you. Good morning, Julien..

So, perhaps first on the cadence of signing up these contracts that you just discussed. When do you expect to start seeing them come through, obviously there is a lot of work with the chop ahead of you.

Is it later this year and or is that really going to be a next year event? And ultimately within that 2017, 2018 window you talk about is this largely weighted towards 2018 in service?.

Yeah. Okay. So, for the contracts that we just signed, 250 megawatts, those are for 2017 delivery and then we also announced the 100 megawatt acquisition of the High Lonesome Mesa project and the acquisition has already closed for that one facility.

And then for your second question Julien, in terms of how we see the shape of the 2017 and the 2018 build, I think we see more of a pull forward of demand into 2016 on solar, so more the solar activity occurring in 2018. And then with wind you know I think, relatively balanced between 2017 and 2018, but perhaps more activity in 2018..

Got it. Excellent.

And then if you can just clarify a bit your intentions here just 2016 equity needs, and then also interest still in the Oncor process or is that – is that on the back burner here?.

I'll take the first one and then the second, I'll kick it to Jim. We currently don't see an equity need in 2016. Again, we announced the closing of the Forney and Lamar sale, which netted cash proceeds of approximately $457 million, which puts us in a pretty good position for the year. On the second question, I will ask Jim to answer that..

So, Julien, I am not going to comment on any individual acquisition other than to say what we've consistently said about acquisitions, which is first of all there is no imperative for us to do one.

Second, that we have a pretty tight screen on what we would be willing to do and it would have to make sense both strategically for us and would have to make sense financially and would have to in our view create significant shareholder value.

And I think that's kind of all that I am willing to say at this point on Oncor or any of the rest of the M&A, other than again that we will be very financially disciplined about how we approach it, and the focus is going to be on creating shareholder value..

But to clarify, perhaps admist the balance sheet implications of the acceleration of the renewal plan, do you see this as expedited data knoll (35:57), can you perhaps comment on that angle?.

Right..

Yeah. So, I think, what I said about there is no imperative for us to do regulated M&A, we don't have to do it. I think is – is addresses that Julien. Obviously we've been very successful on the renewable front, but we've also been very successful on recycling capital and we're going to continue to recycle capital.

We're committed to doing that and we're obviously committed to continuing to have a strong balance sheet and strong credit. So, we feel good about where we are right now and we continue to have one of the best balance sheets in the industry and I guard it pretty jealously.

And we're going to continue to be focused on creating value like we have over the last decade for our shareholders..

Thanks for being explicit. Thank you..

Thank you. We will move next to Stephen Byrd with Morgan Stanley. Your line is open..

Hi. Good morning..

Good morning, Stephen..

Congrats on great results. I was interested by the comments that you made in your prepared remarks on repowering of wind and you mentioned needing to get some IRS guidance.

Could you speak a little bit further of what specifically you need to see from the IRS to allow you to move forward? And then, can you just speak – I know, you can't give a sense of the magnitude, but just what kinds of opportunities could then present themselves in terms of repowering, would these be for sort of new RFPs, where you could, in a low cost way compete against the Greenfield or how should we think about this opportunity?.

I'm going to direct that question to Armando..

Hey, Stephen. Good morning..

Good morning..

So a couple of things, like last time when the – excuse me, the PTC extension was passed by Congress. We're all awaiting guidance on, that started construction, how long out into the future can you build and still get those PTCs. In addition, it looks like – excuse me, the IRS may provide guidance on something relating to repowerings.

There is no, we don't know that that's going to happen yet or not. We've talked about repowerings in the past with investors. We have repowered some of our sites in the past, we've torn turbines down and put up new turbines.

What we're actually looking at is the possibility of enhancing some of our older sites and still being able to qualify for new production tax credit. So, it's difficult at this point to say how big the opportunity is, and it's actually difficult to say exactly what the IRS guidance would have to look like for us to feel comfortable.

The IRS has current guidance on what I'll call if you have an old piece of equipment and you refurbished that equipment to some extent there are some cases where that new refurbished equipment could get all of the tax benefits of a new piece of equipment. And so, that guidance is already out there.

How and when it might apply to what we're talking about, is something that we're interested in. So at this point, it's an opportunity. It could be a good small opportunity or it could be a significant opportunity. I think we will absolutely have more to say on this if it's a decent opportunity on the next call..

Very much, understood. And just shifting gears to, curious about Texas in terms of the renewables market. We've seen pretty significant growth in wind in Texas to very high levels of penetration.

When you think about further growth opportunities in Texas, I was curious just first economically, how interesting is that given the next generation of turbines that we've seen? And secondly, do you see significant changes needed to the grid in order to allow more penetration, that is are we getting to levels where the grid really does need to materially change to allow for greater growth in Texas?.

So for us, I think you've noticed that we really haven't had a lot of new Texas wind development over the last couple of years and that's really a result of our concern over the long-term economics of ERCOT and it's one of the reasons why we decided that the assets, the Lamar and Forney assets, were probably worth more to somebody else than they were to us.

Obviously like you, we've seen a lot of folks build in Texas. I mean look it's easy to build in Texas, the permitting is favorable, the interconnections are favorable.

I think you are probably right in what you're intimating that at some point in the future, there is going to have to be another wave of significant transmission build in Texas in order to accommodate new wind. But it's the other thing to look at in Texas actually Stephen is solar.

We've seen and I'm sure you and others have seen that there appears to be an early wave of solar in Texas at prices that appear very attractive. And so, it's not just wind, I think Texas is also going to be a market that is going to be very favorable for construction of other renewable, including solar.

So I don't want to – my comments shouldn't seem like we're not interested in Texas. We continue to be interested in development in Texas, but it's not going to be in my view as significant a part of our future investment, as it was during the 2006-2008 timeframe..

Great. Thank you very much..

Thank you. We'll go now to Greg Gordon with Evercore ISI. Your line is open..

Hey, good morning. Thank you.

Can I ask another question about Texas? Just in general given the sort of the destabilization of what is happening there on the regulatory front with regard to uncertainty around how taxes are going to be calculated in the future, as it relates to the Oncor proceeding? Is that a less attractive environment for you in general for investment?.

Yeah. I think the only thing I'd say about that is, there is a statute on the books currently in Texas, and other than that I am not going to comment on it..

Okay.

But clearly the commissioners who are currently sitting on that PUC are creating a lot of uncertainty around the interpretation of that statute, right?.

Hey Greg. This is Jim. I think if there was uncertainty it's been driven by the Hunt's application. I think there was some talk of doing a workshop and that workshop has been put off.

And so I think depending on what happens, I think it's all going to come down to depending really on what happens with the Hunt's application, and I think that's a very specific case to a very specific situation and a very specific structure. And I'd be very hesitant to draw any conclusions about other utilities in Texas.

We're not concerned for example about Lone Star..

Okay, great. That was really the gist of the question. And then the second question is with regard to the rate case.

I know the numbers stand on their own in terms of the modest revenue increases that you're asking for in the context of the request, but you've said before, in multiple occasions, that you think that this case is going to be predominantly an ROE case.

So has there been any – is it too early or has there been any sort of commentary from the intervener groups, the commission, the staff, around where the data is around your ability to continue to earn returns in the ranges that you currently have.

Obviously your performance in the state has been excellent and that's a good reason to grant that?.

Yeah, hard to disagree with you Greg on that; look, it's too early. We've – it's – we've filed our case and we're doing responses to a variety of questions and this process will take place between now and July when the case is really all filed and then we'll go from there..

Okay.

So, we really won't start to see the meat of the sort of back and forth, in terms of testimony, until sort of after July?.

Yeah. It will typically go into the July process and then obviously if we go into hearings that will be at the end of August, beginning of September..

Okay. Thanks, guys. Have a great day..

You too..

Thanks, Greg..

Thank you. We'll take our next question from Abe Azar from Deutsche Bank. Your line is open..

Good morning.

Do you have any update on the NET expansion pipeline project, and maybe a little bit more broadly what opportunities are you seeing to add pipeline projects, so, besides the Sabal Trail announcement from this morning?.

So a couple of things. NET, we're still – obviously it hasn't been a year yet since we closed it.

And when we did close it, and we announced that one of the things we said is we were excited about all of the opportunities, not only what we thought were identified opportunities, but all of the unidentified opportunities, because it was a vast pipeline system inside of Texas.

Since then, we've seen continued activity from the Mexican front and we are not in Mexico just to clear that point up. But from the Mexican front that they continue to import a lot of gas and have a lot of needs.

That's creating opportunities, opportunities that we hope will actually turn into something for NET, because in particular, our pipes are – NET pipes are well placed in Texas to be able to provide to Mexico.

In terms of the expansion projects, there were a couple of projects; there were some smaller projects that we expected to get completed during the first 12 months or 18 months. I don't know that many of those projects have fallen off the radar.

As a matter of fact, there has been more projects that have been added on, what I'll call the small-scale optimization, which is good, which is good for NET.

And then, there were a couple of larger expansion projects that we had until – under the terms of the agreement, until the end of this year, to figure out whether they were going to come in or not. And those appear okay at this point; one of them actually appears quite favorable.

I think we're not going to know the pace of actually signing something up with, particularly with the Mexican Government isn't as quick as we would like to see. So we would like for – we'll probably see more activity and we'll have more to say towards the end of the year.

There is a $200 million incentive payment to the owners – previous owners of NET, should those expansion projects come online and obviously if they don't, that saves NET $200 million.

So, I think the previous owners and us are all well incented to get the expansion projects done, but it's just a little too early to figure out how we're going to do by the end of the year..

Thank you..

Thank you. We'll go now to Matt Tucker from KeyBanc Capital. Your line is open..

Good morning. Thanks for taking my questions. I wanted to follow-up on the previous question on NET first.

From an NEP perspective, could you just comment on how the performance has been so far relative to your expectations at NET?.

Yeah, it's been right on Matt – right on expectations..

Okay. Great.

And then keeping with NEP, would you be willing to give any color on your drop down plans for the balance of the year and how you would finance drop downs? Both if you were hypothetically to do something today or in current market conditions and how you would finance in kind of an ideal scenario, if there is a difference there?.

Yeah, I mean, we feel really good about where we are with NEP.

As we said in the prepared remarks, a lot of flexibility for the balance of the year with the equity raise, $287 million for the Seiling I & II acquisitions, and now what we feel is available debt capacity around $300 million to $400 million, it gives us a chance to be very opportunistic about growth for the balance of the year..

Great.

And then just last one from me could you comment on what you're seeing in terms of the third-party M&A market from an NEP perspective right now? And what's NEP's appetite like right now for third-party M&A?.

So there is, we've talked about the M&A market both the asset acquisition market and the small renewable developer market before, and there is quite a bit of activity in what I'll call the asset M&A market out there and we're – we look at all of those opportunities but it's really a very small percentage of opportunity that come to fruition for us.

On the other larger development M&A market, I think Jim has commented before that there is very few players that we would be interested in, only because the way that they put deals together and the way they manage their projects is a little different than us.

And so, I wouldn't really expect, at least in the near-term, for us to be doing any significant acquisitions at NEP..

The only thing I would add is, that we have such a massive pipeline of projects at NEER that can be dropped down into NEP, that there is not a huge need for us to be looking at third-party acquisitions.

And frankly, our focus remains at NEER on great renewable development work and on creating an even more massive pipeline of things that we can drop down into NEP this year and going forward..

Yeah. Thanks, guys..

Just adding on also to what Jim said about the portfolio available at Energy Resources, if you exclude the 2015-2016, we got about 12 gigawatts.

We have another 4 gigawatts on for 2015-2016, and then for 2017-2018 if we're successful in hitting the midpoint of the 4,100 megawatts I mentioned before, by the end of 2018, you are right around 20 gigawatts. So puts us in great shape from a NEP perspective..

Thank you, and this does conclude our question-and-answer session and our conference today. We'd like to thank everyone for joining us. You may disconnect your line at anytime..