Good morning, everyone, and welcome to the NextEra Energy Inc. and NextEra Energy Partners Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today's event is being recorded.

At this time, I'd like to turn the conference call over to Matt Roskot, Director of Investor Relations. Sir please go ahead..

Thank you, Jamie. Good morning, everyone, and thank you for joining our Second Quarter 2020 Combined Earnings Conference Call for NextEra Energy and NextEra Energy Partners.

With me this morning are Jim Robo, Chairman and Chief Executive Officer of NextEra Energy; Rebecca Kujawa, Executive Vice President and Chief Financial Officer of NextEra Energy; John Ketchum, President and Chief Executive Officer of NextEra Energy Resources; and Mark Hickson, Executive Vice President of NextEra Energy, all of whom are also officers of NextEra Energy Partners, as well as Eric Silagy, President and Chief Executive Officer of Florida Power & Light Company.

Rebecca 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 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, nexteraenergy.com and nexteraenergypartners.com.

We do not undertake any duty to update any forward-looking statements. Today’s presentation also includes references to non-GAAP financial measures.

You should refer to the information contained in the slides accompanying today’s presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. With that, I will turn the call over to Rebecca..

acquiring assets from energy resources organically or acquiring assets from third parties. NextEra Energy partners has clear visibility into its growth going forward.

Following another strong quarter of origination, Energy Resources' portfolio of renewable projects now totals more than 27 gigawatts including the signed backlog of projects that Energy Resources plans to build in the coming years.

When combined with the prospects for future renewables development, NextEra Energy Partners' long-term growth visibility remains as strong as ever.

NextEra Energy Partners' cost of capital and access to capital advantages including significant demand from various low-cost private infrastructure capital provide flexibility to finance this growth over the long term.

These strengths together with NextEra Energy Partners' favorable tax position and enhanced governance rights leave NextEra Energy Partners uniquely positioned to continue to deliver on its objectives going forward. In closing, we believe that the fundamental value proposition of NextEra Energy and NextEra Energy Partners remains as robust as ever.

Both companies remain resilient and well positioned to deliver on their commitments. We continue to remain enthusiastic about our future and our continued -- and are focused on delivering smart capital investments that enhance value for both customers and shareholders and expand our position as the world's leading clean energy provider.

That concludes our prepared remarks. And with that, we will open up the line for questions..

[Operator Instructions] And our first question today comes from Julien Smith from Bank of America. Please go ahead with your question..

Hey, good morning. This is actually Richie here for Julien. Just had a question around the CapEx raise at FPL and Gulf.

What was driving that? Is that more around undergrounding and grid hardening, or is that more on the solar side? And how should we think about the CapEx trajectory from 2021 and beyond? Is that more in line with what you disclosed at your Analyst Day, or should we expect it to be at more of these robust levels going forward?.

Richie good morning and thanks for the question. I think it really reflects of consistency with what we've been talking about for a long time, which is we keep finding terrific projects for our customers and investment opportunities and we're starting to put those in place.

As I highlighted in the prepared remarks, we do have a consistent expectations for the growth rate between 2018 and 2022 of a 9% compound annual growth rate. So, obviously some projects move from one year to another. But at the heart of it, it is terrific investments for the benefit of our customers.

As far as beyond 2022, similar to comments that we've made in the past, the growth opportunities that we see across all of our businesses, but specific at FPL and Gulf Power include the modernization efforts including the large deployment of solar over time as well as investments in grid hardening and undergrounding as highlighted by the storm protection plan that we're in the process of going through approvals and initial investments for that program.

So we're super excited about the opportunities for investing, and again, stay very focused on ensuring that these are good projects for the benefit of our customers..

Got it. Thanks. That's very helpful. And then just around your comments around hydrogen. I think you disclosed $65 million for that pilot project.

What are you seeing there on that front? Is this more around transportation opportunities, or is this all around like a pipeline and being able to like blend with the pipes?.

So we're really excited about hydrogen. In particular, when we think about getting to a -- not a net zero emissions profile, but actually a zero carbon emissions profile.

And for -- when we looked at this let's call it, 5 years, 10 years ago and we thought about what it would take to get to true zero emissions, we were worried that it was extraordinarily expensive for our customers.

What makes us really excited about hydrogen particularly in the 2030 and beyond time frame is that that has the potential to supplement significant deployment of renewables including wind and solar technologies complemented by short and I'll call it medium-term duration batteries.

But then that last amount of emissions that you would take out of the system to get down to zero could be most economically served by hydrogen. So that's what makes us excited about doing a pilot project.

We're very excited about the opportunity to present that to the Florida Public Service Commission as a way to further enhance FPL's ability to innovate and deliver these long-term clean energy solutions to our customers.

And as part of that, we'll learn about the technologies, and we'll see what other opportunities there are potentially for the industrial and transportation sectors with – and for us to be able to produce that – the green energy to produce the green hydrogen is a potential significant opportunity for us.

We think we're at the early stages, which is kind of consistent with our toe in the water approach. We want to get some experience with it. Obviously, do a lot of research and talk to folks in the supply chain and get better equipped to deal – take advantage of these opportunities. But we're really excited about it..

All right. Thanks a lot. That's all the questions I had..

Thank you, Richie..

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

Hi. Good morning. It's actually Constantine here for Shar as well. Congratulations on a great quarter. It's – we've definitely seen some impressive numbers for the backlog additions, and kind of contract increases for the 2022 time frame.

Just kind of curious on kind of your thoughts around kind of near growth trajectory and kind of contribution to the business mix. And it's kind of subsided as the conversation point from the rating agencies, but just thoughts on kind of growing contributions from near kind of versus balancing that from the regulated contributions.

Kind of does it – are you thinking about bolt-on acquisitions or kind of any kind of drop-downs accelerated from near? Just some thoughts around that..

Thanks, Constantine. We appreciate you dialing in this morning. We're really excited about pursuing opportunities for investment across the board.

And of course, at FPL and Gulf that's focused on investments that meet – that need to create value for our customers and at Energy Resources it's return focused along with delivering things for our customers there too.

So from a corporate perspective, we don't want to limit any of our businesses, when we find great investment opportunities, which again, I can't highlight enough about how excited we are about the renewables development prospects at Energy Resources. So we're not going to constrain them in any way.

We will develop those opportunities that create value for shareholders.

And to the extent that, we want to maintain balance over time, we've got a lot of opportunities to do that that are accretive for shareholders, including recycling of capital through NextEra Energy Partners, which is obviously a willing and excited acquirer of Energy Resources projects, but Energy Resources has the ability to recycle capital to third parties as well.

So there's plenty of ways to ensure that we can create the real value-accretive opportunities, and still think about it from a corporate perspective in a variety of different ways..

Thanks. That's very helpful. And kind of pivoting a little bit to something a little bit longer term, I guess. Can we get some of your thoughts on the November election, and kind of the Biden campaign has put out some plans and frameworks out there, the higher tax rate, clean energy support.

How is NextEra positioned for kind of potential changes at the federal level?.

So, this is Jim. We always position our business to try to win regardless of the outcome of elections. And so we – I think, you can remember back close to four years ago now there was some turmoil around our stock, when President Trump was elected.

We've managed to completely be fine under this administration in terms of being able to continue to grow our renewable business, because you know what it's all about economics, right? And the time for renewables is now and that kind of transcends politics frankly the economics and the need to – and really the need to de-carbonize not only the electric sector, but the rest of the sectors of the economy are really frankly transcend what happens in elections.

And so obviously, we watch them closely. We think good clean energy policy is important and the right policy for America in the future. And we continue, I think to be positioned really well regardless of who wins in November..

Okay. That makes sense. I’ll jump back in the queue. Thanks so much..

Thank you..

Our next question comes from Michael Weinstein from Credit Suisse. Please go ahead with your question..

Hi, good morning, guys.

On the same question, Jim, are you – what do you think is the most likely outcome from the Congress these days tax credit extensions, cash grants? Do you think a national renewable portfolio standard is a possibility? I'm just wondering of all those different alternatives, what do you think might actually occur, in the next four years?.

So I think, it's honestly too soon to tell, Michael. I think a lot is going to depend on what happens in the election. And is there continued split government or is there not split government that will be I think, a big driver of what policies happen. And I think all of those ideas are on the table.

We've been consistent in, what we've said which is, that we think it's important to have a good and fair clean energy policy going forward. We also have said that it's -- that we think wind and renewables with batteries will be -- are very competitive once the PTCs and the ITCs phase out, in terms of competing against conventional generation.

It's just honestly, really more a matter of the speed with which you want to decarbonize is what is going to ultimately drive the final I think policy choices. And so, we are -- obviously we're actively engaged in the discussions. And I think, it's premature really to say, what we think is going to happen.

Because I think you have an election in four, five months. And as you all know, elections have consequences. And we'll see what happens post the election in terms of what's going to be the policy landscape going forward..

Great. And on hydrogen, do you think -- and I noticed there's a lot of -- a lot more emphasis on renewables rather than gas turbines. And your future construction plans at FPL.

And I'm just wondering if hydrogen works out, is that a method -- do you think you could actually build more -- put more gas turbines back into the plan, if hydrogen production becomes a viable economic alternative, or do you think other alternative technologies are better suited, such as fuel cells?.

Mike, I think from a hydrogen perspective and specific to Florida Power & Light Company, we're talking about potential hydrogen opportunities really in the 2030 and beyond timeframe. And in that intervening time we deploy a significant amount of solar technology.

And then, if we're right, and if the costs come down for hydrogen, and it is the best alternative for supporting getting to a zero emissions profile, we would retrofit certain of our gas facilities to run on hydrogen or run on a portion of hydrogen.

So I think for Florida Power & Light and Gulf Power, it's -- at this point and again we're talking about a long way into the future, you wouldn't necessarily need to build any new hydrogen/gas turbines in that portfolio.

Because we've got a tremendously efficient fleet that's already in service and the investments we would make are really around conversion.

Now, whether or not that's true elsewhere in the country, I think is -- it might be a little bit different, But we're talking about a long way down the road and a lot of things need to come together to have those types of conversations. I think it's fairly preliminary..

Got you. And one final question. Just make a comment on M&A interest these days, what's going on with Santee Cooper, et cetera..

So I think, we -- this won't be surprising. We remain interested in M&A. We think there's a lot that we can bring to the table. I continue to believe that there's not a utility in the country that we couldn't run more efficiently and better for customers. And I truly believe that. And so, we continue to look.

I think, in terms of Santee Cooper, that process has been pushed to next year. And we remain very interested. And continue to be focused on trying to make that happen..

All right, Jim could you -- what regions of the country are you focused on? I was just curious?.

We continue to be focused on, the Midwest and the Southeast….

All right. Thank you very much..

… plus FERC-regulated assets pretty much anywhere..

Perfect. Okay. Thanks a lot..

Thank you..

Our next question comes from Stephen Byrd from Morgan Stanley. Please go ahead with your question..

Hi. Thanks. It's Dave Arcaro on for Stephen. Thanks for taking my question. I had one quick follow-up just on the hydrogen topic.

Wondering if you see a potential path for this to be an opportunity at NEER? And also in terms of business model, but do you think that you would envision being involved in owning the electrolysis function within the supply chain? And if so do you have a vision or view on what technology is ahead of others at this point?.

Thanks Dave. I would say at this point we're looking for opportunities across the portfolio, obviously, we talked about the pilot project at FPL today, but we are looking at other pilot type investment opportunities elsewhere in the portfolio consistent with the way that we approach solar early on and of course batteries more recently.

So I think there will be opportunities over time for those type of pilot projects. Again where you think of it as actually being close to economic today are areas where there's already significant penetration of renewables, because as you well know, it's critical to find a low-cost electricity supply in order to make it economic or close to economic.

And here in the U.S., the economics certainly have to factor in that today there's a very low-cost supply of natural gas, making it the imperative that you find a cheap electricity supply. It's early. Never say never on where we might find opportunities to invest in the business.

But historically as you know, we've not played in the space of owning -- being a vertically integrated owner of technologies or projects. We've typically taken the best of manufactured equipment from other folks, apply our scale and our ability to construct, own and operate over the long-term effectively is where we create value. So again it's early.

But at this point, I wouldn't think that we would focus on vertically integrating. It's more of applying hydrogen as a technology consistent the way that we've created value in the past..

So the only thing I would add to that two things. One, is I'd be disappointed if in John's business we don't make some, kind of, pilot investment in the next year.

We're looking at a variety of things, and I'd be disappointed if we don't make some, kind of, pilot investment in the next year, a very much toe in the water like we did a decade ago in the battery storage business.

Secondly, clearly we're not going to backward integrate into manufacturing electrolyzers or anything like that, but I wouldn't rule out us owning them as part of an integrated system that was integrated with renewables to manufacture hydrogen.

And as our view around that would be if we had a long-term contract and obviously we have access to very efficient capital, we know how to operate equipment. We're -- and so a lot of that would come to our -- I think our strategic advantages in terms of how we're able to create value for folks. So I think it's early.

We are -- there's clearly an opportunity to five to 10 years from now to displace the last 10% of the carbon emissions out of the electric sector by manufacturing hydrogen with renewables. That's clear.

I think there's also clearly an opportunity to make renewables to displace diesel fuel and perhaps even other types of transportation fuel going forward. And there's also I think clearly an opportunity to make green hydrogen to replace other types of hydrogen or/and other feedstocks in industrial applications.

And so we're looking at all of that and we're not being -- all of that in the end comes back to a very important thing, which is this is going to drive gigawatts and gigawatts and gigawatts and gigawatts of renewable demand in this country. And so there is no one better positioned than us to take advantage of that.

And we're going to be -- just like we were in battery storage, we're going to be at the vanguard. We're going to -- and we're going to -- this is a big strategic initiative for us and we're going to drive it, and it's going to be very important for this company I think not -- over the next decade.

We won't make any money on it in the next five years just like we didn't make any money in batteries in the first five years. And next year we're deploying $1 billion of batteries 10 years later. And so that's the way I think about this.

I think about this is help powering the long-term growth of this company into the back half of this decade and the next decade as well..

Got it. That's really helpful. Thank you so much for those comments. I just had one other quick M&A follow-up. I was just wondering if -- is there any path for Texas to be a target of interest for you from an M&A perspective, or what would need to change there? Thanks..

So we have spent a lot of time in Texas. Obviously, we own assets in Texas and so we are a great operator. And we feel like we would bring an enormous amount of the state. We own billions of dollars of assets in the state, right? And we are a great partner for the state. And so, I would never say, never.

Obviously, we were extraordinarily disappointed in the Encore decision. We think it was a mistake and shortsighted, but that is what it is. And so, it's probably going to take a bit to get past that before I'm super excited about doing things in Texas from an M&A standpoint..

Understood. Understood. Thank you very much..

Our next question comes from Michael Lapides from Goldman Sachs. Please go ahead with your question..

Hi, good morning, everybody. Thank you for taking my question. I want to turn to Florida for a second. You're supposed to file rate cases next year at both utilities. And obviously, the combination of the two will be a big fact of that.

Is there any potential for being able to delay or defer the timing of the rate cases to a, see what happens from a tax perspective in D.C. from a public policy perspective, just so you don't have to go back to the regulator two or three times over a two or three year period.

And b, is there any scenario where you may not even need a rate case or rate review?.

Good morning, Michael and we appreciate the question. As I've commented, I think even in these prepared remarks, we do continue to believe that FPL and Gulf would file for a combined rate case in early 2021 for new rates effective in 2022.

As you highlighted, there's some uncertainties and certain factors that could change, but that's the reality of operating any business. You know what you know those days and you do the best you can for planning for uncertainties. And we certainly would contemplate changes that we're aware of at the time, but you've got to keep running your business.

And what's most important from our perspective is continuing to have the ability to invest in Florida Power & Light and invest at Gulf Power in these great opportunities that we see for the benefit of our customers. We continue to lead the industry in O&M costs. We continue to lead the industry in reliability and customer service.

And the best way to keep doing that is execute and that means occasionally having rate cases. We are excited about that prospect. We've been preparing for it for a long time. And we think we have a great story to tell and we welcome the opportunity to talk about the things that we've been doing at FPL and Gulf.

So right -- for now, obviously things could change. But for now, we continue to have those plans to file in 2021 for new rates effective 2022..

Got it. And one other question just on the Florida utilities. You have been the industry leader in terms of cost management.

Do you think the pace of change in O&M cost declines will stay at this level meaning the year-over-year change or decline rates, or do you think you're reaching a point where it will start to flatten out where the ability to continue to take out as much cost as you've done every year will start to slow?.

The surest answer to that Michael is we've got a very creative team and we've got a team that is focused on continuous improvement and not afraid of that. But let it -- let me also not underestimate what that requires and that requires the ability to identify those new technologies and take that cost out over time.

So there's -- we have to work for it. And so every year, we pull together and come up with our best ideas. Do we think over the long period of time that we've exhausted every opportunity? No in part because I think technology will continue to enhance our ability to do that, but it takes time to execute those opportunities.

So our discipline is there, our creativity is there, our innovation, our commitment to continuous improvement and we're going to do the best we can to create the best value for our customers..

Got it. Thank you, Rebecca. Much appreciated..

And ladies and gentlemen, that will conclude today's question-and-answer session as well as today's conference call. We do thank you for joining today's presentation. You may now disconnect your lines..