Good day and welcome to the NextEra Energy and NextEra Energy Partners First Quarter 2021 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jessica Aldridge, Director of Investor Relations. Please go ahead ma'am..

Thank you, Rocco. Good morning, everyone, and thank you for joining our first quarter 2021 combined earnings conference call for NextEra Energy and NextEra Energy Partners.

With me this morning are Jim Robo, Chairman and Chief Executive Officer of NextEra Energy; Rebecca 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 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, nexteraenergy.com and nexteraenergypartners.com.

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

You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. As a reminder Gulf Power legally merged into Florida Power & Light Company effective on January 1, 2021.

Gulf Power will continue as a separate reporting segment within Florida Power & Light and NextEra Energy through 2021, serving its existing customers under separate retail rates. Throughout today's presentation when we refer to FPP, we're referring to Florida Power & Light excluding Gulf Power unless otherwise noted or when using the term combined.

With that, I will turn the call over to Jim..

Thank you, Jessica and good morning, everyone. NextEra Energy is off to a terrific start in 2021 and has made excellent in the core focused areas that we discussed on the last call. Adjusted earnings per share increased nearly 14% year-over-year reflecting successful performance across all of the businesses.

FPL increased net income by approximately $78 million from the prior year comparable period which was driven by continued investment in the business for the benefit of our customers.

During the quarter FPL successfully placed in service approximately 300 megawatts of additional cost effective solar projects built under its SolarTogether program which remains the largest community solar program in the nation.

FPL now owns and operates approximately 2,640 megawatts of solar on its combined system which is more than any other utility in the country. FPL's other major capital investments including the 409 megawatts Manatee Energy Storage Center and highly efficient 1,200 megawatt Dania Beach Clean Energy Center are also on schedule and on budget.

By executing on smart capital investments such as these FPL is able to maintain its best-in-class customer value proposition of clean energy, low bills, highly reliability and outstanding customer service.

FPL's typical residential bills remains well below the national average and the lowest in the nation among the 20 largest US investor-owned utilities while our service reliability has never been higher. Gulf Power also had a strong quarter of execution.

The focus on the operational cost effectiveness at Gulf Power continues to progress well with a 43% increase in net income year-over-year primarily driven by year-to-date OEM cost declining by approximately 21% versus the prior year comparable period and by more than 34% relative to 2018.

Gulf Power also delivered further improvements in service reliability and employee safety with no OSHA recordable year-to-date through the end of March. We remain committed to delivering on the objective that we've previously outlined at Gulf Power and continue to expect to generate significant customer and shareholder value over the coming years.

At Energy Resources, adjusted earnings increased 13% year-over-year and it was another strong quarter of renewables origination with our backlog increasing by approximately 1,750 megawatts since the last call.

We continue to see increased stakeholder focused on environmental social and governance or ESG factors helping to drive accelerated demand for diversified clean energy solutions among new non-traditional customers particularly in the commercial and industrial sector as an attractive source of incremental growth for Energy Resources in the coming years.

We have been encouraged by the Biden Administrations focus on clean energy and the emphasis they have placed on it in their budget and in the upcoming infrastructure package.

We continue to work with the administration on their important efforts around extensions of existing renewable credits, new credits for transmission and storage including hydrogen as well as a new clean energy standard for the electric sector.

We support a clean energy standard that accelerates the decarbonization of the electric grid and enables the decarbonization of the transportation and industrial sectors as well.

We believe that no energy company in the world has been more committed, consistent and proactive in promoting smart investments in clean energy technology as we have been for over two decades.

As a push for actions to address climate change and acceleration of progress towards decarbonization creates new and enhanced renewable incentives across our industry. We continue to believe that no company is better positioned than NextEra Energy to continue to drive change and capitalize on these trends.

At this early point in the year, we are very pleased with our progress at FPL, Gulf Power and Energy Resources. Now let's turn to the detailed results beginning first with FPL. For the first quarter of 2021, FPL reported net income of $720 million or $0.37 per share. Earnings per share increased $0.04 year-over-year.

Regulatory capital employed growth of 10.8% was a significant driver of FPL's EPS growth versus the prior year comparable quarter. FPL's capital expenditures were approximately $1.4 billion for the quarter and we expect our full year capital investments to be between $6.6 billion and $6.8 billion.

FPL's reported ROE for regulatory purposes will be approximately 11.6% for the 12 months ending March 2021. During the quarter we utilized $316 million of reserved amortization to achieve our target regulatory ROE leaving FPL with a balance of $578 million.

As we previously discussed, FPL historically utilizes more reserved amortization in the first half of the year given the pattern of its underlying revenues and expenses and we expect to continue this trend this year. Let me now turn to Gulf Power which reported first quarter 2021 net income of $57 million or $0.03 per share.

Gulf Power's capital expenditures were $170 million for the quarter as it continues to execute on smart capital investments for the benefit of customers and we expect its full capital investments for the year to be between $800 million and $900 million.

All of Gulf Power's major capital investments including the North Florida resiliency connection that is expected to be in service in mid-2022 continue to progress well. As a result of these ongoing investments regulatory capital employed increased by approximately 16% year-over-year.

Gulf Power's reported ROE for regulatory purposes is expected to be approximately 10.4% for the 12 months ending March 2021. Turning to our development and planning efforts. We recently filed an updated 10-year site plan for FPL and Gulf Power which we expect will begin to operate as an integrated electric system in 2022.

The 10-year site plan projects that zero emission sources will provide nearly 40% of all energy produced across the combined FPL system in 2030. Largely as a result of FPL's continued rapid expansion of solar energy through the execution of its 30-by-30 plan and success in its coal phase out strategy.

FPL expects to add 3,800 megawatts of additional cost effective solar over the next four year and we now control all of the land needed to meet our projected solar deployment of 11.7 gigawatts by 2030 for the combined FPL system. The site plan also reflects and expect a total deployment of more than 1,200 megawatts of storage capacity by 2030.

This plan is consistent with our belief that renewable generation and particularly solar paired with battery storage in Florida is an increasingly cost effective form of generation in most parts of the US.

As we execute on these opportunities, we project that FPL's combined emissions rate will be 62% lower in 2030 than the industry average was in 2005 and 20% lower than the US Department of Energy's projected industry average in 2030.

Moreover we continue to plan and invest in sustainable solutions to broaden how we serve customers and prepare for an even cleaner future.

During the quarter FPL placed in service nearly 70 new electric vehicle charging ports and is now operating nearly 400 electric vehicle charging ports in the state as part of our goal to install more than 1,000 charging ports in more than 100 location across the combined FPL service area from 2019 through 2020.

As we previously discussed, we're also developing hydrogen electrolysis project at FPL's Okeechobee combined cycle unit as part of our efforts to introduce further fuel diversity and resiliency into FPL's generation system.

There approximately 25 megawatts solar connected electrolyzer that will be used to generate clean hydrogen as part of the Okeechobee pilot will be the largest of its kind in the US to-date. While these projects are just a few examples of our advanced deployment efforts at FPL.

We are excited about the immense opportunities that lie ahead as our industry moves towards cleaner and more sustainable future. The Florida economy continues to recover from the early effects of the pandemic and is among the strongest in the nation. Their current unemployment rate of 4.7% is well below the national average.

The real estate sector continues to grow with average building permits Case - Shiller index for South Florida up approximately 6% and 10% respectively versus the prior year.

Florida's retail sales index continued its quarter-over-quarter improvement which is a further indication of the ongoing health in our economy and bolster our confidence in our smart investment strategy required to serve anticipated demand growth.

During the quarter FPL's average number of customers increased by approximately 71,400 or 1.4% versus the comparable prior year quarter driven by continued solid underlying population growth.

FPL's first quarter retail sales decreased 1.7% from the prior year comparable period which is primarily due to mild weather in the first quarter of this year versus 2020. We estimate that approximately 3% of the decline can be attributed to weather related usage for customer.

On a weather normalized basis, first quarter retail sales increased 1.3% with continued strong underlying usage contributing favorably. For Gulf Power the average number of customers grew 1.1% versus the comparable prior year quarter driven by continued economic growth in Northwest Florida.

Gulf Power's first quarter retail sales increased to 2.9% year-over-year primarily due to favorable weather. On March 12, we submitted testimony and detailed supporting information for Florida Power & Light 2021 base rate proceeding. The overall proposal for our 2022 through 2025 base rate plan is substantially consistent with a test year.

We are requesting a base rate adjustment of approximately $1.1 billion starting in January 2022, $607 million starting in January 2023 and solar base rate adjustments or SoBRA mechanisms in 2024 and 2025 for up to 1,788 megawatts of cost effective solar.

We are proud to offer our customers service that ranks among the cleanest and the most reliable in the country with typical residential bills of approximately 13% low state average and importantly nearly 10% lower than in 2006.

The four-year base plan has been designed to support continued investments in the long-term infrastructure and advance technology which continues to improve our already best in class reliability and helps keep customer bills low. With the proposed base rate adjustments and current projections for fuel and other cost.

We believe that FPL's typical residential bills will grow in an average annual rate of about 3.4% from January 2021 through the end of 2025 which is expected to result in FPL's typical residential bill being approximately 20% below the projected national average and more than 20% lower than our typical bills, 15 years ago when adjusted for inflation.

Typical Gulf Power residential bills are projected to decreased approximately 1% over the four-year rate plan. The Florida Public Service Commission has established a schedule for the proceeding beginning with Quality of Service hearing in June and technical hearings in late August.

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

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're open to the possibility of resolving our rate request through a fair settlement agreement.

Energy Resources reported first quarter 2021 GAAP earnings of $491 million or $0.25 per share. Adjusted earnings for the first quarter were $598 million or $0.30 per share up 13% versus the prior year comparable period.

New investments added $0.04 per share primarily reflecting growth in the renewables and storage business including more than 2,700 megawatts of new contracted win projects that were commissioned during 2020.

The extreme market conditions in Texas in February were the primary driver of the underperformance in our existing generation portfolio and customer supply and trading business as well as the favourable performance in the gas infrastructure business.

As a reminder when weather events like this occur, we operate our businesses in Texas as a portfolio and while there were pluses and minuses during these events. We believe the end result is a testament to the strength of our large and well diversified business. All weather impacts increased results by $0.03 versus 2020.

As I mentioned earlier, Energy Resources development team had another strong quarter of origination. We added 503 megawatts of new solar projects to our backlog including a 190 megawatts of solar that will be paired with approximately 100 megawatts of four-hour battery storage capacity.

In 2020, our market share of signed contracts and collocated solar plus storage assets in US was more than 35% and we're excited about the continued trend and demand for collocated storage solutions as we anticipate even further cost synergies by pairing low-cost renewables with storage solutions in the coming decades as being an important part of decarbonization in our sector.

We also added 916 megawatts of new win projects to our backlog for 2022. In addition, our backlog increased by energy resources share of NextEra Energy Partners planned acquisition of 391 megawatts of operating wind projects announced earlier this week.

With the approximately 1,750 megawatts added this quarter our backlog of signed contracts at Energy Resources now totals approximately 15,250 megawatts supporting our industry leading long-term growth expectations.

We remain enthusiastic about the expanded investment opportunities that the broad decarbonization of the US economy presents for Energy Resources and we continue to evaluate pilot projects for industrial, transportation and electric sector applications. In addition to the pilots and partnerships we've discussed on prior calls.

We've recently committed to make a minority investment in a clean energy technology company that has developed a proprietary process to essentially decarbonize the industrial production of hydrogen at economic prices.

This investment and the hydrogen pilots we've announced to-date show the promise of electrification across our economy and we're excited for the opportunity to participate in these new markets and build renewables to support future growth and demand for electricity.

Consistent with our long-term track record we will remain disciplined as we take steps to be at the forefront of this developing market while taking a leadership role in the clean energy transition.

Beyond renewables and storage, NextEra Energy Transmission further its efforts to build America's leading transmission company with a closing of its acquisition of GridLiance occurring at the end of last month.

GridLiance which owns three FERC regulated transmission utilities spanning six states is an excellent complement to our existing operations and further expand NextEra Energy's regulated business through the addition of attractive rate regulated assets.

NextEra Energy Transmission now owns regulated assets in 10 states and six regional transmission organizations. Growth in renewables means that there is also a growing imperative to build additional transmission across the US to support this transmission to a low cost, low carbon economy fueled by renewable energy.

Our incorporation of GridLiance into our portfolio furthers our strategy to be North America's leading competitive transmission provider both to deploy capital profitably as well as to enable further renewables deployment. Turning now to the consolidated results for NextEra Energy.

For the first quarter of 2021 GAAP net income attributable to NextEra Energy was $1.67 billion or $0.84 per share. NextEra Energy's 2021 first quarter adjusted earnings and adjusted EPS were $1.33 billion and $0.67 per share respectively. Adjusted earnings from corporate and other segments were roughly flat year-over-year.

Long-term financial expectations which we increased and extended to late last year through 2023 remained unchanged. For 2021, NextEra Energy expects adjusted earnings per share to be in a range of $2.40 to $2.54.

For 2022 and 2023, NextEra Energy expects to grow 6% to 8% off of the expected 2021 adjusted earnings per share and we will be disappointed if we're not able to deliver financial results at or near the top end of these ranges in 2021, 2022 and 2023 while at the same time maintaining our strong credit ratings.

From 2018 to 2023 we continue to expect that operating cash flow will grow roughly in line with our adjusted EPS compound annual growth rate range. We also continue to expect to grow dividends per share roughly 10% rate per year through at least 2022 off of 2020 base. As always, our expectations assume normal weather and operating conditions.

Let me now turn to NextEra Energy Partners which delivered very strong first quarter results with year-over-year growth and adjusted EBITDA and cash available for distribution of approximately 20% and 36% respectively.

Yesterday the NextEra Energy Partners board declared a quarterly distribution of $0.6375 per common unit or $2.55 per common unit on an annualized basis up approximately 15% from a year earlier inclusive of this increased NextEra Energy Partners has grown its distribution per unit by 240% since the IPO.

Further building on that strength, NextEra Energy Partners recently announced that it had entered into an agreement to acquire an approximately 400 megawatt portfolio of long-term contracted wind assets.

This transaction will be NextEra Energy Partners first third-party acquisition of renewable energy assets and represents another step towards growing LP unit distributions in a manner consistent with our previously stated expectations of 12% to 15% per year through at least 2024.

I'll provide additional detail on the transaction in just a few minutes. Turning to the detailed quarterly results. NextEra Energy Partners first quarter adjusted EBITDA was $354 million and cash available for distribution was $184 million.

New projects which primarily reflect the assets acquisitions that closed at the end of 2020 contributed $27 million of adjusted EBITDA and $13 million of cash available for distribution. Existing projects added $39 million of adjusted EBITDA and $23 million of cash available for distribution.

This strong year-over-year increase in adjusted EBITDA and cash available for distribution includes favorable results from NextEra Energy Partners wind and natural gas pipeline investments in Texas during the February winter storm partially offset by the impacts of an accelerated outage at our Genesis project during the quarter.

Cash available for distribution also benefited from a reduction in corporate level interest payments primarily as a result of certain refinancing activities completed in the fourth quarter of last year. Additional details are shown on the accompanying slide.

As I previously mentioned, we continue to execute on our plan to expand NextEra Energy Partners portfolio and recently entered into an agreement to acquire an approximately 400 megawatt portfolio of long-term contracted operating wind projects.

The portfolio has a cash available distribution weighted average contract life of approximately 13 years with high credit quality customers and further enhances the diversity of NextEra Energy Partners existing portfolio.

The transaction is expected to close in the third quarter of this year subject to customary closing conditions and the receipt of certain regulatory approvals and generate an attractive CAFY yield and be immediately accretive to LP distributions.

This transaction demonstrates the NextEra Energy Partners continued ability to execute on its long-term growth plan and it's enhanced by our ability to take advantage of Energy Resources best in class operating platform to reduce operating expenses at the assets.

Energy Resources continues to leverage our culture of continuous improvement to realize lower cost across its renewable assets that it operates.

Since 2017 Energy Resources have reduced fleet-wide dollar per megawatt hour O&M cost in its wind fleet by more than 30% and we believe those Energy Resources wind and solar operating expenses are significantly better than its industry peers.

With Energy Resources operate in the NextEra Energy Partners renewable assets these cost advantages directly benefit LP unit holders.

Over the coming years, we look forward to leveraging the benefits of energy resources operating portfolio platform for both NextEra Energy Partners existing portfolio as well as to add incremental value to future third-party acquisitions.

In addition to providing attractive base returns, these projects are well situated in attractive markets that we anticipate will have significant long-term renewables demand, supporting asset recontracting or potential repowering opportunities after the initial contract terms.

We continue to believe that the existing NextEra Energy Partners portfolio has meaningful organic growth opportunities over the coming years and expect the portfolio we're acquiring provides additional long-term investments opportunities as well.

NextEra Energy Partners expects to acquire the portfolio for a base purchase price of approximately $733 million subject to closing adjustments.

The portfolio of assets is expected to contribute adjusted EBITDA and cash available for distribution of approximately $63 million to $70 million each on a five-year average annual run rate basis beginning in December 31, 2021.

We believe this transaction is an attractive investment in which to deploy the $345 million of undrawn funds from the 2020 convertible equity portfolio financing which we use to fund the acquisition along with the existing NextEra Energy Partners debt capacity.

Following the recently announced transaction we now expect to be in the upper end of our previously disclosed year end 2021 run rate adjusted EBITDA and cast the expectation ranges of $1.44 billion to $1.62 billion and $680 million respectively.

As a reminder, all of our expectations are subject to our normal caveats and includes the impact of anticipated IDR fees as we treat these as an operating expense.

From the base of our fourth quarter 2020 distribution per common unit at an annualized rate of $2.46, we continue to see 12% to 15% growth per year in LP distributions as being a reasonable range of expectations through at least 2024.

We expect the annualized rate of the fourth quarter 2021 distribution that is payable in February 2022 to be in the range of $2.76 to $2.83 per common unit. In summary, after a strong start to the year, we remain as enthusiastic as ever about the long-term growth prospects for both NextEra Energy and NextEra Energy Partners.

At FPL, we continue to focus on delivering our best-in-class customer value proposition through operational cost effectiveness, productivity and making smart long-term investments. Energy Resources main significant competitive advantages and continues to capitalize on the best renewables development period in our history.

Combined with the strength of our balance sheet and credit ratings, NextEra Energy is uniquely positioned to drive long-term shareholder value and we remain intensely focused on executing on these opportunities. NextEra Energy Partners is well positioned to deliver on its already best in class run rate for LP distribution growth.

Finally, last month we were honored the NextEra was ranked Number 1 in its sector for Fortune magazine's World's Most Admired Company's list for the 14th time in 15 years.

Moreover, we're recognized for the 14th time as one of the world's most ethical companies by Ethisphere Institute which is a testament to our team of nearly 15,000 employees who are committed to our core values while helping to build a sustainable energy era that is affordable and clean.

In the coming weeks, we expect to publish NextEra Energy's 2021 ESG Report which we believe establishes our full alignment with the taskforce for climate related financial disclosures or TCFD recommendations. We're also excited to announce our commitment to participation in the Carbon Disclosure Project survey later this year.

These enhanced disclosures highlight the alignment of our corporate strategy with a key tenant of ESG which our company has been focused on for more than 25 years and remains key to execution of our strategy moving forward. That concludes our prepared remarks and with that, I will open up the line for questions..

[Operator Instructions] today's first question comes from Shar Pourreza with Guggenheim Partners. Please go ahead..

Just couple of questions here. First just on transmission opportunities, obviously you closed GridLiance this quarter and there's been some proposals across the US including California for transmission expansions.

Can we maybe get a little bit of refreshed view on your transmission growth strategy and kind of geographies where you may seek to expand? Do you guys see more opportunities for acquisitions perhaps from other PT [ph] type owners? And just as a follow-up here, any thoughts on sort of the new FERC administration recent language could hinder I think future transmission investment with potentially lower ROE removals some of the ROE adders, so just some thoughts there..

Perfect, thanks Shar. I was going to say yes, the question. But I think its multiple questions in here. So I'll start and obviously John or Jim can jump in, if they want to add something. We are very excited about opportunities in transmission and it is founded on a couple of points that I highlighted in the script.

First, is we couldn't be more excited as you well know about the renewables opportunities across the US in the coming decades.

A key part of all of those opportunities or at least a lot of those opportunities in later part of this decade going into the 2030s and beyond, is some level of build out of transmission in the US beyond what's been accomplished.

So both to enable to long-term renewables development but also to capitalize on those opportunities leaves us very interested in transmission.

The Energy Resources team has done a terrific job growing that business both through organic opportunities so long-term development efforts identifying opportunities, participating in processes and ultimately securing opportunities to invest and build and build successfully into line and into operation some of those lines as well as through acquisitions.

Obviously with GridLiance being the most recent and Trans Bay Cable not being too much far behind it. I expect that we'll grow the business through both going forward as well continued efforts on the development side as well as participating in opportunities to acquire investments as they come to market.

On the FERC transmission side, we do think there are lot of opportunities to improve how transmission is sided and built across the US and we're optimistic that this administration and this FERC will start to focus on those and I think to go through FERC as well as potential focus on transmission in this infrastructure package.

So a lot of opportunities to invest in the future..

Yes, the only thing that I would add to what Rebecca said there is, we love GridLiance. Think of our transmission presence of doughnut. We had a hole in the middle. This gets us in the SPP and MISO. We're now a member as a TO - important for [indiscernible] as well. It's strategic. It's going to help enable lot of new renewable development for us.

So it lines up really well with where we see renewable growth opportunities going forward. And even with the news coming out of FERC on the ROE, we'll see what they'll ultimately do. Don't forget that we've been able to enter in the long-term settlements at Trans Bay and on Lone Star as well and so our business is really unimpacted..

Got it perfect, thank you. And then just on the rate case and obviously it's starting to pick up steam, intervene is turning together. Are you seeing any early indications for what sort of topics that maybe debated? I mean affordability is the obvious one, cross - subsidization between the two merged utilities that could be another ROE.

So just maybe just thinking about the bit ask there. At this juncture, do you sort of feel there is a settlement path or does this case kind of need to be more litigated just given the complexities of merging two utilities..

Thanks Shar. I think it's really early to comment on the rate case. We just filed. I think you've heard us comment a couple of times, these as U-Haul trucks versus filing requirements that we produce and supply to staff and the interveners and the commission itself to start the process.

So we're very early and no doubt all of the key stakeholders just trying to review that information and then we'll see the process unfold really over quite a number of months accommodating with the hearings in August. We are very proud as I highlight in the comments both here and in other venues.

We're really proud of the case that the FPL team has put together not just the case itself. But it's built on a foundation of execution not just over the last five years during which we've operated under the settlement agreements but of course years and years before that. So we look forward to the opportunity to articulating that through this process.

As it relates to settlements, as you know here in Florida there is a great history of settlement agreements not just with Florida Power & Light Company but other utilities in the state.

We do think that opportunities to have a negotiated outcomes that meets the need of all stakeholders and historically that is produced consistent rates for many years in the future that provides tremendous value for customers. There's a great history of that. We of course will be open to it.

But it's very early in this process and again we look forward to being able to put forward our case..

And just lastly on Santee Cooper, I mean obviously the discussion they're picking up steam at the legislator.

And do you think we should we kind of watching for in the near term on the legislature side and your bids out there? So do you see any kind of changes with your offer or you're just kind of standing firm at this point?.

Sure, it's Jim. Obviously, you saw the senate asked for folks to re-express an interest. I sent a letter last week re-expressing our interest. We've been pretty clear that we remain interested. We have a very strong bid out there. Obviously, things are changed in the last year with Santee Cooper rate base is different.

Their volumes are different etc, etc.

But fundamentally our bid stands and we're ready to get going and negotiating with the state on the sale and ultimately the most important thing is, it remains very clear to me that the best route to the state and its customer and the economy of the state is to demunicipalize [ph] Santee Cooper and get it in the hands of an entity like ourselves that will run it in best in class way and there's enormous value I think to bring to the state through our ability to bring to decarbonize, our ability to have low bills over the long period of time and our ability to really operate efficiently and bring great reliability to bear.

I think you've seen the progress we've made at Gulf and I think that's a great example of the kind of progress that we'd be able to make at Santee Cooper as well..

Terrific, thank you guys for everything and good execution..

And our next question today comes from Steve Fleishman with Wolfe Research. Please go ahead..

Just curios first on the NEP acquisition, as you mentioned for the most part historically you haven't been able to make the turns lower fund third-party acquisitions.

So could you maybe talk about the returns you expect on this transaction and is this a suggestion that you're more optimistic that there'll be more third-party acquisitions that meet your return hurdles..

We're really excited about the acquisition and we've highlighted both in terms of the financial characteristics of it. One of the things that was particularly attractive about this portfolio when we looked at it is, our teams' ability to add value on the operation and maintenance cost side.

Really think about as we bring assets into the portfolio, it really gets leveraged on the platform that we already operate and so the team is really excited about how we can add incremental value through the Energy Resources management of these assets at NextEra Energy Partners.

We've been very excited about NextEra Energy Partners growth outlook for quite some time as we've always indicated our excitement is well founded, just simply looking at the backlog of those operating and signed contracts and then the potential for new contract synergy resources.

But have always alluded to the fact that really our market opportunity is this broader market set and we'll continue to engage and look for opportunities. I do think there are more opportunities out there, third-party acquisitions on the renewables side. It's an area of focus for us to continue to participate in.

but we've got the three ways to grow and to the extent that we can put opportunities to be rather great and we'll take advantage of them overtime. But we also continue to have terrific organic opportunities in NEP particularly as the portfolio grows and then of course the continued success of Energy Resources in the broader market is very positive..

Okay and just any sense on the returns you expect on this acquisition?.

Sure. We've already highlighted in terms of cap fee produced for the assets $60 million plus relative to the acquisition price that we highlighted obviously that's subject to closing adjustments.

So that's at the project level and then we'll optimize the financing overtime particularly as we think about the rest of the growth expectations for 2021 into 2022..

Okay and then just maybe a little bit more color on the Biden infrastructure and tax plan just I guess maybe obviously you made it clear that the infrastructure side will be beneficial for your business. How are you thinking on the tax side and are there any risk to you from that either just the high rate or the minimum book tax issue? Thanks..

Steve, its Jim. Obviously, there was a lot unpacked in the plan. It's very early in the process. I think this is a process that's going to play out over months, not weeks.

There's obviously a lot in the plan that's very positive from a renewable standpoint and as Rebecca said in the prepared remarks, we're excited to work with the administration on the plan that I think is really going to accelerate the decarbonization of the US economy over the next several years in a way that we've always said for a long time is going to be essentially free to customers i.e.

not more expensive for customers. I mean the thing about the green economy is that it's cleaner, it's greener but it's also cheaper and that's why it's so powerful. So lot of details obviously still to be worked out.

We're working them as you can imagine it's very early and probably too early for me to comment on any of the specific details that we feel like need some work versus the ones that we like a lot.

On the tax front, I think obviously that's - there are a lot of puts and takes with taxes particularly in a company that has both utility assets as well as renewables assets and we're working through it. Think about the tax rate going up something in the $0.04 to $0.07 of headwinds.

I'm not particularly worried about that in the context of all the other things that would be positive for our company if the infrastructure bill gets passed. So we continue to work obviously that as well. Lots of details still be laid out on the minimum tax issue and that also matters as to what the final corporate rate ends up being.

And I guess the last thing I would say is, none of this is going to be easy to get done. It's very narrow margins in both the Senate in the House and folks tend to focus on the Senate.

Its extraordinarily narrow margin given kind of vacancies in the house right now as well and there's - the history on mid-term elections suggests that it's always an uphill battle for the current administration in mid-term for whatever party is in power in mid-term elections on a presidency.

So that on the one hand I think put some urgency I think around the administrations push to get something this year. But the flipside is, it also - there's a lot of risk for moderate democrats to take a vote on some of these issues. It's going to be very - any change will be very hard.

I think we were very much a part of the - we've always been very active in terms of what happens around clean energy policy in Washington and you can imagine that we're remaining very active on that front and working it very hard.

But I will just say in closing, that we're very much encouraged by the focus of the administration on decarbonising the economy.

We feel like it's the - absolutely the right thing for the planet and the right thing for customers and the right thing for the country and we stand ready to support an infrastructure plan that accelerates that decarbonization and I think, any acceleration of what's already going on just because of the amazing economics that renewables have relative to the other alternatives plus what's going on with hydrogen and you saw there was a PTC, hydrogen PTC as part of the suggested as part of the infrastructure plan.

So there's a lot of very positive things in there that we're going to be working on to build on over the next several months..

Great. Thank you very much..

Our next question today comes from Stephen Byrd at Morgan Stanley. Please go ahead..

Wanted to explore green hydrogen a little bit further.

You all have expressed a lot of enthusiasm about the potential for growth here and the potential for joint venture activity and I was just curious, your latest thinking there and I guess broadly I've been thinking that sort of combing best in class renewables that you have with significant capabilities and actually sort of marketing, distributing, selling etc hydrogen would be critical to success in terms of supply of unused customers with green hydrogen.

I'm just curious your general outlook enthusiasm for the prospect for more JV announcements..

Perfect. Thanks Stephen. Let me start with the longer-term view first and then come back to the shorter term which would really tie into I think the latter part of your question in comment.

The first part which is the latter term view is when we look at substantial deployment of renewable and battery storage and think about how do you further decarbonize the US electricity sector. When we previously ran that analysis just trying to add more renewables and add more battery storage.

It became very burdensome for customers because you aren't getting a significant amount of value to the more and more renewables and storage you add, absent other actions.

So when we incorporated hydrogen into that thought which is effectively a form of long duration storage that is taking advantage of chief electricity production coming from renewables in some cases excess renewable production at certain times of the day.

That substantially changes the value equation for customers to fully decarbonize in the electricity sector.

So that gives us great excitement about the potential for substantial renewables and battery storage deployment knowing that as you continue to deploy more and you find economic forms of long duration storage that continues to be very value accretive to customers both in cost and in the performance of clean energy.

So that's kind of the starting point, but then coming back to a little bit more nearer term. If you think about how do you decarbonize transportation industrial sectors.

The most exciting ways to do that, that we see today is through electrification whether that's in the form of electric vehicles fueled by batteries or other type of fuel cells or through hydrogen and hydrogen probably more applicable on the industrial sector particularly for applications that already exist today.

And as Jim highlighted the potential for hydrogen production tax credit being considered by the administration and by Congress is part of the infrastructure package. In the near term we could see a closing of the GAAP perhaps fairly quickly to creating this as an economic alternative to other fuel sources today that are fossil fuel based.

So yes, we couldn't be more excited about it for both the opportunities for renewables for electricity sector, industrial and transportation. But also as you suggested potentially to participate in the hydrogen infrastructure itself whether it's the electrolyzer or rather forms of creating and distributing the molecules.

How much and where we participate in that is really one of the things that we're focused on in all of these different pilots. That both John and the Energy Resources team as well as Eric within Florida Power & Light are thinking through today.

How do we do that economically? How do we leverage some of the scale benefits and opportunities that our business can bring to bear in these opportunities? You'll see us continue to place small bets to get experienced to build relationships to gain knowledge and in the short-term that won't add up to heck of a lot of capital investment opportunity.

But it will add up to a tremendous amount of learning and continuing to focus our strategies on where we can add significant amount of value to the infrastructure and the market and ultimately to our shareholders as well..

That's really helpful and then just separately thinking about the mix of growth that resources. Obviously, there's a lot of solar activity, lot of solar megawatts that you'll be deploying. I just wanted to get your latest thinking on the outlook for returns between solar and wind.

I guess I generally hear continued views that yes, solar returns certainly lower than wind. There is more competition there. But just curious your latest thoughts on solar versus wind return outlook..

From a return standpoint, we do see a differential we have quite for time overall returns between wind and solar from a risk adjusted basis. We're happy with returns that we've seen in both sets of technologies.

In the short-term in terms of backlog John and the Energy Resources team certainly influenced by what I think is the conventional wisdom for a long time, the step downs for the production tax credit on wind and the step down for the investment tax credit on solar or in fact likely to happen.

I think our customers now are thinking about that a little differently as discussions in Washington have started to heat up. But as we look what our likely outcomes as Jim was talking through including the potential for extensions of those incentives.

I think the key takeaway is, they remain both technologies are very likely to remain economic for our customers to deploy on behalf of their customers and ultimately leading to significant cost savings for electricity buyers at the end of the day.

So they remain attractive from our perspective and we continue to focus our development and efforts on wherever we can add value for our customers..

Very good. Thank you very much..

And our next question today comes from Michael Weinstein with Credit Suisse. Please go ahead..

On the subject of third - party acquisition for NEP. Could you comment on any opportunities you're seeing in Texas following Winter Storm Uri? I think we've heard some previous comments there are lots of parties looking at distressed assists in the state and wondering that if there might be an opportunity for NEP as well..

Yes Michael, I think it's probably still a little bit too soon. I think most participants in the market are still working through a lot of the implications and learning's from Texas. So I'm not sure there's a lot to be commented on in the near term. It's obviously something we'll stay engaged in the market and participate where it makes sense.

But at this point, I think it's too soon..

Can you comment a little bit about how much it costs to weatherize in the state? What actions you guys have been taking since the storm?.

So we've done a lot of deep dives across our portfolio to think about where weatherizing makes sense. As I've talked about in the past and you all know, we have a lot of interest across Texas not only wind investment, solar, battery storage, gas infrastructure investments and of course the small retail business.

So we've been carefully thinking through all of - whether the opportunities to learn and perhaps invest going forward. Specifically to weatherizing, I don't know if you were talking exclusively around the renewable fleet or you're talking about the gas infrastructure side.

But on the renewable side keep in mind that weatherization really focuses on ambient temperature effects and ambient temperature at least for our fleet. I can't speak for everybody was not the real issue for any sort of production shortfall versus a P-50 forecast.

It was really related to the fact in this extraordinary event that happened for multiple days it was preceded by an icing event.

So ice was accumulating on our blades and when ice accumulates on the blades it's difficult for them to spin and because the temperatures remained low for several days in a row, there wasn't an opportunity for that ice to shed. Typically weatherization packages don't really address ice accumulation on the blades.

This is something the industry is focused on.

There are some - what at this point are very expensive solutions to try to address ice accumulation on the blades and given that they don't happen every year and certainly don't happen frequently across specific sites every year and ends up being very cost prohibitive for something that happened very sporadically.

So I'm not optimistic that there's a substantial amount due to at least today with respect to weatherization on the wind side to change the events.

I do think there's opportunities across the gas supply side to improve the ability for gas to flow which obviously was really at the crux of the issues along with not only natural gas, supply shortages but plant issues in the coal fleet and issues in nuclear fleet. So there's opportunities across the market to invest..

And if I could just add to that, what Rebecca said, this is John. When you look at ERCOT's operating fleet what they really do have to address at the end of the way as weatherization of gas because you think about 87, 88 gigawatts that were supposed to be available.

I mean renewables on an MCF adjusted basis for only about 3 gigawatts of that and very much a rounding error and the problem that occurred in Texas and so Texas really needs to think through what are the right solutions for gas because when you have icing conditions. It doesn't matter if it's blades on a turbine. It's combustion gas turbine.

It's a nuclear power plant. It's a coal plant. When you have severe icing conditions. They're all going to fail and that's what we saw in Texas.

And so the question is, what is going to be the right market construct going forward to provide the appropriate for weatherization and for backup fuel on site to make sure that these facilities are capable of running and I think those are the kinds of issues that the Texas legislature is currently evaluating..

Got you. One last question from me.

Does third - party acquisitions at NEP put any kind of pressure on IDR payments [ph] and the IDR scheme going forward?.

I'm not sure what you mean by pressure, they're ultimately the calculation for IDRs is one that's known and relates to the overall growth and cash flow within NEP. So it's not specific to where the acquisition source was for the asset..

Okay, just wondering if you see a big uptick in third - party acquisition instead of dropdown cash going up to next year? Is there any kind of pressure one way or another to change the IDR structure?.

No there's not a difference in terms of the structure and at this point in time NextEra Energy Partners and NextEra Energy with the idea of the structure that's currently in place..

Great, thank you..

And ladies and gentlemen, this concludes today's question-and-answer session and today's conference call. We thank you all for attending today's presentation. You may disconnect your lines and have a wonderful day..