Good morning everyone. And welcome to the NextEra Energy and NextEra Energy Partners Q2, 2021 Earnings Call. [Operator Instructions] Please also note today's event is being recorded. And at this time, I would like to turn the conference over to Jessica Aldridge, Director of Investor Relations. Ma'am, please go ahead..

Thank you, Jamie. Good morning, everyone, and thank you for joining our second 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 and 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. 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 FPL, we are 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 Rebecca..

Thank you, Jessica. And good morning everyone. NextEra Energy delivered strong second quarter results and is well positioned to meet its overall objectives for the year. Adjusted earnings per share increased more than 9% year-over-year reflecting continued strong financial and operational performance across all of the businesses.

FPL increased earnings per share by $0.04 year-over-year driven by continued investments in the business. FPL's major capital initiatives remain on track and FPL's focus continues to be on identifying smart capital investments to lower costs, improve reliability and provide clean energy solutions for the benefit of our customers.

In June, FPL demolished its last coal fired plant in Florida with plans to replace it with more clean emissions free solar energy facilities. During the quarter, FPL also successfully commissioned approximately 373 megawatts of new solar, including the FPL Discovery Solar Energy Center at Kennedy Space Center.

With these new additions FPL surpassed 40% completion of its groundbreaking 30 by 30 plan to install 30 million solar panels by 2030. FPL expects to have installed more than 15 million panels by early 2022, which would put the company more than 50% on the way towards completing a 30 by 30 plan. And just over three years since the initial announcement.

To support its solar build out, FPL recently began installing the first components of the world's largest integrated solar powered battery system. The 409 megawatt FPL Manatee Energy Storage Center which expected to begin serving customers later this year.

Gulf Power also continued to execute on its growth initiatives during the quarter with its strong financial performance driven primarily by continued investment in the business and further improvements in operational cost effectiveness.

Excluding the COVID-19 related expenses which were subsequent reversed and booked into a regulatory asset in the third quarter of 2020, Gulf Power's year-to-date O&M costs declined by approximately 9% versus the prior year comparable period, and have now declined by approximately 31% relative to 2018.

Gulf Power's operational performance metrics also continue to improve with reliability of the generation fleet that we operate, and service reliability improving by 71% and 63% respectively, year-to-date versus the first half of 2018.

We continue to expect the cost reduction initiatives and smart capital investments that we've previously outlined will generate significant customer and shareholder value in the coming years. At Energy Resources, adjusted earnings per share increased by more than 7% year-over-year.

The energy resources team continues to capitalize on the terrific market opportunity for low cost renewables and storage, adding approximately 1840 megawatts to its backlog since the last earnings call.

This continued origination success is a testament to Energy Resources' significant competitive advantages, including our large pipeline of sites and interconnection queue positions, strong customer relationships, purchasing power and supply chain execution, best-in-class construction expertise, resource assessment capabilities, cost of capital advantages, and world class operations capability.

Moreover, Energy Resources Advanced Data analytics and machine learning capabilities allow us to utilize the nearly 40 billion operating data points our fleet provides every single day for predictive modeling, further extending our best-in-class O&M and development capabilities.

We continue to believe that no company is better positioned than Energy Resources to capitalize on the best renewables development period in our history. We are pleased with the progress we've made at NextEra Energy so far in 2021.

And headed into the second half of the year, we are well positioned to achieve the full year financial expectations that we've previously discussed, subject to our usual caveats. Now let's look at the detailed results beginning with FPL.

For the second quarter of 2021, FPL reported net income of $819 million or $0.42 per share, which is an increase of $70 million and $0.04 per share, respectively year-over-year. Regulatory capital employed increased by approximately 10.7% over the same quarter last year, and was the principal driver of FPL's net income growth of more than 9%.

FPL's capital expenditures were approximately $1.6 billion in the second quarter, and we expect our full year capital investments to total between $6.6 billion and $6.8 billion. Our reported ROE for regulatory purposes will be approximately 11.6% for the 12 months ended June 2021.

During the quarter, we utilized $100 million of reserve amortization to achieve our target regulatory ROE leaving FPL with a balance of $473 million.

As a reminder, rather than seek recovery from customers of the approximately $240 million in hurricane Dorian storm restoration costs, in 2019, FPL utilized its available reserve amortization to offset nearly all of the expense associated with the write-off of the regulatory assets related to Dorian cost recovery.

Earlier in the year FPL and Office of Public council entered into a settlement regarding the prudence of FPL’s hurricane Dorian storm restoration costs and activities, which was approved by the Florida Public Service Commission in May.

We were pleased by the Commission's determination that all of FPL hurricane Dorian restoration costs were prudently incurred, and we believe the settlement agreement fairly and reasonably balances the interests of FPL and its customers.

Earlier this month, FPL responded to tropical storm Elsa, with a restoration workforce of approximately 7,000 FPL employees and contractors.

FPL safely and quickly restored power to nearly 100,000 customers who were impacted by Elsa as the hardening and automation investments that FPL has made since 2006 to build a stronger, smarter and more storm resilient energy grid continued to benefit customers. Elsa was the earliest that a fifth named storm has formed in the Atlantic basin.

And we remain prepared in advance of what is forecasted to be another active hurricane season in 2021. Let me now turn to Gulf Power, which reported second quarter 2021 net income of $63 million or $0.03 per share.

During the quarter Gulf Power's capital expenditures were approximately $150 million and we expected full year capital investments to be between $800 million and $900 million.

All of the major capital with the Gulf Power capital projects, including the North Florida resiliency connection that is expected to be in service in mid 2022 continue to progress well and Gulf Power's regulatory capital employed grew by approximately 17% year-over-year as a result of these smart capital investments for the benefit of customers.

Gulf Power's reported ROE for regulatory purposes will be approximately 10.3% for the 12 months ended June 2021. For the full year 2021, we continue to target a regulatory ROE in the upper half of the allowed band of 9.25% to 11.25%.

Earlier this month, Florida Public Service Commission also approved a settlement agreement between Gulf Power and the Office of Public Council for cost recovery of the approximately $13 million in COVID-19 related expenses, primarily reflected in incremental bad debt and safety expenses as a result of the pandemic.

We are pleased with this outcome and believe it demonstrates the continued constructive regulatory environment in the state of Florida, as we work to improve Gulf Power's customer value proposition of low costs, high reliability, excellent customer service and clean energy for our customers.

As we anticipated, Florida's economic activity has rebounded since the onset of the COVID-19 pandemic last year, as reflected by a wide range of positive economic indicators. Florida's current unemployment rate is 5%, which remains well below the national average.

Rolling three month average of new building permits are up approximately 46% year-over-year, which is the highest growth rate in nearly eight years, and are the second highest new building permits in the nation. As another indicator of health in Florida's economy, Florida's retail sales index was up over 40% versus the prior year.

The Case-Shiller seasonally adjusted index for South Florida home prices is up over 14% on an annual basis. Recent population growth estimates indicate that Florida remains one of the top destinations for relocating Americans, with Florida adding nearly 330,000 new residents between April of 2020 and April of 2021.

We expect this trend to continue, with Florida's population projected to grow at an average annual rate of 1% through 2023 and FPL, including Gulf Power forecasts adding almost 500,000 new customer accounts from 2018 through 2025.

During the quarter, FPL's average number of customers increased by approximately 70,400 from the comparable prior year quarter, driven by continued solid underlying population growth. FPL's second quarter retail sales increased 2.1% from the prior year comparable period.

Partially offsetting customer growth was a decline in weather related usage per customer of approximately 2.8%. On weather normalized basis, second quarter sales increased 2.9% with continued strong underlying usage contributing favorably.

For Gulf Power the average number of customers grew roughly 1.5% versus the comparable prior year quarter, and Gulf Power's second quarter retail sales decreased 1% year-over-year, as strong customer growth was more than offset by an unfavorable weather comparison relative to 2020.

As we previously stated on March 12, we initiated Florida Power and Light 2021 base rate proceeding. The four year base rate plan we have proposed has been designed to support continued investments in clean energy generation, long-term infrastructure and advanced technology, which improves reliability and keeps customer bills low.

Today FPL typical residential bills remain well below the national average and the lowest among the top 20 investor owned utilities in the nation.

With a proposed base rate adjustments and current projections for fuel and other costs, FPL's typical residential bill is expected to be approximately 20% below the projected national average, and typical Gulf Power residential bills are projected to decrease approximately 1% over the four year rate plan.

As always we are open to the possibility of resolving our rate request through our fair settlement agreement. And our core focus remains on pursuing a fair and objective review of our case that supports continued execution of our successful strategy for customers.

Energy Resources reported second quarter 2021 GAAP losses of $315 million or $0.16 per share. Adjusted earnings for the second quarter were $574 million or $0.29 per share. Energy Resources adjusted earnings per share in the second quarter increased more than 7% versus the prior year comparable period.

The effect of mark-to-market on non-qualifying hedges which is excluded from adjusted earnings was the primary driver of the difference between Energy Resources' second quarter GAAP and adjusted earnings results.

Contributions from new investments added $0.04 per share versus the prior year and primarily reflect growth in our contract of renewables and battery storage program.

Adjusted earnings per share contributions from existing generation and storage assets increased $0.01 year-over-year, which includes the impact of unfavorable wind resource during second quarter. NextEra Transmissions adjusted earnings per share contribution also increased $0.01 year-over-year.

Our customer supply and trading business contribution was $0.3 lower year-over-year primarily due to unfavorable market conditions. All other impacts decreased results by $0.01 per share versus 2020.

The Energy Resources Development team continues to capitalize on what we believe is the best renewables development environment in our history during the second quarter, with a team adding approximately 1,840 megawatts of renewables and storage projects to our backlog.

Since our last earnings call, we've added approximately 285 megawatts of new wind and wind repowering, 1,450 megawatts of solar and 105 megawatts of battery storage to our backlog assign contracts.

With nearly 3.5 years remaining before the end of 2024, we have already signed more than 75% of the megawatts needed to realize the low end of our 2021 to 2024 development expectations range. Since the last call, we have also executed a 310 megawatt build own transfer agreement which is not included in our backlog additions.

Our customer intends to use this solar-plus-storage project to replace existing coal generation. And we are excited to be able to continue supporting the industry's transition away from old inefficient forms of generation into clean, reliable and low cost renewables and storage.

Our engineering and construction team continues to perform exceptionally well commissioning approximately 330 megawatts during the quarter and keeping the backlog of wind, solar and storage projects that we expect to build in 2021 and 2022 on track.

We are well positioned to complete our more than $20 billion capital investment program at Energy Resources for 2021 and 2022. Last month, the IRS extended safe harbor eligibility on production tax credits and investment tax credits.

Providing projects that began construction between 2016 and 2019 with six years to complete construction and projects that started construction in 2020 with five years to achieve their in service dates and qualify for federal tax credits.

We believe the extension reflects the strong support of the Biden administration for new renewables and may enable an incremental 1 to 1.5 gigawatts of new wind and wind repowering opportunities.

We now have more than $2.2 billion of safe harbor wind and solar equipment, which could support as much as $45 billion of wind, solar and battery storage investments across all of our businesses from 2021 to 2024.

Turning now to the consolidated results for NextEra Energy; for the second quarter of 2021, GAAP net income attributable to NextEra Energy was $256 million or $0.13 per share. NextEra Energy's 2021 second quarter adjusted earnings and adjusted EPS were $1.4 billion and $0.71 cents per share respectively.

Adjusted earnings from corporate and other segment were roughly flat year-over-year. Over the past few months NextEra Energy issued nearly $3.3 billion in new financings under its innovative new NextEra Green bond structure.

Funds raised with NextEra Energy green bonds are designated for specific renewable energy and storage projects under development across our businesses. And if funds are not used to bring the renewable projects online within two years, there was a step up in the interest rate on the debt.

Our inaugural NextEra Green issuance was 4.5x oversubscribed, priced at a premium to the market and was well received by investors. We believe that NextEra Green will set a new standard for green issuances moving forward.

NextEra Energy has raised more than $9 billion in new capital year-to-date on very favorable terms as we continue to execute on our financing plan for the year.

Finally, in June, S&P affirmed all of its ratings for NextEra Energy and lowered its downgrade threshold for its Funds From Operation or FFO to debt metric, from the previous level of 21% to the new level of 20%.

We believe this favorable adjustment reflects the strength of our business, as well as recognition of NextEra Energy's leading position in the utility and renewable energy sectors on environmental, social and governance or ESG factors.

We believe this is the first time that S&P has formally recognized the benefits to business risk profile related to ESG factors by allowing more constructive financial metrics since it began its practice of identifying the specific ESG key metrics that drive a company's overall credit position.

Notably, S&P also revised NextEra Energy's management and governance assessment, from satisfactory to strong to reflect its views on our comprehensive enterprise wide risk management standards, and successful track record of consistently implementing our strategic planning efforts. Our long-term financial expectations through 2023 remain 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 are 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 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 our dividends per share at roughly 10% rate per year to at least 2022 off of a 2020 base. As always, our expectations assume normal weather and operating conditions.

Let me now turn to an NextEra Energy Partners, NextEra Energy Partners portfolio performed well and deliver financial results are generally in line with our expectations after accounting for the below average renewable resource.

On a year-to-date basis, adjusted EBITDA and cash available for distribution have increased by roughly 9% and 11%, respectively, versus 2020. This strong operational and financial performance highlights the NextEra Energy Partners remains well positioned to continue to deliver on its outstanding growth objectives.

Yesterday, the NextEra Energy Partners' board declared a quarterly distribution $0.6625 per common unit or $2.65 per common unit on an annualized basis, up approximately 15% from a year earlier. Inclusive of this increase NextEra Energy Partners has now grown its distribution per unit by more than 250% since the IPO.

Further building on that strength, today we are announcing the NextEra Energy Partners has entered into an agreement to acquire approximately 590 net megawatts of geographically diverse wind and solar projects from NextEra Energy Resources. I'll provide additional details on the transaction in a few minutes.

NextEra Energy Partners also completed multiple financing during second quarter to secure funding for its recently announced 2021 acquisitions and further enhance its financing flexibility.

In June, NextEra Energy Partners raised approximately $500 million in new 0% coupon convertible notes and concurrently entered into a capped call structure that is expected to result in NextEra Energy Partners retaining the upside from up to 50% appreciation in its unit price over the three years associated with a convertible notes.

NextEra Energy Partners also drew the remaining funds from its 2020 convertible equity portfolio financing, which was upsized by approximately $150 million during the quarter evidencing continued investor demand for exposure to the high quality long term contract of renewables projects and the underlying portfolio of assets that was established last year.

Finally, NextEra Energy Partners has successfully completed the sale of approximately 700,000 NEP common units year-to-date through its recently expired at the market or ATM program, raising roughly $50 million in proceeds.

Going forward, we will continue to seek opportunities to use the ATM program depending on market conditions and other considerations. And in the near term NextEra Energy Partners intends to renew the program for up to $300 million in issuances over the next three years to permit additional financing flexibility.

As a result of these financings, and the strong cash flow generation of its existing portfolio, NextEra Energy Partners ended the quarter with more than $2.2 billion in liquidity, which includes funds raised in second quarter financing activities and existing partnership debt capacity to support its ongoing growth initiatives, including the acquisition of the approximately 599 megawatts of renewables from Energy Resources, as well as previously announced acquisition of approximately 400 megawatts of operating wind projects, both of which are expected to close later this year.

Let me now review the detailed results for NextEra Energy Partners. Second quarter adjusted EBITDA $350 million was roughly flat versus the prior year comparable quarter driven by favorable contributions from the approximately 500 megawatts of new wind and solar projects acquired in 2020.

Weaker wind and solar resource in this second quarter, which reduced this quarters adjusted EBITDA contribution from existing projects by roughly $22 million was partially offset by positive contributions to adjusted EBITDA from last year's repowering and the Texas pipelines.

Wind resource for the quarter was 93% of the long-term average versus 100% in the second quarter of 2020. Cash available for distribution of $151 million for the second quarter was also reduced for existing projects due to the distributions for the convertible equity portfolio financing entered into late last year.

As a reminder, this convertible equity portfolio financing recapitalize NextEra Energy Partners' existing Genesis solar project and other assets, and the proceeds were used to fund last year's acquisition from Energy Resources. Additional details of our second quarter results are shown on the accompanying slide.

We remain on track for the strong full year growth consistent with our long-term growth objectives of 12% to 15% distributions per unit growth through at least 2024.

As I previously mentioned, we continue to execute on our plan to expand NextEra Energy Partners' portfolio with an agreement to acquire assets in a diverse portfolio of long-term contracted wind and solar projects from Energy Resources.

The portfolio consists of approximately 830 megawatts of renewables, of which NextEra Energy Partners will be acquiring an approximately 590 megawatt net interest.

NextEra Energy Partners' interest in the portfolio will consist of approximately 510 megawatts of universal scale wind and solar projects, and approximately 80 megawatts of distributed solar projects, which is NextEra Energy Partners' first acquisition of distributed generation assets.

The portfolio to be acquired by NextEra Energy Partners has a cash available for distribution weighted average contract life of approximately 17 years and a counterparty credit rating of Baa1 at Moody's and BBB at S&P.

Additional details on the portfolio of assets to be acquired by NextEra Energy Partners can be found in the appendix of today's presentation.

Energy Resources currently owns the country's largest portfolio of distributed generation assets with commercial and industrial customers, and expects to triple its capital investment and distributed generation from 2020 through 2020.

NextEra Energy Partners expects to benefit from this expansion over the coming years through future acquisitions from Energy Resources. NextEra Energy Partners expects to acquire the portfolio for a total consideration of $563 million subject to working capital and other adjustments.

NextEra Energy Partners' share of the portfolio's debt and tax equity financings is estimated to be approximately $270 million at the time of closing.

The acquisition is expected to contribute adjusted EBITDA of approximately $90 million to $100 million, and cash available for distribution of approximately $41 million to $49 million, each on five year average annual run rate basis beginning on December 31 2021.

The purchase price for the transaction is expected to be funded with existing liquidity, and the transaction is expected to close prior to year end and be immediately accretive to LP distributions.

NextEra Energy Partners continues to expect to be in the upper end of our previously disclosed year end 2021 run rate adjusted EBITDA and capped the expectation ranges of $1.44 billion to $1.62 billion and $600 million to $680 million, respectively.

As a reminder, all of our expectations are subject to our normal caveats, and include 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 of 2022, to be in the range of $2.76 to $2.83 per common unit. In summary, we remain as enthusiastic as ever about the long-term growth prospects for both NextEra Energy and NextEra Energy Partners.

At NextEra Energy we were honored to be named on Time magazine's first ever list of Top 100 most influential companies, which highlights businesses making an extraordinary impact around the world.

We are proud to be leading the clean energy transformation in our sector and remained focused on executing upon the opportunities presented by the significant growth in wind, solar and various forms of energy storage in the US over the coming decades.

At FPL, including Gulf Power, that means continuing to deliver on our best-in-class customer value proposition of low bills, high reliability and clean energy solutions. At Energy Resources, our competitive advantages, position as well to capture a meaningful share of the significant and expanding market for renewables.

And at NextEra Energy Partners with its continued access to low cost capital, and accretive acquisition opportunities, is well positioned as ever to take advantage of the clean energy transformation, reshaping the energy industry. That concludes our prepared remarks. And with that, we will open up the line for questions..

[Operator Instructions] Our first question today comes from Shar Pourreza from Guggenheim Partners..

Hey, good morning, guys. Just a question with sort of the infrastructure discussions going on at the federal level and obviously, Rebecca, you highlighted opportunities on the wind and solar side.

Does NextEra transmissions sort of seeing the upside from policy changes? And obviously, with the prior acquisitions closed, do you feel like you have a big enough platform to grow organically or is there an interest to roll up more standalone projects development entities?.

Yes, thanks, Shar. Appreciate the question. From our perspective, and we're looking out decades and looking at the enormous renewables build opportunity across the US. It is clear that over time new transmission needs to be built to support some of that build out. And it's not necessarily imperative today for that transmission to be built.

But it certainly is important to start today to build the type of infrastructure that's needed over time. So we're really excited about the opportunities that the NextEra Energy Transmission team has.

And I would expect over time that we will grow both organically and continue to look for acquisition opportunities, like we have over the last couple of years to supplement and build out that portfolio.

We're thrilled with the Trans Bay Cable acquisition that we closed a couple of years ago, very excited to bring the GridLiance team on board and will continue to focus on opportunities, both organically and through acquisition over time.

From a broader policy standpoint, we saw that important for FERC the regional ISOs to continue to focus on how you support that transmission build out. And we certainly are happy to see that to start to be a focus at FERC this year in particular, and contemplating how do they support it going forward.

And I think there's a receptive audience in the Biden administration, making sure that they support laying a foundation that supportive of renewables, not just in the next couple of years, but in the next couple of decades. So transmission moves slowly, you know that. So stay tuned.

But we're optimistic both about our direct prospects in the near term as well as longer term..

Got it. And then the backlog additions look obviously more solid this quarter. Just thinking about maybe the market dynamics, there was some slowdown in early '21 with input costs and commodity inflation, right.

Have you seen that or are the headwinds largely stabilized? And just as a follow up, is energy storage, still kind of a large component of the backlog and contracted additions or has there been some pricing pressure there?.

Our Energy Resources Development team clearly as evidenced by not only the signings this quarter, but looking back at quarters now going back quite a number of them have just had terrific origination success. And I've encouraged everybody to not just focus on an individual quarter and look at a slightly broader trend.

And we're really pleased not only with what we've seen looking back and what the team has been able to execute on, but also looking forward.

And that's what gave us the confidence just early this year, to not only increase but expand the horizon for our development expectations, such that our four year period starting '21 through '24 is 23 to 30 gigawatts, which is just an exceptional number and one that we're really excited and proud of the team for taking on and we're thrilled to be at 75% already at the low end today.

In terms of our customer demand remains very strong across the board, and we're certainly excited about bringing that into more signed contracts going forward. In terms of costs, as you know, we'll continue to incorporate our latest expectations and industry's latest expectations for costs.

And we feel very comfortable with the returns that we see and excited about the opportunities going forward. .

Got it. And then just lastly, regarding just the rate case, I mean, obviously, you're having conversations with interveners and you're building a case record there and obviously highlighted you always prefer a settlement.

Are there any moving pieces that you feel are in focus? And what do you sort of think you have some flexibility for a constructive kind of outcome versus a fully litigated case?.

Shar, as we've talked about with you all, from an investor standpoint, we're very focused over years now leading up to the case as a matter of our strategy making sure that the best customer value proposition possible, and you can see that in our execution on O&M, or reliability on customer service.

And, of course, the continued focused on clean energy generation, because that's in our control. What's also in our control is putting forward the best case possible to ensure that we're articulating that strategy, not only what the team has accomplished, but what we plan to do in the coming four years to support continued execution.

So the team is very focused on continuing to go through the process. And culminating with the hearings, in short order and commission decision later this year if we go that far. But we're also always very interested in having a win-win solution with stakeholders.

We certainly appreciate the history of that in Florida, not just with us, but with other utilities and broader stakeholder base.

And we will continue to remain very engaged and any sort of constructive outcome that we could bring forward with stakeholders, we think that's positive for our customers and broader stakeholders, if we can accomplish it, but we're focused on the task at hand and we'll continue through the process and see where we are at the end of the year. .

Perfect. Congrats guys on the results..

Our next question comes from Julien Dumoulin-Smith from BOA. .

Excellent. Good morning, team. Thanks for the time. Maybe picking up where Shar left it off.

Can you speak a little bit more about some of this inflation dynamic? And especially some of the elevated freight and logistics? I mean, it seems like your '21, '22 outlook here is relatively intact? Can you speak to some of the dynamics there in and just the competence? It seems like you guys are certainly staying on track of execution that you have historically.

But also in the same vein of inflation, can you speak to what that does to your PPA offtake prices, right? I mean, how are you thinking about this being effectively passed through to your customers, if you will, whether that's as a proxy for higher gas and power prices, or simply just passing through your higher cost of goods here?.

Yes, thanks, Julien. And I'll start with some kind of near term thoughts. And then think about the broader term second, near term, as we talked about in the prepared remarks, we feel very comfortable with where we are with our backlog and what we plan to build in the 2021 and 2022 timeframe. And our comments reflected that in the prepared remarks.

And it's a real credit to the way that we approach this business, and our engineering, construction and integrated supply chain teams are really working through a variety of different circumstances over the last year and a half.

And we've secured the equipment that we need to build out those projects and of course have some contractual agreements in place that help us feel comfortable about acquisition. From a longer term standpoint, I think it still remains to be seen in some respects.

So you can see that in broad set of discussion across the financial and the broader US economy, dialogue of whether or not this is temporary related to near term snapbacks in demand and hurdles in the supply chain that may not persist over time, or if it is systemic and persisting. So I think that remains a little bit to be seen.

One thing that's very fortunate for renewables, as you all well know, is that renewable energy projects are very much the least cost form of generation in many parts, if not most of parts of the US.

So even if there is a change in pricing, if these cost increases are persistent and systemic over a long period of time, the value proposition is still very clear for renewables relative to alternatives. And then beyond that, we also need to think about what implications if any there will be from policy changes.

So I think that the net takeaway is somewhat premised in your question is that we feel comfortable with where we are, we're prepared for a variety of set of circumstances. And we're thrilled with a position of renewables and the growth opportunities. And honestly, the decades ahead..

One small add, I would I would make to listen to what Rebecca just said. This is John; it's actually creating opportunities for us.

Our supply chain capability and our ability to manage that supply chain, the buying power, that we have spent an $11 billion in CapEx a year, it's creating opportunities for us in the renewable space because we can execute deliver where others can't..

I mean, to that point, can you speak to how much procurement you all have done against the full kind of full year outlook that you guys talk about here? I mean, how hedged up, for lack of a better way to describe this, are you against these eventualities? And I know you all do meaningful forward planning here..

Yes, pretty well hedged up Julien, I mean, we've basically locked in, obviously '21, we've locked in '22, making really good headway against '23, as well. And so that's put us in a great position, when you look at where we stand against the rest of the market, and where others can't deliver particularly around commitments in '22, or '23, or '24.

Because they don't have the same supply chain leverage that we do. It's really creating opportunities in those out years. And you got to remember, the customers a little bit concerned.

So if they're dealing with smaller players, that don't have the same supply chain leverage, that are having to constantly go back to them for price ups, or for COD extensions, it really lowers the credibility of those types of players and market, and it creates more opportunities that fall our way.

And so that's why I say it's a real opportunity for us..

Got it.

And just to clarify that even further, or are you suggesting that not only could you get awarded future contracts, are you suggesting that you might be able to take over existing or perhaps the fund PPAS that have already been awarded?.

Not take over. But if those opportunities fall away, because the off take where the customer can't arrange or workout with that developer. Sometimes those are -- those get bid back out to RFP or sometimes it creates a bilateral opportunity for us..

Our next question comes from Steve Fleishman from Wolfe Research..

Hey, good morning. Can you hear me Rebecca? Great. So first question on the announced backlog growth this quarter, lot of solar adds. But just a little bit of storage.

Are you seeing, if I recall, you've been getting kind of 50% roughly adoption of storage with solar, is that changing? Just happened to be more just solar standalone weighted this quarter?.

Yes, Steve, I wouldn't read into it. To kind of consistent with the overall backlog additions, I think you'd need to look a little bit broader in just a three month period to get an indication of trends.

What we see is not a slowdown in storage at all, there's a lot of interest in new storage opportunities, not just with our customers, but even from a regulatory standpoint in certain jurisdictions where storage could be particularly helpful given certain dynamics in various markets.

So we're very excited about the storage opportunity and don't see a change in the overall dynamics as of opportunities..

Yes, and one thing I would add to that Steve is, with all the hot weather that you're seeing out in the West, that's only going to drive more storage opportunity and I think we have a real competitive advantage as you seen the past in those markets..

Okay, great, and maybe just switching over to NEP. So this is the second drop, I think in the last six months or so, where the capped yields have been around 8% is that kind of the new range we should be expecting for NEP on drops of one term contracted asset..

Steve, you can appreciate we and of course, the NEP board and Energy Resources perspectives all constantly looking at what valuations are and where third party transactions have transacted and we think about the valuations in those light.

And I think with where costs of capital are and demands for renewable projects, I think this transaction appropriately balances and reflects those dynamics..

Okay. And I guess last question just on any thoughts on some of the discussion in ERCOT, Texas on renewables on market structure changes, and then how they're discussing kind of treatment of renewables there.

I mean is there a risk that renewables need to end up paying for ancillaries?.

I would characterize it Steve as a work in progress. Obviously, the events that happened in February were pretty significant.

And it takes time to work through and properly account for where there were sources of pressure and what the appropriate responses are, from obviously, from a political but of course, most probably from regulatory and a policy standpoint. And I think they're still sorting through it.

Obviously, Governor Abbott has asked for certain actions to be taken for the PUCT and ERCOT. And there's a framework that the PUCT has started to lay out. But I think it's still time to work through what those details look like. From our perspective you know well, we've been very active in a variety of aspects in ERCOT, we know that market well.

And we certainly have a strong perspective on what needs to be addressed in particular to focus on what really went wrong in February, including a massive amount of disruption across the gas supply, not only from supply, but transmission and ultimately, consumption by end users.

And we hope that a lot of the actions will be focused on that, as opposed to things that that won't necessarily help and solve the fundamental problems at hand. But I think the most important part is work in progress..

Yes. And I think what I would add to that is trying to frame the problem, right, you have an 82 gigawatts system, I mean, renewables, let's face it, we're a very small part of that. On a MCF adjusted basis during your, you're talking about three gigawatts.

And it really the way that to address the problem, if you're really going to go after the problem, you really have to focus on gas fired units, you have to focus on coal, you have to focus on nuclear.

And you can't lose sight of the fact that the reason that ERCOT has low power prices, is because of renewables and renewables are what are really driving the efficiencies and the economics of that market. So there's a much bigger story to be told.

That's what we're working through at the workshop level, as Rebecca said; this is going to take some time to play out..

Our next question comes from Stephen Byrd from Morgan Stanley..

Hi, good morning. I wanted to talk about the outlook for renewable and energy storage costs. But take it from a different perspective. I know there's been a lot of attention on commodity cost dynamics. But on the more positive side, I was interested in your views on sort of innovations that could result in cost reduction breakthroughs.

And there was an interesting article this week in the Wall Street Journal in storage. And we're trying to make sure we're thinking through potential areas of innovation.

I was just curious at a high level, are there areas of innovation, whether it be in storage, or in solar, green hydrogen, just things that excite you in terms of the potential to have very significant impacts on cost or performance?.

Well you know all of us, Steven, we love technology; we love innovation. And we certainly are excited about a lot of changes that are happening across the energy sector. I think the biggest driver dynamic in our sector today is really the cost of renewables overall, even today. And that alone is stimulating a significant amount of change.

And that adoption over time, will create the need for more storage, like applications, whether it's lithium ion, or I think the technology you are referencing in the Wall Street Journal, of course, hydrogen in the longer term, which we're also very excited about.

Those were all very interesting, particularly for the latter part of the 2020s and into 2030 and beyond, which could help support the substantial build up that we're expecting in the short term, I think the biggest dynamic is what we see at hand, which is the economic value proposition of renewables.

What we think could change that probably near term than even some of the innovations you're talking about is policy. You all I know are following just like we are in participating in a variety of discussions in Washington.

But if the incentives are addressed in legislation, that could be a big driver of change in the industry as well, in terms of timing..

That's very helpful.

And then I wanted to go back to the drop down that you announced, I was just curious, what was the amount of gains to NextEra from the drop down of assets down to NEP?.

I'm not sure I understand the question, Stephen.

Are you talking about the proceeds?.

Oh, well, the proceeds relative to the cost of developing, I was just curious sort of what degree of a premium NextEra was able to achieve relative to the costs of developing those assets?.

We haven't disclosed that yet, Stephen, as we go through the process, of course, we will update the financial statements, assuming that the transaction closes.

But we are very pleased from an Energy Resources perspective with these projects consistent overall returns with the types of returns that we see across wind and solar and distributed generation projects. On the DG side, we continue to be very excited about the business in Energy Resources; the team has done a terrific job building it.

And as I commented in the prepared remarks, we're expecting to triple the investment that we've made in the business, and those tend to be very attractive returns..

Understood, thanks. I was asking in part, I was just looking at the multiple of EBITDA and I mean, Steve Fleishman mentioned the cash capped yield that's 8%, it's not surprising, but the multiple EBITDA looked relatively low, but there may be some elements that I'm just missing..

I don't think, I wouldn't think it was characterized in anything unusual, Steven, we're happy with the overall returns of the project. And I do think that the capped yields are reflective of market transactions that we see in the marketplace and really reflective of substantial demand for renewables.

And we've said continue to be very excited about the prospects for NEP..

Our next question comes from Maheep Mandloi from Credit Suisse..

Hey, thanks for taking questions. Just following on the NEP side, the spread the drop downs, the adjusted EBITDA and CAFD guidance remains unchanged.

Is that because of timing or something else on that side?.

I'm sorry, was the guidance changed? What was the -- I missed that part?.

Sure. The adjusted EBITDA and CAFD guidance is the same as last quarter. Just wondering if the new drop downs are accretive on 2022 levels..

I understand now sorry about that. No, from our expectations, if you look at our guidance expectations, even at the end of last year, which is when we started talking about what the expectations for run rates at the end of this year, they were for an increase. This transaction was something that we were anticipating as part of our growth expectations.

We do expect to be at the high end of the ranges as we've articulated for both adjusted EBITDA and CAFD for year end. .

Got it.

And in terms of additional drop downs, would this be comfortable for 2022 needs and it's a fair statement that you might need more drop downs for 2023 distribution growth?.

We will continue to be opportunistic. There's a lot of flexibility within the NEP portfolio, we continue to have a pretty low payout ratio.

If you recall, about a year and a half ago, we took some actions to disperse the lever but also supplement the portfolio during the uncertainty of the PG&E bankruptcy and continue to have a relatively low payout ratio.

One of the advantages of that is NextEra Energy Partners can be opportunistic in terms of meeting its distribution per unit growth targets of 12% to 15%, which is really the metric against for really managing and measuring the business to ensure that we can meet those expectations.

We provide the expectations for run rate adjusted EBITDA and CAFD to give a sense of how we're expecting to achieve them. But there is flexibility and how we get there..

Got you. Thanks, Rebecca. Again, just maybe last one, for me. In terms of -- on the news development, and just given the recent cost pressures on the input side, just having that safe harbor helps meet any near term needs, as in are you using some of that $2.2 billion of safe harbor equipment upfront to avoid any higher costs in the near term..

There's a lot of flexibility inherent to that safe harbor portfolio, but we see it mostly as an option to create the opportunity to realize the tax incentives. Just as we seen over the last couple of years, there have been extensions in terms of timeframes and even extensions in terms of the available percentage of the tax credit in the given period.

So maintaining flexibility and optionality is our first priority. We continue to feel very comfortable with the 2021 and 2022 build being able to meet the equipment needs and ultimately bring them into service and timeframes that are very attractive from an Energy Resources perspective..

Yes. I would think of the Safe Harbor extension as being certainly an incremental opportunity for us. One of the advantages that we have is we're always careful on how we manage our safe harbor vintaging. And we're fortunate because we were in good shape on our 2017 vintage portfolio.

And so the Safe Harbor extension creates 1 to 1.5 gigawatts of opportunity for us on the wind side. And if I could come back just for one second on Stephen Byrd's question on the EBITDA multiples, the EBITDA multiples on this drop down were consistent with what we've done in the past.

You got to remember, it always gets a little bit tricky with tax credits. You also have to remember that even after the sale the NEP we own again, NEE owns a good portion NEP we get the cash distributions, we get IDRS.

When you take all that into account on EBITDA multiple basis, we end up with what we believe is a very competitive marker against where renewable assets trade today..

Our next question comes from Michael Lapides from Goldman Sachs..

Hey, guys, thanks for taking my question. Actually I have a couple. First of all, just broad big picture renewables.

Do you think you're taking share? Meaning, do you think your market share of renewable capacity in the US is actually growing from here? Are you mostly benefiting from the dramatic tailwinds that are happening to the overall space? That's question one.

Question two is, there are lots of new entrants every day someone, a new entrant gets announced and well funded, whether it's by pension funds, whether it's European big oil, whether it's by some of the large, super well capitalized and well known alternative asset managers.

We saw an announcement out of one of them yesterday of the day before about funding a solar and storage startup.

What's that doing the returns? Are you seeing that kind of flow in the cash flow returns yet of new projects you're developing today versus what you may have done a year or 18 months ago?.

So Mike, I'll start with the middle of it and maybe expand to the right and the left, the middle of it is this market is absolutely growing significantly, and we expect it to continue to grow significantly for years to come. So from our perspective, the pie absolutely is getting bigger.

Over a long period of time, our market share has remained very strong in the 20-ish percent range for wind and probably in the mid-teens, occasionally a little bit higher and occasional, probably in the mid teens on solar and storage has actually been higher than both of those, as this market has grown significantly over the last couple of years.

When we look out, we focus on both maintaining market share and also maintaining attractive returns. And we think our competitive advantages have enabled us to do that over time and we think both is important and best among them is very important to John and his team are focused on getting the best of the projects that we see out in the marketplace.

And ultimately being very happy with the projects that we put into the portfolio. We get asked the question about new entrants a lot.

You know this industry well, if you look back and you stack power purchase agreement awards over many years, you'll see that very big bar to the left when we put the chart together, and a couple of bars that are in smaller, of course, but still decent size and then a whole bunch of small players. They get 100, a couple 100 megawatts a given year.

And that dynamic continues to be consistent. That's for Greenfield and kind of in the more development oriented projects, there has been more capital coming in. But that's mostly post COD.

And when we think about capturing the value of developing renewables, it really is on that twinkle in the eye of a developer to COD is the enormous opportunity to create value, and we continue to be very good at it, and enhances competitive advantages to maintain that position over time.

So we're really excited about what we've been able to accomplish really excited about our position, and really excited about the energy transformation overall and the opportunities that presents..

Got it and then one quick follow up just on NEP, you still have the IDR structure at NEP, and as NEP grows, at what point do you think that becomes, and you've made a revision to it, but it's been a while, but at what point do you reevaluate the necessity of the IDR at the NEE level, and especially given the fact that kind of IDR structures have significantly gone away from some of the other industries that used to use them?.

Michael, we, obviously we've gotten that question before and in the past, and of course, from NEE's perspective, we continue to be happy with the relationship as it exists today between NEE and NEP. And there's a lot of synergy between the two companies and value created from each of their perspectives from the structure that's in place.

And that alignment of incentives remains important we believe to ensuring value creation from both NextEra Energy and NextEra Energy Partners perspective. We are excited about the opportunities for both businesses. And we'll see what the future brings but it continues to work and we're very pleased with the alignment of interest today..

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