Good day, everyone, and welcome to the NextEra Energy and NextEra Energy Partners Fourth Quarter and Full Year 2016 Earnings Conference Call. Today's conference is being recorded. .

At this time, for opening remarks, I would like to turn the conference over to Amanda Finnis, Director of Investor Relations. Please go ahead. .

Thank you, Audra. Good morning, everyone, and thank you for joining our fourth quarter and full year 2016 combined earnings conference call for NextEra Energy and NextEra Energy Partners..

Jim Robo, Chairman and Chief Executive Officer of NextEra Energy; John Ketchum, Executive Vice President and Chief Financial Officer of NextEra Energy; Armando Pimentel, President and Chief Executive Officer of NextEra Energy Resources; and Mark Hickson, 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.

John will provide an overview of our results and then turn the call over to Jim for closing remarks. 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 certain non-GAAP measures to the closest GAAP financial measure..

With that, I'll turn the call over to John. .

Thank you, Amanda, and good morning, everyone. Both NextEra Energy and NextEra Energy Partners were very successful in executing the initiatives we discussed for 2016 and ended the year with excellent results. .

NextEra Energy extended its long track record of delivering value for shareholders with adjusted earnings per share of $6.19, up 8.4% from 2015. And the team made significant progress in opportunities to continue to drive growth.

NextEra Energy Partners grew distributions to $1.41 per unit on an annualized basis, up 15% from the comparable quarterly distribution a year earlier, which was the top end of the range we discussed going into 2016. .

Let me now take a few moments to summarize additional highlights for 2016 before taking you through the detailed results. At FPL, we were very pleased to reach a fair and balanced outcome in our base rate case while continuing to deliver on our customer value proposition.

We were honored to be recognized by Edison Electric Institute for our outstanding leadership in restoring power safely and quickly following Hurricanes Matthew and Hermine. .

During the year, the Port Everglades Next Generation Clean Energy Center was completed on budget and 2 months ahead of schedule. Roughly 1,600 megawatts of peaking capacity was upgraded with more efficient, advanced combustion turbines.

And FPL solar capacity was roughly tripled with the addition of over 1 million newer -- new solar panels that make up approximately 225 megawatts of universal solar. FPL built upon key successes from 2015, delivering its best-ever service reliability performance and was again recognized as being the most reliable electric utility in the nation.

At the same time, FPL's typical customer bill has remained well below both state and national averages. We remain committed to our long-standing focus at FPL on operating the business efficiently and reliably for the benefit of customers. And looking ahead, the positives of 2016 position FPL to continue to execute its successful strategy. .

At Energy Resources, contributions from new investments continue to drive growth, and 2016 was a great year for our development and construction programs. We commissioned roughly 2,500 megawatts of new wind and solar projects in the U.S.

during the year, which was a record for Energy Resources and something we believe no other company has ever achieved in the North American renewables industry. .

Origination performance was also very strong over last year, with the Energy Resources team adding a total of approximately 3,500 megawatts of new renewables projects and repowering opportunities. .

In addition to executing well on the project backlog and continuing to advance the development pipeline at Energy Resources, we were pleased to receive additional IRS start of construction guidance on the wind PTC in December that was largely consistent with our thinking.

We believe that our safe harbor purchases could qualify over 10 gigawatts of wind for 100% of the PTC, subject to completion by the end of 2020 and other applicable criteria and provide Energy Resources with excellent strategic positioning to capitalize on both new wind and repowering opportunities. .

A consistent focus on leveraging our development skills, together with our purchasing power, best-in-class construction expertise, resource assessment capabilities, strong access to capital and cost of capital advantages, allow us to continue to advance an already strong and visible opportunity set, and in turn, are at the core of our expectations for outstanding growth prospects at both Energy Resources and NEP.

.

NextEra Energy Partners also delivered continued solid execution on its growth objectives. NEP completed 3 acquisitions from Energy Resources that added a total of over 700 megawatts to its portfolio in 2016, while also demonstrating its flexible and opportunistic approach to financing with a combination of debt and equity.

Yesterday, the NEP board declared a quarterly distribution of $0.3525 per common unit or $1.41 per common unit on an annualized basis, up 15% from a year earlier. .

During the year, we announced proposed transactions that would result in NextEra Energy owning 100% of Oncor, as part of an overall plan of reorganization designed to allow Energy Future Holdings to emerge from Chapter 11 bankruptcy. Bankruptcy court confirmation hearings are currently scheduled to begin on February 14. .

Separate from the bankruptcy approval process, together with Oncor, we have filed a joint application with the Public Utility Commission of Texas seeking approval of our proposed acquisition. Intervenor testimony was filed 2 weeks ago, staff testimony was filed last week and hearings are scheduled to commence on February 21 of this year.

Based on our current targets for completing key milestones and subject to required approvals, we expect the transactions to close in the first half of 2017. .

We made excellent progress on the financing plan for Oncor. In addition to issuing equity units and completing an equity-forward transaction last year, our overall corporate financing activities have benefited from successful execution on opportunities to recycle capital, including the completed sales of FiberNet, Marcus Hook and Forney and Lamar.

The balance of the proceeds for the Oncor transactions are expected to be raised predominantly through debt at capital holdings later this year and the vast majority of this expected debt issuance was hedged several months ago against interest rate volatility. .

Our financing plan is consistent with maintaining our strong balance sheet and current credit ratings which we are unwilling to compromise. All in all, 2016 was a terrific year of execution at FPL, Energy Resources and NEP. .

Now let's look at the detailed results beginning with FPL. For the fourth quarter of 2016, FPL reported net income of $371 million or $0.79 per share, unchanged from its fourth quarter 2015 EPS. For the full year 2016, FPL reported net income of $1.7 billion or $3.71 per share, up $0.08 per share versus 2015.

At FPL, we continue investing in new and modernized generation as well as a stronger and smarter grid to further improve the already outstanding efficiency and reliability of our system. FPL's capital expenditures were approximately $837 million in the fourth quarter, bringing our full year capital investments to a total of roughly $3.9 billion.

Regulatory capital employed grew approximately 8.3% year-over-year. .

In addition to bringing into service approximately 225 megawatts of universal solar since the last call, FPL also announced the retirement of the Cedar Bay generating plant at the end of the year.

Together with our similar plan to phase down another coal-fired power plant, the Indiantown Cogeneration facility, we expect to successfully retire 2 of the highest greenhouse gas-emitting power plants in the state, while also providing customer savings.

The FPSC approved the Indiantown transaction last fall, and we closed the acquisition during the first week of January. .

Our reported ROE for regulatory purposes for the 12 months ended December 2016 will be approximately 11.5%. We ended the third quarter of 2016 with a reserve amortization balance of $230 million. And we added $20 million in the fourth quarter for a total year-end 2016 balance of $250 million. .

As a reminder, the new 4-year settlement agreement that was approved by the Florida Public Service Commission in November became effective this month and includes the flexibility over the 4-year term to amortize up to $1 billion of depreciation reserve surplus plus the reserve amount remaining under FPL's now expired 2012 rate agreement that I just mentioned of $250 million for a total of roughly $1.25 billion.

.

In 2017, we expect the flexibility provided by this reserve amount, coupled with our weather-normalized sales growth forecast and current CapEx and O&M expectations to support our regulatory ROE towards the upper end of the allowed band of 9.6% to 11.6% under our new rate agreement.

As always, our expectations assume, among other things, normal weather and operating conditions. .

The Florida economy continues to progress well with strong job growth and recent unemployment rates around their lowest level since 2007. The latest data from the real estate sector continued to show new building permits at healthy levels and the Case-Shiller Index for South Florida is up 6.4% from the prior year.

Florida's consumer confidence levels remain near post-recession highs. .

For the fourth quarter, we estimate that milder weather had a negative year-over-year impact on usage per customer of approximately 5.1%, and that Hurricane Matthew had a comparable negative impact of 0.8%.

After taking these factors into account, fourth quarter sales increased 0.4% on a weather-normalized basis, which reflects continued customer growth, partially offset by lower underlying usage per customer. .

For 2016, we estimate that FPL retail sales reflect negative year-over-year impacts of 2.1% from weather and 0.2% from Hurricane Matthew. FPL's 2016 retail sales growth on a weather-normalized basis was 1.5%, which was primarily driven by the impact of continued customer growth. .

Looking ahead, we expect year-over-year over weather-normalized usage per customer to average between 0 and negative 0.5% per year for the foreseeable future. .

Let me now turn to Energy Resources, which reported fourth quarter 2016 GAAP earnings of $360 million or $0.77 per share. Adjusted earnings for the fourth quarter were $191 million or $0.41 per share.

Energy Resources contribution to fourth quarter adjusted earnings per share was roughly flat from last year, which primarily reflects strong new investment contributions being offset by lower results from existing generation assets as well as higher G&A and interest expense. .

Similar to the third quarter, our fourth quarter results include a positive impact related to the contingent earnout liability that was recorded as part of the Texas pipeline acquisition in 2015.

As a reminder, the $200 million earnout, which we no longer expect to become payable, was required to be paid if contracts for growth projects on the NET pipeline were signed by December 31, 2016, and if those expansion projects met several precedent conditions.

This impact was roughly offset by lower contributions from our upstream gas infrastructure activities due to increased depreciation expense reflecting higher depletion rates. .

For the full year 2016, Energy Resources reported GAAP earnings of $1.125 billion or $2.41 per share. Adjusted earnings were $1.09 billion or $2.33 per share. Energy Resources full year adjusted earnings per share contribution increased $0.29 or approximately 14% from the prior year comparable period.

Growth was driven by strong benefits from continued new additions to our renewables portfolio, which added $0.47 per share. Contributions from new natural gas pipeline investments added $0.16 per share.

New investment growth was partially offset by a decline of $0.12 per share and contributions from our existing generation assets, largely due to the ongoing impact of PTC roll-off. .

Overall, wind resource was 98% of the long-term average in 2016, up from 94% a year earlier. Contributions from our upstream gas infrastructure activities declined by $0.16 per share.

Consistent with the expectations we discussed last call, this was primarily driven by the full-year impact of increased depreciation expense reflecting higher depletion rates. This essentially offset the $0.17 per share positive impact from the elimination of the Texas pipeline's contingent earnout liability that I mentioned earlier.

All other effects had a negative impact of $0.23 per share, mostly driven by a year-over-year increase in interest expense reflecting continued growth from the business, as well as the effects of share dilution. .

Finally, as we did last year, we have included a summary in the Appendix to the presentation that compares Energy Resources' adjusted EBITDA by asset category to the ranges we provided in the third quarter of 2015. .

2016 was an excellent year for our development and construction programs in Energy Resources. As a reminder, our total 2015 to 2016 renewables development program was approximately 4,000 megawatts.

This significantly exceeded the original expectations we had shared for this time frame in May 2015 to 2016, the most successful 2-year period for renewables development in our history. .

Since the last call, we signed additional contracts for roughly 640 megawatts of new projects, including roughly 540 megawatts of wind for 2017 and 28 (sic) [2018] delivery and 100 megawatts of solar for post-2018 delivery.

We also continue to aggressively pursue repowering opportunities on the balance of our portfolio to add to the 1,600 megawatts of repowering that we previously announced and continue to see the total opportunity being between $2 to 2 -- between $2 billion to $2.5 billion through 2020.

The accompanying slide provides additional detail on where our renewables development program now stands. .

Our natural gas pipeline projects continue to progress through the development process and remain on track. The Florida pipelines commenced full construction activities in 2016, and we continue to expect an in-service date in the middle of this year.

As a reminder, NextEra Energy's investments in Sabal Trail Transmission and Florida Southeast connection are expected to be roughly $1.5 billion and $550 million, respectively. And FPL is the anchor shipper on both pipelines. .

The Mountain Valley Pipeline continues to progress through the FERC process. We expect the pipeline, with approximately 2 Bcf per day of 20-year firm capacity commitments, to achieve commercial operations by year-end 2018. NextEra Energy's expected investment is roughly $1 billion. .

Let me now review the highlights for NEP. Fourth quarter 2016 adjusted EBITDA of approximately $168 million increased $33 million from a year earlier. Consistent with NEP's substantial portfolio growth over this time period, strong contributions from new project additions drove results with a relatively modest offset from higher IDR fees. .

Fourth quarter 2016 CAFD was approximately $68 million. As a reminder, NEP's quarterly CAFD results are impacted by timing of debt service and PAYGO payment. Included within the projects added over the last year, the ceiling 1 and 2, Golden Hills and Cedar Bluff U.S. wind projects, as expected, do not receive PAYGO payments in the fourth quarter.

As a result, together with increased interest in corporate expenses due to growth, fourth quarter CAFD declined year-over-year. We ended the year with adjusted EBITDA and CAFD run rates consistent with the expectations we have shared previously for December 31, 2016.

For the full year 2016, adjusted EBITDA and CAFD were $639 million and $222 million, respectively. Portfolio growth drove higher year-over-year results while existing assets benefited from a favorable comparison of wind resource. .

Across the NEP portfolio, overall wind resource was 98% of the long-term average versus 93% in 2015. As a reminder, these results are net of IDR fees, which we treat as an operating expense. IDR fees increased $34 million year-over-year. .

As I mentioned earlier, NEP completed 3 acquisitions from Energy Resources in 2016, financed with a combination of debt and equity. We have incremental holdco debt capacity of at least $575 million, which continues to provide NEP with substantial flexibility to execute its -- against its future growth prospects. .

Turning now to the consolidated results for NextEra Energy. For the fourth quarter of 2016, GAAP net income attributable to NextEra Energy was $966 million or $2.06 per share. NextEra Energy's 2016 fourth quarter adjusted earnings and adjusted EPS were $566 million and $1.21, respectively. .

For the full year 2016, GAAP net income attributable to NextEra Energy was $2.912 billion or $6.25 per share. Adjusted earnings were $2.884 billion or $6.19 per share. From the Corporate & Other Segment, adjusted earnings for the full year increased $0.11 per share compared to 2015, primarily due to certain tax items and investment gains. .

Turning now to our near-term financial expectations for NextEra Energy. We are introducing expectations for 2017 and updating our range for 2018. We expect adjusted earnings per share for NextEra Energy to be in a range of $6.35 to $6.85 for 2017; and are increasing our range for 2018 from $6.60 to $7.10 to $6.80 to $7.30.

From a base of our 2016 adjusted EPS of $6.19, the midpoints of these ranges reflect the compound annual growth rate of roughly 7%. Jim will discuss our expectations and longer-term outlook in just a moment. .

We continue to expect to grow our dividends per share of 12% to 14% per year through at least 2018, off a 2015 base of dividends per share of $3.08. As always, our expectations are subject to the usual caveats, including but not limited to, normal weather and operating conditions. .

Let me now turn to NEP. At NEP, as I mentioned earlier, yesterday the NEP board declared a fourth quarter distribution of $0.3525 per common unit or $1.41 per common unit on an annualized basis, representing a 15% increase over the comparable distribution a year earlier.

Jim will also discuss our long-term outlook for DPU growth at NEP in just a moment. .

Our December 31, 2016, run rate expectations for adjusted EBITDA of $670 million to $760 million and CAFD of $230 million to $290 million are unchanged, reflecting calendar year 2017 expectations for the portfolio with which we ended the year. .

Our December 31, 2017, run rate expectations for adjusted EBITDA of $875 million to $975 million and CAFD of $310 million to $340 million are also unchanged reflecting calendar year 2018 expectations for the forecasted portfolio at year-end December 31, 2017.

The midpoint of this CAFD range reflects roughly 25% growth from the comparable CAFD midpoint based on our December 31, 2016, run rate expectations. Our expectations are subject to our normal caveats and are net of expected IDR fees as we expect these fees to be treated as an operating expense. .

With that, I will turn the call over to Jim to discuss the long-term outlook at NextEra Energy and NextEra Energy Partners. .

Thanks, John, and good morning, everyone. Our strong performance in 2016 reinforces the overall strength and diversity of our growth prospects. And I remain as enthusiastic as ever about our future. .

Before providing additional updates on our outstanding long-term outlook at NextEra Energy, I'd like to take a moment to discuss an agreement reached between NextEra Energy and NextEra Energy Partners for a structural modification to NEP's IDR fees. .

Since the time of its launch, NEP has diversified its portfolio by roughly tripling its renewables capacity and adding 7 natural gas pipeline assets with the acquisition of the Texas pipelines in 2015.

NEP has built a high-quality portfolio with high-quality cash flows backed by assets with an average remaining contract life of 18 years and average counterparty credit rating of A3. .

NEP's most recently declared distribution at an annualized rate of $1.41 per unit reflects cumulative growth of 88% since its 2014 IPO. This exceeds the expectations for growth that we discussed initially in mid-2014 and reflects solid execution in a difficult capital markets environment. .

NEE offers NEP and its investors high visibility into a large portfolio of attractive long-term contracted assets operated by a best-in-class sponsor and supported by the development capabilities of North America's largest and best renewables developer.

We continue to believe that the scale, financial strength, experience and track record of its sponsor are what set NEP apart from other infrastructure alternatives. .

Conversely, NEP offers NEE the opportunity to highlight the value of Energy Resources' long-term contracted portfolio of assets, while enabling NEE to recycle capital back into its development projects and optimize its tax position by monetizing its deferred tax asset balance against tax gains generated from the sale of assets to NEP. .

Notwithstanding all of these positives, we believe there's a disconnect right now between NEP's future growth potential and its current valuation. There appear to be, at least, a couple of factors that are adversely affecting NEP's performance.

First, capital markets are still recovering from a meaningful reduction in funds flow in the infrastructure space caused by significant declines in commodity prices during the second half of 2015.

While conditions are starting to slowly improve, the constrained environment continues to put pressure on high-quality drop-down stories that require equity to achieve growth targets. .

Second, because NEP has reached the high splits, some investors have expressed concern that NEP's IDRs will consume an increasing share of the incremental cash flow that would otherwise be available to drive LP distribution growth, which could result in the need to drop down more assets and issue more equity at a time when capital markets are constrained.

.

First, IDR fees, based on NEP's most recently declared distribution to current LP unitholders at an annualized rate of $1.41 per unit, are roughly $56 million per year. .

Second, NextEra Energy's ability to achieve incremental IDR fees above $56 million from this point forward is predicated on NEP delivering LP distributions at an annualized rate above $1.41 to all unitholders. If LP distributions exceed $1.41 per unit, the excess above $1.41 is split 75% to common unitholders and 25% to IDR fees. .

Finally, IDR fees would fall below $56 million per year in the unlikely event that annualized LP distributions ever fall below $1.41 per unit. This structural modification to NEP's IDR fee is centered on value creation for both NEE shareholders and NEP common unitholders. .

Let me take a minute to explain our logic. By reducing IDR fees on future growth, we expect there to be significantly more cash available to LP unitholders. And as a result, we expect levered returns or ROEs for NEP common unitholders to increase from the high single digits to the low double digits on future asset dropdowns. .

Also, if there is significantly more cash available to LP unitholders, NEP will need to acquire fewer assets to achieve the same level of distribution growth. If NEP acquires fewer assets, it will need to issue less equity.

In fact, it is our expectation that with the structural IDR -- with this structural IDR modification, NEP can now achieve its distribution growth targets for 2017 and potentially 2018 without issuing common equity. This, of course, is aside from any modest equity issuance that NEP may execute through its at-the-market program. .

Putting it all together, these benefits are expected to provide a longer runway of LP's distribution growth. By reducing NEP's equity needs and extending its distribution growth runway, we expect the increased certainty around growth to translate into improvements in NEP's trading yield and valuation.

If NEP's value improves due to these benefits, so does the value of NEE's ownership position in NEP. In addition, NEE should receive more cash distributions over time as NEP's distribution growth runway is extended. .

Finally, with these changes, NEE should be able to recycle capital and optimize its tax position over a longer period of time. For these reasons, the IDR modification is expected to be accretive to NextEra Energy versus the status quo. .

I am very excited about the future prospects for NEP and the benefits that we expect for both NEE shareholders and NEP common unitholders as a result of today's announcement.

With these changes, we are extending our financial expectations for NEP another 2 years, as we see 12% to 15% per year growth in per unit distributions as a reasonable range of expectations through at least 2022. .

From a base of our fourth quarter 2016 distribution at an annualized rate of $1.41 per unit, we expect the annualized rate of the fourth quarter 2017 distribution to be in a range of $1.58 to $1.62 per common unit. .

I want to conclude with some remarks regarding NextEra Energy and its long-term outlook. As John described, 2016 was a terrific year. NextEra Energy's performance was strong both financially and operationally, and we had an outstanding execution on our growth and regulatory initiatives all across the board.

We were able to grow 2016 adjusted EPS by 8.4% and delivered total shareholder return of 18.4% that not only beat the S&P utility index but also beat the S&P 500. Amidst the significant growth, the company has maintained one of the strongest balance sheets and credit positions in the industry. .

A key element of our value proposition at NextEra Energy is a culture focused on delivering outstanding results for our shareholders. Since 2005, we've delivered compounded annual growth in adjusted EPS of over 8%, the highest among the top 10 U.S. power companies by market capitalization.

And our total shareholder return over that period outperformed the top quartile of the companies in the S&P 500 utility index. We've also outperformed both the S&P 500 and the S&P utility index in terms of shareholder -- total shareholder return on a 1-year, 3-year, 5-year, 7-year and 10-year basis.

We're proud of our long-term track record of providing growth and value-creation opportunities for our shareholders and are completely committed to continuing that track record going forward. .

Since the November election, our stock performance has been adversely affected by investor concerns regarding the outlook for renewable and tax incentives and its impact on new renewables development, in particular, as well as potential tax reform.

We've underperformed since the election, with November 9 being the worst day for NEE's stock performance relative to the S&P 500 in 8 years. And based on 2018 adjusted EPS consensus estimates, we now trade at a slight discount to certain regulated peers.

Therefore, I wanted to take a few minutes to address these concerns head on and put them into context in light of our future growth opportunities and our overall financial expectations. .

Let me start with our opportunity set, which I would not trade with anyone in our industry. At FPL, I'm pleased with the outcome of our 4-year base rate case settlement agreement and what it means for our customers and our shareholders.

The outcome allows us to focus on operating the business efficiently, reliably and affordably for the benefit of Florida's customers. The 2016 settlement agreement supports continued smart investments and reliability in clean energy, including storm hardening, grid automation and modernization.

Continued fuel efficiency initiatives and the construction of the 1,748-megawatt Okeechobee Clean Energy Center that is expected to achieve commercial operation in 2019. .

Consistent with our focus on providing clean and cost-effective energy solutions for the benefit of Florida customers, the agreement also provides a solar base rate adjustment upon commercial operations of up to an incremental 1,200 megawatts cost-effective new solar generation approved over the 4-year term of 2017 to 2020. .

FPL has been working for many years in order to be prepared to add substantial solar capacity affordably for its customers, developing plans and securing sites for cost-effective installations across the state. I'm pleased to report that we have already secured site control on more than 3,000 megawatts of potential solar capacity.

And we are working hard to continue to advance this opportunity. .

In short, we have outstanding growth opportunities at FPL and expect our average annual growth and regulatory capital employed to be roughly 8% per year, over the 4-year term of 2017 through 2020 -- December 2020.

These new investments will benefit Florida customers as FPL's typical 1,000-kilowatt hour residential customer bill is projected to remain below 2006 levels through the year 2020. .

When you put it all together, low bills, best-in-class reliability, award-winning customer service and a clean emissions profile are all what helped FPL provide what we believe is one of the best customer value propositions in the nation. .

Turning now to Oncor. We see an opportunity to make 2 already great companies even stronger. Through the same unyielding focus on our customers that has made us successful at FPL, we believe we have the ability to bring real value to Oncor stakeholders. And in turn, find attractive investment opportunities to create long-term shareholder value.

The transactions provide Oncor the opportunity to transition from a highly leveraged structure in which financial investors own Oncor, to ownership by a strategic investor with one of the strongest balance sheets in the sector.

Under our ownership, we are confident Oncor will be an even stronger company with greater scale and robust financial profile, better positioned than ever to smartly invest capital to improve operations and generate value for its customers, the State of Texas and our shareholders. .

At Energy Resources, our outlook for new renewables development remains as strong as ever. We continue to build North America's leading portfolio of wind and solar assets, and we have an excellent opportunity to leverage our substantial development capabilities, capture even more opportunities going forward.

As John discussed, our actions to safe harbor over 10,000 megawatts of wind are reflections of that enthusiasm. .

With regard to concerns over renewable tax incentives, I believe it's unlikely that either the PTC or the ITC, which were each extended under a 5-year phasedown by Republican Congress at the end of 2015, will be retroactively changed.

Along these lines, it is worth mentioning that during Senate Finance confirmation hearings held last week, the Secretary of Treasury nominee said in a question-and-answer exchange that he was committed to supporting the current phasedown of the wind PTC.

A major driver behind bipartisan support for the 5-year phasedown is jobs, with the tremendous growth in renewables responsible for rapid employment gains in the wind and solar industries. Both wind and solar are largely made in America with more than 80% of the typical wind project and 65% of the typical solar project made in the U.S. .

Renewables also helped stimulate economic growth in rural communities that would otherwise struggle to attract new investment.

Renewable energy is an important economic stimulus for these communities as it helps boost state and local tax revenues, which provides funding for schools, hospitals and emergency response, and has direct and indirect economic impacts that help support local small businesses.

For these same reasons, I also believe it is unlikely the 4-year start of construction guidance for wind that was released by the Treasury Department in the spring of 2016 will be retroactively changed.

Given how rare it is for our government to retroactively change laws, particularly where parties have relied on them to make long-term investment decisions, I believe our safe harbor projects are well positioned to receive the 100% production tax credit through 2020. In addition, we continue to have robust access to tax equity financing.

And we already have tax equity financing commitments for the repowering projects that we've announced. .

State level renewable portfolio standards are now in place in 29 states, and discussions of increasing the renewable requirements under these standards are continuing in certain of these states.

At the same time, economic retirements in generation due to low natural gas prices are also expected to continue to create opportunities for new renewables as what and -- as well as long-term natural gas pipelines, particularly as the regulatory environment for pipeline development in oil and gas production continues to improve. .

As the PTC and ITC phase down, we believe that the economic impact on customer pricing can be absorbed by continued technology and efficiency advancements.

We continue to expect yet another major step change in wind turbine technology through a combination of even taller towers and wider rotor diameters, which will further increase net capacity factors. Continued panel costs and efficiency trends are also expected for solar as well as opportunities to reduce balance assistance costs.

So even if I am wrong about continued Federal incentives for renewables, as we near the end of this decade, I would expect that in 2020, without PTCs, wind will be -- would be a $0.02 to $0.03 per kilowatt-hour product; and solar, without an ITC, would be in the range of $0.03 to $0.04 per kilowatt-hour. .

Finally, in addition to top line growth, we remain very focused on operational cost effectiveness, productivity and opportunities to further leverage technology. Toward that end, we've launched a company-wide initiative to reimagine absolutely everything we do, which we call Project Accelerate.

This new initiative builds upon the success from Project Momentum that was launched in 2013. Although we are only halfway through our review process, we're pleased with our progress and expect to achieve several hundred million dollars in efficiencies over the next few years from Project Accelerate. .

Based on the strength and diversity of our growth prospects, today, we are extending NextEra Energy's financial expectations by 2 years from 2018 to 2020. .

Putting it all together and setting aside the potential accretion we see with our proposed Oncor transactions, we expect NextEra Energy's compound annual growth rate and adjusted EPS to be in the range of 6% to 8% through 2020 off a 2016 base, while maintaining our strong current credit ratings. .

Let me now turn to tax reform. Although it's premature to draw any firm conclusions given that the tax reform discussion is still in the very early stages, we have spent a lot of time over the last few months considering several what-if tax reform scenarios.

We've modeled the scenario where there is a 15% corporate tax rate with current depreciation rules and full interest deductibility, which we call the administration's plan scenario. We've also modeled a scenario where there's a 20% corporate tax rate with immediate expensing and no interest deductibility, which we call the house blueprint scenario.

Off of our 2020 baseline, we would expect the administration's plan scenario to be approximately $0.30 to $0.40 per share accretive; and the house blueprint scenario to be approximately $0.10 to $0.15 per share dilutive. The difference between the 2 scenarios is largely driven by the lack of interest deductibility in the house blueprint scenario. .

Taken together under most reasonable scenarios, we would expect the impacts of tax reform to be manageable.

Moreover, combining these same tax scenarios with what we view as a very unlikely renewables downside case where our renewable build-out is 50% lower than our current expectations, we would still expect to be able to achieve the midpoint of our adjusted EPS growth range through 2020. .

As a result, while there certainly will be challenges that we'll have to manage over the next 4 years, due to the overall strength and diversity of our opportunity set, I will be disappointed if we are not able to continue to deliver financial results at or near the top end of our range, again, all the while maintaining our strong credit ratings. .

In summary, we continue to believe that we have one of the best opportunity sets and execution track records in the industry. I am as enthusiastic as ever about our future prospects. NextEra Energy and NEP continue to make excellent progress across the board against all our strategic and growth initiatives.

Today's announcements of increasing our expectations for both companies are reflections of that enthusiasm. .

With that, we'll now open the lines for questions. .

[Operator Instructions] We'll go first to Julien Dumoulin-Smith at UBS. .

So well done, very well done. Perhaps just a quick clarification on everything you just said.

On 2018, the long-term EPS growth, to what extent is it predicated on the Oncor transaction following through both in the 2018 but also beyond period? And if it's not reflected, can you just preliminarily provide some sense as to how you would think about the increment?.

Yes, so what we have said is in extending the guidance through 2020 at 6% to 8%, we're setting aside the accretion from Oncor. Jim just went through a number of sensitivities in terms of our view regarding our expectations. Just to be clear, one of those sensitivities was around tax reform.

And he outlined the administration's plan and then the blueprint scenario. And then the other was a renewable downside case. where 50% of the expected renewable demand fell away. If you combine those 2 things, we would still expect to be at the midpoint of our range through 2020.

And then, obviously, as Jim ended the call, his expectation would be for us to finish near the top end of the range. And there are a number of factors that could allow us to do that, Oncor being one of them. .

Julien, the only thing I would add is that -- and I've said this publicly about the Oncor transaction, obviously, we remain as committed as ever to getting it done. We -- I said earlier when we announced it that it would help us grow at the top end of the range through 2018.

And I also said that we have a lot of growth levers, and I would be disappointed if we weren't able to grow at the top end of the range even if we can't close Oncor. And I remain that.

And I -- just to address a couple other questions that we've gotten on the Oncor transaction, we've been asked over the last several weeks by investors what were our reactions to the testimony filed in the Oncor proceeding. And I just wanted to address -- take a chance to address that as well here.

Over -- almost over the last nearly 2 decades, we've invested an awful lot in Texas, about $8 billion. And NextEra has one of the strongest balance sheets in the sector. And as I said before, we are unwilling to compromise our A- corporate credit rating as a result of any transaction, including the Oncor transactions.

We've structured that transaction to save Oncor customers hundreds of millions of dollars by removing the debt that hangs over Oncor right now. And that is going to allow Oncor to operate at NextEra Energy's credit rating of A-, which, of course, is an upgrade for Oncor.

Unfortunately, for example, there's -- there are requests in the testimony filed by outside consultants for certain of the interveners would result in NextEra being immediately downgraded once that debt is moved by either prohibiting NextEra from appointing a majority of the Oncor board or placing restrictions on dividends and approval of capital and operating budgets.

And we need to address these issues in order to be -- avoid being downgraded, so we can close the transaction. And if we can't address those issues, otherwise -- unfortunately, we wouldn't be able to close. Texas has been a terrific state in most business in investment.

And we're confident that the commission is going to give our filing a full and fair review and that we can demonstrate that this transaction makes sense for Oncor, its customers and for Texas. .

We'll move next to Greg Gordon at Evercore ISI. .

Not to beat a dead horse guys, but I just want to be clear that your pro formas and the guidance for this year and next year completely exclude any assumption that Oncor's integrated into the NextEra family, correct?.

Yes, again our guidance through 2020 sets aside the accretion from Oncor. .

Okay, fair enough.

In your house blueprint scenario, with the 20% tax rate, loss of interest deductibility, that also includes 100% expensing so you would include the headwind to rate base growth off of your 8% base case in that scenario?.

That's correct. .

Okay.

And then are you assuming interest deductibility as only loss on prospective issuance or that it impacts current balances?.

Everything. .

Okay.

So not just prospective but prospective and on current balances?.

That's correct. We have not assumed a phasedown. .

Okay.

Can you tell us whether or not there's been a significant change in the pace or scale of your ongoing developing opportunities in the wind or solar business, post the election? In other words, as you think about how your book-to-bill is growing over the course of -- how that's grown over the course of the last several months now, it's going to grow over the course of next year, have you had to reevaluate the pace of growth, given the tenor of negotiations given the change in the White House?.

I will turn that over to Armando. But I think just the results that we've shown today with the 640 megawatts in this call and 3,500 from last year, we're certainly not seeing a falloff in customer demand. But I'll let Armando fill in with more detail. .

Hey, John, that's right. I mean, we haven't seen anything come off the table. And it's still a steady state of RFP and bilateral opportunities coming in. And at least my expectation, we're still having a lot of discussions with customers, and they're not really focused on it, honestly.

There's a little bit of talk about, "Hey, let's try to get something done in the earlier years." But I fully expect '17 and '18 to be really good origination years for renewables. .

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

Just thinking through the interest deductibility, the guidance that you provided is very helpful. I've been trying to think through interest deductibility for your renewables development business.

Assuming that, that were to be eliminated, is this something that essentially gets worked into future PPAs? In other words, wouldn't necessarily have a huge impact in your financing decisions, but it's just something that naturally gets worked into the overall economics of your projects?.

Yes, it naturally gets worked into the overall economics of the projects. And remember, what we have to do is maintain our relative competitive advantages. And so to the extent it's an impact on us, it's also an impact on everybody else.

And so we feel very good about our ability to maintain the competitive advantages that we've shared with investors over the past, even if that were to occur. .

Stephen, the other thing I would add is remember, much of the renewable financing we do is tax equity financing and isn't impacted at all by the loss of interest rate deductibility -- of interest deductibility. .

All good points, thank you. And then just thinking about the cost savings, it's a fairly impressive program that you're embarked on. When we think about achievability and factoring this into guidance, Jim, it sounded like you're quite encouraged by what you're seeing.

But could you just talk a little bit more in terms of how achievable you see that? How much is factored into guidance? How much we should be thinking about that in terms of risk to achieving your target?.

Yes, I feel very good about our team's ability to execute against what we've seen so far. And I think just like Project Momentum, the achievability is going to be high. And it's one of the initiatives that we have going on that makes me able to say that I'll be disappointed if we can't grow at the top end of the range through 2020. .

We'll go next to Paul Ridzon at KeyBanc. .

Had just a detailed question. At FPL in the fourth quarter, you had some pretty poor weather. You had a hurricane, yet you still were able to reverse some reserve amortization and maintain the 11.5% trailing 12% ROE.

Kind of what happened there?.

Well, we had a balance of $230 million in reserve amortization going into the year. And the weather, against our expectations in terms of surplus amortization, was a bit better, which allowed us to add another $20 million in the fourth quarter from $230 million to $250 million. And we had very good O&M management during the quarter as well. .

So O&M was a big help. .

Thank you. .

And are you going to do an Analyst Day this year?.

We are. We are still planning to do an Analyst Day in the spring but want to get through the Oncor proceedings first. .

So it'll be after the Oncor order comes out?.

It would, that's correct. .

We'll go next to Michael Lapides at Goldman Sachs. .

Two questions on the near side. First, can you talk a little bit about how much or how significant the PTC roll-off will be? And what 's embedded in your 2017 and 2018 guidance? That's the first question.

Second, can you talk about the opportunity set? And I know this will be a little bit longer term for incremental midstream or pipeline development, outside of what you're already undertaking with Sabal Trail, Mountain Valley and others. .

So I think that I'm going to get a better number here soon, but I think the PTC roll-off here for the next couple of years is in the $30 million to $40 million category. And yes, so that's a good number, I'm hearing. On the midstream and pipeline development opportunities, Michael, I mean there's still a bunch of opportunities out there.

We've talked about this before. We're the -- I don't know that we're the new kid on the block, but we are the newer kid on the block. We've been fairly successful, including the MVP development, which is going quite well, by the way. We've got a couple of others that we're working on right now. There's certainly not a shortage of opportunities.

But whether those opportunities make long-term sense for us remains to be seen. At least one of the opportunities I feel pretty good about. So we've said before that we would be disappointed if we did not have another significant investment opportunity to announce in the pipeline space by 2020; that remains to be the case.

We have certainly poured some significant G&A into greenfield development there. And I expected that we'll get something that's beneficial for all of us. .

We'll take our next question from Alex Kania at Wolfe Research. .

This is -- this happened recently, I guess, last night.

But just any takes on the changes at FERC with Bay leaving? And any impact to you on kind of any important proceedings you might have on pipeline approvals, MVP or other things?.

So Alex, this is Jim. I actually got a note from Joe Kelliher, who's on our team, about this last night. And while FERC won't have a quorum, that won't prevent them from issuing orders with 2 commissioners. So we don't see any impact from only having 2 commissioners right now.

I would expect that to get addressed relatively soon by the new administration as well. .

And our next question comes from Shar Pourreza at Guggenheim Partners. .

Jim, can you comment on whether NextEra and some peers are seeking some sort of a utility carve-out under a potential new tax regime?.

Yes, I think -- Shar, I think what I can say is obviously the industry understands the importance of tax reform for both the U.S. economy as well as for our industry, and it's important to get it right. And we're working very hard to make sure that our voice is heard and that whatever happens with tax reform is both great for the U.S.

economy and also doesn't impact customer -- our customer bills and in our industries. So I think that's all I can say about it. It's very early right now, as I said in the prepared remarks. And there's still a long way to go on this, and we'll be updating. We'll continue to keep everyone informed.

I know it's a very important issue to investors, the impacts of tax reforms. It's a very important issue for us. And I can also tell you that I'm very engaged on it. .

Okay, got it. That's helpful.

And then just on the lower corporate taxes, whether it's the Republican plan or the Trump plan, just from a mechanical standpoint of that P&L, is there -- in your scenario now, so you're assuming that the higher deferred tax liabilities are sort of paid off to the life of the assets? Or is there a scenario where you could sort of think that your -- you can use short-term borrowings and sort of finance the liabilities under a quicker scenario and paying back sooner, and obviously, boost your rate base?.

I think a reasonable way to think about it right now and the way we've been thinking about it is that would be flowed back to customers over the remaining useful economic life of the assets. .

Okay. So no use of short-term borrowings to finance it under a quicker scenario. .

I don't think so. .

And we'll go next to Andrew Hughes at Credit Suisse. .

As you've worked through some of the implications of tax reform, curious if you've considered some of the impacts to renewable project cash flows? And if that, at all, changes how you think about the drop-down schedule at NEP, either geographically or mix of wind or solar or gas, particularly as you kind of look out on the distribution growth pathway?.

No, it really has not changed the way we think about NEP. We still believe that we'll be able to secure tax equity financing. And in terms of tax equity financing, our view is that we'll continue to get first allocation on it.

And even if there is some impact from tax reform on the banks, their tax base will still be high, they'll still need tax equity. If anybody is impacted from a decline in the supply of tax equity, it's going to be the resi solar folks first. And then it's going to be the smaller wind developers second.

So in some ways, I could see it creating a bit of a competitive advantage, but we have ways to manage around tax equity and don't really view it as being a big impact to our business going forward. .

That's helpful. And then just quickly on the repowering front.

Among the 1.6 gigawatts, do any of those -- are those still primarily for projects with hedges for off-take contracts? Have you been able to find the opportunities for PPA projects? And if not, just maybe you could discuss some of the challenges there and your expectations to overcome them going forward?.

It's Armando. The 1.6 that we've announced is really just hedged projects. But in the last 3 months, we've made some, I'd say, pretty good development in engaging our PPA counterparties and amending or trying to amend those PPAs. I feel pretty good about it.

I mean if we didn't feel pretty good about it, we wouldn't have said that we still -- we would expect $2 billion to $2.5 billion from this program. To get up to that $2 billion to $2.5 billion of investment, you're going to have to amend some of the current power purchase agreements that are out there.

And I will tell you that all of the counterparties -- we have not spoken to all the counterparties obviously at this point. But all of the counterparties that we have spoken with are very interested in taking on repowered projects. .

And we'll go next to Colin Rusch at Oppenheimer Company. .

This is Shivani Sood on for Colin Rusch. Two questions for us. We're seeing a rapid evolution of microgrid technology performance and cost.

Can you just kind of talk about how you see the corporate, university, military microgrids fitting into your development plans?.

This is Eric. We don't see a lot of penetration right now and/or interest on microgrids. Obviously, there're still folks who are pursuing that in different parts of the country. In Florida, the value proposition that we provide folks really has just focused on, if anything, I guess, a little bit more towards the energy efficiency.

But that's really driven more by building codes here. So on the microgrid side, I wouldn't say there's been a lot of movement on it. Obviously, technology is something that's driven our business quite a bit. We've adopted a lot on the smart grid technology. That's helped us take costs out of the business and improve the liability.

And that's something that we passed on to customers through lower bills and better performance. .

Great.

And then just as you look at your solar development portfolio and the ongoing cost declines in equipment prices, how much incremental profitability are you seeing in your solar development portfolio?.

Possibility in terms of cost reductions? Or development opportunities? Cost reductions?.

Yes. .

So cost reductions, I mean we're still expecting on a $1 per kW basis for solar to get down to probably pretty close to $1,000 kW by the end of 2020. That's built into all of our expectations at Energy Resources as to what could get done.

And that's built into the expectations that Jim talked about during the prepared remarks where he said by the end of 2020 or early in the next decade, you've got PPA prices that are probably close to $0.03 to $0.04. .

And that concludes today's question-and-answer session and today's conference. Thank you for your participation. You may now disconnect..