Matthew Roskot - NextEra Energy, Inc. John W. Ketchum - NextEra Energy, Inc. Armando Pimentel - NextEra Energy Resources, LLC James L. Robo - NextEra Energy, Inc..

Stephen Calder Byrd - Morgan Stanley & Co. LLC Greg Gordon - Evercore ISI Eugene Hennelly - Guggenheim Securities LLC Michael Lapides - Goldman Sachs & Co. Paul T. Ridzon - KeyBanc Capital Markets, Inc. Christopher James Turnure - JPMorgan Securities LLC Jonathan Philip Arnold - Deutsche Bank Securities, Inc. Cynthia Motz - The Williams Capital Group LP.

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

Thank you, Christina. Good morning, everyone, and thank you for joining our second quarter 2017 combined earnings conference call for NextEra Energy and NextEra Energy Partners.

With me this morning are Jim Robo, Chairman and Chief Executive Officer of NextEra Energy; John Ketchum, Executive Vice President and Chief Financial Officer of NextEra Energy; Armando Pimentel, President and Chief Executive Officer of NextEra Energy Resources; and Mark Hickson, 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 our executive team will then be available to answer your questions. We will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risks and uncertainties.

Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release, in the comments made during this conference call, in the risk factors section of the accompanying presentation, or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our websites, nexteraenergy.com and nexteraenergypartners.com.

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

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

Thank you, Matt, and good morning, everyone. NextEra Energy and NextEra Energy Partners delivered strong financial results in the second quarter, while continuing to execute on the objectives we shared with you at our investor conference last month.

At NextEra Energy, adjusted earnings per share grew by more than 11% driven by new investments at both FPL and Energy Resources. At Florida Power & Light, growth was primarily driven by continued investment in the business to further advance our long-term focus on delivering outstanding customer value.

Average regulatory capital employed increased by over 10% versus the same quarter last year, reflecting our commitment to invest capital to deliver low bills, high reliability and clean energy solutions for the benefit of our customers.

Our major capital initiatives remain on track and I am pleased to report that construction is underway at the eight 74.5-megawatt solar energy centers that are currently being built across FPL service territory under the solar base rate adjustment or SoBRA mechanism of the rate case settlement agreement.

FPL also continues to work hard to provide outstanding customer service and was recently named one of the 2017 most trusted brands according to a nationwide study conducted by market strategies international. While we always strive to continuously improve, we remain pleased with FPL's financial results and overall execution.

At Energy Resources, contributions from growth and our contracted renewables portfolio and investments in natural gas pipelines drove strong financial results for the quarter.

We continue the pattern of origination success with which we started the year signing 631 megawatts of additional wind and solar power purchase agreements since our first quarter call. We also successfully negotiated our first PPA amendment for a repowering project, adding approximately 200 megawatts to our repowering backlog.

This project helps support the acceleration and expansion of our repowering opportunity set, which was increased to a total expected capital investment of between $2.5 billion and $3 billion over the next four years, while our 2017 and 2018 repowering expectations increased to a range of 2,100 megawatts to 2,600 megawatts.

As we outlined last month at our investor conference, we believe we are well positioned to capitalize on one of the best environments for renewables development in our history. With continued costs and efficiency improvements in wind and solar technology, economics have become the primary driver of ongoing customer origination activity.

A consistent focus on leveraging Energy Resources' competitive advantages, including our development skills, purchasing power, best-in-class construction expertise, resource assessment capabilities and strong access to and cost of capital advantages position us to further advance an already strong and visible opportunity set going forward.

Many of these competitive advantages are equally applicable to our natural gas pipeline origination and development activities.

Along those lines, I am pleased to announce that during the quarter both the Sabal Trail Transmission and Florida Southeast Connection natural gas pipeline projects successfully achieved commercial operation on budget and on a schedule consistent with our mid-2017 guidance.

NextEra Energy Partners grew both adjusted EBITDA and cash available for distribution by almost 30%, reflecting meaningful growth in NEP's portfolio over the past year. The NEP assets operated well and the strong growth in adjusted EBITDA and cash available for distribution was consistent with our expectations.

The NEP board declared a quarterly distribution of $0.38 per common unit or $1.52 per common unit on an annualized basis, an increase of approximately 15% from a year earlier.

During the quarter, NEP completed the acquisition of the roughly 250 megawatt Golden West Wind project from Energy Resources that was announced on our last call, adding to its portfolio of high quality long-term contracted assets.

In addition to the modified IDR structure we implemented earlier this year, we believe the changes we announced at NEP last month, including the improved governance structure, the standalone credit rating in the mid to high BB category and the agreement to issue $550 million of convertible preferred units, significantly enhance the LP unitholder value proposition.

With clear visibility into future growth and even greater financial flexibility to finance that growth, we believe NEP is well positioned to meet its long-term financial expectations without the need to sell common equity until 2020 at the earliest other than modest sales under the ATM program.

We are pleased with the progress we are making at NEE and NEP and heading into the second half of the year, we are well positioned to achieve the full-year financial expectations that we have previously discussed, subject to our usual caveats. Now let's look at the detailed results beginning with FPL.

For the second quarter of 2017, FPL reported net income of $526 million, or $1.12 per share, an increase of $78 million and $0.16 per share respectively year-over-year.

Net income growth of over 17% versus the prior year comparable quarter was primarily driven by more than 10% growth in regulatory capital employed, the absence of the gas reserve charge that we recorded in the second quarter of 2016, and increased earnings from wholesale operations.

Our reported ROE for regulatory purposes will be approximately 11.5% for the 12 months ending June 2017.

We expect the flexibility provided by the utilization of our reserve amortization coupled with our weather normalized sales growth forecast and current CapEx and O&M expectations to support our target regulatory ROE of 11.5% for the full year 2017, which is at the upper end of the allowed band of 9.6% to 11.6% under our current settlement agreement.

As a reminder, under the current rate agreement, we record reserve amortization entries to achieve a predetermined regulatory ROE for each trailing 12-month period. We utilized $17 million of reserve amortization during the quarter, which was less than we had planned, in order to achieve the 11.5% ROE that I just mentioned.

Over the remainder of 2017, assuming normal weather and operating conditions, we expect to reverse more than half of the $228 million reserve amortization taken year to date and to end the year with a balance roughly $100 million below the $1.25 billion with which we started the settlement agreement.

Turning to our development efforts, all of our major capital projects at FPL are progressing well. FPL's capital expenditures were approximately $1 billion in the quarter and we expect our full-year capital investments to be between $5 billion and $5.4 billion.

Construction on the approximately 1,750 megawatt Okeechobee Clean Energy Center remains on schedule and under budget. As I mentioned earlier, construction is underway at the eight solar projects currently being built across FPL service territory under the SoBRA mechanism, continuing one of the largest solar expansions ever in the eastern U.S.

The eight new plants, which will comprise a total of nearly 600 megawatts of combined capacity, are all on track and on budget to begin providing cost effective energy to FPL customers later this year and in early 2018.

We are moving through the regulatory process on a number of initiatives that are aimed at strengthening the value proposition that we deliver to our customers.

Earlier this month, we completed the first step in the comprehensive review and permitting process for the planned modernization of Lauderdale plant as the Florida Public Service Commission approved FPL's request for bid rule exemption.

The roughly 1,200 megawatt highly-efficient, clean-burning natural gas Dania Beach Clean Energy Center is expected to begin operation by mid-2022 and generate more than $350 million in net cost savings for FPL customers. We plan to file a petition for a determination of need for the facility later this fall.

The total capital investment for the project is expected to be approximately $900 million through 2022. FPL also filed a petition with the FPSC for approval to shut down the St. Johns River Power Park, an approximately 1,300-megawatt coal-fired plant jointly own with JEA at the end of this year.

The early retirement of the plant is projected to save FPL customers $183 million and prevent nearly 5.6 million tons of carbon dioxide emissions annually. The technical hearing is scheduled for mid-September to review the filing. Following the hearing, we anticipate an agenda conference will be scheduled later in the fall to decide on the proposal.

We continue to make good progress on our other capital initiatives, including our ongoing investments to harden and automate our existing transmission and distribution system, and development of the additional 1,600-megawatts of solar projects that are planned for beyond 2018.

We have currently secured more than 4 gigawatts of potential sites that support FPL's ongoing solar expansion. All of our efforts at FPL are aimed at further enhancing our already best-in-class customer value proposition. The economy in Florida continues to grow at a healthy pace with the state adding approximately 1,000 new residents per day.

Florida's seasonally adjusted unemployment rate in June was 4.1%, down 0.8 percentage points from a year earlier, and the lowest since mid-2007.

Within the housing sector, the Case-Shiller Index for South Florida shows home prices up 5.2% from the prior year, while mortgage delinquency rates continue to decline and new building permits remain at healthy levels. At the same time, the June reading of Florida's consumer sentiment remained close to post recession highs.

FPL's second quarter retail sales increased 0.7%. For the quarter, FPL's average number of customers increased by approximately 64,000 or 1.3% from the comparable prior-year quarter, which was consistent with our long-term expectations.

Overall usage was flat as a favorable weather comparison was roughly offset by decline in underlying usage per customer.

As you may recall, last year underlying usage was in line with our long-term expectations and, as we have often pointed out, this metric can be somewhat volatile on a quarterly basis, particularly during periods when temperatures deviate significantly from normal as we sometimes experience during the second quarter of each year.

Our long-term expectations of underlying usage growth continue to average between 0% and approximately negative 0.5% per year. Let me now turn to Energy Resources, which reported second quarter 2017 GAAP earnings of $301 million or $0.64 per share. Adjusted earnings for the second quarter were $351 million or $0.74 per share.

Energy Resources' contribution to adjusted EPS increased by $0.07 or approximately 10% year-over-year. New investments added $0.17 per share, reflecting continued growth in our contracted renewables program and contributions from our natural gas pipeline development projects.

These gains were partially offset by a decline in contributions from our existing generation assets of $0.08 per share. The refueling outage at our Seabrook Station nuclear plant combined with other headwinds was partially offset by favorable wind generation. Overall, wind resource was 101% of the long-term average, up from 93% a year earlier.

Our customer supply and trading business contributed a positive $0.05 per share due to favorable market conditions and successful origination activities.

All other remaining items contributed negative $0.07, reflecting lower contributions from the company's gas infrastructure business and higher costs associated with a year-over-year increase in interest expense. Additional details are shown on the accompanying slide.

As I mentioned earlier, the Energy Resources development team had another successful quarter of origination activity, adding 630 megawatts to our contracted renewables backlog since the first quarter call. Let me now spend a minute on where each program stands.

Since our last earnings call, we have added 193 megawatts of wind projects and 438 megawatts of new solar projects to our renewables backlog. All of the wind projects and 80 megawatts of the solar projects are for delivery in 2017 and 2018.

The accompanying chart updates information we provide on last quarter's call, but our overall expectations have not changed.

We continued to track against the total development forecast for 2017 through 2020 that we shared at our investor conference last month, and our backlog continues to track against the assumptions supporting our previously announced financial expectations.

Only halfway through 2017, we are pleased to have already signed more than 1,600 megawatts of contracts for 2019 and 2020 delivery which is a reflection of the continued strong economic demand for wind and solar combined with our competitive advantages in renewables development.

During the quarter, Energy Resources successfully commissioned an additional 213 megawatts of our wind repowering program and we continue to make solid progress on the remaining sites. As I previously mentioned, since our last earnings call, we added approximately 200 megawatts to our repowering backlog, which now totals roughly 1,800 megawatts.

This new opportunity, which is scheduled to be completed in 2018, represents our first wind repowering under an existing power purchase agreement. Our development team is in active negotiations with customers under other existing PPAs to facilitate additional repowering opportunities.

As a reminder, at last month's investor conference, we increased our total expected capital deployment for repowerings to between $2.5 billion and $3 billion through 2020, while also accelerating delivery of additional repowering megawatts into 2017 and 2018.

For the reasons discussed at our investor conference, we expect to bring into service a total of 10,100 to 16,500 megawatts of renewables from 2017 through 2020, including repowerings.

To highlight the scale of this opportunity set, it's worth noting that the midpoint of this range represents more megawatts than Energy Resources' total wind and solar portfolio as of year-end 2014.

As I mentioned earlier, in addition to our continued renewables operation success, we're pleased that both Sabal Trail Transmission and Florida Southeast Connection achieved commercial operation during the second quarter, both on budget and in line with the mid-2017 timing that we had previously shared.

The Mountain Valley Pipeline continues to progress through the FERC process. Late last month we received the final environmental impact statement which recommended approval of the project to the commission.

Assuming a FERC quorum is reestablished, we project a FERC certificate for MBP this fall and will begin advancing construction efforts for December 2018 in-service date. NextEra Energy's expected investment is approximately $1.1 billion. Let me now review the highlights for NEP.

Second quarter adjusted EBITDA was $196 million and cash available for distribution was $84 million, up $40 million and $19 million respectively from the prior year comparable quarter, primarily driven by growth in the underlying portfolio. New projects added $43 million of adjusted EBITDA and $20 million of cash available for distribution.

The existing assets in the NEP portfolio operated well and benefited from a year-over-year improvement in wind and solar resource. As a result, adjusted EBITDA and cash available for distribution from existing projects increased by $6 million from the prior-year comparable quarter.

For the NEP portfolio, wind resource was 98% of the long-term average versus 91% in the second quarter of 2016. The improvement in existing assets was roughly offset by higher IDR fees, which increased by $7 million year-over-year. The impact of these and other effects is shown on the accompanying slide.

During the quarter, NEP completed the financing and acquisition of the approximately 250 megawatt Golden West Wind Energy Center from Energy Resources that was first announced on our last earnings call, which was funded entirely through NEP's existing debt capacity.

NEP's financing flexibility was significantly enhanced by the announcements we made in June. Based on the standalone credit ratings in the mid- to high-BB category that were received last month, NEP expects to target total holdco leverage to project distributions of four to five times over the longer term, which is consistent with its credit ratings.

It should be noted that each rating agency makes their own adjustments to our reported financial information, including adjusting expected production at our sites from P-50 to P-90 in some instances, which our target leverage ratio takes into account.

Currently, NEP's holdco leverage ratio is approximately three times project distributions after debt service assuming P-50 resource, or approximately 3.3 times assuming P-90 resource and other rating agency adjustments.

With the increased leverage capacity provided by the standalone credit ratings, NEP has substantial balance sheet capacity moving forward. We have included a new slide in the appendix to today's presentation with additional details regarding NEP's leverage targets and credit metrics and our year-end expectations against these targets.

NEP's financing flexibility is further enhanced by last month's agreement to issue $550 million of convertible preferred units.

The convertible preferred securities have a 4.5% coupon for the first three years, the lowest ever in the yieldco or MLP space, and an issuance price of roughly $39.23 which represents a 15% premium to NEP's 45-day volume weighted average price prior to execution of the agreement.

Among other attractive features, the coupon can be paid in kind with additional preferred units during the first three years. As a result of these efforts to further improve NEP's financing flexibility, we did not expect NEP to need to sell common equity until 2020 at the earliest, other than modest sales under the ATM program.

Earlier this month, we filed a Schedule 14C with the Securities and Exchange Commission, which includes forms of updated organizational documents for NextEra Energy Partners, reflecting the governance changes that were announced at last month's investor conference.

These governance improvements, among other rights, will give LP unitholders the ability to elect the majority of the NEP board and are expected to further enhance LP unitholder value.

As announced in our filings, LP unitholders will have their first opportunity to elect the majority of the NEP board beginning at the 2017 annual meeting of limited partners which is expected to be held in December of this year. A more detailed timeline of the schedule is available in the appendix of today's presentation.

As a result of these governance changes, NEE will be required to deconsolidate NEP from its financial statements beginning January 1, 2018. Turning now to the consolidated results for NextEra Energy, for the second quarter of 2017, GAAP net income attributable to NextEra Energy was $793 million, or $1.68 per share.

NextEra Energy's 2017 second quarter adjusted earnings and adjusted EPS were $881 million and $1.86 per share respectively.

Adjusted earnings from the Corporate and Other segment decreased $0.04 per share compared to the second quarter of 2016, reflecting the sale of FiberNet earlier this year and other miscellaneous corporate items, none of which was individually notable.

NextEra Energy's year-to-date operating cash flow adjusted for the impacts of certain FPL clause recoveries and the Indiantown acquisition increased by roughly 9% compared to 2016, and we continue to maintain our strong financial position and credit profile.

As a reminder, through 2020 we expect cash flow from operations to grow in line with our adjusted EPS compound annual growth rate of 6% to 8%. Last month we provided financial expectations for NextEra Energy through 2020. For 2017, we continue to expect adjusted earnings per share at NextEra Energy to be in the range of $6.35 to $6.85.

While we have had a strong first half, we continue to expect to finish 2017 at or near the upper end of our previously disclosed 6% to 8% compound annual growth rate off a 2016 base. Based on what we see now, we expect most of our growth in the second half of the year to be in the fourth quarter.

For 2018, we expect adjusted earnings per share to be in the range of $6.80 to $7.30 and in the range of $7.85 to $8.45 for 2020, implying a compound annual growth rate off a 2016 (27:07) base of 6% to 8%.

As I said last month, we believe that we have one of the best growth opportunity sets in our industry and we will be disappointed if we are not able to deliver financial results at or near the top end of our 6% to 8% range through 2020.

We continue to expect to grow our dividends per share 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.

Finally, as we announced earlier this month, Energy Future Holdings terminated the agreement and plan a merger with NextEra Energy for the approximately 80% ownership interest in Oncor held by EFIH.

As a result of the termination of the agreement EFH is obligated to pay a $275 million termination fee to NextEra under the terms and conditions of the agreement. And we will vigorously pursue our rights with regard to the payment of the fee. Let me now turn to NEP.

From a base of our fourth quarter 2016 distribution per common unit at an annualized rate of $1.41, we continue to see 12% to 15% per-year growth in LP distributions as being a reasonable range of expectations through at least 2022 subject to our usual caveats.

As a result, 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, meaning the fourth quarter distribution that is payable in February 2018.

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

Our expectations are subject to our normal caveats and are net of anticipated IDR fees, since we treat these as an operating expense. In summary, we continue to believe that NEE and NEP offer some of the best value propositions in the industry.

NEP has clear visibility into its long-term growth trajectory and has significant flexibility as to how that growth can be financed with no need to sell common equity until 2020 at the earliest other than modest sales under the ATM program.

Combined with its enhanced governance, the IDRP modification announced earlier this year and stable cash flows supported by a portfolio of assets with an average contract life of 18 years and an average counterparty credit rating of A3, we believe NEP offers a superior investor value proposition when compared against high quality dropdown MLPs and other yieldcos.

At NextEra Energy, we have a long-term track record of delivering results for shareholders and remain intensely focused on achieving our strategic growth and growth initiatives going forward.

NEE has one of the strongest credit ratings and balance sheets in the sector backed by a largely rate-regulated and long-term contracted asset portfolio and $3 billion to $5 billion of excess balance sheet capacity.

FPL benefits from a constructive regulatory environment with four years of rate predictability, while both FPL and Energy Resources stand to gain from one of the best renewables environments in our history with improving equipment costs and efficiencies and expected advancements in energy storage.

Together with $425 million of run rate efficiencies identified across our businesses through Project Accelerate and a strong pipeline of backlog with many incremental investment opportunities, we believe NextEra Energy is as well positioned as it's ever been to deliver on our financial expectations over the next four years.

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

Thank you. And we will take our first question from Stephen Byrd with Morgan Stanley..

Hi. Good morning..

Good morning, Stephen..

Yeah. Wanted to first talk about the repowering. I believe this is the first contract that you signed with respect to repowering.

Were there any lessons learned in terms of the process you went through in signing the new contract in terms of the time it required or sort of the win-win scenario that you envisioned in terms of the economic benefit of repowering? Any sort of commentary you can provide around the signing of that contract?.

Yeah. I'll refer that question to Armando..

Hey, good morning, Stephen. Not really, each one of these are going to be different with a different customer.

Each one of the customers has a different timeline, I can tell you that we are in discussions with a number of customers and all of them, I would say virtually all of them, are responding favorably to the economics about picking up some additional megawatts.

So, but each one of these are different, right? The customer's in a different place and their regulatory environment and what their needs are. But we continue to feel really positive that we're going to pick up what we said we would at the investor conference in terms of additional megawatts under the repowering program.

I think this is one of those situations where it's really good for those customers that have those long-term contracts and it's really good economics for us..

Great. That's helpful. And just stepping back and thinking about renewables acquisition opportunities, it appears there's no shortage of renewables assets that are available for purchase out in the market. But I know generally you've had just excellent organic returns on your development profile.

When you think about the prospects for acquiring renewables assets out in the market versus your own organic growth opportunities, is it fair to say you're still fairly heavily biased towards your own organic growth or do you think that there is some potential to be able to win in a competitive situation and acquire renewable assets in the market?.

Well, Stephen, the first thing I will say is, we're always looking, right, the assumption should be if there are renewable assets for sale out there in the market, the expectation of our investors should be that we're taking a look.

We haven't been, as you noted, as successful in the larger type of acquisitions that draw a lot of folks to the table, but that doesn't mean that there may not be something unique about the ones that are out in the market right now that might put us in a better position. We continue to be very active in the asset acquisition market.

It really doesn't get a lot of headlines.

So these are projects that may not be necessarily 100% greenfield, but these are smaller projects, one-off projects that smaller developers either have land or have permits or may have an interconnect and so on that we are actively looking in the area and that we pick up and those don't necessarily make a splash anywhere in the media, but those are situations that we continue to be very active in.

You're right, it is a time where there are larger assets available out there, larger portfolios and the assumption is that we're taking a look and if it makes sense, that either at NEE or at NEP, that we would be in a position to be a buyer..

That's helpful. So it sounds like, Armando, the less cookie cutter it is, the more – if it has some unique elements, then maybe there's a better chance versus if it's a very standard type of asset where you could have a lot of bidders, that would be less likely for you all to be successful there..

That's correct, Stephen and that is really no different than where we've been..

Very good. Thank you very much..

Thank you, Stephen..

And we'll take our next question from Greg Gordon with Evercore ISI..

Thanks. Good morning, guys. Great quarter..

Good morning, Greg. Thank you..

Two very, very sort of modest questions. One was that can you tell us what the quarter-over-quarter improvement was in marketing and trading and retail? It was a nickel improvement. And then also if I go to the appendix, there was a very modest change, a $25 million reduction in the guidance range for contracted renewables.

And is that just sort of rounding error or did something meaningful happen in terms of a near-term outlook for certain assets in that portfolio?.

Yeah. On the latter question, really just rounding error there. I mean, given the size of the build, just a very small change. I mean, I think it was just $25 million and that's rounding error.

And on the first question, where did the contribution come from the training and marketing business? I mean it was really through improvements and full requirements and then some origination activity on some of the customer facing business within that portfolio..

Okay. Thank you. Have a great day..

Thank you..

We'll take our next question from Shar Pourreza with Guggenheim Partners..

Hi. Good morning, everyone. This is actually Eugene Hennelly on for Shar. Sort of a quick question. I was wondering on – you touched on the termination fee that you were pursuing with Energy Future Holdings.

Just wondering if you could remind us what the status of that was and maybe in light of the petition filed in Texas to kind of review the order denying the proposed acquisition there..

Yeah. So, first of all, the agreement has been terminated by EFH.

It was terminated in that the burdensome conditions had not been satisfied, which were one of the precursors to obtaining regulatory approval and if the burdensome conditions had not been satisfied, one of the burdensome conditions being that we would not have to accept an independent board, that would trigger payment of the $275 million termination fee..

Okay. That's helpful. Thanks.

And then the petition to review the PUCT denial, any way associated with it or still kind of pursuing Oncor, any avenues that are open there?.

No, I think the petition that we filed speaks for itself. I'll probably....

Okay..

...just leave it at that..

Okay. Thank you..

We'll take our next question from Michael Lapides with Goldman Sachs..

Hey, guys. Two questions.

Jim, Armando, how are you guys thinking about the market impact for solar, if the Suniva tariff-related case kind of keeps progressing and we actually see the United States government put tariffs on imported solar related products? How are you thinking about the big picture impact, what it means for solar new builds? What it means for demand from your customers who want utility scale solar? How are you just kind of thinking about how this kind of shakes through the value chain?.

So Michael, this is Jim. We'll see what happens on that case. Obviously we're following it closely. My own view on this is that markets adjusts and this is a very competitive market out there for manufacturing panels, that the panel manufacturers are not going to abandon this market and they'll figure out a way to compete.

And it may take a little bit, but fundamentally I'm not worried about the long-term implications of whatever happens with the ITC there..

Got it. And then kind of a near-term question next, two to three years. You saw in the quarter and we've seen for a bit that you've managed O&M costs at FP&L down and done so successfully. And you talked a little bit about cost savings opportunities at NEER as well, although I don't know if we've actually seen that.

When do you expect that to really kind of trickle in? And does that – do you expect actual O&M at NEER to be down or just not to be up as much as it otherwise would've been because you're still adding a lot of megawatts there?.

Yeah, I think one of the things that we laid out at the investor conference was the run rate savings that we saw coming from Project Accelerate being about $425 million roughly by the time you get to 2019. You can think about that being a 60% FPL, 40% Energy Resources.

And as we stair-step into those savings opportunities, you'll see those realized over time for the balance of 2017, mainly in 2018, until we get to that run rate number in 2019..

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

We'll take our next question from Paul Ridzon with KeyBanc..

Congratulations on a solid quarter..

Thank you..

Do you have any read-through on DC and Rick Perry's report and when that could come out and any expectations of what will be in it?.

So Paul, this is Jim. I think we will see. I think it's – obviously there's been some press about drafts of that report. I think it's honestly too soon to speculate on what's going to be in there.

I think the – and Joe Kelliher actually testified in front of Congress last week around this whole issue of are there reliability issues as a result of the changes that have happened in terms of low natural gas prices and more renewables on the grid. And I think the data is pretty clear. There's no reliability issues on the grid.

And, there is plenty of capacity there, and the grid is very resilient. I think you saw, actually last week Andy Ott from PJM saying renewables were very helpful during the polar vortex and that they're a part of the reliability solution, not only part of the problem.

And so I feel very confident that the facts are that the grid is extraordinarily reliable as it is right now in America, and that renewables and storage are only going to make it – particularly combined with storage as storage prices come down, are only going to make it more reliable going forward.

And as I said at our investor conference, I think the industry has a choice. The industry has a choice of hang onto the past and the technologies of the past or adopting and embracing the technology of the future. And we know what we're going to do and we know what our strategy is and that is to embrace the future and to embrace it wholeheartedly..

Thank you.

And then just on the renewables side, your customer mix, how is that evolving from RPS to the Amazons and Googles of the world, and what does that trajectory look like over the next five years in your view?.

Hey, Paul, it's Armando. I think it's evolving a bit. Clearly, right, as a C&I market, we see much more activity out there now than we did just a couple of years ago.

And if we were to look at the amount of bids that we're getting in and what we're responding to compared to a couple years ago, you certainly see a lot more of the C&I customers that are in there. So, and that's all positive, I think. It's positive for the entire market, and I think it's positive for us.

Those contracts, those commercial negotiations are bit different than the ones that we've had in the past, but it's all good and I think it's going to evolve to a good place.

I think most important is that when – we laid this out at the investor conference is, it's really only a small number or small amount of the overall power market at this point that is powered by renewable energy, right? I mean, there's a long way to go and whether it's the C&I sector, whether it's the munis and co-ops that are making the evolutionary change that Jim talked about, or even the traditional utility customers, there's a long way to go.

And everybody is talking about it. When I go and talk to C&I customers or the munis and co-ops or the traditional utilities, those discussions are all about how they can change their systems to have more renewables and everybody's really positive about it.

And so we continue to be really positive about the fact that it's a very low penetration in the market of renewables and it's got a long way to go, and I think the C&I sector, entering into it is really good for us and really good for the market..

Okay.

Are there notable differences in project returns depending on what type of customer it is?.

No. No. There's no notable difference..

Thank you very much. Okay. Appreciate it. Thank you..

We'll go now to Chris Turnure with JPMorgan..

Good morning. You mentioned in the prepared remarks, John, that the second quarter tends to be a little bit difficult to forecast on per customer load growth or per customer usage, but we've seen two quarters now of pretty negative numbers there.

Any differences between your expectations in the first half of the year going in and kind of where things have panned out so far or differences between maybe the evolution of the Florida customer and usage there versus other states?.

Yeah. I mean, we continue to see strong underlying growth in the Florida economy.

Customer growth has been right around our expectations, 64,000, 65,000 a quarter, about 1.3% growth this quarter and what we typically see in the shoulder months, particularly the second quarter of many years, it's just a lot of volatility, because the comparison set is not entirely accurate.

Sometimes it can be really, really hot and sometimes it can be a little cooler than normal and we had one of those quarters that was a little bit warmer than usual which makes it difficult to get a really accurate comparison. And so that's really what we're getting at.

We have made the adjustment of zero to negative 50 basis points on underlying usage. It's something that we'll continue to watch. Weather related usage I think was up about 2.9%, underlying down about 2.9% and so the offset was really just the usage from the customer growth. But, it's something that we'll continue to watch.

But again, it's very hard to draw any accurate conclusions from what we see in the second quarter..

All right.

And just to clarify that negative 50 basis points to zero long-term growth was per customer usage or overall normalized low sort of underlying guidance?.

Yeah. That is our weather normalized usage impact. So, when you look at underlying usage the impacts of higher efficiency air-conditioning, LED light bulbs, those types of things, we've been anticipating about a zero to a negative 50 basis point impact..

Okay.

And so that number does include the positive impact of customer growth as well?.

No..

Okay..

That's the offset against that..

Got you. And then, my second question is a little bit longer-term. You've obviously had success on a couple large midstream projects so far. But when you look out into the future, I think at the Analyst Day it was mentioned those will continue to be in your sights.

What is the risk and return differential there versus your existing renewable and utility portfolio, whether we're talking about an individual project that you might do in the future or a portfolio of assets?.

Well, we'd like to be able to find an additional greenfield development project opportunity on the pipeline side, which is what we said at the investor conference. Hopefully over the next four years, by the end of 2020, be able to have one in our line of sights.

And the reasons that we say that is all the things that make us a successful renewables developer translate equally over to natural gas pipelines. I mean, we're great at the state regulatory side, we're great on the land acquisition side. We've got an equipment procurement advantage. We have a cost of capital advantage, an access to capital advantage.

All those things, particularly when you look at where our cost of capital is against compared to the yield of other MLPs should give us a real advantage to be able to be successful in that business.

All that being said, the greenfield pipeline business is very, very competitive and while we will continue to look for gas basis dislocations that can support the economics for a new pipeline project and be able to execute, move forward on one, they're tough to find.

And so, that's something that we'll continue to try to identify through our development efforts..

So Chris, this is Jim.

The only thing I'd add to that is, I think John's absolutely right on the greenfield front, but we have four or five expansion/bolt-on opportunities that we are running very hard at that are in some way associated with our three existing – with the two existing pipeline systems that we're building out at NEE and the one existing pipeline system that is at NEP.

And I'm actually quite excited. Just was with our team a few weeks ago, quite excited about some of the opportunities there. And I think in terms of returns there, the returns there would be just as attractive as our renewable portfolio..

Okay.

And then this is probably a good problem to have, but does at any point the magnitude of midstream development opportunities get too big given the level of risk that would be brought on there?.

No, because remember the kind of opportunities that we're going to be looking for long-term average contract life with strong on counterparty credits, which is a match against our renewables portfolio..

Great. That's very helpful..

Yeah. We view those as a very complementary fit with the rest of our assets..

Thanks..

Thanks, Chris..

We'll take our next question from Jonathan Arnold with Deutsche Bank..

Good morning, guys..

Good morning, John, and how are you?.

Good. Thank you. Could I just clarify – we kind of didn't quite catch the comment on the upper end.

I want to be clear that you're saying you expect to be at the upper end on 2017 as well as 2020 and when you say 2017, are we talking about the guidance or the growth rate or both?.

We're talking about the growth rate, the 6% to 8%. We expect to be at the top end for 2017. We'd be disappointed to not be at the top end through 2020. Remember at the investor conference, we did lay out financial plans for both FPL and for Energy Resources.

The FPL financial plan had us growing regulatory capital employed at about 8% and net income at right around 9% and the Energy Resources plan had us growing EPS at roughly 11%.

Now there's a little bit of an offset for some interest expense on the C&O side, but what we're establishing at the investor conferences, we have a lot of headroom to get to the top end of the range, a lot of cushion to be able to withstand some unexpected events that may come up over the next four years..

And just to make – so the base for 2016 is $6.19, is that correct? When you talk about the earnings..

Yeah, the base for 2016 is $6.19. That's right..

Okay. So, that upper end of the growth rate would not be consistent with upper end of the guidance on 2017. I just want to make sure we're understanding that right..

That's right. Remember, when we say upper end, we mean upper end of the growth rate, not the guidance range..

Okay..

So, we're talking compound annual growth rate of 6% to 8% off a 2016 base of $6.19 a share through 2020..

Okay. And then, I just wanted to return to just the growth question that Chris brought up. You've typically given the 12-month trailing usage number and if Q2 isn't that meaningful, is that a number you can share? It seemed not to be on the slide..

I'm sorry, Jon.

Can you repeat the question?.

The customer usage number that....

Yeah..

...you've typically give a 12-month annualized column there which is not there in the slide today..

Yeah..

What's the usage tracking at on an annualized basis?.

No we – yeah we typically do that in the fourth quarter. We'll show it for the full year, but we don't typically do that on a quarterly basis..

Oh, okay. It was kind of there last quarter, so I thought maybe that was something you – we'll try and back into it, I guess. Well, thank you..

Yeah, the reason we showed it last year was the first quarter of the year comparing against the last 12 months on usage trends..

Okay. Great. Thank you..

You're welcome. Thanks, Jonathan..

And we'll take our next question from Cindy Motz with Williams Capital Group..

Oh, hi. Thanks for taking the question. Most of my questions have been answered, but just on NEP, in terms of their revenues, they were pretty much in line overall with what I was expecting and renewables were a little higher. The pipeline was just a tad lower. And I was just wondering if anything was going on with the operation and maintenance expense.

It was just a bit off, just was curious about that.

And then just secondly, Armando, you guys talked a lot about storage and you've already talked about acquisitions and everything like that and looking at everything, but just any color you could give us in terms of how you're working with storage and what you see like with you guys working with your competitive advantages there. Thanks..

So, Cindy, no big reason for the revenue on the pipeline to be a little lower. We have moved some of the CapEx on the NET pipes back a little bit from where we had it in our original expectations, but we – I just actually did a review yesterday. We feel really good about the opportunities at those pipes that are sitting down at NEP.

We have CapEx opportunities that we're looking at now that are higher even than when we did the acquisition, so we feel good about those pipeline opportunities, but there's no single thing there that I would call out.

In terms of storage, my overall comment on storage is fairly consistent with what we talked about at the investor conference and that is that in virtually all circumstances where we are having discussions with customers right now on the solar side, we are also having a discussion about storage.

I would say it's just a little less on wind, but not that much less. Everyone is interested in storage. The prices that we're seeing for renewables at this point without storage I think are very competitive with what we're seeing with traditional resources out in the market and we're offering long-term contracts.

And so folks are interested in what can you do for me for two, three, four hours of storage? We're having a lot of discussions about the technology with customers. We have a head start compared to our customers and so they're very active discussions.

And again, my expectation would be that later on in this decade but particularly early part of next decade that we are going to see storage associated with most of the renewable opportunities out there. I think it's that good, based on what we're seeing on the cost side..

Great. Thanks..

And our next question will be from Steve Fleishman with Wolfe Research. .

Steve, this is Jim. We remain very engaged on that topic and have been speaking with senators on both sides of the aisle and impressing upon them how important it is for infrastructure, continued growth in infrastructure projects in the country to get a vote.

Leader McConnell has extended by a couple weeks the time that the Senate plans to be in session in August. That was a positive in terms of being able to get a vote on the nominees prior to August recess. We remain very focused on stressing how important that is to folks on both sides of the aisle and we remain hopeful.

Obviously there are some larger dynamics going on. I wish getting a FERC quorum was number one on the hit parade in terms of what Congress is focused on right now, but they're focused on some other things obviously.

So, as far as Mountain Valley timing is concerned, it's pretty important that we get that FERC certificate by the end of September in order to continue on the timeline that we have and so we're watching it very closely. .

Sure. So, we've talked, I've said about any M&A that it has to be strategic. It has to be significantly accretive. We have to see a clear path to getting it approved.

When it comes to a big midstream acquisition, I think – and I think the other thing just the other – the criteria that we laid out for M&A was that we would do nothing that would impair the credit rating. And so any big midstream acquisition I think certainly would not be credit neutral.

And so it's not been a big focus of ours frankly, and I'll probably leave it at that. In the yieldco space, we, as Armando said, as assets come available in that space, we will look both at NEE and NEP.

And again, we're going to always hold those deals up against our own origination efforts and our own ability to grow NEP on a standalone basis as well. So that's a (01:03:58). That said, we have obviously some real advantages in the yieldco space in terms of synergies and I believe we'd be able to operate the assets better.

And so there are some things that could offset some of the headwinds that you'd see from buying big asset portfolios. But we remain very focused on our core strategy which is continuing to grow FPL and continuing to improve the customer value proposition.

And at Energy Resources, continuing to grow what we think is the world's best development business, and continue to grow our own pipeline, expand our own long-term contracted pipeline opportunities there. And at NEP, to continue to make it the best.

We think it is the best, certainly is the best yieldco in the space and we're very confident that even when you compare it against high-growth MLPs that NEP is extremely well positioned there as well and is going to continue to grow and be a terrific value proposition for our unit holders.

And so we have a lot of just core execution that we're focused on. We feel really good about the future and as I said at the investor conference, we don't have to do M&A. It's going to be opportunistic if we do and it really has to make sense and it has to make sense against those four criteria that I laid out earlier. .

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