Good morning, and welcome to the NextEra Energy Inc. and NextEra Energy Partners LP Q4 and Full Year 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

And now, I would now like to turn the conference over to Matt Roskot, Director of Investor Relations. Please go ahead..

Thank you, Kathy. Good morning, everyone, and thank you for joining our fourth quarter and full year 2018 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.

Jim will provide some opening remarks and we will then turn the call over to John for a review of our fourth quarter and full year results. We will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risks and uncertainties.

Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release and the comments made during this conference call, in the Risk Factors section of the accompanying presentation, on 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 Jim.

Thanks, Matt, and good morning, everyone. As John will detail later in the call, 2018 was a terrific year for both NextEra Energy and NextEra Energy Partners.

By successfully executing on our plans at both FPL and Energy Resources, NextEra Energy was able to achieve our target 2018 adjusted EPS of $7.70, an increase of approximately 15% over our 2017 results.

Dating back to 2005, we’ve now delivered compound annual growth and adjusted EPS of over 8.5% which is the highest among all top ten power companies who have achieved on average compound annual growth of roughly 3% over the same period.

We delivered a total shareholder return of over 14% in 2018, outperforming the S&P 500 by nearly 19% and the S&P 500 Utilities Index by more than 10%.

Since 2005, we have outperformed 86% of the S&P 500 and 100% of the other companies in the S&P 500 Utilities Index while continuing to outperform both indices in terms of total shareholder return on a one, three, five, seven and ten year basis.

We are once again honored to be named for the 12th time in 13 years number one in the Electric and Gas Utilities Industry on Fortune’s list of world’s most admired companies and to be among the top 25 of Fortune’s 2018 Change The World list.

During 2018, FPL successfully executed on its ongoing capital plan including the continuation of one of the largest solar expansions ever in the U.S. and achieved its O&M efficiency targets to further improve its already best-in-class customer value proposition.

As a result of continued smart investments to benefit our customers, FPL’s typical residential bill is more than 30% below the national average, the lowest of all 54 electric providers in the State of Florida and nearly 10% below the level it was in 2006.

In addition to low bills, FPL delivered its best ever service reliability performance in 2018 and was recognized for the third time in four years as being the most reliable electric utility of the nation.

Throughout the year, we were fortunate to be in a position to assist other utilities across the country in the recovery from natural disasters and we remain grateful for the support that others have given us over the years. After a nearly ten year process, last month FPL closed on the purchase of the City of Vero Beach's municipal electric system.

We look forward to extending FPL’s value proposition to Vero Beach’s approximately 35,000 customers while also generating significant long-term savings for FPL’s existing customers.

The benefit to both new and existing customers is reflective of FPL’s collaborative efforts with city, local and regional leaders, as well as other state authorities to find the best outcome for all stakeholders.

Earlier this month, we were pleased to close on the purchase of Gulf Power and excited to welcome our new colleagues to the NextEra Energy family. We’ve now successfully completed all three transactions with Southern Company that we announced in the middle of last year.

The acquisitions are an excellent complement to our existing operations and further expand NextEra Energy’s regulated business mix through the addition of attractive electric and natural gas franchises.

By executing on the same long-term strategy that we deployed at FPL, we expect the acquisitions to benefit customers, shareholders and the Florida economy. The Energy Resources team also continued its long track record of strong execution in 2018.

The renewable origination success was particularly strong as the team added approximately 6500 megawatts including storage and repowering to our backlog over the past year. This represents the most successful origination year in our history and is nearly twice as many megawatts as we originated in 2017 our prior record year.

Our ongoing renewable origination success results from operating in what we believe to be the best renewable development environment in our history and our ability to leverage Energy Resource’s competitive advantages.

These competitive advantages include our best-in-class development skills, strong customer relationships, purchasing power, best-in-class construction expertise, resource assessment capabilities, strong access to in cost of capital advantages and the ability to combine wind, solar and battery storage and to integrate its [indiscernible] low cost products.

During the year, we were pleased to receive the IRS start of construction guidance on the Solar ITC which we believe positions us well for substantial solar and storage growth well into the next decades.

In 2018, more than 40% of the solar projects that were added to our backlog included a battery storage component highlighting the beginning of the next phase of renewables development that pairs low cost wind and solar energy with a low cost battery storage solution.

With continued technology improvements and cost declines, we expect that without incentives wind is going to be a $0.02 to $0.025 per kilowatt hour product and solar is going to be a $0.025 to $0.03 per kilowatt hour product early in the next decade.

Combining these extremely low costs with the one half to three quarter cent adder for a four hour storage system will create a [indiscernible] renewable generation resource that is cheaper than the operating cost of coal, nuclear and [lesser] [ph] fuel-efficient oil and gas-fired generation units.

We continue to believe that this will be massively disruptive to the nation’s generation fleet and create significant opportunities for renewable growth well into the next decade.

Consistent with our focus on growing our rate regulated and long-term contracted business operations, during the fourth quarter, NextEra Energy Transmission announced an agreement to acquire Trans Bay Cable, a 53 mile, high-voltage direct current underwater transmission cable system with utility rates set by FERC which provides approximately 40% of San Francisco’s daily electric power needs.

Subject to regulatory approval, the approximately $1 billion acquisition including the assumption of debt is expected to close later this year and to be immediately accretive to earnings.

The proposed acquisition, combined with the Mid-Continent independent system operator selection of NextEra Energy Transmission to develop the approximately 20 mile, single circuit 500 KV Hartburg-Sabine Junction transmission line in East Texas furthers our goal of creating America’s leading competitive transmission company.

In addition to successfully growing our regulated operations both organically and through acquisitions during 2018, we further strengthened Energy Resources’ existing portfolio during the year.

In December, the Connecticut Department of Energy and Environmental Protection selected approximately 20% of the Seabrook nuclear plant’s generation and 80 megawatts of new solar projects which are not yet included in our backlog for long-term contracts.

By operating one of the top performing nuclear plants in the nation, Energy Resources expects to provide significant amounts of carbon-free energy at prices generally in line with current forward curves while generating attractive shareholder returns.

As a result, Seabrook’s contract pricing is expected to be roughly 50% lower than the cost of offshore wind generating significant savings for Connecticut customers over the eight year contract term.

The Seabrook award complements Energy Resources’ exit of the merchant business which we began back in 2011 and essentially completed in 2016 with the sale of our Forney, Lamar and Marcus Hook natural gas generation assets.

Excluding Seabrook, the remaining merchant generation assets contribute less than 1% of NextEra Energy’s consolidated adjusted EBITDA. Going forward, we expect this contribution to decline as the focus remains on regulated and long-term contracted opportunities in renewables, natural gas pipelines and regulated transmission.

As always, we will continue to opportunistically evaluate recycling capital through sales of non-strategic assets in our portfolio including the remaining fossil generation assets to fund the additional growth of the long-term contracted businesses.

As a result of increasing the expected adjusted earnings contribution from rate regulated businesses to 70% and the steps that we have taken to further de-risk the Energy Resources portfolio, S&P announced earlier this month that they have revised the reassessment of NextEra Energy’s business-rich profile upward from strong to excellent.

As a result of this improvement, S&P reduced NextEra Energy’s FFO-to-debt downgrade threshold from 23% to 21%.

This follows Moody’s announcement last year that with the expansion of the company’s regulated operations to roughly 70% following the Gulf Power transaction, NextEra Energy’s CFO pre-working capital-to-debt downgrade threshold would be reduced from 20% to 18%.

At these revised rating agency thresholds and following some utilization of balance sheet capacity for t he Trans Bay Transmission acquisition, we now expect to maintain $4 billion to $6 billion of excess balance sheet capacity through 2021.

While we have multiple alternatives for utilization, we expect to use approximately $2 billion of this capacity in the near-term to support additional regulated capital investments at FPL.

Consistent with the significant incremental smart investment opportunities that exist at FPL, last week, we announced FPL’s groundbreaking 30-by-30 plan to install more than 30 million solar panels by 2030 resulting in an incremental 10,000 megawatts of solar projects versus what is in operation in FPL today.

We will give further details on these and other potential investments which are mostly expected to help maintain on a long-term adjusted EPS compound annual growth rate beyond 2021 at our investor conference which we plan to hold on June 20 in New York City.

Following the strong results from 2018, I continue to believe that we have one of the best organic opportunity sets and execution track records in the industry.

I remain as enthusiastic as ever about our long-term prospects and based on the strength and diversity of our underlying businesses, I will be disappointed if we were not able to deliver financial results at or near the top-end of our 6% to 8% compound annual growth rate range in 2021, plus the expected deal accretion from the Florida transactions while at the same time maintaining our strong credit ratings.

Let me now turn to NEP which also had a terrific year of execution in 2018. As John will describe later in the call, NEP successfully delivered on its growth objectives for adjusted EBITDA, CAFD and LP distributions. During the year, we recycled the proceeds from the sale of NEP’s Canadian portfolio into a higher yielding U.S.

portfolio that benefits from a more favorable tax position. As a result of this accretive transaction, NEP extended its expectations for 12% to 15% per year DPU growth by one additional year to 2023.

The 1.4 gigawatt renewable portfolio that was acquired from Energy Resources further enhanced the diversity of NEP’s existing portfolio and was financed through a combination of the Canadian asset sale proceeds and a $750 million convertible equity portfolio financing with Blackrock.

The financing demonstrates NEP’s ability to access additional low-cost sources of capital to finance its growth and with the right to convert a minimum of 70% of the portfolio financing into NEP units issued at no discount, the transaction further reduces NEP’s equity needs going forward.

NEP grew the LP distribution by 15% year-over-year and delivered a total unitholder return of approximately 4% in 2018 which is on the heels of a total unitholder return of over 75% the year prior.

NEP outperformed both the S&P 500 and the other YieldCos by 7% on average and its total unitholder return was more than 15% higher than the Alerian MLP Index.

I continue to believe that the combination of NEP’s growth visibility along with its flexibility to finance that growth offer unitholders an attractive – offer unitholders an attractive investor value proposition. For these reasons, NEP is well-positioned to continue executing on its growth objectives and delivering strong performance going forward.

Before turning the call over to John, I’d like to announce some important organizational changes.

Armando Pimentel, President and Chief Executive Officer of NextEra Energy Resources and President and a member of the Board of Directors of NextEra Energy Partners will retire from each of his positions on March 1st of this year as part of a planned leadership succession process that began when Armando shared his plans with me more than a year ago.

John Ketchum currently Executive Vice President and Chief Financial Officer of NextEra Energy will replace Armando as President and Chief Executive Officer at NextEra Energy Resources.

As part of John’s new responsibilities, he will continue to serve as a member of the Board of Directors of NEP and will be appointed President of NextEra Energy Partners. Rebecca Kujawa, currently Vice President Business Management NextEra Energy Resources will succeed John as Executive Vice President and Chief Financial Officer of NextEra Energy.

Rebecca will also become a member of the Board of Directors of NEP. Each of these changes will become effective on March 1st of this year. Armando has been an enormous contributor to NextEra Energy’s success during his more than ten years with the company helping to build an industry-leading business during his tenure as CEO of Energy Resources.

His leadership, commercial judgment, financial discipline have all guided Energy Resources through a period of truly unprecedented growth in financial success. Armando’s contributions set the company on a path to become what it is today, the world’s leading renewable energy company.

He has been a great friend, colleague and a truly valued counselor to me personally and it’s an understatement to say I’ll miss him. But I am also excited for Armando and what will come next for him and his family in retirement.

With regard to John’s promotion, I have had the chance to work closely with John for more than 16 years as he has successfully progressed through a variety of different roles in our company. We are fortunate to have a person of his capability, vision and experience.

He is an exceptional leader who has emerged as one of the premier CFOs in our sector and I have tremendous faith that John is the ideal successor to lead the Energy Resources team into the future due to a strong financial acumen, knowledge of the sector and passion for building a world leading-energy company.

Likewise, Rebecca has distinguished herself as well-rounded executive with a proven track record of execution, outstanding finance and commercial skills and an unparalleled understanding of NextEra Energy enterprise.

She has been instrumental and helping Armando lead Energy Resources and develop our strategy for NEP over the last several years and her innovative analytical and strategic mindset will serve us well in her new role. I am very happy to have Rebecca as our new Chief Financial Officer.

I’ll now turn the call over to Armando who would like to make some closing remarks. .

Thank you, Jim. First I want to thank Jim for providing me the opportunity to lead Energy Resources for the last seven-and-a half years and I want to thank those of you on the phone today who I have had the privilege of meeting and interacting with since I began at NextEra Energy in 2008.

I thank you for the interactive dialogue and the opportunity to continue to tell our story and today there is no doubt that Energy Resources is not only the largest developer, operator and owner of renewable energy in the world, but also it’s most profitable and innovative.

And as I tell our employees and customers, I believe we are just getting started. I strongly believe that the renewable energy opportunity is actually just beginning. The combination of energy storage with wind and solar is a revolution which will expand the opportunities for renewable and is very exciting.

I am profoundly comfortable in the continued success of Energy Resources, NextEra Energy Partners and NextEra Energy. I want to thank all of our employees at NextEra Energy for providing me the opportunity to work alongside them. I have learned and lacked much over the years and will miss the innovative, fast-pace environment in which we work.

I have no concrete plans as of now, but I am excited about pursuing new adventures and honing old skills. At the very least retirement will allow me to pursue one of my great passions, fishing. Thanks again to all of you who have helped guide me and our company successfully over the years.

Our company is in terrific shape and I congratulate and applaud John and Rebecca on their new roles, well deserved. I will now turn the call over to John. .

Thank you, Armando and Jim. Let’s now turn to the detailed results beginning with FPL. For the fourth quarter of 2018, FPL reported net income of $407 million or $0.85 per share, up $0.01 per share, compared to FPL’s adjusted earnings in the prior year period.

For the full year 2018, FPL reported net income of $2.2 billion or $4.55 per share, an increase of $0.46 per share versus FPL’s adjusted earnings in 2017. Regulatory capital employed increased by approximately 12.4% for 2018 and was a principal driver of FPL's adjusted net income growth of 12.5% for the full year.

FPL's capital expenditures were approximately $1.5 billion in the fourth quarter bringing its full year investments to a total of roughly $5.1 billion. FPL’s reported ROE for regulatory purposes was 11.6% for the twelve months ended December 31, 2018, which is at the upper-end of the allowed band of 9.6% to 11.6% under our current rate agreement.

During the fourth quarter we restored an additional $240 million of reserve amortization leaving FPL with a year-end 2018 balance of $541 million.

We continue to expect that FPL will end 2020 with a sufficient amount of reserve amortization to operate under the current base rate settlement agreement for up to two additional years creating further customer benefits by potentially avoiding a base rate increase in 2021 and perhaps 2022.

Before moving on, let me now take a moment to update you on some of our key capital initiatives at FPL. During 2018, FPL completed construction on schedule and on budget for the first eight 74.5 megawatt solar energy centers developed under the solar base rate adjustment or SoBRA mechanism of the rate case settlement agreement.

In 2018, we also deployed the first two projects under FPL’s 50 megawatt battery storage pilot program pairing battery systems with existing solar projects and highlighting FPL’s innovative approach to further enhance the diversity of its clean energy solutions for customers.

The next 300 megawatts of solar projects being built under the SoBRA mechanism remain on budget and on track to begin providing cost-effective energy to FPL customers in early 2019.

To support the significant solar expansion that FPL is leading across Florida, we have secured sites that could potentially support more than 7 gigawatts of future projects. Beyond solar, construction on the approximately 1750 megawatt Okeechobee Clean Energy Center remains on budget and on schedule to enter service in the middle of this year.

Additionally, the roughly 1200 megawatt Dania Beach Clean Energy Center received Siting Board approval during the quarter to support its projected commercial operation date in 2022.

We continue to expect that FPL’s ongoing smart investment opportunities will support a compound annual growth rate and regulatory capital employed, net of accumulated deferred income taxes of approximately 9% from the start of the settlement agreement in January 2017 through at least December 2021, while further enhancing our customer value proposition.

The economy in Florida remains healthy. The current unemployment rate of 3.3% remains below the national average and at the lowest levels in a decade. Florida’s consumer confidence level remains near ten year highs.

The real estate sector also continues to show strength with new building permits remaining at healthy levels and the Case-Shiller Index for South Florida home price is up 4.8% from the prior year. FPL’s fourth quarter retail sales increased 4% from the prior year comparable period.

We estimate that weather-related usage per customer contributed approximately 0.6% to this amount. On a weather-normalized basis, fourth quarter sales increased 3.4% with positive contributions from both weather-normalized usage per customer and ongoing customer growth including the addition of Vero Beach’s customers.

For 2018, we estimate that FPL’s retail sales on a weather-normalized basis increased by 2.6%. Continued customer growth and an estimated 1.7% increase and weather-normalized usage per customer both contributed favorably.

While we are encouraged by the growth in underlying usage in 2018, which was a consistent benefit during all four quarters as we have often discussed, this measure can be volatile and we are not yet ready to draw any firm conclusions about long-term trends.

We will continue to closely monitor and analyze underlying usage and will update you on future calls. Let me now turn to Energy Resources which reported fourth quarter 2018 GAAP earnings of $263 million or $0.55 per share. Adjusted earnings for the fourth quarter were $317 million or $0.66 per share.

For the full year, Energy Resources reported GAAP earnings of $4.66 billion or $9.75 per share and adjusted earnings of $1.46 billion or $3.05 per share. In the fourth quarter, Energy Resources contribution to adjusted earnings per share increased by $0.18 from the prior year comparable period.

Positive contributions from new investments, customer supply and trading, our gas infrastructure business, including existing pipelines and the reduction in the corporate federal income tax rate, all supported the strong year-over-year growth.

These favorable contributions were partially offset by lower contributions from our existing generation assets as a result of particularly poor fleet-wide wind resource which was the lowest fourth quarter on record over the last 30 years and higher interest and corporate expenses due to growth in the business.

Energy Resources’ full year adjusted earnings per share contribution increased $0.45 or approximately 17% versus 2017. For the full year contributions from the new investments declined by $0.04 per share due in part to the expected smaller than usual 2017 renewable build.

In 2019 and beyond, we expect meaningful growth from new investments as we continue to execute on our renewables development backlog. Increased PTC volume from the approximately 1600 megawatts of repowered wind projects that were commissioned in 2017 helped increase contributions from existing generation assets by $0.10 per share.

Contributions from our gas infrastructure business including existing pipelines increased by $0.17 per share year-over-year. As expected, the reduction in the corporate federal income tax rate was accretive to Energy Resources increasing adjusted EPS by $0.45 compared to 2017.

All other impacts reduced results by $0.23 per share, primarily as a result of higher interest and corporate expenses driven largely by increased development activity to support the favorable renewables development environment. Additional details are shown on the accompanying slide.

In 2018, Energy Resources continue to advance its position as a leading developer and operator of wind, solar and battery storage projects commissioning nearly 2700 megawatts of renewable projects in the U.S. including an additional 900 megawatts of repowered wind.

Since the last call, we have added 1791 megawatts of renewable projects to our backlog including 680 megawatts of wind, 797 megawatts of solar and 215 megawatts of battery storage, all of which will be paired with new solar projects.

Included in the solar megawatts, we added to backlog this quarter is a 150 megawatt solar build own transfer project with a 10 year O&M agreement that will allow the customer to leverage Energy Resources’ best-in-class operating skills while providing meaningful ongoing revenue through the contract term.

During the quarter, Energy Resources signed an additional 99 megawatts of wind repowering and successfully commissioned approximately 600 megawatts of repowering projects. For 2017 and 2018, this brings the total repowering projects placed in service to roughly 2500 megawatts near the top-end of the previously outlined range for this period.

We continue to expect to be on the upper half of $2.5 billion to $3 billion in total capital deployment for repowerings for 2017 through 2020. Following the record origination year in 2018, it was nearly two years remaining in the development period, we are now within the previously outlined 2017 to 2020 ranges for U.S.

wind, solar and wind repowering. For the post-2020 period, our backlog has already nearly 2000 megawatts placing us well ahead of our historical origination activity at this early stage. The accompanying slide provides additional detail on where our renewables development program now stands.

Beyond renewables we completed construction of approximately 175 miles of the Mountain Valley pipeline during 2018. As planned, MVP is continuing with its scale-back construction efforts for the winter.

While we continue to target our previously announced full-in service state for the pipeline during the fourth quarter of 2019 and revised overall project cost estimate of $4.6 billion, we also continue to work through the project’s outstanding legal challenges and to closely monitor developments related to the Atlanta Coast pipeline and the current government shutdown as the outcome of any one of these issues could impact MVP’s project schedule and cost estimates.

We also continue to evaluate mitigation alternatives to address potential adverse outcomes should they arise. MVP’s expected annual contribution to NextEra Energy’s ongoing adjusted EPS is approximately $0.07 to $0.09.

We did not expect any material adjusted earnings impacts nor any change in NextEra Energy’s financial expectations as a result of the ongoing challenges. We will provide further updates as those proceedings evolve.

Turning now to the consolidated results for NextEra Energy for the fourth quarter of 2018 GAAP net income attributable to NextEra Energy was $422 million or $0.88 per share. NextEra Energy’s 2018 fourth quarter adjusted earnings and adjusted EPS were $718 million or $1.49 per share respectively.

For the full year 2018, GAAP net income attributable to NextEra Energy was $6.64 billion or $13.88 per share. Adjusted earnings were $3.67 billion or $7.70 per share reflecting growth of 15% off our 2017 adjusted EPS including an approximately $0.45 benefit from lower federal income taxes.

For the Corporate and Other segment, adjusted earnings for the full year increased $0.09 per share compared to 2017 primarily due to lower interest and certain favorable tax items.

We continue to expect NextEra Energy’s adjusted EPS compound annual growth rate to be in a range of 6% to 8% through 2021 off our 2018 adjusted EPS of $7.70 plus accretion of $0.15 and $0.20 in 2020 and 2021 respectively from the Florida acquisitions. For 2019, we continue to expect our adjusted EPS to be in the range of $8 to $8.50.

From 2018 to 2021, we expect that operating cash flow will grow roughly in line with our adjusted EPS compound annual growth rate range. We are closely following the recent developments with Pacific Gas and Electric.

Projects directly affected by the potential PG&E bankruptcy have an expected annual adjusted EPS contribution of roughly $0.13 to $0.15 for NextEra Energy.

Regardless of the outcome of PG&E’s anticipated bankruptcy proceedings, we expect to achieve NextEra Energy’s adjusted EPS expectations that I just outlined and we’ll be disappointed if we are not able to deliver growth at or near the top of our 6% to 8% compound annual growth rate range off our 2018 base of $7.70, plus the expected deal accretion from the Florida transactions.

We continue to expect to grow our dividends per share 12% to 14% per year through at least 2020 off a 2017 base of dividends per share of $3.93. 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 which also had a strong year of operational and financial performance in 2018.

Yesterday, the NEP Board declared a quarterly distribution of $46.50 per common unit or $1.86 per unit on an annualized basis, up 15% from the comparable quarterly distribution a year earlier and at the top end of the range we discussed going into 2018.

For the full year 2018, adjusted EBITDA and CAFD increased 18% and 36% respectively, primarily as a result of portfolio growth.

In addition to meeting NEP’s growth objectives with the acquisition from Energy Resources, during 2018, we are also pleased to announce the execution of a long-term contract that enables an expansion investment in the Texas pipelines.

The opportunity was subject to regulatory approvals is expected to be in service during the fourth quarter of 2020 demonstrates the organic growth potential of NEP’s underlying portfolio.

Beyond the attractive low-cost convertible portfolio equity financing with Blackrock, NEP took additional steps to further enhance its financing flexibility during 2018. In the fourth quarter, NEP entered into an additional $1 billion interest rate hedge agreement to help mitigate interest rate volatility on future debt issuances.

NEP’s hedge agreement has a fixed rate of approximately 3.95% and can be flexibly utilized in any date until December 11, 2028.

The swap is incremental to the $5 billion hedge agreement that we announced last year providing significant protection against interest rate risks and NEP executes on its long-term growth plans – as NEP executes on its long-term growth plans.

Additionally, during 2018, we successfully raised approximately $85 million through the sale of roughly 1.8 million common units under NEP’s ATM program. Going forward, we will continue to flexibly seek opportunities to use the ATM program depending on market conditions and other considerations. Now let’s look at the detailed results.

Fourth quarter adjusted EBITDA was $165 million and cash available for distribution was $44 million, a decrease of $35 million and $33 million from the prior year comparable quarter respectively.

The decline was primarily driven by the sale of a Canadian portfolio earlier in the year with those assets not replaced until the late December closing on the 1.4 gigawatt acquisition from Energy Resources.

For the full year 2018, adjusted EBITDA and CAFD were $881 million and $339 million, up 18% and 36% respectively, primarily driven by growth of the underlying portfolio. Existing projects benefited from increased contributions from Texas Pipelines versus the prior year.

For adjusted EBITDA, this benefit was offset by the year-over-year reduction and the pre-tax value of NEP’s tax credits as a result of a decline in the federal income tax rate. This change has no impact on CAFD.

Cash available for distribution from existing projects also benefited from reduced debt service which was roughly offset by higher corporate level interest expense. As reminder, these results include the impact of IDR fees which we treat as an operating expense. Additional details are shown on the accompanying slide.

For NEP, absent any impact from a PGE bankruptcy filing, our December 31, 2018 runrate expectations for adjusted EBITDA of $1 billion to $1.15 billion and CAFD of $350 million to $400 million are unchanged reflecting calendar year 2019 expectations for the portfolio with which we ended the year.

Our previously announced December 31, 2019 runrate expectations for adjusted EBITDA of $1.2 billion to $1.375 billion and CAFD of $410 million to $480 million are also unchanged. Our expectations are subject to our normal caveats and include the impact of anticipated IDR fees as we treat these as an operating expense.

From an updated base of our fourth quarter 2018 distribution per common unit on annualized rate of $1.86, we continue to see 12% to 15% per year growth in LP distributions as being a reasonable range of expectations through at least 2023.

We expect the annualized rate in the fourth quarter 2019 distribution that is payable in February 2020 to be in a range of $2.08 to $2.14 per common unit. NEP expects to be able to manage through the impacts of the anticipated PG&E bankruptcy and to achieve the growth expectations that I just outlined.

As we have previously disclosed, the 420 megawatts of projects that are contracted with PG&E represents 15% to 18% of NEP’s expected year-end 2018 runrate cash available for distribution.

As a result of the PG&E Board of Directors authorizing the commencement of a bankruptcy filing, we believe an event of default has likely occurred under the Genesis financing.

The administrative agent for the Desert Sunlight 300 financing has notified us an event of default has occurred under those agreements which we dispute and they are currently withholding the January distribution.

For any financing or an event of default is determined to have occurred, cash distributions can be restricted and other remedies could be exercised including acceleration of the debt.

Additionally, due to provisions in the financings an event of default under the Desert Sunlight 300 financing can’t prevent distribution from Desert Sunlight 250 which has contracted with SE. We expect the combination of Desert Sunlight 250 and the PG&E projects to contribute roughly 18% of NEP’s year-end 2019 runrate CAFD.

As we execute on NEP’s growth strategy, we expect this to further decline over time and that the PG&E projects and Desert Sunlight 250 will not represent a significant percentage of NEP’s 2023 cash available for distribution.

For projects or cash distributions are restricted, we expect that over time, these funds will go toward paying down the principal on existing financings, which would potentially result in more distributable cash flow to NEP in the future.

In each of these projects, we are reviewing our alternatives and we’ll pursue all options to protect our interest including vigorously defending our contracts and working with key stakeholders of each financing.

Even in a worst case scenario, where we receive no further contributions from projects that are contracted with PG&E or Desert Sunlight 250, we continue to expect that NEP will achieve its annual 12% to 15% growth in distributions per unit through 2023 without the need to sell common equity until 2020 at the earliest of the modest at the market issuances.

We are pleased with NEP’s strong performance in 2018 and believe it continues to provide a best-in-class investor value proposition. With the flexibility to grow in three ways, acquiring assets from Energy Resources organically or acquiring assets from other third-parties, NEP has clear visibility to support its growth going forward.

Following a new record renewables origination year by Energy Resources and the continued strength of the best renewables development environment in our history, NEP’s growth visibility further improved in 2018.

Additionally, NEP’s cost to capital and access to capital advantages further improved over the past year providing flexibility to finance its growth over the long-term.

When NEP’s growth potential and financing flexibility are combined with its favorable tax position and enhanced governance rights, we believe NEP is well-positioned to meet its financial expectations and we look forward to delivering on NEP’s strategic and growth initiatives in 2019 and beyond.

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

[Operator Instructions] And we will go first to Stephen Byrd of Morgan Stanley. .

Hi, good morning. .

Hi, good morning, Stephen. .

Armando, congratulations on your retirement and John and Rebecca, congratulations on your new role. All very well deserved. .

Thank you, Stephen..

I wanted to just talk, as you can imagine about California for a minute. If all of the project that essentially withheld cash to the – arguably to the extent that they would be permitted I wanted to make sure I was clear, how much CAFD would be restricted? You mentioned 18% related to several projects.

But I wanted to check if every single piece of debt relating to PG&E sort of exercise their cash, cash strap right, what amount of CAFD would be impacted?.

Yes, so, again it would comprise roughly 18% of our runrate CAFD for 2019. We have included a page in our investor material that – Page 41 that details the CAFD from each of these projects totals about $90 million..

Understood..

So, let’s go back though, to what I just said, which is that, first of all, even if all of that cash is trapped, we expect to be able to meet our financial expectations 12% to 15% growth in distributions per unit through 2023, we expect we will not have a need to issue common equity until 2020 at the earliest.

So our financial expectations are not impacted by any means. The second, the impact of PG&E and SCE cash flows is going to diminish over time. So by the time, we get to the end of the period of our financial expectations, the cash flows from these projects is not going to be significant contributor to the overall CAFD.

And then, I think you have to take a look too, Stephen at what is happening in California. I mean, obviously we are not going to sit on our heels. We are going to pursue all avenues with our noteholders to try to free up that cash and we will work vigorously to do that as I said in the prepared remarks. .

That all makes sense.

And John, in terms of any exposure to other California utilities, I am thinking of Edison International and Sempra, just wanted to check both at NEP and NextEra would you mind just speaking briefly to your other California exposure?.

Yes. So, on our other California exposure with SE, I mean right now, we don’t have any, because there is, none of those finances are in default other than the SCE contract that I mentioned which is about 250 megawatts on Desert Sunlight because that’s part of a portfolio financing.

But again, the impacts of that are included in the numbers that I gave you earlier. So, the 250 impact is included in the $0.13 to $0.15 at NextEra Energy, it is also included in the roughly 18% of total CAFD for 2019. .

Okay.

But do you have any CAFD exposure not in default, but does – where the offtaker is a subsidiary of either Edison International or Sempra?.

No, zero. .

At NEP.

At NEP.

Okay, great. Just wanted to check. .

Zero..

At NEP, okay.

And at NextEra, is that significant or is it relatively small?.

It’s relatively small. I mean, the contributions that we would have from SCE contracts are roughly $0.08 and that includes the Desert Sunlight 250. So, without it it’s about $0.06. So small..

Understood. Sorry for all the questions on California, maybe just one last one. You filed at FERC to sort of secure your legal rights under the contracts.

Would you mind just to kind of briefly talking through your legal arguments around ensuring to protect your rights under your contract?.

Yes, I mean, the bottom-line is, we think the majority of those contracts have Mobile-Sierra provisions and that these contracts are in the public interest and that the federal power act preempts what the bankruptcy court can do and the FERC has the final say assumption or rejection. .

That’s very good. That’s all I have. Thank you very much..

We will now go to our next question and that will come from Steve Fleishman of Wolfe Research..

Yes, good morning. So, just first on the NEP plan. I assume your – embedded in there you are assuming that you can continue to get financing other than equity, I assume including some of the – like private financing, converts and such that you gotten in the past.

How do you feel about the ability to get those with this California uncertainty?.

First of all on the financings like the Blackrock financing, still feel good about our ability to be able to execute against those types of financings and again, we also have a lot of debt capacity at NEP that we can always fall back on as well. .

Okay.

And then, just separate question off-topic, could you update your interest in – thoughts and interest in Santee Cooper?.

Yes, thanks, Steve. This is Jim. We did put a proposal in to acquire Santee Cooper. I think I've been very clear that we have been interested in pursuing Santee Cooper over the last 18 months or so and we did put a proposal in to acquire it and we look forward to the next steps of the process that the committee is going to be going through. .

Do you have any idea when you will get an answer?.

I think this is a process that ultimately have to – if the legislature decides to sell Santee Cooper, it's going to have to actually pass a law to do so essentially and the legislative session ends at the end of May or June in that time period. So, it’s going to play out over the next several months. That’s the bottom-line, Steve. .

Okay, Armando, best to you. Thank you..

Thanks, Steve..

And now we will go to Julien Dumoulin-Smith of Bank of America Merrill Lynch. .

Hey good morning. Congrats Armando.

Can you hear me?.

Yes, thanks, Julien. .

Good. Well, just one quick clarification on the FERC strategy on NEP and then move away from it. But, just if there is indeed some kind of stay, how does that impact the [technical faults] [ph] and the possibility of distribution. Just want to clarify that. Or cash from PG&E for that matter..

Yes, from a FERC standpoint, if there were a FERC – well, first of all, FERC were to ramp the relief that we are seeking by the end of the week. I mean, I think it just would grant FERC the final say and what happens to the contract. So I don’t think it really has any impact on the status of the existing financings. .

Got it. Okay, fair enough. Excellent. And then, just want to turn back to FPL real quickly. Specifically, on the last call, you talked about having – shall we say, adequate reserve amortization. You also talk about usage trends et cetera and the ability to potentially avoid base rate increases in 2021 and 2022.

Where does that stand now? How if at all is that impacted by some of the latest events? Just curious on how you are positioning FPL into the longer term here?.

Yes, I don’t think it’s impacted by any of the current events. We feel very good about our position in front of the OPC if that was – Julien, is what you are referring to as other events. We’ve ended the year….

More specific, quite a bit, what are you expecting to tell something more formal about a further rate stay out?.

Well, here is where we are right now. We have $540 million of surplus ending the year. We have – we believe and expect to have enough surplus to potentially stay out of rate case for 2021 and 2022.

We will make those strategic rate case decisions later, but we have a lot of flexibility and that flexibility is very good for Florida customers, because the longer we are able to stay out, the longer period of time that build stay where they are, and then I’ll see a bill impact from another rate case..

Julien, this is Jim. I think you can expect us to give you all - some more thoughts on that fronts in the June investor conference. .

Excellent.

And then, maybe, Jim, this is a quick question, your direction, but as you think kind of conceptually, first you’ve given the commitments from the last Analyst Day around midstream, potentially some of the latest developments you’ve already alluded to around renewable especially some of the RPS expansions that might be coming in the next six months prior to the June Analyst Day.

Could you give us a little bit of your latest thought process around your future investment prospects just a little bit more holistically?.

Yes, sure. I mean, when you look at our capital investment plans, I think they are over $12 billion this year. When you look at what we are doing at FPL Gulf and Energy Resources combines, something in that range, we are as of the year before last. We don’t have the details yet on last year.

We were the fourth largest investor of capital in the United States in any industry, only AT&T, Verizon, and Amazon invested more in this country than we did in terms of capital investment.

And we are going to continue to do what we have done for more than a decade which is invest smart capital at FPL to improve the value proposition for customers and we are going to – we are very excited about and we will have more to say about what we are doing at Gulf at our June meeting. But we have hit the ground running.

Very excited about what we are doing in terms of what investment prospects are on the Gulf front and we are moving aggressively forward on that pretty much on day one.

And at Energy Resources, it is the best renewable environment that we have ever seen and we are going to continue to invest in renewable going forward and as we see pipeline opportunities - contracted pipeline opportunities we will continue invest in those as well. So, I don’t think you should expect a big change in our thinking in June.

I think you will just see us frankly go forward our vision through the amount of investment and the amount of customer improvement that we are going to bring to our customers as well as the amount of what we are going to do in terms of earnings going forward..

I’ll leave it there. Thank you very much. .

Thanks, Julien. .

We will now go to Greg Gordon of Evercore ISI. .

Yes, congratulations to all three of you, it goes without saying you're all terrific at your jobs. And Armando, someone asked me to ask you, if you could get circle back to people and tell us where you’d like to fish that would be good now that you are going to have lot of time..

That’s common..

Couple questions.

Can you just go back over what you said about the levelized cost of energy for battery with storage and what I am particularly interested other than just a restatement of that is what delivery year you see that crossover happening on sort of a large enough scale to tip this sort of disruptive transition that you are talking about?.

Yes, so, what we covered in Jim’s remarks, we will start with the wind. So, wind, we are expecting to be right around $20, $25 a megawatt hour. I would kind of put that we have some PTC helping there, this is a no incentive look. So call it, when those incentives expire more towards the middle of the decade that 2024 timeframe.

So, $20, $25 a megawatt for wind and we think batteries are going to be about $0.05 to 7.5 cent adder. And so, that’s how we were able to – I am sorry, per megawatt, that’s how we are able to get to the ranges that Jim provided for wind. So just take the 20, 25 add on 5 to 7 for battery storage.

For solar, don’t forget, we have the solar ITCs at 30% through the end of 2023. And so, when those ITCs go away and they don’t ever go away, right.

They go from 30% to 10%, we are expecting that solar given how quickly panel costs are coming down, balance of panel costs are coming down, solar is a product we are going to be selling in the $25 to $30 a megawatt hour range and then the same adders for batteries is how you get to the math that we are in Jim’s remarks and those are the expectations we have.

And the solar pricing isn’t really all that far off from what we are doing in the day. So that’s not much of a leap per se. .

Okay. That makes sense. I appreciate it and last question, you didn’t mention it explicitly anywhere in your comments, but the balance sheet capacity of $5 billion to $7 billion, I mean your credit metrics and the position on the balance sheet seems unchanged from last quarter.

So I would assume that you still feel like that balance sheet capacity is in place?.

Yes, and Gordon – Greg, one of the things that we said there is that, we had 5 to 7, right. We bought Trans Bay, that was $1 billion. So we took that down, call it 4 to 6 and we are earmarking probably another $2 billion of CapEx opportunities for FPL. We’ll update what – where exactly that will be used at our June conference.

But certainly some of that money is going to go the 30-by-30 initiative that we already announced earlier last week. .

Got you. Great update. Thank you guys. .

We now will go to Michael Lapides of Goldman Sachs.

Hey guys. Armando, congrats on your announcement and to the rest of the team to John, Rebecca, as well. Great to see people move around and get new opportunity. One question about Florida ballet initiative that is being pushed right now.

Can you just talk about what is actually in that ballet initiative? What it would mean if it would have garnered the votes and what’s the process from here?.

Yes. I am going to turn that question over to Eric..

Hey, Michael.

How are you doing today?.

I am great, Eric. Thanks for taken the question..

Yes, no problem. The ballet initiative, it’s being primus about helping Florida customers, but it’s not about it all. When you look at it it’s really about furthering the business interest of the few folks including a retail electric provider that’s located and based out of Gainesville, that markets power currently outside of Florida.

This is a group, they have tried unsuccessfully to get this proposal in front of voters through the Constitutional Revision Commission and also through the – unsuccessfully they tried through legislation in Tallahassee. Their efforts have been unsuccessful in the past because, frankly, Florida's regulated electricity market works really well.

When you look at the state, the power prices are among the lowest in the nation with electricity that’s among the cleanest and most reliable in the country. As an example, Florida Power & Light offers our customers bills that are more than 30% lower than the national average. Lower than bills in 45 states.

And, as John said earlier, we are just recognized third time in four years as t he most reliable electric provider in the country which is you could appreciate in a state like this is important when our customers need us most particularly during times of storms and hurricanes.

So playing simply, it’s a proposal that just – it actually will lead to increases in electric rates across a state, reduced reliability, particularly during periods of storms, hurricanes, things of that nature.

And I think it’s going to compromise the clean energy goals that have been announced including the one we just did on FPL’s 30-by-30 initiative as the unregulated star producers would, they’d have no restrictions on the type of generation that would build.

Also, I think it’s important to understand on these type of things that consumer protections are removed. You no longer have Florida Public Service Commission role in determining what rates are. They would no longer be viewed as being just and reasonable if that’s the standard would go out the window, and that’s going to impact reliability as well.

The ability of the customers, this language would actually prohibit customers from being able to buy power from the existing utility. So Florida Power & Light customers would not be able to continue to be customers of Florida Power & Light.

There is some other areas too that I think just to be a lot of focus on including the fact that franchise fees which we collect and pay to municipalities across the state would be eliminated.

And that is significant amount of revenue that would no longer be available to pay for things like first responders, fire fighters, police, hospital employees, these municipalities that everybody counts on.

Even you look at now attorney generals in a number of other states have called for the end of deregulation due to all the consumer complaints and the deceptive trade practices. So, there is a lot of reasons why these proposals have failed across the country since, frankly early 2000s. You look at including even recently in Nevada work failed.

There is – when you look at other states that and look and just say a lot of backed away, particularly after the California crisis and when Enron moved into California to take advantage of their so-called market-based model, which was ultimately the catalyst for that crisis and helped contributed the state having some of the highest power prices in the country.

So, I don’t think it’s by accident that there hasn’t been a state that’s passed deregulation since the California power crisis which occurred now nearly twenty years ago. So, there is a number of hurdles. The answer to your question that have to be cleared for this proposal to go forward to be placed on the ballet.

We are going to be very actively engaged. We're going to be educating Floridians on the true motives of the special interest groups, and we are going to also spend a lot of time educating folks on the significant negative impacts that this failed idea would have on the state and on their pocket books..

Got it. Thank you, Eric. I appreciate that. I have one other for either, Jim, John or Armando and this is more longer term.

When you are watching what's happening in California with PG&E with that is an international or SoCal Ed and put California in the context of being the nation’s largest renewable market and with the most aggressive renewable target. How do you think this impacts the broader U.S.

development of renewable if one of t he largest markets is going through some turmoil? And how do you think about that kind of longer term?.

So, great question, Michael. I think, one of – the first thing I would say is, California has some very aggressive renewable targets and some very aggressive climate change goals.

The turmoil around the credit of the most important counterparties in the state is, to say at least does not conducive to continued capital investment to continue to further those goals.

And so, I think it’s a very – from an energy policy standpoint in the State of California, it’s going to be very important for the state to recognize that and to recognize that there has been significant capital investment by companies from around the world to make that happen and to the extent that that investment is somehow diminished by these credit issues.

I think that's going to have a real impact on their market going forward and I think the state understands that and it’s one of the elements of the things that they are grappling with now as they deal with the fallout from the tragic fires as well as some of the other issues that they have been facing.

So, the good news from a market standpoint is, California was obviously the biggest market in the country ten years ago in the renewable business. It isn’t any more.

It’s an important market, but it’s no longer the most important market in the country and with the cost declines in renewable, nearly every state in the country is in the – we have an opportunity to do business and I mean, we have – my last count, we have development going on in 48 states right now.

We don’t have operating projects in 48 states, but we have development going on in 48 states.

So, while I think it’s very important for the state to address these issues from a climate change standpoint going forward, I think the renewable market is going to be robust going forward because it is just gotten so big and the cost declines have expanded the market to such a dramatic fashion. .

And with that, we'll go now to Jonathan Arnold of Deutsche Bank..

Yes, good morning guys. Thanks for taking my question. .

Hey, good morning, Jonathan. .

A quick question on – this is how I think about you talked about managing through the situation at NEP in context of the growth rate. So, as we think about things you might do that would fall under that header, you mentioned pushing to have the cash released.

And I guess you could drop down other assets more quickly, you could let the dividend, thrift down in the range and still be within 12 to 15.

Is there anything else I am missing? And which of those kind of alternatives would you either be planning to use or not use?.

Yes, I think I’d go first of all back to the prior – one of the prior questions about are there other attractive financing vehicles available? One, yes, we think they are. But, two, even if we had to finance additional drops to meet our financial expectations with existing debt capacity that we have, we can do that. We're fine.

And so, really the way I would answer that question is that, obviously we’ll vigorously try to put it to negotiate something what the holders that would allow us to end the DOE. Don’t forget the DOE is in these projects that will allow us to free up the cash, we can’t do that. We have debt capacity, plenty of debt capacity at NEP.

Energy Resources is coming off with a best development year in its history. We have very clear visibility to growth prospects going forward and there are many levers in the vehicle. So, we are comfortable in our ability to manage through even a worst case scenario, which would be where the cash is trapped until a final call is made on the contracts..

Okay. So, John, I think, to be clear, you said that in some of them the cash is trapped just by virtue of PG&E saying that it may file. Is t hat correct? And I am curious..

Yes. But not to get into the technicalities, but the – one of the financings has a provision that basically just says that there is corporate action taken in further and so the bankruptcy which are largely the filing of the 8-K to be that would constitute - potentially constitute an event of default..

So that was just on one of them?.

That’s on the Genesis financing..

Okay. And then what would it ….

It’s on some of the other need financing, but the need financings are small. It’s a series of four five projects that don’t have any meaningful contribution earnings..

So, that would be a sort of a judgment as to what would definitively constitute that not occurring presumably?.

Yes, I mean, it doesn’t happen and I think it’s back to its business as usual. .

Jonathan, let me just add, let me add something. I mean, obviously I think it’s appropriate for the focus on the PG&E assets and the cash flows. But we still have at both at NextEra Energy Resources and at NextEra Energy Partners, we still have a lot of projects that are not PG&E and Southern California Edison projects.

It have significant cash flows and there are still many parties that are interested in attractive financings, attractive for us and presumably for them that we are talking to. And it's not necessarily about what’s the risk of PG&E and Southern California Edison.

It’s about, hey, what other assets are available for us to be able enter into those types of financing.

So, I think, while it’s appropriate to have some focus on what’s going on with PG&E, we got to remember that NextEra Energy Resources has had its – we have 6600 megawatts of origination this year which is a record year and that’s twice the amount we had last year which was a record year and I got to tell you, we feel at least internally, very comfortable, as John said, that even if these PG&E cash flows are tied up in these debt financings, that we can meet our current expectations and one of the reasons that we feel that way is because we are talking to the market, and two, origination is going very well in Energy Resources.

.

Great. That’s helpful perspective. Thank you, Armando. And then, could I just one other thing. With the Gulf and Florida acquisitions having closed, sooner, I think than maybe you thought, is there – but you're not talking of any accretion in 2019.

It would just sort of help us sort of understand the bump in 2020, what’s driving that and why nothing this year?.

So, Jonathan, obviously, we got to done it little earlier than we thought, but we also always assume that we have some cost to achieve t his year to get there. So, we are being conservative as we always are and we feel very good about our plans at Gulf and you can bet I am pushing the team very hard to get things done even faster than we’ve laid out.

And so, I am really optimistic about the future for Gulf in this company and in our ability to bring real value to their customers and real value to shareholders. So, very excited about it. We will have more to talk about it in June. But, remember we don’t have any cost to achieve in any of these numbers in 2019, so. .

Thank you very much..

And with that, ladies and gentlemen, that does conclude today’s conference. We want to thank you again for attending today’s presentation..