The operator introduces the NextEra Energy and NextEra Energy Partners, LP Third Quarter 2023 Earnings Conference Call and explains the format. Kristin Rose, Director of Investor Relations, introduces the speakers and mentions the possibility of forward-looking statements. The speakers will provide an overview of results and answer questions. The operator reminds listeners that the call is being recorded and directs them to the company's websites for more information.

The presentation includes references to non-GAAP financial measures and the call is turned over to Kirk Crews. NextEra Energy had a strong third quarter with 10.6% growth in adjusted earnings per share. FPL delivered value to customers and has a strong capital plan. Energy Resources also had strong performance with record origination in renewables and storage. NextEra Energy has a strong balance sheet and access to capital, making it well positioned for long-term value for shareholders. FPL's earnings per share increased by $0.04 due to regulatory capital employed growth of 13.6% and they expect 9% growth annually through 2025.

FPL's capital expenditures for the quarter were $2.6 billion and are expected to be between $9 billion and $9.5 billion for the full year of 2023. Their reported ROE for regulatory purposes will be approximately 11.8% for the 12 months ending September 2023. FPL has a balance of over $1.2 billion in reserve amortization and plans to make capital investments of $32 billion to $34 billion over the current four-year settlement agreement. The Florida economy is healthy and FPL's third-quarter retail sales increased 3% due to warmer weather. Energy resources reported a 21% year-over-year growth in adjusted earnings, with contributions from new investments and existing clean energy portfolio. However, there was a decline in earnings due to higher interest costs.

In the last quarter, Energy Resources had a record number of new renewable and storage projects added to their backlog, totaling over 3,245 megawatts. This is a sign of strong demand for renewable energy. Despite some projects being removed from the backlog, they remain on track to achieve their renewable development goals. A significant portion of the backlog additions were for repowering existing wind facilities, which allows for attractive returns. Additionally, there were also standalone battery storage projects added to the backlog.

NextEra Energy's standalone storage tax credit and use of existing interconnection capacity position the company well to meet customers' growing needs. In the third quarter of 2023, adjusted earnings from corporate and other decreased slightly. The company's long-term financial expectations remain unchanged and they aim to deliver financial results at or near the top end of their adjusted EPS expectation ranges. They plan to fund the business through cash flow from operations, tax equity, project finance, and corporate debt. The sale of tax credits is a new source of capital funding for NextEra Energy, reducing their capital recycling needs. The company's balance sheet and financial discipline are still a key part of their strategy.

The company plans to fund investments while maintaining a strong balance sheet and does not expect to issue any equity for the rest of 2023. They expect to need a total of $3 billion in equity from 2024 to 2026, which will be satisfied through equity units with no dilution for the first three years. FPL and Energy Resources are well-equipped to handle interest rate volatility, with FPL relying on the surplus mechanism and an ROE adjustment to offset higher rates. FPL will file a rate case in 2025 for new rates effective 2026. The company has $20.5 billion in interest rate hedges in place for Energy Resources and corporate and other, with a weighted average rate of 3.75%. This allows them to mitigate the impact of interest rate changes on energy resources backlog returns and $12.8 billion of debt maturities from 2024 to 2026.

NextEra Energy uses interest rate swaps to hedge project-level debt funding and term maturities. This has a minimal impact on expected adjusted EPS for 2023 and 2024, but may have a 1% impact in 2025 and 2026. The company also employs cost reduction and efficiency measures to offset any potential impacts. The expected returns on equity for the backlog are strong, and the company prices power purchase agreements based on current market conditions and cost of capital. Interest rate swaps are utilized before committing significant capital to projects, and the company remains financially disciplined in passing on projects that do not meet return expectations. Lower equipment and material prices may help offset the impact of higher interest rates on power purchase agreement prices.

NextEra Energy Partners has seen strong demand and has been able to rely on low-cost financing to drive its distribution growth. However, the partnership's cost of capital has increased, leading to a reduction in its growth rate to 6%. This is in line with its peers and the partnership does not expect to require growth equity until 2027. The partnership is focused on executing its transition plan, which includes selling off its Texas natural gas pipeline portfolio and assets in 2025.

NextEra Energy Partners plans to address equity buyouts associated with FPL's midstream, NEP pipelines, and NEP renewables through convertible equity portfolio financing until 2025. They expect to have a small equity buyout in 2026. The partnership's growth plan includes repowering wind projects and acquiring assets from energy resources or third parties. They do not expect to need an acquisition in 2024 to meet their growth target. They also plan to repower 740 megawatts of wind facilities through 2026, with funding from tax equity or project-specific debt. To minimize volatility and support their growth plan, the partnership has hedged refinancing costs for 2024 and 2025 maturities.

In the third quarter, NextEra Energy Partners had an adjusted EBITDA of $488 million and cash available for distribution of $247 million. New projects contributed $66 million and $32 million, respectively, while existing projects saw a $5 million increase in adjusted EBITDA. The suspension of incentive distribution rights fees provided a $39 million benefit. The company declared a quarterly distribution of 86.75 cents per common unit, representing a 6% increase from the previous quarter. They expect 5-8% growth in LP distributions per unit annually through 2026. By 2023, they anticipate a fourth quarter distribution of $3.52 per common unit. NextEra Energy Partners expects significant contributions from their forecasted portfolio by the end of 2023.

The paragraph discusses NextEra Energy Partners' year-end 2023 run rate projections and the exclusion of the Texas Pipeline portfolio from these projections. It also highlights the value of the partnership's underlying portfolio and its potential as a long-term investment. The paragraph also addresses the partnership's plans for growth and the repowering projects announced. Finally, it mentions NextEra Energy's focus on its two main foundations: FPL and NextEra Energy Resources.

Both businesses, NextEra Energy and FPL, have been performing well and complement each other. They have received positive feedback from investors and are focused on growth. FPL is among the best utilities in the US with low costs, clean emissions, and high reliability. It plans to add solar and underground its distribution system. Energy Resources is also poised for growth.

The paragraph discusses the current and future growth of renewable energy in the US, with Energy Resources being a leader in the market. The company's scale, experience, and strong balance sheet give it a competitive advantage in building renewables at attractive returns. The company is committed to serving customers and providing long-term value for shareholders. A question from an analyst is also mentioned.

Steve Fleishman asks John Ketchum about the slide on tax transferability and the $6.5 billion of equity content it creates. Ketchum explains that the example is based on a $1 billion transfer and a 18% FFO to debt ratio, resulting in $6.5 billion of equity content. Fleishman asks where this will show up in the funding plan, and Ketchum explains that it will be in the cash flow from operations and will also benefit other sources, such as corporate debt issuances. Fleishman also asks about the tenor of the interest rate swap and how much project debt will be covered by it, and Ketchum responds that it will cover about 70% of the project debt.

The speaker discusses the company's backlog and how a majority of it will go towards paying off existing debt and near-term maturities. They also address the impact of higher interest rates on the renewables market and how having a strong balance sheet and credit rating gives the company a competitive advantage. The speaker then turns it over to another person to provide more insight on the current market environment for renewables.

The speaker is pleased with the recent signings and highlights strong returns, a mix of technologies and customers, and a promising development pipeline. They also mention that customers are drawn to the company's ability to execute projects successfully. The speaker expects continued positive results and mentions a potential sale in Texas, but does not provide any new updates on the process.

John Ketchum discusses the progress of selling NEP's pipes and the challenges they may face due to market conditions. He assures that they are working diligently to find a transaction that maximizes value for unit holders and expects to provide an update in the future. Rebecca Kujawa adds that the repowering projects will be a nice complement to NEP's growth plan, which includes acquiring assets, and they have 1.3 gigawatts of projects in the near term.

The company has opportunities to repower assets in their portfolio and is focused on reducing costs and improving capital productivity. They anticipate being able to offset the $3 billion of equity and $3 billion of asset sales through cost reduction and asset recycling. They have had success in selling renewable projects in the past and feel confident in their sources plan. The company mentioned that storage and wind have over 20% returns.

The speaker responds to a question about the company's higher return on investment in the renewables market, stating that it reflects the team's ability to adapt to changing environments and work with partners. They also mention strong demand for projects, with 3.2 gigawatts already reported and a promising pipeline for the future.

The speaker is excited about the current state of the company and its ability to succeed in the growing demand for electrification and renewable energy. They have a strong tax department and have already reached out to top taxpayers for tax credit transfers, with a robust demand and strong execution. The company's strong balance sheet and ability to underwrite credit gives them an advantage over smaller developers in the market.

The company is pleased with the success of their tax credit transfer program and notes that it complements their broader business and appeals to customers who are interested in renewable energy. They see a deep market and potential for cross-selling opportunities. When considering their $25-35 billion project tax equity and tax credit transferability range, the company takes into account their existing tax equity commitments and potential impacts from regulatory changes. They aim for a 50-50 split between tax equity and project finance.

The speaker believes that their company will have no problem accessing tax equity and that any regulatory issues will be resolved. They are confident that they will receive their allocation and can also rely on relationships with corporate parties for financing. They also mention the possibility of using transferability to fill any gaps. The speaker clarifies that transferability is not included in their financing plans but is still a possibility.

The cash flow from operations and equity content are reflected in the corporate debt issuance line. There is a discussion about interest rates and the sensitivity of the company's portfolio. The company has a strong protection against interest rate exposure through hedges and project financings.

Carly Davenport from Goldman Sachs asks about the funding plan and asset sales, specifically if renewables are the only assets being considered. John Ketchum responds that while renewables are a top priority, they will also consider other non-core assets. Rebecca Kujawa adds that the 4Q pipeline is weighted towards 2024-2026 and there has been an increase in solar projects compared to wind. She expects this trend to continue.

The speaker believes that the current quarter was unusual in terms of project timelines, with most projects scheduled for 2024-2026. They are pleased with the increase in adoption of storage technology in various markets, not just California. Wind demand has been affected by tax credit changes, but there is still strong demand in many areas. The speaker also mentions the success of their repowering initiative and the potential for more opportunities in the future. Overall, they are optimistic about their prospects in the renewable energy industry.

The speaker discusses the improved state of supply chains for solar and grid-level equipment, citing the resolution of issues such as CERC convention and forced labor. They also mention their company's advantage in securing equipment due to their scale and leverage in purchasing.

Andrew Weisel asks a question about the purchase of equipment by NIR and FPL, and also asks about the timing and potential outcomes of the Florida State Supreme Court's review of the rigged case settlement. Armando Pimentel responds that both NIR and FPL are buying the equipment, and that the Public Service Commission is expected to resubmit the settlement to the Supreme Court in the first quarter of next year, following a similar process to the Duke case. The call then ends.

This summary was generated with AI and may contain some inaccuracies.