NextEra Energy Partners, LP (NYSE:NEP) Q1 2024 Earnings Call Transcript

NextEra Energy Partners, LP (NYSE:NEP) Q1 2024 Earnings Call Transcript April 23, 2024

NextEra Energy Partners, LP isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the NextEra Energy and NextEra Energy Partners LP First Quarter 2024 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Kristin Rose, Director of Investor Relations. Please go ahead.

Kristin Rose: Thank you, Drew. Good morning, everyone, and thank you for joining our first quarter 2024 combined financial results conference call for NextEra Energy and NextEra Energy Partners. With me this morning are John Ketchum, Chairman, President, and Chief Executive Officer of NextEra Energy; Kirk Crews, Executive Vice President and Chief Financial Officer of NextEra Energy; Rebecca Kujawa, 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 Armando Pimentel, President and Chief Executive Officer of Florida Power & Light Company. John will provide some opening remarks and will then turn the call over to Kirk for a review of our first quarter results.

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 and the comments made during this conference call and the risk factor 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, www.nexteraenergy.com and www.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 financial measures to the closest GAAP financial measure. With that, I will turn the call over to John.

John Ketchum: Thanks, Kristen, and good morning. NextEra Energy delivered strong first quarter results, growing adjusted earnings per share by 8.3% year-over-year. Based on FPL and Energy Resources financial and operational performance, we are once again off to a solid start for the year. In addition, FPL placed into service 1,640 megawatts of new solar, while Energy Resources added 2,765 megawatts of new renewables and storage projects to its backlog. This quarter marks Energy Resources’ second-best origination quarter ever, as well as its best solar and best storage origination quarter. As we highlighted at our March Renewables Development Day, we believe NextEra Energy is well-positioned for the expected strong power demand growth through the end of the decade and beyond.

After years of relatively flat U.S. power growth, numerous reports now highlight significant future low growth being driven across industries such as oil and gas, manufacturing, and technology. The redomestication of industry in the U.S., supported by public policy, will drive the need for more electricity, and the tech industry is going to need data centers to support the expected cloud capacity demands that come with artificial intelligence applications. Of course, increased load demand will not come all at once and will take some time to materialize, but it is clear that many new customers are concerned about power availability to meet their plans and consider power supply as a significant obstacle to business expansion. We believe renewables and storage are a key enabler to help meet this increased demand.

In fact, we believe the U.S. renewables and storage market opportunity has the potential to be 3x bigger over the next seven years compared to the last seven, growing from roughly 140 gigawatts of additions to approximately 375 to 450 gigawatts. And we believe no one is better positioned to address these power supply challenges and capitalize on this demand than NextEra Energy. At NextEra Energy, the plan is simple. Our two businesses are deploying capital in renewables, storage, and transmission for the benefit of customers while also providing visible growth opportunities for shareholders. Our enterprise-wide scale, decades of experience, and technology investments are key competitive advantages that allow us to drive value and meet this expected power demand.

Scale is one of our key differentiators, and it matters more than ever. Scale allows us to buy and build with better pricing, better protections, and better positioning to navigate disruption. Scale provides access to capital and cost of capital advantages, allowing us to leverage one of the strongest balance sheets in the sector and worldwide banking relationships to finance projects at beneficial terms. Scale has driven top-decile operational performance throughout our generation fleet. Today, NextEra Energy’s roughly 74-gigawatt operating fleet, comprised of 35 gigawatts at FPL and 39 gigawatts at Energy Resources, provides significant operational scale. As FPL continues its solar and storage build-out and Energy Resources brings new renewables and storage projects online for customers, the operating fleet could grow to over 100 gigawatts by the end of 2026.

This would further extend our scale advantages and create value for customers and shareholders. Our scale has enabled greater supply chain diversification and flexibility, and the good news is the solar supply chain is much improved from two years ago. Inflationary pressures are alleviating and manufacturing capacity is significantly expanding. In the U.S., manufacturing incentives are expected to support increases in domestic module manufacturing capacity to over 50 gigawatts by 2026, from just under 8 gigawatts at the end of 2021. We have greater supplier diversity and flexibility than ever before, strengthening our ability to bring low-cost solar to American consumers and businesses. Our decades of experience is another key competitive advantage.

Our experience allows us to navigate power demand challenges, delivering cost-effective, reliable generation for our growing FPL customer base, and designing clean energy solutions to help our Energy Resources customers. We understand every part of the energy value chain with deep expertise in all technologies, the power markets, and transmission. Our team embraces continuous improvement that drives innovation. We recognized the changing landscape and secured land, interconnects, and transmission equipment years in advance. Technology is the next frontier for the power industry, and we believe our two-decade head start on the rest of the industry is a significant competitive advantage. Today, NextEra Energy captures 560 billion operational data points each day and has dozens of proprietary artificial intelligence tools to drive analytical, real-time decision making.

We use these tools to analyze over 100 attributes of our own data to secure and develop the best sites in Florida and across the country. We use our tools to iterate millions of site layout designs based on proprietary resource data and assessments to maximize value. And we use our tools to operate nearly all our renewable storage and fossil generation fleets around the clock from our headquarters in South Florida. We are leveraging this combination of enterprise-wide scale, decades of experience, and investment in technology to better position both businesses to capitalize on what we believe will be years of demand to drive long-term value for customers and shareholders. Today, electricity represents just 20% of overall U.S. energy consumption, and wind and solar generation represents only 16% of the U.S. electricity mix.

In short, we believe the U.S. will need a significant and growing amount of electricity over the next decade and beyond, a large part of which will be powered by new renewables and storage. At FPL, as more people move into Florida, we are focused on extending the customer value proposition by keeping our bills as low as possible and delivering clean, affordable energy by investing in solar, battery storage, and transmission. At Energy Resources, our business is focusing on building low-cost wind, solar, battery storage and transmission. We are using our data and proprietary technology to help power customers, balance supply and demand while keeping customer bills affordable. We also use our tools with commercial and industrial customers to identify the best locations based on their physical preferences and most important variables.

For both power and commercial and industrial customers, we leverage our 300 gigawatt development pipeline and transmission and market expertise to help design the lowest-cost clean energy solutions. Both businesses complement each other, deepen our skill sets and advantages, and foster innovation. And we leverage our greatest asset, our people, who have decades of experience to drive value for our customers and shareholders. When I consider current energy demands, the long-term electricity needs, and our competitive advantages, I wouldn’t trade our opportunities set with anyone. I look forward to telling more of our story and explaining why NextEra Energy is uniquely positioned to lead the electrification of the U.S. economy at our Investor Day on June 11th in New York City.

With that, I will turn the call over to Kirk to cover the quarterly results.

Kirk Crews: Thank you, John. For the first quarter of 2024, FPL’s earnings per share increased $0.04 year over year. The principal driver of this performance was FPL’s regulatory capital employed growth of approximately 11.5% year over year. We now expect FPL to realize roughly 10% average annual growth in regulatory capital employed over our current rate agreement’s four-year term, which runs through 2025. FPL’s capital expenditures were approximately $2.3 billion for the quarter, and we expect FPL’s full-year 2024 capital investments to be between $7.8 billion and $8.8 billion. For the 12 months ending March 2024, FPL’s reported ROE for regulatory purposes will be approximately 11.8%. During the first quarter, we utilized approximately $572 million of reserve amortization, leaving FPL with a balance of roughly $651 million.

As we’ve previously discussed, FPL historically utilizes more reserve amortization in the first half of the year, and we expect this trend to continue this year. Earlier this month, FPL received approval to reduce customer bills due to projected 2024 fuel savings. As a result, FPL’s typical 1,000 kilowatt-hour residential customer bill is expected to be roughly $14 lower in May than the start of the year, and approximately 37% lower than the current national average. Over the current four-year settlement agreement, we now expect FPL’s capital investments to be slightly above our previous range of $32 billion to $34 billion. This quarter, FPL placed into service 1,640 megawatts of new cost-effective solar, putting FPL’s owned and operated solar portfolio at over 6,400 megawatts, which is the largest utility-owned solar portfolio in the country.

FPL’s annual 10-year site plan continues to indicate that solar and storage are the most cost-effective answer for customers to add reliable grid capacity over the next decade. The 2024 plan includes similar levels of new solar generation capacity, 21 gigawatts, across our service territory over the next 10 years compared to our 2023 plan. But our 2024 plan doubles the expected deployment of battery storage to over 4 gigawatts, some of which we expect to be needed earlier than forecasted in our 2023 plan. With this plan, we expect to increase FPL’s solar mix from approximately 6% of our total generation in 2023 to 38% in 2033, while continuing to provide customers with clean, affordable energy. FPL believes battery storage will play an increasingly valuable role for customers, serving as an attractive capacity complement to our growing solar generation.

From providing system-balancing needs in critical parts of FPL’s service territory to supplying energy during any time of day or weather condition, battery storage acts as a key resource to the system that is both valuable and cost-effective for customers. Key indicators show that Florida’s economy remains healthy. Florida continues to be one of the fastest-growing states in the nation and has four of the five fastest-growing U.S. metro areas between 2022 and 2023. FPL had its strongest quarter of customer growth in over 15 years, with the average number of customers increasing by more than 100,000 from the comparable prior year period. Although FPL’s first quarter retail sales decreased by approximately 1.3% year-over-year, we estimate that weather had a negative impact on usage per customer of approximately 5.4% on a year-over-year basis.

After taking weather into account, first quarter retail sales increased roughly 4.1% on a weather-normalized basis from the comparable prior year period, driven primarily by continued favorable underlying population growth and usage per customer. Now let’s turn to energy resources, which report adjusted earnings growth of approximately 13.1% year-over-year. Contributions from new investments increased $0.15 per share year-over-year, primarily reflecting continued growth in our renewables portfolio. Our existing clean energy portfolio declined $0.02 per share, primarily due to unfavorable wind resource during the quarter. The comparative contribution from our customer supply business increased results by $0.04 per share. All other impacts reduced earnings by $0.12 per share.

This decline reflects higher interest costs of $0.07 per share, half of which related to new borrowing costs to support new investments. Energy resources had a strong quarter of new renewables and storage origination, adding approximately 2,765 megawatts to the backlog. With these additions, our backlog now totals roughly 21.5 gigawatts after taking into account 1,165 megawatts of new projects placed into service since our last earnings call, highlighting energy resources’ ability to continue to identify attractive and accretive investment opportunities which provide strong growth visibility in the years ahead. We recently placed 740 megawatts of new solar and storage projects into service, which are being used to support data centers located in Arizona and New Mexico.

Both of these projects are now one of the largest battery storage facilities in their respective states, and in combination with their co-located solar, each project enabled the local utility to serve their customers’ need for new, reliable, clean energy to grow their own business operations. We are proud to continue to support our power and commercial and industrial customers to meet their growing power and capacity needs, create jobs, and provide economic development in these local communities. Our origination activities across our power and commercial and industrial customers are beginning to reflect the rising power demand. We are seeing it manifest with our power customers in their state RFP processes and bilateral discussions where we deliver cost-effective renewables and storage to their grid.

We are also observing it through interactions with our oil and gas and manufacturing customers where we utilize our data and technology to help them make better citing decisions. Our technology customers have been a consistent driver of demand for many years, reflected by our roughly 3 gigawatt operating portfolio and over 3 gigawatt project backlog as we partner with them to provide various clean energy solutions based on their key business variables. We are a partner with both our power and commercial industrial customers’ trust. We can leverage our 3 gigawatt development pipeline, our 35 gigawatt operating renewables and storage portfolio and our transformer and switchgear procurement covering energy resources billed through 2027 to deliver projects for customers.

As John said, the power demand growth is expected to be strong through at least the end of the decade. We expect 2024 to be another strong year for new renewables and storage origination. This is on the heels of two consecutive record origination years at Energy Resources. We continue to expect to remain on track for our overall renewable development expectations of roughly 33 gigawatts to 42 gigawatts from 2023 through 2026. Beyond renewables and storage, NextEra Energy Transmissions was recently selected by the California ISO to develop a new 82 mile 500 kV transmission line in Southern California with a capital investment of more than $250 million. We believe this project could unlock over 3 gigawatts of new renewable generation capacity supporting California’s ambitious clean energy goals.

This award falls a record year for NextEra Energy Transmission in 2023, and we remain excited about the opportunities ahead for this growing business. We continue to believe our ability to build, own, and operate transmission is a key advantage for our renewables business. Turning now to our first quarter 2024 consolidated results, adjusted earnings from corporate and other decreased by $0.01 per share year-over-year. This quarter, we entered into an agreement to transfer approximately $1 billion of tax credits throughout 2024, representing the bulk of our expected transfers for the year. Our long-term financial expectations remain unchanged. We will be disappointed if we are not able to deliver financial results at or near the top end of our adjusted EPS expectation ranges in 2024, 2025, and 2026.

From 2021 to 2026, we continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. And, as we announced in February, the Board of Directors of NextEra Energy approved a targeted growth rate in dividends per share of roughly 10% per year through at least 2026 off a 2024 base. As always, our expectations assume our caveat. Turning to NextEra Energy Partners. We continue to focus on executing against the partnership’s transition plan and delivering an LP distribution growth target of 6% through at least 2026. We bought out the STX Midstream convertible equity portfolio financing in 2023 and have sufficient proceeds available from the Texas Pipeline Portfolio Sale to complete the NEP Renewables II buyout due in June 2024 and 2025.

The third convertible equity portfolio financing associated with the Meade natural gas pipeline assets is expected to be addressed in 2025. With a plan for the near-term convertible equity portfolio financing well understood, we remain focused on the partnership’s cost of capital improving, which is critical for its success. With that objective in mind, we continue to evaluate alternatives to address the remaining convertible equity portfolio financing with equity buyout obligations in 2027 and beyond. Turning to the partnership’s targeted 6% growth in LP distributions per unit, NextEra Energy Partners does not expect to need an acquisition this year to achieve its 6% targeted growth rate, and the partnership does not expect to require growth equity until 2027.

In terms of NextEra Energy Partners’ growth plan, as a reminder, it involves organic growth, specifically, repowerings of approximately 1.3 gigawatts of wind projects through 2026, as well as acquiring assets at attractive yields. Today, we are announcing plans to repower an additional approximately 100 megawatts of wind facilities through 2026. The partnership has now announced roughly 1,085 megawatts of repowers. Yesterday, NextEra Energy partners’ board declared a quarterly distribution of $89.25 per common unit, or $3.57 per common unit, on an annualized basis, which reflects an annualized increase of 6% from its fourth quarter 2023 distribution per common unit. Let me now turn to the detailed results. First quarter adjusted EBITDA was $462 million, and cash available for distribution was $164 million.

New projects, which primarily reflect contributions from approximately 840 megawatts of new projects that either closed in the second quarter of 2023 or achieved commercial operations in 2023, contributed approximately $32 million of adjusted EBITDA and $7 million of cash available for distribution. First quarter adjusted EBITDA contribution from existing projects declined by approximately $37 million year-over-year, driven primarily by unfavorable wind resource during the quarter and lower generation at Genesis Solar project as a result of a planned outage for major maintenance. Wind resource was approximately 97% of the long-term average versus 102% in the first quarter of 2023. The incentive distribution right fee suspension provided approximately $39 million of benefit this quarter for adjusted EBITDA and cash available for distribution.

Finally, adjusted EBITDA and cash available for distribution declined by approximately $44 million and $38 million, respectively, for the divestiture of the Texas pipeline portfolio. From a base of our fourth quarter 2023 distribution per common unit and an annualized rate of $3.52, we continue to see 5% to 8% growth per year in LP distributions per unit, with a current target of 6% growth per year as being a reasonable range of expectations for at least 2026. We continue to expect the partnership’s payout ratio to be in the mid-90s through 2026. We expect the annualized rate of the fourth quarter 2024 distribution that is payable in February 2025 to be $3.73 per common unit. NextEra Energy Partners expects run rate contributions for adjusted EBITDA and cash available for distribution from its forecasted portfolio at December 31, 2024 to be in the ranges of $1.9 billion to $2.1 billion and $730 million to $820 million, respectively.

As a reminder, year-end 2024 run rate projections reflect calendar year 2025 contributions from the forecasted portfolio at year-end 2024. As a reminder, our expectations are subject to our caveats. That concludes our prepared remarks, and with that, we will open the line for questions.

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. The first question comes from Steve Fleishman with Wolfe Research. Please go ahead.

Steve Fleishman: Yes, hi. Thank you. Just first question, just there’s been press reports about potential another AD/CVD case to be filed related to solar panels and, Biden also talking about getting rid of the protection on the bifacial panel tariff. Could you just talk a little bit more about how you’re positioned to deal with those cases if they do arise, changes if they arise? Thanks.

John Ketchum: Sure. Steve, this is John. I’ll go ahead and take that. Let me take those in order. Let me talk about, first of all, the speculation around AD/CVD filing, which, may or may not occur, and then the bifacial exemption. But first on the AD/CVD, the bottom line takeaway for folks is that, we expect that any trade actions that would occur this time around will be very manageable. And for several reasons, I’m going to go through them. This is not like circumvention. This is not circumvention 2.0. The solar panel market is in a very different spot. And the first point I want to make is we don’t expect any trade action, if it were to occur, to result in delivery stoppages. And in any event, our panels are delivered well in advance of construction, which gives us a lot of time and opportunity to be able to troubleshoot any issues should they arise.

And why do I think no stoppages were going to occur this time around? The main reason is the U.S. is the most expensive solar panel market in the world, and so there’s a lot of economic reasons for deliveries to continue to occur. The second point I want to make is that, given our scale, we have appropriate incentives and contractual protections that are in place in our agreements with our suppliers to ensure that delivery occurs timely. And we also don’t put all of our eggs in one basket. We have a diversified set of suppliers, as you would all expect, and the ability to pivot from one supplier to another should any issues occur. So I feel like we’re in a very good spot there. The third point I want to make, and it’s one that I hit in my prepared remarks, is that the U.S. and the global supply of solar panels is bigger than ever, and it’s growing.

Let me talk, for example, about the U.S. market specifically. The U.S. domestic solar panel industry is getting stronger and stronger than it’s ever been. One of the points that I made also in the prepared remarks is at the end of ’21, solar panel module capacity in the U.S. was about 8 gigawatts. That’s expected to be about 50 gigawatts by the time we get to 2026. So the U.S. market is in a much different spot. There’s already been 150 gigawatts of new U.S. solar panel factory announcements that have been made. If you talk to most U.S. domestic solar panel manufacturers, they’re sold out through 2026, so they’re certainly not having any trouble with demand, which is the other point that I want to make. So now let’s speculate a little bit. So if a filing is made around anti-dumping, let me deal with that first.

We find it hard to believe that any panels are being dumped into the U.S. market under the law. That would be applied. As I said, the U.S. is the most expensive solar panel market in the world. It’s 2x to 3x higher than any other market in the world. And if panels were being dumped, that could not be the case. So that’s the first point I want to make on anti-dumping. The second point I want to make, if there were a countervailing duty claim filed, the Department of Commerce would first have to look in to see if the price of solar modules in Southeast Asian countries, for example, were being subsidized. We don’t really have any idea or way of knowing that until we see what gets filed. But after we see those arguments, we’ll be able to make a better assessment.

But countervailing duties historically, if you look at examples for countervailing duties that have been applied in the past against China suppliers, they’ve typically been around 10% to 15%. So even if those were to be applied in this case, quite manageable. And the other point I want to make is that what’s different is tariffs in this situation would be prospective and not retroactive. And so for all of these reasons, even if something were to move forward, we still have no way of knowing if it will. We are very well positioned to manage through this like we always do. Our inventory position and the contractual protections that we have in place are expected to give us strong coverage for our backlog through 2027. And by that time, as more and more U.S. production comes online as expected, these trade issues will fall away.

So that’s AD/CVD. Let me just turn quickly to a couple of minor comments on the bifacial exemption. The bottom line, the bifacial exemption, even if it’s removed, really has no impact on NextEra. Why is that? We’ve contracted all of our panel needs through February ’26, and we have very minimal exposure to the bifacial exemption being removed. And once that bifacial exemption, even if removed, it would expire at the end of February of 2026, and it can’t be brought again and reinstated for another eight years. So we feel like we’re in a very good spot. And the last point I’ll make is as more and more U.S. production capacity comes online and it’s actually available by, we will continue to source from U.S. suppliers. So look, when you put all those things together, I feel like this is very manageable and I feel like we will be fine.

Steve Fleishman: That was very thorough and helpful. Thank you, John. And then I guess one other question on the data center. So you talked about the backlog edge you had this quarter. Just as we go into this year and think about this, is this going to continue to be more kind of one-off or two-off quarter-by-quarter updates, or is there — should we see more kind of potential for more like long-dated partnerships or kind of larger-scale agreements? How should we think about how that might develop?

John Ketchum: I think kind of all of the above, Steve. Our opportunity set is significant around data centers is the first point that I’ll make. And I think if you look historically on what we’ve been able to do with data center customers, I don’t think anybody’s had better results than we have. If you look at just our gigawatts in operation, we have 3.5 gigawatts in operation today. We have another close to 3.5 gigawatts in our backlog with technology providers. We really understand their business. We really understand what it is they need. And part of that is because we spend a lot of time with them. We do business with all what I would call the top five hyperscales in this country, also doing business increasingly with some of the developers of data centers as well.

And we’ve owned data centers. And so we understand how they work, how they operate, what the CapEx and OpEx is and how it’s driven by energy and power and what the right locations are for them. We’ve developed tools to address them. And so what do we see? We see about a 15% CAGR through the end of the decade for data center demand. I think data center developers are really focused more than anything on three things. They want low-cost energy. They want to be able to say that they’ve accomplished additionality from a decarbonization standpoint, which requires a new facility to be built, not an existing facility. And the third piece is it’s got to be in the right location and it’s got to have speed to market. And there’s obviously been a lot of talk about renewables and nuclear, and I do want to — I’m a little more of a skeptic about nukes, and let me explain why that is.

They’re already in the ground. You can’t move them. And if you look at the nuclear fleet, there’s only 15 nuclear plants in this country that are west of the Mississippi. And when you think about the 15 that are west of the Mississippi, most of them are already rate regulated or long-term contracted. So that really is just creating maybe an East Coast opportunity for those that aren’t rate regulated and that aren’t contracted. I think that’s a small subset of nuclear units that could perhaps satisfy East Coast demand. But in our discussions with data center providers, getting access to cloud capacity for Silicon Valley, Santa Clara in particular, is critical. We can all count on one or two fingers how many nuclear plants are located in those regions, not many.

And you just can’t move a nuclear plant. And so the thing we bring to the table is a lot of flexibility and speed to market. We can put the renewable project exactly where it needs to be. And SMRs, I hear a lot of talk about SMRs. SMRs are still a decade to 15 years away. Not only do you have nine OEMs that are really struggling to access capital. If we pass a sanctions bill against Russia, a nuclear fuel that’s going to limit conversion and enrichment capacity in the U.S. for sourcing of nuclear fuel for these SMRs, which also is going to require a real step up in technology to get them done. And you’re also dealing with undercapitalized fuel providers. I’m a real skeptic on SMRs really coming into the picture to satisfy data center demand any time in the near future.

And so when you put all of that together, I think the right answer is renewables in our discussions with data center developers and providers, their first focus is renewables. And I hear a lot about the reliability concerns and what do you do when the wind doesn’t blow and the sun doesn’t shine and the four-hour battery is not enough? We can overbuild the battery. We can also help work with them to design a clean energy solution where if they do have a grid by it, we can green it up with RECs from our green desk. We have technology and tools which we showcased back in March where we can identify parts of the country that not only the best resource areas, but also the best fiber connectivity is the best water resource and those are the areas that we’re locking up and we have the sites and we have the relationships.

And so I don’t think anybody’s better positioned to capitalize on data center demand than NextEra is and I’m very excited about what the future opportunities hold for us there, but the other thing I would say, and we’ll talk a lot more about this at our investor conference in June is this electricity demand is real. We’ve been in a period of static demand for decades and the demand is not only coming from data centers. It’s coming from decoupling from China, creating more domestic manufacturing around industry, around chip manufacturing, oil and gas industry continues to electrify. We continue to even beyond data centers see significant electric demand. We have the tools. We have the sites. We have the relationship and we are chasing those opportunities and look we’re coming off our second best origination quarter ever.

I think the results speak for themselves.

Steve Fleishman: Great. Thank you.

Operator: The next question comes from Shahriar Pourreza with Guggenheim Partners. Please go ahead.

Shahriar Pourreza: Hey, good morning, guys. Just maybe starting off on NEP, given the continued pressure from capital markets and the benchmark rates, are you advancing any longer-term resolution plans for the CEPFs? Have existing holders and maybe other infrastructure players showed any interest in transactions to fund and maybe simplify the cap structure for longer-term growth? What could that look like and is this Analyst Day disclosure?

John Ketchum: Yes, sure. Thanks for the question. A few comments that I’ll make on it. One is we have talked about private capital raise potentially being a solution to address back-end CEPFs for NEP. Obviously there’s a lot of interest in that just given. NextEra’s stature in the market, NextEra Energy Partners’ stature in the market. And so those discussions continue to move forward. We don’t have anything to say about them right now. We may not have anything to say about them at the Analyst Day. I wouldn’t expect us to make a whole lot of comments at the Analyst Day about NEP. When we do have something to say about NEP, as these discussions continue to evolve, we will address them at that point.

Shahriar Pourreza: Okay. Perfect. Stay tuned. And then lastly, John, on the FECs, since the process disclosures have been made and obviously showed FP&L was clear of any wrong doing, there were some disagreements with the FEC commissioners on the nonprofit matters. Is there an appeals path, and would there be any further information request to FP&L or NextEra or should we just close the books here?

John Ketchum: Yes. I think the way I look at it Shah is plain and simple. The FEC voted. They voted to close the matter. We’re now moving on, and I think this is behind us.

Shahriar Pourreza: Okay. Perfect. That’s it. Very comprehensive. Thank you, guys, and congrats on the results.

John Ketchum: Thank you.

Operator: The next question comes from David Arcaro with Morgan Stanley. Please go ahead. Mr. Arcaro, your line is open. Is your phone muted accidentally? I’m sorry. We’ll need to go to the next questioner. The next questioner comes from Carly Davenport with Goldman Sachs. Please go ahead.

Carly Davenport: Hi, good morning. Thanks for taking the questions today. I appreciate it. I wanted to just ask one on the backlog good strength in the additions this quarter, and we continue to see a lot of strength in the solar and the storage piece of it. Wind’s been a little bit weaker. So I guess just as you think about the difference in the returns on those projects, are there any implications for your financial guidance and your plan as you think about the mix that you’ve seen actually evolve versus what is in that base plan?

Rebecca Kujawa: Hi, Carly. It’s Rebecca. I’ll take that question. Good morning. Let me start with probably the most important takeaways first. Obviously, Kirk and John highlighted our continued expectations and expressed the fact that we’d be disappointed if we didn’t meet the top end of those expectations as we’ve outlined. So that’s most important. Secondly, we continue to be comfortable with the overall development expectations as we also highlighted in the prepared remarks and that’s consistent with what we’ve seen over time. As we’ve long stated, obviously there’s a mix in technologies. We, 4 years in advance, are not always going to be predicting exactly where we’re going to be able to develop and what our customers are going to be interested in.

And notably, since we laid those expectations out for the first time, a lot did change including the passage of the IRA and that had both an impact on changing dynamics for our customers buying wind which was largely in advance of the expectations that the incentives would ultimately wind down and in the IRA the introduction of the production tax credit for solar which made solar more attractive than it was even before, as well as the standalone ITC for storage. So that really spurred demand for solar and storage. But if I can take a step back and pile into the question that Steve answered and some of the comments that John made earlier we are seeing significant demand across the entire US economy. That, of course, includes data centers, technology, AI-driven compute demand, but it is also manufacturing, the re-domestication of important industries in the US and it is also oil and gas and chemicals companies looking to get lower-cost energy solutions into their mix.

That spurs a need for a lot of build. So as we look at our 300-gigawatts of products that are in development and the integrated solutions and solutions that we are designing for our customers, I remain very optimistic about all of the technologies. In various parts of the country, wind is most economic. In parts of the country, it is going to be solar and storage, et cetera. So I love the portfolio approach and from a returns perspective I think we continue to realize very attractive returns for all the technologies and, of course, adjusted for the types of risks that we think we take. So mid-teens for solar and above 20% levered returns for wind and storage technologies. So I think from an investor standpoint, that is a very attractive proposition.

Carly Davenport: Awesome. Thanks for that, Rebecca. And then you mentioned over the last question 15% CAGR for data center demand growth through the end of the decade. I guess as you think about some of these other drivers that you’ve mentioned of increased power demand in the US, how do you think that will drive overall load growth? Do you have expectations there through the end of the decade?

Rebecca Kujawa: So we’ll have a lot more to say in terms of our expectations and certainly in context of a number of third-party views at the investor conference. But I think it’s safe to say at this point that we see strong drivers for a long period of time, decades into the future, driving renewables penetration and electricity and electricity penetration into overall U.S. energy consumption which sets up terrific dynamics for us to continue to compete and create opportunities to invest capital for our shareholders at very attractive returns. So I love our opportunity at.

Carly Davenport: Thank you for that color.

Rebecca Kujawa: Thank you.

Operator: The next question comes from Durgesh Chopra with Evercore ISI. Please go ahead.

Durgesh Chopra: Good morning. Thank you for giving me time. Maybe just, Rebecca, on the topic of electricity demand growth. One of the questions we consistently get, and I think John hinted on this 15% the data center growth driving it is how quickly can you ramp up? So maybe can you just talk to that? Are there any constraints, whether it’s equipment, whether it’s sites? How quickly can the generation side of this, the renewable generation can ramp up?

Rebecca Kujawa: Yes, Durgesh, I appreciate the question. I think a little bit of context is important. I think all of us, ourselves included, have really started talking about the significant change in load growth really over the last year, maybe even the last six months, and you all very much appreciate that a development business, anything connecting to electrical infrastructure usually talks in terms of years and sometimes a lot of years depending on the market. To get something into place in the ERCOT market is maybe a couple of years, and some markets in the Midwest that have had congested queues and some transmission constraints, that could be five to seven years, and obviously we’ve been working for a period of time. I think we’re the least behind of anybody with our 300 gigawatt portfolio, but some of this will take some time to materialize.

I feel very confident in long-term trends. I feel really excited and pleased with our team’s preparedness in terms of the development of that pipeline, and I very much think our competitive advantages that John highlighted on scale, experience, and technology really position us well in the types of conversations we’re having with our customers, creating this long-term visibility into demand dynamics. You guys asked John a question about data centers and how competitive we are with them. They are not looking for projects anymore. They are looking for integrated solutions that solve long-term problems for them, and we are a perfect partner for them with which to work.

Durgesh Chopra: That’s very helpful, Rebecca. And then maybe just a quick follow-up. I think you made comments around very healthy returns. Are you seeing higher returns, higher margins with your data center clients versus your other clients? Some of your peers have highlighted higher returns there. Maybe just comment on that.

Rebecca Kujawa: I continue to believe we have very attractive returns across the board, consistent with the comments that I’ve made today as well as the comments we made at our development 101 day and included in our monthly updates for investor materials, so mid-teens and solar and above 20% for both wind and storage. Of course, as we talk with customers and we have unique solutions that solve particular problems that we have, we design the solutions to meet those needs and always stay focused at the end of the day on what’s the attractive value proposition from an investor standpoint, and we remain disciplined around that. I love the portfolio. I love the positioning, and I believe what we ultimately deliver for investors is very attractive.

Durgesh Chopra: That is very helpful. Thank you very much.

Operator: The next question comes from Jeremy Tonet with JPMorgan. Please go ahead. Excuse me, Mr. Tonet, your line is open.

Jeremy Tonet: Good morning. Thank you. I just want to start off on storage originations coming in quite strong.

Rebecca Kujawa: Hi, Jeremy, it’s Rebecca. I’m going to go for the presumptive close on the answer. Hopefully it’s the question you actually asked. Storage origination is very strong. As Kirk highlighted in some of the prepared remarks and John commented in Q&A, as we think about our customers’ needs for energy and capacity, it remains a very attractive value proposition to incorporate storage to firm up renewables, either co-located or separate. So we’re seeing terrific origination from an energy resources perspective, and we’ve also talked today about the attractiveness of storage FPL, so I’ll hand it off to Armando to give some additional color.

Armando Pimentel: Thanks, Rebecca. So I would add, if you recall John and Kirk’s comments, we filed our 10-year site plan, which we do every year. Our 10-year site plan this year had the same amount of solar that it did last year, which is a lot of solar, 21 gigs over the next 10 years. But we doubled the amount of storage up to 4 gigawatts of storage that we have in our plan. We increasingly see storage as an economical addition in our service area. My expectations are that, as time goes on, that we would likely add more storage to our plans going forward because it is that attractive in the overall economics, especially as we add solar, which, again, continues to be the best proposition from a cost standpoint for our customers.

Jeremy Tonet: Thank you for that. And just going back to the Renewable Development Day, or for people that weren’t able to make it, any particular points you want to highlight?

Rebecca Kujawa: Jeremy, you broke up a little bit, so I’m going to, again, guess a little bit on what the question was. But I’m assuming it was what were some of the key takeaways from the Development 101 Day. And I hope it was a worthwhile time for our investors. We certainly were so proud of our team in talking about what it is that we believe differentiates us as we talk to our customers. And it really was around that scale, experience, and technology, not just individually how all of those are important, but also how they interact with one another. So, as John highlighted, with the scale advantages comes the ability to deploy technologies that are unique. And with that experience, we actually are able to invest in capturing that data that we get from scale and put it in technologies to actually get some really cool insights.

So I think the key takeaway from my perspective is significant load growth, certainly some opportunities to deploy that scale, experience, and technology to deploy unique and compelling solutions to our customers. So I love our growth prospects. I love the position that we have, just as John highlighted in his comments. And I look forward to telling you more at the investor conference in June.

Jeremy Tonet: Great. Thank you very much.

Operator: This concludes our question and answer session and the NextEra Energy and NextEra Energy Partners, LP earning conference call. Thank you for attending today’s presentation. You may now disconnect.