新世紀能源 (NEE) 2007 Q4 法說會逐字稿

Good day, everyone, and welcome to the FPL Group fourth quarter 2007 earnings conference call.

Today's conference is being recorded.

At this time, for opening remarks, I'd like to turn the conference over to your host, Mr.

Jim von Reisemann.

Please go ahead, sir.

Thank you, Daryl.

Good morning, everyone, and welcome to our fourth quarter and full-year 2007 earnings conference call.

Moray Dewhurst, Chief Financial Officer of FPL Group, will provide an view overview of our performance for the quarter.

Also with us this morning are Lew Hay, FPL Group's Chairman and Chief Executive Officer; Jim Robo, President and Chief Operating Officer of FPL Group; Armando Oliveram President of Florida Power & Light Company; and Mitch Davidson, President of FPL Energy.

Following Moray's remarks our senior management team will be available to take your questions.

Let me remind you that our comments today will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Any statements made herein about future operating results or other future events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from such forward-looking statements.

A discussion of factors that could cause actual results or events to vary is contained in the appendix herein and our SEC filings and in the investor section of our website www.fplgroup.com.

And now I would like to turn the call over to Moray Dewhurst.

Moray?

Thank you, Jim.

Good morning everyone.

2007 was another excellent year for FPL Group, driven again by outstanding performance from FPL Energy.

Despite some weakness in revenues at Florida Power & Light, particularly late in the year, full-year results for FPL Group exceeded the expectations we shared with you at this time last year and 2007 was second only to 2006 in the last 20 years in terms of adjusted EPS group.

At the same time, in both major businesses we made significant progress in positioning ourselves for good future growth.

As a result we continue to believe that average adjusted EPS growths of at least 10% per year off the 2006 base is achievable.

We have good growth plans in place and we believe we are well positioned relative to likely long-term trends in both commodity prices and the increasingly important issue of global climate change.

We look forward to sharing with you more details of our growth plans at our investor conference in late March and at various other conferences during the year.

We expected FPL Energy to perform well in 2007 and it did, driven by contributions from new investment as well as the roll off of below-market hedges in the existing fleet.

In addition, however, the merchant portfolio enjoyed good market conditions and delivered at the high end of our expectations, while the same favorable market environment enabled our wholesale marketing and trading activities to deliver much better results than we had anticipated.

At the same time, we funded significant expansion of our internal capabilities to support the new and more aggressive growth goals, especially for the wind business, that we introduced during the year.

Florida Power & Light delivered good results over all, although the latter part of the year was a bit disappointing on the revenue front.

We expected that 2007 would be a challenging year for this business, falling to cost pressures, but we were generally successful in managing these.

We went into the year with uncertainty on the revenue front and were pleasantly surprised with the first part of the year.

However, particularly with the fourth quarter, it has now become clear that we are seeing definite signs of a slow down in growth in our service territory as well as signs of changes in customer usage patterns.

I'll discuss these topics in more detail later.

Never the less, for the full year, Florida Power & Light came in $0.01 short of the lower end of the range we had originally set out in the fall of 2006, which we think is strong performance in a challenging environment.

Much effort in 2007 was spent in both major businesses, laying the groundwork for future growth and we are very pleased with our progress in this regard.

At FPL Energy, responding to what we see as an increased opportunity for our wind business, we expanded and accelerated our growth plans and outlined for you our program to add an additional 8,000 to 10,000 megawatts of wind generation in the period 2007 through 2012.

We're pleased with our progress to date.

We expect to add at least 1,100 megawatts with our 2008 program, of which more than 700 is currently under construction.

Assuming continued policy support, we expect to roughly double our annual capacity to deliver new megawatts by 2012.

FPL Energy also invested significant effort in other growth initiatives, including new solar capacity and new transmission facilities designed to leverage the overall growth of the renewables business.

We also welcomed the team at the two unit Point Beach nuclear facility to it the FPL Group portfolio.

Florida Power & Light responded to a sometimes rapidly changing external environment and adjusted its development plans to ensure its ability to support continued long-term growth in the state.

In the generation area, significant progress was made with fossil, nuclear and renewable development, all of which have important roles to play in the future portfolio.

At the same time we continued to invest in strengthening our transmission and distribution infrastructure, and our advanced metering initiative yielded good early results.

Overall we are very pleased with the progress made in both businesses.

Last October we shared our thoughts on expectations for 2008 and 2009 adjusted income and EPS.

At this point we continue to expect full-year 2008 adjusted EPS to be in the range $3.83 to $3.93, and we continue to see a reasonable range for 2009 of $4.15 to $4.35.

The revenue outlook for Florida Power & Light has clearly deteriorated since we discussed expectations last October.

On the other hand, some other drivers, particularly on the FPL Energy side, have improved.

But the overall adjusted EPS ranges still appear reasonable at this time.

We will continue to keep you posted on our views of the future as we go through the year.

As a reminder, when we discuss FPL Group's earnings expectations we assume normal weather and mark our he open positions to the current forward curves.

We also exclude the effect of adopting new accounting standards, if any, and the mark-to-market effect of non-qualifying hedges, neither of which can be determined at this time.

Let's look at the results for the fourth quarter and full-year 2007.

In the fourth quarter of 2007, FPL Group's GAAP results were $224 million, or $0.56 per share, compared to $268 million, or $0.67 per share during the 2006 fourth quarter.

FPL Group's adjusted 2007 fourth quarter net income and EPS were $282 million and $0.71 respectively, compared with $254 million, or $0.63 per share in 2006.

As a reminder, our adjusted earnings exclude the mark-to-market effect of non-qualifying hedges.

Please refer to the appendix of the presentation for a complete reconciliation of GAAP results to adjusted earnings.

We use adjusted earnings internally for financial planning, for analysis of performance, for reporting of results to the board of directors, and as inputs to the Company's employee incentive compensation plan.

I should also remind you that last year's fourth quarter and full-year adjusted results were affected by two large items; a gain of $0.15, or $0.16 for the full year at FPL Energy from the resolution of a long-standing commercial dispute, and a loss of $0.15 at corporate and other from the write-down of FPL FiberNet's metro assets in response to changing market conditions.

Both these items make direct comparison to 2007 and 2006 adjusted results a bit challenging.

For the full year, FPL Group's 2007 net income was $1.312 billion, or $3.27 per share, compared to $1.28 billion, or $3.23 per share in 2006.

Excluding the mark-to-market effect of non-qualifying hedges and merger-related costs, FPL Group's 2007 adjusted earnings were $1.40 billion, or $3.48 per share, compared to $1.20 billion, or $3.04 per share in 2006.

Again, please refer to the appendix presentation for reconciliation of GAAP results to adjusted earnings.

Turning now to Florida Power & Light, before discussing 2007 results I'd like to highlight two items in the 2006 results that will make the comparison to 2007 more meaningful.

First, earnings in 2006 were reduced roughly $27 million by the net write-off of certain disallowed storm costs.

Secondly, usage due to weather in 2006 contributed about $19 million relative to what we had expected from normal weather.

Excluding these two items, normalized 2006 results might be thought of as about $810 million, which would have resulted in an increase in 2007 earnings of about $26 million over normalized 2006 earnings.

As I mentioned earlier, we expected 2007 to be a challenging year on the cost front and we also indicated some uncertainty about the revenue outlook.

As the year unfolded, we were able to find offsetting productivity improvements for some of the cost pressures, but the revenue performance fell well short of our expectations, with much of the shortfall concentrated in the latter part of the year.

Clearly we've been seeing some significantly different trends during the past four months than earlier in the year.

These affect both customer growth and usage.

Customer growth on average for the full year was in line with our expectations, adding $0.11 per share to earnings.

However, much of the growth occurred earlier in the year when we were a bit surprised by its continued strength.

It then tapered off considerably at the end of the year and the customer count has been roughly flat for the last several months.

Weather for the year as a whole was roughly in line with normal, although with large swings, which has complicated our analysis of usage patterns.

Non weather-related usage was inconsistent throughout the year and did not deliver the growth that we expected for either the fourth quarter or the year, as I'll discuss in a moment.

Results were aided by a base revenue increase associated with the addition of the 1,144 megawatt Turkey Point fire generating facility, which went into service in May, slightly ahead of schedule and under budget.

For the year, the revenue associated with the new Turkey Point facility added $0.13 per share.

This was the first application of the generation base rate adjustment, or GBRA, which you may recall is a mechanism introduced as part of FPL's 2005 rates (inaudible) stipulation agreement, which allows FPL to increase base rates for the cost of approved new generation facilities placed into service prior to the end of the agreement in 2009 with a simplified administrative review.

The addition of Turkey Point 5 to our portfolio is beneficial, both to customers and to shareholders, with a slight increase in base rates more than offset from the fuel savings arising from the incremental efficiency of the new unit.

On the expense front costs were up but not as high as we had indicated when we discussed our expectations for 2007 in late 2006.

The absence of disallowed storm costs broken out separately on our financial statements helped the comparative results by $0.07 per share.

FPL undertook several initiatives throughout the year to continue to position the Company for the long term.

We continued to make good progress with our West County Energy Center generation expansion.

Two identical natural gas units of approximately 1,220 megawatts are currently under construction.

The first facility is expected to be placed into service in mid-2009 and the second approximately a year later.

The total approved costs for the two units is approximately $1.3 billion.

These units will be among the lowest-emitting and most-efficient fossil units anywhere in the world and like Turkey Point 5 will have the effect of displacing older, less-efficient capacity, as well as supporting continued service territory growth.

In December we received regulatory approval to implement extended power uprates at all four existing Florida nuclear units.

The uprates will provide roughly 400 megawatts of incremental base load capacity with zero greenhouse gas emissions and should be completed by the end of 2012.

The estimated cost of approximately $1.8 billion will be recovered under the nuclear cost recovery rule adopted by the Florida Public Service Commission in early 2007.

This recovery mechanism allows the cash recovery of all carrying costs during construction and, subject to annual prudencey reviews of the costs as they are incurred, a base rate increase when the new capacity comes into service with a simplified administrative procedure.

We also filed a petition for need determination for two new nuclear units to be constructed at our Turkey Point site, subject to numerous required regulatory approvals and satisfactory resolution of outstanding technical and economic uncertainties.

If all goes well, the new units will add approximately 2,200 to 3,000 megawatts of new generation in the 2018 to 2020 timeframe.

While there are many challenges associated with developing new nuclear capacity in this country, we continue to believe that any serious national response to the challenge of global climate change has to include the deployment of new nuclear units.

Hearings begin on our petition later this week and the commission is scheduled to vote on our request in mid-March.

During 2007, FPL also made good progress in our continuing development of advanced metering technology.

We now have several years of practical experience with different technologies and believe that our current approach can provide a solid basis for a reliable, scalable and manageable network architecture.

To date we have deployed about 50,000 advanced meters with another 50,000 expected to be deployed in 2008, ramping up further in 2009 and beyond if all continues to go well.

FPL expects the full deployment of its advanced metering initiative to require a capital investment of approximately $500 million.

We are very optimistic that when fully deployed, the new technology will allow us to reduce costs, improve the quality of our service and at the same time provide our customers with greater insights into their consumption patterns and greater flexibility and choice in using electricity.

Finally, Florida Power & Light continues to make progress in responding to Governor Crist's policy initiatives, particularly in the area of climate change.

We have accelerated plans for renewables development.

We expect to build a ten-megawatt solar thermal facility for proof of technology and economics, and assuming this is successful, we will then expand to 300 megawatts of capacity.

We also expect very soon to open the state's largest photovoltaic facility and we continue to seek opportunities for wind generation projects within the state.

We believe we can find specific renewables projects that will allow us to increase the percentage of our supply coming from renewable resources without significant adverse rate impact for our customers.

For the fourth quarter, Florida Power & Light reported net income of $173 million compared with $170 million in last year's fourth quarter, and corresponding contributions to EPS were $0.43 per share in both the just completed and comparable year-ago quarter.

For the full year, Florida Power & Light reported net income of $836 million compared with $802 million in 2006.

Earnings per share for 2007 were $2.09 versus $2.02 in the comparable period a year ago.

For the full year, customer growth ended up about where we had expected at 2%.

The average number of customer accounts increased by 87,000.

But essentially, all of this growth was concentrated in the first half of the year.

The first half of the year saw customer growth rates slightly ahead of our expectations, while the latter portion of the year experienced very little growth.

In the last four months of the year, Florida Power & Light customer growth was disappointing.

We had built into our expectations some tapering off of growth, but in fact the customer base stayed essentially constant during the fourth quarter.

As a result, the fourth quarter year-on-year growth rate was only 1.5%, equating to 64,000 customers.

In a few moments I will discuss customer growth in greater detail in the context of the recent declines in housing starts that Florida and the rest of the nation face.

For now, let me just note that we continue to believe that the median to longer-term prospects for growth in our service territory remain good.

In the fourth quarter, retail kilowatt hour sales rose 3.1%.

This was made up of the 1.5% customer growth I just mentioned, 2.6% due to favorable weather comparisons with last year's fourth quarter, and -1% from underlying usage mix and all other effects.

For the full year, total retail sales growth was 1.6%, made up of 2% customer growth and -0.8% weather effect and 0.4% from underlying usage growth mix and other.

For most of 2007, usage growth has been lower than our statistical model, which takes into account weather effects, general economic conditions, price elasticity, and long-term trend data would suggest.

However, it has been very difficult to detect any consistent pattern.

During the fourth quarter we undertook more in-depth analysis of revenue trends for the past few years, and while we have eliminated some hypotheses, we cannot at this stage say we have a clear handle on systemic changes in the drivers of revenue.

Broadly speaking, we believe the weakness in usage is likely to be related to two categories of change experienced by our customers.

First, there likely are negative economic factors that drive lower usage per customer that are not fully reflected in our forecast model.

The housing sector, in particular, has experienced a significant downturn in recent months and certainly this should have some effects on usage patterns which cannot be positive.

However, this factor is likely to prove cyclical.

Obviously, we have experienced economic cycles before and by themselves they do not lead us to change our positive outlook for long-term growth based on the fundamentals of the Florida economy, which remain strong.

On the other hand, it will clearly be some time before the housing sector cycle has been played out and therefore we can expect continued revenue weakness for Florida Power & Light from this source at least through 2008.

It's possible that there may also be a component of usage weakness related to growing customer efficiency actions not directly related to price, although we have no solid evidence for this as yet.

To the extent these effects are present, they're likely to last indefinitely.

Unfortunately, they're very hard to model in a meaningful way and they give us little insight into what to expect in terms of magnitude of usage impact going forward.

Of course, historically, we've seen a fairly consistent long-term trend towards greater efficiency, but average usage has nevertheless increased as customers have utilized more electric power devices and as average home sizes have increased.

We continue to believe that the long-term outlook for usage growth will remain positive as long as electricity prices remain moderate.

We will continue to analyze the data to understand the patterns and prove our forecast models, but there is no obvious single explanation at this point.

For the moment we believe the prudent thing to do is to assume that we are seeing some cyclical weakness in underlying usage in the near term and perhaps a modest shift in the longer-term trend.

Of course, with the base rate agreement, the shareholder bears essentially all the risk of revenue variability through the end of 2009.

Thereafter, any fundamental shift in demand growth would be reflected through the rate setting process.

As a reminder, in the past we've seen annual usage growth that has averaged about 1% but this figure has always been quite volatile from quarter to quarter and year to year.

As with customer growth, we will continue to monitor usage trends and let you know if we see any reason to change our outlook.

Having acknowledged that our understanding of the reasons for the revenue trends we have recently experienced is less than we would like, let me try and place one element at least in context.

This chart shows the historical relationship between the housing starts in our service territory and customer growth.

As you can see, generally speaking there's been a close relationship between the two, but this relationship broke down in 2004 and 2005, with housing starts running away from customer growth.

Since then, of course, housing starts have slowed dramatically.

This is very clear evidence of the housing bubble that we discussed before, with much of the over-building occurring in the condominium segment of the market.

This suggests to us that the recent weakness we have experienced in customer growth is not directly tied just to the Florida housing market, but instead, is probably driven by the broader housing market issues.

If it was strictly related to Florida issues, we should have seen a much earlier and more dramatic slowing of customer growth than we, in fact, have.

Instead, recognizing that our customer growth historically has been driven by inward migration to the state, we suspect that weaknesses in the housing markets in other parts of the country have at least as much to do with the recent slowdown in customer growth as anything occurring within our state.

For example, if a family contemplating a move to Florida finds itself unable to sell its current house at an acceptable price, it may well choose to defer its move until the situation improves; thus changes in markets outside of Florida can result in changes in our customer growth rate.

To the extent these factors are at play, we're likely to continue to see weakness in customer growth until the Florida housing market issues have been resolved across the country at large.

This is likely to take some time.

On the other hand, the chart shown here clearly suggests that the Florida housing bubble should have had an impact on our usage patterns.

It implies a buildup in unsold new homes, particularly condos, which, while they will likely count for us as new customers, will not likely have the same level of usage as a new home that is occupied.

This element of usage impact, which I should stress is probably only one of a number of issues affecting, will likely go away as the surplus of housing is gradually absorbed.

However, since this absorption too is likely to depend on national economic trends and national housing market trends, it could take some time.

Looking forward, we feel it's important to maintain a balanced perspective.

Clearly, the near-term outlook has weakened, though exactly how much is very difficult to say.

On the other hand, we continue to feel very positively about the longer-term growth prospects.

As long as the Florida economy continues to perform well, particularly on a relative basis, we believe the natural attractions of the state, coupled with the beginnings of the baby boomer retirement wave, will continue to serve as a basis for healthy growth and demand for electricity.

For the fourth quarter, FPL's 2007 O&M expense was $380 million compared with $350 million in last year's fourth quarter, driven by higher distribution, power generation and employee benefits cost.

Comparative nuclear expenses were down slightly owing to timing issue associated with scheduled plant outages.

For the full year, FPL's O&M expense was $1.45 billion, up from $1.37 billion in 2006.

Higher operating costs in nuclear power generation and distribution drove O&M expenses, as well as costs associated with employee benefits.

Generally speaking, the trends we had anticipated were present, but with the exception of nuclear costs we were generally able to do better than we had expected.

We remain on track with Storm Secure, our long-term plan to strengthen our network and make it more resilient in the face of extreme weather conditions.

Looking forward, e see the same general areas of cost pressure; nuclear, an increase in the number of planned fossil unit outages and employee-related costs.

Despite the modest uptick we have seen in cost per kilowatt hour or cost per customer over the last few years, our latest benchmarking data confirms that Florida Power & Light remains one of the most cost-efficient utilities in the country, ranking in the top decile in performance in our analysis, with O&M cost per kilowatt hour roughly 30% below average.

Depreciation in the fourth quarter declined to $197 million from $199 million in the same period a year ago.

For the full year, depreciation fell to $773 million from $787 million.

The fourth quarter and full year reflect underlying growth in transmission and distribution, and the introduction of the Turkey Point fossil unit, which were more than offset by reductions in certain amounts recovered through the capacity [close] Underlying base depreciation increased by approximately $8 million and $20 million for the quarter and year respectively.

The table shown here summarizes the drivers of the earnings growth for Florida Power & Light for both quarter and year.

In the interest of time I will not read each number for you.

For those of you without immediate access to the slides, they will be available in the investor section of our website, www.fplgroup.com.

In total, the quarterly comparison was flat year over year and the comparative annual figure is $0.07 per share.

Relative to the expectations we shared with you in the fall of 2006, we ended the year a $0.01 below the lower end of the range, almost entirely due to the slowdown in revenues.

FPL Energy had another excellent quarter and an outstanding year overall, and the adjusted financial comparisons are, in fact, stronger than they may appear.

In 2006, FPL Energy recorded a gain on a litigation settlement, which is included in adjusted earnings, benefiting last year's fourth quarter and year by $0.15 and $0.16 per share respectively.

The annual growth was driven by margin expansion at the existing assets, notably at [Apool], where we benefited from the anticipated rollover of older hedges to higher prices; by new assets, primarily new wind projects with a minor contribution from Point Beach; and by increased contributions from our wholesale marketing and trading operations, including our full requirements business.

While all these factors were to some degree built into the expectations we shared with you a year or so ago, the existing portfolio and our marketing and trading results exceeded our expectations, as we were able to take advantage of favorable market conditions to extract incremental value from our physical and contractual positions.

Operationally, the fleet continued to perform very well, with a total portfolio of forced outage rate under 3%, despite some continued teething problems with some of the newer wind turbines.

In addition, we were able to fund certain incremental G&A expenditures, primarily for new wind development, that will help us continue to drive growth into the future.

It was a good quarter for our longer term outlook, too.

We saw some strengthening in the gas curve, which is good for the long-term outlook for FPL Energy even while it produces book losses under Generally Accepted Accounting Principles for the non-qualifying hedge category.

We remain well hedged for 2008 and 2009.

For 2008 we are essentially fully hedged at the first order of impact for natural gas prices and very significantly hedged against other price movements, including spark spreads.

Over 90% of the equivalent gross margin we expect our existing asset portfolio to generate in 2008 is protected against commodity price volatility.

For 2009, the comparable figure is about 84%.

As you are aware, there has been a significant movement on the political front with regard to climate change policy.

We continue to believe that the scientific evidence suggests that we need to take action at the federal level on this topic and we believe FPL Energy is well positioned relative to the likely regulatory frameworks that might result from such action.

Our wind development program, which calls for the addition of 8,000 to 10,000 megawatts over the 2007 to 2012 time period, has made excellent progress.

In 2007, we added 1,064 megawatts of incremental wind.

This is slightly ahead of where we expected to be when we shared our revised wind program for you last July.

For 2008 we expect to add at least 1,100 megawatts of incremental wind.

To date we have more than 750 megawatts under construction or already approved.

Beyond 2008, we expect to scale up our growth even further, subject to continued public policy support for the wind business.

Some of you may have been disappointed that an extension of the production tax credit beyond the end of 2008 wasn't included in last year's energy legislation; however, we continue to believe there is bipartisan support for extension of the PTCs.

Also, during the fourth quarter, we welcomed the Point Beach team to the FPL Group portfolio.

While the financial contribution of this asset is small in 2007, it will grow over time and add meaningfully to our growth profile.

Finally, we continue to make good progress on our other growth initiatives, solar transmission and others, and we look forward to discussing these with you in more depth at various investor conferences later this year.

FPL Energy's 2007 fourth quarter reported results were $72 million, or $0.18 per share, compared with $148 million, or $0.37 per share in the prior-period results.

Adjusted earnings for 2007, which exclude the effect of non-qualifying hedges, were $130 million, compared to $133 million.

The equivalent per share contribution in both quarters was $0.33.

To repeat, last year's fourth quarter adjusted results included a litigation gain amounting to $0.15 for the quarter and $0.16 for the full year, which I referred to in my earlier comments.

Excluded from adjusted results are the effects of transactions in the non-qualifying hedge category.

During the quarter, the forward curve for natural gas rose significantly and this naturally led to book losses in the non-qualifying hedge category.

These are, of course, offset by roughly equivalent gains in the economic value of the underlying physical asset positions, which gains appear nowhere in the financial statements.

For the full year, FPL Energy's reported earnings were $540 million, or $1.35 per share, compared with $610 million, or $1.54 per share in 2006.

Adjusted earnings were $626 million, or $1.56 per share, versus $518 million, or $1.31 per share last year.

The full year impact of the non-qualifying hedge category was a negative $86 million, reflecting the large increase in forward prices that we observed over the course of the year.

FPL Energy's fourth quarter adjusted EPS growth was flat comparatively, but the prior period was driven to a great extent by the one-time gain on resolution of litigation.

The existing portfolio added $0.15 in the quarter, driven primarily by favorable market conditions in the New England fleet and the absence of a refueling outage at Seabrook.

The existing wind fleet improved slightly year over year.

New asset contributions, namely wind and Point Beach, accounted for an $0.06 improvement.

The 2007 fourth quarter results benefited from approximately 1,215 megawatts of additional wind capacity compared with a year ago.

Results from marketing and trading activities increased by $0.03 per share.

This was offset by the absence of a $0.03 gain posted in 2006 from the sale of certain development rights.

All other factors were a negative $0.06, owing primarily to additional interest expense and overhead associated with continued growth of the business.

For the full year, FPL Energy's adjusted net earnings per share increased $0.25.

As indicated earlier, the prior period results contain the unusual $0.16 item associated with the litigation gain settlement, so the effective increase was even greater.

In the fall of 2006 we indicated that 2007 would show very healthy growth, owing primarily to two key drivers; the rollover of older, lower-priced hedges to more current market values and the additional contributions from new wind.

Both drivers played out very much as we expected, but FPL Energy ended up doing better than we expected, primarily because of the existing portfolio was stronger than anticipated and because the opportunities available to our wholesale marketing and trading arm were better.

These factors helped us more than offset disappointing wind resource in the first part of the year.

New investment added $0.19, which was about what we had expected, although we were a little behind with the wind portfolio owing to some delays in one particular project.

This was offset by a small contribution from Point Beach, which was not in the expectations we've shared with you in October 2006.

The existing portfolio added $0.28, which was at the upper end of what we had expected.

Wind resource in Texas was weak in the early part of the year, but other parts of the [Aircot] portfolio outperformed our expectations, as did the [Neport] portfolio.

In general we enjoyed good market conditions with generally strong pricing and some periods of volatility, which enabled us to take advantage of the inherent optionality of the physical assets.

As noted earlier, last year we had a gain of $0.03 from the disposal of certain development rights.

This hurt the 2007 comparison by the same amount.

The same market conditions that led to additional opportunities for our physical assets also were beneficial to our marketing and trading operations, the contribution of which increased $0.14, of which roughly half came from our full requirements portfolio.

As a reminder, we expect these elements of FPL Energy's business to grow roughly in line with overall income growth over several years.

2007 was a particularly strong year in this area.

Increases in interest expense had a negative $0.06 impact on the full-year 2007 versus 2006 comparison.

This was slightly larger than we had set out in October of 2006, owing to the impact of Point Beach.

All other factors had a negative $0.11 impact on the full-year comparison.

This was primarily owing to increased spending to support future growth and was larger than we had expected since we elected to accelerate our growth plans, particularly for the wind business part way through the year.

We are very pleased that we could fund programs designed to accelerate growth at the same time as delivering results better than expected.

In the appendix we have included a chart that reconciles FPL Energy's full-year 2007 results to the ranges we originally set out for you and that ties together the gross margin ranges and the adjusted earnings ranges.

We have also included a similar tie from adjusted gross margin to adjusted earnings for our 2008 expectations.

These are in response to requests from some of you to assist modeling.

In the relevant commodity markets the main feature of note in the quarter was a general increase in the forward curve for natural gas as illustrated here.

As you know, an increase in the natural gas curve is generally good for FPL Energy's future earnings outlook and it also generally produces losses in the non-qualifying hedge category.

We continue to believe the long-term fundamentals that both natural gas and spark spreads in our key markets are strong, but we expect continued volatility in our markets.

Before closing, I'd like to take a moment to highlight a few points about our wind portfolio.

As of the end of 2007, we now have over 5,000 megawatts of wind projects in operation, and we continue to be the largest competitor in the U.S.

business.

In fact, on a megawatt hour basis, we believe we are the largest in the world, since our average capacity factor is higher than that of our leading global competitor, reflecting the more attractive wind resource characteristics of our portfolio.

Our wind power output is very competitively priced, and in 2007 we were again the largest developer in the U.S.

Since a number of you have asked about EBITDA for the wind business, we have made a rough estimate of where we expect to be in 2008 and 2009.

Recognizing that the economics of the U.S.

wind business are different from those of other countries, we think of the adjusted EBITDA of a U.S.

wind project as encompassing the pretax equivalent value of the PTCs.

On this basis, we expect the adjusted EBITDA for the wind business to be in the range of $900 million to $1 billion in 2008 and between $1.2 billion and $1.4 billion in 2009.

Of these figures, roughly 50% to 55% of the adjusted EBITDA will be in the form of pure EBITDA, i.e., revenues minus certain costs but excluding depreciation and amortization, and 45% to 50% in the form of the pretax equivalent value of the PTCs.

We hope these forward-looking estimates will be of help to you in analyzing the business, as we recognize that different analysts look at the business in different ways.

Please note that these figures are not and are not intended to be taken as measures of GAAP performance.

Another way of thinking about the contribution of wind business to the FPL Group portfolio is to recognize that it contributes roughly 30% to 40% of FPL Energy's adjusted earnings.

This has been true for the last few years and is likely to continue to be true for the next few years, assuming we continue to be successful in executing our growth plans.

Finally, as you know, we have supported the growth in the wind business and its attendant capital requirements very successfully over the past several years with a variety of financial instruments.

Later in the fourth quarter we entered into what may well be the first of several differential partnership transactions designed to support the continued growth of the wind business.

As you know, we believe our competitive advantage in the wind business lies primarily in developing and operating wind facilities.

In addition, we believe the market does not at this stage fully recognize the long-term value of these assets and therefore we are comfortable retaining long-term upside exposure and risk.

In contrast, there is much less disagreement about the value of the first ten years or so of a project's life, particularly if the project has a long-term PBA, and during this period, our regular cost to capital may not be the lowest available in the broader markets for capital.

Accordingly, a transaction in which we effectively sell off a large portion of the value of the project in its early years for a competitive price, while retaining the longer-term upside, can potentially be attractive to us and to counter parties.

This is effectively what the differential partnership transaction that we entered into in December does.

In exchange for up-front cash, we offer our partners a differential interest in the economic attributes of a portfolio of projects, including the tax attributes, for a variable period.

The exact period depends upon the performance of the project relative to pro forma expectations, but is likely to be about ten years.

Once certain conditions have been met, the differential interests flip around and FPL Energy retains the bulk of the long-term upside.

Through this transaction we have actually sold partnership interest in a portfolio of nearly 600 megawatts of wind projects.

From an economic perspective, however, we can think of the partnership as an alternative to financing the same projects, and because the sale of the partnership interest still leaves value in the projects, we also raised additional project level debt in an associated transaction.

Thus looking forward, we can evaluate and compare, using either these differential partnership structures or conventional project financing as tools for supporting the growth of the wind business.

While they have somewhat different economic and accounting impacts, both provide us means of recycling our capital investment in wind projects in a very efficient fashion to support additional growth, and both do so in a way that does not lean heavily on our corporate credit.

While we can fairly claim to have led in way in the U.S.

wind industry with project financing, the differential partnership transactions are ones that have been pioneered by others and are now widely used in the wind business.

We are very pleased that we now have an additional tool in our kit bag that will help us achieve our aggressive growth goals while allowing us to retain our strong and efficient corporate capital structure and credit position.

We expect to use a mix of project lending, differential partnerships, hybrid corporate capital issuances, as well as conventional corporate debt -- first mortgage bonds and perhaps a limited amount of new equity capital over the next five years -- as we continue to support strong capital expenditure profiles at both main businesses.

To summarize the 2007 fourth quarter, on an adjusted basis FPL contributed $0.43, FPL Energy contributed $0.33 and corporate and other was a negative $0.05 contribution.

That is a total of $0.71 compared to $0.63 in the 2006 fourth quarter on an adjusted basis.

For the full-year 2007, again on an adjusted basis FPL contributed $2.09, FPL Energy contributed $1.56 and corporate and other contributed a negative $0.17.

That is a total of $3.48 a share or an increase of $0.44 over the same period in 2006.

For the year, the corporate and other drag was a little less than we had expected, primarily owing to a more favorable impact from certain consolidating state tax adjustments than we had anticipated.

We finished the year $0.03 better than the high end of the $3.35 to $3.45 range that we originally set out in October of 2006, and delivering growth in adjusted EPS of about 15%.

It was an excellent year overall for FPL Group.

To conclude, we are very pleased with what we've been able accomplish in 2007 and look forward to building on this base in 2008.

At this point in the year we continue to see a range of adjusted EPS from $3.83 to $3.93 as being reasonable for 2008, as well as a range of $4.15 to $4.35 for 2009.

And now we'll be happy to take your questions.

Thank you.

(OPERATOR INSTRUCTIONS) We'll take our first question with Dan Eggers with Credit Suisse.

Please go ahead.

Good morning.

On the utility side you did a good job helping us understand the volume end of the conversation, but I guess I was wondering if you could give us a little more color around some of the operating-efficiency, synergy-type of benefits you anticipate that's helping to offset the O&M cost increase and help mitigate some of the volume pressure, particularly for '08?

Well, I'll ask Armando if he has any other further comments.

I guess my response is that we were just a little sharper across the board.

We initiated a number of new small-scale productivity initiatives.

We knew it was going to be a tough year on the cost front and we were generally a bit more successful than I think we expected to be, but I don't think there was anything particular of note.

Armando?

I don't have a lot more to add, except that as we saw the downturn in the economy, we started to pull back in distribution and transmission and although most -- a lot of that was capital cost, it was just enough O&M to help us during that transition.

We sharpened our pencil too on the customer service side and managed to do pretty well on the uncollectible side, so a lot of little efforts across the board really added up.

What kind of cost inflation should we be thinking about, I guess, for 2008, 2009, maybe in the slower customer growth environment?

Dan, I don't think we have anything really new.

I would go back to the charts that we shared with you in the October release.

I think at this stage they're probably the best guide we have.

Obviously, we are going to be thinking very carefully about what the -- whether we need to adjust revenue outlook and if so, what the ripple impact will be on some of the operating areas.

But we haven't really been through that yet, so I can't give you any new information beyond what we shared in October.

Okay.

And I guess just one other.

Obviously a lot of optimism and PTCs get extended, but can you just start giving us a thought process for '09.

If the tax credits aren't there, are there markets where you can still build because the contracts will compensate you without the tax credits and that sort of thought process?

I think on that front, I'd just repeat what I've said many times before, which is we don't think that's a likely scenario, but if it were to play out it would very much depend upon the circumstance at the time.

And what I mean by that is if everybody thinks that there is just a temporary pause and the PTCs are then going to come back, then frankly I think we'll see a sharp drop-off in new wind development and it will come back when the PTCs come back.

On the other hand if people perceive that there will never be any more PTCs again, we would expect to see continued wind development, albeit at probably a somewhat lower rate than in the presence of PTC support.

As long as you have the state level renewable portfolio standards you create the demand pull, but that would then come at a cost and pricing consequence.

Okay.

Thank you.

We'll take our next question with John Kiani with Deutsche Bank.

Please go ahead, sir.

Good morning.

Good morning, John.

Now that you've had a chance to observe the [Ebinova] wind IPO, can you give us your latest thoughts on separation or some strategic transactions with your wind business or perhaps -- or the differential partnership transactions that you just discussed more the route you want to take going forward?

Well, I'll ask Lew to comment, as well.

I guess my reaction would be that at least at the moment, it's tending to reinforce some of the factors that we talked about before.

In particular, as we noted, we see to the extent that there's a disconnect, it seems to be mostly on the long-term outlook for wind.

So one of the concerns is that in doing a partial IPO, you end up in a sense selling some of that long term short.

In that sense the differential partnership structures are preferable because they allow us preserve essentially close to 100% of that long-term upside.

But, Lew, I don't know if you have any other thoughts?

Yes, I'm not sure there's a whole lot to add to that.

The one thing we have noticed is that our stock is seeing a fair amount of volatility that seems to be somewhat correlated with the [Ebadrola] spin company's name -- I'm drawing a blank on it.

Ebinova.

Yes.

So some how, the market's focusing a little bit more on that part of our business and how that company's stock is trading, so we are getting a bit of that benefit, if you will, but also the cost of that volatility.

And I will point out, it's only been trading for roughly a month-and-a-half, so it's still a little early to see how it's really going to trade and I'd say let's give it a little bit more time.

But it's not like we're really capital constrained at this point inbeing able to fund our wind business and we still are very bullish on the long-term value, as Moray pointed out, of our wind portfolio, and we really aren't -- we see no need to sell it at a value below what we view it as and leave money on the table.

That's very helpful.

Just one other question.

Moray, I didn't see a hedging slide for FPL Energy this time in your deck.

Can you tell us, is there anything that meaningfully different in '08 or '09 from a hedging perspective since you last updated that?

And then can you also just talk a little bit about how those differential partnership transactions would affect what we were looking at before on those hedging slides?

On the first part we didn't include any updates.

There really haven't been any material changes --

Okay.

-- in this last quarter here.

We were very heavily hedged as of the end of third quarter for '08, essentially close to fully hedge.

Right.

And then in '09?

And in '09 we're still edged a little bit higher than we would typically expect to be at at the equivalent point, kind of a year and a bit out, so we've added a little bit in the fourth quarter to the '09 numbers, but not materially.

Okay.

As for how the differential partnership structures affect that, since these were done on a series of PPA projects, they're all essentially represented in the contracted segment.

To the extent that sometime in the future we were to do an equivalent structure using some of the hedged projects, I'm not sure -- I haven't really thought about how we would present that, but thank you for flagging that.

If we ever get there I will make a note to make sure we're clear on however we present it.

And then the earnings that come out from the differential partnership transactions are replaced by what?

I guess the simple way to think of it is it's a sale of a partnership interest, but it's kind of economically equivalent to a financing, so you give up the revenue but you give up the expense.

So it's just as though a piece of the thing hadn't been there, but on the other hand, you've got the capital that's immediately been recycled.

Okay.

Thanks.

We'll take our next question with Greg Gordon from Citigroup.

Please go ahead.

Thanks.

Good morning.

Good morning, Greg.

Follow on to that question on FPL E and then one question on the utility.

First, just to make it simple, you essentially sold 600 megawatts of the wind portfolio.

You've taken a chunk of the business and monetized it; correct?

No, that's not correct.

What we have essentially done in economic terms is sold the vast majority of the first ten years of those projects while retaining the upside.

Okay.

So you've sold the earnings stream -- cash flow and earnings stream of 600 megawatts for ten years and you've gotten cash in return?

Yes, all the economic attributes for roughly a ten-year period.

Okay.

So for all intents and purposes, it's like you monetized it for ten years and then in year 11 it it returns to the income statement and the cash flow?

Yes, that's a simplification, but economically that's about what it does.

Okay.

Can you tell us what the proceeds were for the 600 megawatts, what the compensation was for the 600 megawatts for the first ten years?

In the two transactions, we raised -- or received roughly $950 million of total.

Of that about $700 million was the actual partnership structure and the other $250 million was the additional project leverage put on the residual economic interest.

So you received $750 million in cash?

$700 million in cash.

And then you were able to lever the piece of the partnership interest that you retained?

By an additional $250 million.

All right.

So essentially we have pulled close to, I think it's 99% of the capital for those projects out, as ready to be recycled.

Obviously, we still retain the longer term -- I'm sorry, I've been corrected.

It's actually 94%.

So basically if I have a view on what the first ten years' worth of cash flows were from those properties I can discount them back and look at those proceeds and figure out what the economic value was that that partner was willing to pay?

Yes, I think that's reasonable.

Okay.

On the utility side --

Excuse me, Greg, for a second.

One of the things that we're planning on doing, and we haven't done yet, so Moray's probably going to kick me because it's not been worked out, but for the investor conference it's my intention that the team put together a simple example, not that it's simple in this world of comparing a typical wind project financed the way we have historically financed it, versus one with this kind of a structure, just so you can see it sort of side-by-side and walk through it.

And at a greater risk of Moray kicking me, I just view this as an alternative way of financing this structure.

It's not anywhere near that simple, but -- because there's a little bit more up-front earnings drag, but at the end of the day, I got comfortable with it.

As I said, a little drag on up-front earnings, but the MPVs are just about the same and the overall financial results, albeit a slightly different pattern, aren't all that different.

Lew, from my perspective, you basically -- you monetized a slice of the business.

Intuitively it seems like you got a very good price for that, and all things being equal, you're still able to meet your near and long-term earnings growth target.

Yes, you're just thinking about it more as a monetization.

I'm thinking about it more as a leveraged financing.

Hold off on the -- I would suggest holding off on a lot of these questions for the investor conference.

It's not -- it's just about two months away and hopefully we'll have some real live examples to be able to walk you through at that point in time and you'll be able to see it in real life, if you will, some examples of how this -- how it works and the impact on the balance sheet, but also the economic impacts.

All right.

Cool.

Let me just add that in the interim, just for modeling purposes, frankly, the simplest way to treat these, I think, is actually to treat them as equivalent project financing.

They have slightly different accounting treatment and actually are not quite as favorable from an accounting perspective, but as a short hand you can, in your models, substituting the equivalent amount of project financing is not a bad way to get at.

Moray, when you look at the EBITDA projection you given for 2008, that EBITDA now excludes this EBITDA from the 600 million that are subject to this transaction, correct?

That's correct.

Right, because it came in a little bit light.

That projection was a bit light to what I would have expected and I think the differential transaction explains that.

That was why I was asking -- that was my train of thought in the question.

Right, understand.

The second thing.

On FP&L, you've had the ability to have some flex in the amount of depreciation you book and you've also been spending quite aggressively on Storm Secure.

To what extent -- are those the flection points that you can use to manage your costs going into the '09 rate case, or are you, in fact, doing it to -- are there other areas in the operating and capital budget that are more flexible or that you're also using to try to get ahead of the deceleration and usage growth?

Really, the latter.

The two factors you mentioned are significant factors that will play into wherever we are for 2009 rate discussions, but between now and then they are relatively limited in flexibility.

We are very committed to the Storm Secure program.

It's driven really from the operational level, from the ground up on looking at specific facilities and the order in which we want to harden them.

So I think the main thing that we would hope for in the next two years is simply that we will continue to get more efficient in our deployment of capital and assets in support of Storm Secure.

But the major areas where I think we can still hope to, as Armando put it, sharpen the pencil and push the teams a little further are really outside of those areas.

And this all hopefully academic, presuming revenue requirement in the 2009 case is -- accurately reflects the economic conditions going into 2010?

Well, that's exactly right and that was the point I tried to make in my prepared remarks.

We've got more uncertainty to the next two years, but for better or worse, whatever the then realistic outlook is will form the basis for the -- for rate negotiations or rate proceeding in 2009 that will set the base for 2010 and beyond.

Thank you, Moray.

We'll take our next question with Ashar Kahn with SAC Capital.

Please go ahead.

Good morning.

Good morning.

Not to belabor the point.

Moray, you mentioned these differential partnerships will be used going forward.

Could you tell us, is there more projection for 2008 to sell more of these interests as we look forward?

I guess the way I look at that is we have a portfolio of tools to support the capital needs of that business, which we will use in any particular time period or any particular circumstance.

Again it would depend upon the situation at the time.

At this point, I am not anticipating that we'll do another one in 2008, but that could change later on so we'll just have to see.

So the main thing is that we have now multiple means of supporting the growth and that makes me feel very good about the capital requirements of the business.

What I like about these particular transactions is that they are very clear and rapid recycling of the capital that we deployed, and as I indicate in the prepared remarks, where we really add the value is in the development and the early stage of getting the project up and getting it to peak operating conditions.

So the quicker we can get the capital out and move on to the next one, the better off we are.

And if I can just end up with -- could you just mention a little bit on the FPL Energy's pipeline in respect to solar projects.

What is your thinking about developing in the pipeline and what can we hear in the next 12 months?

Let me ask Jim to address that one.

Sure.

Ashar, we think it's a strong pipeline.

We are hoping to get full approvals for our first projects sometimes this year and I would basically benchmark our success on that, based on how much we're able to bring through full approval this year and announce for full construction.

We probably -- as our policy is, we probably won't announce it until it actually goes COD, but we feel good about the pipeline and I feel like this year is going to be a watershed year for us in the solar business, so time will tell.

Okay.

Having said that, in terms of contribution to the earnings growth profile, we are not looking for any meaningful contribution, really, until 2011, 2012 time frame.

So there's a lot of acti -- the development cycle here is a little bit longer than even for the wind business and the construction cycle is a lit longer, too.

So we feel good about where we are in the development front, but it's going to be a little further out before it turns into earnings than it would be for comparable effort on the wind side.

Okay.

Thank you, sir, very much.

Thanks.

We'll take our next question with Paul Patterson with Glenrock Associates.

Please go ahead.

Good morning, guys.

Good morning.

On the customer demand, you mentioned that there was a -- that there could have been a potential impact associated with non-price customer usage or demand but that was hard to model.

I was wondering if you could just elaborate what you were talking about there?

That wasn't completely clear to me.

And then also, are you seeing any impact on demand response or anything with advanced metering or -- have you seen anything on that end?

On the second part of that question, I don't think we're really deep enough into the development program really to see anything meaningful.

On the first part, my comment was really meant to capture the fact that obviously there's been a huge amount of attention focused on energy issues, energy efficiency issues, climate change, all those kind of things, so that has to be present in people's consciousness.

To what extent people may actually have acted on that and as a consequence changed their consumption patterns of electricity, manifesting itself in lower usage, we just don't know, but that's obviously something that a mechanical model, which has price elasticity term in it, wouldn't capture.

The reality is that our prices -- as you may recall, in 2006, when we had a significant increase in prices driven by fuel, we expected a price elasticity effect and it came through pretty much exactly as the model would have predicted.

Now, in 2007, retail prices were flat or actually slightly down, so there should be no price elasticity effect one way or the other.

We should go back to whatever our underlying trend is, but the underlying trend was short of our expectations.

So, possibly customers have begun actually to change their usage patterns, but as I say, that's kind of speculative and in any case it's not very operational for us to use for predicting where we're going to be in 2008 so that we really have little alternative other than to continue to monitor it and learn more as we go along.

Okay, great.

Just the regulatory ROE that you guys have earned, any -- could you just tell us what that was for 2007?

It was -- we came in the end at 12%.

That was actually a little better than we had expected, mainly due to some working capital issues, I believe.

Okay, great.

Thanks a lot.

We'll take our next question with Steve Fleishman with Catapult Capital Management.

Please go ahead.

First, just on these wind plant sales, the differential transactions, the contracts at the end, when you own full ownership again, are you selling that power merchant or is that power contracted beyond the ten-year period?

This portfolio has -- I think they're all 20 year PPAs on them.

Okay.

So obviously, at the end of 20 years we have all the pure long-term upside, whatever that turns out to be.

In a carbon constrained environment we think it's probably going to be pretty significant, but we also get the vast bulk of the economics back for the second ten years.

And then another question on the -- we have this FCM auction coming up.

I wonder if Jim might have any view on where that likely goes, and if you can't be specific just some views on whether he expects it'll actually represent true capacity prices?

Sure.

Jim?

Well, first of all, Steve, obviously we're watching it very closely, and since we will be a big player in that auction, it's probably not appropriate for us to talk about where we think things are going to end up.

Steve, let me just add to that.

I think that the -- the rules of the bidding process are complex but clear is perhaps the best way to put it, and built into that descending auction format there are a couple of points where bid participants clearly get to make some decisions as to what they want to do with their capacity, so there's some inherent options that one has in the bidding process.

And I think that that provides pretty strong incentives for all market players to think very carefully about those options as they go through their bidding.

Okay.

Thank you.

We'll take our next question with Shalini Mahajan with UBS.

Please go ahead.

Thank you, good morning.

Good morning.

Moray, could you quantify the top line pressures at Florida Power & Light a bit more, specifically in terms of your '08 EPS guidance for the utility at $215 million $220 million, which almost had a $0.30 to $0.35 then contribution from revenue growth?

Yes, we don't have any update on that at the moment.

It's really very early in the new year.

Frankly, I don't know that I know what else I could put in there.

So, I would say is relative to that, which we shared with you in October, clearly we don't feel as good about the revenue piece, but how much that is going to turn out to be I just couldn't say at the moment.

So I'd just have to say, bear with us.

Hopefully we'll get a better view as we go through the first quarter as to what's happening and we'll adjust it.

But in terms of the overall outlook for 2008, for the whole portfolio, while there's clearly some weakness in the drivers on that side, offsetting that we're seeing some strengthening in some of the drivers for FPL Energy.

So at this stage it's very early in the year, I feel very good about the overall range.

I'm sorry I can't be more helpful to you.

Okay.

Could you elaborate on these offsets a little bit, because it seems, given the differential partnership structure, there is some earnings drag from that as well?

I'm sorry.

Could you elaborate?

I'm sorry.

No, Jim has a couple --

I've been wanting to make this comment on the differential partnership structures through all these questions, which is certainly for '08 and '09, any of the impacts from that transaction were reflected in the expectations that we gave you in October.

And more than that, the difference between using that kind of structure and a conventional project finance structure is really immaterial in the context of the earnings ranges that we set out, so it really is a non factor in that regard.

Okay.

And just lastly, Moray, I thought you mentioned -- I'm not sure if I caught it correctly, but I thought you mentioned in your comments about some problems with wind turbines.

I --

Oh, yes, we had mentioned as we went through last year that we continue to have experienced teething problems with some of the newer turbines.

The technology of these wind turbines is pretty good, but it's still not quite as robust and reliable as we would really like it to be and that's most noticeable whenever any of the manufacturers makes a step up, particularly in size, or introduces a new gear box or whatever happens to be in the design.

We tend to have a few infant mortality problems and the operational guys are still working through those on the wind fleet.

But as you saw, an overall forced outage rate for the full portfolio of less than 3% that we thing is outstanding.

Okay, great.

That's helpful.

Thank you, Moray.

Thanks.

I think we have time for maybe two more.

We'll take our next question with Patrick Forkin with Tejas Securities.

Please go ahead.

Good morning.

With respect to your advanced metering project, I was wondering if you could give us a little insight into negating factors on that 50,000 end points that you did last year and 50,000 for 2008, seems like a relatively slow ramp up.

Are those gating factors proving the technology and/or any regulatory constraints?

Yes.

First of all let me make clear that we are still in the pilot or early development phase and our philosophy in just about everything we attempt is to work really hard on a small scale to work out all the bugs before we scale things up.

That's worked very well for us in lots of areas in the past.

But with that general comment, Armando, you want to talk some more about that?

Sure.

Just to put it in some context, this is effectively our third technology pilot and the reason we felt more comfortable coming out and talking about it is because it's been a very, very successful pilot but it's been primarily along the technology sides and making sure that it has the kind of flexibility and a broad set of future functionality.

We have not yet done any testing for changes in customer behavior as a result of having this technology in place.

Obviously, we are contemplating a number of those.

Most of them would require some sort of regulatory approval and sort of a pilot rate, but we're not there today yet.

We're still focused very much on the technology and making sure that it works in our environment.

But so far it's been a very, very successful pilot.

Okay.

Thank you.

That's helpful.

And the last question.

We'll take our final question with Andrew Levi with Brencourt.

Please go ahead.

Actually you can give it to somebody else.

I'm all set, but thank you.

Thanks, Andrew.

Another question?

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

Please go ahead.

Good morning, Moray.

You talked about that you had monetized 600 megawatts for 94% of the capital costs.

What would that percentage be of new build?

These are essentially all new build projects.

So that pricing was current?

Yes.

Okay.

Thank you very much.

Okay, thank you.

That does conclude our question-and-answer session.

I'd like to turn it back over to management for any additional or closing remarks.

Thank you for joining us today.

Once again, ladies and gentlemen, this will conclude today's conference.

We thank you for your participation.

You may now disconnect.