新世紀能源 (NEE) 2015 Q4 法說會逐字稿

Good day, everyone, and welcome to the NextEra Energy and NextEra Energy Partners earnings conference call.

Today's conference is being recorded.

At this time, for opening remarks, I would like to turn the call over to Amanda Finnis.

Please go ahead.

Thank you, Zach.

Good morning, everyone, and thank you for joining our fourth-quarter and full-year 2015 combined earnings conference call for NextEra Energy and NextEra Energy Partners.

With us this morning are Jim Robo, Chairman and Chief Executive Officer of NextEra Energy, Moray Dewhurst, Vice Chairman and Chief Financial Officer of NextEra Energy, Armando Pimentel, President and Chief Executive Officer of NextEra Energy Resources, and Mark Hickson, Senior Vice President of NextEra Energy, all of whom are also officers of NextEra Energy Partners.

As well as Eric Silagy, President and Chief Executive Officer of Florida Power & Light Company, and John Ketchum, Senior Vice President of NextEra Energy.

John will provide an overview of our results, and our executive team will then be available to answer your questions.

We will be making forward-looking statements during this call based on current expectations and assumptions, which are subject to risks and uncertainties.

Actual results could differ materially from our forward-looking statements, if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release, and the comments made during this conference call, in the Risk Factors section of our Company 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 and 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 certain non-GAAP measures to the closest GAAP financial measure.

With that, I will turn the call over to John.

Thank you, Amanda, and good morning, everyone.

Both NextEra Energy and NextEra Energy Partners enjoyed strong fourth quarters, and ended 2015 with excellent results.

NextEra Energy achieved full-year adjusted earnings per share of $5.71, which was a penny higher than the upper end of the range we discussed going into the year, and up 8% from 2014.

We also experienced double-digit growth in operating cash flow, and continue to maintain our strong financial position and credit profile.

NextEra Energy Partners successfully executed the acceleration of its growth plan, despite the challenges of difficult capital market conditions in the second half of the year.

And grew its fourth-quarter distribution per unit by 58% versus the comparable prior-year quarter, with a distribution of $0.3075, or $1.23 on an annualized basis.

Before taking you through the detailed results, let me begin by take summarizing some additional highlights.

At Florida Power & Light, we continued to invest in the business in 2015 with a focus on delivering value to customers, and all of our major capital initiatives remain on track.

Since the last call, we received Florida PSC approval of the 2019 need for our planned Okeechobee Clean Energy Center.

We expect this project to further advance our focus on providing clean, reliable and cost-effective energy for our customers, consistent with our long-term strategy.

We continue to work hard at FPL to further enhance what we consider to be an already outstanding customer value proposition.

Our customers enjoy electric service that is cleaner and more reliable than ever before, while our typical residential customer bill is the lowest among reporting utilities in the State of Florida, and is approximately 14% lower than it was a decade ago.

Despite a challenging summer lightning season, FPL delivered its best ever full-year period of service reliability in 2015 and was recognized as being the most reliable electric utility in the nation.

This was accomplished as we continued to invest to make the grid stronger, smarter and more responsive and resilient to outage conditions.

Our performance is the direct result of our focus on operational cost effectiveness, productivity, and the long-term investments we have made to improve the quality, reliability, and efficiency of everything we do, and 2015 was an excellent period of execution by the FPL team.

At Energy Resources, 2015 was an outstanding period of performance for our contracted renewables development program.

New renewables project additions drove financial results, while origination results for new projects to be placed in the service by the end of 2016 exceeded the expectations that we discussed at our March investor conference.

The longer-term outlook beyond 2016 also continued to develop favorably.

The team signed contracts for a total of approximately 2,100 megawatts of new renewables projects over the last year, making this our second best year ever for renewables origination performance.

We continue to believe that Energy Resources is well positioned to capitalize on one of the best environments for renewables development in recent history.

We now have greater certainty regarding federal tax incentives for renewables, as Congress took action in December to extend the 2014 wind PTC and the 2016 solar ITC programs over a five-year phase-down period.

We expect that the IRS will provide start of construction guidance with a two-year safe harbor period for wind and solar, similar in form to what was put in place for the 2014 PTC.

The certainty regarding tax incentives will provide planning stability, which we think in turn will serve as a bridge to further equipment cost declines and efficiency improvements that will enable renewables to compete on a levelized cost of energy basis with combined cycle technology when tax incentives are phased down.

In the meantime, with tax incentives, both wind and solar will be very competitive.

And in addition to the favorable impact of tax policy, we expect the carbon reduction requirements under the EPA's clean power plan to significantly drive demand for new renewables as we move into the next decade.

Finally, we expect low natural gas prices to continue to force coal to gas and coal to renewable switching, with new renewables supported by the factors I just mentioned.

Driven in large part by our enthusiasm about our renewables growth prospects, in the middle of last year, we increased our expectation for NextEra Energy's compound annual growth rate and adjusted earnings per share to 6% to 8% through 2018 off of a 2014 base.

These increased [exotations] will in turn affect our capital expenditure plans for a renewables development program, which we will update on the first-quarter earnings call in April.

Across the portfolio, both Energy Resources and FPL continued to deliver excellent operating performance.

The fossil, nuclear and renewables generation fleets had one of their best periods ever, with E4, or the equivalent forced outage rate, at less than 1.5% for the full year.

Similar to NextEra Energy, NEP also delivered on all of its financial expectations.

NEP grew its portfolio through the acquisition of economic interests and over 1,000 megawatts of contracted renewables projects from Energy Resources.

With total ownership increasing by over 1,200 megawatts, and established its presence in the long-term contracted natural gas pipeline space with the acquisition of seven natural gas pipelines in Texas.

This acquisition is expected to reduce the impact resource variability has on the portfolio and extend NEP's runway of potential drop-down assets.

All of the same factors that favor growth in new renewables for Energy Resources likewise should benefit NEP.

The strong renewables origination performance at Energy Resources continues to expand the pipeline of generating and other assets potentially available for sale to NextEra Energy Partners, now and in the future.

In contrast to many other Yokz, NEP does not have the same dependence on third-party acquisitions to grow.

But rather can reasonably expect to acquire projects that have been organically developed by its best-in-class sponsor.

We continue to believe that the strength of its sponsor and the ability to demonstrate a strong and highly visible runway for future growth is a core strength of the NEP value proposition.

Which is but one of many factors that distinguish it from other Yokz.

As we head into 2016, both NextEra Energy and NEP remain well positioned to deliver on their financial expectations, subject to the usual drivers of variability including, in particular, renewable resource variability.

FPL benefits from a surplus amortization balance of $263 million, which is expected to position it to earn at the upper half of its ROE range, while it continues to execute on its capital investment initiatives for the benefit of customers.

In addition, the rate case will obviously be a core focus area for FPL in 2016.

At Energy Resources, the business plan is built around the contribution from new investments, and executing on the development and construction of roughly 2,500 megawatts of new renewables scheduled to go commercial by the end of the year.

Meanwhile, NEP enters 2016 with a solid run rate, and the flexibility necessary to execute its growth plans.

In summary, we are very optimistic about our prospects for another strong year.

Now let's look at our results for the fourth quarter and full year.

For the fourth quarter of 2015, FPL reported net income of $365 million, or $0.79 per share, up $0.14 per share year over year.

For the full year 2015, FPL reported net income of $1.6 billion, or $3.63 per share, up $0.18 per share versus 2014.

Regulatory capital employed grew 6.8% for 2015, which translated to net income growth of 8.6% of the full year with fourth-quarter performance leading the way.

Regulatory capital employed continued to grow through the year.

In addition to being the first full quarter since the closing of the Cedar Bay transaction in September, fourth-quarter results were also affected by timing effects and a number of smaller items, including outstanding performance under our asset operate optimization program.

As a reminder, FPL's current rate agreement provides an incentive mechanism for sharing with customers gains that we achieve in excess of a threshold amount for our gas and power optimization activities.

In 2014, these activities produced roughly $67 million of incremental value.

Of this amount, $54 million was for the benefit Florida customers.

Under the sharing mechanism, which only applies once customer savings exceed $46 million, FPL was permitted to record approximately $30 million of pre-tax income in the fourth quarter of 2015.

Consistent with the expectations that we shared with you previously, our reported ROE for regulatory purposes will be approximately 11.5% for the 12 months ended December 2015.

As a reminder, under the current rate agreement, we record reserve amortization entries to achieve a predetermined regulatory ROE for each trailing 12-month period.

During the fourth quarter, aided by the impact of unusually warm weather, we utilized only $67 million of reserve amortization.

This brings our cumulative utilization of reserve amortization since 2013 to $107 million, leaving us a balance of $263 million, which can be utilized in 2016.

In 2016, we expect to use the balance of the reserve amortization to offset growing revenue requirements due to increased investments.

We expect the reserve amortization balance, along with our current sales, CapEx and ONM expectations, to support regulatory ROE in the upper half of the allowed band of 9.5% to 11.5% in 2016.

As always, our expectations assume, among other things, normal weather and operating conditions.

Fourth-quarter retail sales increased 11.7% from the prior-year comparable period, and we estimate that approximately 9.6% of this amount can be attributed to weather-related usage per customer.

On a weather-normalized basis, fourth-quarter sales increased 2.1%, comprised of continued customer growth of approximately 1.4%, and increased weather-normalized usage per customer of approximately 0.7%.

As a reminder, our estimates of weather-normalized usage per customer are subject to greater uncertainty in periods with relatively strong weather comparisons like we have seen throughout 2015.

For the full year 2015, retail sales increased 5.6% compared to 2014.

After adjusting for the effects of weather, full-year 2015 retail sales increased 1.2%.

Weather-normalized underlying usage for the year decreased 0.3%.

And looking ahead, we continue to expect year-over-year weather-normalized usage per customer to be between flat and negative 0.5% per year.

The economy in Florida continued to grow at a healthy rate, with strong jobs growth reflected and consistently low rates of seasonally adjusted unemployment around levels last seen in early 2008.

And over 1 million jobs have been added from the low in December 2009, though the pace of jobs growth is beginning to slow.

Leading indicators in the real estate sector continue to reflect the strong Florida housing market, and the December reading of Florida's consumer sentiment remained close to post-recession highs.

Let me now turn to Energy Resources, beginning with a reporting change.

We have reevaluated our operating segments, and made a change to reflect the overall scale of our natural gas pipeline investments and the management of these projects within our gas infrastructure activities at Energy Resources.

As you may recall, our upstream gas infrastructure activities have not only better informed our hedging decisions, but have also led to opportunities and gas reserves to benefit Florida customers and the acquisition, development and construction of natural gas pipelines.

Our reporting for Energy Resources now includes the results of our natural gas pipeline projects, formally reported in the corporate and other segment.

While our 2014 results have been adjusted accordingly for comparison purposes, the effects are minimal due to the prior immaterial contributions from these projects during early stages of development.

Contributions from the Texas pipelines acquired by NEP in October are also included in the Energy Resources results for 2015.

Energy Resources reported fourth quarter 2015 GAAP earnings of $156 million or $0.34 per share.

Adjusted earnings for the fourth quarter were $185 million, or $0.40 per share.

Energy Resources' contribution to adjusted earnings per share in the fourth quarter was flat against the prior-year comparable period, which primarily reflects contributions from new investments being offset by higher corporate G&A and interest expenses.

For the full year 2015, Energy Resources reported GAAP earnings of $1.1 billion, or $2.41 per share.

Adjusted earnings were $926 million, or $2.04 per share.

Energy Resources full-year adjusted EPS increased $0.14 per share, despite a significant headwind associated with poor wind resource versus 2014, which was largely offset by strong results in our customer supply and trading business.

These improved customer supply and trading results reflect, in part, a return to more normal levels of profitability in the first quarter following the adverse effects of polar vortex conditions in 2014.

While wind resource was approximately 96% of the long-term average in 2015, other factors including, in particular, icing in the fourth quarter and other production losses reduced production by another 2%.

New investments added $00.31 per share, consistent with the reporting change that I just mentioned.

This includes $0.04 per share of contributions from our gas pipeline projects, reflecting the addition of the Texas pipelines acquired by NEP to the portfolio, as well as continued development work on the Florida pipelines and Mountain Valley project.

New renewables investments added $0.27 per share, reflecting continued strong growth in our portfolio of contracted wind and solar projects.

In 2015 alone, we commissioned approximately 1,200 megawatts of new wind projects and approximately 285 megawatts of new solar projects.

Contributions from our upstream gas infrastructure activities, which declined by $0.02 per share, were negatively impacted by increased depreciation expense as a result of higher depletion rates.

Based on market conditions, we elected not to invest capital in drilling certain wells, which resulted in a earlier recognition of income through the value of the hedges we had in place.

Although this helped mitigate other negative effects in 2015, including higher depletion rates, the low commodity price environment presents a challenge for these activities going forward.

Partially offsetting the growth in the business was a negative impact $0.22 per share, reflecting higher interest in corporate expenses, including increased development activity in light of what we consider to be a very positive landscape for the renewables business.

Results also were impacted by negative $0.06 per share of share dilution, while benefiting from the absence of charges associated with the 2014 launch of NEP.

Additional details for our results are shown on the accompanying slide.

Energy Resources' full-year adjusted EBITDA increased approximately 9%.

Cash flow from operations, excluding the impact of working capital, increased approximately 14%.

As we did last year, we have included a summary in the appendix to the presentation that compares Energy Resources adjusted EBITDA by asset category to the ranges we provided in the third quarter of 2014.

As I mentioned earlier, 2015 was an outstanding period of performance for new wind and solar originations.

Since our last earnings call, we have signed contracts for an additional 206 megawatts of wind projects for 2016 delivery.

With these additions, we have exceeded the expectations we shared at our March 2015 investor conference for our 2015/2016 development program.

The accompanying chart updates information on where each of our programs now stand.

We have also signed contracts in California and Ontario for storage projects to enter service in the next couple of years.

Although it is early in the technology lifecycle, we are successfully originating storage projects to support our expectations to invest up to $100 million per year in order to maintain our competitive position with regard to this important emerging technology.

For all the reasons I mentioned earlier, we continue to believe that the fundamental outlook for our renewables business has never been stronger.

And we're working on an update to our capital expenditure expectations for our 2017 to 2018 development programs.

It is important to keep in mind that because these projects drive growth upon entering commercial operation, the greatest potential benefits are to 2019 and beyond.

For 2016, we believe that our development program is largely complete, other than one or two additional opportunities that we are pursuing.

Turning now to the development activities for our natural gas pipeline projects that are now reported in the Energy Resources segment, the Florida pipelines remain on track, and we expect to be in a position to receive FERC approval early this year to support construction beginning in mid-2016 and an expected in-service date in mid-2017.

As a reminder, NextEra Energy's investments in Sabal Trail Transmission and Florida Southeast Connection are expected to be approximately $1 billion and $550 million respectively, and FPL is the anchor shipper on both pipelines.

The Mountain Valley pipeline has continued to progress through the FERC process and filed its formal application in October 2015.

We continue to see market interest in the pipeline.

And we are pleased to announce earlier this month, the addition of Consolidated Edison as a shipper on the line, as well as the addition of Con Edison Gas midstream as a partner.

We continue to expect approximately 2 Bcf per day of 20-year firm capacity commitments to achieve commercial operations by year-end 2018.

With the addition of Con Edison, our ownership share in this project now stands at approximately 31%, and our expected investment is roughly $1 billion.

Let me now review the highlights for NEP.

Fourth-quarter adjusted EBITDA was approximately $135 million, and cash available for distribution was $75 million.

During the quarter, the assets in the NEP portfolio operated well, overall renewable resource was generally in line with our long-term expectations and the acquisitions of the Texas pipelines in Jericho Wind Farm were completed as planned.

Overall, 2015 was a successful year of execution against our growth objectives.

Consistent with our decision to accelerate the growth of NEP, the portfolio grew throughout the year to support a fourth-quarter distribution of $0.3075 per common unit or $1.23 per common unit on an annualized basis, up 58% against the 2014 comparable fourth-quarter distribution.

Also consistent with the range of expectations that we have shared, full-year EBITDA was approximately $404 million and cash available was $126 million.

Clearly, 2015 had its challenges, as well.

Changes in market conditions not only affected our financing plan in 2015, but also lead us to pursue additional options to be more flexible and opportunistic as to how and when we access the equity markets going forward.

On the last call, we announced an at-the-market equity issuance, or dribble program for up to $150 million at NEP.

At the same time, NextEra energy also announced a program to purchase, from time to time based on market conditions and other considerations, up to $150 million of NEPs to outstanding common units.

During the quarter, NEP completed the sale of over 887,000 common units, raising approximately $26 million under the ATM program.

Turning now to the consolidated results for NextEra Energy.

For the fourth quarter of 2015, GAAP net income attributable to NextEra Energy was $507 million, or $1.10 per share.

NextEra Energy's 2015 fourth-quarter adjusted earnings and adjusted EPS were $530 million and $1.17 per share respectively.

For the full year 2015, GAAP net income attributable to NextEra Energy was $2.8 billion, or $6.06 per share.

Adjusted earnings were roughly $2.6 billion, or $5.71 per share.

Our earnings-per-share results for the year account for dilution associated with the settlement of our forward agreement of 6.6 million shares that occurred in December of 2014.

And the June and September settlements totaling approximately 16 million shares associated with the equity units issued in 2012.

The impact of dilution on full-year results was approximately $0.17 per share.

The issuance of additional shares is consistent both with our strategy of maintaining a strong financial position, and with our ability to grow adjusted EPS at 6% to 8% per year over a multi-year period.

Adjusted earnings from the corporate and other segment increased 9% per share compared to 2014, primarily due to investment gains in the absence of debt retirement losses incurred in 2014.

NextEra Energy's operating cash flow, adjusted for the potential impacts of certain FPL clause recoveries and the Cedar Bay acquisition, grew by 16% in 2016.

And as expected, we maintained our strong credit position, which remains an important competitive advantage in a capital-intensive industry.

At FPL, we will continue to focus on excellent execution and delivering outstanding value to our customers.

In addition, the rate case proceeding will be a core area of focus that is likely to occupy much of 2016 and I will discuss this more in just a moment.

With regard to delivering on our customer value proposition and executing on our major capital initiatives at FPL, we will focus on completing our generation modernization project of Port Everglades, constructing our Peeker upgrades at Lauderdale and Fort Myers, and delivering the three new large-scale solar projects and our other additional investments to maintain and upgrade our infrastructure.

At Energy Resources, growth will continue primarily through the addition of new renewables and continued construction of our gas pipeline projects, which we expect to more than offset PTC rolloff of approximately $37 million.

We feel better than ever about the quality of our renewables development pipeline.

And as we said on the last call, over the next few years, we expect to as much as double the development resources committed to our wind and solar origination and development capabilities in order to seize an even larger share of the growing North American renewables market.

Headwinds could come from the potential impact of El Nino on wind resource in the first half of the year and current weak commodity price environment.

With regard to weak commodity prices, we evaluated our generation portfolio from markets where we expect low prices for sustained periods of time.

As a result of that exercise, we took steps at the end of last year to reduce approximately 40% of our merchant generation capacity by entering into a contract to sell our Lamar and Forney natural gas fired generating assets located in ERCOT.

Once closed, the sale is expected to be slightly accretive to our EPS and credit profiles, and will generate $450 million in net cash proceeds that will be recycled into our long-term contracted renewables business.

We remain well hedged through 2018, and will continue to evaluate our other merchant-generating assets for potential capital recycling opportunities.

With regard to our upstream gas infrastructure business, sustained weak commodity prices, of course, means fewer new drilling opportunities, other things equal, and we have reduced our expectations of future growth from this part of the portfolio.

When we elected to drill, we hedge most of our expected gas and oil production for up to seven years.

In cases where we have elected not to drill, we have, as we did in the fourth quarter, liquidated the hedges that were put in place, which generally allows us to recover a portion of our original investment on those wells that we planned to drill.

At the corporate level, we don't expect our financing plan in 2016 to require equity, and if there would be and need we would expect it to be modest.

Similar to previous years, we will work to maintain a strong balance sheet with a flexible and opportunistic financing plan and a focus on capital recycling opportunities.

Also, as I just mentioned, we plan to evaluate capital recycling opportunities within our merchant generation portfolio, as we continue to execute on our strategy to become more long-term contracted and rate regulated.

Earlier this month, we filed a test year letter with the Florida PSC to initiate a new rate proceeding for rates beginning in January 2017, following the expiration of our current settlement agreement.

FPL was finalized in a base-rate adjustment proposal that would cover the next four years, 2017 through 2020.

While the details of the numbers are still being finalized, we expect the proposal to include base-rate adjustments of approximately $860 million starting in January 2017, $265 million starting in January 2018, and $200 million upon commissioning of the Okeechobee Clean Energy Center in mid 2019, with no base-rate adjustment in 2020.

Based on these adjustments, combined with current projections for fuel and other costs, we believe that FPL's current typical bill for January 2016 will grow at about 2.8%, roughly the expected rate of inflation through the end of 2020.

When thinking about the rate case, there are four key points to keep in mind.

First, we are proposing a four-year rate plan, which provides customers a higher degree of predictability with regard to the future cost of electricity.

Second, for the period 2014 through the end of 2017, FPL is planning to invest a total of nearly $16 billion, with additional significant investments expected in 2018 and beyond to meet the growing needs of Florida's economy, and continue delivering outstanding value for Florida customers by keeping reliability high and fuel and other costs low.

While the benefits of building a stronger, smarter grid and a cleaner more efficient generation fleet are passed along regularly to customers through higher service reliability and lower bills, we must periodically seek recovery for these long-term investments supported by base rates.

Third, you may recall that FPL was required to file a comprehensive depreciation study as part of the rate case.

The depreciation study to be filed with this rate case reflects the investments that FPL has made since the last study in 2009.

Based on the changing mix of assets and the recoverable lifespans, the resulting impact of the study is roughly a $200 million increase in annual depreciation expense.

Fourth, we expect to request a performance adder of 0.5% as part of FPL's allowed regulatory ROE.

Compared with peer utilities in the Southeastern costal US, FPL has the cleanest carbon emissions rate, the most cost-efficient operations, the highest reliability, and the lowest customer bills.

But in allowed ROE midpoint, that is below the average of those peer utilities.

We believe that the proposal for a performance adder presents an opportunity to reflect FPL's current superior value proposition and encourage continued strong performance.

The estimated impact of the three base-rate adjustments phased in during the four-year period would total approximately $13 per month or $0.43 per day on the base portion of a typical residential bill.

FPL has worked hard to deliver service that is ranked among the cleanest and most reliable for the lowest cost, and has made the decision to seek relief only after a thorough review of its financial projections.

Since 2001, FPL's investments in high-efficiency natural gas energy have saved customers more than $8 billion on fuel, while preventing $95 million tons of carbon emissions.

In addition, while the cost of many materials and products that the Company must purchase in order to provide affordable, reliable power have increased and the energy demands of Florida customers are growing with the projected addition of nearly 220,000 new service accounts during the period 2014 through the end of 2017, FPL's focus on efficiency and productivity has significantly lessened the bill impact.

Compared with the average utililized O&M costs, FPL's innovative practices and processes save customers nearly $2 billion a year, or approximately $17 per month for the average customer.

Through its focus on cost reduction, FPL ranks best in class among major US utilities for having the lowest operating and maintenance expenses measured on a cost per kilowatt hour our of retail sales.

In addition, while other utilities around the country are facing potentially higher costs to comply with the EPA's clean power plan, FPL was already well positioned to comply with the targets in Florida.

Today, FPL's typical residential bill is about 20% lower than the state average, and about 30% lower than the national average.

And we expect it will continue to be among the lowest, and lower than it was 10 years ago in 2006, even with our requested base-rate increases.

We look forward to the opportunity to present the details of our case, and expect to make our formal filing with testimony and requires detailed data in March.

The timeline for the proceeding will ultimately be determined by the commission, but we currently expect that we will have hearings in the third quarter with the final commission decision in the fourth quarter in time for new rates to go into effect in January 2017.

As always, we are open to the possibility of resolving our rate request through a fair settlement.

Over a period of the last 17 years, FPL has entered into five multi-year settlement agreements that have provided customers with a degree of rate stability and certainty.

Our core focus will be to pursue a fair and objective review of our case that supports continued execution of our successful strategy for customers, and we will continue to provide updates throughout the process.

Turning now to expectations, for 2016, we expect adjusted earnings per share to be in the range of $5.85 to $6.35, and in the range of $6.60 to $7.10 for 2018, implying a compound annual growth rate off a 2014 team base of 6% to 8%.

We continue to expect to grow our dividends per share 12% to 14% per year through at least 2018 off of a 2015 base of dividends per share of $3.08.

As always, our expectations are subject to the usual caveats, including, but not limited to normal weather and operating conditions.

Before moving on, let me take a moment to discuss the expected impacts on the business of the recent phase down extension of bonus depreciation.

Let me start by saying that we had already assumed the extension of bonus depreciation in our 2016 financial expectations.

In addition, after analyzing the recent extension, we do not expect bonus depreciation to impact NextEra Energy's earnings per share expectations through 2018.

At NEP, as I mentioned earlier, yesterday, the Board declared a fourth-quarter distribution of $0.3075 per common unit or $1.23 per common unit on an annualized basis, representing the 58% increase over the comparable distribution a year earlier.

From this base, we continue to see 12% to 15% per year growth in LP distributions as being a reasonable range of expectations through 2020, subject to our usual caveats.

As a result, we expect the annualized rate of the fourth quarter 2016 distribution to be in a range of $1.38 to $1.41 per common unit.

The December 31 run rate expectations for adjusted EBITDA of $540 million to $580 million and CAFD of $190 million to $220 million reflect calendar year 2016 expectations for the portfolio at year end December 31, 2015.

The December 2016 run rate expectations for adjusted EBITDA of $640 million to $760 million and CAFD of $210 million to $290 million reflect calendar year 2017 expectations for the forecasted portfolio at year end December 31, 2016.

Our expectations are subject to our normal caveats and our net of expected IDR fees, as we expect these fees to be treated as an operating expense.

As we have said before, in the long run, in order for NEP to serve its intended purpose, we need to be able access the equity markets at reasonable prices.

For 2016, beyond the ATM program, we continue to plan to issue a modest amount of NEP public equity to finance the growth included in our December 31, 2016 annual run rate.

However, we will be smart, flexible and opportunistic as to how and when we access the equity markets.

If the equity markets are not accessible at reasonable prices, we expect to have sufficient debt capacity at NEP that, together with proceeds raised through our at-the-market dribble program, should be sufficient to finance currently planned 2016 transactions.

Where conditions are appropriate, one alternative would be to raise equity privately, pre-funding drops before they are publicly announced.

However, this is just one option that we are considering, and we may access the equity markets in other ways when market conditions permit.

In addition, we expect our drops to be smaller in magnitude in order to manage the capital required to finance acquisitions.

As I mentioned earlier, the aftermarket dribble program has proving to be successful.

As NEP raised approximately $26 million of equity during the fourth quarter, and we will continue to seek opportunities to use this program to help finance potential future acquisitions.

We continue to believe it is important that we remain focused on the fundamentals.

And given the strength of NEP sponsor and the prospects for future renewables development, the NEP value proposition, which relies on projects organically developed by energy resources rather than third-party acquisitions for growth, is the best in the space.

We plan to continue to be patient with NEP, and have taken the necessary steps to provide time for a recovery of the equity markets.

NEP benefits from a strong sponsor, derisked and long-term contracted cash flows with an average contract life of 19 years, strong counterparty credits, and projects that, in many cases, have been financed predominantly through mortgage style financing that provides long-term protection against interest-rate volatility.

We remain optimistic that the NEP financing model can and will work going forward.

In summary, we have excellent prospects for growth.

The environment for new renewables development has never been stronger, and FPL, Energy Resources and NEP each have an outstanding set of opportunities across the board.

The progress we've made in 2015 reinforces our longer-term growth prospects, and while we have a lot to execute in 2016, we believe that we have the building blocks in place for another excellent year.

With that, we will now open the lines for questions.

(Operator instructions)

Stephen Byrd, Morgan Stanley.

Good morning, I wanted to check in on the solar ballot initiative.

It looks like consumers for Smart Solar, which you had supported, has gotten the votes necessary.

Could you just speak to the process for getting this on the ballot, and what we should be looking at going forward there?

Sure, hello, Stephen.

Good morning, it's Eric Silagy.

So the necessary votes were secured, signatures, those of been verified, and there's two tests, there's a number of votes, or signatures I should say, and then also the number of congressional districts.

They have to seek at least half of the congressional districts.

Those two tests have been met.

So the next up right now is that this language -- the consumer's report solar amendment language has to be verified by the Supreme Court as being valid to be on the constitutional ballot.

That has to take place by April 1, briefs have been filed by a number of groups in front of the court.

Oral arguments have not been scheduled, they are not required actually.

So the court could possibly rule without the oral arguments or they will set oral arguments to be heard, and then by April 1 at the latest, the court will rule.

If the court approves the language, it will go onto the ballot for November elections.

That's very clear, thank you.

And then shifting over to resources, where I was very happy about the extension of the ITC and PTC.

I wanted to get your sense of the state of the tax equity market, given continued growth in renewables.

We had heard some reports that the market is -- some of the players may be exiting, and over time there could be a bit of a squeeze in terms of who actually is able to secure tax equity.

Would you mind talking at a high level in terms of your take on the health currently of the tax equity market where you see that?

And whether or not that might be an advantage for you all, given your position versus say smaller competitors?

Sure.

Stephen.

Actually, we see the opposite.

We see the tax equity market actually strengthening.

And one of the benefits of having a global banking network as we have, gives us the ability to access different tax equity providers.

And one of the things that we do at the beginning of each fiscal year, and we just completed this process, is work on our tax equity allocations going forward.

So we feel very good.

And to the extent that others that may be having a poorer financial performance and don't have the same prospects for future growth, may not have the same access to tax equity going forward that we do given the strength of our renewables pipeline and our track record, which speaks for itself.

Very helpful.

Thank you very much.

Dan Eggers, Credit Suisse.

Hi, good morning, guys.

Just, John, going back to the bonus depreciation comment and the fact that it's not really affecting any of your funding or growth expectations.

Can you just walk us through where you guys expect to be from a tax cash payer perspective, and how far out into the future does that take you with the bonus depreciation and the extent that that it has been?

Yes, we don't expect bonus depreciation really to have much of an impact as to when we become a cash tax payer.

And the reason for that is that Energy Resources, we use tax equity financing.

And because we use tax equity financing, it really doesn't result in that much of a deferral of our deferred tax asset balance.

And it doesn't affect it at FPL why?

Well, if you walk through the impacts on the business.

At FPL, what you would expect to see is a lower amount of equity required to be put in the business because you have a lower tax liability.

Energy Resources, we use the tax equity financing.

But on a consolidated basis at NextEra Energy, the lower tax liability we have at NextEra Energy results in higher FFO to debt, which gives us additional flexibility in terms of having to issue less equity.

So having to issue less equity, really offsets any impacts that we have at FPL.

And that's the reason why on a consolidated basis, net-net, bonus depreciation really is not expected to impact our financial expectations going forward.

Okay.

And I guess I remember, early on the idea of what's going to happen to the pipeline for renewable development.

Past conversations suggest that there were a lot of folks trying to jam in projects and 2016 to catch the solar ITC.

Are you guys having discussions right now about your shifting the timing and magnitude or the shape of when the projects are going to get done, given the fact that your customers have more flexibility now?

No.

Not the way our contracts are structured.

Okay, very good.

Thank you.

Julien Dumoulin-Smith, UBS.

Hello, good morning and congratulations.

Thank you.

So first, just on the capital markets and balance sheet needs.

I just want to be very clear about this, in terms of equity expectations for this current year, I think I heard you say you don't really expect any at the corporate level.

Can you just expand upon the assumptions baked therein, and specifically discuss capital recycling?

I presume that no equity does not presume further capital recycling, and how you think about more specifically what that recycling might look like.

Obviously, in light of the Texas decision, is there more merchant divestment is what I would ask as the follow up?

Is in terms of our equities for 2016, our base case is that we have recycling opportunities available in our merchant generation portfolio that we will continue to explore, similar to what we did with the Lamar Forney transaction back in 2015.

We also have some renewable assets that may be rolling off of contract that could be good opportunities as well.

And then we have some renewable assets on the balance sheet that we have not previously put debt financing up against, that could provide additional sources of capital for 2016 offsetting what would otherwise be a modest equity need in 2016 for NextEra Energy.

Got it.

But just to be clear on equity here, are you assuming further asset sales beyond Lamar and Forney to make sure -- to hit that no equity need?

Julian, this is Jim.

I think the way you should think about it is, everything we have is always for sale.

And if there's an opportunity to sell something that's accretive to our earnings going forward and makes sense from a strategic standpoint, we're going to sell it.

But we're also not betting that we are going to have to sell in order not to have to issue equity this year.

How much equity content we need in any given year is always driven by how much capital we are going to deploy, what the opportunities are, how we're doing against all of our financing activities.

And we have a whole host of things that we -- a whole host of levers at our disposal that we go to.

And obviously issuing equity is very well -- and the team knows this, this is very low on my list of the kind of things that we want to do to finance the plan.

Obviously, the flip side of that is, is we need a strong balance sheet and we are committed to strong ratios to maintain a strong balance sheet.

So what we said is I think very clear in the script.

We said we don't believe we're going to have an equity need this year, and if there is one, it's going to be very modest.

Great, very clear.

And then just lastly on natural gas and obviously, the dip we've seen here.

Does that impact at all your rate-based gas effort in Florida, or your solar efforts in Florida?

On the one hand, you could say it should create more opportunities, given the distressed nature of that space and potential assets coming up for sale.

On the other hand, it does provide somewhat of a limitation in that you have to be able to identify producer operators that are willing to sell in today's lower natural gas and price environment at a price that makes sense for Florida customers.

But we're working hard to identify those opportunities through the FPL origination efforts.

Yes.

Julian, this is Eric.

I will just add that on the three solar projects, it has no impact.

Those are underway.

And remember, those were advantaged sites that we had because we had the property, the transmission was there and so we're moving forward with those.

They provide customer benefits right up front.

Great, thank you very much, guys.

Steve Fleishman, Wolfe Research.

Hello, good morning.

So first just on the renewable backlog opportunity.

I know you mentioned we will have more specifics on the Q1 call.

But could you just give a little bit -- and I might have missed it in the commentary, just a little bit of the high-level color on how you're looking at the extensions in CPP moving the needle on these things?

I think you said like maybe more like after a big push after 2019, was that?

I just want to make sure I understood what you -- the high-level color you gave.

So, Steve, I think the first thing we look at is, if you go back over the last several years, you've probably had a renewable market in the US of 8 to 9 gigawatts.

It's lumpy though, as you know.

When we look at 2017 through 2020, we see a market that's probably much closer to 13 to 15 gigawatts and there are some out there that would say that towards the latter part of the decade, that that market could get up to 18 to 20 gigawatts.

So when we look at it, we say well, gee whiz, we've gotten our fair share in the past and so our expectation is to continue to get our fair share in the future.

If you look at wind on its own, and by the way, it's often very difficult to separate how much of that is going to be wind and how much of it is going to be solar.

Although I will tell you that solar is more and more competitive the longer you go out.

But if you look at the near term, if you look at 2017 and 2018 on the wind side, certainly the expectations are that there's going to be an awful lot of wind build.

Especially if the IRS comes through with what we think they are going to come through, the same interpretation of in construction as they've had before, you're going to likely get 100% PTCs for CODs on wind all the way through the end of 2018.

2017 remains to be seen whether that will be a banner year for wind or not, but I think combined 2017 and 2018 will be pretty good on the wind site.

Then you look at wind a little further out, obviously you've got CPP.

We and others have provided comments to EPA on CPP.

One of those comments that EPA asked for was, what do we do with the clean energy incentive program.

So right now, states have to have a state implementation plan that could go in as late as the fall of 2018.

Before that plan goes in, you can't really get under the incentive plan for renewables, so that's probably a 2020 to 2021 build that you see there.

We're hoping that that comes up a little bit.

We do see CPP making a difference for wind, probably starting in 2019, but certainly no later than 2020.

On the solar side, the way that it's been structured, you could potentially get 30% ITC on solar all the way through 2020.

I've said this over and over again in the past.

We continue to be surprised by the demand for solar out there.

It's certainly it's more competitive, but there's a lot of demand for solar.

So we see fairly steady solar growth from 2018 through 2020.

I think it was Dan that asked the question before about 2016 maybe go to 2017, which I don't -- I agree with what John said.

But the point there also on solar is, you may actually see a smaller 2017, because so much is getting built in 2016.

So, is that good?

That's helpful.

The reason that you are going to do the updated into Q1 versus now versus later is you'll just have better visibility on the backlog at the end of Q1?

It will have -- look, I know that a lot of people have read the CPP.

We have read it 100 times.

It's complicated.

We want to make sure that we understand what we think is going to happen in the market.

But in addition, we are out talking to all of our customers to make sure that we understand what their plans are for the next couple of years.

Okay.

One other question on the gas pipeline business.

Jim, I guess how are you thinking about -- are the projects on time?

Are you seeing any counterparty risk, and maybe more importantly, given the duress in the business, just -- do you view that as acquisition opportunities, or stay away and be careful?

How are you looking at what's going on in that space?

So we are making good progress in terms of timing on the projects.

And so I feel good about -- on the pipeline projects, I feel good about that.

There's always pressure on timing, and certainly FERC has been a little slower in terms of pipeline permitting than it's been historically, but we're feeling good about that.

In terms of counterparty risk, obviously, we feel good with our portfolio of projects that the vast, vast, vast majority of the counterparties that we have on all of our pipelines across both the Florida pipelines, Mountain Valley pipeline, and the Texas pipelines are all very strong credit-worthy entities.

And so we don't have that counterparty risk that some of the other folks in the pipeline business do, and our average contract length is quite long.

It's probably close to 20 years.

So given where the market is at, obviously there's a lot of distress in this market right now.

We would have interest only in pipelines with strong credit counterparties and long-term contracts.

So if there are those that come available, and there may be some of those that come available, given some of the things going on in the industry, we will be interested in that.

Obviously, we will be disciplined as we always are, vis a vis acquisitions, but it would be something that we would look at.

But I have no interest in adding anything with commodity exposure and short contracts.

Thank you.

Michael Lapides, Goldman Sachs.

Hi, guys, congrats on a good quarter.

Two questions, one FPL related, one NEER.

At FPL, how much of the rate increase request is related to the total change in depreciation?

Meaning, you mentioned the DNA study and the incremental middle $200 million, but we've also got the rolloff of the reg amortization.

Is that part of that $200 million, or is that incremental to it?

And then, Armando, if you wouldn't mind, can you just talk about what the PTC rolloff is, not just in 2016, but does that accelerate in 2017, does it decelerate or stay at a constant level over the next couple of years?

Okay, Michael, this is John.

I will take the first one, and then I'll turn it over to Armando for the second one.

On the depreciation question about $200 million.

And the surplus amortization balance, I think the $263 million that I mentioned earlier for 2016, rolls off by the end of the year as part of our settlement agreement that expires.

And, Michael, we're going to have to get back to everybody.

Obviously, it's $37 million next year, which John mentioned in the call.

I don't recall what it is in the following year.

Okay.

And just on the FP&L question, the $200 million from the DNA study, that drives part of the rate increase request.

But then you've had multiple years of accumulated regulatory amortization.

Should we assume that all of that flows back in, not just the amount for 2015 but the multiples years into depreciation in 2017 and beyond at FP&L?

Hey, Michael, this is Jim.

I think the way you should think about the impacts of the reserve amortization, first of all, when you do a depreciation study, everything gets washed out in the study.

So you are looking at things fresh, you are looking at the current -- what would currently depreciate in terms of our ongoing depreciation expense, and we do a new study and we come up with a new revenue requirement from that study.

There are a lot of puts and takes in it.

And the fact that we've had some surplus amortization over the last several years has led to rate base being a little bit higher than it otherwise would have been had we not had the surplus amortization.

But actually doesn't have a giant impact on the ongoing depreciation expense in the study.

Got it.

Last one, Jim, just curious, any thoughts on the bipartisan energy bill that's weaving its way through the US Senate right now?

You mentioned -- there was some commentary earlier in the call about some of the investments and storage, and I think there's some terms in that legislation, if it were to make its way through, that would have a pretty big impact on storage on the grid.

So, Michael, I give the sponsors a lot of credit for working to try to get something done in this environment -- that, this environment in Washington.

That said, I think it's highly, highly unlikely that anything gets done this year.

Got it, thank you.

Much appreciated, guys.

And we are out of time for questions here.

Thanks everyone for joining the program today.

You may disconnect and have a wonderful day.