Nextera Energy, Inc. · NYSE:NEE
Nextera Energy — Investor Presentation (August 2018)
64 slides from Nextera Energy's investor presentation, August 2018
Slide 1: August 2018 Investor Presentation
August 2018 Investor Presentation
Slide 2: Cautionary Statements And Risk Factors That May Affect Future Results
Cautionary Statements And Risk Factors That May Affect Future Results This presentation includes forward-looking statements within the meaning of the federal securities laws. Actual results could differ materially from such forward-looking statements. The factors that could cause actual results to d
Slide 3: NextEra Energy is comprised of two strong businesses supported by a common platform
NextEra Energy is comprised of two strong businesses supported by a common platform • ~$79 B market capitalization(1) • ~47 GW in operation(2) • ~$95 B in total assets(3) • The largest electric utility • The world leader in in the United States by electricity generated retail MWh sales from the wind
Slide 4: NextEra Energy offers a best-in-class investment proposition
We believe NextEra Energy offers a best-in-class investment proposition NextEra Energy Investment Proposition • Strong utility franchise supported by constructive regulatory environment and significant economic tailwinds • Best-in-class operational cost effectiveness • Customer bills nearly 30% belo
Slide 5: Strong earnings, dividend and cash flow growth and a low beta
NextEra Energy’s businesses deliver strong earnings, dividend and cash flow growth and a low beta NextEra Energy Investment Proposition (cont.) Track record of delivering value to shareholders High visibility into earnings growth to support 11% - 12% total return potential Low payout ratio and
Slide 6: Long-term track record of delivering value to shareholders
We have a long-term track record of delivering value to shareholders Adjusted Earnings Per Share(1) Total Shareholder Return(3) $6.70 $6.19 40% 70% $5.71 34% 60% $5.30 60% $4.97 $4.39 $4.57 30% 50% $3.84 $4.05 $4.30 $3.49 22% 38% 40% $3.04 20% $2.63 30% 24% 12% 10% 20% 10% 0% 0% '05 '06 '07 '08 '09
Slide 7: Valuation is attractive considering long-term growth potential
NextEra Energy’s valuation is attractive when considering its long-term growth potential PEG Ratio Top 10 Power Companies(1) by Market Cap 5.3x 4.3x 3.5x 3.0x 3.1x 2.9x 2.6x 2.3x 2.1x 0.9x NEE 1) Top ten U.S. power companies as of 7/31/18; Source: FactSet; 2019 PEG Ratio as of 7/31/18 7
Slide 8: Growth strategy has led to real change in relative position
Over a sustained period of time, our growth strategy has led to real change in relative position Top 20 Global Utility Equity Market Capitalization(1) As of 6/1/2001 ($ MM) As of 7/31/2018 ($ MM) Rank Market Cap Rank Market Cap 1 $38,574 1 $79,013 NextEra Energy 2 $38,185 2 $58,142 3 $34,476 3 $56,7
Slide 9: Well positioned to continue this track record
We are well positioned to continue this track record Wholesale & Service FPL Coal FPL Territory Retirements Energy Expansion Services FPL FPL Battery FPL T&D FPL New Solar Infrastructure Generation Storage Expect $40 B - $44 B(1) FPL Capital New Wind Generation Asset of capital Recycling Growth Mode
Slide 10: Florida Power & Light is one of the best utility franchises in the U.S.
Florida Power & Light is one of the best utility franchises in the U.S. Florida Power & Light • One of the largest U.S. electric utilities • Vertically-integrated, retail rate-regulated • ~5 MM customer accounts • ~27 GW in operation • $12 B(1) in operating revenues • ~$52 B in total assets 1) As of
Slide 11: Core focus at FPL has been consistent for many years
Our core focus at FPL has been consistent for many years Areas of Focus • Unyielding commitment to customer value proposition Customer – Low Bills Satisfaction – High reliability – Excellent customer service • Focus on efficiency and best-in- Superior Constructive class cost performance Customer Vir
Slide 12: FPL's value delivery founded on low cost position and best-in-class operations
FPL’s value delivery is founded on a low cost position and best-in-class operations Operational Cost Effectiveness(1) $100.00 Adjusted Regressed Top Quartile Top Decile Good $/ Retail MWh Log/Log FPL 2017 = $12.44/MWh $10.00 1,000,000 10,000,000 100,000,000 1,000,000,000 Retail MWh 1) FERC Form 1, 2
Slide 13: FPL has outperformed the industry on cost management
FPL has significantly outperformed the industry on cost management over a long period of time FPL vs Industry Non-Fuel O&M per Retail MWh(1) $35.00 FPL Industry Average $30.79 $30.00 Good $25.00 O&M $20.00 $18.10 $/MWh $15.00 $15.32 $12.44 $10.00 $5.00 $0.00 Retail MWh (MM) 1) FERC Form 1, 1994 - 20
Slide 14: FPL 2017–2020 Investment Initiatives
FPL projects total capital deployment of $17.5 B to $19.0 B from 2017 to 2020 through smart investments that result in customer savings and enhanced reliability FPL 2017 – 2020 Investment Initiatives Projected Recovery Opportunity Status Investment(1) Mechanism Completed construction on ~600 Solar B
Slide 15: FPL has 18 MW of battery projects in operation
FPL has 18 MW of battery projects in operation, each providing unique reliability and economic benefits FPL Storage Project Summary Primary Secondary Size In-service Application (Use Case) Benefit Benefit (MW) date Freq. Response Distribution Feeder Installation Peak T&D Deferral 1.5 8/2016 (Peaker)
Slide 16: FPL typical residential bills below Florida and National averages
FPL’s strategy continues to result in typical residential bills below both Florida and National averages FPL 1,000-kWh Residential Bill $140 ~$138 $120 ~$119 ~$109 ~$99 ~$100 $100 Good $80 $60 $40 $20 $- FPL FPL (1) FPL FL IOUs(2) National (3) 2006 2018 2021E Average Average FPL expects the typical
Slide 17: Agreement to acquire Gulf Power, Florida City Gas, and Stanton and Oleander plants
NextEra Energy announced agreement to acquire Gulf Power, Florida City Gas, and the Stanton and Oleander natural gas power plants Transaction Overview • Addition of attractive regulated electric and natural gas franchises that are an excellent complement to our existing Florida operations – NextEra
Slide 18: Gulf Power and Florida City Gas are an excellent geographic and strategic fit
Gulf Power and Florida City Gas are an excellent geographic and strategic fit for NextEra Energy Strategic Rationale • Complementary service Tallahassee Tallahassee Tallahassee Tallahassee Tallahassee Tallahassee territories to FPL Pensacola Pensacola Pensacola Pensacola Pensacola Pensacola Jacksonv
Slide 19: Transactions subject to receipt of key regulatory approvals
The transactions are subject to the receipt of key regulatory approvals Expected Timeline & Key Approvals • Gulf Power and Stanton & Oleander natural gas power plants: – Subject to FERC approval and Hart-Scott-Rodino antitrust requirements – Transactions are expected to close in first half of 2019 •
Slide 20: Energy Resources' focus is to be the leading North American clean energy company
Energy Resources’ focus is to be the leading North American clean energy company Energy Resources • World leader in electricity generated from the wind and sun • ~20 GW(1) of generation in operation – ~14 GW wind – ~2 GW solar – ~3 GW nuclear – ~1 GW natural gas/oil • ~8 BCF of natural gas pipeline
Slide 21: Energy Resources' growth driven by development skills and competitive advantages
Energy Resources’ growth is driven by its best-in-class development skills and competitive advantages Energy Resources Development Skills 20,000 Wind and Solar Portfolio(1) 15,000 MW Best-in-Class 10,000 Operations Purchasing Power 5,000 0 Resource Wind Solar Competitive Assessment Cost of Capital a
Slide 22: Wind and solar expected to be competitive into the next decade
With continued technology improvements and cost declines, wind and solar are expected to be competitive into the next decade Wind and Solar Technology Levelized Cost of Levelized Cost of Electricity from Wind Electricity from Solar (Including Production Tax Credits) (Including Investment Tax Credits
Slide 23: Purchasing power as a top capital investor across all industries
Energy Resources benefits from NextEra Energy’s purchasing power as a top capital investor across all industries 2017 Top 10 U.S. Capital Investors(1) $20.0 $19.3 $18.0 $17.2 $16.0 $14.0 $12.0 $B $12.0 $10.7 $10.0 $9.6 $10.0 $8.7 $8.4 $8.1 $8.1 $8.0 $6.0 $4.0 $2.0 $0.0 A B C NEE D E F G H I NextEra
Slide 24: Scale and purchasing power have reduced wind O&M costs
Leveraging the scale of Energy Resources’ portfolio and purchasing power have helped reduce wind O&M costs by ~25% since 2014 Wind O&M(1) $/MWh 4.5% 10.5% Improvement Per Year Improvement Per Year 2014 2016 2018E (2) NextEra Average Site (2) Top Quartile Site Top Decile Site (2) Energy Resources’ fl
Slide 25: Leveraging NEE's strong balance sheet and diverse bank group
Energy Resources is able to leverage NEE’s strong balance sheet and diverse bank group with total capital commitments of over $21 B Funding Breakdown by Country(1) Our lending group is large, balanced and well-diversified 1) Reflects corporate credit facilities, commitments and term loans outstandin
Slide 26: Resource assessment and site selection capabilities support renewables growth
Resource assessment and site selection capabilities help identify optimal sites to support long-term renewables growth Renewable Development Longer-Term Pipeline Wind: 450-600 MW Wind: 4,500-4,800 2,200-2,500 MW Solar:1,600-1,700 MW Solar: 600-700 200-300 MW Wind: 300-450 MW Solar: 600-700 MW Wind:
Slide 27: Battery efficiency improvements and cost declines expected to expand storage market
Battery efficiency improvements and cost declines are expected to expand the storage market and enable even greater renewables expansion Storage Technology Lithium-ion 4-Hour Battery Pack Cost(1) Battery Storage Adder(2) $/kWh $/MWh $1,200 $80 $71-$81 $1,000 $70 $1,000 $60 $800 $45-$55 $50 $642 $38-
Slide 28: Energy Storage Portfolio
Energy Resources’ battery portfolio has rapidly transitioned from single-use short duration ancillary services to long duration multi-use stacked applications Energy Storage Portfolio Operating Portfolio Announced Backlog Portfolio Project MW Duration Project MW Duration Parry 2 4.0 Rush Springs 10
Slide 29: Energy Resources Development Program
Energy Resources’ competitive advantages position us well for continued success Energy Resources Development Program(1) (Signed Contracts as of July 25, 2018) 2017 – 2018 2017 – 2018 2019 – 2020 2019 – 2020 2017 – 2020 Signed Current Signed Current Current Contracts(2) Expectations Contracts Expecta
Slide 30: Energy Resources backlog of renewables projects has never been stronger
Energy Resources backlog of future renewables projects has never been stronger Energy Resources Renewables Backlog(1) (MW) ~7,400 ~5,000 ~3,700 ~2,900 ~2,400 ~2,100 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q2 2018 Wind Solar Repowering Energy Storage Energy Resources added ~1,600 MW of new renewables
Slide 31: Positioned for potentially disruptive industry changes
We are well positioned to capitalize on and respond to potentially disruptive changes to our industry in the next decade Disruptive Industry Changes Potential Cost per kWh Post-2020(1) Shale (¢/kWh) Gas 3.5 - 5¢ 4 - 5¢ 3 - 4¢ 3 - 4¢ Big Data Renewables /Storage 2 - 2.5¢ Generation Wind Solar Gas Coa
Slide 32: Expansion into the natural gas pipeline business
We have leveraged our skills and capabilities to expand into the natural gas pipeline business Natural Gas Pipeline Assets Sabal Trail and Florida Mountain Texas Southeast Connection (FSC) Valley Pipeline (MVP) Pipelines • ~$1.5 B investment in Sabal • NextEra is a 31% owner of • NEP completed the $
Slide 33: Maintaining $5 to $7 B of excess balance sheet capacity
We expect to continue to maintain $5 to $7 B of excess balance sheet capacity following the closing of the acquisition of Gulf Power Strong Financial Position NextEra Energy Current Downgrade Expected Post-Closing Rating Agency Corporate Rating Threshold Downgrade Threshold(1) Standard & Poor’s A- 2
Slide 34: Adjusted Earnings Per Share Expectations
We remain well positioned to achieve the $7.70 target adjusted EPS for 2018 as well as our long-term financial expectations NextEra Energy’s Adjusted Earnings Per Share Expectations(1) • The Gulf Power, Florida City $9.40 - $8.70 - $9.95 Gas, and two natural gas $8.00 - $9.20 power plant acquisition
Slide 35: NextEra Energy Partners
NExTera energy” PARTNERS Z
Slide 36: NextEra Energy Partners is a diversified clean energy growth company
NextEra Energy Partners is a best-in-class diversified clean energy growth company NextEra Energy Partners’ Portfolio(1) • Stable cash flows supported by: – Long-term contracts with credit- worthy counterparties – Geographic and asset diversity • ~3,300 MW of renewables – ~2,800 MW wind – ~500 MW so
Slide 37: Since the IPO, NEP has grown distributions by ~133%
Since the IPO, NEP has grown distributions by ~133% and delivered total unitholder return of 116% Annualized Total Unitholder Return LP Distributions(1) NEP vs. Indices $1.75 120% 116% 110% 100% 90% 80% 70% 60% 56% 50% 39% 40% 30% $0.75 20% 10% 1% 0% Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q
Slide 38: NEP's value proposition built upon four core strengths
NEP’s value proposition is built upon four core strengths NextEra Energy Partners’ Core Strengths High-Quality Portfolio Financial Strength and Flexibility Issuer Credit ~3.3 GW Rating(3) Year-end 2017 17-Yr Baa1 Renewables >90% Ba1/BB/BB+ Remaining Counterparty Capacity of Project Debt ~1.2x & Tax
Slide 39: NEP focuses on clean energy assets with stable cash flows
NEP continues to focus on investing in clean energy assets with stable cash flows Asset Suitability Long-Term Contract Clean Energy Technology Creditworthy Counterparty “NEP-Able” Asset Stable Regulatory Environment Limited or Monetized Tax Credits Strong Operations Any clean energy asse
Slide 40: Growth Opportunities
Acquisitions from Energy Resources, organic growth and third party M&A all provide NEP with clear visibility to future growth Growth Opportunities Potential Acquisition of Potential Organic Clean Energy Potential for 3rd Prospects for Assets at Energy Party Texas Pipelines Resources, Acquisitions an
Slide 41: NEP's credit ratings increase financing flexibility and debt capacity
NEP’s credit ratings increase financing flexibility and debt capacity due to greater market access Corporate Credit Rating and Debt Capacity • NEP corporate credit ratings: High-Yield Term Loan B Debt Revolving Convertible Credit Facility Moody’s S&P Fitch Preferred Convertible Preferred Ba1 BB BB+
Slide 42: Extended long-term outlook for distribution growth through 2023
We have extended NEP’s long-term outlook for distribution growth through 2023 NextEra Energy Partners Financial Expectations Annualized LP Distributions(1) Adjusted EBITDA and CAFD(3) Annual 12% - 15% $1,000–$1,150 MM Growth(2) $1.81-$1.86 $1.62 $360–$400 MM Q4 2017 Q4 2018E Q4 2023E 12/31/2018 12/3
Slide 43: NEP offers a superior value proposition
We believe NEP offers a superior value proposition and is better positioned than ever to deliver upon its long-term expectations Investor Total Return Potential • Opportunity to earn a total return of ~4% 16% - 19% roughly 16% - 19% per year through at least 2023 12% - 15% • Diversified portfolio wi
Slide 44: Appendix
Appendix NExTera’ NexTera energy” ENERGY & PARTNERS 2 44
Slide 45: NextEra Energy
NExTera’ ENERGY @
Slide 46: Built on best-in-class operational excellence and financial strength
Built on a foundation of best-in-class operational excellence and financial strength, and focused on clean generation FPL Service Reliability(1) Generation Profile 2017 NextEra Energy Fuel Mix MWhs(2) ~101 minutes Nuclear Wind ~56 minutes 26% 22% Good Coal 2% FPL ~$14 FPL ~61 Natural Gas Solar 3% 46
Slide 47: NextEra Energy's credit metrics remain on track
NextEra Energy’s credit metrics remain on track Credit Metrics A- Downgrade Actual Target S&P Range Threshold 2017(1) 2018(2) FFO/Debt 23%-35% 23% 26% / 29% 28% Debt/EBITDA 2.5x-3.5x 3.0x 3.0x Baa Downgrade Actual Target Moody’s Range Threshold 2017 2018(2) CFO Pre-WC/Debt 13%-22% 20% 22% 23% CFO-Di
Slide 48: Contracted Wind and Solar Development Program
Contracted Wind and Solar Development Program(1) Wind Location MW Solar Location MW 2017: 2017: Oliver III ND 99 Whitney Point CA 20 Golden Hills North CA 46 Marshall MN 62 Bluff Point IN 120 Westside CA 20 Cottonwood NE 90 Distributed Generation Various 97 TOTAL 2017 Wind: 355 TOTAL 2017 Solar: 199
Slide 49: U.S. Federal tax incentives extended into the next decade
U.S. Federal tax incentives for completed renewables projects have been extended into the next decade Extended U.S. Federal Tax Credits Wind Production Solar Investment Tax Credit (PTC) Tax Credit (ITC) Start of Start of Construction COD Wind Construction COD Solar Date Deadline PTC Date Deadline IT
Slide 50: Reconciliation of Earnings Per Share to Adjusted Earnings Per Share
Reconciliation of Earnings Per Share Attributable to NextEra Energy, Inc. to Adjusted Earnings Per Share 1) Net of approximately $0.08 of income tax benefit at FPL 50
Slide 51: Definitional information
Definitional information NextEra Energy, Inc. Adjusted Earnings Expectations This presentation refers to adjusted earnings per share expectations. Adjusted earnings expectations exclude the effect of non- qualifying hedges, the transitional impacts of tax reform, NEP investment gains, as well as unr
Slide 52: Cautionary Statement And Risk Factors That May Affect Future Results
Cautionary Statement And Risk Factors That May Affect Future Results This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words or phrases such as “may,” “will,” “anticipat
Slide 53: Cautionary Statement And Risk Factors (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) This presentation contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical f
Slide 54: Cautionary Statement And Risk Factors (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) risk to NextEra Energy Resources of increased operating costs resulting from unfavorable supply costs necessary to provide NextEra Energy Resources' full energy and capacity requirement services; inability or failure by Nex
Slide 55: NextEra Energy Partners
NExTera energy” PARTNERS Z
Slide 56: NEP's portfolio of ~3.3 GW renewables plus seven natural gas pipelines
NEP’s portfolio is comprised of ~3.3 GW of renewable assets plus seven natural gas pipelines with an ~17 year weighted average remaining contract life Portfolio Overview(1) Project COD Location Net MW Technology Counterparty Credit PPA Life Ashtabula III Dec-10 ND 62 Wind A3 20 Baldwin Dec-10 ND 102
Slide 57: NEP's tax shield creates need for tax equity financing
NEP’s tax shield creates the need to employ tax equity financing for projects that generate a large portion of their economics from tax credits PAYGO Tax Equity Financing • Tax equity financing is used Project Cash Flow Split(1) to monetize tax attributes • Under tax equity, an investor makes an up-
Slide 58: NEP's holdco leverage target consistent with BB credit ratings
NEP’s holdco leverage to project distributions metric target of 4.0x – 5.0x is consistent with its strong mid– to high–BB credit ratings Credit Metrics BB Actual Target (1) (4) S&P Range 2017 YE 2018(5) Holdco Debt/EBITDA 4.0x - 5.0x 3.8x 4.0x - 5.0x Ba1 Actual Target (2) (5) Moody's Range 2017 YE 2
Slide 59: Expected Cash Available for Distribution
Expected Cash Available for Distribution(1) (December 31, 2018 Run Rate CAFD) $1,100-$1,250 ($20-$30) ($75-$85) $1,000-$1,150 ($240-$320) ($330-$410) ($30-$35) ($5-$15) $360-$400 Project-Level Corporate IDR Fees Adjusted Debt Pre-Tax Non-Cash Maintenance Estimated Adjusted Expenses EBITDA Service (2
Slide 60: Definitional information
Definitional information NextEra Energy Partners, LP. Adjusted EBITDA and CAFD Expectations This presentation refers to adjusted EBITDA and CAFD expectations. NEP’s adjusted EBITDA expectations represent projected (a) revenue less (b) fuel expense, less (c) project operating expenses, less (d) corpo
Slide 61: Cautionary Statement And Risk Factors That May Affect Future Results
Cautionary Statement And Risk Factors That May Affect Future Results This presentation contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are not statements of historical facts, but instead represent the current expectations of NextEra
Slide 62: Cautionary Statement And Risk Factors (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) A change in the jurisdictional characterization of some of the Texas pipeline entities' assets, or a change in law or regulatory policy, could result in increased regulation of these assets, which could have a material adve
Slide 63: Cautionary Statement And Risk Factors (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) The natural gas pipeline industry is highly competitive, and increased competitive pressure could adversely affect NEP's business; NEP may not be able to access sources of capital on commercially reasonable terms, which wou
Slide 64: Cautionary Statement And Risk Factors (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) Holders of NEP's common units and preferred units currently cannot remove NEP GP without NEE’s consent; NEE’s interest in NEP GP and the control of NEP GP may be transferred to a third party without unitholder consent; The