Good day, and welcome to the NextEra Energy and NextEra Energy Partners First Quarter 2021 Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions].

I would now like to turn the conference over to Jessica Aldridge, Director of Investor Relations. Please go ahead ma'am.

Jessica Aldridge - Director of Investor Relations

Thank you, Rocco. Good morning, everyone, and thank you for joining our first quarter 2021 combined earnings conference call for NextEra Energy and NextEra Energy Partners. With me this morning are Jim Robo, Chairman and Chief Executive Officer of NextEra Energy; Rebecca Kujawa, Executive Vice President and Chief Financial Officer of NextEra Energy; John Ketchum, President and Chief Executive Officer of NextEra Energy Resources; and Mark Hickson, Executive Vice President of NextEra Energy. All of whom are also officers of NextEra Energy Partners. As well as Eric Silagy, President and Chief Executive Officer of Florida Power and Light Company. Rebecca 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, in the comments made during this conference call, in the risk factors section of the accompanying presentation or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our websites, nexteraenergy.com and nexteraenergypartners.com. We do not undertake any duty to update any forward-looking statements.

Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. As a reminder, Gulf Power legally merged into Florida Power & Light Company effective on January 1, 2021. Gulf Power will continue as a separate reporting segment within Florida Power & Light and NextEra Energy through 2021, serving its existing customers under separate retail rates. Throughout today's presentation when we refer to FPL, we are referring to Florida Power & Light excluding Gulf Power, unless otherwise noted, or when using the term combined.

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

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Thank you, Jessica. And good morning, everyone. NextEra Energy is off to a terrific start in 2021, and has made excellent progress in the core focus areas that we discussed on the last call. Adjusted earnings per share increased nearly 14% year-over-year, reflecting successful performance across all of the businesses. FPL increased net income by approximately $78 million from the prior-year comparable period, which was driven by continued investment in the business for the benefit of our customers.

During the quarter, FPL successfully placed in service approximately 300 megawatts of additional cost-effective solar projects built under its SolarTogether program, which remains the largest community solar program in the nation. FPL now owns and operates approximately 2,640 megawatts of solar on its combined system, which is more than any other utility in the country. FPL's other major capital investments, including the 409-megawatt Manatee Energy Storage Center and highly efficient 1,200 megawatt Dania Beach Clean Energy Center are also on schedule and on budget.

By executing on smart capital investments such as these, FPL is able to maintain its best-in-class customer value proposition of clean energy, low bills, high reliability and outstanding customer service. FPL's typical residential bill remains well below the national average and the lowest in the nation among the 20 largest US investor-owned utilities. While our service reliability has never been higher.

Gulf Power also had a strong quarter of execution. The focus on the operational cost-effectiveness at Gulf Power continues to progress well with a 43% increase in net income year-over-year, primarily driven by year-to-date O&M costs declining by approximately 21% versus the prior-year comparable period, and by more than 34% relative to 2018. Gulf Power also delivered further improvements in service reliability and employee safety with no OSHA recordables year-to-date through the end of March. We remain committed to delivering on the objectives that we have previously outlined at Gulf Power and continue to expect to generate significant customer and shareholder value over the coming years.

At Energy Resources, adjusted earnings increased 13% year-over-year and it was another strong quarter of renewables origination with our backlog increasing by approximately 1,750 megawatts since the last call. We continue to see increased stakeholder focus on environmental, social and governance or ESG factors, helping to drive accelerated demand for diversified clean energy solutions among new non-traditional customers, particularly in the commercial and industrial sector as an attractive source of incremental growth for Energy Resources in the coming years.

We have been encouraged by the Biden administration's focus on clean energy and the emphasis they have placed on it in their budget and in the upcoming infrastructure package. We continue to work with the administration on their important efforts around extensions of existing renewable credits, new credits for transmission and storage, including hydrogen, as well as a new clean energy standard for the electric sector. We support a clean energy standard that accelerates the decarbonization of the electric grid and enables the decarbonization of the transportation and industrial sectors as well.

We believe that no energy company in the world has been more committed, consistent and proactive in promoting smart investments in clean energy technology as we have been for over two decades. As the push for action to address climate change and acceleration of progress towards decarbonization creates new and enhanced renewable incentives across our industry, we continue to believe that no company is better positioned than NextEra Energy to continue to drive change and capitalize on these trends. At this early point in the year, we are very pleased with our progress at FPL, Gulf Power and Energy Resources.

Now, let's turn to the detailed results, beginning first with FPL. For the first quarter of 2021, FPL reported net income of $720 million or $0.37 per share. Earnings per share increased $0.04 year-over-year. Regulatory capital employed growth of 10.8% was a significant driver of FPL's EPS growth versus the prior-year comparable quarter. FPL's capital expenditures were approximately $1.4 billion for the quarter and we expect our full-year capital investments to be between $6.6 billion and $6.8 billion. FPL's reported ROE for regulatory purposes will be approximately 11.6% for the 12 months ending March 2021.

During the quarter, we utilized $316 million of reserve amortization to achieve our target regulatory ROE leaving FPL with a balance of $578 million. As we've previously discussed, FPL historically utilizes more reserve amortization in the first half of the year given the pattern of its underlying revenues and expenses, and we expect it to continue this trend this year.

Let me now turn to Gulf Power, which reported first quarter 2021 net income of $57 million or $0.03 per share. Gulf Power's capital expenditures were $170 million for the quarter as it continues to execute on smart capital investments for the benefit of customers, and we expect its full capital investments for the year to be between $800 million and $900 million. All of Gulf Power's major capital investments, including the North Florida Resiliency Connection that is expected to be in service in mid-2022, continue to progress well. As a result of these ongoing investments, regulatory capital employed increased by approximately 16% year-over-year. Gulf Power's reported ROE for regulatory purposes is expected to be approximately 10.4% for the 12 months ending March 2021.

Turning to our development and planning efforts, we recently filed an updated Ten Year Site Plan for FPL and Gulf Power, which we expect will begin to operate as an integrated electric system in 2022. The Ten Year Site Plan projects that zero-emission sources will provide nearly 40% of all energy produced across the combined FPL system in 2030, largely as a result of FPL's continued rapid expansion of solar energy through the execution of its 30-by-30 plan and success in its coal phase-out strategy.

FPL expects to add 3,800 megawatts of additional cost-effective solar over the next four years. And we now control all the land needed to meet our projected solar deployment of 11.7 gigawatts by 2030 for the combined FPL system. The Site Plan also reflects an expected total deployment of more than 1,200 megawatts of storage capacity by 2030. This plan is consistent with our belief that renewable generation and particularly solar paired with battery storage in Florida is an increasingly cost-effective form of generation in most parts of the US.

As we execute on these opportunities, we project that FPL's combined emissions rate will be 62% lower in 2030 than the industry average was in 2005, and 20% lower than the US Department of Energy's projected industry average in 2030. Moreover, we continue to plan and invest in sustainable solutions to broaden how we serve customers and prepare for an even cleaner future. During the quarter, FPL placed in service nearly 70 new electric vehicle charging ports and is now operating nearly 400 electric vehicle charging ports in the state as part of our goal to install more than 1,000 charging ports in more than 100 locations across the combined FPL service area from 2019 through 2022.

As we've previously discussed, we are also developing Hydrogen Electrolysis Pilot Project at FPL's Okeechobee combined cycle unit as part of our efforts to introduce further fuel diversity and resiliency into FPL's generation system. There are approximately 25-megawatt solar connected electrolyzer that will be used to generate clean hydrogen as part of the Okeechobee pilot will be the largest of its kind in the US to date. All these projects are just a few examples of our advanced deployment efforts at FPL. We are excited about the immense opportunities that lie ahead as our industry moves towards cleaner more sustainable future.

The Florida economy continues to recover from the early effects of the pandemic and is among the strongest in the nation. The current unemployment rate of 4.7% is well below the national average. The real estate sector continues to grow with average building permits and the Case-Shiller Index for South Florida, up approximately 6% and 10% respectively versus the prior year. Florida's retail sales index continued its quarter-over-quarter improvement, which is a further indication of the ongoing health in our economy and bolsters our confidence in our smart investment strategy required to serve anticipated demand growth.

During the quarter FPL's average number of customers increased by approximately 71,400 or 1.4% versus the comparable prior-year quarter, driven by continued solid underlying population growth. FPL's first quarter retail sales decreased 1.7% from the prior-year comparable period, which is primarily due to mild weather in the first quarter of this year versus 2020. We estimate that approximately 3% of the decline can be attributed to weather-related usage per customer. On a weather-normalized basis, first quarter retail sales increased 1.3% with continued strong underlying usage contributing favorably.

For Gulf Power, the average number of customers grew 1.1% versus the comparable prior-year quarter, driven by continued economic growth in Northwest Florida. Gulf Power's first quarter retail sales increased 2.9% year-over-year, primarily due to favorable weather.

On March 12, we submitted testimony and detailed supporting information for Florida Power & Light's 2021 base rate proceeding. The overall proposal for our 2022 through 2025 base rate plan is substantially consistent with the test year letter filed in January. We are requesting a base rate adjustment of approximately $1.1 billion starting in January '22; $607 million starting in January of 2023; and Solar Base Rate Adjustments or SoBRA mechanism in 2024 and 2025 for up to 1,788 megawatts of cost effective solar.

We are proud to offer our customers service that ranks among the cleanest and the most reliable in the country with typical residential bills of approximately 13% below state average and importantly, nearly 10% lower than in 2006. The four-year base plan has been designed to support continued investments in the long-term infrastructure and advanced technology, which continues to improve our already best-in-class reliability and helps keep customer bills low. With the proposed base rate adjustments and current projections for fuel and other costs, we believe that FPL's typical residential bill will grow at an average annual rate of about 3.4% from January 2021 through the end of 2025, which is expected to result in FPL's typical residential bill being approximately 20% below the projected national average, and more than 20% lower than our typical bills 15 years ago when adjusted for inflation.

Typical Gulf Power residential bills are projected to decrease approximately 1% over the four-year rate plan. The Florida Public Service Commission has established a schedule for this proceeding, beginning with the quality of service hearings in June and technical hearings in late August. The proceedings would conclude in the fourth quarter with the staff recommendation and commission rulings on revenue requirements and rates. We look forward to the opportunity to present our case to the Commission this summer and our focus will be to pursue a balanced outcome that supports continued execution of our successful strategy for customers. As always we are open to the possibility of resolving our rate request through a fair settlement agreement.

Energy Resources reported first quarter 2021 GAAP earnings of $491 million or $0.25 per share. Adjusted earnings for the first quarter were $598 million or $0.30 per share, up 13% versus the prior-year comparable period. New investments added $0.04 per share, primarily reflecting growth in the renewables and storage business, including more than 2,700 megawatts of new contracted wind projects that were commissioned during 2020. The extreme market conditions in Texas in February were the primary driver of the underperformance in our existing generation portfolio and customer supply and trading business, as well as the favorable performance in the gas infrastructure business.

As a reminder, when weather events like this occur, we operate our businesses in Texas as a portfolio, and while there were pluses and minuses during these events, we believe the end result is a testament to the strength of our large and well-diversified business. All other impacts increased results by $0.03 versus 2020.

As I mentioned earlier, Energy Resources' development team had another strong quarter of origination. We added 503 megawatts of new solar projects to our backlog, including 190 megawatts of solar that will be paired with approximately 100 megawatts or four hour battery storage capacity. In 2020, our market share of signed contracts in co-located solar plus storage assets in US was more than 35% and we are excited about the continued trend in demand for co-located storage solutions as we anticipate even further cost synergies by pairing low-cost renewables with storage solutions in the coming decades as being an important part of decarbonization in our sector.

We also added 916 megawatts of new wind projects to our backlog for 2022. In addition, our backlog increased by Energy Resources share of NextEra Energy Partners planned acquisition of 391 megawatts of operating wind projects announced earlier this week. With the approximately 1,750 megawatts added this quarter, our backlog of signed contracts at Energy Resources now totals approximately 15,250 megawatts, supporting our industry leading long term growth expectations.

We remain enthusiastic about the expanded investment opportunities that the broad decarbonization of the US economy presents for Energy Resources, and we continue to evaluate pilot projects for industrial, transportation and electric sector applications. In addition to the pilots and partnerships we've discussed on prior calls, we recently committed to make a minority investment in a clean energy technology company that has developed a proprietary process to essentially decarbonize the industrial production of hydrogen at economic prices. This investment and the hydrogen pilots we've announced to date show the promise of electrification across our economy, and we are excited for the opportunity to participate in these new markets and build renewables to support future growth and demand for electricity. Consistent with our long-term track record, we will remain disciplined as we take steps to be at the forefront of this developing market while taking a leadership role in the clean energy transition.

Beyond renewables and storage, NextEra Energy Transmission furthered its efforts to build America's leading competitive transmission company with the closing of its acquisition of GridLiance occurring at the end of last month. GridLiance, which owns three FERC-regulated transmission utilities spanning six states is an excellent complement to our existing operations and further expands NextEra Energy's regulated business through the addition of attractive rate-regulated assets. NextEra Energy Transmission now owns regulated assets in 10 states and six regional transmission organizations.

Growth in renewables means that there is also a growing imperative to build additional transmission across the US to support this transmission to a low-cost, low carbon economy fueled by renewable energy. Our incorporation of GridLiance into our portfolio furthers our strategy to be North America's leading competitive transmission provider, both to deploy capital profitably, as well as to enable further renewables deployment.

Turning now to the consolidated results for NextEra Energy. For the first quarter of 2021, GAAP net income attributable to NextEra Energy was $1.67 billion or $0.84 per share. NextEra Energy's 2021 first quarter adjusted earnings and adjusted EPS were $1.33 billion and $0.67 per share, respectively. Adjusted earnings from Corporate and Other segment were roughly flat year-over-year.

Long-term financial expectations, which we increased and extended to late last year through 2023 remain unchanged. For 2021, NextEra Energy expects adjusted earnings per share to be in a range of $2.40 to $2.54. For 2022 and 2023, NextEra Energy expects to grow 6% to 8% off of the expected 2021 adjusted earnings per share and we will be disappointed if we are not able to deliver financial results at or near the top end of these ranges in 2021, 2022 and 2023, while at the same time maintaining our strong credit ratings.

From 2018 to 2023, we continue to expect that operating cash flow will grow roughly in line with our adjusted EPS compound annual growth rate range. We also continue to expect to grow dividends per share roughly 10% rate per year through at least 2022 off of a 2020 base. As always, our expectations assume normal weather and operating conditions.

Let me now turn to NextEra Energy Partners, which delivered very strong first quarter results with year-over-year growth in adjusted EBITDA and cash available for distribution of approximately 20% and 36%, respectively. Yesterday, the NextEra Energy Partners' Board declared a quarterly distribution of $63.75 per common unit or $2.55 per common unit on an annualized basis, up approximately 15% from a year earlier. Inclusive of this increase, NextEra Energy Partners has grown its distribution per unit by 240% since the IPO.

Further building on that strength, NextEra Energy Partners recently announced that it had entered into an agreement to acquire an approximately 400 megawatt portfolio of long-term contracted wind assets. This transaction will be NextEra Energy Partners' first third-party acquisition of renewable energy assets and represents another step towards growing LP unit distributions in a manner consistent with our previously stated expectations of 12% to 15% per year through at least 2024. I'll provide additional details on the transaction in just a few minutes.

Turning to the detailed quarterly results. NextEra Energy Partners' first quarter adjusted EBITDA was $354 million and cash available for distribution was $184 million. New projects, which primarily reflect the asset acquisitions that closed at the end of 2020, contributed $27 million of adjusted EBITDA and $13 million of cash available for distribution. Existing projects added $39 million of adjusted EBITDA and $23 million of cash available for distribution. This strong year-over-year increase in adjusted EBITDA and cash available for distribution includes favorable results from NextEra Energy Partners' wind and natural gas pipeline investments in Texas during the February winter storm, partially offset by the impacts of an accelerated outage at our Genesis project during the quarter.

Cash available for distribution also benefited from a reduction in corporate level interest payments, primarily as a result of certain refinancing activities completed in the fourth quarter of last year. Additional details are shown on the accompanying slide.

As I previously mentioned, we continue to execute on our plan to expand NextEra Energy Partners portfolio and recently entered into an agreement to acquire an approximately 400-megawatt portfolio of long-term contracted operating wind projects. The portfolio has a cash available distribution, weighted average contract life of approximately 13 years with high credit quality customers, and further enhances the diversity of NextEra Energy Partners' existing portfolio. The transaction is expected to close in the third quarter of this year subject to customary closing conditions and the receipt of certain regulatory approvals and generate an attractive CAFD yield and be immediately accretive to LP distributions. This transaction demonstrates the NextEra Energy Partners' continued ability to execute on its long-term growth plan and it's enhanced buyer ability to take advantage of Energy Resources' best-in-class operating platform to reduce operating expenses at the assets. Energy Resources continues to leverage our culture of continuous improvement to realize lower costs across the renewable assets that it operates.

Since 2017, Energy Resources has reduced fleet-wide dollar per megawatt hour O&M costs in wind - in its wind fleet by more than 30% and we believe both Energy Resources' wind and solar operating expenses are significantly better than its industry peers. With Energy Resources operating in the NextEra Energy Partners' renewable assets, these cost advantages directly benefit LP unitholders. Over the coming years, we look forward to leveraging the benefits of Energy Resources' operating portfolio platform for both NextEra Energy Partners' existing portfolio as well as to add incremental value to future third-party acquisitions.

In addition to providing attractive base returns, these projects are well situated in attractive markets that we anticipate will have significant long-term renewables demand, supporting asset re-contracting or potential repowering opportunities after the initial contract terms. We continue to believe that the existing NextEra Energy Partners portfolio has meaningful organic growth opportunities over the coming years, and expect the portfolio we are acquiring provides additional long-term investment opportunities as well.

NextEra Energy Partners expects to acquire the portfolio for a base purchase price of approximately $733 million subject to closing adjustments. The portfolio of assets is expected to contribute adjusted EBITDA and cash available for distribution of approximately $63 million to $70 million each on a five-year average annual run rate basis beginning in December 31, 2021. We believe this transaction is an attractive investment in which to deploy the $345 million of undrawn funds from the 2020 convertible equity portfolio financing, which we used to fund the acquisition along with the existing NextEra Energy Partners' debt capacity.

Following the recently announced transaction, we now expect to be in the upper end of our previously disclosed year-end 2021 run rate adjusted EBITDA and CAFD expectation ranges of $1.44 billion to $1.62 billion and $600 million to $680 million, respectively. As a reminder, all of our expectations are subject to our normal caveats and includes the impact of anticipated IDR fees as we treat these as an operating expense.

From the base of our fourth quarter 2020 distribution per common unit at an annualized rate of $2.46, we continue to see 12% to 15% growth per year in LP distributions as being a reasonable range of expectations through at least 2024. We expect the annualized rate of the fourth quarter 2021 distribution that is payable in February of 2022 to be in a range of $2.76 to $2.83 per common unit.

In summary, after a strong start to the year, we remain as enthusiastic as ever about the long-term growth prospects for both NextEra Energy and NextEra Energy Partners. At FPL, we continue to focus on delivering our best-in-class customer value proposition through operational cost-effectiveness, productivity and making smart long-term investments. Energy Resources maintains significant competitive advantages and continues to capitalize on the best renewables development period in our history. Combined with the strength of our balance sheet and credit ratings, NextEra Energy is uniquely positioned to drive long-term shareholder value, and we remain intensely focused on executing on these opportunities.

NextEra Energy Partners is well-positioned to deliver on its already best-in-class runway for LP distribution growth. Finally, last month, we were honored that NextEra Energy was ranked number one in its sector for Fortune Magazine's Most Admired - World's Most Admired Companies list for the 14th time in 15 years. Moreover, we are recognized for the 14th time as one of the World's Most Ethical Companies by Ethisphere Institute, which is a testament to our team of nearly 15,000 employees who are committed to our core values who are helping to build a sustainable energy era that is affordable and clean.

In the coming weeks, we expect to publish NextEra Energy's 2021 ESG report, which we believe establishes our full alignment with the task force for climate-related financial disclosures or TCFD recommendations. We are also excited to announce our commitment to participation in the carbon disclosure project survey later this year. These enhanced disclosures highlight the alignment of our corporate strategy with the key tenets of ESG which our company has been focused on for more than 25 years and remains key to execution of our strategy moving forward.

That concludes our prepared remarks. And with that, I will open up the line for questions.

Question & Answers

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Shar Pourreza with Guggenheim Partners. Please go ahead.

Shar Pourreza - Guggenheim Partners - Analyst

Hey, good morning, guys.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Good morning.

Shar Pourreza - Guggenheim Partners - Analyst

So just a couple of questions here. First, just on transmission opportunities and you obviously closed GridLiance this quarter and there has been some proposals across the US, including California for transmission expansions, can we maybe get a little bit of a refreshed view on your transmission growth strategy and kind of geographies where you may seek to expand? Do you guys see more opportunities for acquisitions perhaps from other PT [Phonetic] type owners?

And just as a follow-up here. Any thoughts on sort of the new FERC administration, recent language could hinder I think future transmission investment with potentially lower ROE's - removal of some of the ROE adders, so just some thoughts there.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Perfect. Thanks, Shar. And I appreciate all answers to the question, but I think it's multiple questions in there. So I'll start and obviously, John can - just John or Jim can jump in if they want to add something. We are very excited about opportunities in transmission and it is founded on a couple of points that I highlighted in the script. First is, we couldn't be more excited as you well know about the renewables opportunities across the US in the coming decades. A key part of all of those opportunities or at least a lot of those opportunities in the latter part of this decade going into the 2030s and beyond is some level of build-out of transmission in the US beyond what's been accomplished. So both to enable long-term renewables development but also to capitalize on those opportunities leaves us very interested in transmission.

The Energy Resources team has done a terrific job growing that business both through organic opportunities, so long-term development efforts of identifying opportunities, participating in processes, and ultimately securing opportunities to invest and build and bring successfully into line - into operation some of those lines, as well as through acquisitions. Obviously with GridLiance being the most recent and Trans Bay Cable not being too much far behind it. I expect that we'll grow the business through both going forward as well, continued efforts on the development side as well as participating in opportunities to acquire investments as they come to market.

On the FERC transmission side, we do think there are lots of opportunities to improve how transmission is cited and built across the US, and we're optimistic that this administration in this FERC will start to focus on those and I think it's both through FERC as well as a potential focus on transmission in this infrastructure package. So a lot of opportunities to invest in the future.

John W. Ketchum - President and Chief Executive Officer

Yeah. The only thing that I would add to what Rebecca said there is, we love GridLiance. Think of our transmission presence as a donut. We had a hole in the middle. This gets us in the SPP and MISO, we're now a member as a TO [Phonetic], important for cow-ISO [Phonetic] as well. It's strategic, it's going to help enable a lot of new renewables development for us, so it lines up really well with where we see renewable growth opportunities going forward.

And even with the news coming out of FERC on the ROE and we'll see what they ultimately do. Don't forget that we've been able to enter in the long-term settlements at Trans Bay and on Lonestar as well, and so our business is really unimpacted.

Shar Pourreza - Guggenheim Partners - Analyst

Got it. Perfect. Thank you. And then just on the rate case and, obviously, it's starting to pick up steam, intervene is turning together, are you seeing any early indications for what's sort of the topics that may be debated? I mean obviously, affordability is the obvious one, cross-subsidization between the two merged utilities that could be another ROEs. So just maybe - just thinking about the bid-ask there. And at this juncture, do you sort of feel there is a settlement path or does this case kind of need to be more litigated just given the complexities of merging two utilities?

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Thanks, Shar. I think it's really early to comment on the rate case. We've just filed - I think, you've heard us comment a couple of times that these are U-Haul trucks worth of filing requirements that we produce and supply to staff in the interveners and the Commission itself to start the process. So we're very early. And no doubt, they - all of the key stakeholders are trying to review that information and then we'll see the process unfold really over quite a number of months, accomodating with the hearings in August.

We are very proud, as I highlighted in the comments, both here and in other venues. We're really proud of the case that the FPL team has put together, not just the case itself, but it's built on a foundation of execution, not just over the last five years during which we've operated under the settlement agreement, but of course, years and years before that. So we look forward to the opportunity to articulating that through this process.

As it relates to settlements, as you know, here in Florida there is a great history of settlement agreements, not just with Florida Power & Light Company, but other utilities in the state. We do think that opportunities to have a negotiated outcome that meets the needs of all stakeholders, and historically, that has produced consistent rates for many years in the future that provides tremendous value for customers. There is a great history of that. We of course will be open to it, but it's very early in this process, and again, we look forward to being able to put forward our case.

Shar Pourreza - Guggenheim Partners - Analyst

Perfect. And then just lastly from me on Santee Cooper. I mean, obviously, the - now the discussions are picking up steam at the legislator. Anything we should be kind of watching for in the near term on the legislature side and your bids out there? So do you see any kind of changes with your offer or are you just kind of just standing firm at this point?

James L. Robo - Chairman and Chief Executive Officer

Sure. It's Jim. Obviously, you saw that the standard asked for folks to re-express an interest. I send a letter last week re-expressing our interest. We've been pretty clear that we remain interested. We have a very strong bid out there. Obviously, things have changed in the last year with Santee Cooper, rate base is different, their volumes are different, etc, etc. So - but fundamentally our bid stands and we're ready to get going and negotiating with the state on the sale and ultimately, the most important thing is, it remains very clear to me that the best route for the state and its customers and the economy of the state is to demunicipalize Santee Cooper and get it in the hands of an entity like ourselves that will run it in the best-in-class way. And there is enormous value I think to bring to the state through our ability to bring to decarbonize, our ability to have low bills over a long period of time, and our ability to really operate efficiently - operate efficiently and bring great reliability to bear one of the - I think you've seen the progress we've made at Gulf, and I think that's a great example of the kind of progress that we'd be able to make at Santee Cooper as well.

Shar Pourreza - Guggenheim Partners - Analyst

Terrific. Thank you guys for everything and good execution.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Thanks, Shar.

Operator

And our next question today comes from Steve Fleishman with Wolfe Research. Please go ahead.

Steve Fleishman - Wolfe Research - Analyst

Hey, good morning.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Good morning, Steve.

Steve Fleishman - Wolfe Research - Analyst

Rebecca, can you hear me okay?

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

We can hear you just fine.

Steve Fleishman - Wolfe Research - Analyst

Great. So just curious, first on the NEP acquisition, as you mentioned, for the most part historically you haven't been able to make returns work on third-party acquisitions, so could you maybe talk about the returns you expect on this transaction? And is this a suggestion that you're more optimistic that there'll be more third-party acquisitions that meet your return hurdles?

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Yeah. Steve, we're really excited about the acquisition. And as we highlighted, both in terms of the financial characteristics of it. One of the things that was particularly attractive about this portfolio when we looked at it is our team's ability to add value on the operation and maintenance cost side, really think about it as we bring assets into the portfolio. It really gets leveraged on the platform that we already operate. And so the team is really excited about how we can add incremental value through the Energy Resources management of these assets at NextEra Energy Partners.

We've been very excited about NextEra Energy Partners' growth outlook for quite some time. As we've always indicated, it's well-founded - our excitement is well-founded, just simply looking at the backlog of both operating and signed contracts, and then the potential for new contracts in Energy Resources. But I have always alluded to the fact that really our market opportunity is this broader market set and we'll continue to engage and look for opportunities. I do think there are more opportunities out there, third-party acquisitions on the renewable side. It's an area of focus for us to continue to participate in, but we've got the three ways to grow and to the extent that we can put opportunities to gather great and we'll take advantage of them over time, but we also continue to have terrific organic opportunities in NEP, particularly as the portfolio grows, and then of course, the continued success of Energy Resources in the broader market is very positive.

Steve Fleishman - Wolfe Research - Analyst

Okay. And just any sense on the returns you expect on this acquisition?

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Sure. We've already highlighted the - in terms of the CAFD produced for the assets is $60 million-plus relative to the acquisition price that we highlighted, obviously, that's subject to closing adjustments. So that's at the project level and then we'll optimize the financing over time, particularly as we think about the rest of the growth expectations for 2021 and to 2022.

Steve Fleishman - Wolfe Research - Analyst

Okay. And then just maybe a little bit more color on the Biden infrastructure and tax plan. Just, I guess, maybe obviously, you made it clear that the infrastructure side would be beneficial to your business, I think. How about - how are you thinking on the tax side? And are there any risk to you from that either just the higher rate or the minimum book-tax issue? Thanks.

James L. Robo - Chairman and Chief Executive Officer

Steve, it's Jim. Obviously, there was a lot - there was a lot to unpack in the plan. It's very early in the process. I think this is a process that's going to play out over months, not weeks. There is obviously a lot in the plan. It's very positive from a renewable standpoint. And as Rebecca said in the prepared remarks, we are excited to work with the administration on the plan that I think is really going to accelerate the decarbonization of the US economy over the next several years. In a way that is we've always said for a long time, it's going to be essentially free to customers, i,e. not more expensive for customers, right? I mean, the thing about the green economy is that, it's cleaner, it's greener, but it's also cheaper and that is why it's so powerful.

So, a lot of details, obviously, still to be worked out. We are working them. As you can imagine, it's very early, and probably too early for me to comment on any of the specific details that we feel like need some work versus the ones that we like a lot. On the tax front, I think, obviously, that's - there are a lot of puts and takes with taxes, particularly in a company that has both utility assets as well as renewable assets and we're working through it. Think about the tax rate being - tax rate going up something in the $0.04 to $0.07 of headwind. I'm not particularly worried about that in the context of all the other things that would be positive for our company if the infrastructure bill gets passed. And so we continue to work obviously that as well and lots of details still to be laid out on the minimum tax issue and that also matters as to what the final corporate rate ends up being.

And I guess the last thing I would say is, none of this is going to be easy to get done. It's very narrow margins in both the Senate and the House, and folks tend to focus on the Senate in extraordinarily narrow margin given kind of vacancies in the House right now as well. And there is the history on mid-term elections suggests that it's always an uphill battle for the current administration in mid-term for whatever parties in power in the mid-term elections of Presidency. So that on the one hand, I think put some urgency, I think, around the administration's push to get something done this year, but the flip side is, it also there is a lot of risk from moderate democrats to take a vote on some of these issues.

So it's going to be very - any change will be very hard. And I think we were very much a part of - we've always been very active in terms of what happens around clean energy policy in Washington. And you can imagine that we're remaining very active on that front and working it very hard. But I would just say in closing that we are very much encouraged by the focus of the administration on decarbonizing the economy. We feel like it's absolutely the right thing to do, right thing for the planet, and the right thing for customers, and the right thing for the country, and we stand ready to support an infrastructure plan that accelerates that decarbonization. And I think any acceleration of what's already going on, just because of the amazing economics that renewables have relative to the other alternatives plus what's going on with hydrogen and you saw there was a PTC - Hydrogen PTC as part of the - suggested as part of the infrastructure plan. So there's a lot of very positive things in there that we're going to be working on to build on over the next several months.

Steve Fleishman - Wolfe Research - Analyst

Great. Thank you very much.

Operator

Our next question today comes from Stephen Byrd at Morgan Stanley. Please go ahead.

Stephen Byrd - Morgan Stanley - Analyst

Hey, good morning. Thanks for taking my questions.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Good morning, Stephen.

Stephen Byrd - Morgan Stanley - Analyst

I wanted to explore green hydrogen a little bit further. You all have expressed a lot of enthusiasm about the potential for growth here and the potential for joint venture activity. And I was just curious, your latest thinking there and I guess it - I guess, broadly I've been thinking that sort of the combining best-in-class renewables that you have with significant capabilities and actually sort of marketing, distributing, selling, etc, hydrogen would be critical to success in terms of supply and end-use customers with green hydrogen. And I'm just curious your general outlook enthusiasm for the prospects for more JV announcements.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Perfect. Thanks, Stephen. Let me start with the longer-term view first and then come back to the shorter-term view, which would really tie into, I think, the latter part of your question and comment. The first part, which is the latter term view is, when we look at substantial deployment of renewables and battery storage, and think about how do you further decarbonize the US electricity sector. When we previously ran that analysis, just trying to add more renewables and add more battery storage, it became very burdensome for customers because you aren't getting a significant amount of value to the more and more renewables and storage you add, absent other actions.

So when we incorporated hydrogen into that thought, which is effectively a form of long duration storage that is taking advantage of the cheap electricity production coming from renewables, in some cases, excess renewable production at certain times of the day, that substantially change the value equation for customers to fully decarbonize in the electricity sector. So that gives us great excitement about the potential for substantial renewables and battery storage deployment knowing that as you continue to deploy more and you find economic forms of long duration storage that continues to be very value accretive to customers both in cost and in the performance of clean energy.

So that's kind of the starting point, but then coming back to a little bit more nearer term, if you think about how do you decarbonize transportation in industrial sectors, the most exciting ways to do that, that we see today is through electrification, whether that's in the form of electric vehicles fueled by batteries or other type of fuel cells or through hydrogen. And hydrogen probably is more applicable on the industrial sector, particularly for applications that already exist today.

So - and with - as Jim highlighted, the potential for hydrogen production tax credit being considered by the administration and by Congress as part of the infrastructure package. In the nearer term, we could see a closing of the gap perhaps fairly quickly to creating this as an economic alternative to other fuel sources today that are fossil fuel-based.

So yes, we couldn't be more excited about it for both the opportunities for renewables, for electricity sector, industrial and transportation. But also, as you suggested, potentially to participate in the hydrogen infrastructure itself whether it's the electrolyzer or other forms of creating and distributing the molecules. How much, and where we participate in that is really one of the things that we're focused on in all of these different pilots that both John and the Energy Resources team as well as Eric within Florida Power & Light are thinking through today. How do we do that economically? How do we leverage some of the scale benefits and opportunities that our business can bring to bear in these opportunities?

You'll see us continue to place small bets to get experience, to build relationships, to gain knowledge, and over the - in the short term, that won't add up to a heck of a lot of capital investment opportunity, but it will add up to a tremendous amount of learning and continuing to focus our strategies on where we can add significant amount of value to the infrastructure and the market and ultimately to our shareholders as well.

Stephen Byrd - Morgan Stanley - Analyst

That's really helpful. And then just separately thinking about the mix of growth at resources, obviously, there's a lot of solar activity, a lot of solar megawatts that you'll be deploying. I just wanted to get your latest thinking on the outlook for returns between solar and wind. I guess I generally hear continued views that solar returns are certainly lower than wind, there is more competition there, but just curious, your latest thoughts on solar versus wind return outlook.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Sure, Stephen. From a return standpoint, we do see a differential we have for quite some time, overall returns between wind and solar from a risk-adjusted basis. We're happy with returns that we've seen in both sets of technologies. In the short term, in terms of backlog that John and the Energy Resources team, it certainly has been influenced by what I think is the conventional wisdom for a long time that the step-downs for the production tax credit on wind and the step down for the investment tax credit on solar were in fact likely to happen. I think our customers now are thinking about that a little bit differently as discussions in Washington has started to heat up.

But as we look what our likely outcomes as Jim was talking through, including the potential for extensions of those incentives, I think the key takeaway is, they remain - both technologies are very likely to remain economic for our customers to deploy on behalf of their customers and ultimately leading to significant cost savings for electricity buyers at the end of the day. So, they remain attractive from our perspective and we continue to focus our development efforts on wherever we can add value for our customers.

Stephen Byrd - Morgan Stanley - Analyst

Very good. Thank you very much.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Thanks, Stephen.

Operator

And our next question today comes from Michael Weinstein with Credit Suisse. Please go ahead.

Michael Weinstein - Credit Suisse - Analyst

Hi, good morning.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Good morning, Michael.

Michael Weinstein - Credit Suisse - Analyst

Could you - on the subject of third-party acquisitions for NEP, could you comment on any opportunities you're seeing in Texas following Winter Storm Uri? I think we've heard some previous comments that there are lots of parties looking at distressed assets in the state and wondering if there might be an opportunity for NEP as well.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Yeah, Michael. I think it's probably still a little bit too soon. I think most participants in the market are still working through a lot of the implications and learnings from Texas. So I'm not sure there is a lot to be commented on in the near term. It's obviously something will stay engaged in the market and participate where it makes sense, but at this point, I think it's too soon.

Michael Weinstein - Credit Suisse - Analyst

As - can you comment a little bit about how much it costs to weatherize in the state? And what actions you guys have been taking since the storm?

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Yeah. So we've done a lot of deep dives across our portfolio to think about where weatherizing makes sense. As I've talked about in the past and you well know, we have a lot of interest across Texas, not only wind investments, solar, battery storage, gas infrastructure investments, and of course, a small retail business. So we've been carefully thinking through all of what are the opportunities to learn and perhaps invest going forward. Specifically to weatherizing, I don't know if you were talking exclusively around the renewables fleet or if you're talking about the gas infrastructure side.

But on the renewable side, keep in mind that weatherization really focuses on ambient temperature effects and ambient temperature, at least for our fleet, I can't speak for everybody's, was not the real issue for any sort of production shortfall versus a P-50 forecast. It was really related to the fact that this in this extraordinary event that happened for multiple days, it was preceded by an icing event, so ice was accumulating on our blades and when ice accumulates on the blades, it's difficult for them to spin. And because the temperatures remained low for several days in a row, there was an opportunity for that ice to shed.

Typically weatherization packages don't really address ice accumulation on the blades. This is something that the industry is focused on. There are some of what at this point are very expensive solutions to try to address ice accumulation on the blades and given that they don't happen every year and certainly don't happen frequently across specific sites every year and ends up being very cost-prohibitive for something that happens very sporadically.

So I'm not optimistic that there is a substantial amount to do at least today with respect to weatherization on the wind side to change the events. I do think there's opportunities across the gas supply side to improve the ability for gas to flow, which obviously was really at the crux of the issues along with not only natural gas supply shortages but plant issues and issues in the coal fleet and issues in the nuclear fleet. So there's opportunities across the market to invest.

John W. Ketchum - President and Chief Executive Officer

Yeah. And if I could just add to that what Rebecca said, this is John. When you look at ERCOT's overall operating fleet, what they really do have to address at the end of the day is weatherization of gas, because you think about 87, 88 gigawatts that were supposed to be available, I mean renewables on an NCF adjusted basis were only about 3 gigawatts of that and very much a rounding error in the problem that occurred in Texas. And so Texas really needs to think through what are the right solutions for gas because when you have icing conditions, it doesn't matter if it's blades on a turbine, it's a combustion gas turbine, it's a nuclear power plant, it's a coal plant. When you have severe icing conditions, they're all going to fail. And that's what we saw in Texas.

And so, the question is, what is going to be the right market construct going forward to provide the appropriate incentives for weatherization and for backup fuel on-site to make sure that these facilities are capable of running and I think those are the kinds of issues that the Texas Legislature is currently evaluating.

Michael Weinstein - Credit Suisse - Analyst

Got you. Hey, one last question from me. These third-party acquisitions at NEP put any kind of pressure on IDR payments and on the IDR scheme going forward?

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

I'm not sure what you mean by pressure, but ultimately the calculation for IDR's is one that's known and relates to the overall growth in cash flow within NEP. So it's not specific to what the acquisition source was for the asset.

Michael Weinstein - Credit Suisse - Analyst

Okay. Just wondering if you see a big uptick in third-party acquisitions that have dropped down cash going up to NextEra, is there any kind of pressure one way or another to change the IDR structure?

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

No, there is not a difference in terms of the structure. And at this point in time, NextEra Energy Partners and NextEra Energy remain happy with the IDR structure that's currently in place.

Michael Weinstein - Credit Suisse - Analyst

Great. Thank you.

Rebecca J. Kujawa - Executive Vice President Finance and Chief Financial Officer

Thanks, Michael.

Operator

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NEXTERA ENERGY INC

Q1 2021

Earnings Transcript

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