NextEra Energy, Inc. (NEE)

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NextEra Energy, Inc. (NEE)

2013 Investor Conference

March 12, 2013 1:00 pm ET

Executives

Julie Holmes

James L. Robo - Chief Executive Officer, President, Chief Operating Officer and Director

Eric E. Silagy - President and Director

Moray P. Dewhurst - Vice Chairman, Chief Financial Officer and Executive Vice President - Finance

Armando Pimentel - Chief Executive Officer and President

Analysts

Brian Chin - Citigroup Inc, Research Division

Andrew Bischof - Morningstar Inc., Research Division

Presentation

Julie Holmes

Everyone, if you could take your seat, please. Thanks. We'll get some water passed around. Thanks, everyone. Good afternoon, and welcome to the NextEra Energy 2013 Investor Conference. Today's agenda, we're going to have Jim Robo provide an overview of the company, and that will be followed by Eric Silagy, the President of our Florida Power & Light Company. We'll give everybody a little bit of a break and some snacks after that, and we'll come back and Armando Pimentel will give an update on NextEra Energy Resources and our transmission business. And then Moray will wrap everything up with a financial outlook.

We're going to hold Q&A until the end of the 4 presentations today, when all 4 of our execs will come up, and we'd ask that you please wait for a microphone. We are webcasting today. And if you could minimize your texting and e-mailing, to the extent we could avoid any interference, that'd be great. I'm not going to ask you not to do it, but please silence your phones. We'd appreciate it.

A couple of housekeeping items. We've got surveys on the tables. We'd really appreciate your feedback. So if you could take the time after the conference today and fill out the surveys, and leave them on the tables. We'll collect them after. For those who are listening on the webcast, our survey provider will send you a link to the -- or will send the survey to you with instructions to get it back to us.

Second housekeeping item is our cautionary statement. Today's presentations will include forward-looking statements and references to non-GAAP financial measures. You should refer to the cautionary statements and risk factors in our presentation, along with all of the recent SEC documents. And with that, I'm going to turn it over to Jim.

James L. Robo

Great. Thanks, Julie, and good afternoon, everyone. Thanks for being here. I have a few things I want to cover this morning before we get in to the other speakers. First of all, I'm going to spend a few minutes talking about 2012 and some of our accomplishments in 2012. I'm going to lay out a few thoughts on our business strategy going forward. I'm going to talk then about the growth strategy at FPL through 2016, spend a few moments talking about the Energy Resources growth strategy through 2016, and then I will pull it all together and share some thoughts on both our CapEx and our earnings going forward.

I think, today, if you take one thing away from our conference this afternoon, I want you to take this away: that we are positioned to grow off of a 2012 base, 5% to 7% per year, earnings, through 2016. The 5% is completely anchored by the $9 billion of capital that we have in our baseline forecast at FPL and the $3.6 billion we have of growth CapEx in our backlog in Energy Resources.

On top of that, we have $6 billion to $8 billion of terrific growth projects, at both FPL and Energy Resources, that I think will allow us to earn at the high end of that range, 7% a year compound annual growth off a 2012 base, that would get us to $6 a share in 2016. If you take away one thing today, that's the message I want you to take away.

So let me go in and spend a few moments talking about 2012. We had a terrific year in 2012. The best EPS -- adjusted EPS growth of any of the top 10 market caps in the space. We have the best dividend per share growth forecasted through 2014 of any of the top 10 market caps in the space. We had the #2 ROE in the space last year, the #2 total shareholder return on a one-year basis. On a 3-year basis, we had the #3 total shareholder return, when you look at the top 10 market caps.

Obviously, we're very pleased that we were able to come to a fair outcome to our rate case last year, an outcome that we think is very fair for customers and very fair for shareholders. It will provide us, I think, a terrific opportunity over the next 4 years to improve our customer value proposition at FPL and to do even more, to invest even more in that business, to improve that value proposition even more and continue to improve our position at FPL over the next 4 years.

On the Energy Resources side, last year, we were able to install an all-time record, something we're very proud of, an all-time record of U.S. wind megawatts, over 1,500 megawatts, the most done by any company in a single year.

Going into a few more details on FPL. In 2012, we grew net income by 16% versus 2011. We successfully completed 3 of the 4 nuclear uprates at our -- at St. Lucie and one of the units at Turkey Point, last year. We're in the midst of completing the fourth unit at Turkey Point, as we speak, and when those are complete, we'll have added more than 500 megawatts of new nuclear megawatts to our portfolio in Florida and adding much needed fuel diversity to our mix.

The thing I'm most proud about, that the team was able to accomplish last year, is they delivered terrific operating results across the board. It was our best ever safety year. We had our best ever year in reliability. We have had for a long time and continue to have top decile performance in O&M. That's not to say that I don't see a lot of opportunity now for continued productivity improvement at FPL. I think one of the things that is very important about the settlement agreement, we'll talk more about it today, Eric will spend some time talking about it today, is we have an opportunity now to focus on productivity at FPL for the next 4 years to take cost out of the business. That will allow us to invest in capital projects that will continue to improve the customer value proposition and will have benefits for both customers and for shareholders.

On the smart meter front, we nearly completed, last year, our smart meter implementation. And I'm pleased to say, right now, as of today, we're essentially complete with our smart meter implementation, 4.5 million smart meters. That is putting in place a technology that is going to also allow us to change the game at FPL, in terms of how we deliver service to customers. It will give us another lever to drive productivity and another lever to continue to add intelligence into the network to improve the customer value proposition.

On the Energy Resources front, Armando and the team delivered, in 2012, higher earnings than we expected at the beginning of the year. Obviously, the very first day of the new year, we were able to secure an extension of the wind production tax credit. That -- we effectively expect that to be a 2-year extension because of the language change allowing for qualifying for those credits, based on the start of construction. We had, as I said, continued strong performance in wind development, and we continue to make good progress on our solar backlog as well.

Overall then, we were able to grow EPS. As I said, it was the #1 of all the top 10 market caps in the space, it was only 4% EPS growth. That's not a year that I'll be satisfied with going forward, but it was the highest EPS growth of any of the top 10 market caps in the space. We were able to deliver shareholder return that not only beat the S&P utility index but also beat the S&P 500. Paul and the team on the treasury front had a terrific year raising close to $8 billion of capital. And overall, the company, not just at FPL, but overall, something that is very important to us, we had, overall, our best-ever safety performance from a OSHA recordable standpoint.

So 2012, we continued our track record, our very long-term track record, of delivering shareholder value. Over the last 10 years, we've delivered EPS growth of over 6%. We've delivered dividend per share growth over 7%. We've outperformed both the S&P 500 and the S&P Utility Index on a one-year basis, on a 3-year basis, on a 5-year basis and on a 10-year basis. I'm here today to tell you that myself and the team are completely committed to continuing that track record going forward for the next decade.

So let me spend a few minutes and talk about how we're going to do that, in terms of our business strategy. Our strategy starts with a vision, a very simple vision, and that's to be the largest clean energy provider in the U.S. At FPL, we want to be the best utility in America. How do we define that? We define that along 3 real measures: operational excellence, customer value, delivering a terrific value proposition to your customer and having a constructive regulatory environment.

On the Energy Resources side, we want to be the most profitable competitive energy supplier in the space, the largest renewable developer in North America and continue our profitable, focused gas infrastructure presence, that Armando is going to take you through in a little bit more detail.

At NextEra Energy Transmission, we're going to take our footprint, the footprint that we have in Texas and New Hampshire, and leverage that to grow a national transmission business. And overall, our goal is to leverage our position, leverage our scale and scope, leverage the skills that we've built up over the last decade, to continue to develop related new growth platforms and meet customer's needs across both our businesses.

So our growth strategy has been a key piece of our strategy over the last decade, and it's been based on some simple precepts. First of all, it's been based and embedded in a couple of the key core strategic elements that we've had for a very long time, more than 20 years, and that is, operational excellence and financial strength. We've built on that over the last decade, to add a set of commercial skills, to continue to build scope, to build scale and, as a result, start a variety of different businesses, at both FPL and at Energy Resources, that have grown quite profitably over the last decade. By -- just the businesses that we started since 2005 represent -- will represent roughly 20% of our net income in 2014.

Now as I've taken over as CEO in my first 9 months, I've been asked by investors, by rating agencies, by employees, the #1 question I get asked is, "What's going to change about your business strategy?" And I've consistently answer that question by saying that we're not going to change the underpinnings of what has been a very, very successful strategy over the last decade. Those underpinnings are things like our focus on customers, our focus on clean energy, being both low cost and highly reliable at the same time, having a strong balance sheet, commitment to financial discipline and attention to detail and a focus on execution, process discipline, knowing in every one of our processes how do we benchmark against the best and having plans laid out to get there, being effective in our risk management and having a toe in the water strategy when it comes to growth. That focus is not going to change, and it's going to continue to underpin our strategy going forward.

So let me start by talking about operational excellence. We're going to continue to have a focus on operational excellence, that's a key piece of our business strategy going forward. I think 2012 is a great example of that. Best-ever reliability at FPL and improving. We had our best ever fossil reliability at Energy Resources last year, as well as our best ever fossil reliability at FPL. Operational excellence is going to continue to be a core piece of our business strategy going forward.

Secondly, cost of performance. We have been a top decile cost performer for a very long time. We need to continue to be an outstanding performer in terms of cost. One of the things I'm very excited about is the fact that, with this 4-year settlement, we have a terrific opportunity to turn the attention of our business, which has been very focused over the last several years on the regulatory front, and focus it on improving our business going forward. We have a terrific set of O&M productivity improvements, that we're going to be talking about today. The team is focused on it. We're going to be able to leverage that O&M productivity to be able to generate room, to be able to invest incremental capital at FPL that will continue to improve our customer value proposition. That is a core piece of what we'll talk about on the FPL front going forward. So being outstanding on cost has been and will be a continued key piece of our strategy going forward.

Strong balance sheet, absolutely critical to our business strategy going forward. Having ratings that are on the high-end of the range, absolutely critical to our business strategy going forward, at both FPL and Energy Resources.

Financial discipline. We've grown a lot over the last decade. The chart on the left lays out the fact that we've acquired 4,500 megawatts of new generation. We've developed more than 12,000 megawatts of new generation over that 10 years and -- but we've also sold 3,500 megawatts of generation over that period of time. We are not focused on growth for growth's sake. It has to be profitable for us to be -- to invest the money. Financial discipline has been a core of what we've been about. It will continue to be a core of what we're about. It underlies our very conservative approach to hedging at Energy Resources. And we'll talk about this, it's very highly hedged. Obviously, FPL earnings are also protected against the commodity price fluctuations. Financial discipline is going to continue to be a core part of our business strategy going forward.

And so, through one of the most difficult periods over the last 5 years in our country's history, in terms of the tough economic times, we've been able to grow EPS by 5.5% off, of a 2007 base, through 2012. The #1 EPS growth of any of the top 10 market caps in the space. On a 5-year basis, we were able to do that. On a 10-year basis, we've been able to grow earnings faster than the top 10 market caps in the space. And our goal going forward is going to continue to drive to be at the best in the industry in terms of EPS growth going forward.

So let me spend a couple of minutes and talk about FPL. Our strategy at FPL is very simple. It starts with delivering superior customer value. If we can deliver superior customer value, that will drive customer satisfaction. Happy customers will drive a constructive regulatory environment. A constructive regulatory environment will give us a strong financial position to be able to make those investments that we've been able to make over the last decade and that we plan to make over the next several years, to improve that customer value proposition. And that is what we call, the "virtuous circle", and it's something that's been core to what we've done at FPL for a long time. We've been investing capital to improve the customer value proposition, make ourselves more fuel-efficient, make ourselves more O&M efficient, to improve the customer value proposition. That's been a key piece of our business strategy at FPL, and will continue to be a key piece of it going forward.

And so we think we have one of the best customer value propositions at FPL in the nation right now. We have the lowest bills in the state, bills that are 25% below the national average. The best reliability in the state, reliability that's in the top quartile of the nation, award-winning customer service and a clean emissions profile. When you put all of that together, we deliver a terrific value to our customers.

And one of the things that I'm most excited about is that we now have a 4-year period in which to continue to make those investments, to improve that value proposition even more going forward. How are we going to do that? First, we're going to do it by being focused on efficiency and productivity at FPL. We've identified a significant number of O&M cost savings opportunities, $75 million already, to date, in places like nuclear operations, transmission distribution and staff functions. We are focused on -- the whole team is focused on identifying additional productivity opportunities. Eric's going to talk some more about it, but our goal is simple. Our goal is to going to be to hold O&M, on a nominal basis, flat over the next 4 years at FPL, that's the stretch goal. And I'm very confident that we have a line of sight in order to be able to do that.

Every dollar of O&M savings that we can generate gives us $7 that we can invest back into the business, and have it be customer bill-neutral and invest in projects that improve the customer value proposition. That's a very powerful virtuous circle.

And so from a growth standpoint at FPL, we have $9 billion of growth in what I'll call our baseline case, and that's the baseline case that I mentioned earlier, that underpins our ability to grow EPS by 5% a year off of a 2012 base.

On top of that $9 billion of capital over the next 4 years at FPL, we have line of sight into $4 billion to $5 billion of incremental capital expenditures in very solid projects that will improve the customer value proposition, that will be win-wins for customers and win-wins for shareholders. Eric will spend more time talking about it, but it's things like incremental storm hardening, improving our overall reliability, some things that we're doing, obviously, on the natural gas pipeline that you know about. There are some environmental rules coming that may require us to do some generation upgrades. We have the Vero Beach acquisition, we have some opportunities for solar investment. We have line of sight to $4 billion to $5 billion, in total, of capital expenditures over that 4-year period, that will underpin our ability to earn at the high end of that 5% to 7% range through 2016.

Let me move now to Energy Resources. You all know Energy Resources, it's the largest renewable developer in North America. It's got a strong $3.6 billion backlog in projects that we've already signed, that many of them are already under construction, that we're going to be spending between now and 2016, and we have a terrific pipeline. Armando will speak more about the pipeline, but we have a terrific pipeline of new renewable projects as well.

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