Good day, everyone, and welcome to the NextEra Energy and NextEra Energy Partners Conference Call. Today's conference is being recorded. At this time for opening remarks, I'd like to turn the call over to Mr. Matthew Roskot. Please go ahead, sir.

Thank you, April. Good morning, everyone, and thank you for joining our fourth quarter and full year 2017 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; John Ketchum, Executive Vice President and Chief Financial Officer of NextEra Energy; Armando Pimentel, 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 & Light Company. Jim will provide some opening remarks, and we will then turn the call over to John for a review of our fourth quarter and full year results. 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, on 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. With that, I will turn the call over to Jim.

Thanks, Matt, and good morning, everyone. As John will describe in more detail later in the call, 2017 was a terrific year for both NextEra Energy and NextEra Energy Partners. Moreover, 2017 was a year in which we successfully positioned both businesses for strong growth well into the next decade. For NextEra Energy Partners, we started 2017 by structurally modifying the IDR fee, which allowed NEP to extend its distribution growth expectations through at least 2022, avoid the need to sell common equity until 2020 at the earliest, other than modest sales under the ATM program, and increase levered returns for unit holders to the low double digits on future acquisitions. This change, combined with other steps we took to improve NEP's investor value proposition over the past year, including governance enhancements, stand-alone credit ratings in the mid to high BB category, and NEP's utilization of additional sources of low cost financing, helped separate NEP from its peers. We were able to grow the NEP LP distribution by 15% year-over-year and deliver a total unit holder return of over 75%. NEP outperformed other yieldcos by more than 55% on average, and its total shareholder return was almost 90% higher than the Alerian MLP Index. With the flexibility to grow in three ways -- acquiring assets from Energy Resources, organically, or acquiring assets from other third parties -- NEP has clear visibility to support its growth going forward. As we've said before, Energy Resources portfolio, as of the end of 2016, provides one potential path to support NEP's 12-15% growth per year through 2022. And, with one of the lowest costs of capital among all yieldcos and MLPs, NEP has the currency to be competitive in acquiring long-term contracted assets from other third parties going forward. With tax reform and a…

Thank you, Jim, and good morning, everyone. NextEra Energy delivered solid performance in the fourth quarter, capping off an outstanding year overall. We achieved full year adjusted earnings per share of $6.70, up 8.2% from 2016, while continuing to make excellent progress on our major growth initiatives. FPO grew regulatory capital employed approximately 10.3% year-over-year as we continue to invest in the new and modernized generation as well as a stronger and smarter grid to further improve the already outstanding efficiency and reliability of our system. All of our major capital initiatives, including one of the largest solar expansions ever in the eastern US, remain on track. In 2017, FPL continued executing on its outstanding customer value proposition, delivering its best ever service relatability performance while maintaining a typical customer bill that is more than 25% below the national average and the lowest among the top ten investor owned utilities by market cap. As Jim mentioned earlier, 2017 was the best period for new wind and solar origination in our history. The Energy Resources team added more than 2,700 megawatts of new renewables projects to our backlog, including the largest combined solar and storage facility in the United States announced to date, and roughly 700 megawatts of additional wind repowering to our backlog. Over the course of the year, we commissioned roughly 2,150 megawatts of wind and solar projects in the US, including the first approximately 1,600 megawatts of our repowering program. All in all, 2017 was a terrific year of execution at FPL and Energy Resources. Now, let's look at the detailed results, beginning with FPL. For the fourth quarter of 2017, FPL reported GAAP net income of $344 million, or $0.73 per share. FPL's adjusted earnings for the fourth quarter, which excludes a tax reform related item that…

[Operator instructions] We'll take our first question from Stephen Byrd with Morgan Stanley. Please go ahead.

Good morning. Congratulations on good results and a great outlook. I wanted to hit first on the last thing John talked about on NextEra Energy Partners in terms of the potential for sell of the Canadian portfolio. I didn't quite follow the potential benefit of that and how to think about that. What would the rationale be in terms of tax reform?

We are looking, as a result of tax reform, at some optimization opportunities around our international portfolio. There is a difference between the federal income tax shield in the US and in Canada after the results of tax reform have come through. This has pinpointed a potential capital recycling opportunity, where we may be able to sell the assets in the Canadian portfolio and then use those proceeds to reinvest either in third party M&A opportunities or acquisitions from energy resources or to support our organic growth program. By reinvesting those proceeds in the US, it has the effect of actually creating more CAFD for every dollar invested. Because of that, it puts us in a position where we could extend our runway, our financial expectations, and extend the need for common equity. So, it's kind of a very interesting opportunity that we continue to evaluate here internally.

Understood. That makes a lot of sense. At the beginning, you mentioned some of the changes in rating agencies in terms of targeted ratios. I just want to make sure I understood that properly. Given the most recent change from Moody's that you mentioned, moving from 20% to 18% if there was a mix of regulated assets in the 70% range, am I to understand that if you had that kind of business mix that would result in additional leverage capacity over the $5-7 billion? Did I get that right?

Yeah, so let's walk through it. Right now, here's the state of play. We are at 23% FFO to debt with S&P. We're currently at 20% CFO to debt with Moody's. Moody's has said that we have an opportunity to move down from 20% to 18% if we're able to further improve our regulated business mix up to 70%. S&P though is still the gating metric, so S&P -- we feel like, if we can improve our regulated mix to right around the same range that Moody's is targeting, that would also result in a reduction to the S&P credit threshold. So, yes, that would create additional balance sheet capacity. But, right now, the $5-7 billion of balance sheet capacity that we described is tethered to where we stand today, which is 23% at S&P and 20% at Moody's, with the opportunity to further improve upon that $5-7 billion of excess balance sheet capacity if we're able to make a slight improvement in our regulated business mix for both agencies.

That's very clear. And then, lastly, on the utility business. In terms of tax reform, I just wanted to check whether that has any impacts on your net rate base growth? I was wondering whether it might increase your rate base growth or if you think your overall rate base position over time is similar to where it's been in the past, pre tax reform.

No, it does impact our rate base. One of the main impacts of tax reform is for rate regulated utilities. Customers and shareholders benefit because we're able to preserve in the final outcome of tax reform the ability to fully deduct interest at the utility level. But, that was made as a compromise in exchange for no longer being able to take immediate expensing at the utility. So, if you can't take immediately expensing at the utility as the impact of lowering our deferred tax liability, which is actually zero cost equity in our capital structure -- so, if that goes down, it's just more equity that we're able to put into the business, which has an effect of increasing the rate base growth over time.

Understood. I'll follow offline in terms of going through the rate base calcs. Thanks so much.

We'll take our next question from Steve Fleishman from Wolfe Research. Please go ahead.

Hi. Good morning. A couple of questions. On the excess capital, the $5-7 billion, to clarify in your plan and growth rate, you're just effectively keeping that as cash on the balance sheet for now? It's not being put into buybacks or any investments? It's just extra available cash?

Yeah, exactly, Steve. We think of it as excess debt capacity that we have on the balance sheet. Utilizing that excess balance capacity is not in our current financial expectations. It's really a cushion and upside. So, if later on, we wanted to explore one of three options, one of which could be a buyback and another could be something in the regulated M&A space, or an incremental capital investment opportunity around the two main businesses. Those are opportunities to utilize that excess balance sheet capacity.

Okay. In your 2018 guidance, it's up about $0.65 from prior midpoint. So, $0.45 of that is tax. Is there any particular item that represents the other $0.20?

Yeah, it's pretty simple. We took the $6.70 and we just said, "Look, we're going to assume we're going to grow $6.70 at 8% and then add on $0.45." So, really that extra $0.20 is roughly that additional 8% off the $6.70 and targeting the midpoint of the $7.70 in '18.

Great. Can you give us a sense against these S&P and Moody's metrics, where are you with tax reform? We have your metrics as of now, but it doesn't include with the tax reform changes in terms of FFO to debt?

Yeah, we do not expect tax reform to have an impact on where the metrics currently stand. So, what I just told you takes into account tax reform.

Okay. And then, just lastly on NEP, in terms of the communication here, the Canadian transaction might be an upside to runway and growth runway? And then, you're still just assuming the NEE portfolio as a dropdown as of year end 2016. So, anything you've done '17 and plan to do through 2020 would be additional potential growth for NEP?

Exactly. NEP has terrific visibility into future growth because of that. If you locked our portfolio down as of the end of 2016, consistent with what we said the Investor Conference, that locked down portfolio was enough to support NEP's growth 12-15% through 2022. So, what we've been able to add since then is incremental to that. And, on the Canadian portfolio, we would only do that transaction if it is incrementally accretive to our long-term grown runway and puts us in a position to extend our financial expectations and potentially our need for common equity.

Great. Thank you very much.

We'll take our next question from Michael Lapides from Goldman Sachs. Please go ahead.

Hey, guys. Jim, I'm curious how you're thinking about this and how you and the management team will present to the board, because it's obviously a board decision. With the one-time step up in earnings guidance for 2018, how are you thinking about the dividend and whether there's a similar one-time step up in the dividend and then continued growth from there?

So, as you said, it's a board decision. We have been talking about some various options over the last couple of months. In 2015, when we set the 12-14% growth rate through at least 2018, the at least was not a mistaken two words we put in front of that. We're going to be reviewing a variety of different options. Obviously, earnings are stepping up with the midpoint at $7.70, something like 15%. So, we will have some room from a payout ratio standpoint. We have a lower payout ratio than the rest of the industry does, so we have some room there as well. I'm a big believer in returning cash to shareholders, so we'll be making our recommendation here in a few weeks and we'll have an announcement sometime in February, once we make the decision at our board meeting.

Got it. Post tax reform, how does NextEra, and how do you, look at the M&A market in utilities? Does tax reform make M&A more difficult for utilities? Does it make it less difficult for utilities? We have a number of years where there has been an accelerated level of transactions. I just want to get your high-level views.

I think two things, Michael. One is that it obviously takes a pretty important uncertainty off the table. You know at least what the rules of the road are for how you finance any potential acquisition going forward and what the benefits are. Secondly, I think you've seen the rating agencies put a variety of our peers on negative watch over the last couple of weeks because tax reform, all else being equal if you're 100% regulated, puts stress on your FFO to debt ratios. We've been very methodically moving our business mix to create a balance sheet capacity, and to improve our business mix over time. I think we're in a unique position relative to the rest of our peers, vis-à-vis our capacity. So, that's obviously a positive for us. That said, we're going to continue to be super disciplined about what we look at and it'll have to be accretive and make strategic sense for us. As you've seen over the years, we've been very disciplined and we haven't changed things for the sake of just getting them to close. That will continue to be how we approach M&A.

Got it. Thank you, Jim. Thanks, guys. Much appreciated.

We'll take our next question from Greg Gordan from Evercore ISI. Please go ahead.

Thanks. Good morning, guys. Congratulations. Great numbers. Just a follow-up question, and then a new question. Your earnings were up 9%, the $0.55 that Steve Fleishman articulated, with $0.45 from tax. If I'm just thinking about the components of the other $0.20, is part of that the increased earnings power from not having bonus depreciation in '18 and beyond and the resultant increase in earnings power at the utility? And then, if I do that math, the delta would come from better outcomes at Energy Resources, ex tax reform. If so, what are you seeing that's ahead of the prior plan in Energy Resources that caused you to -- whatever that component is -- increase it by that amount?

Really, we're just rebasing. If you took $6.70 and you said what's the right midpoint for 2018, we've been telling investors we'd be disappointed not to be able to grow '18 at 8% off of '17. That's your missing $0.20 to get you to the $7.70 midpoint. And then you add on $0.45 for tax reform -- and tax reform primarily reflects the reduced corporate tax rate from 35% to 21% in Energy Resources. A couple of other things in there -- a little bit of a deferred tax benefit at FPL as well -- that that's all in the $0.45. That's how you get to $7.70 as the midpoint. The midpoint for '18 is what we're targeting and what we are then going to base our future growth expectations off of at 6-8% off that 2018 $7.70 baseline going forward.

Great. With regard to the explanation of what you're doing with regard to helping FPL customers on Slide 7, would you mind walking through the steps of what happened this year and how you utilized the reserve amortization to offset the Hurricane Irma costs, and then how the reserve amortization will be replenished, and then how that positions you to then avoid having to ask customers for more money for another two years?

Really simply, we had a $1.3 billion regulatory asset on our books and that asset was there because we anticipated having to charge customers $4.18-$5.50 or so in '19 and '20. So, that established a regulator asset on our books for about $1.3 billion. We then said, "Well, tax reform has occurred. Here's an opportunity to immediately return tax savings to customers by utilizing surplus in the right way." The average savings for the customer is going to be about $250.00. You'll see an immediate rate reduction of $3.38 when Matthew rolls off on March 1, and potentially the ability to avoid a base rate increase up through 2022. So, how did we do it? We wrote down the $1.3 billion. We had sufficient surplus to offset the majority of that $1.3 billion, and it's a permitted use of surplus under or settlement agreement to do that. That left roughly $50 million after tax that could not be recovered from surplus. We are excluding that from adjusted earnings as a tax reform related item. And then, as you go forward, since we start with a zero reserve amortization balance, we're able to replenish that over time through the tax savings that we get from the reduction in the federal income tax rate of 35% to 21%. Instead of immediately flowing that savings to customers over a much longer time as you amortize that benefit out, this is a way to get the savings in the customers' pocket immediately. So, that's how that works. We would expect to end 2020 with a reserve amortization balance that would be sufficient to potentially allow us to stay out of a rate case for up to two years.

That's great. I really appreciate it. Thank you.

We'll take our next question from Julien Dumoulin-Smith from Bank of America. Please go ahead.

Hey. Can you comment on the payout ratios here and your related thinking on that? I heard your earlier commentary about evaluating the pace of GPS growth, but can you give us a little bit of a sense of your thinking about eventual payout ratios under the new forecast? Has it evolved at all? That could give us a little bit of a sense on how you're thinking about this, if it's changed.

I think what I said is probably all I'm prepared to say. It's a board decision. The industry average payout ratio is around 65%. Our current payout ratio is below that and is now, with the new rebasing we've done in 2018, will be quite below that. As I said earlier, I'm a big believer in returning cash to shareholders. We are discussing options with the board right now, and we'll have an announcement on it in a few weeks.

Got it. As you think about some of the financing benefits from 100% expensing with tax reform as well as, I imagine, some benefits in terms of equipment costs, how has that changed your financing plan on the near side? If you could just talk about that a little bit and maybe discreetly break it up? At the same time, on the equipment side, how has that changed your outlook for '21 and even '22 at this point in terms of the near business trajectory?

Two things I'll say about that. First of all, we're not limited in terms of our interest deductibility, so it really doesn't change a whole lot, the way we would approach financing those businesses. We will continue to expect tax equity dollars to be available. Again, we have always had a first call on the tax equity market, so we intend to finance the Energy Resource's renewables build in much of the same way as we have in the past. In terms of tax savings and its impact on the renewables business, a lot of those tax savings from manufacturers in particular, we would expect to hopefully see some benefit in reduced prices on the equipment side, as a result of the lower taxes that they will be paying. Armando, I don't know if you have anything you want to add to that?

No, I think you said this a couple of times today. Things are going well at Energy Resources, and there's nothing really that happened in tax reform that upsets our plans going forward we feel really good about energy resources and that.

To clarify, in terms of wind equipment pricing itself, how much does that cut? How much are you realizing the benefits that I suppose others are talking about and how has that changed your own views on '21 and '22? Clearly, you extended the outlook.

I think what we have said is we saw a 30% reduction last year and as much as 10% going forward. Tax reform could have some incremental benefits probably on top of that. We will certainly, as always, try to squeeze our supply change to pass those benefits on to us. This is a competitive space. In order to be competitive, if you're on the equipment side and deliver the lowest price possible while retaining your profit margin, you're probably going to be expected to relay most of those tax benefits on to your customer, if you want to be competitive.

Julien, just one other thing. When we talked about 30% and 10%, that's cost per kilowatt hour or cost per megawatt hour. We would expect the -- that's the way we think about it and that's how we -- it's not just turbine price. It's wind capture, balance of plant reduction in costs, and all of those things.

Got it. Excellent. Thank you. Congratulations, again. ...

This concludes today's presentation. We thank you for your participation. You may now disconnect.