NextEra Energy, Inc. (NEE) Q4 2010 Earnings Report, Transcript and Summary

Good day, everyone, and welcome to the NextEra Energy, Incorporated, Fourth Quarter and Full Year 2010 Earnings Release Conference. [Operator Instructions] At this time, I'd like to turn the conference over to Ms. Rebecca Kujawa. Please go ahead, ma'am.

Thank you, April. Good morning, everyone, and welcomed to our fourth quarter and full year 2010 earnings conference call. Lew Hay, NextEra Energy's Chairman and Chief Executive Officer, will provide an overview of NextEra Energy's performance and recent accomplishments. Lew will be followed by Armando Pimentel, our Chief Financial Officer, who will discuss the specifics of our financial results. Also joining us this morning are Jim Robo, President and Chief Operating Officer of NextEra Energy; Armando Olivera, President and Chief Executive Officer of Florida Power & Light; and Mitch Davidson, President and Chief Executive Officer of NextEra Energy Resources, which we will refer to as Energy Resources in this presentation. Following our prepared remarks, our senior management team will be available to take your questions. We will be making statements during this call that are forward looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements. If any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release and the comments made during this conference call in the Risk Factors section of our accompanying presentation or in the latest reports and filings with the Securities and Exchange Commission, each of which can be found on the Investors section of our website, www.nexteraenergy.com. We do not undertake any duty to update any forward-looking statements. Please also note that today's presentation includes references to adjusted earnings, which is a non-GAAP financial measure. You should refer to the information contained in the slides accompanying this presentation for definitional information and reconciliations of the non-GAAP measure to the closest GAAP financial measure. With that, I will turn the call over to Lew Hay. Lew?

Okay. Thanks, Rebecca. Good morning, everyone. In both the fourth quarter and for the full year of 2010, NextEra Energy achieved strong financial results. For the quarter, we earned adjusted earnings of $332 million or $0.80 per share. And for the full year, we earned record adjusted earnings of $1.8 billion or $4.30 per share. Even though last year was one of the most challenging business environments we've ever faced, NextEra Energy was able to grow adjusted earnings per share by 6%, right at the midpoint of our long-term adjusted EPS growth expectations of 5% to 7% per year on average through 2014, starting from a 2009 base. In addition, when measured over the long term, we continue to provide a strong track record of outperformance when compared with our peers in the overall market. For the five years ending on December 31, 2010, we delivered a total shareholder return of 48%, easily outpacing both the S&P 500's 12% and the S&P Electric Utilities' 20%. Over 10 years, our performance is even more impressive with a total return of 107% compared to 15% for the S&P 500 and 57% for the S&P Electric Utilities. Now one of the keys to our success over the long term has been our commitment to financial strength. This commitment allowed us to raise $3.7 billion in debt, of which $1.2 billion is project debt, at attractive rates in 2010. We also issued $711 million in equity and equity units to support our strong credit position and to enable us to invest wisely in the future. You've often heard me say that one of the features that sets NextEra Energy apart is the fact that we have two great businesses under one roof. The wisdom of that strategy was clearly evident last year. In 2010, as challenging market conditions limited the growth of Energy Resources' adjusted earnings, FPL once again became the largest driver of NextEra Energy's adjusted earnings growth. Something that we expect to continue through at least 2014. The rate settlement approved by the Florida Public Service Commission in December will effectively freeze base rates through 2012, provide cash recovery for our new combined-cycle natural gas unit at FPL's West County Energy Center and provide the company with an allowed retail regulatory return on equity or ROE of 9% to 11%. The settlement agreement provides financial certainty to customers and regulatory certainty to FPL. And we appreciate the willingness of those who represent Florida's electric consumers to work with us on a constructive outcome. We believe FPL's retail regulatory ROE will be at or near 11% in 2011 and 2012. Over the four-year period from 2011 through 2014, FPL plans to bring into service major capital projects that cost approximately $6.4 billion, from combined-cycle natural gas plants to nuclear uprates to the Smart Grid. Not only do we expect our overall retail base rate to expand at a compound annual growth rate of approximately 8.5% through 2014 from a 2009 base, but we also expect to earn an appropriate return on our investments over time while continuing to provide great value to our customers. In December, we brought online a 75-megawatt solar thermal array that is fully integrated with and augments the steam produced by our combined-cycle gas unit in Martin County. This represents the last of the original 110 megawatts of solar projects approved for clause recovery in 2008 by the Florida Public Service Commission. As with all of the projects in our Florida pipeline over the past few years, we completed the Martin solar thermal array on schedule and under budget. NextEra Energy's strong financial performance is matched by the company's ability to consistently achieve high levels of operational performance. In 2010, FPL's fossil fuel fleet set another record for its efficiency, bringing the system-wide heat rate down to 8,043 British thermal units per kilowatt hour. The average heat rate for the industry was 10,060 British thermal units per kilowatt hour for 2009, the most recent year for which data are available. Since 2001, FPL's heat rate has improved by 17%. And in 2010 alone, we saved customers more than $600 million in fuel costs as a result. Just as important have been our efforts to prudently manage costs. For all of 2010, FPL's non-fuel O&M expenses were $0.015 per kilowatt hour compared with the 2009 industry average of $0.022 per kilowatt hour. On service reliability, the company's System Average Interruption Duration Index or SAIDI was again top quartile in the industry. At Energy Resources, we added 754 megawatts of wind capacity in North America in 2010, including 70 megawatts from acquisitions. At the end of the year, we owned 8,298 megawatts of wind power. Not only are we the leading wind energy owner in the United States, but we are now the fourth largest wind energy owner in Canada. We also made considerable progress in 2010 signing power purchase agreements for the production of our wind fleet. All told, we secured long-term contracts on approximately 1,238 megawatts of wind power during the year. And although not all of these contracts were for 2010 construction projects, we're happy with the progress in this area. On the solar front, the PPA for our Genesis project was approved by the California Public Utility Commission, Bureau of Land Management and the California Energy Commission in 2010. Site work started this month. And we plan for the project's twin 125-megawatt arrays to qualify for the convertible investment tax credit or CITC in 2013 and 2014, respectively. Our Spain solar project also made progress in 2010. In December, the Spanish government published its revised feed-in tariff. As we had expected, the net effect of the changes contained in the revised Royal Decree were roughly neutral to our project, and we remain interested in moving forward. Energy Resources now has a talented team in place on the ground to work with the banks, government officials and other parties to manage our interests. Armando will provide a more detailed update on Spain in a couple of minutes. Combined, the full construction of the Genesis and Spain solar projects would represent an approximately $2.3 billion investment in solar. And we expect them to be significant earnings drivers for the company starting in the 2013-2014 time frame. From an operational standpoint, Energy Resources' fleet of power generating assets performed exceptionally well during 2010, setting a high mark with its lowest forced outage rate on record. In addition to growth at FPL and Energy Resources, we expect to grow earnings through Lone Star Transmission, our regulated utility in Texas. Lone Star received approval in late 2010 to build a roughly 320-mile, approximately $800 million transmission line. The company is eligible to earn an allowance for funds used during construction in 2011, and the project is expected to be in service in 2013. Record adjusted earnings, solid earnings growth, strong operational performance and the continued development of an attractive pipeline of capital projects, this was NextEra Energy's story in 2010, and we expect it will be our story going forward as well. On that note, let me turn the call over to Armando Pimentel before I return for a few final remarks. Armando?

Thank you, Lew, and good morning to everyone. In the fourth quarter 2010, NextEra Energy's GAAP net income was $263 million or $0.63 per share. NextEra Energy's 2010 fourth quarter adjusted earnings and adjusted EPS were $332 million and $0.80, respectively. The difference between the GAAP and adjusted results is the exclusion of the mark in our non-qualifying hedge category and the exclusion of net other than temporary impairments on certain investments or OTTI. For the full year 2010, NextEra Energy's GAAP net income was $2 billion or $4.74 per share. NextEra Energy's adjusted 2010 earnings and EPS were $1.8 billion and $4.30, respectively. For the fourth quarter of 2010, Florida Power & Light had net income of $181 million or $0.43 per share. For the full year 2010, FPL's net income was $945 million or $2.29 per share. The table shown here summarizes the earnings drivers for FPL for the just completed quarter as well as for the full year 2010. In total, quarterly earnings decreased by $0.02 per share. The decrease was primarily driven by the impact of weather and increased O&M expenses. These drivers were partially offset by the impact of FPL's base rate increase and increased results from clauses, including the shifting of certain capacity charges from base rates in the capacity clause. Full year 2010 results were driven by the addition of West County units 1 and 2 and the impact of FPL's base rate revenue increases in clause results, partially offset by higher O&M, depreciation expense as a result of the settlement agreement and AFUDC. We are continuing to see improvement in some of our key customer metrics, although they are not yet all trending positively. The table in the upper left shows the change in retail kilowatt-hour sales in the quarter versus last year's comparable period. Overall, retail kilowatt hour sales fell by 3.5%, a decline due primarily to lower weather-related usage and partially offset by an increase in customer growth. Although many of you are aware that we experienced a far colder-than-normal month in December, the weather for the quarter as a whole, particularly cooling degree days, was mild relative to normal and well below the favorable weather realized in the fourth quarter of 2009. Non-weather-related or underlying usage and all other declined by 0.9%. Although some of this decrease continues to be due to mandated energy efficiency measures, I think that some is related to the impact of empty home that I will discuss in a moment, and some is also related to the effects of extreme weather that are not precisely covered in our models. Over the last 60 years, December 2010 was the coldest December on record and the fifth coldest winter month overall for our service territory. And again, our total system performed admirably during this last cold weather event, just as it did during last January's record cold temperatures. As depicted in the graph in the upper right-hand corner, during the fourth quarter of 2010 we had approximately 28,000 more customers than we did in the comparable period of 2009. This is the fourth quarter in a row where we have had customer increases compared to the prior comparable period, and we continue to be cautiously optimistic that our customer growth is returning. The graph on the bottom left shows our monthly year-over-year customer additions in percentage terms, broken down by residential and commercial customers. As you can see, residential customer additions accelerated at the beginning of 2010, then the growth held roughly steady through the balance of the year. Trends in commercial customer growth appear to lag that of the residential customers, and it was not until the summer months of 2010 that commercial growth accelerated. The coming year will be important for the Florida economy, and we will continue to monitor customer trends carefully in the next couple of months. The graph on the bottom right of the page shows inactive and low-usage customers, which we believe depict the level of empty homes in our service territory. In December 2010, the decline in residential inactive meters accelerated, while the ratio of inactive meters to total accounts experienced its largest drop since February 2010. However, despite the decline in inactive meters, low-usage customers increased slightly. While we cannot be certain, we believe it is possible that a certain number of inactive accounts are turning into low-usage accounts. To my earlier comments on sales growth, some of the customer growth we are experiencing may not yet be producing sales and, in our analysis, may be contributing to the negative underlying usage. The current environment might be viewed as a transition period as Florida is working through the effects of the real estate market downturn over the last couple of years. On the positive side, homes in FPL markets are becoming more affordable. For example, the current housing affordability index for Miami is now 66% versus 72% for the U.S. and compared to 11% at the peak of the boom in late 2006. Traditionally, housing affordability has been one of Florida's advantages. And we believe Florida will continue to be a very attractive destination to which people and industry will move. Because of the impact of -- the base rate agreement will have on FPL's earnings over the next couple of years, I would like to spend a couple of minutes reviewing the details of the agreement in general and the amortization of surplus depreciation in particular. Under the terms of the agreement, retail base rates will remain effectively frozen through the end of 2012. And through the capacity clause, FPL is permitted to recover the costs, including return, for its new combined-cycle natural gas unit at West County Energy Center up to the projected fuel savings for customers attributed to the new unit. This allows for current cash recovery without a corresponding increase in customers' total bill. The estimated 2011 fuel savings is approximately $96 million, which is roughly equal to the non-fuel revenue requirements for the plant at a 10% ROE. The authorized retail regulatory ROE remains within the range of 9% to 11%, and is measured on an actual non-weather-adjusted basis. I will refer to the actual non-weather adjusted retail regulatory ROE in this discussion as just retail regulatory ROE. As you recall, as part of the rate order issued in March 2010, the Commission determined that FPL had $895 million in net surplus depreciation and ordered FPL to amortize its surplus depreciation ratably over a four-year period starting in 2010. Under the agreement, FPL has the flexibility to vary the quarterly and annual amount of surplus depreciation amortization that it records. The surplus depreciation will be amortized to keep FPL's earned regulatory ROE within the approved range of up to 11%, subject to certain annual and total caps. A $267 million annual cap on the amortization of surplus depreciation applies to each year of the agreement. However, to the extent that our amortization of surplus in any given year is less than the $267 million cap, it can be carried forward and will be available for use in subsequent years. In essence, raising subsequent years' caps. No more than $776 million of the surplus depreciation can be amortized during the term of the agreement, unless more, up to the entire amount of the initial $895 million of surplus depreciation then remaining, is required to avoid a filing with the PSC showing a retail regulatory ROE of less than 9%. In any year of the agreement, the company must amortize enough of the surplus depreciation to maintain at least 9% retail regulatory ROE, but may not amortize any surplus depreciation if the amortization would result in FPL earning above an 11% retail regulatory ROE. We have prepared this summary to assist you in understanding how the surplus depreciation might be amortized over the term of the agreement. As a result of favorable weather during 2010, we amortized approximately $4 million of the allowed $267 million for the year. The amount below the annual cap that we did not amortize in 2010, or $263 million, will be available for use in 2011, bringing the total allowed amortization of surplus depreciation in 2011 to be approximately $530 million. Based on current estimates and making certain assumptions, including normal weather and operating conditions, we believe we will amortize between $245 million and $265 million of surplus depreciation in 2011. Assuming those estimates are correct, that would leave between $507 million and $527 million of surplus depreciation available to be amortized in 2012 in order to achieve a retail regulatory ROE at or near 11%. Based on current estimates, we expect FPL will earn a retail regulatory ROE at or near 11% in both 2011 and 2012. On a book basis, the overall FPL ROE would be less than 11% because there are some expenses not recoverable through rates and some clause investments that earn a 10% ROE. As Lew mentioned, we expect FPL's retail rate base to grow at a compound annual growth rate of approximately 8.5%, from a 2009 base through 2014. This growth is being driven by approximately $6.4 billion of major capital projects, including modernizations and nuclear uprates, expected to be brought into service between 2011 and 2014. All of which have been approved by the Commission and several of which will receive clause recovery. As you recall, we manage our equity ratio on a GAAP basis to approximately 59%, which currently translates to a regulatory equity ratio of roughly 48%. It is strong rate-based growth, coupled with a fair and appropriate return on these investments, which we expect to be the significant driver of NextEra Energy's overall growth. As many of you know, last year the Florida legislature considered legislation that would have given utilities the voluntary opportunity to build renewable generation in the state and would have provided costs recovery through a clause mechanism. If legislation is enacted in the future, FPL would have the opportunity to build incremental renewable generation that is not in our current plans. Let me now turn to Energy Resources. During 2010, we successfully added 754 megawatts of incremental wind capacity to our portfolio, including 70 megawatts of existing wind generation that we acquired during the fourth quarter. Of note, our 82 megawatt Ghost Pine Canada wind project was the largest wind generation facility brought into service in 2010 in Canada. And we now own and operate approximately 220 megawatts of wind generation in the country. We are pleased that in the fourth quarter, we secured approximately 454 megawatts in wind purchase power agreements or PPAs. This figure includes 78 megawatts related to a PPA we signed for a repowering project in California. We will talk more about the current wind generation contracting environment in a couple of minutes. During the course of 2010, we elected to receive CITCs on 603 megawatts of new wind generation. During the calendar year of 2010, we received approximately $430 million in cash related to the program, and we expect to receive roughly $400 million in cash in 2011. As we initially indicated on the third quarter earnings conference call, we continue to expect to elect CITCs on 400 to 550 megawatts of new wind generation in 2011. Turning to our solar initiatives. We have also continued to make significant progress on our solar development pipeline. During the fourth quarter, we acquired appropriately 40 megawatts of solar projects currently in development in Ontario, Canada. Construction on the projects is expected to begin in early 2011, and commercial operations are expected by the end of 2011. The projects, when completed, will sell power under a long-term contract to the Ontario Power Authority. We also commissioned the 5-megawatt Paradise solar PV project in New Jersey. The Paradise project generates New Jersey's solar renewable energy credits. In November, the Genesis solar thermal project received approval from the Bureau of Land Management, the last major approval the project needed before site work began this month. And although we do not have anything to announce at this time, we are optimistic about our ability to sign incremental PPAs in California and adjacent states for large-scale solar generation. We are pleased to highlight that our Duane Arnold Energy Center received a 20-year license extension from the Nuclear Regulatory Commission or NRC. The NRC approval comes just after two years after NextEra Energy Duane Arnold and its joint owners entered the extremely rigorous and comprehensive license extension process managed by the NRC. Finally, we have two financing transactions we would like to highlight. First, during the fourth quarter, we entered into two CAD $150 million three-year variable rate revolving credit facilities that expire at the end of 2013. These facilities are particularly attractive because they are in Canadian dollars, which align well with investments we are making in the country. Second, in December, we successfully financed our 507-megawatt gas-fired facility located in Blythe, California. We were able to secure a $231 million limited recourse loan as a result of proactively seeking a long-term power sales agreement for the output of the plant. Energy Resources reported fourth quarter 2010 GAAP earnings of $73 million or $0.17 per share. Adjusted earnings for the fourth quarter, which exclude the effect of non-qualifying hedges and net OTTI, were $143 million or $0.34 per share. For the full year 2010, Energy Resources reported GAAP earnings of $980 million or $2.37 per share. Adjusted earnings were $800 million or $1.93 per share. As we mentioned in the first quarter of 2010, we have changed the methodology for allocating interest and shared costs to affiliates. And historical figures on this slide have been adjusted to reflect that change. Energy Resources' fourth quarter adjusted EPS increased $0.02 from last year's comparable quarter. New wind and solar investment contributions were relatively flat due to the $0.04 lower contribution from CITCs. This was largely offset by the $0.03 contribution from assets placed into service in the fourth quarter of 2009 that were available for a full quarter in 2010. We elected to take CITCs on 603 megawatts of new wind generation placed in service in 2010 compared with 815 megawatts in 2009. In aggregate, the existing asset portfolio contributed $0.15 relative to the prior year. Existing wind assets contributed approximately $0.04 per share as compared to the year-ago period, which was largely due to an improved wind resource. The wind resource was approximately 92% of normal, which was an improvement relative to the prior year's quarter of 81%. Within our existing merchant assets, the lack of an extended outage at our Seabrook nuclear facility in 2010 fourth quarter contributed $0.16. This was partially offset by weak market conditions affecting our merchant Texas gas assets, which resulted in $0.03 lower adjusted earnings per share. Within our contracted assets, a positive $0.02 contribution from the lack of a refueling outage at our Point Beach nuclear facility in 2010 was substantially offset by a negative $0.02 contribution from Marcus Hook 750, which was largely due to unfavorable market conditions and a scheduled outage. Contributions from the Customer Supply business declined $0.02. Contributions from proprietary trading declined by $0.03 per share. As we've indicated before, results from Customer Supply and trading will often be higher or lower than we expect based on a number of factors, including market volatility and opportunities. As we noted in last year's fourth quarter earnings report, market conditions were particularly favorable in both the fourth quarter and full year 2009. Restructuring and asset sales contributed a negative $0.01 compared to last year due to the absence of a gain recorded last year. During the quarter, we wrote down the value of certain assets associated with our plants that repower two wind facilities. The write-offs negatively impacted adjusted EPS by $0.03. Although we have included the impact of the write-offs in adjusted earnings, we wanted to highlight them separately so investors understand these are not part of ongoing operations. All other factors contributed negative $0.04 per share, primarily due to higher interest expense. For the full year 2010, adjusted earnings per share decreased by $0.01. New wind and solar additions contributed $0.11, which was driven primarily by the full year adjusted earnings impact from 2009 wind additions and the benefit of state income tax credits, partially offset by the impact of lower CITC elections in 2010 relative to 2009. In aggregate, the existing asset portfolio contributed $0.13 relative to the prior year. For the full year, the contribution from existing wind assets declined $0.02 due to unfavorable pricing of ERCOT wind and the lack of certain state tax credits in 2010, which were substantially offset by lower curtailment and an increased wind resource. Performance from our existing merchant NEPOOL assets was higher by $0.20, driven primarily by the lack of an extended outage at our Seabrook nuclear facility. Contributions from our merchant gas assets in Texas were lower by $0.07 due to unfavorable market conditions. Gas infrastructure contributions were up $0.06 relative to the prior year, largely due to the closing out of certain hedges in the third quarter. The Customer Supply business contributed $0.10 due to a strong Full Requirements business as well as GEXA retail and mid-marketing origination contributions. Within Full Requirements, the sale of a power supply contract in the first quarter, new contracts and favorable market conditions contributed to the strong results for the year. The proprietary Power and Gas Trading business contributed a negative $0.16 due to unfavorable market conditions relative to last year's very favorable market conditions. Asset sales contributed a positive $0.02, while the write-offs taken in the fourth quarter related to the California wind assets contributed a negative $0.03. All other factors contributed a negative $0.24, of which $0.13 was from higher interest expense and share dilution, and the balance is largely related to the lack of favorable tax benefits in 2010 relative to 2009. We remain interested in developing or acquiring new wind generation projects and believe that our economy and our environment will benefit from continued investments, including generation. We're also committed to maintaining our financial discipline. Therefore, the amount of new wind we ultimately add to our portfolio will largely depend upon our ability to secure attractive long-term PPAs. As Lew mentioned a couple of minutes ago, during the fourth quarter we secured approximately 454 megawatts in wind PPAs, bringing our total wind PPAs signed in 2010 to 1,238 megawatts. As of year-end 2010, we have 612 megawatts of wind capacity that is built and we intend to contract, but currently do not have a signed long-term agreement in hand. Contracting these megawatts continues to be a high priority for us, and I am comfortable with the progress that we are making. As noted in the chart on the right, of the total 1,238 megawatts of PPAs secured in 2010, 553 megawatts are for projects we expect to be commissioned in 2011. As always, some of these projects could slip into 2012 due to normal development and construction timing issues. In addition to the 553 megawatts of secured contracts, we have another 400 to 500 megawatts of projects currently in development, but without contracts, that could be commissioned in 2011. This level of certainty regarding contracts for the pipeline is particularly positive, given the challenging conditions we continue to encounter in the market. One way that we plan to add incremental value to the business in the next couple of years is to begin to repower some of our older wind facilities. We can deploy fewer wind turbines with an increased net capacity factor and also take advantage of new elections of either the production tax credit, or PTCs, or the CITC. In fact during in the fourth quarter, we signed a PPA with an existing California facilities off-taker to repower that facility. We believe we may have the opportunity to repower approximately 300 to 400 megawatts of wind capacity over the next four years. As we have indicated to you many times and our track record should show, we are as interested in acquiring new and existing wind and solar assets as we are in building them ourselves. In fact, we have acquired approximately 343 megawatts of renewable generation assets since 2008. This does not include 190 megawatts of wind and solar projects purchased or contracted to purchase in the fourth quarter of 2010 that are expected to come online in mid-2011. As we have indicated over the past 12 to 18 months, we have expected a number of assets to change hands, but the executed transactions have been fewer than we would have predicted. You should expect that when large assets or portions of assets come into the market, we will take a look at most, if not all of these opportunities and pursue the ones that fit into our portfolio and our strategic plans. As Lew, mentioned in December, the changes to the Royal Decree that we first mentioned during the second quarter earnings conference call were officially approved and incorporated into a revised Royal Decree. As a reminder, the Spain projects consist of two 49.9-megawatt solar thermal projects with molten salt storage. Under the current tariff, the projects will receive a government guaranteed premium tariff rate over their operating lives, which we estimate will be approximately 30 years. We are now working to finalize the financing for the projects that should provide the bulk of the funding for construction through the projects' commercial operations. While the financing has not been finalized, we are currently engaged with several European banks on a financing package that would provide the bulk of the necessary cash flows for construction and limit our exposure in the event of a change in the tariff to the amount of our equity investment. We began site work in January and expect the two units to reach commercial operations in 2013. The projects in Spain are a high priority for our development team, and are the only significant development or acquisition opportunity we are pursuing outside North America. We continue to believe the risk-adjusted returns are attractive and the projects represent a strategic opportunity for us to further build our skills in solar and expand our Solar Generation portfolio. We have a team permanently on the ground in Spain that is monitoring and managing all the developments that affect our projects. We monitor carefully the financial, economic and political developments in the country. And our team is engaged with the banks, local industry, government officials and other interested parties to manage and support our interests. Our overall Energy Resources projects gross margin and EBITDA expectations for 2011 and 2012 have not changed significantly since we reviewed them with you last quarter. The full gross margin hedge slides can be found in the appendix of this presentation, which is posted to our website. In 2011, the average hedge price for our non-spark spread merchant assets in terms of dollars per MMBtu of natural gas is $6.97, and the average hedge price in 2012 is $6.36. These prices are clearly above current market prices and highlight the effectiveness of our hedging program. In addition to incremental detail about 2011 and 2012, we wanted to give you a little perspective on the visibility we have on Energy Resources business in 2014. Predominantly, as a result of our portfolio of long-term contracted assets, approximately 69% of our existing power assets' expected gross margin is currently hedged in 2014. Regarding earnings sensitivities, the adjusted EPS sensitivity to changes in natural gas prices on our 2011 open positions is relatively modest. For every $1 per MMBtu change in gas prices, the annualized impact is approximately $0.03 per share on an adjusted earnings basis at NextEra Energy, Inc. For 2012, the equivalent adjusted earnings sensitivity is $0.06 per share. We also want to update the sensitivity regarding the wind resource for assets and service as of January 1, 2011. For every 1% change in the wind resource on an annual basis, adjusted EPS at NextEra Energy, Inc., would be impacted approximately $0.02 per share. To summarize 2010's fourth quarter results on an adjusted basis, FPL contributed $0.43, Energy Resources contributed $0.34 and Corporate and Other was a positive $0.03 contribution. That is a total of $0.80 per share compared to $0.79 per share in the fourth quarter of 2009 or a 1% increase year-over-year. On an adjusted basis for the full year 2010, FPL contributed $2.29 per share, Energy Resources contributed $1.93 and Corporate and Other was a positive $0.08 contribution. That is a total $4.30 compared to $4.05 per share in 2009 or a 6% increase year-over-year. Before turning the call back over to Lew, I wanted to spend just a minute discussing our long-term adjusted earnings per share guidance. Back at our May 2010 Investor Conference, when we first discussed our longer-term expectations, I indicated that primarily because of the significance of our current construction cycle at FPL, adjusted earnings per share growth through 2014 would be driven largely by FPL investments. That continues to remain true, and we should not forget about the value that our investments are bringing to our Florida customers. Our typical residential electric bill remains the lowest in Florida, and 24% below the national average. And we estimate that by 2014, our continuing investments and more efficient generation will save our customers roughly $1 billion per year relative to a 2001 base. We continue to believe that a laser-sharp focus on doing what is best for our customers will result in positive outcomes for our shareholders as well. And so by 2014, our expectations are that a majority of our consolidated adjusted earnings will be from the regulated side of our business, including our investments in Lone Star Transmission. We believe that not only will our regulated adjusted earnings per share make up roughly 60% of our consolidated adjusted earnings, but that on an EBITDA basis, roughly 80% of our forecasted adjusted EBITDA will be from investments that are either regulated or long-term contracted. For 2010, that percentage is approximately 74%. Of course, that assumes that new renewable investments in our plan through 2014 are long-term contracted. But that is a proper assumption since we are committed to invest in that side of our business only when we expect longer-term certainty in the cash flows from those investments. So that should give you some additional insight regarding the make-up of our expectations for 5% to 7% adjusted earnings per share growth per year through 2014 from a 2009 base. In 2011, we continue to believe that adjusted EPS within a range of $4.25 and $4.55 is a reasonable expectation. With that, let me turn the call back over to Lew.

Thanks, Armando. I want to close by providing some perspective on why we think NextEra Energy remains well positioned for growth. On the regulated side of our business, we are in the midst of a substantial capital spending program and expect to bring into service projects that cost approximate $7.2 billion between FPL and Lone Star Transmission between now and 2014. In Florida, we will be building new combined-cycle plants, pursuing more than 400 megawatts of added capacity to our nuclear units and continuing the deployment of our Smart Grid program. We plan to spend an approximately $2.1 billion to $2.3 billion on the nuclear uprates, all of which is clause recoverable. We expect to earn an appropriate return on all of these projects, each of which have produced tangible benefits for customers in the form of improved long-term power affordability and reliability. In Texas, our Lone Star Transmission business became a utility in October 2010. We will earn regulated returns on our roughly 320-mile transmission line, even as we help set the stage for a dramatic expansion of wind power in the state. Energy Resources has a strong pipeline of renewable energy projects that should fuel profitable growth. We remain confident in our ability to grow our wind fleet by 3,500 to 5,000 megawatts through 2014. And the 754 megawatts we added in 2010 were an excellent start. Equally impressive is the progress we've made on our solar strategy. Of the $3 billion to $4 billion we expect to invest in solar projects between 2010 and 2014, we already have approximately $2.3 billion of projects under contract, and initial site work is underway. We also have a robust pipeline of additional opportunities. And of course, whenever assets come up for sale, we will be taking a careful look to see if they make sense for us. With our track record of superior execution, we have every confidence that we will be able to bring these planned projects to a successful completion. That's why we remain very comfortable with our view that the business can generate a 5% to 7% average annual increase in adjusted EPS through 2014 from a 2009 base, even as the overall level of risk in our portfolio declines. By 2014, we expect that approximately 80% of NextEra Energy's EBITDA will come from regulated or long-term contracted assets. In closing, I want to thank NextEra Energy's 15,000 employees for their talent and hard work, which allowed us to deliver superior value for customers and shareholders alike in 2010, and will continue to do so in the years ahead. And with that, I'm going to turn the call over to the conference moderator for any questions you might have. Thank you.

[Operator Instructions] And we'll first hear from Dan Eggers of Credit Suisse. Dan Eggers - Crédit Suisse AG: Just kind of running with the renewable comments in the investment program, can you just share a little more thoughts on how the returns are looking on some of the acquisition projects you guys have seen this year relative to the self-built projects? And there are targets for wind and solar investment, but how you think about the flexibility of maybe reallocating dollars between technologies as the opportunity shows up?

I think we're -- and we tried to make that clear in the comments, I think we're very open to reallocating the dollars across the board, whether it's towards technology or from self-build to acquisitions, Dan. Your first comment, though, on returns, I'd say it's no different than what we would expect and have been receiving for our self-build projects. And I do believe that, that is one of the reasons -- I talked about this in the script and I've talked about it before. I think that is one of the reasons why we and others haven't seen as much activity as maybe we expected 12 to 18 months ago. I think there's still some hesitation on the other side, on the seller side, to potentially let go of these assets so that the buyers are able to gain the returns that they expect and that make economic sense for them. But on the self-build and acquisition front, I tried to make very clear today in the prepared remarks that we see both opportunity and a pari passu. Our investment dollars will be allocated to those projects that we believe have the strongest long-term returns. Dan Eggers - Crédit Suisse AG: And then I guess if you could just share some thoughts on the bonus depreciation changes, how you guys anticipate that showing up in cash in '11 and into '12 relative to plan and what that might mean as far as how you're thinking about capital raising requirements for the next two years?

Yes, obviously a big issue for this industry because it's so capital intensive. It's appropriate, though, to start out by saying that the rules are not -- the legislation might be done. This legislation went through rather quickly, as we all know. And now the folks in Washington D.C. that are responsible for actually interpreting that legislation appear to be having difficulty with pieces of it. And so I would first start out by saying that there is more to this bonus depreciation that should be coming out, I would hope, in the next couple of months. And the interpretations that would be particularly important for the industry and for us are interpretations regarding self-build or self-constructed assets. I'm not going to get into details on this call, but I will tell you that those interpretations are still up in the air and would make the difference between some of our assets receiving 100% bonus depreciation and some of our assets receiving 50% bonus depreciation. But the additional cash that's coming in on both sides of the business is not that significant for us overall. But that's because we had a significant amount of production tax credits that were going to offset future taxable income. And we have talked about that before. So it's really an allocation of cash flows between the companies. But on a corporate level, at least for us, based on what I'm seeing today, I wouldn't expect the cash flows to be significantly different from our forecast of 2014. Dan Eggers - Crédit Suisse AG: On the wind resource availability for 2011, it looks like getting back to normal would add $0.16 or $0.18 if you're at 100%. What sort of utilization assumptions are you guys putting into your numbers for '11 in the guidance right now?

We always assume wind will blow at a P50 level. That's what we've assumed in the past. We've talked about wind resource quite a bit over the last 12 to 18 months. I've spent, what I would say, large amounts of earnings calls really discussing what we do and how we do it and our estimates. And we continue to feel comfortable in the way that we're forecasting wind. Clearly the work that we've done up to this point show that the wind resource for 2009 and for 2010 were very low based on historical standards. A couple of times in the last year, I've mentioned, this is the worst quarter in the last 30 years, and so we should assume that that's not going to continue long term. We certainly don't see any indication that wind resource would be less than our P50 estimates longer term.

Next we'll hear from Steve Fleishman of Bank of America Merrill Lynch.

Just on the wind PPAs, the 1,200 megawatts, that's, my guess is, among the most PPAs you've done in a year. And given the conditions, that where people were concerned about that, it seems to be quite large. Kind of what -- are these all long-term PPAs? And just kind of in what frameworks have you been able to achieve that, even just the 450 megawatts in the fourth quarter? Is this mainly through renewable PPAs or are there other ways you're being able to -- through renewable RFPs or are there other ways you're being able to contract this?

Yes, I don't -- Steve, first of all, if I can get all your questions just kind of in order here. But the 1,243, as far as we know, is the largest amount of PPAs in terms of megawatts that we have signed in a year. So we're pretty happy with that. There's nothing nefarious about that number. They are all long-term contracts. They all are sort of how we'd been doing business in the past. I mean they are bilateral agreements. There are some feed-in tariffs. There are some RFPs. I mean, it's all in there. I can tell you that it has been a laser focus of the company over the last 12 to 18 months to get this done, and we're not done. I mean, we have 600 megawatts or so of uncontracted wind projects that is high priority for us to contract. So I know that we are very, very happy with the team's progress on this during the year, but we expect more. So I wanted to lay it out in the slide, and I think we did a good job of doing that in the presentation, but we shouldn't believe that there was anything different that we did. I mean, we have been spending a whole heck of a lot management time making sure that we get some visibility on this business longer term.

One other unrelated question, just on the financing plans. If I recall back to your Analyst Meeting last year, you planned to do $1.2 billion of equity over the five years to fund your growth?

Yes.

And I think you said just in 2010, you did $700 million.

Yes.

Does that mean there's only about $500 million left or has that $1.2 billion changed?

Let me just -- that $1.2 billion has not changed at this point. We have what I would say is less than $500 million to go. That $1.2 billion could change in the future. But it could change as a result of newer opportunities. It could change as a result of changes in cash flow from operations at either one of our businesses, specifically in 2013 and 2014. We have put a financing plan together that we believe maintains our strong credit and our strong balance sheet. And so we present that, obviously, to the rating agencies every year. I have no expectations at this point that the $1.2 billion that we presented in May would change through 2014. I just don't want to give -- that was an estimate. I don't want to give folks the view that, that could never change, no matter what happens. Clearly changes in cash flows, especially in '13 and '14, could affect that number.

Jonathan Arnold of Deutsche Bank.

Armando, could I ask you just to give a little bit more color on maybe the geographic location of some of the uncontracted megawatts and versus where you have managed to contract legacy with wind?

Yes. The contracted PPAs were kind of all across the board: California, Midwest, Canada. I mean we've had, I would say, pretty good results in all of the areas that we had uncontracted plants that I spoke about in the third quarter or that we were constructing. I wouldn't say necessarily that we're having worse results in any one particular area. In terms of the projects that are open and uncontracted, most of those projects would be in the Midwest-type area where we did a lot of development in 2008 and 2009. It's not that we feel uncomfortable longer term about contracting those. I mean, we clearly have identified potential customers and we've identified potential opportunities through RFPs that are coming up. So again, I wouldn't say that, of the 1,238 we signed, we were particularly strong just in region X or region Y. We did well across the board. And with the open ones that we have, I would say that they're mostly in the Midwest. And we feel comfortable that, in a reasonable period of time, that we can find contracts for those.

And can you hazard a guess as to what your sort of market share of the PPAs signed in the last quarter might have been?

It would be high.

Okay. I did have one other thing. We noticed, on a different topic, on the portfolio disclosures, there's been a shift between, I think, power and gas trading in favor of Power Supply business, between those buckets, although the numbers at the bottom stayed the same. Can you give us -- $30 million, $40 million or so. Some insight into what happened there?

Yes. I think that's -- Jonathan, that's a continuation of the comments that I made during the third quarter, where I said that we had seen -- up to that point, we had seen less opportunities, both because of prices and volatilities in the proprietary trading business. But on the other hand, we had seen stronger results in what we call our Customer Supply business, which contains both the Full Requirements business and our Retail business. And so in the third quarter, I talked about, and we did move some of that margin over. And in the fourth quarter, I think it's a little bit of the same. In the third quarter, it was a little larger adjustment. This one's a little smaller. But it's really there's nothing else there. It's a continuation of what we've seen, which is a pretty decent and strong business in both our Retail business and Full Requirements business. And actually, our origination, our mid-marketing origination business also, and not as many opportunities on the proprietary trading side which, honestly, we're pretty happy about.

Okay. And can I just come back for a second to the first topic on what you describe as high market share. What do you put down your outperformance to? Is it quality of projects? Is it aggressiveness on price? Is it legacy relationship? Can you give us any flavor there in terms of your performance versus the market?

Well, maybe this is a little corny. But we are spending a significant amount of time, including senior management time, making sure that we are successful in identifying the certainty of long-term cash flows in this Renewables business. So I would expect that to be a similar comment, I guess, if you ask others. But since I'm so close to the situation here and I see what happens every day, it'd be silly for me not to point that out.

Michael Lapides of Goldman Sachs.

Two questions: one on the regulated side, one on the non-reg. First on the reg, can you just give comments about your expectations for incremental turnover or changeover at the Florida Commission? And then on the non-regulated side, when you look at your asset portfolio, are there regions or assets that you might view as either non-core or assets that you don't view as being much, both in the way of contributing to earnings growth and therefore you might be willing to -- maybe you're not the logical owner of those assets?

Michael, on the regulated side, the commission side, it'd be really unfair for me to make any comments on that. Clearly, there are four new commissioners, a couple of which have to be confirmed by the Senate in the -- I'm sorry, all four, I apologize, by the Senate in the spring. So I can't predict how that will happen and how the political situation will work itself out. So it'd be inappropriate, really, for me to comment on that. But we certainly would appreciate a stable commission in Florida. On your other question, we look at that. We sold one of our small -- or really, maybe it was large, because it was one of our only coal facilities, last year, the Paza [ph] facility out in California. And we continue to look at it. I wouldn't say that we are active sellers, but I also wouldn't say that investors should be surprised if we sell an asset or two every year that we just determine just don't really fit into our longer-term mix.

Okay. And one Florida follow-up. You commented in your prepared remarks regarding a potential renewable-related legislation or regulation in terms of being able to expand your renewable footprint within the regulated utility. Would you not consider adding incremental renewable resources and using the current environmental cost recovery clause as the recovery mechanism for that? Or is there pushback coming at the commission level or elsewhere in the state for doing so?

Yes, that's not an option, to put it through the new environmental clause without specific legislation or regulatory approval. We'll wait and see what happens this spring in the Florida legislature. Certainly, we and others have been proponents of diversifying the fuel mix in Florida. And on the environmental side, certainly building more solar capacity makes a heck of a lot of sense in the Sunshine State. So we are hoping that some legislation or regulation gets moved that will allow us to add to the 110 megawatts that we added over the last couple years. We think again, it's a positive. It'd be a huge positive in terms of diversity, in terms of jobs, in terms of economic development for the state of Florida.

Next we'll hear from Hasan Doza of Citi.

A couple of quick questions on the Supply and Power and Gas Trading business. I recall in a previous slide, you had shown about 68% of your gross margin being hedged in that business. So I was wondering, for 4Q in 2010, where did the weakness come from? Did it come from execution of the existing backlog or from new businesses?

A little bit of both. I think you're referring to the last time we showed the 2010 gross margin slide, which was the second quarter of this year...

Exactly.

Yes. So the short answer -- maybe the short and the long answer to your question is it was both.

Okay. If I think about the 2011 gross margin that you're highlighting for this business and the percentages in the backlog, what's the best way to think about what's actually embedded in your guidance?

Well, what's actually embedded in our guidance is the midpoint of what you see either on the gross margin side or the EBITDA side. And we provide both of those numbers back in the appendix.

Okay. So when I think about the Supply and Power and Gas Trading business, the amount that's embedded in your guidance is the midpoint of that range between 3.20 to 4.30s?

Correct.

Okay. And just one follow-up question on wind development, I might have missed it. Did you guys talk about how many megawatts you plan to bring online during 2011 versus your previous range of 700 to 1,000 megawatts?

We did not, but our estimate for 2011 does remain 700 to 1,000.

Next, we'll hear from Jay Dobson of Wunderlich Securities.

A question for you, Armando or Lew. You mentioned acquisitions and sort of said, anything's that big, you should or we should anticipate you to look at. Yet you've talked about Canada and Spain. Should we expect that's a global comment? Or do you think sort of big is appropriate here in the U.S. and it's somewhat more focused internationally?

Jay, I'll at least take the lead on that one. Our focus is really North America, and we've bought a few assets in Canada. We like that market. It's hard to say what will happen and it's very hard to speculate on acquisitions, but the vast majority of the things that we would -- first of all, we don't have any acquisitions in our forecasts, per se, but to the extent that we do any, I would expect them to be domestic. I would point out that sometimes there are things that we look at for other reasons. Sometimes we don't know whether it's attractive and sometimes we want to learn about what's going on in the market and that sort of thing. So as I've said for probably the whole time I've been CEO, if something major is on the market, don't be surprised if we're at least taking a look at it. We're a logical buyer for a lot of things. And I think we have a pretty good track record over the years. But it's not a huge amount of money spent or assets over the last 10 years or so.

And Lew, while I've got you, you mentioned in your closing comments the goal of, I think, 80% regulated and contracted EBITDA by 2014. How would that compare with current? I mean, I think of you guys as substantially, certainly, a majority regulated and contracted EBITDA. So is that going up by more than I expect it is?

Yes, currently it's 74%. I think we've said that in the prepared remarks. And I want to just be a little picky with you on one word. The 80% is a projection right now, it's not necessarily a goal. But that's where -- based on all of the assumptions that go into our plan, that's where it looks like things will play out.

And then Armando, pension. You've got an overfunded pension plan. Income was probably a little better in '10 than you expected. Just impact on '11, as you think about it, maybe changing for smoothing and sort of what you have in guidance?

Jay, at this point, I expect very little change in what we had forecasted related to pension earnings for next year.

And does that include any change in the smoothing?

No, no changes in the smoothing, which is not a technical term, but we'll go with it for this call.

Next, we'll hear from Paul Patterson of Glenrock Associates.

What I wanted to ask you guys was about the Power Supply business and where you saw the opportunity on the Full Requirements side. But also on the, I guess, the shopping side, how shopping might impact your Full Requirements portfolio? But also where you might see some potential to pick up some margin? Because it looks like that's been improving steadily for the last couple of quarters in your outlook. And I was just wondering if you could give us a little bit of flavor there, maybe what service territories or regions that look particularly attractive to you?

Paul, this is Jim Robo. I think from a Full Requirement standpoint, I think it's all the various regions that we've always played in there, both on a RFP basis and on a originated basis. So that would be New England's PGM and Texas in the Midwest. And then from a retail standpoint, we're seeing good growth opportunities in Texas. And frankly, there's good headroom in PGM and some of the New England markets as well.

Okay. Is there any exposure? When we think about the Full Requirements contracts, we've seen some companies that participate in these auctions, and then there's been some erosions due to customer migration. Is that something that we -- how do we think about that in terms of, a, an opportunity for you guys to get customers from other people, and, b, perhaps a risk in terms of the hedge position?

I think it's both. It's not a kid business. I mean it's a grown-up business, the Full Requirements business. And we've clearly seen in the past, after a bad season or a bad year, that folks kind of fall away from the business and there's little competition the following year. So I think that does present more opportunities. And certainly for those that pick them up, pick the contracts up and the load up, including us, that that presents more risk. And we think we have appropriately priced those risks and haven't been too surprised by what's happened this year. Weather, obviously, is what I would think is the biggest risk. But then you've got what you're talking about, Paul, which is the risk of folks walking in into the deal or folks walking out. So we haven't been surprised by the results up to this point, but that continues to be a risk for this business.

And we will take a follow-up from Steve Fleishman of Bank of America Merrill Lynch.

A question for Lew. I guess, you obviously have one of your neighbors involved in a large M&A transaction recently. And just curious your take on how important that kind of large-scale M&A might be in terms of your strategy and just your general take on it?

I'm only surprised that we ended up with the last question before we got to this question. I'm trying to come up with the right way to say that, Steve. Look, we really believe that we have strong stand-alone growth plans. We've consistently been growing this business at a rate that's, and this is off the top of my head, I think the top quartile in the industry over the last decade. I've talked a lot about the growth that we have going forward. I continue to be very bullish on the Florida market long term. I've always thought that this industry -- it was a real original thought on my part, that this industry should consolidate. That's a joke. People have talked about that for years and years and years. And yet when I look at sort of the growth that we've achieved, in many ways we've effectively added the equivalent of several medium-sized utilities over the years. So we've tried to do this before. We realize that there's a lot of challenges and distractions associated on the M&A side. Having said that, we are always going to be opportunistic about it. We have a fiduciary responsibility to look at the things that come our way. And our criteria for M&A hasn't changed. And we always look at M&A from a standpoint: is it economically attractive? Is it feasible from a regulatory perspective? And is it socially doable? Those have proven to be a tough set of barriers over the years for getting transactions done. So I'm not sure that's a very clear answer for you, Steve, but maybe intentionally so. I guess the bottom line is that we're always open to it, but our focus is on growing our business and building shareholder value that way.

And I'll turn the call back over to the presenters for any additional or closing comments.

Thank you, everybody, for your joining us today on the conference call and for your interest in our business. And we look forward to speaking with you again soon.

That does conclude today's conference. Thank you, all, for your participation.