XPLR Infrastructure Q4 2024 Earnings Report

XPLR Infrastructure EPS Results

• Actual EPS: $0.99
• Consensus EPS: $0.79
• Beat/Miss: Beat by +$0.20
• One Year Ago EPS: N/A

XPLR Infrastructure Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $329.97 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

XPLR Infrastructure Announcement Details

• Quarter: Q4 2024
• Date: 1/28/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, January 28, 2025
• Conference Call Time: 9:00AM ET

XPLR Infrastructure (NYSE:XIFR) LP engages in the acquisition, management, and ownership of contracted clean energy projects with long-term cash flows. It owns interests in wind and solar projects in North America and natural gas infrastructure assets in Texas. The company was founded on March 6, 2014 and is headquartered in Juno Beach, FL.

XPLR Infrastructure Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to the Explore Infrastructure 4th Quarter and Full Year 2024 Earnings Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Mark Idleman, Director of Investor Relations. Please go ahead.

[Mark Edelman, Director of IR at NextEra Energy Partners]

Thank you, Betsy. Good morning, everyone, and thank you for joining our call. With me this morning are John Ketchum, Chairman of Explorer Infrastructure Brian Balster Rebecca Kiava and Mark Hickson, members of Explorer Infrastructure's Board of Directors and Alan Liu, President and Chief Executive Officer of Explorer Infrastructure. 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 conference call and the comments made during this conference call in the Risk Factors section of the company presentation or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, www.xplrinfrastructure.

[Mark Edelman, Director of IR at NextEra Energy Partners]

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. Please note that the name change to Explore Infrastructure became effective on January 23 and trading on the New York Stock Exchange under the new stock ticker of XIFR will become effective on February 3rd.

[Mark Edelman, Director of IR at NextEra Energy Partners]

We will also be referring to convertible equity portfolio financings, as SEPPIFs, throughout today's call. With that, I'll turn the call over to Brian.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Thank you, Mark, and good morning, everyone. Today, Explorer Infrastructure is announcing a strategic repositioning of the company. I will first outline the major elements of that repositioning. I will then provide some background explaining how we have arrived at these changes, following a detailed strategic review of the company. Finally, I will discuss some of the related implications and opportunities.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Alan Liu will conclude with details regarding Explore's priorities and path forward. Turning now to the broad outline. First, the most important change Explore is making is to suspend for an

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

indefinite

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

period distributions to unitholders. Rather than issue equity to make investments, including investing in the SEPIF buyouts, Explore will instead utilize its retained operating cash flow. As such, today, we are transitioning from a model that focused primarily on acquiring assets and paying out substantially all of its ongoing cash flows, which required constant access to equity markets to a strategy that focuses on making investments funded by the cash flow cash flows and balance sheet capacity of the business. Growth will be an output. And to the extent our free cash flow exceeds investment opportunities with an attractive return profile, we remain committed to returning capital to unitholders, which will ultimately be what each of our investment alternatives will be measured against.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

In short, rather than seeking acquisitions to support a growing unitholder distribution, Explorer will be focused on investing its free cash flow to provide value accretion to unitholders, whether that is the cash buyout of ZEPAS, funding wind repowering, investing in the co location of storage at our renewable assets, pursuing other growth investments or ultimately returning capital to unitholders. By taking this action today, we believe we have eliminated the need to issue equity. We have also created a path to self fund organic growth and other investment opportunities, while preserving our balance sheet and retaining the option to return capital to unitholders. 2nd, to implement this new approach, Explorer is putting in place a new management team, all of whom are and will continue to be employees of NextEra Energy. This management team led by Allen Liu will be looking broadly to create additional unitholder value, both at the existing asset base and through ancillary opportunities, all measured against returning capital to unitholders.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Associated with these changes is a change to the name of the company, which we think appropriately captures the transition from a company that was primarily an acquisition vehicle to an entity that will explore a broader suite of capital allocation and investment opportunities. The Xplore team will continue to leverage the existing relationship with their largest unitholder, NextEra Energy, through supplier and financing contracts, meaningful Board representation, existing service agreements and access to investment opportunities adjacent to Explorer's clean energy assets. Through its continued close relationship with NextEra Energy, Explorer will retain the same benefits and operational expertise that NextEra Energy currently provides across its entire portfolio. Having given you the main elements of the changes we will be making, let me now spend a few minutes on some background, which will give context for these changes. I will then turn to some of the implications of the changes and describe how we believe they will benefit the long term interests of unitholders.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

When Explorer was established in 2014, we expected its basic function to be to acquire contracted clean energy assets and to hold those assets in a portfolio that delivered relatively low risk and growing cash flows. Other opportunities for growth, of course, were not ruled out, but this is expected to be the main path to growth at least for some years. Explicit in this model of growth driven by acquisitions was the commitment to pay out a very high proportion of annual cash flows, which necessarily meant that every new acquisition would bring with it a need for new equity issuances. For many years, this model worked. However, as distributions per unit grew, the Partnership needed to acquire more assets and thus issue more equity to support its distribution growth rate.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

As our equity needs grew, the existing public equity market for Yieldcos proved to be more limited, creating the need for substantial discounting and thus increased dilution. Therefore, we looked to private capital as a financing source to help support our growing equity needs and maintain our distribution growth rate. When issued, the SEPIF offered a new equity offered new equity capital to support acquisitions. Unfortunately, as we began to buy out SEPIF obligations by issuing equity in 2021, there was significant downward selling pressure on the unit price. If we had continued to issue equity buyouts at CEPAS, it would have resulted in significant dilution to unitholders.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Over this time, it has become clear that utilizing the significant cash available to explore to fund these buyouts, instead of distributing that cash and issuing new equity, results in what we believe is a better economic value proposition for unitholders over the longer term. It's within this context that Explore it re examined its distribution policy and what level of adjustment to make going forward. As you're all aware, we have multiple opportunities for our cash. 1, the buyout of CEPAS 2, other growth opportunities, including but not limited to repowers and investments in co located storage and 3, return of capital to unitholders, either in the form of a distribution or common unit buybacks. We also need to maintain sufficient balance sheet flexibility to efficiently refinance capital obligations as they come due.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

For several reasons, we believe a full suspension of the distribution gives us the clearest path to maximizing unitholder value. First, we believe it is in the best interest of unitholders to finance the buyout of selected SEPIS with cash flow, not equity. We believe buying out SEPIS at double digit unitholder returns is one of our most attractive investment opportunities. 2nd, we expect to see attractive investments around our clean energy assets like wind repowers and co located storage investments that we believe will create value for unitholders. These investments will generate incremental demand for cash, which can be funded from retained cash flows.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

3rd, given the unprecedented demand for power, we expect to have many other attractive investment opportunities through our close relationship with NextEra Energy. Finally, suspending the distribution today does not prevent a return of capital in the future, and we will evaluate all of our investment opportunities against returning capital to unitholders. By fully suspending the distribution, we believe that Explorer will be able to adopt a business plan that does not contemplate equity issuances. In the face of attractive investment opportunities, continuing as an acquisition vehicle, while paying out a distribution at a double digit yield is not the value maximizing path. Similarly, maintaining a token distribution as part of our near term capital allocation plan diverts cash flow from potential valuable investment opportunities.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

We believe a full suspension of the distribution allows us to retain the ability to allocate capital back to unitholders over time rather than pay out a smaller distribution and potentially have to rely on the equity markets to fund buyouts or investments. That's why today we announced the change in Explorer's business model to one that focuses on the economic allocation of the cash flows generated by Explorer's assets. Over the next 2 to 3 years, that means Explorer plans to use a combination of its available cash flow and some balance sheet capacity to invest in the buyout of selected SEPIS at attractive returns and to advance our organic growth opportunities. The decision to buy out the SEPIS or not will be based on the return of the cash flows acquired from the buyout. Over the longer term, Explorer plans to evaluate investment opportunities in other clean energy assets, including, but not limited to, co locating storage across its renewables portfolio.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

The return on these opportunities will continually be measured against the value of returning capital to unitholders, including through common unit buybacks over time and potentially eventually restoring the distribution. At some point, we can either reinitiate distributions, engage in buybacks or both. However, we do not expect to revert to a distribution policy of 90 plus percent payouts of available cash flows. The timing of unit buybacks or future distributions is impossible to predict right now. They will depend on the investment opportunities available at the time.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

We will keep you updated on our thinking and we are committed to the principle of returning to unitholders all capital in excess of that needed to fund only those investments that promise attractive risk adjusted returns. In the context of a dynamic capital allocation model, Explorer will be putting a new management team in place, all of whom will continue to be employees of NextEra Energy. The Explorer management team will be led by Allen Liu, who is on the call with me today and will serve as the partnership's Chief Executive Officer. Explorer will retain its close ties to NextEra Energy and again, Explorer's Board of Directors remains unchanged. Alan and his team will be responsible for executing on the repositioning the business.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Explorer's new management team is committed to assessing and pursuing a disciplined capital allocation policy, which maximizes unitholder value, either through its multiple investment opportunities or by returning capital to unitholders over time. Alan is an industry veteran with a proven track record of leadership and has held senior positions in risk management and corporate development at NextEra Energy. Prior to joining NextEra Energy in 2021, Alan was a Managing Director at Goldman Sachs, where he advised a broad range of companies, public and private, across the power, utilities and renewable and energy and infrastructure sectors. Alan brings to explore a diverse set of skills and nearly 20 years of electric infrastructure and financing experience that comes from helping companies think strategically about and execute on complex mergers, acquisitions, capital raise, investments and other strategic and financial matters. With that, I will turn it over to Alan to discuss the strategic repositioning in more detail.

[Alan Liu, CEO at XPLR Infrastructure]

Thank you, Brian, and good morning, everyone. Before I discuss the repositioning in greater detail, I feel it's important to provide a brief overview of Explorer's assets and key investment highlights. Explorer Infrastructure is one of the largest independent power producers and the 3rd largest producer of wind and solar energy in the United States, owning and operating a diverse set of high quality generation assets, totaling 10 gigawatts in operation today. Our portfolio is diversified across generation technologies with wind, solar and storage assets and across customers with high credit quality. Geographically, the portfolio is located in 31 states, including power markets that are projecting significant future load growth, which we think provides a number of opportunities, including re contracting, repowering and other investment opportunities enabled by the existing assets.

[Alan Liu, CEO at XPLR Infrastructure]

The portfolio generates most of its cash flows through long term contracts with a weighted average remaining contract life of 13 years with 78 different customers that have an average credit rating of BBB. This means we have long term visibility to our project level cash flows. As we have reviewed the universe of opportunities available to explore to deploy its cash flow, we have identified 4 priorities, which we believe will drive value for unitholders. The first priority is funding the cash buyout options of selected SEPIS. We expect the buyout of selected SEPIS to produce double digit returns, allowing us to retain ownership of assets we believe will provide attractive opportunities well into the future.

[Alan Liu, CEO at XPLR Infrastructure]

We expect the buyout of these investments will also simplify our capital structure by eliminating friction costs such as change of control restrictions and make whole payments, which can limit strategic flexibility. I will provide more detail on the specifics of these SEPIF buyouts after I finished outlining all of our capital allocation priorities, but I want to reiterate, we do not expect to need new equity issuance to address these buyouts. The second priority is investing in our existing assets, including wind repowering projects that meet double digit return targets. Wind repowerings that we move forward on are expected to provide increased cash flows over the life of the asset, which would enhance the value of our assets beyond the current contract period and create value for unitholders. Another investment opportunity in our existing assets is through co located storage.

[Alan Liu, CEO at XPLR Infrastructure]

Given the current market dynamics and demand for power, one of the most important development assets is an interconnection position. Without an interconnect, a project cannot move forward. A typical site on average wind site on average produces energy approximately 40% of the time, which means the other 60% of the time, the interconnect is available for a co located battery. We have a multi gigawatt opportunity with unutilized interconnection capacity that could be used to co locate battery storage behind Explorer's approximately 10 gigawatt renewable portfolio today. This is a valuable asset, especially as times for interconnection continue to expand and the need for capacity solutions increases with growing power demand.

[Alan Liu, CEO at XPLR Infrastructure]

Over the longer term, we plan to evaluate other investment opportunities adjacent to our clean energy assets. The guiding principle of our investment strategy will be defined areas where Xplore has a differentiated market opportunity and can generate accretive returns for unitholders. We believe a logical place where we may find differentiated opportunities is in industries that are driving the fundamental 7x24 low demand for power. Power demand growth is forecasted to increase 6 fold in the next 20 years versus the prior 20. U.

[Alan Liu, CEO at XPLR Infrastructure]

S. Data center demand alone is expected to increase substantially, adding approximately 460 terawatt hours of new electricity demand at a compound annual growth rate of approximately 22% from 2023 to 2,030. We believe EXPLORER is well positioned to capitalize on this expected long term secular demand shift into power demand through its own assets and also through new opportunities that may become available through its close relationship with its largest unitholder, Exterra Energy. Over the next 2 years, the buyout of selected SEPAs and investments in our existing assets, including previously announced repowers, will require approximately $4,400,000,000 of debt financing. That includes approximately $1,500,000,000 of new debt.

[Alan Liu, CEO at XPLR Infrastructure]

In addition to funding these initial two priorities, we plan to expand the focus of our cash allocation to new growth opportunities as well as return of capital to unitholders, our 3rd and 4th priorities. We will measure growth opportunities in comparison to each other and relative to returning capital to unitholders with a goal of allocating capital to the highest returning opportunity. While we are raising new debt as part of our capital plan, we are also refinancing existing debt, including project debt and holding company debt. For the $2,200,000,000 of holding company debt coming due through 2027, we plan to refinance those maturities at the holding company when they mature in 2025, 2026, and 2027. We have approximately $3,600,000,000 of interest rate hedges in place to de risk those planned issuances, but consistent with our view on the dilutive impact of issuing equity, we do not plan to reissue convertible debt.

[Alan Liu, CEO at XPLR Infrastructure]

We are committed to ensuring sufficient balance sheet strength and liquidity to facilitate our refinancing activities, allowing us to extend the holding company maturities. Along these lines, we recently received ratings affirmation from each of the agencies based on the plan we are laying out here today. Again, following the distribution suspension, we believe Explore can pursue a number of opportunities as available to it, including the separate buyouts, repowers and select other growth opportunities without having a need to issue incremental equity. Having given you an overview of our capital plan, I want to provide more details on the SEPAP buyouts. Today, we have 5 SEPAPs in place.

[Alan Liu, CEO at XPLR Infrastructure]

Intend to buy out 3 of these portfolios with cash and we intend to sell the assets of the other 2 to fund their buyouts. We have provided specific plans for each SEPA in the presentation. But in summary and based on these assumptions, for 3 SEPAs we plan to buy out with cash, we will invest approximately $945,000,000 in 2025, dollars 150,000,000 in 2026, and $465,000,000 in 2027. At the end of 2027, we expect to have only 2 remaining separates outstanding. We have also worked collaboratively with the investor in one of these 2 remaining separates to create the option to restructure the approximately $1,000,000,000 buyout payment due in 2,030 into smaller distributed payments through 2,034.

[Alan Liu, CEO at XPLR Infrastructure]

This allows us to fund buyouts in that timeframe from cash flow. In summary, we believe we have a pathway to address all of the CEPAs, which does not require us to issue equity. Switching gears to our financial results. For the full year 2024, our adjusted EBITDA was approximately $1,960,000,000 very close to the midpoint of our run rate expectations range. For 2025, assuming normal weather and operating conditions, among other caveats, we expect our adjusted EBITDA to be roughly flat year over year, although results may be impacted by the timing of the expected sale of the Mead pipeline investment that we currently expect in the Q4 of 2025.

[Alan Liu, CEO at XPLR Infrastructure]

For calendar year 2026, we expect the portfolio to deliver adjusted EBITDA of $1,750,000,000 to 1,950,000,000 dollars The decline in adjusted EBITDA of approximately $105,000,000 is due to the impact of the expected sale of the Mead pipeline investment in the Q4 of 2025. With the repositioning, Explorer is changing its cash flow expectations metric to free cash flow before growth. Cash available for distribution is no longer meaningful for an entity suspending its distribution indefinitely. You can reference our financial disclosures for the specific definitions. As with other companies, including independent power producers with meaningful free cash flow and multiple capital allocation opportunities, we believe free cash flow before growth will be a more appropriate metric to help guide our capital allocation decisions.

[Alan Liu, CEO at XPLR Infrastructure]

Given that 2025 is a transition year, which will have partial impacts of $945,000,000 for CPAP buyouts, the expected Mead pipeline investment sale and other Holdco financings, we believe 2026 represents a more appropriate baseline for our free cash flow before growth metric. We expect free cash flow before growth to be in the range of $600,000,000 to $700,000,000 in 2026, and we expect it to remain relatively consistent through the end of the decade. As discussed earlier, we expect our cumulative free cash flow before growth will exceed our remaining SEPA buyout options, which we expect will provide us optionality to allocate capital on the benefit of unitholders. We have provided a detailed walk from our midpoint 2023 run rate cash available for distribution expectations provided in the Q4 of 2023 to our 2026 free cash flow before growth expectations. After adding back debt pay down to get to free cash flow before growth, the main drivers between expected 2024 free cash flow before growth and 2026 calendar year expectations are the estimated impact of the expected Mead pipeline sale and higher financing costs.

[Alan Liu, CEO at XPLR Infrastructure]

Higher financing costs include the buyout of CPF 1 and the refinancing of 0 coupon and other low cost converts with debt. While cash flow is expected to decline as a function of these higher financing costs, we believe unitholders are meaningfully better off on a cash flow per unit basis relative to issuing equity at current prices. In summary, we are suspending the distribution and executing on a plan that enables Xplore to pursue investment opportunities available to it and that does not contemplate issuing equity. We believe investing in separate buyouts is our best value maximizing opportunity for unitholders. Next, we are going to opportunistically invest in growth opportunities, including repowerings and co located battery storage across our portfolio, as well as other investment opportunities that arise, while maintaining sufficient balance sheet strength to address our maturities.

[Alan Liu, CEO at XPLR Infrastructure]

All of these investments will be measured against returning capital to unitholders. Over time, we expect that return of capital to take the form of either common unit buybacks or potentially the reinitiation of a distribution. In our view, we believe this repositioning will enable Xplore to unlock the value of the strong cash flows in the existing portfolio today and best position Explore to allocate cash flow optimally for unitholders in the future. This focus on disciplined capital allocation is consistent with the capital allocation strategy deployed by high cash flow generating companies like independent power producers. We believe Xplore offers an attractive value proposition to existing and potential unitholders.

[Alan Liu, CEO at XPLR Infrastructure]

Xplore's diverse assets and long term contracts with high quality customers provides long term visibility in our project level cash flows. The chart on Slide 14 illustrates a range of theoretical potential unit prices based on a range of independent power producer trading levels and our 2026 free cash flow before growth expectations range. Of course, we cannot predict actual unit prices, but we do firmly believe Explorer represents a compelling long term investment opportunity due to the unprecedented demand for power, our close relationship with NextEra Energy and the quality of our large diversified portfolio of renewable energy projects that uniquely position us for opportunities to create value for unitholders through a disciplined approach to capital allocation. That concludes our prepared remarks. And with that, we will open the line for

[Alan Liu, CEO at XPLR Infrastructure]

questions.

[Operator]

We will now begin the question and answer session. The first question today comes from Shahriar Pourreza with Guggenheim Partners. Please go ahead.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Hey guys, good morning.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Good morning.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Good morning. So just really quick one for me, please. Just on the guidance as we're thinking about the free cash flow before growth, how much of that is kind of driven by the ITC and PTC? Thanks.

[Alan Liu, CEO at XPLR Infrastructure]

Hey, Shar, it's Alan. So in the appendix of the presentation, we've given you the tax credits up to 2026. So the way I think about it is, as we've said in the prepared remarks, our free cash flow before growth is relatively consistent through the end of the decade. So that's kind of what we're willing to share with you today.

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

Okay, perfect. No, that's all the

[Shar Pourreza, Senior Managing Director at Guggenheim Partners]

questions I had. Appreciate it and congrats, Alan, on the new spot.

[Alan Liu, CEO at XPLR Infrastructure]

Thanks, Joe.

[Operator]

The next question comes from Julien Dumoulin Smith with Jefferies. Please go ahead.

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

[SPEAKER JULIEN DUMOULIN SMITH:] Hey, good morning, team. Thank you

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

guys very much. I appreciate the time and congrats, Alan, pleasure. Maybe just to follow-up a little bit. How do you think about what that run rate EBITDA is in terms of the growth CapEx that you guys are laying out here? So I.

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

E, how do you think about that run rate growing? And then how do you think about the net of, as you say, selling assets out from under this assets? How do you think about that over time? I imagine there's some puts and takes and probably for convenience you're talking about run rate. But can you talk about the gross up and the gross down there a little bit as you think about run

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

rate?

[Alan Liu, CEO at XPLR Infrastructure]

Yes. So I think the way I look at it is, let's we're not going to talk about run rate on a go forward basis, right? I think what matters to my mind is going forward is what the actual cash flows that we're going to produce so that we can allocate on behalf of unitholders. And our project as we stated, our project level cash flows are relatively consistent.

[Alan Liu, CEO at XPLR Infrastructure]

What we have laid out here is a plan where you have significant movements in the capital structure. The change in the capital structure is primarily due to our decision not to issue equity. So you've got higher interest expense, but after you've kind of gotten your way through 2025, we're into 2026, we arrive at a free cash flow growth of $600,000,000 to $700,000,000 That I think is the most important metric, right? We're at that $600,000,000 to $700,000,000 of free cash flow that we can allocate on behalf of all the capital allocation decisions of this company to drive unitholder value.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Hey, Julien, on the question with regard to EBITDA, so and I think we've shown you a page on that. EBITDA is effectively flat during the period that we're talking about. The one change to EBITDA will be Mead, right? And so you can see that step down. And then on the repowerings, it's effectively flat.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

So we're spending the capital, but I think you need to that is effectively extending the asset life of the assets. So we're creating meaningful NPV. We're creating attractive IRRs. But what you're seeing that in is in the multiple more years of asset life that we've added to it.

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

Got it. And then just in terms of incremental interest expense, how do you think about what you're targeting there beyond the 'twenty six environment? Any kind of way to think about how you're thinking about refinancing at the Holdco and interest expense there or any kind of heuristics each year? Just as you think about it rolling forward. I mean, would you use converts and other lower coupon structures again?

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

Are you thinking about more traditional debt structures?

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Yes. I think right now, we're obviously focused on straight debt because we like the value of our equity price, and so we don't want to sell it through a convert. We'll see where we are when the next set of maturities comes due, but we're doing a lot of the refinancing in the '25 and 'twenty six timeframe. So that's why we feel very confident about the cash flow number that we've put in front of you today.

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

Awesome. And then net, if I can think about it in a different direction, as you think about re contracting the portfolio here, etcetera, again, that's also re contemplated in your run rate conversation. I get repowering is a net flat. You're selling assets here. So presumably, that pushes down the EBITDA relative to your run rate conversation.

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

Are there other positive offsets? Or should we not read your run rate EBITDA as being inclusive of the CEPFIS loss over time?

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Right. Julian, if I'm following the question, I guess I'll just say a couple of things. One is we're going to eliminate conversations of run rate going forward. We're just going to talk about the EBITDA of the assets. And if you look at the page that we presented, the EBITDA of the assets is effectively flat, except for when we sell off the SEPAs, which we've shown you that step down over time.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

And then as Alan mentioned, from a cash flow perspective, we've given you where we think we are in 2026, and we've said we think that's effectively flat. That's the right range to think about through the end of the decade. So hopefully that answers your question, but want to make sure we're hitting it directly.

[Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group]

No, absolutely. Thank you guys very much for the details. I appreciate the time and patience. Good luck, all right. Look forward to it.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Thanks.

[Alan Liu, CEO at XPLR Infrastructure]

Thank you.

[Operator]

The next question comes from William MacRifan with UBS. Please go ahead.

[William Grippin, Director - Equity Research at UBS Group]

Good morning. Thanks very much for the time. Just one quick one for me. Could you give us a little bit more color on sort of the quantum and timing of your expected growth investments or perhaps when we could get a little bit more color on how exactly you plan to make those investments?

[Alan Liu, CEO at XPLR Infrastructure]

Yes. So I think we've laid out in the sources of use in the appendix, right, the planned CapEx expenditures. I would say you have most of it is going to be in the 2025 timeframe, right? And then you have some of it in 2026. But what we've laid out here today is really a 2025 to 2026 will plan.

[Alan Liu, CEO at XPLR Infrastructure]

The current that's kind of how you think should think about it. That answer your question or?

[William Grippin, Director - Equity Research at UBS Group]

I guess, well, and then how do I think about that sort of in the context of guiding to flat free cash through the end of the decade, right?

[Alan Liu, CEO at XPLR Infrastructure]

I'm sorry. So I think what you should think about it is, obviously, in the near term, we're focused on our 2 first priorities, right, which is the set of buyouts and the repowering projects. The guidance does not contemplate growth beyond that at this point. Obviously, as we complete our two priorities and we have access to cash flows, we think there's plenty of opportunities beyond that, but the guidance today does not incorporate anything beyond that.

[William Grippin, Director - Equity Research at UBS Group]

Got it. Thanks very much.

[Operator]

The next question comes from Willard Granger with Mizuho. Please go ahead.

[Willard Grainger, Senior Associate at Mizuho Financial Group]

Hi, good morning, everybody. Just a point of clarity, do you expect there is the expectation that the EBITDA from the $1,700,000,000 to $1,900,000,000 of growth CapEx will bridge you or offset any decline in EBITDA from asset sales? Is that how we should be thinking about it?

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Yes. I think the way you should think about repowers, which is where the money is going to over the next. So we're spending money on 2 things, as Alan laid out. 1 is we're going to buy out selected SEPAs, right? And then 2, we're going to spend money on repowers.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

And the way I would think about repowers is not adding meaningful prompt to your cash flow, but adding extending the life of the asset. And so we're adding meaningful NPV and meaningful IRR. And so we are spending capital and we're holding the EBITDA and the cash flow at a range that we've talked about. But we are extending the life of the assets many years, which is adding NPV. That's why we've talked about them being positive IRR investments.

[Willard Grainger, Senior Associate at Mizuho Financial Group]

Got it. And the funding of the new CapEx, should we just think about that as a combination of equity and tax equity? Or is there a refinancing of the project level debt? Will a lot of that just be kind of pushed down from the hold code in the form of hold code debt? How should we be thinking about that?

[Willard Grainger, Senior Associate at Mizuho Financial Group]

Thanks.

[Alan Liu, CEO at XPLR Infrastructure]

I think it's going to be a combination of project level and tax equity. Obviously, we think the majority of that financing will be at the project level.

[Willard Grainger, Senior Associate at Mizuho Financial Group]

Perfect. I'll leave it there.

[Willard Grainger, Senior Associate at Mizuho Financial Group]

Thanks very much.

[Alan Liu, CEO at XPLR Infrastructure]

But I would point you to Slide 20 in the appendix where we've actually laid out in detail our financing plan, the expectations of the financing plan for the next 2 years.

[Operator]

The next question comes from Andrew Weisel with Scotiabank. Please go ahead.

[Andrew Weisel, Director at Scotia Howard Weil]

Hi, thanks. Good morning, everyone. Appreciate all the details here, a lot to digest. My first question, just to clarify the EBITDA and free cash flow before growth guidance figures, are those calendar guidance figures? In the past, you've talked about December 31 run rate figures.

[Andrew Weisel, Director at Scotia Howard Weil]

Is this a change? Are these more traditional full year numbers?

[Alan Liu, CEO at XPLR Infrastructure]

That is correct. As stated, what we think matters most in a go forward basis is how much cash do we have available in each calendar year to fund the different sources and the different capital allocation decisions that we intend to make.

[Andrew Weisel, Director at Scotia Howard Weil]

Okay, great. Thank you for clarifying. And then secondly, Brian, just to elaborate on what you were saying a moment ago, if I understand correctly, the $1,700,000,000 to $1,900,000,000 of growth CapEx over $25,000,000 to $26,000,000 primarily repowerings and that should basically maintain the EBITDA and free cash flow before growth that you're guiding to for 2026. That should be stable through the end of the decade. So my question is, should we model out a similar level of growth CapEx each year in order to maintain that level?

[Andrew Weisel, Director at Scotia Howard Weil]

Or how do we think about that? I mean, I think Okay.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

So

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

again, the way that I would think about repower is, as you said, we're putting money into the assets to extend the life of the assets, right? So, on an NPV basis, we've added years of cash flow to the business because it had we've extended the life of the assets. That's where we're going to focus our money in 2025 and 2026. As we look at other opportunities, we mentioned co located storage, right? So that could be a different kind of CapEx.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Obviously, that will come with incremental cash flow and its own NPV. So the near term cash flow is invest in the assets, extend the life of the assets, which we think is a very attractive IRR. And then we'll look at other as Alan said, we'll look at other opportunities when we get out to the 2025, 2020 6 and 2017 timeframe.

[Andrew Weisel, Director at Scotia Howard Weil]

Okay. So in the simplest terms of modeling, until we hear otherwise, EBITDA and free cash flow should be flattish, no growth CapEx and no distribution. Is that kind of the way we should think about this until we hear otherwise?

[Alan Liu, CEO at XPLR Infrastructure]

That's correct.

[Andrew Weisel, Director at Scotia Howard Weil]

Okay, great. Thank you. And then one last one.

[Alan Liu, CEO at XPLR Infrastructure]

Obviously, we mentioned, I just want to point out, as we talked about in the presentation, there is obviously the expected drop in EBITDA from the sale of the Mead pipeline investment, right? So you should factor that in as well.

[Andrew Weisel, Director at Scotia Howard Weil]

Correct. I should have said after 2026. Right. Very clear on the near term changes. Okay, great.

[Andrew Weisel, Director at Scotia Howard Weil]

Then my last one, if I may. You mentioned some additional changes coming on the management team. Congratulations to Alan again. Can you maybe elaborate on what other new faces we might see coming into the picture here

[Andrew Weisel, Director at Scotia Howard Weil]

or position I should say?

[Alan Liu, CEO at XPLR Infrastructure]

Yes. I think with this announcement today, we are also we have a new CFO, Jessica Jeffrey. Jessica has been a leader within NextEra for a number of years, really talented individual that I'm super excited to be going on this journey with. So she's going to be the other named Executive Officer.

[Alan Liu, CEO at XPLR Infrastructure]

With us is a really talented team as well in NextEra. And obviously, as you heard today, the relationship between Xplore and NextEra Energy isn't changing. So obviously, we have continued support and opportunities to work with the NextEra team.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Andrew, you might remember Jessica, she is a former Head of IR, so you may have interacted with her in that capacity.

[Andrew Weisel, Director at Scotia Howard Weil]

Yes, I do. Congratulations all around. Thank you, everyone.

[Operator]

The next question comes from Michael Sullivan with Wolfe Research. Please go ahead.

[Michael Sullivan, Director - Equity Research at Wolfe Research]

Yes. Hey, good morning. I think you mentioned rating agencies effectively signing off on the plan. Can you just give us a sense of what the credit metrics look like over the next couple of years?

[Alan Liu, CEO at XPLR Infrastructure]

Yes. I think obviously we've previewed this plan with all the 3 of the agencies that rate us, right? And our credit metrics from an FFO perspective are expected to be kind of consistent with levels that are consistent with our ratings. I think that that's kind of what the expectation.

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Yes. So you'll get if you haven't seen their press releases, I think they'll be coming out later this morning. So they've affirmed their expectations and each of them has a slightly different way of going through the calculations. So rather than taking them agency by agency, you can look at the reports, but you'll be able to see their guidance and where we sit within their guidance. But I think the important part for this conversation is that they've affirmed where they are relative to where they were before this announcement.

[Michael Sullivan, Director - Equity Research at Wolfe Research]

Okay, very helpful. And then just on the Mead sale, so to confirm, do you expect to close it in the Q4? And has the process kicked off yet officially?

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

I don't want to comment on the process more broadly, but I think the timing is consistent with the Q4 of this year.

[Michael Sullivan, Director - Equity Research at Wolfe Research]

Okay. And any change to how much leverage is on that asset from prior disclosures?

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

No change.

[Michael Sullivan, Director - Equity Research at Wolfe Research]

Okay. Thank you.

[Operator]

The next question comes from Christine Cho with Barclays. Please go ahead.

[Christine Cho, Managing Director at Barclays]

Good morning. Thank you for taking my question. I just have one.

[Christine Cho, Managing Director at Barclays]

And I know you've kind of touched upon this, but the repowerings, you talk about it being NPP positive as you extend the terms. But is there any opportunity to renegotiate the PPA rate, especially for the ones that don't have some sort of adder? I would just think that given some of these original PPAs were signed 10 years ago that there could be some uplift in the PPA rate?

[Brian Bolster, Executive VP of Finance & CFO at NextEra Energy]

Sure. I mean, listen, as part of these conversations, there's always an option to renegotiate the PPA. And so it obviously depends on where the PPA was struck relative to where current prices are. So we look at all those opportunities in the context of these repowerings.

[Operator]

This concludes our question and answer session and concludes our conference call today. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Alan Liu, CEO

Analysts

• Mark Edelman, Director of IR at NextEra Energy Partners
• Brian Bolster, Executive VP of Finance & CFO at NextEra Energy
• Shar Pourreza, Senior Managing Director at Guggenheim Partners
• Julien Dumoulin-Smith, Research Analyst at Jefferies Financial Group
• William Grippin, Director - Equity Research at UBS Group
• Willard Grainger, Senior Associate at Mizuho Financial Group
• Andrew Weisel, Director at Scotia Howard Weil
• Michael Sullivan, Director - Equity Research at Wolfe Research
• Christine Cho, Managing Director at Barclays