Kirk Crews
Executive Vice President and Chief Financial Officer at NextEra Energy
Thank you, Kristen, and good morning everyone. NextEra Energy is off to a strong start in 2023. Adjusted earnings per share increased by approximately 13.5% year-over-year building on the success of last year's strong execution and financial performance. During the quarter, we were honored the NextEra Energy was again ranked number one in our sector on Fortune's list of the World's Most Admired Companies for the 16th time in 17 years. We are extremely proud of the team and culture we have built that has enabled us to deliver low-cost, clean and reliable power to our customers, while also providing long-term value to our shareholders.
FPL is the largest electric utility in the US and Florida is now officially the fastest-growing state in America. At FPL, our focus remains the same, deploying smart capital to deliver on what we believe is one of the best customer value propositions in our industry. Key to that strategy is keeping customer bills affordable. In this quarter we proposed using projected 2023 fuel savings to reduce unbilled fuel costs from 2022 to provide bill relief to customers. To further manage fuel price volatility, we are also helping customers by adding more solar to the FPL grid. This quarter, we placed into service approximately 970 MW of new low-cost solar putting FPL's owned and operated solar portfolio in nearly 4,600 MW which is the largest solar portfolio of any utility in the country.
We believe solar is now the lowest-cost generation option for Florida customers but represents only about 5% of FPL's delivered energy. In order to extend the benefits of low-cost solar to customers, FPL's recently filed 10-year site plan now includes nearly 20,000 MW of new solar. Energy Resources, the world's leader in renewables and a leader in battery storage remains laser-focused on executing the strategy of decarbonizing the power sector and helping commercial and industrial customers outside the power sector, reduce their energy costs and decarbonize their operations by moving to low-cost renewables and other clean-energy solutions. This quarter, Energy Resources added approximately 2020 MW of new renewables and storage projects to its backlog.
Energy Resources also closed on its previously-announced acquisition of a large portfolio of operating landfill gas to electric facilities, providing the foundation for our growing RNG business. We are also excited to announce a new memorandum of understanding with CF Industries to create green hydrogen establishing what we expect will be a long-term relationship with the world's largest ammonium producer. And finally, Energy Resources continues to build what we believe is the nation's leading competitive transmission business to help support growth and renewables.
We are pleased to announce that the California ISO recently recommended for approval approximately $400 million in new transmission and substation upgrades for NextEra Energy Transmission. We believe NextEra Energy continues to be anchored by two great businesses that leverage each other's expertise to make them even better. We do not believe anyone in our industry has our set of skills, scale and breadth of opportunities. We believe NextEra Energy is able to buy, build, operate and finance cheaper with one of the strongest balance sheets in our sector. We also believe our best-in class development skills and unparalleled dataset enables us to provide innovative technology and low-cost clean-energy solutions for the benefit of our customers. The opportunities and products demanded by the market are becoming more complex requiring significant scale and a combination of skills that few of our competitors can offer, further enhancing our competitive advantages and creating even more growth opportunities for our business going forward.
We have a culture rooted in continuous improvement, always striving to be better. Along those lines, we just completed our annual employee led productivity initiatives, which we now call Velocity. For over 11 years, our employees have generated approximately $2.6 billion in annual run-rate savings ideas as part of this process. In 2023 alone, our team generated idea is expected to produce roughly $325 million in annual run-rate savings, which when combined with last year's result of over $400 million is the most productive 2-year period in this program's history and that's after doing it for over a decade. We believe we have the best team in the industry and these results are indicative of the breadth and depth of capabilities and the commitment to excellence that our team brings to our business every day and executing on behalf of our customers and shareholders.
With that, let's turn to the detailed results, beginning with FPL. For the first quarter of 2023, FPL reported net income of $1.07 billion or $0.53 per share, an increase of 9% year-over-year. Regulatory capital employed growth of approximately 11.2% was a significant driver of FPL's EPS growth versus the prior year comparable quarter. FPL's capital expenditures were approximately $2.3 billion for the quarter. We expect our full-year 2023 capital investments of FPL to be between $8.0 billion and $9.0 billion dollars as we continue to invest capital smartly for the continued benefit of our customers. FPL's reported ROE for regulatory purposes will be approximately 11.8% for the 12 months ending March 2023.
During the quarter, we utilized $373 million of reserve amortization to achieve our targeted regulatory ROE leaving FPL with a balance of $1.77 billion. As we previously discussed, FPL historically utilizes more reserve amortization in the first half of the year and we expect this trend to continue this year. Earlier this year, the Florida Public Service Commission approved FPL's proposed plan to recover approximately $2.1 billion of incremental fuel costs from 2022, partially offset by projected 2023 fuel savings of approximately $1.4 billion.
Amid high natural gas prices in 2022, FPL decades long modernization of its generation fleet has saved customers more than $2 billion in fuel costs in 2022 alone. The Commission also recently approved recovery of approximately $1.3 billion of hurricane costs from 2022 over a 12-month period. Taking all approved adjustments together, we anticipate that FPL's typical 1,000 kilowatt-hour residential customer bills will remain well below the projected national average and among the lowest of all Florida utilities.
Turning to our development planning and efforts. FPL recently filed its annual 10-Year Site Plan that presents our generation resource plan for the next decade. The 2023 plan includes roughly 20,000 MW of new low-cost solar capacity across our service territory over the next 10 years, which would result in nearly 35% of FPL's forecasted energy delivery in 2032 coming from cost-effective solar generation, up significantly from roughly 5% in 2022. Given the increasing customer benefit of low-cost renewables FPL's post 2025 solar capacity additions in this year's plan or more than double last year's approved plan and also includes two gigawatts of battery storage over the next decade. We believe the expansion of cost-effective solar and storage will provide a valuable hedge for our customers against volatile natural gas prices and meet the electricity demand of FPL's growing customer base with a low-cost generation source. Finally, construction of our green hydrogen piloted at our Okeechobee Clean Energy Center is on-track and projected to go into service later this year.
Turning now to the Florida economy, Florida became the fastest growing state in the nation in 2022 and its population continues to increase with over 1,000 people moving to Florida every day. Over the last five years, Florida's GDP has grown at a roughly 7% compound annual growth rate and is now approximately $1.4 trillion which is up approximately 8% versus a year ago. Based on GDP if Florida was a country, it would have the 14th largest economy in the world. FPL's first quarter retail sales increased 0.4% from the prior year comparable period driven by continued solid underlying population growth with FPL's average number of customers increasing by approximately 65,000 even after removing roughly 50,000 inactive customers due to Hurricane Ian.
For the first-quarter, we estimate that the positive impact of warmer weather was more than offset by a decline in underlying usage per customer. As we have often pointed out, underlying usage can be somewhat volatile on a quarterly basis, particularly during periods when temperatures deviate significantly from normal as we experienced this winter with average temperatures greater than four degrees above normal. Our long-term expectations of underlying usage growth continues to average between 0 and approximately negative 0.5% per year. Energy Resources reported first quarter 2023 GAAP earnings of approximately $1.440 billion for $0.72 per share. Adjusted earnings for the first-quarter were $732 million or $0.36 per share, up $0.04 versus the prior year comparable period.
Contributions from new investments increased $0.07 per share year-over-year. Contributions from our existing clean-energy portfolio were lower by $0.03 per share, primarily due to less favorable wind and solar resource compared to the prior year. The contribution from our customer supply and trading business increased by $0.06 per share, primarily due to higher margin in our customer-facing business and compared to a relatively weaker contribution in the prior year comparable quarter. Gas infrastructure and all other impacts reduced earnings by $0.01 and $0.05 per share respectively versus 2022.
Energy Resources had another strong quarter of origination, capitalizing on strong renewables demand environment. Since the last call, we added approximately 2020 MW of new renewables and storage projects to our backlog, including roughly 1,370 MW of solar, 450 MW of storage and 200 MW of wind. With these additions, our renewables and storage backlog now stands at over 20.4 gigawatts, net of projects placed in-service and provides strong visibility into our future growth.
With more than a year and a half remaining before the end of 2024, we are now within the 2023 to 2024 development expectations range. Given the volatility in gas and power prices over the last year and a half, we continue to see economics driving long-term decision-making and renewables remain the clear low-cost option for many customers. On the supply, solar supply-chain front, we continue to take constructive steps to mitigate potential future disruption. Nearly every one of our suppliers has repositioned their supply chains to manufacture solar panels in Southeast Asia using wafers and cells produced outside of China and all our suppliers are expected to meet the criteria established in the Commerce Department's preliminary determination in the 2022 circumvention case by the end of 2023.
Additionally, we are focused on further diversifying our supply-chain and are currently advancing discussions to support the domestic production of solar panels. Finally, we are encouraged by the improvement in the flow of panels into the US as suppliers continue to provide the request the traceability documentation to US Customs and Border Protection. Also during the quarter, we closed on the previously announced transaction to acquire a large portfolio of operating landfill gas to electric facilities that I mentioned earlier. The approximate $1.1 billion transaction represents an attractive opportunity for Energy Resources to realize double-digit returns on this investment, while expanding its portfolio of renewable natural gas assets and growing its in-house capabilities and rapidly expanding renewable fuel market.
Turning to green hydrogen. We are excited about the role it is expected to play a solution to help our customers cost-effectively lower emission. As the world-leader in renewables and a leader in battery storage, we believe we are the logical partner for green hydrogen with significant interconnection and land inventory positions and deep market expertise to help our potential partners optimize some of the best green hydrogen sites around the country. As a result, with the right regulations we see hydrogen quickly becoming a significant technology for our customers, a new growth driver for Energy Resources, given the number and size of the opportunities we are evaluating.
Earlier this month, NextEra Energy joined a coalition of 45 other companies with a combined approximately $1 trillion in market capitalization and [Indecipherable] to the Secretary of Energy and Treasury and the White House advocating programmatic policies for the implementation of the IRAs green hydrogen production tax credit. This coalition is advocating for prudent policy that will foster investment in green hydrogen technology, paving the way for the US to become the world leader in hydrogen technology. A key aspect of this policy is for the electricity consumed for green hydrogen production to be matched to its renewable power generation on an annual rather than an hourly basis. We believe that annual imagining construct has several benefits overall including lower green hydrogen prices, more renewables being built, significant reduction in carbon emissions and green hydrogen achieving cost parity with grey and blue hydrogen, both of which rely on fossil fuels for their production. This viewpoint is supported by numerous third-party studies from respected entities such as Wood MacKenzie, Rhodium Group, Energy Futures Initiatives, Energy and Environmental Economics and MIT Energy Institute.
As we continue to work with the industry and government representatives to progress a smart hydrogen policy, we are also advancing our green hydrogen development efforts, including a recently executed Memorandum of Understanding for a joint venture with CF Industries, the world's largest producer of ammonia to develop -- excuse me, to deliver green hydrogen to an existing CF Industries ammonia production facility, which it intends to expand and incorporate green hydrogen into its production process. The proposed facility includes an approximately 450 MW Renewable Energy Solution powering a 40 tonnes per day hydrogen facility. This project combined with other opportunities we are pursuing represent significant momentum for green hydrogen, which we believe will continue to be a driver of new renewables growth going forward. Our team continues to engage with multiple potential partners and customers on hydrogen projects representing over $20 billion of capital investment and requiring more than 15 gigawatts of new renewables to support. As we focus on leading the decarbonization of the US economy building additional transmission is essential to support long-term renewables deployment. We believe our ability to build, own and operate transmission is a key competitive advantage for our renewables business in addition to being a terrific investment opportunity. We are pleased that the California ISO recently recommended for approval approximately $400 million in transmission and substation upgrades for NextEra Energy Transmission subject to approval by the CAISO Board of Governors in May. We believe these projects along with others could unlock up to 11 gigawatts of new renewable generation that could be built to support California's ambitious clean energy goals.
Turning now to the consolidated results for NextEra Energy for the first-quarter of 2023. GAAP earnings attributable to NextEra Energy were $2.086 billion or $1.04 per share. NextEra Energy's 2023 first-quarter adjusted earnings and adjusted EPS were approximately $1.678 billion and $0.84 per share respectively. Adjusted earnings for the corporate and other segment decreased results by $0.03 per share year-over-year, primarily driven by higher interest rates. In March, S&P affirmed all of its ratings for NextEra Energy and lowered its downgrade threshold for its funds from operations or FFO to debt metric from the previous level of 20% to the current level of 18%. In making this favorable adjustment S&P acknowledged improvement in Energy Resources business risk following the passage of the IRA, particularly noting the improved visibility and clarity into long-term cash flows. At the same time S&P adjusted its treatment of non-recourse project debt associated with FERC-regulated investment to bring it back on credit. We believe this overall favorable adjustment, which creates roughly 50 bps of additional headroom against the downgrade threshold highlights the attractive risk profile of renewables and acknowledges the long-term stable cash flows and Energy Resources business particularly given the benefits of the IRA.
Finally, as we have discussed in the past, we actively enter into various interest rate swaps products to manage interest rate exposure on future debt issuance. Today, we have $21 billion of interest-rate swaps at NextEra Energy to help mitigate the impact of potential future increases in rates, which exceeds the notional value of our 2023 and 2024 maturities, and as always, the current interest rate environment is taken into account in our financial expectations.
Our long-term financial expectations, which we extended earlier this year through 2026 remain unchanged. And we will be disappointed if we are not able to deliver financial results at or near the top-end of our adjusted EPS expectation ranges in each year from 2023 to 2026, while at the same time, maintaining our strong balance sheet and credit ratings. From 2021 to 2026, we also continue to expect that our average annual growth in operating cash flow will be at or above our adjusted EPS compound annual growth rate range. We also continue to expect to grow our dividends per share at roughly 10% per year through at least 2024 off a 2022 base. As always, our expectations assume our usual caveats including normal weather and operating conditions.
Turning to NextEra Energy Partners. We believe we have never had more visible growth opportunities than we have today. We have the ability to grow in three ways, acquiring assets from Energy Resources growing organically and buying assets from other third parties. With significant tailwinds from the IRA, Energy Resources operating portfolio combined with its backlog of projects and development expectations through 2026 totaled approximately 58 gigawatts providing terrific visibility for NextEra Energy Partners. And Energy Resources and continuing to grow in innovative ways, adding new technologies and clean-energy assets to its portfolio, such as RNG and hydrogen.
In addition to acquiring assets from Energy Resources NextEra Energy Partners also has the ability to re-power its existing assets with approximately 1,300 MW of potential wind repowerings already identified and many more opportunities expected to come as well as potential to locate storage at its existing renewable assets given the new standalone storage ITC. Finally, there are significant acquisition opportunities with renewable portfolios continuously being brought to market. NextEra Energy Partners also has numerous ways that can finance this growth and we believe it can do so efficiently giving us ample liquidity and access to capital.
At the end-of-the first-quarter, NextEra Energy Partners had $2.8 billion of liquidity and approximately $6 billion of interest-rate swaps to manage future interest rate volatility on debt maturities through 2026. With regard to convertible equity portfolio financings, we can fund equity buyouts by delivering common units or utilizing our at-the-market or ATM program or a combination of both. And we believe we have ample liquidity to fund cash payment. Importantly, we have flexibility. And we expect to leverage the flexibility to manage future buyout to select the most efficient option. Using this flexibility, NextEra Energy Partners has now bought out 50% of the STX midstream convertible equity portfolio financing through funds generated from a combination of the ATM program where NextEra Energy Partners was able to be opportunistic and cash from our subsidiaries revolving credit facility.
With the buyouts of the 2018 convertible equity portfolio financing and 50% of the STX midstream convertible equity portfolio financing complete, we estimate that the convertible equity portfolio financing structure has resulted in approximately 55% and 64% respectively or 16 million fewer units being issued compared to raising capital with underwritten block equity, all for the benefit of unit holders. For the balance of the year buyouts are now expected to be limited to the remaining 50% of the STX midstream convertible equity portfolio financing and 50% of the net renewables to convertible equity portfolio financing with the equity portion of these buyouts requiring common units of approximately $280 million and $130 million respectively.
Over the next eight months, we have flexibility and time to opportunistically manage these buyouts in the most efficient way. For each buyout, we have the flexibility to deliver common units to the convertible equity portfolio of financing investor, utilize the ATM program or some combination of the two. Ultimately, we will select the most efficient option. In any event, the potential unit issuance from these buyouts are not expected to exceed an average of three days of total trading volume per quarter which we expect will make them quite manageable. Most importantly, NextEra Energy Partners' growth expectations through 2026 already factor in its financing plan including convertible equity portfolio financing buyouts at current trading yields.
Turning to distribution growth. Yesterday the NextEra Energy Partners' Board declared a quarterly distribution of $84.25 per common unit or $3.37 per common unit on an annualized basis, up approximately 15% from a year earlier. Inclusive of this quarter, NextEra Energy Partners has grown its LP distribution per unit, up nearly 350% since the IPO. Today, we are pleased to announce that NextEra Energy Partners has entered into an agreement with Energy Resources to acquire an approximately 690 MW portfolio of long-term contracted operating wind and solar projects, an attractive cash available for distribution yield. The high-quality portfolio has a cash available for distribution, weighted-average remaining contract life of approximately 16 years and average customer credit rating of BBB at S&P and BAA2 at Moody's Investors Service. NextEra Energy Partners is to acquire the portfolio for approximately $708 million subject to closing adjustments and is inclusive of the portfolio of existing project debt and interest-rate swaps, which are estimated to be approximately $142 million. In addition to the approximate $708 million purchase price NextEra Energy Partners is also expected to assume the portfolios existing tax equity financing balances. The remaining purchase price is expected to be funded by a combination of new project finance debt in the corporate revolving credit facility. The portfolio of assets is expected to contribute adjusted EBITDA of approximately $110 million to $130 million and cash available for distribution prior to the existing project debt service of approximately $62 million to $72 million each on a 5-year average annual run-rate basis beginning December 31, 2023. The transaction is expected to close in the second quarter of this year.
Additional details on the portfolio of assets to be acquired by NextEra Energy Partners can be found in the appendix of today's presentation. NextEra Energy Partners will remain opportunistic pursuing acquisitions in 2023 and with the closing of the transaction announced today, NextEra Energy Partners expects to be well positioned to meet its year end 2023, adjusted EBITDA and cash available for distribution run rate expectations.
Turning to the detailed results, NextEra Energy Partners delivered first-quarter adjusted EBITDA and cash available for distribution results in line with management's expectations. Adjusted EBITDA of $447 million increased by $35 million versus the prior year, driven primarily by favorable contributions from the approximately 1,200 net MW of new projects acquired in 2022. Both adjusted EBITDA and cash available for distributions were negatively affected by lower resource from existing projects. Additionally, cash available for distribution was lower versus the prior year comparable period due to incremental debt service and timing of payable payments.
Looking forward in the second-half of 2023, we expect strong double-digit growth in adjusted EBITDA and cash available for distribution to support NextEra Energy Partners LP distribution per unit growth expectation range of 12% to 15% for the full year 2023. Additional details are shown on the accompanying slide. NextEra Energy Partners continues to expect run rate contributions for adjusted EBITDA and cash available for distributions from its forecasted portfolio at December 31, 2023 to be in the ranges of $2.22 billion to $2.42 billion and $770 million to $860 million respectively. As a reminder, year end 2023 run-rate projections reflect calendar year 2024 contributions from the forecasted portfolio at year end 2023 and include the impact of IDR fees, which we treat as an operating expense. As always, our expectations are subject to our usual caveats including normal weather and operating conditions.
From a base of our fourth quarter 2022 distribution per common unit at an annualized rate of $3.25, we continue to see 12% to 15% growth per year in LP distributions as being a reasonable range of expectations through at least 2026. We continue to remain comfortable with these growth expectations. And in fact, even at the current yield, Energy Resources portfolio loan is just one way NextEra Energy Partners believes it can meet its growth expectations through 2026. For 2023, we expect the annualized rate of the fourth quarter 2023 distribution that is payable in February 2024 to be in a range of $3.64 to $3.74 per common unit. We also continue to expect to achieve our 2023 distribution growth of 12% to 15%. In summary, we continue to believe that both NextEra Energy and NextEra Energy Partners are well positioned to continue delivering on their long-term growth prospects. At FPL, that means executing on smart capital investments to deliver on its customer value proposition of low bills, high reliability and outstanding customer service. At Energy Resources, that means leading the de-carbonization of both the power sector and non-power sector and leveraging its competitive advantage to capitalize on low-cost renewal and new emerging technologies like green hydrogen. At NextEra Energy Partners, we expect to capitalize on its unmatched growth visibility to further expand its best-in class clean energy portfolio to provide long-term distribution growth for unit holders.
With that, we're happy to address your questions.
