XPLR Infrastructure, LP (XIFR) Earnings Call Transcript & Summary

Awesome. Well, all right. So good morning to you and the team. Thank you for making this happen. I appreciate you making the time. I know that we're kicking off. Literally, our renewables because I'd like to call it and claim. We got a good chunk of folks on the line. As you can see, we've been waiting a couple of minutes here. We got 200 change and counting. And look, John, there's a lot that's happened in the last few months, as you know. And really, I wanted to use this moment to talk about the industry. I mean, third quarter was dynamic for a lot of companies out there. So look, why don't we just kick it off and I'll let you jump in with maybe opening comments, remarks. I see you guys put a deck out there and then I've got a whole lot of new questions that have come up. And again, for folks on the line, if you have anything you want to dig in on, just take me here, e-mail, chat, whatever you like. But with that, John, good morning to you and the whole team, and thank you for making it happen. I appreciate your patience here.

Yes, absolutely, Julien, thanks so much for setting us up. Great to be with everybody today. I'm going to keep my opening remarks brief, Julien, because I want to get to the -- all the questions. And I think we've got a lot to cover this morning and excited to do it and hope we can do that in a rapid-fire fashion. My bottom line message is, look, our focus has been on derisking the business. So if you look at FPL, 70% of the business, we've got our CapEx plan, right in line of sight through '25, through the settlement agreement, we feel very good about where those dollars are going to be spent, where the rate base growth is coming from. It's coming from solar, it's coming from transmission investments. So they are well baked. And then on the Energy Resources side, we have 30% of the business, we have really spent a lot of time on derisking the development process. And Julien, that's one of the things I really want to focus on today is around how we're doing that, and the steps that we've taken to do with some of the changes that we've made around it because it's an approach that I think really favors the large players like NextEra, I think some of the smaller players in the space will have a little bit more difficulty doing some of the things that we are doing to derisk the development process. And I'd like to dive deep on some of those, and I know you probably have questions on some of those things. But look, the backdrop going in this discussion and it's been a tough couple of years for the industry, obviously, with circumvention which we've made our way through. I think we've got bright-line rules, a lot of certainty around that new foot with the import restrictions. I think the solar supply chain has been largely cleaned up around that. I think we're starting to see inflation upside. Certainly seeing that in the OEM prices that we are now receiving from our RFPs around panels, inverters, batteries, you name it, prices are coming down significantly. That's very favorable. So a good backdrop there. And then interest rates, cost of capital, price -- hopefully, some release in sight, nobody has a crystal ball on what that will bring. But I think some real favorable tailwinds and you start thinking about the balance of the year and the way the industry shapes it up for '24.

Awesome and thank you, John. And again, for folks just tag me here, any comments, questions. Look, I've got a whole bunch of things feed up here already. We've been anticipating this chat for a little bit.

John, maybe just at the outset, is there anything you want to flag from that deck that just got posted here? Again, I know that a lot of it seems like a lot of the commentary from the call itself, but anything you want to flag there before we keep moving? I just want to make sure that the folks are aware of what's in there.

Yes. One of the things I do want to flag is we added a few -- a little bit more content around the development process. And so you're going to hear a lot of discussion from us on that, how we derisk our business model on the renewable development side. And as a matter of fact, we're probably going to have investors come down here, I don't know, end of February, beginning of March, we'll probably host event with a couple of hours here in our auditorium and walk investors through developing 101. How are we approaching the renewable development business, how have we derisked the model, getting to some of the nitty-gritty that might not be appropriate for an Analyst Day in terms of some of the details, but answer some of the questions that I know that are on investors' minds because the bottom line around renewables is especially onshore where we are, we make a bunch of small bets, right? We're building 100, 200 megawatts projects in 49 states, and we have really been able to derisk that model substantially. I'll talk more about that in a second. So look for that into February, beginning of March when we're going to host investors down here in Florida, hopefully, a good reason to come down to the sunny Palm Beach County around that time of year. And then we'll have an Analyst Day in the June time frame, I'm sure folks are expecting that. So this will be a good precursor to the Analyst Day that folks can expect in June. But let me talk about some of these flags, which is really your question. Let me talk about what I mean about derisking of the renewable development model. And we have spent -- I think we're having some background noise.

So I think someone may need to go on mute.

Well. So what I mean about derisking the development model. Here's what I mean about derisking the development model. First, to start with early-stage development, okay? So what have we done around early-stage development? And when I talk about early-stage development, I'm talking about finding the right sites, getting them permitted, working through the public relations part of that. That's been a huge point of focus for us this year in particular. And you've seen us talk about really growing the pipeline to about 300 gigawatts. So why are we so focused on early-stage development? Here's why we are. If you get the project right and you have a good project that's fully permitted, ready to build, finding the contract is not the difficult thing. We can find a contract and a customer to be able to put against that site. But you want to start early because it takes -- spin out the ISO that you're in 4 to 7 years to get through the queue process. So you got to start early. You've got to have a balance sheet to be able to commit around early-stage development. So if we start by using our all the data and the automation that we've built around the business. So you all know we have a company called NextEra Energy Analytics up in Minneapolis. We have been able to develop models that show us where are the best wind resources, where are the best solar resources, where the best place interconnect is because we're in this competitive transmission business, we have a lot of insight into that. We use that to design a tool that we call Discover. And that Discover tool we put in the hands of our land agents, and we say, hey, here we earmark we heat map the whole country, we say, "These are the best sites to go try up." If they don't try those sites up. Then we start immediately working on the permitting and we start working on the interconnect, getting in the queue that you can take some time, and then we start working on the public relations part in the community that's really going to help set up the foundation for the permitting. So we're working in social media. We're talking to the local communities about all the benefits of being in their backyard of the property tax base, the sales tax revenues, the jobs that are going to come, the landowner payments, all the economic revitalization of these rural communities. You got to start early. But if we can do that and we got a good early-stage development portfolio put together, which we do 300 gigawatts, and I don't think anybody is getting close to that. Now we've got the inventory. We can go grab projects off the shelf. And it's really like a factory line model from there, Julien. We start with the early-stage development. Then what we do next is we start to pivot to later-stage development activities. Now we're starting to say, okay, we've got a great project in Texas. Let's start finding customers to line up while we're working through the permitting process, while we're working through the queue process. We start lining up the power purchase agreement. We then bring that to -- once we have a power purchase agreement with an early-stage development project, we call that a late-stage development project. Now we're ready to start making some decisions. That project eventually gets brought for a final investment decision. Once we're making that final investment decision, we're lining up all the equipment. We're lining up the balance of system. We're putting the interest rate hedges in place. We're totally derisking that project. So we've taken something from early stage, which uses all the tools and the automation and all the designs that we have fully permitted project, late-stage find a new customer. Now we're bringing this to FID, we're lining up the equipment and then we're lining up the financing. And we're always lining the financing up for a year in advance. We know exactly where the tax equity dollars are coming from, we're going to leverage transferability where we have significant scale. We already have all of our transferability done for '23. Our '24 projects, by the way, are done, right? They've already been in construction. All the contracts have been signed, they're totally derisked. All it is, is just going and turning the shovels and gets the project built. So we're focused on '25, '26, '27. And we do some things that are a little bit different than I think the rest of the industry is able to do because of our size and scale. Let me give you a couple of examples around that. One is around EPC contractors, right, around balance the system. I've heard a lot about labor shortages. We don't have that problem because we're always going out to our balance of system contractors 2 or 3 years in advance, and we're saying, look, we're going to build 2 gigawatts of solar, give us crews, go start line up the racking, get the equipment that you need, get it all tied up and we're going to find 2 gigawatts of solar or storage or wind for you to go build, and we'll sign those deals up with 4 or 5 contractors 2 gigawatts at a time gives us tremendous scale. We don't have to worry about where they're going to find the people. And then we can just rotate their crews, right? We could start them in the upper Midwest in Iowa, we can move them to Nebraska and down the Missouri and finish up in Indiana. And if we have a hiccup in one project, we can move them to the third and then back to the second and over the fourth. So it gives us a ton of flexibility in terms of how to get that done. And then we're also running a factory model, not only on our balance of system, but on our supply chain, right, which we've diversified across the world. We're sourcing from every part of the globe. We're -- I view it as a 1/3, 1/3, 1/3, probably 1/3 of Southeast Asia, 1/3 Indiana, 1/3 domestically is really the goal of where we want to get to with solar panels and batteries and inverters, and wind turbines is pretty much a U.S. play. That's working really well for us. We're seeing terrific price competition. Panels that were in the low to mid-$0.40s are now right around $0.30, $0.31, right? For example, every $0.05 a panel decline is $5 improvement in the PPA. So a significant decrease in panel prices. We've seen the same thing in battery storage. Battery storage used to be $215 a kilowatt hour. It's down to $175, moving down to $165. You're seeing that will -- just the demand on the EV side and the amount of lithium capacity increasing, which is really relapse in battery storage prices at a great time, where we're starting to see inflation really come off on steel and aluminum and soft attributing a lower build cost going forward. So a real favorable environment. But we can go ahead and enter into large-scale supply agreements with a number of different panel manufacturers, which gives us a ton of flexibility to be able to move things around. If we have an issue with one project or another, that diversification is a great risk management tool. The buying power, obviously, allows us to buy a deep discount compared to the rest of the market. But gives us a lot of flexibility in our factory line model in terms of how we are building these projects across the U.S. And we're also able to like on panel, what we do is we'll always keep about a gigawatt or more in inventory in the U.S. We just go pull them. So if we have any import delays or any issues we don't find ourselves in trouble there, right? We've got plenty of backup supply to be able to draw from. And that's the beauty of being large. And we've said for a very long time that this is a scale business where that's going to favor the large players like NextEra, you've got to have balance sheet, you've got to have access to capital to do the things that we do. I mean once we start building then we're working on the financing, right? And we're not like a small player in this business that's relying on construction loans. And I saw your piece yesterday, which is spot on, right? I mean, if you're a small developer you got to get construction financing. And oh my gosh, that means you better have your tax equity lined up. Well, guess what? These guys are getting the last allocation. They're behind NextEra. NextEra, we're always securing our tax equity a year in advance. Our tax rate stability program now kind of obviate some of the need even for tax equity. And we already have our '24 tax transfer pretty much all sold to the corporate. We're already working on '25 now, '23 is already done. Again, another part of the derisking, but we don't rely on construction financing. We build everything on balance sheet than we permit out, and obviously, we're hedging along the way. But these other folks that are relying on construction loans and then how to get the finance, have the tax equity sold in the back end, they're really struggling. That's creating a lot of opportunities for folks like us with the balance sheet to be able to scoop up projects on the cheap, and scoop up equipment that will go into those projects. Then we're going to get built at a deep discount. We're always more than happy to help voraciously at a deep discount to be able to pick up panels on the cheap, inverters on the cheap that are no longer going to a project that's just not going to happen. And so -- and then the operations. We have a huge advantage over everybody else. We already have started 33 gigawatts of renewables in operation, right? We're going to put another 7 gigawatts in operation this year. It's going to take us around 40. If you look at the backlog that we have, the 21 gigs and then what we plan to get built through our '26 forecast, and we're going to be over 70 gigawatts of renewables. Nobody can compete with that scale from an operations standpoint. The investment we've been able to make in technology and basically operating those facilities with very few people. Nobody could do that. So it's just a giant derisked model for us, early stage, getting way ahead of the game, and getting things permitted early, securing the land, not having change orders. Then moving on to late stage, getting the customer and FID, locking in the equipment, locking in the balance of the system, and then locking in the financing without all the headaches that everybody else has to deal with because we got the A- balance sheet to be able to fall back on and then having better skills and customer relationships than anybody else has in the market. We've been at it for over 2 decades. Customers are coming to us because they don't want to deal with these small developers who have these construction financing problem, that have these delays that aren't getting stuff built for them on time because they have rate base investments. They have full plants getting retire, whether they're patent on PPAs from wind or solar. We have C&I customers that have made commitments to their investors. They want people that are going to get things done. So we now are starting to see a lot of our customers come to us wanting to do joint development agreements over a very long period of time. And just saying, look, no more one-off RFP bid, we need the certainty that we're actually going to get our projects built. And so big JVs coming our way and what -- the other reason they're coming our way is because we have all the land in their own backyard, right? We have that 300 gigawatts. We've got all of the best sites tied up. And so they're coming to us because they know that if they don't work with NextEra, they're going to have limited options in terms of the land and the interconnects because we've already gotten out way in front of the land acquisition piece on the way we're putting together the sites. So when you put all that together and you think about the building blocks that we have in development, we really derisked a lot of the development process, a lot of things that you hear about offshore about some of these smaller developers just don't apply to NextEra. And one final example I'll give you, Julien, is on I'm hearing a lot about delays, right? And these delays that I'm hearing about -- I hear some of the feedback on these earnings calls when people are saying, well, it's domestic content. If you guys [ are hearing a ] domestic content, you're hearing somebody making an excuse, nobody is waiting for domestic content to get projects built, okay? It's just -- sorry, something else is going on. Where there's smoke, there's fire. There's another problem there. It's not domestic content. That's not the issue. And so what we've done, we've got like -- you know why they're really not getting these [indiscernible] they don't have transformers, they don't have to switch gears, they don't have substage equipment. You know what we did. We have transformers, switch gears and substation equipment tied up for the next 4 years. We don't have those issues, right? And we're more than happy to build our substation ourself because we have the transmission expertise. We'll bring the equipment. We're just not having these delay problems that you're seeing across the space.

[indiscernible], maybe that's a good way to parlay the conversation. So I mean, obviously, a difficult conversation with [indiscernible] because of this pervasive dialogue on delays across the sector. How do you see that today, right? Again, we've got a bunch of renewable companies coming through New York this week. We got our conference this week. I'd love to hear how you frame -- how do you think about your market share, right, wind, solar, storage -- how do you think about the setup here considering the backdrop where, look, I mean, in theory, if the bigger players, the first, right, there should be a disproportionate market share accruing to you all. But again, I'd also love to hear how you think about this to set up in the fourth quarter. Are more delays likely, whether that's because they're not getting the financing or because you've got issues on labor, you alluded to this or transformer is another pervasive topic that others are struggling with. I mean, how would you -- just setting the tone into '24, how do you think about approaching that and saying, "Look, this is our situation, but this is what's happening across the industry, we're going to gain market share or not?"

Yes. No. Listen, Julien, great question. So if I were an investor, and I were going into your conference here at the balance of the week and you guys have spent a lot of time with folks in the industry. Some of the things that are top of mind that I would be asking are, well, look, when did you buy your solar panels, right? That's going to tell you a lot. Like if you're dealing with a solar developer, ask them when they bought their panel, they had someone they bought their inverters, when they were entering into those agreements 12 months ago, I'm not even sure that project is ever getting built. That thing may be underwater to begin with, right, from an economic standpoint. Certainly, the customer is probably not happy they entered into that agreement. And then they're going to have -- quite a lot of these smaller developers are already having equipment problems, right? They may not be admitting it. They don't have transformers. They don't have switchgear. They're not the substage equipment. That is creating a big delay in terms of getting these projects actually interconnected into the grid. So if you did go along, transformers and switch gears and substation equipment, you don't have a way to solve it for the company utility that's instilled in substation, Well, guess what? I mean your project is delayed 6 or 12 months. So you're going to have to wait for that to happen. And also, look, we're lined out these EPCs 2 years in advance. We're getting the labor already tied up in the part of the country where we're going to build. We don't have to worry about that. But like if you're a small developer, you don't know if you got your construction financing lined up, you're probably late to the game on getting the EPC tied up. They probably are having labor issues, depending on what part of the country you're in and how much supply and demand that they're having. And that's creating issues. Or they've already signed the EPC contract -- and guess what, they're having to pay delay damages and [indiscernible] already because they can't provide a site that's ready to build. And they don't want to pay the [ Revo to devo ]. So they get eaten alive on the EPC side. So those are all things to watch out for, I think, here in Q4 as you think about the delays. And also where their panels coming from and where are they sourcing their equipment? Are they here or not? And who do they sign the deal with, at what price. Those are all things that I think will be top of mind for me from an investor standpoint. And look, how does that apply to a NextEra. From our standpoint, safe and dry power and making sure we got room in the plan to be able to scoop some of these things up. Because the way I look at it is these are just opportunities for us as we lie in waiting, right? I mean if these projects aren't going to happen. That means we're buying equipment on the cheap because these panels don't have a home. The inverters don't have a home, the batteries don't have a home. We're more than happy to help. So we'll scoop those up at a nice discount which you can further improve the economics of the projects that we're looking to build next year, year after and so forth. And sometimes, we're just going to go in and buy these projects out because we've already tied up an EPC contractor and their whole team for 2 years out. We can buy a project, I got no problem, put labor against and getting a bolt, but I've already got a gigawatt panel sitting in stores here. I can just put those against the deal. So it's -- we're being opportunistic about it also. But I always look at early-stage development is you're always going to be better off of greenfield, but you could also be very opportunistic around M&A, which we have been in the past. But I'll just give you some numbers, and I can develop greenfield the project at, solar, I can greenfield probably develop around $30 a kW, wind a little higher than that, maybe $90, $100 in kW. But if I'm buying on the M&A market, I'm usually paying triple that price, right? But if I find a project in trouble, I can pick that up at a discount that looks not maybe as attractive as my greenfield, but I can make the returns work because of all the economies of scale that we could put against it from the things that we've talked about. So how the market share was your other question. So right now, we're about 20% of the market. I mean I love our position now because here's how I look at it is I think a lot of the issues that we've seen in the renewable industry are starting to change because -- look, we've seen a customer base that's been very resilient, still buying, and we think gave off last year. We're well off pace to set a new record this year in terms of origination and probably one of the most challenging, most difficult renewable environments I've seen in the 2 decades that I've been at this company. So I would expect with equipment prices coming off, inflation starting to subside a little bit, hopefully, we see a little bit of improvement in terms of cost of capital going forward that I'm really optimistic about what '24 looks like, '25, '26, '27 and that 20% market share, we're at 15 gigawatts of renewable generation or 15% of the U.S. generation mix is today renewables. That's going to go to, we think, to about 30% over the next 8 years, right, by the time we get to 2030. So if we're at 20% market share, I feel really good about where we sit.

Right. And just to clarify, how much do you think it grows in the near term? I mean that's a big implied number. Are you going to double through, call it, the next call it, 8, 7 years, what have you, but the point -- that's a nice trajectory. How do you think about kind of looking at the near-term '24, '25 here, if you will, just kind of seeing that play [indiscernible] again, there's all these worries about can people execute in the here and now. And that's why I asked about market share in part because maybe you guys can, et cetera, but you want to hit that real quickly, '24, '25? And then let's pivot a little bit back into your business and let's talk about kind of your outlook as well.

Yes, sure, certainly. So when I look at '24, we're done, right? I mean we already -- these projects are basically built. I mean they're derisked. They're built. We've bought the equipment. We've hedged the interest rates, whatever. I mean we're going to get the return that we already talked about over the last couple of months with investors on that. I'm flipping the calendar to '25 and '26. I always tell my development team if you out the year, [indiscernible] you're done and the next year is done, and we're not doing our job. So you better be already in '25, '26, '27 the way they're thinking about it. That's what they do under our factory model approach. But let me go back to the early stage development activities. Why have we ramped up the 300 gigawatts? We've ramped up to 300 gigawatt pipeline because of what I just said, right, 15% going to 30% at 2x. The doubling of the installed renewable capacity over the next 10 years. That's what we expect to see, and we've got 20% market share. We're not waiting. And you got to have a balance sheet to be able to go out and invest in that size of a pipeline. And you got to have the skills, the data, the analytics. There aren't a lot of companies that could do it. I don't know anybody close to where we are, but we are planning big for the future because we see a huge opportunity as we move forward. And so when I think about '24 and '25, I mean, look at last year, we grew the business at close to 14%. We're up 11% [indiscernible] the third quarter in 2 of the most -- more challenging years around renewables. But now with IRA, I keep getting at by investors what are you going to start seeing really that tailwind emerge. Well as we move through some of these issues, these supply chain issues, inflation, the rate environment that we've been in. I think the industry is really well positioned for the NextEra in particular, because we've been sitting around not just getting things built and taken care of in this year or next year, but we've really been planning for the future and make events around the future and making sure that we're well positioned for what we see as a huge opportunity over the next decade.

Excellent. Look, maybe pivoting it back to more of what you guys are specifically focused on right? I mean, you talk about this dynamic of buying up smaller players, right? And again, not platforms, but like literally individual projects, right, they got themselves upside down. As you say, right, there is a certain element of distress and challenge for folks out there, right? We see that in this third quarter result season at large. I mean should we be expecting any kind of updates from you all that will actually kind of see our side? I mean, a lot of this, I imagine is fairly immaterial in size. It was just going to be tuck-in. How would you like frame that opportunity that you see emerging, right? Clearly, it's a dynamic backdrop. It's probably more distressed now than it was 6 months ago. You set these targets a while ago. Arguably, there's probably some degree of latitude within the plant? Can you talk about how you see this emerging to kind of fit into the totality what you guys do?

Yes. Yes. Sure, Julien. So here's how I look at it, right? I mean you guys have seen our development expectations '23 through '26, and I think the midpoint [ Christian ] is sitting here, so correct me if I'm wrong, we're kind of mid-30s on around 35, 36 gigs to get to the midpoint. I think we're kind of low 40s to get to the high point, 42, 43 gig, something like that. And look, I mean, we're coming off a 3.2 gigawatt quarter last quarter. So that sets us up really nicely when you think about hitting the development expectations. And so to get to the midpoint of our development expectations, and you're talking about less than 1,500 megawatts a call. Right? Where we have 8, 9 calls that don't count. '26 is the call. So at our earnings call through '25, we've got another one. Q4 here, we've got 2 more, we've got 9 more calls. So we do a little less than 1,500 gigs, we get to the midpoint. We do track a little less than 2 gigs a call we're at the high end of our range in the market that's come our away for all the reasons that I already said in a very much of a derisked way based on the way we are approaching the development business and hedging our exposure around equipment and rates. So I feel very good about where we are. And then you got the Analyst Day, we'll start getting some visibility as we really start talking about '26, '27 usually, we go 4 years out, will that be '24, '25, '26, '27. So it will be with our plan to see if an investor. But certainly, the future looks very bright for NextEra, both inside of Florida for all the same reasons. It looks good for NextEra outside for it.

Totally hear you on that. Look, a bunch of things you just phrased there. Let me just take one at a time real quick. Just on the backlog, I mean, obviously, the 15, you talked about like 1.5 gig just to get to that midpoint. But then you're going to be procuring beyond that. I get that you could talk about while I'm procuring from '27 and '28 in there as well. But bottom line, if I'm hearing you right, you still feel good about being towards the higher end of those origination targets. So I know that's what I think you're trying to convey. I want to be more explicit about that.

Yes. No. Look, I think we feel really good about the mid. And look, I think we've got a good shot at being above the mid towards those higher end of the range. And with solar, for example, China just cleared its last auction at $0.11, right? $0.11 and panels in the U.S. have been going for $0.41. I mean, I got a $0.30 premium baked into the OEM cost curve on panel delivery. That makes you feel pretty darn good about where things are heading going forward in terms of equipment prices. And then what we're seeing on the EV side, we've seen a lot of investment in lithium. The Chinese incentives have gone away around EV. That's really suppressed demand. You saw very light prints in Q3 for domestic EV manufacturing. That's great for our sector, around stores and solar. And then all the other things that we continue to look at, I'm sure we'll talk about some of the emerging technology opportunities as we see going forward. But really like where we sit right now, Julien. Look, '22 and '23 have been challenging years for the industry. But I think we're starting -- we're at a place where I think we could expect to start to see things pivot and change. But from an investor standpoint, what I would be focused on and the questions I would be asking are, how are you managing your risks around your development program?

And actually, just to be explicit about that you guys here. I know that we were talking before about interest rates and having those hike up and projects moving around and your own supply chain challenges a year ago. I mean at this point, just to level set, I mean, it sounds like you are in kind of a new -- you found a new normal of execution. We shouldn't be expecting kind of material shifts in execution besides such that maybe in the last little bit, you've seen disproportionate contribution and earnings growth from [ non ] new investment bucket, right? There's the customer supply and trading. The first [indiscernible] elements of [ near ], a, you think when it comes to PPAs and having had that whole reset in execution, it sounds like you feel comfortable, and then, b, in terms of what that means to earnings and earnings quality and the contribution of which bucket it's coming from, you obviously have seen kind of trailing a certain mix perspective? How do you feel about that? How would you frame that today?

Yes. Yes, great question. So I mean, we just start at the top. I mean, just to remind folks, we said, 70% is FPL, right? Largest rate regulated to the United States with a giant renewable build opportunity at 5% of our generation today is solar in stores, so massive renewables here in transmission bill. But then your real question is, I think, is on the resource side. And on the resources side, 20% -- if you take that 30% of the business, right, over 2/3 of it is renewables, right? So 20% me is renewables. The other 5% of me on the Energy Resources side is nuclear, long-term contracted gas and our competitive transmission business. So that leaves the last 5% of me is kind of everything else that supports all of our other businesses, right? And let's talk about where the earnings are coming from. So this year, we knew this going in because of circumvention and some of the delays we saw around circumvention and some of the delays that we saw around, and you put up with solar panel manufacturers having to do the labor tracing, we knew we were going to see COD dates slip on solar. And we saw that. '23 projects move from '24 and '25, or so on and so forth. And so this year, you saw probably a little less contribution from new investment in the first and second quarter. That certainly picked up in the third quarter at [ $0.11 ]. And then in the fourth quarter, I would expect more of a return from contributions from our new investment activity, more of a turn back to the norm. Why? Because now these projects that were getting delayed because of circumvention you equip are turning the trip. And you're going to see less of the contribution coming from the customer supply business, for example, right? So it's going to be more return in the norm. But look, that's the great thing about having a diversified business. Yes, if you have a hiccup of one part of your business, you can pick it up with another and that's what we've seen on the Energy Resources side. But from an investor standpoint, I would expect to see a return to the norm in terms of renewables really carrying the flag on earnings contributions.

Got it. Yes. And carrying the flag is the new term. I appreciate that. I do. I like it. With that said, let me pivot here a little bit. So as you say, right, so let's go a little bit more on the offense here. Okay, you're back, we've kind of reestablished the COD date in '23, but more importantly, '24, '25. How do you think about setting expectations going beyond that '26, even '27? How do you think about just in an effort to start to think about what this analyst boils down to on just your ability to continue to execute? What are the sources of growth within that, right? Again, you guys have meaningful market share in the core buckets, right, solar, wind and now storage, right? Is '26 and beyond really still, hey, look, those end markets grow, we maintain market share, we grow with it? Or I almost kind of read your body language in the past, you talked about hydrogen as one angle, you talked about transmission. Talk about some of these other buckets in various ways. And again, I guess there's different permutations of how you can participate. EverBright in the distributed space, for instance, makes a lot of -- getting a lot of attention of late. How do you think about the sources of growth that contribute to that longer dated? Is this about just maintaining market share and growing in the industry? Or how would you frame that?

Yes. Here's how I would frame it, Julien. First of all, it's going to be -- we start with an energy platform, right? All the things that I talked about, the factory model of growth, the early stage, the buying power, the build, the operations, the financing, the customer relationships, the enrollment skills, the market knowledge, the data analytics, all the things that you guys are well familiar with. The nuts and bolts of energy resources going forward is going to win solar battery storage, right? That's going to be where roughly if you think of me, think about a [ median ] level, right, 70% FPL, it's going to be 20%, the 30% that near makes up coming from those parts, right? And that market share has been steady at 20%. But if we could be opportunistic, it would be great to find a way to continue to build that market share. And as our scale improves, I would hope that we would have an opportunity to do that because this is becoming a business that's favoring the large-scale players as we look to the future. And how do I think about demand, right? We've seen PPA prices essentially double in this post circumvention, you [indiscernible] world, where we're seeing risk premiums charged by OEMs. We've seen inflationary pressures on steel and aluminum, we've seen a higher cost of capital. But if all those 2 things start to go the other way, right, we start to return to more of a -- more normalcy, you would expect demand to increase. So that's why we're very optimistic about seeing that 15% of the renewable penetration today going to 30% over the next decade. And when a company has got 20% market share, that could be opportunistic and hopefully grow that and been able to do 8 gigs in 2 tough years, right, '22 and certainly on pace to be able to have a very strong year, a record year I would hope here in '23. You got to feel really good about the future, right? You got to feel really good about '24, '25, [indiscernible], particularly the '26, '27, '28 and '29 as you start to think about the future. And it's not just around energy resources, it's around FPL too, right? Because as those costs come down, even at the higher cost level, solar and storage are the cheapest option for our customers in Florida, that value proposition becomes even more compelling. So you're seeing great growth on both sides of the business happened at the same time as we kind of emerge from this 2-year down cycle that we've seen in renewables.

Actually, just to that point, just we haven't tackled wind directly. We've seen a lot of gyrations, the OEMs having a very difficult time, right? The ecosystem is struggling, maybe at writ large. How do you think about your participation there and obviously, implicit in your own numbers? Your mix is shifting perhaps away from where you were heavy wind, you're obviously expanding a little bit. How do you set expectations on wind here? I'll leave it open ended, both in terms of just the supplier health and then also returns in making those megawatts -- those volumes come back, if you will.

Yes. Well, look, I mean, it's no secret that most of our activity around wind has been with -- feel like they make a high-quality piece of equipment. And from a [ Siemens ] perspective, we never had the ForEx and the buybacks at our [ fleet ]. We never have exposure to some of the issues that they've had. But encouraging about where the wind OEM manufacturer going is a workforce turbine, right? These are turbines. Instead of constantly trying to expand the 2 bases or the [ 3 8 to the 4 8 or the 5 8s], let's get the [ 2 8s ] right. Let's make sure it works. Let's make sure we're working with the high-quality suppliers. When you work with a high-quality supplier, make sure you're leveraging cost and getting the equipment at the lowest price possible. Let's make sure we understand what some of the some of the O&M concerns could be. So I feel good about where [ GE ] in particular is headed on that. Siemens although they're short with the ForEx and [indiscernible], they're also pivoting to a similar strategy around a workhorse turbine. But our market share in wind has really climbed as a result. And we're fortunate, right? We've made a bet on GE where we've had a good experience. And it hasn't been the same case with some of the other suppliers. And so I look to the future, and I think about the higher market share that we have in a product that's a lot more difficult to build. As long as we can hang on to that higher market share in wind. And by the way, last year, we had about 55% of the wind market. That was our market share last year, 55%. That's great. That's a great place for us to be, and we've always said, wind is scale business, right? Wind is the scaled business at the end of the day. You got to have a giant operating scale. You got to have a lot of buying power. You got to know what you're doing on the O&M side. And if you can't put all those clues together, you're going to struggle, right? And so hanging on that market share puts us in a good spot there and feel good about what the future holds around wind. But look, we're also going to have to have to see when pricing come in a little bit and become a little bit more favorable because I think you're going to see solar panel pricing continue to trim down. There's new technologies that are emerging for [indiscernible] being one example who no doubt we can solve this keep an air out of the panel and making sure that it could work and high rain dense areas. For [indiscernible], it's going to be an absolute game changer. For solar panel technology you see a ton of money being invested around in EV with the autos are going to be moving from 4 car garage to 8 to 12 undoubtedly around battery storage, which continue to get better and better as we think about the future. So look, the overall landscape has a lot of disruptive technologies that we continue to invest in that we continue to look at, that we continue to plan more for the future that are -- you're going to have to consider in light of wind and solar battery storage as we think about what the -- what the energy complex looks like 5, 10 years down the road, which is where we've spent a lot of our time, right? We're not just living the here and now. Hope is not a strategy. I mean, our strategy is making bets on what things look like 5, 7, 10 years out.

Right, totally. Look, I just want to keep pivoting here. I know we're starting to run of time, so I want to make sure I get to some of these other key questions. Look, I think maybe repowering is one that we should really touch on in brief. Again, I think when IRA came out, folks flexibly said, well, repowering, that's going to be the first basket of projects. We haven't seen as much repowering, maybe as people had, of course, thought at the time. Again, there's a whole [indiscernible] of reasons as to when to thoughtfully leg into that. How do you think about the timing of repowering happening and the economics that you talked about this team's return in new development? How do you think about the relative economics of repowering, right, especially in an elevated energy price environment depending on the market? Where -- when does it happen at NextEra near/now? Do you want to talk a little bit about that, if you don't mind?

Yes, absolutely, Julien. So IRA was a game changer around grid repowering because now we're building a project today, there shouldn't be any reason why we can't repower in year 11, then again, repower it in year 20 or 21 and then maybe repower again in year 30, depending on where we are. But at least a couple of repowerings could be on the table for wind that we're building today. And so we look at all of our wind portfolio. Look, we've been at it for 2 decades. So now if you go back and you look at the 2013, [indiscernible] the '22s, the [ '14s ] or the '23s, the '15s, [indiscernible] you saw on and so forth. Every one of those opportunity tests that we look at, we said, why can't -- we should be able to repower the majority of -- you have to be able to repower all of them. I think our hit rate historically has been around 65%, 70% that we've been able to repower and our fleet on things that come due. But the ones that we can't repower, those sites still have a lot of value, right? I mean they have interconnects that's usually close to load. So you can do a complete what I call, brownfield where you just knock down the existing infrastructure, put in solar, put in store and whatever and build a wind farm. So these projects have a lot of value. And I look at the footprint that we have, 33 gigs in operation. If we get the backlog built which still very good about, it's the midpoint of our development expectations are higher. Over 70 gigawatts of repowering candidates going forward. Now look, some we got to still figure out. But the giant piece of that 70 gigawatts is wind, and we're working hard on solar on how to figure out how do you repower solar facilities going forward. But don't ever forget the option value that we have embedded in a 7-gigawatt portfolio because when you look at that and, you say, well, gee, if it's a wind site, why can't I put solar under wind. Why can't I use that interconnection agreement to put stores there? And we're starting to see stores move from a California opportunity to a MISO, SPP and ERCOT opportunity. We have a huge massive storage opportunity set, but we have something people don't have, which are interconnects. So we're putting storage out the existing side, putting solar under wind. We don't have to go back through the LGIA prices process. We've got that interconnect ready to go, which is huge because it typically -- around the early stage development program, we're looking at 4 to 5 -- 4 to 7 years on [indiscernible] in the queue.

Sure. Right. And just on the wind repowering there, super quickly, if you don't mind. How do you think about moving forward on that front? It seems like that's probably not trivial here as far as setting your expectations on the [indiscernible], very quickly. And then I got a couple of quick follow-ups here to close this out. But I'm just on the set of totality of storage. It seems like you're very excited about that if I read the tune of the line.

So on the wind repower, if we can get over 2/3 repower, the economics are very favorable. The CapEx is 50% to 70%, 80% of what a new build would be. The returns are very attractive of being able to execute on the repower when you think about restarting the clock on the PTC. So feel very good about -- and we have a very dedicated effort, a whole team assigned just to repowers. Just like we do with storage, right? Storage, they have a whole team, all they do all day long is look at our existing sites and say, where can we put storage? Where can we locate it? And then we'll start with our existing sites and then work from there. And it's also part of the early-stage development program, just in states like California and Texas where you can secure storage in attractive parts of the country. But I am very excited about storage. It's proved to be a lot more difficult for competition to get in to storage. Why? Because of the software. In software, we haven't even talked about few [indiscernible], but it's a huge opportunity for us. We have a massive data set. We're very focused on designing our NextEra 360 systems for C&I customers. The way we are able to operate the fleet, our ability to commercialize that product, artificial intelligence, oh my God, we got started on that 12 months ago. We got hundreds of AI projects already in the works within the company. I think we were one of the top Fortune 500 companies accessing OpenAI with all the things that we're doing around project assistance, machine learning, optimization products that we can use around AI. Having the data is an enormous competitive advantage for us. We start thinking about artificial intelligence and how it's going to shape our business going forward. And when we bring folks down to talk about the building blocks of development in late February, early March, we'll have our NextEra Energy Analytics team there, it will blow investors away on what we're doing there. [indiscernible].

There we go. Look, just a couple of last questions here because I really want to make sure we hit it too. I mean, look, on returns, we talked about this in various ways. So we talked about the different pieces. We talked about rates. How do you think about returns today, especially if, say, these hedges -- these hedges that you have? I'm not sure how you think about your new development returns with or without or what have you. But just level setting today, right? The market has been dynamic. There's a lot of different puts and takes, deflation on panels. Obviously, rates continue to tick up blah, blah, blah. How do you think about returns today for near -- in the kind of core development sense, whether that's acquisitive and/or greenfield? And then also, how do you think about the third-party piece, right? You introduced the asset sale piece, whether it net for other parties, how do you feel about that market being intact and meeting the criteria that you want? I just want to make sure that we hit that core nexus of questions that I've gotten in bound here as well.

So as you feel great, like you look at our whole backlog, 21 gigawatts, our backlog test, right? So returns are locked in from a cost of capital standpoint. So we signed the PPA. We're signing that contract at today's rates, right, today's cost of capital. We're pricing it so we achieve our return over today's cost of capital. And then we're hedging the exposure going forward. The projects we might have entered into 2 or 3 years ago before we go to permanent financing are all hedged, right, through that -- through the $21 billion of hedges that we have. And then the near-term project maturities that we [indiscernible] we had [ $12.5 billion ] coming due through '26. We run a sensitivity on it of interest rates, and this was back when the rates were around 5%. Now they're down to about [ 4.40 ]. I haven't seen where they are this morning on the tenure to come off immediately. But even at 5%, it was 0% impact of '23, 0% in '24, $0.35 in '25, $0.35 in '26. Very manageable. And remember, an FID, our final investment decision, where we wonder what the final returns are on renewable projects and we make the go/no-go decision in order to build it, we're walking in the equipment, we're locking in the balance of the system. So we're fully hedged on the equipment, on the labor, on the racking, on the inverter, all of that is locked in, and we have the interest rate protected. And so that's what I want to spend time with on investors though in February and March on how we have derisked our business, how we have derisked the development business. I think investors will walk away feeling very comfortable about that.

Awesome. That's actually kind of a nice -- I know we're halfway through the hour here. Any final comments on your side? I know folks probably have another call that they need to move to here, but any points that you bring up to close this out. Otherwise, we can close it. That was a fine point.

I think we covered it, Julien. Thank you.

Thanks, everyone, for your questions, comments today. Thank you, John and your whole team for making it happen. I know there's a lot of production to make this come together. So thank you all. John, I'll speak to you soon. Take care. Good luck, and everyone enjoy the holidays, and I'll see you guys soon enough, right? Thank you.

Thank you, everyone. Take care.

Thank you, everyone.