you all for joining us. Welcome to the 2019 NextEra Energy and NextEra Energy Partners Investor Conference. I'm Matt Roscoe, Director of Investor Relations. Before we begin, a reminder that today's presentation contains forward looking statements and references to certain non GAAP financial measures. You should refer to the cautionary statements and risk factors as well as the non GAAP reconciliations in the appendix of today's presentation and our recent SEC filings.
On Page 3 of today's materials is an agenda for the conference. After Jim's remarks and Eric and Marlene's discussions of FPL and Gulf Power, we'll take a short 10 minute break. Following the break and the remainder of the presentation, the entire executive team will be available to answer your questions. With that, I'd like to welcome Jim Robo.
Thanks, Matt. Good morning,
everyone. Appreciate you being here with us this morning. I've been at NextEra now for almost 18 years, and I have never been as optimistic and as confident about our future as I am today. We have 2 terrific businesses, 2 great franchises, 4 of Powerlight, which I think is the best utility in the country, NextEra Energy Resources, the world's largest renewable developer, both have terrific growth prospects. Feel very excited about the future there.
We have a big role to play in the enormous change that's going on in our industry and the disruption that's going on in our industry. I'll talk about that today. And I think most of you probably already saw that we have extended our expectations a year out through the end of 2022, 6% to 8% growth off of our adjusted 2021 EPS. That translates to about a 10 dollars to $10.75 a share EPS range. And as usual, I will be very disappointed if we don't earn at the top end of that range.
At NextEra Energy Partners,
it is almost Mark Hickson reminded me
of this the other day, it is almost 5 years to the day, June 26, Mark, right? 27, June 27. Today is almost 5 years to the day of the NEP IPO. NEP is a terrific vehicle. It has tremendous growth prospects.
I'll spend some time taking you through, and Mark will take you through in a lot of detail. But greater organic growth prospects, opportunities to acquire assets from Energy Resources and 3rd party acquisitions. I don't think there's another vehicle in the S and P 500 that has visibility on distribution growth through the middle of the next decade. And I think you all saw this morning that we extended our LP unit distribution growth expectations of 12% to 15% for NEP through the end of 2024. So with that, I want to take you through a few things this morning.
First of all, I'm going to spend some time on the NextEra Energy value proposition. Then I'm going to spend some time on a topic that is really critical and really important to our growth, but one I don't get a lot of questions about, particularly from this audience, and that is our culture. And I'm going to take you through the NextEra playbook and how that playbook is playing out at Gulf Power. Marlene will take you through in a lot more detail what we're doing at Gulf Power. But I think it's a very what's happening at Gulf is very instructive.
It's a very instructive insight into the NextEra culture. I'm going to spend a lot of time talking about how do we grow continue to grow this company. This is a big company by any measure, right? We're going to have $120,000,000,000 of assets at the end of this year and at NextEra and of course, some pretty big growth aspirations. And so how do you grow a very big company?
I'm going to talk about that. Take you through the NEP value proposition and the various sources of growth there. And then I'm going to end with our outlook. So I'm not going to take you through this in a lot of detail. Obviously, 2 years ago, we laid out a variety of expectations for NEE at our investor conference and we really delivered.
And that's a big and I'll talk about this a lot this morning. We say what we do, we do what we say. That is a very big part delivering on our commitments is a very big part of our culture at NextEra. And so whether it was growing EPS, we grew EPS close to 12%. Now there was a tax good guy there that obviously we didn't that wasn't necessarily embedded in our numbers in 2017.
But even without it, we grew faster than 8 percent on an EPS basis in that period. We grew dividends right in the middle of where we said we would. And we've continued to have one of the strongest balance sheets and highest credit ratings of any utility in the U. S. And all three rating agencies recognized our improvement in our business risk profile.
At FPL, we continue to deliver on our customer value proposition. Bills continue to be 30% below the national average, lower than they were 8% lower than they were in 2,008. Not a lot of things that you can buy that are almost 10% lower in nominal terms than they were more than a decade ago. Enormous O and M efficiency. We were the best O and M at FPL.
We have the best O and M position of any utility in America in 2016. And it got 10% better. That is an insight into our culture. We are never satisfied. We have a drive every day to get better.
There is no better example than what the team has done at FPL in terms of O and M efficiency over the last several years. And we've used the dollars that have been freed up by that O and M efficiency to continue to invest capital in our business that's good for customers, that delivers reliability, that delivers lower costs ultimately, that delivers lower fuel. And we've grown regulatory capital employed by 11% over that period of time. So FPL really has delivered on its commitments over the last several years. At Energy Resources, we made terrific progress on the commitments we made in 2017.
Our best renewable origination period in our history, we signed contracts for more than 10,000 megawatts in 2017 2018. It took us 15 years to get to 10,000 megawatts installed. We signed 10,000 megawatts of contracts in 24 months. Enormous progress in our storage business. We're still very much in the early innings there, but you'll see in a minute that we have great aspirations there.
We're making great progress. 40% of the contracts we signed last year in solar had an energy storage component. We're very successful in recycling capital as well over $5,000,000,000 Everything we have at NextEra Energy is for sale. I am not wedded to any asset. If someone offers us a price for an asset that is more than what we think the whole value of that asset is for us, we will sell it and we will recycle the capital.
That is absolutely a big part of our culture, that financial discipline around capital allocation. On natural gas pipeline development, obviously MVP has been a miss over the last 2 years. I don't think any of us expected that we were going to have to essentially permit large swaths of that pipeline twice. Nonetheless, we're making good progress there. And John is going to take you through more details on it.
But fundamentally, we feel like we're going to get the
pipe in by the end
of next year. And there is going to be no more valuable pipe when it is built than that pipe given how hard it is now to build pipelines on the East Coast. We also made tremendous progress on regulated acquisitions, over $7,000,000,000 of regulated acquisitions over the last 2 years. We continue to be very opportunistic here. These are the first regulated acquisitions actually that we have closed in our history as a company.
Very happy about that, but we remain opportunistic there. I'll talk a little bit more about that in a minute. But nonetheless, you're going to see as we as I take you through the NextEra playbook, the way we think about doing regulated acquisitions and how applying that playbook creates value for shareholders and for customers going forward. We're now one of the largest companies in the country. We're the 5th largest capital investor in any sector.
We're obviously the largest capital investor in the utility sector, but last year we were the 5th largest capital investor in any sector. Our renewable business, there's no one bigger in the world. There's only 7 countries in the world that own more wind than we do. We own more wind than Brazil. We own more wind than is installed in Canada.
We own more wind than what's in France. That gives us great scale and an unbelievable competitive advantage in the Renewable business. And over the last 15 years, we've had a terrific track record of continuing to grow earnings. We've grown earnings almost 8% a year over that 15 year period. And this is an industry where if you look back over a long period of time, if you look back over 20 years, the average EPS growth is closer to 0.
But over the last 15 years, it's been about 3% when you exclude us and you look at the S and P the top players in the S and P utility index. Yet, when you look at the average forward expectations, this is an industry that says they're going to grow at 7 even though the history is they grow at 3 at best. We say what we do, we do what we say. We said we were going to grow at 8. We have grown at 8.
We continue to grow at 8. And we've delivered. And on top of that, we have better quality of earnings than anyone in the sector. This is a chart. I showed you this chart 2 years ago.
We've updated it over the last 15 years, top 10 players in the space. On average, other than the 2 companies who had GAAP earnings more than adjusted earnings, we were one of them obviously. So our GAAP earnings were higher than our adjusted earnings. We report our adjusted earnings we reported have actually been lower than our GAAP earnings over that period of time. On average, you can look at the rest of the top 10, it's almost 10% or 15%.
They've excluded bad guys of almost 10% to 15% of their total adjusted earnings over that period of time. So, we have a higher quality of earnings than almost anyone in the space as well. And so we have a long term track record of delivering value to shareholders. And we've beat the S and P utility index and the S and P 500 Index on a 1 year basis, on a 3 year basis, a 5 year basis, a 10 year basis. There is no management team that is more aligned with shareholders than this one.
And on a 15 year basis, not only have we outperformed the S and P 500 and the S and P Utility Index, we've more than doubled the median return of the S and P Utility Index over that period of time, 900% TSR over 15 years. And we've almost tripled the S and P 500 TSR over that period of time. So, probably the thing we're the most proud of is that a utility has outperformed 83% of the S and P 500 over that 15 years, a utility. And so, we've been able to take 15 years ago what was in size at least a middling utility and we're now the biggest utility in the world by market cap. That's something we're very proud of.
But one of the really important elements of our culture is while we may be proud of our track record, we're never satisfied. We know we can do better. We are always focused on the future and getting better every day. And so with that, I want to spend some time talking about the NextEra Energy Playbook and talking a little bit about our culture. So I've been very blessed that I followed 2 great CEOs.
In the last 31 years, this company has had 3 CEOs. Chip Brodhead came in, in 1988. He brought a focus on cost and continuous improvement and financial discipline that are still hallmarks of our culture today. Lou Hei became CEO in 2,001. He brought a focus on growth and at the same time made that really critical decision to pivot to clean.
I like to think in the last 7 years, I've had us have a focus as a company on how do we be great both at growth and at cost at the same time. And one of the key things that I look for and leaders in our company, my leadership expectation for those leaders. The first one is great at cost and great at growth. It's easy to be good at cost at the expense of growth and it's also easy to be focused on growth without worrying about profitability. It's a lot harder to be great at both and that's a hallmark of the NextEra Energy playbook in our culture.
Another big element of our strategy has been, as I said, a focus on clean and on being economic. What do I mean by that? We have for more than 20 years had a strategy from a generation standpoint in particular that we were going to be clean, but also that we were going to do economic things for our customers, whether they be our customers in Florida or our customers outside of Florida NextEra Energy Resources. This company is living proof that you can be clean and low cost at the same time, that you can be clean and not only is it free, it's lower cost. And I think that is something this industry still, still has yet to really embrace after 2020 year, not only is it free, it's lower cost.
So those elements of our strategy revolve around a culture that is focused on our talent and building talent and building great talent and customer focused at the same time.
And
those are the building blocks for some of the tactics that we use to implement those strategies, things like great execution. I'm going to talk a little bit about what I mean by that. A focus on benchmarking. I can tell you where we stand in every process in our company relative not only to other utilities but to the best process owners in the world. And financial discipline, always a hallmark of what we do in all of our investments and how we run our company.
You combine that with our tactics on growth, focus on innovation, focus on towing the water, investments first and new growth opportunities, and a focus on building commercial skills. And you put all that together on a base of a culture that delivers on its commitments. We say what we do. We do what we say. We have a culture of delivering on our commitments.
So let me talk about execution. I'm going to start with safety. There's nothing more important in our company than the safety of our employees. That is job 1 for us. I'm very proud of this track record.
We've been able to take we've been able to improve safety by 80% over the last 15 years. Show me
a great a company with a great safety record
and I will show you a great company. And the vice versa is true as well. A few weeks ago, the team sent me a newsletter from 1952. We still have those, I guess. And that's it was a newsletter that went out to the company talking about our first FPL storm dry run.
We have been doing storm dry runs in this company for more than 65 years. Now by virtue of geography, we've had a lot of practice. We learn from every storm. But in a lot of ways, how we execute in those storms is really, I think, a key measure of it is what we do, right? I mean, we in the toughest times, all our customers are best.
And we have a history of executing on storms. Eric is going to talk a little bit about it in more detail. Another example of execution, Again, doesn't get a lot of focus. Our engineering construction team very quietly over the last 15 years has built 181 projects on average under budget and on average ahead of schedule and maybe most importantly 123 wind projects that didn't miss a COD date or didn't miss a PTC cliff. These are great examples of our focus on execution, really critical to our success.
Cost. I had the team go back a long way on cost because I think it's a really interesting perspective into how we've run this company over the last 30 years. So go back to 1988, FPL not only wasn't an average company from a cost perspective, it was worse than average. You can see its position. It was almost 10% worse on average on O and M per megawatt hour.
We've made great progress through the years. Today, we're 62% lower than the industry. And on a nominal basis today, we are lower than we were in
1988. Think about that.
Nominal dollars were lower than we were and this is an industry that essentially has never gotten the cost message. In 30 years, this industry hasn't gotten the cost message. You see what's happened. And one of the things that I'm most proud of is you can look at where we were in 2012 and what we've done to put a kink back in that curve over the last 7 years. How have we done that?
We've done it with a process that today we call Project Accelerate. It started out as Project Momentum And it is a bottoms up idea generation process that we do every year. We've evaluated over 11,000 ideas over the last several years since we started. Over 5,000 ideas have been implemented, dollars 1,400,000,000 run rate cost savings. This has been an amazing process and a focus on continuous improvement, a comprehensive look at our whole business every year.
Every year we do this. And it is a big part of the culture, the big part of the reason why that we continue to get better. As I said, FPL got better from 2016 to 2018. You know what, in 2019, we're better so far year to date than we were last year too. So that's been an enormously important part of the playbook is the ability to focus on execution and to focus on cost.
The next big thing for us is going to be digital, technology, machine learning, artificial intelligence, big data. I'm not going to spend a lot of time taking you through examples because both Eric and John are going to take you through several examples. We've got a couple of videos to share with you today of what we're doing in the company around this. 2 years ago, we launched an initiative. I said we needed to get better at this.
We needed to get smart about this. And I got up in front of the management team and they will tell you, I said, I admitted to them, I have no idea what this is going to look like. Many of you know I'm not necessarily the most technologically forward person in the world. Today, we have over 100 projects. Our wind business is a big data business.
This technology, this focus on these technologies, big data, AI, machine learning is going to be two things. It is going to be the next step and how we continue to get more efficient and improve our business, and it's going to continue to differentiate us from the competition and continue to build our competitive advantage. I'm very excited about what we're doing here. You'll see some more on that today. Another big hallmark of the playbook is smart capital deployment.
Across the board, whether it's in wind and solar, whether it's in the smart grid, storm hardening, generation modernization, gas pipelines, all of this capital has had at its core two things, projects that were good for our customers, whether they were in Florida or outside of Florida, delivering good economics to our customers and at the same time good returns for our shareholders. Financial discipline is a huge part of our culture. It starts with balance sheet strength. We've always had a strong balance sheet. I've always been committed to having a strong balance sheet and I always will be committed to having a strong credit rating and a strong balance sheet.
It is a key part of the strategy for us and it always has been. We're going to continue to have a regulated we expect to continue to have a regulated business mix of around 70% and we're going to continue to be focused on opportunistically recycling capital. So balance sheet strength, a really core part of the playbook in our strategy. Running the business. So we have a very detailed monthly operating review.
And I'm sure you all hear that from every name you cover, right? Detail everyone does operating reviews, right? I told you I'm not very technology forward. Everyone else has this on their iPads now. This is what we go through more than 500 pages every month all day.
I can tell you where each of our businesses stands, each of our business units stand against all other metrics every month. You can imagine and the folks here can attest to that. We don't spend a lot of time on the things that are going well. We spend most of that time on the things that aren't going well and how do we fix them and how do we get better. So detailed monthly operating reviews, a core part of our rhythm, core part of how we run the business.
Disciplined risk management is also a big piece of how we run our business. I think many of you know we do a long term forecast. We review that forecast every month in that monthly meeting. We have a very disciplined approach to running the business, disciplined capital allocation. In my view, there are 3 things that CEOs do.
There's a lot of things that CEOs do, but 3 number one things: Talent development, execution and capital allocation. A lot of you would argue that capital fundamentally, we have a really disciplined capital allocation process, realistic assumptions, looking what we call P50, look ourselves in the eye, say these are really realistic assumptions, data driven, high return thresholds, everything we do has to meet the market test. Everything in John Ketchum's business in Energy Resources has to be able to attract 3rd party financing. If we can't meet the market test in a project, we're not going to do it. It's that simple.
Let me spend a minute and talk about corporate M and A. Obviously, we've been very active over the last several years. Some successfully, some maybe not so successfully. I would tell you though that we've learned from every one of those exercises. It but fundamentally, we remain very opportunistic.
We do not have to do regulated acquisitions. We don't have to do M and A. We have terrific organic growth prospects. So whatever we do, number 1, we'll be opportunistic. Number 2, always has to be accretive.
You will never see me announce a transaction that fills a hole or that we say, hey, it's strategic, don't worry, it's dilutive, always has to be accretive, always has to make sense, has to be in a constructive regulatory environment. So we'll always be disciplined. I think you know that we have been and our track record has been very disciplined on the M and A front. Another part, as I talked about, our culture is being focused on clean and overall our ESG approach. We have ESG is really embedded in everything we do.
We have a culture of doing the right thing. It's one of our key values. We've done well by doing good. Very proud that we were the 1st to receive a best in class assessment from S and P's new ESG evaluation around preparedness. And very proud of our track record, particularly on the clean front.
I don't think there's anyone I don't think there's any company in any industry who's done as much the next era to address CO2 emissions. And so when you put all of that together, you have a culture that's focused on our people and our talent, it's focused on our customers, and it's focused on setting big goals, getting better every day, having accountability in everything we do. So that's the playbook. Now I want to switch gears a moment and talk about how are we going to implement that playbook at golf. So I think it is a real window into the culture of this company to understand a little bit.
And Marlene is going to take you through in a lot more detail than I will on these two slides. But let me start with in January, we closed in January, our accounting team came to me and said, we can report golf in a new regulated segment and we'll combine FPL and golf in a single regulated segment and it all get mushed together. And I said, you know what, I hate that. I want all of you, all of our stakeholders, our investors, our customers, I want everyone to see to
be able to
have visibility into how we do with golf. And so we set it up as a separate segment. And the 2 key hallmarks of the playbook, taking cost out, being more efficient to use that to fund great capital investments for customers, that's playing out right now. We will by 2021. And I want to set these goals.
I want to be very clear with these goals. And I said to the team, I wanted to be very clear publicly with what these goals are. I want you to hold us accountable against these goals that we will get their costs to $14 to $15 a megawatt hour by 2021. Close to where FPL is today, not quite there yet, but close. And that we'll deploy a couple of $1,000,000,000 of capital over the next 3 years, grow regulatory capital deployed by about 16% and have great outcomes for our stakeholders and our customers and our shareholders.
We're going to have service reliability that's going to be 20% better, CO2 emission rate that will be 40 better by 2021. And perhaps most importantly, customer bills, they're going to be 9% better in real terms by 2021. And then once we've had a chance to implement some of the projects that we're going to be building over the next few years by the mid-20s, a build target of the mid-120s, so about a 20% reduction in real terms over that period of time. And we will grow net income at Gulf over the next several years at about 16% a year, just like we told you when we did the acquisition, somewhere between $240,000,000 $260,000,000 of net income. It seems rolling up actually to a number that's a little bigger than that.
That's okay. Great outcomes for customers, great outcomes for shareholders. This is a window into how we think about regulated M and A, and it's a window into our culture and how we think about running our business. So let me talk about growth. That's a huge part of our culture.
It's been a big focus of our company for more than 20 years. And it all starts with a vision. And that vision has been the same for many years. And that is to be the largest, most profitable, most capable clean energy provider to have the best skills and capabilities of anyone in the industry at FPL and Gulf to have the best utility franchises in the country at NextEra Energy Resources to be the best renewable developer in the world. And to leverage those 2 great businesses and the scale we have and the scope we have in those businesses to develop multiple new growth platforms across the board.
And we have, over the last 20 years, essentially started toe in the water, very toe in the water in each of these, a new business every year. And here's six examples. Our wind business, when Lou made that pivot, it was very small. It's now an enormous business. We expect it to be somewhere between 20 23 gigawatts of installed capacity by 2022.
Solar,
solar didn't exist.
We invested in the 1st solar project ever done in the United States in the early '90s and we owned that, it was like 75 megawatts I think. And I went to visit that in the 1st year I was CEO of NextEra Energy Resources and I said we need to get bigger in solar. We bought another one of them. And then through some fits and starts, we're now the biggest solar player in the country. FPL just announced 30,000,000 panels by 2,030.
We're going to add 10 gigawatts of solar at FPL on a 26 gigawatt system by 2,030. Totally revolutionize what we're doing at FPL. Our transmission business, same store, didn't exist 10 years ago. We're going to have $3,000,000,000 deployed there by 2022. Storage, super excited about storage.
Not only have we announced the world's largest storage facility at Manatee in Florida, we have several big storage facilities that we're going to be building in John's business. We have a big storage business. This is the Holy Grail of the Renewable business to figure out how to pair storage with solar and wind and deliver near firm capacity to our customers. FPL Energy Services, that was a business that made no money when I came to the company 18 years ago. It's going to make $45,000,000 or $50,000,000 this year.
By 2022, it's going to make $65,000,000 or $70,000,000 And gas pipelines will have $7,000,000,000 invested in a business that didn't exist 7 or 8 years ago. And so we are terrifically positioned to continue our track record of growth. I'm not going to take you through every one of the bubbles on this chart other than to say at FPL, I am very excited about what we're doing in solar. I'm very excited about the opportunity we have to improve reliability and our resiliency through storm hardening. At Energy Resources, I'm going to talk some more about the great growth we're going to have in renewables and in storage.
When you put it all together, dollars 50,000,000,000 to $55,000,000,000 of capital deployment from 'nineteen to '22, that's $12,000,000,000 to $14,000,000,000 of capital a year. Let me put that in perspective for you. $55,000,000,000 is bigger than every company in the S and P utility index other than 8. Think about that. We will add in the next 4 years more assets than 20 of the 28 or 19 of the 27, however many folks there are in the S and P utility index now over the next 4 years.
No one in the industry has better growth prospects than we do. So at FPL, the focus is going to continue to be continue to focus on cost, continue to focus on reliability and delivering low bills to customers. And at the same time, finding new projects that deliver great outcomes for customers and great outcomes for shareholders, we're going to grow regulatory capital employed over the next 4 years at 9% a year at FPL. At Energy Resources, we're going to continue to build our wind storage and solar pipeline and portfolio going from 18 gigawatts to 27 gigawatts to 34 gigawatts by the end of 2022, going from $6,000,000,000 in transmission and pipelines to $9,000,000,000 to $10,000,000,000 in 2022. Put all that together, building on the competitive advantages that we have in this grow adjusted earnings at Energy Resources over that 4 year period at 12% a year.
I spent a lot of time 3 years ago talking about disruption. All the different things that are disrupting this industry. There's enormous change going on in this industry. And if anything, and these headlines are just couple of examples, if anything, it's happened faster than even we thought would in 2017. Let me take you through some of the things.
I'm going to end on generation restructuring because I think that's really critical to the story, but there's several elements of destruction going on. Let me start with shale gas. There are a lot of folks in this industry that still haven't figured out that natural gas prices are going to be low, at least they're not acting that way. The natural gas prices are going to be low for a
very, very, very long time.
It is still disruptive. Shale gas is still disruptive in this space, 15 years later. And a lot of folks in our industry still haven't figured that out yet. Smart grid,
very excited about what we
can do. You're going to see some things in what in Eric's video what we're doing, really disruptive. All of the technology that I talked about, big data, AI, machine learning, those things are going to change what the utility industry looks like 5 years from now and 10 years from now. 2 years ago, I had shareholder activism on this chart. My team begged me not to put it on at the time.
And you know what, it turns out there's been a lot of it over the last 2 years even in the utility space and I expect that there will be more going forward. And then someday this industry is going to wake up and realize there is enormous cost to be taken out and there will be cost restructuring that will happen. And that will be a great thing for customers and a great thing for the folks who figure out how to restructure this industry from a cost standpoint going forward. But most importantly, from a disruption standpoint, there are enormous trends in renewals and storage that mean that post 2023 without incentives, wind plus storage, solar plus storage, brand new wind plus storage, brand new solar plus storage is going to be cheaper than existing coal and most existing nuclear. By 2,030, this is one forecast, it's an NREL forecast of high renewable penetration.
It's got 40% penetration. I think it's going to be more than that. But 8% to 40% is a 15% a year CAGR in megawatt hour growth over that period of time. There is enormous change coming in this industry. I don't think the company over the next decade.
And just one more thing on that forecast. So I have the teams go back because and look at 3rd party forecasts. And this is EIA and I pick on EIA only because they have the misfortune of actually having done a forecast for 30 years, right? So you can go back and you can look at it. And so this chart, 2014, in 2004, the green bar, the EIA forecast of solar in 2014 would be a gigawatt.
In 2,009, their 2014 forecast was a gigawatt. And of course, you can see it was 10 gigawatts as it turned out and the same across the board. We have as an industry completely missed the boat on the speed with which renewables have penetrated. And I think we could have even more renewable penetration than what I showed on that last graph. And it is a huge disruptive force in this industry and it's going to be an enormous driver of growth for this company.
Let me spend some time talking about NextEra Energy Partners. 2 years ago, we came and we said we're going to grow LP unit distributions by 12% to 15%. How have we done? We've grown them by 15% over that period of time. We've delivered on our EBITDA, adjusted EBITDA and CAFD expectations over that period of time.
We've delivered on our asset acquisitions. We've delivered on some of the most creative financing to finance that growth. We have one of the most creative and talented teams in our company focused on net. They've done a tremendous job of financing this vehicle over that period of time for the benefit of unitholders. And we made some governance changes that I think have been very beneficial for unitholders.
Now recent and it's got a great portfolio. We've grown distributions by 160% since the IPO. And we've levered the same playbook that we've used at NextEra Energy. It's the same playbook. It's a focus on clean.
It's a focus on cost. It's a focus on talent. Like I said, we have some of our best talent in the company working on NEP. And NEP is a big company in its own right. It would be as big as several of the S and P utility index companies today.
It's as big as NextEra Energy was 15 years ago in 2003. And we have a long way to grow. I don't think many of the companies in the S and P utility index are going to grow at 15
own
and it has terrific, terrific growth prospects. Mark's going to spend a lot of time going through each of these, but let me spend a minute. Organic growth prospects, we're announcing today some new organic growth at NEP. We embedded in the portfolio terrific organic growth prospects. We have the ability to grow from acquisitions from NextEra Energy and we have the ability to do 3rd party acquisitions.
And just to put that in perspective, just on renewables, all of these disruptive factors that I'm talking about are going to position NEP for a tremendously long runway of future growth. It's got a 5 gigawatt portfolio Near alone, when you include the backlog and what we expect to do over the next few years by the end of 2022, somewhere between 4 and 6 times the number of megawatts than what is in NEP right now. Existing other capacity today, there's 100 gigawatts. That's going to grow to 500 gigawatts. That is a huge, huge market for us to play in.
Mark's going to take you through that in a lot more detail, but that 15% growth NEP plays in a market that's going to be growing at 15 percent a year. And I feel very, very good about its growth prospects. Now recently, there's been some headwinds for NEP and that's been the PG and E bankruptcy filing. Mark, again, will take you through some more detail on this. I just want to say a couple of things.
First of all, I'm very confident that we're going to
be able to resolve the
PG and E issue favorably for NEP. You saw this week, we announced a tender for some debt. Mark will take you through some more details on that at Genesis. Embedded between the organic growth prospects that NEP has that we've announced today, combined with the CAFD that is currently trapped in the PG and E assets. The combination of those 2 CAFD elements represents about 1.5 years worth of growth without NEP needing to do any other acquisitions.
There is embedded upside in the NEP portfolio that I think is not reflected in its unit price right now. And I remain, as I said, very confident that we're going to be able to resolve the PG and E issues favorably to NEP going forward. So NEP and NEE really do complement each other. NEE offers NEP a great asset backlog, experienced management and industry leading operating experience and expertise. NEP offers NEE, capital recycling opportunity, the ability to highlight the value for us of contracted renewable assets and an ability for us in a very tax efficient way to recycle capital and optimize taxes.
And so we've had a terrific track record at NEP. Is since the IPO, doubled the S and P utility index TSR, doubled the S and P 500 TSR, doubled them. And we remain utterly focused on extending that track record going forward. Let me talk about the outlook. I'll start with NEP.
Today, as I said, we're extending that distribution growth outlook through the middle of the decade. Through the middle of the next decade, 12% to 15% a year of LP unit distribution growth through twelvethirty onetwenty 24. There is no company in the S and P 500 that has the kind of visibility and distribution growth that NEP does. Our adjusted EBITDA and CAFD expectations remain unchanged. You can see that with the drop that we did with the acquisition that NEP did earlier this year that essentially we're on target for our twelvethirty one run rate, CAFD, without counting on any of the PG and E assets.
And as I said, those PG and E assets represent, combined with organic growth, about 1.5 years worth of distribution growth upside embedded in this vehicle without the need to do any acquisitions. At NextEra Energy, we're extending the outlook, 6% to 8% off the 2021 base, dollars 10 to $10.75 I'll reiterate, I'll be disappointed if we don't earn at the top end of that range in 2022. We're going to continue to grow the dividend. We're not updating the dividend policy today. Obviously, that's a Board decision.
We'll be updating our policy going forward in the Q1 of next year. But fundamentally, we have a low payout ratio relative to the rest of the industry. I would expect that we'll be able to continue to grow the dividend faster than we're growing EPS. But again, we'll be giving you an update on that in the Q1 of next year. So in total, and Rebecca will take you through some more details on this, I don't think there's another company in the space that offers the kind of attractive risk adjusted total return that we do.
So I'll end by simply saying this, I've never been more optimistic about our future, never been more confident in our ability to deliver on these expectations. And I can promise you that myself and the management team is utterly laser focused on delivering on these commitments and making both NextEra Energy and NextEra Energy Partners better every single day. So with that, I'm going to turn it over to Eric and he'll take you through the FPL story. Thank you.
So good morning, everybody. Great to see you and thanks for taking the time to be here. I'm going to walk you through what's going on at FPL and what the opportunities and prospects are going forward. As Jim talked about, it's been busy, and a lot has happened since the last time we all saw each other 2 years ago. But this is an area I'm very, very proud of the company having delivered on the commitments that we brought forward in 2017.
We continue to provide bills that are among the lowest in Florida, among the lowest in the country, 50% on average below the national average. We've got our operational efficiencies continue to improve, which again helps keeping those bills down. And also, we've executed on a lot of capital investment projects very well, making sure they've come in on time, under budget. Now one of the areas that I want to spend just a moment on because Jim talked to you about culture is a little bit of our philosophy too on how we run the business. And that's the virtuous circle.
Many of you have seen this before, but I think it's worth spending just a few moments on so you really understand the business philosophy of how we run day to day operations. And it really all starts with providing our customer the best value proposition possible: low bills, high reliability, clean energy, great customer service. When you do that, you drive high customer satisfaction. And high customer satisfaction leads to a regulatory environment, which is much more welcoming than when people are really upset and they're complaining to regulators, complaining to their legislators. But when you have that opportunity to have a really good healthy regulatory environment, a healthy political environment, It gives you the opportunity to have the kind of conversations that we're able to have in front of the Public Service Commission as well as legislators, local elected officials, all the stakeholders about what the possibilities are for us moving forward, investing in new technology, doing things a little differently and getting the kind of support that you get when you have credibility.
That leads to a much stronger financial position, the ability to actually have a return on equity that can attract investment, maintain a strong balance sheet, which in turn allows you to make the kind of investments in technology, processes, approaches, which allows you to provide customer value that's second to none and around you go. It's really not complicated, but it really all turns on execution and being able to get it done. And when you do, the payoff is huge. Now as Jim said, we're a large utility no matter how you want to measure it. By sales, we're actually the largest utility in the United States.
We cover half of the state of Florida geographically. Over 10,000,000 people rely on us day to day for their electricity. And I'm going to talk a little bit about it in slides to come, we're growing. Both in the East Coast and the West Coast of Florida, The state is growing and we continue to expand our footprint. Customer bills.
Let me spend just a few minutes on this. Jim, again, touched on this, but I think it's really important to see what we've been able to accomplish through the focus and the execution. We've actually been able to continue to drive bills down, keep them flat against everything else that seems to be rising. We touch our customers, well, through electricity delivery constantly, put a bill once a month. Every month, they get a chance to benchmark us and see how we're doing against everybody else, everything else that's touching their lives.
Our bills are actually down over the last decade. And as Jim said, think about it. Go to the store. What can you buy today that's actually 6% less than it was a decade ago? Not much.
And we're subject to inflation like everybody else, whether it's medical costs, whether it's the price for what we pay to our vendors because they're subject to medical costs, to cable, to home insurance, everything, all the prices are going up, but not on FPL bills. This makes again a huge difference for our customers because it gives them more disposable income in their pockets, which they turn around and invest in the economy. And how do we do that? Really through smart capital investment, which allows us to ultimately take costs out of the business. You can see in the last decade, we've invested over $40,000,000,000 in Florida at FPL in a variety of different technologies that have allowed us to again drive costs out of the business and provide customers with better service than they've ever had.
But it's not just about spending money. You have to spend it smartly so that you can actually take costs out. So you can see that while we've been actually investing every year more capital in the business, we've actually been able to take out operating expenses along the way. It's across a variety of areas of the business, but nothing has been more substantial for our customers' pocketbooks than our ability to take cost of fuel out of the business. This really goes back almost 20 years ago when the company looked at our generation fleet and said, we need to really do better.
What can we do better from both a cost perspective and ultimately an emissions perspective. You see the pie chart on the left in 2,001, and you see we had a huge component of our business that was fueled by oil. In fact, in 2,001, we burned more oil than any utility in the United States to generate electricity. 41,000,000 barrels is what we purchased and burned in 2,001. Company made decision to start a modernization of its fleet, changing out technology, which is really 1950s technology, most of the plants built in the early 60s and mid-60s and switching from oil to natural gas.
This wasn't required. It wasn't mandated by the commission or by legislators. In fact, frankly, it was fought along the way by just about everybody who said, don't change, just keep doing what you're doing. But we made investments, and we went from a company that burned more oil than any utility in the United States to a company that last year burned next to none. Matter of fact, the 200,000 barrels of diesel that we burned, we burned because we're required to burn it to prove that we can burn it in case we have to for an emergency.
We switched to natural gas. We expanded our nuclear plants, and we switched into renewables. And in the process, we saved our customers 1,000,000,000 of dollars in fuel savings that we didn't go out and buy. Now let me go back a second because I want to spend just a second on this on the fuel savings for you to understand. This is about fuel efficiency.
It's not even about the spread between oil and gas prices. This is about in the industry, we call it heat rate. It's miles per gallon, if you want to put it in car terms. It's just like taking a 1962 Cadillac because our plants were built in the 60s, massive car, big fins, 500 cubic inch engine with a trunk that you could put all 20 people in your dining room set, go out and their picnic. And we've replaced them with very fuel efficient, modern generation.
So think about a Toyota Camry or a Honda Accord. The difference in miles per gallon between the old plants and the new plants has saved our customers $10,000,000,000 in fuel that we simply didn't purchase. And remember, in Florida,
fuel is a pass through.
We make no profit off fuel whatsoever. So if we save $1 customers save $1 You save $10,000,000,000 customers saved $10,000,000,000 $10,000,000,000 stayed in their pockets, dollars 10,000,000,000 that stayed in Florida's economy. Makes a massive difference for not just individual customers, but for the state itself. In the process, we also continue to drive down our emissions. Again, not mandated by the state of Florida, no requirement, clearly the right thing to do, but it also makes a huge difference and I think it's good business, especially in a state like Florida.
Look, we're a state that last year had 126,000,000 tourists come to visit. 126,000,000 people came to visit Florida. I suspect many of you did, and so thank you in advance. It's a huge industry for us, and most people have to spend all year saving up to be able to go take a vacation somewhere. They want to go somewhere where it's beautiful.
Want to go somewhere the beaches are beautiful and the air is clear. People work their whole lives in other parts of this country, so they have a chance to retire and move somewhere where it's beautiful, where, again, they can breathe the air, where the water is clean. People have a choice of where they spend their money when they go on vacation or they retire, and they choose Florida because it is a beautiful place. And so being clean is not just the right thing to do. It's really good smart business because without that kind of economic drive, we wouldn't be able to grow either.
Without that economic activity from tourists, retirees, we wouldn't be able to grow the way we are. So this is good business along with, again, the right thing to do. Our investments have also spent a lot of time in reliability in our transmission and our distribution network. Really proud of the fact that we've been able to continue to improve on what is already the best in class in reliability. We've won several awards in the past since 2017 of being the most reliable utility in the nation.
We're 50% more reliable than the next best utility in Florida. Just to remind everybody, there are 54 electric utilities in Florida, a lot of small co ops and munis. To be fair, many of them don't report what their reliability, what their SADI rates are. I've always been a believer if you're not reporting your metrics, you're probably not proud of them. But the investor owned utilities have to report them, and I can tell you we are 50% better than the next closest utility in the state as well.
Again, that goes to credibility in front of the regulators, in front of anybody in Tallahassee and as well obviously with your customers. Now the challenge with this, by the way, is that our customers come in every day, they turn on the lights, they walk in the room, it's already cool because the air conditioner is running. Our bill is so low at the end of the month, they get it. They typically doesn't move their needle. It's lower than their cable bill.
It's lower than their phone bill. It's a lot lower than their DIRECTV bill. So what happens? Customers never think about us, right? They really don't focus on us.
I have to after I remind a lot of our employees all the time, don't expect our customers to be saying thank you because they take this for granted primarily, right? We're Americans. We expect all this just to work. They don't think about you until it doesn't work. And this is where the investments that we've made, the nearly $4,000,000,000 in investments in transmission and distribution have paid off significantly.
Jim talked about storm response and hurricanes. This is a picture of Hurricane Irma as she came onshore in 2017. The Category 4 storm, a storm that was the largest actually when you look at it from a footprint and power to storm to ever hit us in the state of Florida, It caused the largest number of outages we've ever had in our service territory. We have 5,000,000 customers, meters. We had 4,400,000 customers without power when Irma left the state, 90% of our customers, 9,000,000 people without electricity just for FPL.
And of course, you can see this storm touched everybody in Florida. Every single one of the counties in Florida, the 67, with the exception of 3 in the very west part of the Panhandle, had hurricane force winds. The investments that we made in the previous decade along with frankly the storm drills that go back to 1952, the experience that we've gathered from even responding to other storms in the past like even coming up to Superstorm Sandy, right, we learned from these storms, allowed us to be able to restore power faster than ever before. 24 hours or less, we had 2,200,000 customers restored. That's 5,000,000 people back up in 24 hours or less.
You can see some of the metrics here. Overall, the reduction in number of days, the amount of damage that we didn't have because we had invested in hardening like concrete poles and steel poles and guy wires and smart grid technology made a huge difference. But one metric that I want to point out here is the economic impact. So Florida is now the 3rd largest state by population in America, but it's also the 17th largest economy in the world. We are larger than Saudi Arabia as an example.
Mexico is the next largest economy compared to Florida. We crossed the $1,000,000,000,000 mark for GDP last year. So we cover over half the state of Florida. So every day that we're out and not able to serve our service territory, it's over $1,000,000,000 of economic impact. So just shaving 3 days off a storm as an example is effectively a simple payback on the amount of money that we put in over the last decade into the state.
Has a huge impact for customers on a lot of levels, and it clearly pays off to make these kind of investments. And it all goes to customer satisfaction. Again, I talked about how in fact part of our problem is the fact that customers are generally pretty satisfied. We actually have metrics that TOS is having some of the highest customer satisfaction, not just in Florida but the country and award winning customer service. And you have to be able to find ways to be able to touch your customers in the way that they want to be communicated with.
So we spent a lot of time on trying to find ways to make sure that our customers have the interaction with us when they need it. We're not perfect. Lights go out. Things happen. And so we have to be able to communicate with our customers, and we've created new apps, portals on our websites.
A lot of customers want to communicate through Facebook and Twitter, and we spent a lot of time trying to make sure that we have that customer interaction, so we drive again that high customer satisfaction. And you can see the results speak for themselves. Very low significant reduction in customer complaints and a response time that continues to improve. We measure it in seconds, not minutes. Don't you wish you had that when you called Comcast for your cable?
I know I did. I spent 22 minutes. I clocked it actually the other day. Let me talk a little bit about Florida. We're very fortunate.
We serve a state that continues to be hitting on all cylinders. We are unemployment continues to decline. Consumer sentiment continues to rise. You can see it in the number of housing permits as well as housing starts. Pulling a permit is one thing, actually turning dirt is another.
And we've seen consistent growth across both those metrics. And the state is blessed with a very diverse economy now. This was an economy that turned largely in the past on tourism, agriculture primarily and construction. We're now an economy that has a much broader and diverse base, 2nd largest concentration of aerospace companies in America as an example, a huge simulation, dollars 8,000,000,000 simulation industry that works between NASA basically and over to Tampa, does a lot of work with our military. We've got huge biomedical research industry as well.
And the state has really diversified where the opportunities are for folks to come and to locate their businesses, grow their businesses and to move. And you can see people are coming. On average, Florida is adding 1,000 people a day. Every day, 1,000 people a day are coming to the state. And you can see from the map where they're moving from, including this part of the country.
Why? Well, again, I think Florida has actually done a pretty good job of creating an environment that is very warm and receptive, pardon the pun, warm, to folks who want to come in and grow, start a business, right? We have a lot of opportunities, great university system, diverse workforce, folks who actually speak other languages, native language from across the globe, a great center for Latin America, but we're also a great state from a regulatory standpoint, stable, predictable, relatively easy to permit, new construction and a great tax environment. No state income tax, relatively low property taxes, and it's frankly only getting better when you compare it to other states. So Florida just passed its we just finished our legislative session.
Florida just passed its state budget, dollars 91,000,000,000 Remember, we're the 3rd largest state in the country with a population of 21,000,000 people, just passed the state of New York a couple of years ago from population. But let's for argument's sake say that New York is the same size from a population standpoint. Geographically, Florida is actually a little bit bigger. Let's for argument's sake say it's the same size. It's relevant because of number of ports, roads, the infrastructure a state has to spend money on.
Florida's budget was $91,000,000,000 Anybody know what New York's budget was this year? $176,000,000,000 dollars $176,000,000,000 to serve actually fewer people on a smaller state geographically. So I guess you need to ask yourself, are you getting twice as good a service? Because you're paying twice as much. So part of the problem where you have states with high taxes is that people who have the choice to leave do.
People who have the opportunity to relocate their businesses to a lower tax environment, they do, which, of course, reduces the amount of revenue coming into the state, which puts pressure on the budget, which you're going to have to cut expenses or you have to raise taxes. The New York's budget went up 4%. Doesn't sound like it
was a
reduction. So it's an increase in the budget, which means taxes are going up. It's just math. And if that continues in Chicago, in Connecticut, in Massachusetts, in California, Great. That just helps us.
That's why I think 1,000 people a day is going to only continue and actually increase, and it's going to help us on our growth. And you can see this on our growth. We continue to add at about 1% a year, a little over 1% a year on new customer accounts, technology, energy efficiency, frankly, transparency, people having the opportunity to see how they use their electricity, puts downward pressure on sales because people have the ability to actually be a little smarter about how they use their electricity or they go on to their app and they turn the thermostat down when they forgot to do it and they leave the house and they go to their ecobee or their nest and they get to the office and they remember to turn it down or it does it automatically. That puts downward. But net net, we're still growing at about 0.5%.
Not many electric utilities in the country have growth at all. So we're very blessed to have growth on a net basis even when you bring in energy efficiency to the mix. Now of course, smart capital deployment is very important, but so is driving the cost down. Jim talked about this. He showed this to you, But I love this slide.
I love seeing exactly how we benchmark against every other utility in the United States with 100,000 customers or more. You can see where we were in 2016. That's the very top one up here. You can see where we were in 2017. And to Jim's point about culture, we're not satisfied and we're not done.
We got better in 'eighteen and we're trending in 'nineteen to be even better. Now besides the fact that it gives me the opportunity to say that we're best in class, what does this really translate to? Why is this important for customers? Simple. If we were average up there on the blue line and look, I could probably go to Tallahassee.
Every few years, we have a rate case, and I'd go on the stand under oath and say, we're doing a good job. We're average. We're right in the middle of the pack. Our customers would pay $2,000,000,000 more a year in O and M. We would spend $2,000,000,000 more than what we spend.
We don't spend $2,000,000,000 total. We'd spend $2,000,000,000 more if we were average. That's a 20% difference for our customers' bill. Average customer pays a little less $100 a month. That's $20 a month and after tax dollars that are staying in customers' pockets every month.
Again, very important from a standpoint of credibility, but also important from a standpoint of the state's economy because that's 1,000,000,000 of dollars that stays in customers' pockets and gets reinvested back into Florida and helps the whole place grow. And it's about culture. This isn't just about 1 or 2 things you do and you take the cost out and then you move on, you think about something else. This chart shows you this has been a March. It is not a sprint.
Year in, year out, focus on this and really driving productivity so we can get the costs out on a sustainable basis. That's why I'm so bullish about our opportunity to continue to invest in the business and take costs out and take that money, those savings and redeploy it in smart capital, which will help us grow and provide overall a much better experience for the customer. And we're doing it in all kind of ways because look, we don't have a special patent, a special widget that no one else does. We're not we don't have some kind of magic dust that only we have access to. We take technology that everybody else does, has access to, and we figure out ways to deploy it.
Many times, the technology is actually developed for another industry. And how do we adapt it? And then yes, we do sometimes. So we have a number of algorithms and processes that we have patented. We deploy it and we get costs out of the business.
And our focus now is, again, Jim talked about this, big data, analytics and deploying technologies like AI, like virtual reality in ways that will actually help us drive costs out and satisfaction for customers up. I'm going to show you a video rather than try to explain all this, which will give you a better understanding of things that we're actually doing today, give you just a little bit of insight of where we're going to be tomorrow.
Florida Power and Light is not your average utility. We're actually a technology company that delivers clean, reliable and affordable power at prices well below the national average to more than 10,000,000 people. Our smart grid uses advanced technology to predict and prevent outages and restore power faster when outages do occur, often without ever having to roll a truck. It all started with the deployment of millions of smart meters and thousands of smart sensors. Each day, we collect nearly 1,000,000,000 data points from these devices More than 110,000 intelligent devices are installed on our grid, like our new automated transformer switch, the first of its kind in the world.
These devices can automatically redirect power, self heal, and eliminate or minimize customers impacted all in milliseconds, and thermal imaging to constantly assess the health of the grid, our drones use artificial intelligence with machine learning and image recognition software we develop to spot the facilities night and day and report back in real time, remotely identifying any changes or potential issues with equipment. Our state of the art natural gas facilities are the cleanest and most fuel efficient in the world, and we're using a proprietary design platform and high performance cloud computing to quickly and optimally design, build and integrate new solar and battery facilities, including the world's largest battery site covering over 40 acres that will replace an old fossil plant and provide over 400 megawatts of clean energy to our customers during peak periods. Innovation and technology are at the heart of what we do every day. We'll never stop looking around the corner and working to improve how we serve our customers today, next year and for the next generation, all while keeping reliability high, cost down and build low.
It's really an exciting time of different areas that we're looking at and how do we drive business, how we drive costs out of the business. I will tell you, I don't even think of us as a utility. I think of us as a technology company that actually delivers power. And that's the culture that we're really instilling throughout the entire organization, which will allow us then to continuously look at how do we continue to grow the business smartly so our customers can benefit. And I'm very bullish about the opportunities on our capital program going forward.
We have a number, as you can see from this, and I'm not going to go through all of these. I'm going to go into some detail in some slides going forward. But everywhere from new generation on natural gas, the solar program that Jim talked about, some new tariffs that we've come up with on lighting and backup generation, battery storage, which we are just in the beginning of the first inning on the opportunities on battery storage to make a difference, and then, of course, investments continuous investments in smart grid technology, transmission, distribution and undergrounding. Now, Jim talked a little bit about this on quietly going about our engineering construction group on being able to execute on big projects. I want to take just a minute to give you an example of one of those.
So this is Plant Okeechobee. This is a 1776 Megawatt plant that we just brought into operation just north of Lake Okeechobee. Natural gas fired, very, very efficient, super clean technology that our team brought in actually early and under budget. And guess what, that's not an exception. Last 25 major capital projects we've done have come in early or on time and under budget, on average, about 7%.
7% is real money. This is over $1,000,000,000 for this plant. And as we've seen in other parts of the country, yeah,
but
yes, but you guys put a lot of wind turbines in. They're not that complicated. Wrong. There are a lot of things that can go wrong in building a wind farm, right? You have to really tightly manage it.
And on something complicated like this, there are a lot of things that can go wrong and you have challenges on. And yet project after project after project, the team has executed. Again, it goes to culture. It goes to never being satisfied and always challenging yourself of what you could do better. The plant on the right, that's a real plant that was constructed at the same time in the same region.
Again, everybody can get access to the same technology by the way that we can, but execution makes a huge difference. Look at the difference in time it took to build the other plant and the cost to build the other plant and ultimately the performance of the other plant from a heat rate perspective. Again, remember, heat rate, miles per gallon, that's every day. For the rest of that plant's life, it is going to be burning more fuel than the one we built every day. Every day, their customers are going to get charged more money for the exact same product at the end of the day and Electron.
That's why the focus on execution and the technology is so critical. That's why we're building Dania Beach right now. The next plant that goes online, not far from the Fort Lauderdale International Airport, if you're flying in over the water, look out the right side of the airplane, you'll see this project under construction for just second because then you'll be on the ground, then you won't see it. Super clean, very, very efficient, great emissions profile on this plant as well and will deliver reliable power in a low pocket that is growing and has challenges from a transmission perspective. So really, really important to be able to get this done.
We have permission. We've gotten all the approvals. It's under construction. And I have every expectation that we're going to get it done on time and hopefully a little bit under budget. Jim talked about this, but I want to spend a few moments on our 30 by 30 plan.
So it's because it's not all about just switching from oil to gas. We have gone into solar in a very big way. So I will take a little risk here, and I will actually correct my boss. Our first solar project was actually 1984, tiny in Miami, FPL did it, right? And it was experimental because we wanted to learn about the technology, we wanted to understand it.
And what we found out in 1984 was, it was very interesting, but it was wickedly expensive and didn't really make a lot of sense. The world has changed a lot. The price of solar panels has come down materially, as has inverters and the cost to construct. And at FPL, we learn from nears, from resources, experiences. We also get the benefit of a corporate wide purchasing program, so we get the prices down.
And so we were able to actually go out and announce that we're going to do 10 gigawatts of solar between now and 2,030, and it's cost effective for customers. It makes a lot of sense for customers. We've actually been working on this for several years. We just didn't want to say anything because frankly this takes a fair amount of land. And we wanted to be able to go out and secure the land before folks understood what we were going to be doing because guess what happens when people know you're going to go out and tie up hundreds of sites in advance, price of land goes up.
So we were able to actually get most of the land secured through options or purchases before we made this announcement. Dollars 10,000,000,000 investment between now and 2,030, very excited about the opportunities and the benefits that customers will see and the state will see. We've also launched a new program called SolarTogether. This is a program that gives customers who otherwise wouldn't be able to participate to participate on a voluntary basis if they choose to. So why can't customers participate and put solar on their roof?
A lot of our customers live in condos or apartments. They don't own the roof. Or they live in a structure that won't support solar panels, right, like a manufactured home. But they still want to participate. So this is a program that gives them an opportunity to do this.
Same thing with commercial and industrial customers. Our C and I customers, many of them will want to be able to participate in solar, but they can't put it on their roofs. Again, many of them don't own the roofs, they're in a mall or many of them have a roof that doesn't work because it's got a lot of equipment already on it. We've gone out to customers to gauge their interest. Just C and I customers alone in the 60 day period of time materially oversubscribed on the interest of this program because it's a great opportunity to participate and get a simple payback.
And only a few years, about 6 years, you get a simple payback. You pay a little more upfront and then you get credits on your bills that will last for the entire life of the projects and net net, your customers end up saving money and being able to participate in solar. Another great opportunity, going to be in front of the commission with this. Again, huge support across all of our customer base that we've seen so far to move forward on this, and I'm excited about it. This will allow us to, again, deploy large scale solar around the state, but bring it down to the individual customer from a benefit at the beginning stages.
Again, a great opportunity for us to leverage the expertise the company has for what NEAR has learned and what we've learned. To remind you, in 2016, in our rate case, we actually secured a 50 megawatt battery pilot program. We've learned a lot throughout that process. And now we're going to be deploying the world's largest battery facility at a plant called Manatee. This was one of the plants I was talking about.
It was actually built in the very early '70s, oil fired, switched to natural gas. We're going to tear it down. We're going to replace it with 40 acres of batteries. 409 Megawatt 2 hour battery, largest facility by a factor of 4 in the world, again, setting the stage for a whole new part of the industry and the ability to serve our customers reliably but also provide them real economic savings. Continued investment in transmission and distribution, a lot going on in this space.
Smart grid technology continues to expand. We continue to put more devices on. We continue to look for ways to strengthen the grid. As I told you before, particularly now with the focus we had, unfortunately, last year in the Panhandle, we had Hurricane Michael. We had Irma the year before that.
We had Hermine the year before that. And what you see is people recognize that these are good investments, not just for hurricanes, but every single day. You get a thunderstorm that comes through, 60 mile an hour winds, our system hardly impacted because, again, these investments pay off every single day. There's a lot of opportunity to deploy capital here. And the legislature even went so far as to say, we really want to make sure that the entire industry focuses on this and passed legislation this year, which will which directs the Public Service Commission to actually put together a clause recovery mechanism for utilities on storm hardening and undergrounding.
So we already do storm hardening. We already do some undergrounding, but this is going to give us an opportunity to even expand that and do it on a programmatic basis over the course of decades to be able to go now into laterals, the lines that are typically in people's backyards or right in front of their homes and start to underground those. And again, this makes a huge difference not just from a capital deployment standpoint, but also on how we run the business because by smartly doing this, we will actually be able then to reduce the amount of money we spend to maintain the overhead lines because there will no longer be overhead. Last year, we spent $71,000,000 on vegetation management. That's a fancy way of saying trimming trees.
When the lines are underground, you don't have to trim the trees. So we get to take that cost out of the business and then redeploy it into capital. Again, tariffs that we're looking at, LED lighting, backup generation, these have been approved by the commission. These are voluntary, but an opportunity for our customers who have said to us, this is what they want. They need help being able to deploy these technologies, but they are not experts.
They want us to do it and they want the ability to have a tariff to be able to pay for it. We've now put those in place, a good opportunity for several $1,000,000,000 worth of deployment across our territory. You can see some of the differences just in streets as an example and the lighting. Very, very positive for customers as well as other stakeholders like law enforcement who love this and are encouraging cities as well as customers like in their parking lots to switch over and put in LED lighting. So again, lots of visibility and to be able to deploy capital across the business between now and 'twenty two smart capital that will allow us to take more costs out and be able to continue to keep bills very low.
So I'm going to wrap it up with the financial a couple of financial slides just to give you a little more visibility in this. Of course, you know that our business really depends on smart deployment or regulatory, regulatory capital growth. Capital structure ROE, you can see we're going to have continued growth about 9% in our capital deployment across a number of different parts of the business. This is not just generation. This is across a number of different parts of the business, and it gives us a chance to continue to grow our net income and make sure that we are financially strong.
Let me take just a moment to talk also about where we stand with regards to our rate case. So to remind all of you, we are in a base rate settlement agreement went into 2016. That's a 4 year agreement, runs through 2020. We've talked about in the past that we're going to see if there's an opportunity to go ahead and extend beyond that period of time. We have the unilateral option to do that.
Right now, based on everything that we see, and of course, this is going to turn on sales ultimately, right, retail sales, our ability to continue to manage costs and our ability to execute around our capital program. If we continue on the trend we are right now, foresee a 1 year stay out on our rate case, so we will actually be filing for rates in the Q1 of 'twenty one for new rates starting January of 'twenty two. Again, that could change depending on what happens in sales and our capital program. But right now, I feel pretty good about 1 year stay out and being able to not go for new base rate adjustment until 'twenty two. That's a 5 year stay out that our customers have had no adjustments to their base bill, which again also allows us during that period of time to really focus in on the business, to drive those costs down, to find new ways to actually enhance the customer experience when they are communicating with us, to find technologies that will help us drive the CO2 emissions rate down even further and ultimately have the lowest bills possible for our customers.
I'm really, really proud of our team, the ability of them to continue to stay focused. It's hard when you've won a bunch of awards for being best in this and best in that to keep people focused on still trying to find ways to be even better. But the culture of the company is such that Jim is right, never satisfied. And I think with that kind of culture, I'm confident we'll be able to continue to be able to take costs out and provide that value proposition for our customers that's second to none. So with that, I'm going to ask Marlene Santos to come up, who runs actually Gulf Power for us.
Marlene, by the way, used to run customer service for Florida Power and Light for many, many years. She is one of the big reasons we have such happy customers at FPL. And but she also very, very tightly managed the business, managed costs and was the perfect person to go up to Pensacola and become President of Gulf Power. So welcome, Marlene.
Thank you, Eric. Thank you, Eric, and good morning. So it has been about 6 months since NextEra Energy acquired Gulf Power. And today, as you'll see, although we are oneten the size of Florida Power and Light, we have big plans to transform the company. Those big plans are well underway, and they include investing in smart capital, reducing our O and M costs, reducing fuel costs, changing the culture.
And at the end of the day, they're going to result in a net income CAGR of 16% a year between 2018 2021. And because we are very committed to providing a great value proposition for our customers, you're going to see that we're going to do that while also reducing our customer bills. We have a target to reduce customer bills by 20% in real terms by the mid-twenty 20s. The slide that you see up here is actually has pictures of day 1, which was a very exciting day for our company and a big milestone. So let me tell you give you an overview of Gulf Power.
So we are located in Northwest Florida. It really adds a great footprint to our regulated operations in Florida. Northwest Florida, 460,000 customers, mostly residential, but the CI customer segment is very interesting because it's got a big presence of military customers. This area is known as the birthplace for naval aviation. And so that has brought on lots of military presence, STEM skill sets.
So I'll talk about that in a little bit about how that gives us opportunities for growth. We have about $5,200,000,000 in assets. So my presentation is all around opportunities. This slide shows 4 opportunities and the next slide that I'll show will show a 5th opportunity. The first opportunity is a graph that you've already seen a few times today, but it shows our dollars per megawatt hour compared to others.
And Eric has the privilege of showing you FPLs, which is all the way at the bottom at $12 or so. And I have the privilege of showing you the Gulf Power 1, which is at 29%, which creates huge opportunity for us to drive that cost down using best practices that we know from Florida Power and Light. You also see service reliability, so SADI. And our SADI at Gulf Power is about 1.8x that of Florida Power and Light. So big opportunity for improvement.
We're actually also above the Florida average. So big opportunity there. When it comes to generation mix, you can see that 3 quarters of our generation is from coal and purchased power, which are very costly generation mix sources. And our CO2 emissions rate were 1.7 times the industry average. So big opportunity there.
Lastly, here's another great opportunity and this is the opportunity to invest smart capital. So you can see in the regulatory capital employed chart that Gulf Power has grown its regulatory capital employed at roughly half the rate of FPL over the past 10 years. What has happened to the bills as a result of that is the next the chart next to it. You can see that Gulf Power's bills have gone up 30% during those 10 years. FPL's bills have actually come down 6% during that same time period.
And if you take a look at the reasons for those shifts, you can see that for Gulf Power, just about everything, all the bars have gone up, but one that is very notably increased is the yellow one, which is environmental cost. For FPL, you can see a big reduction in fuel, which is the green bar. So to me, this is a testament of the next energy playbook working beautifully for customers. And this is what you will see us doing at Gulf Power. So very similar to what Eric showed as far as customer growth, we're also expecting about 1.2% growth in customers, seeing the same type of decline in usage as Florida Power and Light.
So at the end of the day, we're expecting about 0.5% increase in retail sales. So let me take you through that NxThera Energy playbook that we are executing. So one of the when before we acquired Gulf Power, we already had some ideas of some of the things that we wanted to do. And so we were very quickly able to get into the company and put together our road map with our strategic focuses, which are the 4 that I'm showing to you here today. I'll go through each one.
The first one, clearly investing in our people. You've heard about culture. You've heard about the importance of culture from Jim and from Eric. So we're doing a lot to invest in that culture. 1st and foremost is safety.
The safety of our employees is the most important thing. And as you can see, we have a long ways to go. If you look at our OSHA rate, we are a 0 today culture. So one incident is one too many. But we're very proud of the fact that we have been able to reduce the OSHA rate already year to date by 50%.
We are very focused on culture and building into the Gulf Power employees that same culture of excellence, of accountability that Florida Power and Light and NextEra still strongly, enjoy. We have started 6 Sigma training. We started actually a culture assessment. We're doing a lot of work around accountability, innovation. So all those things that we know are needed for our employees to thrive and be successful into the future.
We're blessed with a wonderful group of employees, very talented group. So we are spending a lot of time and effort to development to develop them, to grow them so that they could be successful. And we've set very big goals for ourselves, and we're very committed to delivering them. So that's part of that culture of accountability. 1 of the big goals that we have set is sort of, as Jim mentioned, we have to do sort of 2 things at the same time.
We're going to be best in class in all of our performance indicators. And at the same time, we're going to drive down costs. We're not going to do 1 or the other. We're going to do them both. And so 3 weeks into the acquisition, against I'm looking at Jim and he's smirking at me, because it was against my recommendation.
We launched Project Accelerate just 3 weeks in and the team did amazing. I'm so, so proud of the Gulf Power employees. We came up with over 500 ideas. We're actually executing on over 200 ideas and have very detailed plans to deliver on over those 200 ideas. And you can see here the value that we created so, so quickly in the organization.
Dollars 100,000,000 worth of ideas, I've listed some of them here. At the end of the day, a lot of ideas around centralization, consolidation, IT, streamlining the operation, bringing in the next era best practices into Gulf Power. Focus on the customer. Clearly, that's going to that's one of our big areas. We started measuring customer value and we're very, very happy to see that we are very grateful that we have a very good customer brand and customer satisfaction at Gulf Power.
So we're starting off at a good point, but we're driving those key metrics that we know are important to our customers. And we've already, in just this very short time, have already started getting very good results. You can see speed of answer, PSC complaints, just big, big improvements in those areas. The other thing that we're doing is that by the end of this year, we will be deploying new customer systems, and we're excited about the fact that they will enable us to provide a better customer experience. Lastly, you've heard a lot about investing in smart capital.
And by smart capital, we mean capital that creates long term benefits for our customers. In generation, that's going to be investing in capital that reduces fuel, reduces O and M, improves emissions. In T and D, it's around improving reliability and storm resiliency. So I'm going to talk to you more about those capital investments. Here's a chart similar to the one that Eric showed of all the capital initiatives that we have planned between now and 2022.
When you look at this, you see a lot of opportunities for a little company like ours, lots of opportunities. And if you look at the status column, just about everything is underway. It's amazing the speed at which we have been able to start all of these projects. And I can tell you that the reason for that is because of what I'll call the mothership, right? I mean, the amazing support that we at Gulf Power are getting from our NxThera family.
So everything is pretty much underway. So very excited about all of these projects. One of the very strategic projects is what we're calling the North Florida Resiliency Connection. So this is a 176 mile transmission line that connects from FPL. So you can see FPL that's in the sort of northwest point of FPL and takes it all the way to the most eastern point of Gulf Power.
So transmission lines connecting systems, the big value of that is that we're going to be able to bring low cost power from Florida Power and Light over to Gulf Power customers. You can see $400,000,000 capital investment, huge benefits of savings for our customers and we're targeting an in service date in 2021. Another strategic investment is the conversion of our plant, Crist, from coal to gas. You saw that big percentage of coal in our generation mix. So this is a big winner for our customers.
You can see that we're not only going to convert the plant, but we're also building a gas lateral to bring the gas into the plant, about $175,000,000 investment. We're going to reduce CO2 emissions by 40% just from this investment. Target in service day mid-twenty 20. Also at Plant Chris, we will be adding combustion turbines, 9 50 megawatts of baseload capacity, a $500,000,000 investment. And the beauty of this investment is that it's going to allow us to essentially eliminate the capacity costs that our customers are paying today.
And you'll see that in the bills coming down in a little bit when I show you. Moving on to a different plant, Plant Smith. This project is almost done. It will be done the next week or so. We're actually improving the efficiency of a combustion turbine at Plant Smith, increasing 100 megawatts of a base load, dollars 50,000,000 capital investment with nice savings for our customers also.
We're bringing solar to Northwest Florida. You heard from Eric the amazing work that we are doing around solar, and we are using that FPL development, the NextEra knowledge around solar. We're leveraging all of that to bring solar also to Northwest Florida. We're developing 3 projects, 2 25 Megawatts across Northwest Florida, spending about $300,000,000 and we'll be reducing customer bills, also nice savings for that. And we're continuing to look for more opportunities and more projects for solar.
So all those generation investments, this is what they do as far as the fuel cost, 50% reduction in fuel cost, 100% reduction in the capacity clause. I mean, these are true benefits for T and D is the other area that has lots of opportunities. Here, I'm laying out for you more or less the investments that we're expecting to make. But when it comes to the transmission and distribution grid, we have a huge opportunity around smart grid devices making just really pretty much upgrading the whole T and D structure to the levels that you saw in the video that Eric showed you. So there's lots to do still there.
To give you some statistics, 75% of our distribution lines are still overhead. So we have a lot to do in that area. When it comes to storm hardening, you heard about the legislation. We're thinking about adding $100,000,000 to $200,000,000 of incremental capital to do that storm hardening at Gulf. We have lots of opportunity in transmission, our wood poles.
We currently have about 60% of our transmission poles are wood. For FPL, that statistic is 10%. So lots of upgrading to do to get the infrastructure to be hardened and resilient. We just had Hurricane Michael hit the panhandle. And so that community knows the importance of these investments.
So we're very excited about doing the right thing for the community. And when you add all those capital expenditures up, this is more or less this is what you get, dollars 2,900,000,000 to 3,300,000,000 big increase from historical levels. So what does this all do to our financials? You've seen some of these charts already, but reduction in O and M cost of 50%, regulatory capital employed CAGR of 14%, which at the end of the day rolls up to a net income CAGR of 16% between 2018 through 2021. And it's not just about financials.
We're focused also on our employees, our customers and our communities. OSHA rate reduced by 50%, service reliability increased 20%, CO2 emissions reduced 40%. And I told you that we are committed to providing that strong customer value proposition. So this is what we expect will happen to customer bills. We are targeting a 20% reduction in real terms by the mid 2020s.
So when you look at these financial outcomes, a couple of things that you should also note. Eric mentioned about the rate case for FPL and the fact that the current best estimate for a rate case for FPL timing is filing in mid-twenty 21 for rates to be effective in 2022. Like FPL for Gulf Power, a lot of things go into deciding when to file a rate case. It will be dependent upon many factors. Our best current estimate is the same as FPL, which would be to file a rate review in the Q1 or so of 2021 for rates to be effective in 2022.
In addition to that, we are in the midst of reviewing the possibility and the benefits, the impact of merging or combining our 2 Florida utilities into 1 larger utility. No decision has been made on this, but we're in the midst, like I said, of reviewing it and understanding the financial impacts, the operational impacts. And as all of you know, one of the big benefits of being able to do this, because it takes a lot of time to file a rate case, would be to be able to file one rate case for one company. So that's in the midst of being reviewed. So in summary, we've got big transformational plans at Gulf Power.
We're going to increase net income by 16% per year, and we're going to provide an excellent value proposition for our customers by reducing their rates in the long term in real terms. So thank you so much for your attention. And it's now time for a break, 10 minute break. Thank you.
I would ask folks to take their seats, plenty of time for discussion afterwards. Give folks maybe 15, 20 seconds more here. Okay. Well, welcome back, everyone. Again, the agenda for the rest of the day, you'll hear a little bit from me.
We'll turn it over to Mark on NEP and then Rebecca will pull it all together and wrap up and then we'll go to Q and A. But I want to start with something that Jim said, right? I mean, he said he'd been here 18 years. And in that 18 year period of time, he's never seen this company better positioned. And I think you've heard from Eric and Marlene, and the growth is really only getting started at FPL and at Gulf, terrific prospects over the next 4 years.
And it's really much of the same story for Energy Resources in terms of just an amazing growth story over time. Just an amazing growth story over time. Going back to that 2,001 timeframe that Jim mentioned where Lou had made his decision to get into clean energy, well, one of the things he did is he brought Jim over to the business in 'two and you saw the growth of that business exponentially climb. And we have been able to turn energy resources into a Fortune 500 company from scratch. And that's been a lot of blood, sweat and tears for many people in this room, terrific execution on the development side led by Mike O'Sullivan as well.
And so our goal for Energy Resources is straight forward. Our goal is to continue to grow North America's largest, most profitable competitive clean energy company. So how are we going to do that? The first way we're going to do that is by leveraging our competitive advantages or our playbook. The second thing we're going to do is capitalize on what is the best renewables environment in our history.
I'm going to spend some time taking you through that. And the third piece is we're going to disrupt the rest of the industry. And if you put all those things together, that's been the right strategy at the right time. That's worked very well for Energy Resources. And we are really well positioned.
If you take one thing away from my comments over the next 40 or so minutes, we are really well positioned over the next 4 years. Since the last earnings call, just in the last 60 days, we've already added 1500 megawatts to our backlog. We already have almost a 4 gigawatt head start to our post-twenty 20 development. So we are really well positioned for the future. Let me start by talking a little bit about the Energy Resources value proposition.
As you know, Energy Resources is a company that's built on a long term contracted model. It's centered around renewables. You can see it from the chart here, roughly 17.5 gigawatts in operation. If you add that 11 Gigawatts of backlog, we're right around 29 Gigawatts today of renewables under operation. And those 11 point those 29 gigawatts of opportunities that we have on the renewable side are really well diversified.
So when you look at the map, lots of dots, hard to see, but we're not focused on any one part of the country. We're in over 36 states. So from a resource variability standpoint, terrific diversification across the entire portfolio. You can see from a renewable standpoint, when you look at the generation mix right around 75%, that's a number that you should expect to continue to go up over time. On top of that business and as part of the long term contracted model, which is really a perfect complement to our Bcf on the gas side.
We have a about 8 PCF on the gas side. We have a nuclear business that is about 70% contracted. We have a competitive transmission business that's approaching $3,000,000,000 in CapEx by the end of 'twenty two, rate regulated long term contracted, perfect complements also to the renewable platform that we've been able to deliver. So let's talk first a little bit about what the expectations were back in 2017. What's the report card?
How do we do? Well, green checks typically mean you did pretty well. Really happy with the results that we were able to demonstrate. When you look on the renewable side, the midpoint was right around 13.3 gigawatts, a little bit short of that at 12.3, but we're still not done on 2019 2020 development. We probably have realistically maybe 200 megawatts, 300 megawatts more of potential opportunity through the 2020 time period.
Why is that? Turbines are in short supply, E and C contractors are in short supply, a lot of constraints because of that. We're all of a sudden getting calls from folks that signed up contracts with smaller competitors that have backed out and now are looking for help to see if there's somebody that could step in before the end of 2020. We're always uniquely positioned to do that because of the leverage that we have on our supply chain. But really well positioned for 2019 2020.
It's a perfect fit with the financial expectations you're going to see today. And on the backlog, like I said, a 4 gigawatt head start to post-twenty 20. 40% of our solar origination in 20 18 was enabled by battery storage, a business that we said in 'seventeen would be towing the water. We probably under estimated what a big impact it would have on the solar origination business that we have seen over the last couple of years. And again, you see that in that 40% number.
Really happy with the capital recycling we've been able to achieve largely through NEF, also with the final divestment of much of our merchant gas portfolio really making the company a long term contracted business. And then on the natural gas pipeline side, on MVP, still in progress. I'm going to take you through some more details later. But we see a path forward there and are continuing to construct that project which should be about 90% complete by the end of this year. So at its heart, again, a long term contracted model built on renewables.
You can see that our merchant generation has declined pretty consistently over time. We really, for all intents and purposes, aren't in the merchant generation business anymore, except for Seabrook and I'll talk a little bit about that later on. But you can see all the growth in renewables that 17.5 gigawatts plus the 11 gigawatt pipeline put in as close to 30 gigawatts today if you believe we'll build out what's in the backlog, which we have a very good track record of doing it. So how are we able to achieve that type of success? It really starts with our development skills, which I view as the moat, so to speak, the thing that separates us from the rest of the pack.
And an easy analogy would be if you drop 1 of our developers and pick your state anywhere in the country And they have to go and get a win, which means originating the new solar or PPA contract. They really start at somewhat of an unfair advantage just because number 1, we've been in this business for 20 years. We have a lot of experience, a lot of know how, and we own a lot of assets in every single state that we build renewables in. And so we already are starting from a point of strength in that we have amassed a pipeline, which are what we think are the best sites in that state to build more wind, more solar, more battery storage. And so when we're responding to an RFP from a customer, a lot of the smaller developers we might compete against, they might put 1 project in, they might put 2 projects in, we're able to bid 3 projects, 4 projects.
And those projects we think are probably the best projects because we have intentionally and strategically selected those sites based on all the information we have from our 20 years of experience in that state and the data that comes back from the assets that we operate. And then you combine that with not only having a great site, but all the things we can do on the development side, outstanding relationships with customers, the ability to sell and market integrated products, wind and solar and battery storage together, the brand recognition that we have. Customers signing up because they know when we give them a price, we're going to deliver, we're going to show up with the megawatts, they're not going to have to go back out and rebid those projects. And most importantly, our people. We have outstanding people.
We've had Jim talked a lot about the culture with outstanding loyalty. We don't lose people. Our people are very engaged in what it is that we're trying to accomplish. And we have a massive construction company platform that we're able to leverage. So when we're in there competing against other folks in any state that you might pick, We're able to leverage that scale, that skill, that scope.
If we run into regulatory problems, we have, I think, bar none the best regulatory team in the business. It starts with Joe Kelleher, the former Chairman of the FERC back under the Bush administration. So a lot of tools that we're able to utilize, technology and innovation being one of those as well that I'll talk a little bit more about in a few minutes. Right strategy at the right time, right? Definitely the right strategy at the right time.
You can see it here in the cash and earnings growth, which has been in the mid to upper teens, both from adjusted EBITDA and adjusted earnings perspective. So that's the value proposition. Let's talk a little bit about how we've been able to leverage our competitive advantages or the playbook and how we're going to be able to leverage that going forward to be able to create significant
opportunities. A lot of bubbles
on the chart here, but I want to focus you in on the one in the middle, the yellow one. That's the opportunity set that we have in this industry through 2022. 80 gigawatts of potential opportunities through 2022. The blue circles on the outside, those are the ones that are driving that 80 gigawatts. Battery storage, nuclear to coal switching, I'm going to talk a lot about economics.
Although we don't need it, state RPS, a lot of states increasing their renewable portfolio standards. Solar and storage under existing wind, let me talk about that just very briefly. There's a new order that came out from FERC, it's called FERC 845. What it says is, hey, if you have an existing site, like say you have an existing wind site somewhere in the Midwest and you have surplus capacity under your long term generation interconnection agreement,
guess what, you don't have
to go through the whole queue process that normal folks to do. Expedited queue process and no transmission upgrades associated with that development opportunity. So think about the possibilities, right? We talked a lot about repowering last time. Think about the possibilities if you have the largest renewables portfolio in the world to take advantage of this new rule where we can go to our existing wind sites, start looking at putting storage together with them, putting solar under wind and taking advantage of the fact that we have 0 transmission upgrades because we already have an interconnection agreement in place.
C and I demand, all this all we hear about from ESG demands, from investors being placed on the C and I market. That's creating a lot of demand, a lot of demand. And it's not just the typical FAANG stocks that we used to hear from. Now it's the Wilshire 2,000 and it continues to grow as we go forward. And then technology, ton of technology improvements coming in the sector that are also driving that 80 gigawatts of demand.
So, the question is, how do we get our fair share? That's the green circles. That's the playbook. Those are our competitive advantages. 1st, we buy cheaper.
We buy cheaper, we build cheaper. We build and buy cheaper because when you're spending $12,000,000,000 to $14,000,000,000 a year in CapEx and you're the 6th largest capital investor in the United States, you get terrific terms and conditions and price concessions from your supply chain. We operate cheaper. Scale, I'm going to talk a little bit a lot about how we're using technology to be able to do that. Our O and M costs are lower than the many small competitors that we compete against.
We finance cheaper. Paul Cutler, the whole treasury team does an amazing job of going out globally to secure capital and we take an approach where with our bank group, which is over 100 banks are really driving down the borrowing costs. Identifying customer solutions, because we've been in this business as long as we have, every single state that we go into, we know transmission congestion. We know how gas is correlated to power. We know where the best potential sites are next to load.
And then we are now bringing solutions to customers where we're saying the right way to look at this is wind, solar, battery storage combined or maybe it's 1 of the 3, but being able to come to them with real ideas and being able to think like our customer. We have a tremendous advantage. We have Florida Power and Light and Gulf. We know how investor utilities think. We know how they model their system.
Don't underestimate what a leg up that gives us against the smaller competitors that we compete against and we innovate better. So if we're able to take that playbook and apply it against that 80 gigawatt demand, we expect to be able to get our fair share. What our fair share mean back in 2018? Our fair share in 2018, a win meant 26% of the market, because that's how successful that playbook was for us. Don't underestimate how much leverage that gives us.
19% share in solar. Again, you can see the small bars. Those are the really small folks we compete against in wind and solar. We're the ones with scale. We're the ones investing capital.
We're the ones that can drive the lowest prices for our customers. Back to the buying power, I said again, 6th largest capital investor in the U. S. In any sector over the last 10 years. Last 3 years, we've been anywhere from 4th or 5th, but tremendous amount of scale.
We are almost always our supplier or vendor's largest customer. That means better pricing, better terms and conditions, a lot of ability to exercise that buying power. The other thing it means is back to what I said before, there are a lot of the small guys in the chart that I showed you earlier that get in over their skis, right. They put a price in front of a customer that they're not actually able to deliver and they string the customer along for a couple of years and then all of a sudden they show up and say, yes, guess what, I can't do it. We get those calls and the call is, hey, do you guys have a site?
Do you guys have the equipment? Can you guys build this for us? Because of this, trust me, the vendors and the suppliers, if they're going to make room for anyone, they're going to make room for NextEra first and that creates a lot of opportunities for us as well. O and M, we operate cheaper than anybody else in this sector. And how are we able to do that?
Look at wind, I'll just take wind for example. We have taken 25% out of our O and M since 2014. Culture continuous improvement, never settling. And you know what, that's not good enough. That is not good enough.
So we're going back to our teams and saying we're not going to settle for that, go totally reimagine the way you approach O and M. We expect another 20% coming out of the O and M on the wind side, 30% on solar. And if you think about wind, wind is really becoming technology driven. So instead of just calling up the side, hey, what are you doing today, what's the work order on our 10,000 turbines, We don't approach it that way, right. We use all the data points that we get from our wind fleet, which is billions of pieces of information a day, we take all the PPA revenues that we have, the financing conditions and debt service coverage ratios that we have and we rank our sites and we rank our turbines and we say which ones are the most important to fix first and which ones are the most important to fix last.
It's a giant logistics exercise. The crane goes to the one that maximizes profitability. And guess what? It's all done electronically using big data, using AI, using machine learning. We put Ipads in the hands of our people in the field and they have real time work plans and they maximize the utilization of the resources and the parts that it takes to get that work done and it's going to drive an enormous amount of cost reductions across the business.
In solar, we are moving towards unmanned operations at our solar projects. So really excited about where we are today, but not settling for it, not being complacent because we can be a lot better and looking forward to that as we go forward. It doesn't just start with O and M and the people orientation and having the right skills and talent, but it's also technology. You've heard Jim talk a little bit about it. You've heard Eric talk about many of the things that they're doing at FPL.
But think about our company, right? We have again the largest renewable fleet in the country. That means we get more data and information than anybody in this industry. Again, billions of pieces of data coming in every single day. Then we're able to transfer that data over to NextEra Analytics.
And I've talked over the years to most of you in the room about who NextEra Analytics is. We have amazing capability at NextEra Analytics. This is a group of PhD mathematicians, data scientists, data engineers that are extremely innovative. It started back in 'five with them doing just our wind resource assessment and our solar resource assessment. And it's expanded into helping our development team, helping our operational team.
And they are developing tools that are becoming competitive weapons for our business. And you can see some examples there rather than have me take you through them, I'm going to show you a short video.
At NextEra Energy Resources, we generate more than clean energy. We develop solutions to meet America's energy needs. Our goal is to provide cost competitive, reliable, clean energy options and we deliver by leveraging big data, machine learning and artificial intelligence like no other energy company in the world. We collect billions of data points every day and use that data to make smart decisions that optimize project development, maximize revenues and reduce operational costs. In renewable development, design unlocks value.
A typical wind project has trillions of possible designs and traditional computing capabilities require several weeks to evaluate just a few of them. So we developed an intelligent design optimization tool to evaluate millions of possibilities in just a few days. Our tool uses state of the art cloud computing and advanced analytics to process enormous amounts of proprietary data on topography, weather and equipment capabilities. Now we can deliver better solutions for customers and shareholders and expand our competitive advantage in renewable development. Combining big data with digital automation, we also transformed the way we work.
With digital work plans and the ability to view real time performance of our fleet, we leverage digital tools to streamline, simplify and automate labor intensive processes. Rather than having more than 120 site managers develop individual work plans for their projects, we leverage our digital capabilities to optimize work planning across our portfolio. Every part of our company is infused with technology, even in the air. We use drones to detect, predict and prevent issues with our wind turbines, Using artificial intelligence to analyze the images, an autonomous system can make repair decisions that reduce cost and decrease turbine downtime to maximize revenue. At our company, success is driven by our people who leverage technology to deliver development expertise, financial strength and operational excellence now and for the next era.
So, amazing what we've been able to accomplish in a short period of time. I always ask
a question, which is what if. What if
we could do this? What if we could do that? What if we could take all these tools, our ability to do a site layout in a couple of days on a wind project or a solar project and be able to look across the country at where the opportunities are and where the disconnects are in terms of generation fleet and be able to proactively go to customers to identify solutions. Those are the kinds of things that will differentiate and revolutionize the development business for energy resources. And you take the equipment that we have today, whether it's a battery, whether it's solar panels, whether it's a wind project, these are really sophisticated pieces of technology.
Take a wind project for example, we had the autonomous predictive adjustments for wind turbines. Wind turbines have are basically computers with blades on top of them. And so, it's not just a matter of having somebody back in the main office making twice a day adjustments to where our wind turbine is facing and whether the pitch is correct to maximize the revenue off that turbine. Today, it's about using AI and a computer algorithm where we're making minute by minute changes that turbine. So, it's always positioned into the wind, pitched properly to maximize revenue off that turbine.
This is a technology business. I really challenge you to think about whether small competitors that don't have the working capital, don't have the skill set, don't have the people, don't have NextEra Analytics can really do these kinds of things. All right. So let's talk a little bit about growing the business. I talked about leveraging our competitive advantages.
So how do we leverage our competitive advantage with what is the best renewables environment in our history and what kind of growth does that lead to. So no secret, this business has shifted dramatically over the years from one that was based really entirely on compliance, right? The slides we used to have on the projector here back in 2010, pre-twenty 10 were all about maps on which state was in which place on the renewable portfolio standard because that was what was driving demand because guess what, wind and solar wasn't cheap. So you're going to folks who had to buy it to accomplish a state guideline. That has completely changed.
Today we sell wind for one reason because it's 3 times cheaper than the variable cost to run coal or nuclear. Today, we sell solar because it's 30% to 40% cheaper than the cost to run coal or nuclear. And it's also challenging gas fired generation on the economics as well. You can see solar, about 75% of the origination has been driven by economics. And it's opened up new markets for us.
Used to be IOUs, co ops, munis, but now C and I. C and I is coming to us because it's cheap. It's a cheaper source of power than what they're paying the local investor owned utility today and it's green and it is a great ESG story. All right. So what's really driving the cost reductions that we see in wind and in solar?
So from a wind standpoint, you guys have all seen this chart before, but we've been able to achieve about 15% productivity in wind. How we've been able to do it? Taller towers, wider rotor diameters that have really increased the efficiency and lowered the cost. Lowered the cost why, because we have to put fewer wind turbines at any one site. And that's really driven the economics to where we sell wind today, right around $10 to $15 a megawatt hour and I would say $15 really on the high end.
And these are in our bread and butter states in the Midwest where we have strong wind resource. If you look at 2021, because I know a lot of you have that question, well, what's the price going to be in 'twenty one? What's going to be in 'twenty? We expect the price in 2021 to be about the same as it is in 2020. Why is that?
Because the OEMs are coming out with a taller tower and a wider rotor diameter that's basically going to offset the PTC going from 100% to 80%. So feeling really good about 'twenty one. You can see the 'twenty two economics really aren't that much different from what we've seen in 2020. The LCOEs or Levelized Cost of Energy for Solar, about a 5th the same 15% productivity gain. Where is it coming from?
Worldwide competition for panels, a real focus on decreasing balance of system costs. As those panels become more efficient, you have to install fewer of them, really help them to drive down the capital cost in that business. I'm sure we all saw the recent announcement on bifacials, right? If the manufacturing lines for most of our Southeast suppliers were already moving to bifacials because it's just not that much more expensive to produce. And now with the ITC relief, bifacials are really going to help to continue to push pricing down as well.
But about $25 to $35 we expect that to be a little bit lower in '22 just as we see the technology to continue to progress. And then I'll show you a post ITC view in a few minutes. So what's driving wind, right? And where do we think wind prices are going to be when tax credits expire? That's a question that I used to get all the time on the road with all of you.
And you can see here taking a 2020 price down to the post 2023 LCOE, which means no production tax credit. If we can just get a 10% productivity gain, right, which ought to be pretty darn doable versus the 15% that we've seen in this market, we're going to be selling wind at about $20 to $25 right? So you can see the levelized cost of the PTC at about $20 will make up for half of that in a few ways. One is taller towers, wider rotor diameters, the blades are going to get longer. They're probably going to be delivered to the site in 2 pieces and assembled on-site based on our conversations with the OEMs.
There's going to be fewer turbines required, which is going to reduce the balance of system costs, the continued O and M reductions that I showed you earlier, right, trying to take another 20% out of wind O and M on top of the 25% we've already taken out. And then financing efficiencies, without tax credits, you move from more expensive tax equity to less expensive project finance. We think this 10% productivity is very, very doable. Similar story for solar, if you can go from that 15% productivity that we've seen down to 10%, you're able to compensate for a lot of the lost value as a PTCs to a point where solar should be exactly the same price when the ITC steps down from 30% down to 10%. Where is it coming from?
Increased competition on panel manufacturing, improved efficiencies as more folks get into that business, more innovative thinking on racking systems. Why do they have to be designed at the site? Why can't you design them off-site to ship men and drop them into the ground? Why can't you use robotics in the field? We could be a lot smarter in this industry about how we're handling the installation and the racking of solar, huge opportunity for us going forward.
The O and M reductions, if we can get to unmanned solar, which we should certainly be able to do, feel very good about our ability to get there. You're taking another 30% out of the O and M and then the tax the financing efficiency again and moving from tax equity finance to project finance, which will really help drive the economics there. So storage costs. Jim said earlier, storage is the Holy Grail of renewables. The thing we've never been able to do in this sector is firm up renewables.
The reactions we used to get from the critics was great, wind's cheap, 3x below the variable cost of nuclear and coal, solar is 30% to 40% below that same variable cost, but you can't store it. It's not always available during the days hours a day that I need it, that 5 to 9 at night period, my peak hours, solve that problem for me. We've been able to solve it. We've been able to solve it with battery storage. It's come earlier than we thought.
You can see it in the numbers with 40% of our solar origination enabled by batteries last year. The left hand side of this chart, the relative cost the cost relative to capacity. What's happening in this industry, it's an industry driven by automotive demand and EV pricing. So if you look at that blue line at the end of 2019, think about this, right? Right around 35% of that was driven by EV, they had 35% of the battery market, power at 5%, consumer electronics at 60%.
By 2,030, that's going to completely shift. EVs are going to be 80%, consumer electronics are going to be 10%, and power is going to make up about 10%. So we expect significant productivity gains to continue to come from increased manufacturing, scale manufacturing. On the battery side, you can see the adders being right around $4 to $9 Guess what, at $4 to $9 that's going to displace a lot of the gas peakers gas fired peakers in this country, right? We've got a lot of old gas fired peakers, low capacity factors, high heat rates, expensive to run, batteries are going to start taking them out.
So what are the drivers for the storage cost reductions?
We expect to move from
an 18% to 16% productivity gains. Again, storage is new. It's still in the early innings. I think it's very reasonable to believe that the reductions will be similar to what we've seen. And it's going to come again from significant automotive investment.
I think we're really underestimating how quickly electric vehicles are going to come into market, not only in China and India and Europe, but also in the U. S. And the balance of system savings. As energy density improves, you need fewer batteries, which means fewer enclosures, we're getting smarter about the enclosure design. We're looking at DC to DC connectors and inverters connecting up with the batteries.
We're getting smarter on O and M, particularly on degradation of batteries. When you look at energy density, you look at capacity at cycle times, you look at temperature and the ability to cool batteries, a lot of opportunities to take cost out there. And while I said the industry had moved to economics, don't forget there are tailwinds from RPS standards. There are 11 states now that have RPS requirements over 11%. We don't need them because economics drives it.
But this is going to be a big tailwind to renewables in the next decade. And it's not only with states trying to take climate goals into their own hands, but it's also fading over to C and I, as I had mentioned earlier. And then all of that leads to that 10% productivity that I mentioned in wind and solar and the 16% and storage to really cheap renewables even when the tax credits go away. So wind will be the cheapest form of generation even when there are no tax credits. Solar will be second.
It will compete and be much cheaper than the variable cost to run a coal or nuclear plant and we'll be able to compete head to head and probably at the lower end of gas fired generation. Offshore wind, I'm not going to spend a lot of time on it, really expensive, we think bad energy policy. It's a very tiny opportunity at about 8 gigawatts. We do that in a couple of years. Why should we distract the organization on something that has a 5 year development cycle and the green bar speaks for itself.
So let's talk about the size of the market, right? Jim mentioned the NREL study. Well, the NREL study is a low cost renewable study. And so if you believe the numbers I just gave you, right, if we expect to see a 10% productivity gain in wind and solar and 16% in storage, which we think is very doable, This is what NREL, who actually has higher assumptions around cost, thinks is going to happen. They think that the market is going to shift from 8% renewables in 2018 to 39% in 2,030.
Think about that. That's a huge shift. And where is it going to come from? What do you have to believe to think that's going to happen? 1, you got to believe the economic numbers I gave you.
2, you got to believe that 47% in the middle, that yellow bar, that's 28% coal. That's 19% nuclear. You got to believe that most of that 28% coal probably goes away by 2018. And then some of that nuclear that's not backed by state subsidies follows along as well. And then there's going to be some cannibalization of gas fired and it's really going to come, I think, more than anything from gas fired peakers for the reasons that I gave you before, particularly as you combine integrated solutions with storage.
So what does that imply? If we're going to get to close to 40% renewables by 2,030, that means the renewable market is going to grow at roughly 15% a year through the next decade. That is a massive opportunity for this company, a massive opportunity for this company as we head into the next decade. And that's why we feel so good about our growth prospects going forward. So let's talk about how we take all that into account into our development expectations.
Divide this into 2 parts. First, I want to talk about 2019 2020. You can see we're right about 7.5 gigawatts. Well, that's higher than the midpoint we had for 2019 2020 at 7.35. And then you look at the signed contracts right around 3 gigs for 2021 to 2022.
What's not in that number is about 8 50 megawatts of 'twenty three solar and storage, which puts us up around the 4 gig post-twenty 20 number. But with where we are today with that 7.5, the 3 and then the 23, we're at 11.2 gigawatts. That is the highest backlog we've ever had in our company's history. And then we set the 2021 to 2022 expectations. Well, how do we do that?
We looked at it and we said, look, most of the wind repowering opportunities are going to go away. Why are they going to go away? They're going to go away because we did such a darn good job in basically capitalizing on every single opportunity we had in our portfolio through 2020, okay. But even with the wind repowering going away, our midpoint is going up from 7.35 to 7.4 gigawatts because that's how we feel about the demand that's going to be driven by all the things I just went through on wind and on solar. And don't lose out on the fact that we have a terrific head start on hitting those objectives.
And so when you take a look at our ability to hit that $10.75 which Jim said he'd be disappointed not to hit and you look at Eric's capital plan, you look at Marlene's capital plan and you look at our head start with all the opportunities that we have, you got to feel pretty good. Disruption, right? It's not only about leveraging our playbook. It's not only about capitalizing on the best renewables environment in our history, but it's about continuing to disrupt the rest of the sector, doing things that nobody else can do. And we talked a lot about a lot last time about it being really an energy generation play around economics.
Well, it's also changing to more ESG. There's going to be more of an RPS focus as well that's going to continue drive that disruption as states now really want that coal to come offline and it's technology. Don't underestimate the impact of technology and the skill sets of companies to be able to leverage that technology to drive better development solutions, better operational solutions and better customer solutions. Right strategy at the right time, very well positioned in our Renewables business. Let me talk a little bit about the rest of the portfolio.
Again, no surprise here, right? 80% of the adjusted EBITDA is coming from renewables. We are a renewables company at our heart, roughly 2% on merchant. Again, Seabrook is essentially the only merchant asset that we have in the fleet with our capital recycling activity and about 18% coming from the peripheral businesses, which is really growing in line with the rest of the company, which I'll talk a little bit more about. But don't forget how important those peripheral businesses are from a market knowledge, information and customer development standpoint, which I'll touch upon in a minute.
But again, primarily a renewables business, 30, 34 gigawatts by the end of 'twenty two, which is where we expect to be the cash really being driven by the renewable investments, a 15% CAGR there. But the long term contracted business doesn't stop there. It also goes to nuclear. Our nuclear portfolio is really a long term contracted nuclear portfolio. 70% even including Seabrook is long term contracted.
Point Beach is fully contracted. Steve Brook is 1 third contracted, right, because the deal we just signed was Connecticut. We had always been doing some co op deals off that asset. And then finally, Duane Arnold, which is being retired for all the reasons I just gave you, it can't compete in a low renewable environment. Even though we have the best nuclear team in the business.
Top decile and O and M at every site, tops in safety, tops in reliability, and we still couldn't make it work at Duane Arnold because of renewable economics. Natural Gas Pipelines. This is a toe in the water business we started a few years back. You can see by 2022, we expect to be right around $6,500,000,000 to $7,000,000,000 of CapEx in this business. Sable Trail, Florida Southeast Connection, the Net Midstream acquisitions that we're able to do at NEP and then MVP, which I'm going to talk about in a minute.
But also, we have some terrific opportunities in our portfolio right now, multiple opportunities that we expect to be able to execute on going forward, leveraging all the skills that make us successful in renewables, which naturally translate over to pipelines and you can see the growth in that business from one that didn't exist a few years ago. Mountain Valley Pipeline, Jim touched briefly on this. Again, it's resumed construction, got 90% complete. We expect by the end of 2019, continue to make progress on some of the permitting issues. The one you're probably most focused on is the Appalachian Trail.
We have alternatives that we are pursuing with our partners. I'm not going to go into details on any of those, but our expectation is to be able to achieve a COD in 2020 and for the CapEx to go up a bit to right around $5,000,000,000 But regardless of the outcome, we feel good about where we are on MVP, really not much of an impact to NextEra Energy's overall performance either way. Transmission. So I went from 1 long term contract or rate regulated business to another. Transmission, a great long term contract or rate regulated business, toe in the water didn't exist, dollars 3,000,000,000 of CapEx on the high end by 2022.
When you combine that with the potentially $7,000,000 on pipes, that's $10,000,000,000 of long term contract to rate regulated businesses, right, on top of renewables, on top of nuclear. So a terrific story, very happy with what Eric Leeson and his team has been able to accomplish in this business. And you can see all the opportunities that we have. We have had an incredible hit rate in competitive transmission. Out of the $6,000,000,000 of opportunities that have been presented through RFPs in this business, we've gotten 30% of them.
That's pretty amazing when you think about the fact that we are always going into somebody else's backyard and trying to steal an opportunity away from them. And so really terrific execution. I think it's a great example of the skill, scale, scope and talent and people that we have in that business and a great complement to what we do on the renewable side, which is a good transition to the peripheral business. The peripheral business is growing in line with the rest of the company, as I said earlier. It's our customer supply and trading business, It's a customer flow business.
It's directed towards full requirements, middle marketing, things that are our customer flow transactions. We get a ton of leverage out of this for the rest of our business, right. Those customer relationships many times end up being converted into long term PPA opportunities on the renewable side or pipeline customers on pipes that are being built by our gas infrastructure business. And don't underestimate the amount of information and market knowledge that impacts our decision making on development of wind and solar, what sites to pick and transmission congestion, basis dislocations, gas, the power correlation, all those things, amazing talent, amazing culture, great skill set that we bring to bear on the rest of the business, requires very little capital and we get terrific returns out of it, but we'll always keep it small and contained and growing in line with the rest of
the business.
Gas Infrastructure, a business we got in a few years ago because we're North America's largest consumer of natural gas, was smart to understand gas price movements and how it impacted our strategic decisions across NextEra. But think about what this has done for us strategically. We made much better decisions about long term hedging around our merchant assets. It drove our decision to sell our merchant assets based on what we were seeing. And it created a ton of new opportunities for us in natural gas pipelines.
So the financial outlook, no surprise on the CapEx. The green bar is renewables. Very simply, that's the story at Energy Resources. We're a renewables company. That's where the CapEx is going.
If the CapEx is going into renewables, you would expect the growth in EBITDA and earnings to follow. That's what you see here. Out of the 12% CAGR from 2018 to 22%, we expect that to come primarily from renewables. And then same story on the earnings side, 12% growth coming there, renewables, that's where we're investing our capital. Energy Resources is a renewables company and that bodes well not only for NextEra Energy Resources and NextEra Energy, but think about what that does for the future prospects of NEP.
You take that 29 gigawatts if you include our current backlog with all the opportunities that we have going forward, NEP has terrific visibility into how it can support its growth going forward. And that's why it was an easy decision to extend the growth out an additional year. With that, I will turn things over to Mark Hickson.
Thanks, John. Well, Jim spoke about the fact that in his 18 years at the company, this is the best period of time at NextEra Energy. I feel the same way about NextEra Energy Partners. I think back to the first half of twenty fourteen when Dan Loitano and I were busily working on the IPO. Dan Loitano runs NEP for us.
And if you think about what was going on in the industry at that time, the fact that in 2014, we were looking at largely the expiration of tax credits around the 2016 timeframe versus where we sit today where we have the longest line of sight probably pretty close in the history of renewables in the U. S. And in 2014, we had cost declines, technology improvements. But those cost declines and technology improvements, as John just ran through, are accelerating. And back in 2014, we really weren't talking about energy storage opportunities.
And where we sit today as John pointed out, in 2018 for Energy Resources, about 40% of the additions to the solar backlog came with energy storage. So as a result, where we sit today is NEP is in a great position from an industry standpoint, looking at somewhere in the neighborhood of 15% growth in the renewable energy industry, additional opportunities in natural gas, looking forward to opportunities eventually in energy storage. We have built up a portfolio of assets at NEP that is starting to give us benefits of organic growth opportunities, which are also really attractive. So we are very excited. This is the best time in the history of NEP.
That is why in part we extended the guidance, distribution growth guidance 12% to 15% through 2024. And so hopefully you're going to get a sense for all of the things that we're excited about as I go through my presentation. We're going to talk about growing NEP, financing that growth and finally end with the long term growth outlook. So I'm not going to touch on each item on this page because Jim went through them in detail, but NEP has successfully delivered on its key objectives from the 2017 Investor Conference. And the fact that NEP has done so positions the company very well for its continued success in 2019 and going forward.
It's been 5 years since the IPO. I was going to give the June 27 plug, but Jim has already stole my thunder on that. But over that 5 year period, we've accomplished quite a lot at NEP. We've significantly expanded the renewable energy portfolio from approximately 1 gigawatt at the time of the IPO to where we sit today over 5 gigawatts of renewable energy capacity. In addition, we've added approximately 4 Bcf of natural gas pipeline capacity.
And as you can see from the map on the right hand side, we have significantly diversified the portfolio geographically as a result of acquisitions of assets from Energy Resources and 3rd parties. In addition to geographic diversification, we have significantly diversified the portfolio by asset type, significantly reduced the project concentration, expanded the customer diversity to almost 50 counterparties today, And as I mentioned, geographic diversity as well. So as a result, where we sit today is NEP's value proposition is built on 4 core strengths. The first, high quality portfolio. I touched on this on the prior pages.
Over the last 5 years, we've built up a very diversified portfolio of assets that is now a very high quality portfolio. The second, financial strength and flexibility. NEP has an attractive distribution coverage ratio, strong credit ratings and the ability to opportunistically access the capital markets in a variety of alternatives on very attractive terms. 3rd, tax advantage structure. This is a very important point for the NEP unitholders.
And as a result, I'm going to go into this point in detail on the next slide. And lastly, opportunities for growth. NEP has 3 primary avenues for growth. The first, organic growth opportunities. I'm going to touch on 2 really attractive organic growth opportunities here in a second.
1 at our Texas natural gas pipeline and the other repowering opportunities at our wind facility. But the important point to make here on the organic growth opportunities, they're just getting started. We announced our first organic growth opportunity in the fall of 2018. These are as you're going to see very attractive opportunities being done at a very on in very attractive investment terms. And as NEP's portfolio continues to expand and diversify, these organic growth opportunities are going to continue.
Next, the potential acquisition of assets from Energy Resources and finally the potential acquisition of assets from 3rd parties. I want to talk a little bit more about that structural tax advantage as a core strength.
As you
know, NEP is a C Corp for tax purposes, which means that it is a taxpaying entity. However, due to the tax attributes of assets acquired by NEP, including the ability to achieve a step up in the tax basis of assets as well as the related tax depreciation, NEP is able to offset its taxable income such that NEP is not expected to pay meaningful U. S. Tax for at least the next 15 years. In addition, as long as NEP has no current earnings and profits, distributions to unitholders is treated as a return of capital.
And as a result, LP investors are not expected to pay taxes on distributions for at least the next 8 years. And finally, as I mentioned before, NEP is a C Corp for tax purposes, which means investors will receive a 10.99 versus a K-one. We believe that this allows NEP to tap into a much broader investor base. And you can see what is a very attractive total return potential on the right hand side of this page. The combination of distribution growth, distribution yield and approximately 1 percentage point increase as a result of the earnings and profits tax yield results in a very attractive total return potential of 16% to 20%.
I'm going to show you later on in the presentation the fact that this distribution growth is really best in class when you compare it to other companies in the S and P 500. In addition to the 4 core strengths I just outlined, NEP has a number of operating advantages by virtue of NEP's access to the Energy Resources platform. And John just spent a lot of time walking through with you all of the advantages and reasons why Energy Resources is the leading developer and operator in our industry. And that translates into operating advantages for NEP. The development expertise, the operating expertise, John spent a lot of time on the AI and data analytics, all of which are going to serve to benefit NEP as well.
Going to result in strong wind and solar operations and getting better, expected to improve approximately 20% 30% in wind and solar respectively by the year 2022. And the development expertise is really going to come in handy as we move forward as NEP's portfolio continues to expand and diversify resulting in an increased level of organic growth opportunities. So NEP's ability to leverage the Energy Resources platform over time through operation improvements, development expertise is expected to result in an increase in cash available for distribution and drive long term unitholder value. So now I'm going to spend some time talking about growing NEP. Since the IPO 5 years ago, NEP has had a consistent growth strategy of acquiring clean energy assets with strong cash flows, long term contracts with credit worthy counterparties.
We have acquired and or developed wind, solar and natural gas pipeline assets, and we'll continue to do so going forward. In addition, we may acquire or develop energy storage assets as well as other clean energy assets. The combination of the characteristics of assets on this page in the blue and the types of assets
on the
outside circle on this page, along with the three avenues of growth that I've talked about before, namely organic growth opportunities at NEP, the potential acquisition of assets from Energy Resources as well as third parties, all support NEP's ability to continue to execute on what has been a very successful growth strategy. Now, a potential acquisition of assets from Energy Resources provides clear visibility into continued growth at NEP. Since the IPO of NEP, Energy Resources has significantly expanded its portfolio from approximately 10 gigawatts at the time of the IPO to where we sit today. We're just a combination of renewable energy capacity and operation, along with the existing backlog, totals approximately 21 gigawatts. That coupled with the expected future development through 2022 totals 29 gigawatts.
So as a result, the Energy Resources portfolio alone provides one potential path to allow NEP to grow its distributions by 12% to 15% per year through 2024. NEP is also well positioned to benefit from significant wind and solar growth that's expected in the U. S. You heard this in John's presentation. This is the best time in the history of the renewable energy industry.
And you can see that highlighted on this page. In addition to the 5 gigawatts of generation renewable energy capacity at NEP and the 21 to 29 gigawatts of capacity that I spoke about at Energy Resources, the combination of renewable energy capacity in operation plus expected future development through 2,030, totals approximately 500 gigawatts. And from a generation perspective, U. S. Renewable penetration is expected to increase from 8% to approximately 40%, implying about a 15% compounded annual growth rate.
A meaningful share of the growth opportunities in renewable energy. Now I should point out a few pages ago, we talked about the types of assets that are suitable for net including long term contracted natural gas pipelines and energy storage, which are not on this page, but NEP is also very well positioned to capture a meaningful share of those opportunities as well. So you might ask why do we feel so confident that NEP is going to capture a spare share of opportunities that I spoke about on the prior page? Well, there's a number of reasons for that. The first is NEP's trading yield.
NEP has the lowest trading yield when compared to its MLP and Yieldco peers, which allows NEP to raise equity capital at a lower cost. 2nd, NEP has the ability to raise capital, other forms of capital at a lower cost and in some cases like the convertible equity portfolio financing that I'm going to run through in a second in ways that our competitors can't. Next, the operating cost advantage that I talked about. The ability to leverage the Energy Resources platform, making NEP strong in wind and solar operations is a really competitive advantage to bring to bear when looking at third party opportunities. And finally, NEP's better than 15 year corporate tax advantage I'm sorry, tax yield provides another advantage.
So very excited about NEP's ability to capture a meaningful share of the opportunities in the clean energy space. So on the next two pages, I'm going to talk about the 2 organic growth opportunities at NEP. The first is a natural gas pipeline expansion project. We announced this project in the fall of last year. More specifically, it's the installation of natural gas fire compression at one of our stations, comes with a long term contract expected to be in service at the towards the end of next year.
You can see here it's about $115,000,000 capital investment and a very attractive implied EBITDA multiple of about 7 times. Upon completion, it is expected to result in about a $15,000,000 to $20,000,000 uplift in cash available for distribution from the Natural Gas Pipeline segment of NEP. Very excited about this organic growth opportunity because it provides a window of things to come as it pertains to future organic development in the natural gas pipeline assets of NEP. 2nd organic growth opportunity I want to talk about was announced today. We reached agreement to repower about 2 75 Megawatts at 2 of our sites.
Back to completion next year. This repowering has a number of benefits to NEP. Obviously, the repowering results in increased production. Upon completion of the repowering, it enables NEP to raise PAGO tax equity financing to pay off existing debt, which serves to further increase the cash available for distribution. And obviously, repowering is going to lead to longer asset life and lower maintenance costs.
And you can see that the meaningful uptick in cash available for distribution as a result of this repowering, dollars 15,000,000 to $20,000,000 prior and $40,000,000 to $50,000,000 after. These types of organic growth opportunities that are being done at very attractive investment yields, again, are sign of things to come at NEP as this portfolio continues to expand and diversify. So we talked about growing NEP. I want to talk about financing that growth. NEP is very well positioned to finance the growth its growth over the coming years as a combination of a strong balance sheet, credit ratings and all of the financing flexibility shown on this page.
We've actually utilized all of the tools on this page, some of which didn't exist at the time of the IPO. We actually created some of these financing tools. As Jim pointed out, we have a very creative team that's working on NEP and we've created some of these financing opportunities from scratch. The ability to access low cost capital in all of these different forms is a significant competitive advantage for NEP. One example of NEP's financing flexibility is the fact that NEP recently upsized its revolving credit facility from $750,000,000 to $1,250,000,000 and in the process improved the pricing, expanded the number of banks and extended the maturity for almost 2 years.
This new credit facility provides NEP with additional liquidity to support all of the growth opportunities that I just spoke about. As I mentioned before, we've used a variety of financing alternatives at NEP to finance the growth over the last 5 years. About $4,000,000,000 of the capital raise, more than $4,000,000,000 of the capital raise has come from equity and equity linked financings, which serves to increase the float and liquidity of NEP over time. That has represented about 70%, more than 70% of the capital raise. And again, a lot of these financings were not contemplated at the time of the IPO and I expect that we will continue to find creative ways to finance NEP's growth going forward.
One
creative financing in particular that I want to spend some time on, on the next few pages is the convertible equity portfolio financings that we've done over the course of the last year. This page provides a comparison of equity linked financing alternatives along with attributes that we believe are important to consider in the context of these financings. The combination of having a low annual cash cost associated with the security, the ability to retain the upside in the NEP units associated with the conversion of these securities, as well as the ability to extend the period of time upon which these securities convert to equity and having NEPs option to convert the securities at any price all result in the ability to mitigate and reduce the amount of dilution that is associated with the conversion of these securities, very important attributes to consider in the context of equity linked financings. In addition, the ability to have be afforded strong equity treatment by the rating agencies is also another very important attribute. And as you can see from the right hand side of this page, the convertible equity portfolio financing is the only equity linked financing product that meets all of these very important attributes and is the reason why we believe that the equity the convertible equity portfolio financing is the superior equity linked financing alternative.
So I'm going to go into a little bit more detail on the 2 financings that we've done. The first in the second half of twenty eighteen transaction with BlackRock, dollars 750,000,000 about a 2.5% per year cash coupon over a 3 year period. All in cost about 7.75 per year over a 3 year period And the combination of the buyout right timing and the buyout right payment effectively means that the conversion of this security at NEP's option occurs in year 4. Fast forward to 2019, transaction with KKR $900,000,000 proceeds, less than 1% per year coupon over a 6 year period and a little bit more than 8% all in cost of capital per year over a 6 year period. And the conversion of the KKR security at NEP's option occurs between years 3.5 year 6.
So we're very happy with the BlackRock financing and we continue to be very happy with that financing. But the KKR financing offers a lower cash cost and the ability to convert the security over a longer period of time, which all serve to enhance NEP's financing flexibility. So now I want to compare the 2 convertible equity portfolio financings that I talked about on the prior page with a convertible preferred transaction that we announced in 2017. You may recall in the second half of 2017, we announced a $550,000,000 convertible preferred security financing. And that financing came with a 4.5% coupon and it entitled the holders of that security to convert their security at a price that was 15% higher than the NEP price at the time of issuance.
You compare that to the 2 convertible equity portfolio financings that I just ran through, you see that those financings have lower cash costs and the ability to retain 100% of the unit, the NEP unit price upside. So the low upfront cash costs and the ability to retain all of the upside are the reasons why the convertible equity portfolio financing is superior to the convertible preferred as well as the other equity linked products that I ran through earlier. So you may say, you know what, all of that's great. I get why the convertible equity portfolio financing is the superior equity linked financing alternative. But all of that equity linked stuff is really complicated.
And what you really should do is just issue straight common equity in the context of financing acquisitions and organic development. Hopefully, this page will show you why we've moved away from those types of financings over the course of the last year. On the left hand side of this page, we take a generic asset that's $105,000,000 And with the low cash cost of the convertible equity portfolio financing, the net cash flow to the NEP unitholder is $100,000,000 Compare that to the same asset that's financed with common equity, where the combination of the 4% to 5% cash cost of the dividend, along with the additional IDRs that are required as a result of the equity issuance, result in the fact that the same asset financed with common equity requires twice the amount of assets to achieve the same level of cash flow. So the convertible equity financing significantly reduces the assets that we need to achieve NEP's growth targets. So putting it all together, the low upfront cash costs means more cash available to the LP unitholders.
Low upfront cash costs means lower future asset needs in order while achieving the same level of growth and lower future asset needs means lower future financing needs, all of which means enhanced value to the NEP LP unitholder. And as one of the reasons why NEP does not expect to need to sell common equity until 2021 at the earliest. So finally, I'm going to talk about the long term growth outlook at NEP.
But before I do that,
I want to spend a little bit of time talking about PG and E. Made it almost 30 minutes without talking about PG and E. As you know, earlier this year, PG and E filed for bankruptcy. And that bankruptcy filing resulted in trapped cash at the NEP projects, the total being approximately $100,000,000 In response, NEP as part of the KKR financing this year acquired additional assets from Energy Resources and refinanced some of its existing assets, all of which resulted in an increase in cash available for distribution of approximately $125,000,000 significantly in excess of the $100,000,000 of trapped cash at NEP. So what does that mean?
That means that NEP, we are very well positioned to meet our 2019 run rate guidance and also very well positioned to meet our 12% to 15% per year distribution growth guidance through 2024. Now despite that, we are busy evaluating and considering several mitigating strategies to release that trapped cash. You can see some of them here on the page. I'm not going to go through each one of them, But we're actively considering all of them. We're closely monitoring the situation at PG and E.
I in fact said on the Unsecured Creditors Committee for PG and E and we are confident in our ability to reach a successful resolution on the PG and E situation as it pertains to the NEP projects. One example of the mitigating strategies we actually announced on Monday and this is the launch of a tender offer to purchase 100% of the outstanding holding company notes at our Genesis project. It's about $240,000,000 We launched the tender because we believe that there is value in the Genesis project. PG and E continues to
honor its obligations under the
PPAs and we're confident that the PPAs will remain in place post exit from bankruptcy. You can see on the right hand side some of the pricing terms of the tender. Again, we launched it on Monday. The tender offer expires on July 16. We have an early tender period on June 28, which allows holders who tender earlier to get a little bit better pricing.
And the most important thing, if there's anyone here in the room that holds HoldCo bonds, I would encourage you all to participate. So the combination of the organic growth opportunities that I spoke about earlier, the expansion opportunity at our Texas natural gas pipelines, the wind repowering opportunities along with the cash that is currently trapped at NEP are resulting about a 22% uplift in the run rate cash available for distribution. So you can see that we have significant embedded growth within the NEP portfolio. And the future release of the PG and E cash flow along with these organic growth opportunities translates into about 1.5 years of CAFD and distribution growth. So very focused on this embedded growth significant embedded growth opportunity.
So now financial expectations. Run rate guidance, consistent with what we've talked about before for 2019. And then we extended the distribution growth guidance of 12% to 15%, an additional year through 2024. This distribution growth guidance is best in class in our opinion. And hopefully, you can see why on this page.
There are only 8 companies in the S and P 500 that are expected to deliver distribution growth of at least 12 percent over the next several years. And you see that peer set of companies on the left hand side of this page. Total return of approximately 15% as compared to NEP that is around 19%. So NEP has a superior total return potential. And despite that, NEP's distribution yield trades at twice the level of this peer group.
So it feels like there's an opportunity there from a value standpoint. Speaking of value proposition, on the left hand side of this page, you can see that NEP compared to its MLP and Yoco peers has by far the longest growth runway, all the way out to 2024, the next highest is 2022. And the reason why we extended the growth guidance was a number of reasons that you see here on the page that I ran through. The expected 15% per year industry growth through 2,030 the ability of NEP to achieve its growth objectives in 3 primary ways organic growth, acquisition from Energy Resources and 3rd parties and the flexibility that we have to finance that growth in a variety of ways. We have a favorable tax position, low cost operations and a history of successful execution on the growth strategy.
We do not believe that all of these attributes are factored into NEP's price. We've successfully executed on the objectives that we set out in the 2017 Investor Conference and we are well positioned to achieve NEP's growth guidance going forward. With that, I'll pass it over to Rebecca.
Thank you, Mark. And now we are officially in the home stretch. So I have just a couple of concluding comments to talk with you and share with you this afternoon and then we will open up for questions. We may run just a little bit over the 12:30 mark in order to get in a couple of extra questions from you. But we've given you a lot of information over the last couple of hours.
We've talked a lot about our strategies, about the disruption in our industry and how we plan to take advantage of that as well as about our culture. And so I just want to make a couple of synthesizing comments about the things that we've told you about and also talk a little bit about how we finance it, particularly at NextEra Energy. Let me start with NextEra Energy Partners. Mark already walked you through a significant amount of the important takeaways that you should have from NextEra Energy Partners. But at the bottom line, it is that it is a strong clean energy company in its own right.
And it has terrific growth prospects throughout the expectations window and beyond for what we talked about with you today. The opportunity is a 3 fold: organic growth, through continued acquisitions from NextEnergy Resources as well as the opportunity to acquire projects from 3rd parties. And we're talking against a backdrop, as both John and Mark talked about, of substantial growth in the renewable sector, an estimated 15% per year through 2,030, perhaps higher than that if you believe that adoption will happen faster or for longer if you assume that it doesn't and renewables continue to be as economic as we believe that they will be. That is a terrific growth backdrop. And as Mark just highlighted as well, it's not simply limited to the renewable sector.
Any clean energy asset with long term contracted cash flows is a possible asset to build into the NEP portfolio. And we're excited about what the opportunities are for us. And so we are confident in our ability to extend these expectations now up to 2024 of being able to deliver 12% to 15% distributions per unit growth throughout that time frame. And as Jim and Mark and John all highlighted, we are as confident as we have ever been, as excited as we have ever been about the outlook for NEP. So let me talk a minute about PG and E.
I didn't make it quite as long as Mark said. So PG and E, we continue to believe it will be resolved favorably, at least with respect to our contracts. But we have the flexibility and the visibility to deliver the expectations that we've talked about today regardless of what happens with PG and E. And so if PG and E and when PG and E is resolved favorably, that release of cash flow along with the organic growth opportunities that Mark just laid out and that we've announced today represents a year and a half of growth on their own, which is a pretty powerful equation and gives us incremental confidence about our ability to deliver the expectations that we've laid out for you today, which, of course, assume certain normal operating operating conditions and normal caveats. Notwithstanding our confidence and ability to deliver, if I simply highlight to you about NEP's trading yield relative to the 10 year treasuries over the last 2 years, we are trading at the highest spread, the least favorable spread we have in the last 2 years.
And we believe a lot of that is related to PG and E, and we think it's overdone. If NEP simply traded at the average of where we have traded for the last 2 years on the spread to treasuries, that represents a 20% higher NEF unit trading price than where we trade today. And where else can you find a company that has debt to EBITDA of less than 5 times, has a dividend yield greater than 3%, has delivered distributions per unit growth of over 100% over the last 4 years and has forward expectations for the next 3 years of being able to grow distributions per unit another 12% per year or more in our case And that NextEra Energy Partners has the visibility out to 2024 into the middle part of the next decade. There is only one company that meets those metrics and it is NextEra Energy Partners. Between our distribution yield as well as our distribution growth expectations out through 2024, that is a 16% to 19% total return potential on an annualized basis.
It's a terrific value proposition. We are just getting started and couldn't be more excited about the outlook that we have for NextEra Energy Partners. So let me turn now quickly to NextEra Energy. Our strategy has remained largely the same for a number of years, and we are unapologetic about that. That strategy has delivered significant value to our customers and significant value to our customers.
Let me start first with Florida Power and Light Company. We are supremely focused on delivering superior value for our customers, low bills, high reliability, terrific customer service, all while delivering clean energy electricity to our customers. We're doing that by taking cost out of our business and deploying modernized generation in order to drive efficiencies throughout the portfolio. And we're deploying technology. We are disrupting ourselves in order to find efficiencies across that portfolio.
And as Eric highlighted, we are just getting started at Florida Power and Light Company. Just between the significant capital deployment opportunities and the programs for solar, to bring solar to Florida in a meaningful way as well as continued modernization of our grid infrastructure for storm hardening and reliability, we have multi decade opportunities to continue delivering the same way that we've been delivering in the past and improving the customer value proposition for our customers at Florida Power and Light Company. 1 of Marlene's slides highlights the value of the FPL strategy best. Eric, a lot of your slides did, too, but Marlene's slide was particularly good in my mind. And it was that over the last decade, Florida Power and Light has grown its regulatory capital employed or a measure of our investment in the business 10% per year and lowered bills 9%.
And over that same time frame, Gulf Power invested to grow its regulatory capital employed 5% per year, so roughly half the growth. And its bills went up 30%. That's the opportunity we have at Gulf Power, change the strategy and deploy the Florida Power and Light playbook. So already Marlene and the Gulf Power team, our employees have identified $100,000,000 in run rate savings across Gulf Power, and they've identified roughly $3,000,000,000 of capital investment, smart capital to invest in our portfolio that will deliver meaningful improvements in our customer value proposition. Marlene highlighted these for you: a 50% reduction in O and M, a 50% reduction in fuel, a 100% reduction in the capacity clause.
And these will translate to meaningful improvements
for our
customers in terms of reliability, a 20% improvement and a 40% reduction in CO2 emissions. And this is in the next 3 years. What our customers may notice first is that we expect our bills to go down 9%. And as Marlene highlighted, we're just getting started. And if you look out to the mid-2020s, we are targeting a bill in the roughly $120 range for an average 1,000 kilowatt hour bill, so roughly 20% improvement in real terms for our Gulf Power customers.
And for our shareholders, that means translates into a roughly 16% annual CAGR growth in net income contributions. So let me turn now to NextEra Energy Resources. John highlighted that we are totally focused on continuing to develop North America's leading renewables developer. We have significant competitive advantages in this market, and we are operating against an amazing backdrop, a 15% growth that is driven by economics, and it's with a tremendous tailwind of growing appreciation in the broader market about the value of clean energy generation for our environment, for our communities. So we are excited to continue delivering on the growth opportunities across the renewable sector and believe that we have the competitive advantages from our scale, from our experience in engineering construction being able to deliver the projects, from our development organization in order to be able to find the right projects as well as our operations team to be able to operate them efficiently over the long term.
And the technology revolution, as John highlighted, is significant. It's probably intuitive to you about what we can do from an operation and maintenance side in order to deploy technology to continue to improve how we operate our fleet. But it may be less intuitive for you to understand how important technology is to us being able to win new business. As John highlighted, to be able to identify and advance where customers should want their generation solutions, to identify help them to identify what solutions are best for them and be able to get in the queue first and develop the project and be ready with the right project at the right time so we can win their business and deliver value to them. That is going to create some of the competitive advantages along with the competitive advantages you've long known and we've long taken advantage of.
So with this terrific growth outlook across each of these businesses, we are very pleased to be extending our guidance expectations today out to 2022. And we now expect to grow our adjusted EPS 6% to 8% off of the 2021 realized adjusted EPS. This is a high confidence outlook for reasons I'll continue to talk about in the remarks. And as Jim highlighted, we would be disappointed if we were not at near at or near the top end of this range. Throughout all of this, throughout all of our growth, I'll highlight something and talk about it more now in a couple in the next couple of slides.
We remain completely committed to having strong balance sheet as we continue to grow our business. Over the last 8 years, we have significantly meaningfully changed the mix of our business to higher contributions from regulated assets, having grown our regulated contributions from below 60% to now 70 percent today and roughly 70% also in 2022. And when you add in long term contracted cash flows to that, our adjusted EBITDA has gone from roughly under 80% from long term contracted and regulated to now over 90%. And this didn't happen from one transformative transaction. This happened from a disciplined execution of our strategy.
We've grown our regulated businesses. We've acquired regulated businesses. We've divested of our merchant assets. We've entered into longer term contracts for our existing assets, adding incremental value to the investments we've already made in the past. And of course, as we've expanded our Energy Resources business, we have continued to increase our focus on ensuring that we have long term contracts in place before the time of capital commitment.
If you just look at the pie chart on the left and the pie chart on the right, you see a significant shift from below 50%, so nearly 75% of our projects were merchant before 2007 to now 100% of our generation projects have long term contracts before we build them ever since 2012. And I'll highlight to you one of the reasons why we made this shift is one of the things that John talked about in his presentation, and it was related to our dip the toe in the water approach. We started making small investments in gas infrastructure in near the beginning part of the shale gas revolution. And because of those small investments and the realizing the realization of what was to come, we started entering into more contracts, making sure that those contracts were longer than what we had even previously been doing, and we did start the divestiture process of most of our merchant assets because of this. So we learned a tremendous amount from this dip the toe in the water strategy that better informs what we do and helps us keep capture strategic advantages like this one.
Our credit ratings are some of the strongest in the industry. You just at the bell curve, it's we're on the left side of it, which is the place that we want to be. We believe it's a competitive advantage to have a strong balance sheet and to maintain strong credit ratings. I can highlight a number of reasons why that is the case, but probably one that is very easy for you to understand, especially for how we focus on it today. But in part because of the because we could, we were able to acquire Gulf Power, enter into the transaction last year and close at the beginning of this And being able to take advantage of that because of the strength of our balance sheet is critically important to being successful and getting an edge in this industry.
Our change in business mix from more long term contracted and more regulated contributions certainly has been noticed by the rating agencies, and they've improved their views on our business mix as a result of that. We remain disciplined. We remain committed to our strong balance sheet, and that is unwavering. Let me talk now a little bit about how we finance our business. We have a diverse set of banking relationships.
We have over $21,000,000,000 of credit from 100 different institutions across 18 different countries and 4 continents. I often talk and make a joke about playing the game of where in the world is Paul Cutler. Paul is here today, and many of you know, along with the rest of the Treasury team, including Joe Balzano, we spend a lot of time talking with the rating agencies and with our credit providers and the other broader relationships in the banking industry. We want to make sure they understand what our strategies are, they know where we want to grow our business and why and that they're in a position to help us when we need them to make sure that we can fund the business in a most cost effective way. We ask them to bring their best ideas and their best industry at $12,800,000,000 And this year, we extended $6,400,000 of that out to 2024, providing us long term visibility for our liquidity needs.
Our financing strategy is really, in many ways, opportunistic, ensuring that we get low cost of capital wherever it may be. While it may be opportunistic, it also has produced terrific results. Our average debt tenure is longer than our peers in the industry and is at lower cost. Our strategy at FPL is typically to enter into long dated maturities and shorten up as market demands and opportunities present themselves. And at Capital Holdings, which is how we finance much of Energy Resources business, we typically finance on balance sheet and then we enter into project finance or tax equity structures at the time of commencing operations.
I'd be remiss if I didn't highlight some of our internal sources of cash flow, which obviously fund a significant amount of our business as well. We have terrific cash generation across our existing business. And if you added up all the small numbers here, fortunately have it in front of you, along with the capital recycling proceeds, you'll see that it's over $30,000,000,000 which funds a significant amount of the growth opportunities that we plan to invest in, in the coming years. But as Jim highlighted in one of the first slides that he presented, talking about our culture and what's really important and differentiates us versus competitors in the industry. 2 of the key factors is financial discipline and making sure that we meet the market test in everything that we do.
We don't need to make investments because we do have terrific organic operations cash flow generation from our existing operations. Here is a hypothetical scenario for you. If we simply took the cash flow generations from our existing assets and instead of deploying growth capital to grow our business, we simply deploy the capital to maintain those operations. Our business generates substantial cash flow. And if we simply return that cash flow to shareholders instead of redeploying it in the business to grow, we returned it to our shareholders.
That is one path alone to meet the 12% the 6% to 8% adjusted EPS growth out through 2022. We like to call this our put our feet up, take a vacation, go golfing type scenario. That's one of the reasons why we have such high confidence in our ability to execute on the expectations we've laid out for you today. But I'd also be remiss to tell you that's probably not the most likely outcome, not only because we have terrific growth prospects as we've outlined for you today, but it is also not in our DNA. We are absolutely the type of folks that go after the opportunities that we believe create incremental shareholder value, which we believe the opportunities that we laid out for you today absolutely do.
And that financial discipline is key to everything that we do. We ensure that each investment creates incremental opportunities because there is no reason to dilute the power of what we already have. We should only make those investments if they add to it. So we talked a lot about our adjusted EPS growth, talked to you about our cash flow generation profile organically as well as with our growth opportunities. Our dividend per share expectations are also very strong in terms of an outlook.
We continue to expect to be able to grow distributions per share dividends per share 12% to 14% through 2020 off of our 2017 base. And as this is a Board decision, we plan to talk with the board about it early in 2020. But I want to highlight for you today that our dividend payout ratio continues to be roughly around 60%, our expectations for 2019. And with that and our strong adjusted EPS growth combined with cash flow generation that's growing at an even more rapid rate than our adjusted EPS guidance, it positions us very well to continue to have a very attractive growth profile for our dividends per share relative to our peers. So let me bring it all together.
Where else can you find a company that is investment grade, has a market capitalization greater than $20,000,000,000 it's sizable enough for investors such as yourself to establish a meaningful position, has an adjusted EPS CAGR over the last 5 years of 8% or more. They've delivered that growth Has a total annual return of greater than 10% for the next 3 years based on current dividend yields and consensus expectations as well as a dividends per share CAGR of greater than 10%. And all of this with a market beta of less than 0.5%. There is only one company and that's NextEra Energy. We are very excited about what lies ahead.
We are just getting started, and that is both at NextEra Energy and NextEra Energy Partners. We appreciated the opportunity today to lay out some of our plans and our excitement for what lies ahead of us. And now I'd like to welcome Jim Robo, our Chairman and CEO, to rejoin me on stage along with Eric Salaji, Marlene Santos, John Ketchum and Mark Hixson, and we'd be happy to take your questions. So there's several folks that are going to be in the hallway in the aisles with microphones. So please, if you wouldn't mind, give us your name and then feel free to ask your question.
I think Julian has a question.
Take that. Predictable.
Wow, yes, wow. That was a lot. And thank you. All right. Maybe first question for you, Jim.
Let's talk a little bit about the renewable growth and just conceptually the competitive pressures out there, right? Because you guys showed pretty clearly the sources of where you're growing your renewables businesses. And I know that a lot of your competitors talk about the competitive pressures and returns, etcetera. I'm sure you've heard these out before. But you also clearly articulated you're focusing on the municipal and cooperative and the C and I opportunities.
How do you continue to scale this business even as the volumes grow, but the competitive pressures seem to expand? Maybe that's the first one.
So Julien, I think one of the interesting things about the Renewable business, and I've been in it now for nearly 20 years, is our competitors have come and gone over that period of time, right? I mean, the Europeans were some of our biggest competitors in the early 2000s and they all left and they've come back. Small developers have been started, have left, come back. And we've been really one of the few constants in the industry over the last 20 years. And I know John did a terrific job of laying out the moat we've drawn around our competitive advantages.
There's no one who can do what we do. I think the some of the things that were on the video, those are several dollars a megawatt hour of advantage, right? And this is a business where quarters and $0.50 and dollars matter a lot in returns. And so I'm as confident as ever in our competitive position. Our returns are where they've been historically, right?
Our wind returns are levered wind returns are over 20%, our levered solar returns are in the teens. And we feel terrific about the portfolio and feel like we have a huge competitive advantage role as everybody else and are going to continue to execute on our playbook and not worry too much about the folks out there that you saw a small developer, you've seen several folks over the last year, what I will call, blow up, right, where they did a bunch of bad projects and they couldn't get them financed, they sold out, they've exited. You've seen big oil companies say they're going to come back in. Holy cow, they used to be in. They were in it 20 years ago.
They lost 1,000,000,000 of dollars. Oh my God, some of the silliest capital destruction I've ever seen, honestly, in the renewable space. And yet they're talking about getting back in. So you know what, we're just going to continue to execute on our strategy and continue to build on those competitive advantages and execute and do the right thing for our customers.
A quick follow-up, if I can. You've laid out through 2022. And again, in this day and age, so this is excellent. But how about how do you think about the cash flow versus earnings trajectory of the company? And I suppose, let me frame it this way.
You've got clear tax credit starts to roll off? I mean, this is the underlying question.
Sure. And especially with some
of the amortizations also rolling.
Right. Sure. And so obviously, we didn't lay out expectations post-twenty 22, right? So we extended it to 2022, which there's not a lot of folks,
I think,
who have expectations of that far. We spend not only do we do a rolling 5 year forecast every month, we spend a lot of time last year with John, this year with Rebecca on a 10 year as crazy as that sounds, on a 10 year forecast, right? And we have terrific visibility into the business. We understand the growth visibility that we
have in both businesses.
And I think one of the more exciting things that you saw laid out in both Eric and John's presentations today is we're really we're just getting started, right, in both businesses, right? I mean, in Eric's business, people have historically always said to me, well, aren't you done at FPL? Like, gosh, we're just getting started, right, with solar, with the T and D side of the business. We still have a ton of generation monetization. You just look at what we just did with Manatee, right?
And in John's business, I am so excited about the future growth of renewables and the penetration of renewables in this country, right? I mean, we are playing in a market that's growing at 15% a year. There's no reason why we can't maintain and actually grow share profitably through that period of time. So I feel really good about our long, long term growth prospects too. We just didn't weigh them out in numbers today because gosh, you got to leave us something to talk about next year and the year after.
Hi, good afternoon. Thank you for taking my question. Maybe if I may just to follow-up on the your regulatory strategy around storm hardening in Florida. So there's a filing out there right now where you proposed the extension of your pilot and this one capital in there and then there's some numbers you put up on the deck right now. How does it all going to work together especially as you move towards a position where you will have potentially a close recovery?
And like is that going to roll into that? Or how should we think about this?
Eric, do you want to?
Sure. Well, again, we have a storm arting program that we've laid out and that continues. This incremental program, assuming the governor signs in a law and it gets sent over to him, will provide us opportunities to look at other undergrounding. And so we laid on the slide that will be on top of the storm hardening that we're going through now. We have a variety of CapEx projects that we've been planning on for quite some time that goes to hardening like the 500 kV transmission line as an example.
But this lateral undergrounding will take it to another level and give us an opportunity to prove out what we've been doing now for the last 4 years and that's under a pilot program that was approved by the commission. We've had a number of undergrounding projects underway to look at how do we do this kind of at the residential level at a much more cost efficient, cost effective way. And we've been able to prove that out. And so now we can roll it out on a much larger scale. But it will be, as Rebecca said, this is a multi decade type of approach.
We don't want to see any rate shock in customers' bills. We want to make sure this is done in a manner that is stepwise and allows us to leverage the purchasing power as well as frankly the ability to execute. We have 67,000 miles of distribution line in our system. About 40% of it is underground right now. There's a lot of work to be done, right?
But it's not something you do in a couple of years. It's something you do over a very long period of time. And what we'll be doing if this legislation is signed into law is the first thing we do is we have to bring a plan before the commission that is again much like what we do on our site our 10 year site plan, a multiyear plan that would be approved and then that would go into a clause recovery mechanism that we would then recover on an annual basis going back before the commission review it and to renew the plan going forward.
So that would be incremental to what you have now on the slides?
There'll be an incremental component to it as well as in the storm hardening we're currently doing will go presumably into that clause as well. It'll all be storm hardening that will go into the clause whereas today that storm hardening is part of our base rate proceedings when we're in front of the commission. It's approved. We execute it until we go back in. So that part will go out of base rates and in a clause recovery.
And so it'll be a new mechanism to recover it. It will be done on an annual basis.
Thank you. And one quick other one, if I may. The transmission line is going to connect the Gulf territory with the FP and L territory. First, which utility is it now contemplated to be a part of? And second, as you think about that project, is this a good opportunity to think about combining those 2 also at the same time?
Can you repeat the question? I didn't understand part of it.
Did you understand also?
Yes. So I think are you Yes.
So I think are you asking which utility
is which utility is about putting Gulf together with
The transmission line is connected to which utility is technically going to belong to right now? And is this a
good opportunity to call right now?
Yes. So right now it belongs to Gulf Power.
Got it. Mike Weinstein from Credit Suisse. Just a follow-up on that last question. There's a lot of opportunity in undergrounding and also the 30 by 30 plan FPL, and that is additive to the current plan. But how much more annual CapEx can you legitimately add and still keep customer rates in line, still keep the balance sheet from overheating.
I'm just wondering what is the how much can we actually expect the capital plan to increase as things get approved? Yes. I think what you saw us lay out today through 2022 is a pretty good estimate of on our part of what we think the capital is going to be between solar and the hardening that we have in place. Remember, assuming the governor signed the build hasn't even been transmitted over to the government yet, so he hasn't even had a chance to sign it. But assuming he signs it, there's a whole process to go through with the PSC.
They have to set up some rules. We have to put a program in front of them. My expectation is the rules aren't going to be really finalized until sometime next year. And then you're going to have a hearing around what to do. So and remember, we are in the pilot stage right now of figuring out the best way to do undergrounding on our distribution system.
So And we have a lot of solar in the plant through 'twenty two. So you should think about all of those things as Julian's asking about what's going to drive the growth after 2022. Those are two great examples of things that are going to be terrific drivers of growth post 2022, terrific for FPL customers, improving resiliency, lowering fuel costs in this part of solar, but also I think will be good for shareholders as well as we continue that growth post-twenty 22.
Yes. And the only thing I would add is, so you've got a slide there, it gives you visibility through 'twenty two, what we expect to be able to deploy. But remember, part of the deploying of the money for capital, smart capital is ways that we're going to continue to be able to take costs out of the business. And so from a bill pressure standpoint, that's how you take pressure off of the bill. If you just spend the money and don't reduce your expenses, the bills go up.
But what we're really focused on is taking and continue to take the cost on.
If you
remember on that O and M chart, we've reduced between 2016 and 2018 by 10% of our O and M non fuel O and M per megawatt hour even further. And we're going to continue to do that by deploying those technologies that I showed like in the video. Those technologies change the way that you actually can run the business. I mean, you really should you need to put the you really need to understand that there is a real opportunity to run the business differently. When we have smart technology like the drones, as example, using the data that we're getting and the recognition software, we don't have to roll a truck.
When we do roll a truck, we roll a truck with a different complement of people on it, less people, less frequently. All that takes cost out of the business and how you actually run it. And so all of these things that we're doing and sometimes it's a little bit slices here and there, but when you got a business that's 74,000 miles of transmission distribution line that covers 27,000 square miles, When you're not rolling trucks on a regular basis, that starts saving real dollars, 1,000,000 here, 1,000,000 there before you notice real money. That's what keeps the bills pressure low.
Jim, Erica, the regulatory environment in Florida, it has been and continues to look pretty balanced, but there's this ballot initiative that is being proposed to deregulate. And for the life of me, I don't understand how there could be an economic benefit for customers. And yet, it has proceeded most of the from what I've read is the legislature, the commission sort of understand this is bad policy and I see that there's some legal proceedings that are progressing to try to figure out how to prevent this from getting on the ballot. Can you talk about what's going on there? How you think that's going to play out?
And if it for some reason did get on the ballot, how you would educate your customers as to the benefits of not voting for that? Sure. So think about it this way. Obviously, we think it's terrible energy policy. We just need to look at our bills compared to other states that have deregulated in terms of how much lower FPL's bills are than those states to know that as you said, it would be very bad energy policy.
And I think you saw there is the Supreme Court has to rule on whether the ballot language is even constitutional, right. And so that's kind of the first step. And there were, I think, 18 groups who filed in opposition to there are 18 groups who filed in opposition to the ballot initiative with the Supreme Court. Obviously, you'd expect the IOUs to file in opposition, but hospitals, Sheriffs, little cities, big cities, the House, the Senate, the Public Service Commission, environmental groups. There was a host of pretty much the entire economy came out.
Attorney General. Attorney General, thank you. The Attorney General. Pretty much the entire economy came out against it. We think the initiative is deeply flawed by the standard by which it needs to be adjudicated by the Supreme Court.
Those are all arguments through the end of August. And they'll make a decision at some point after that. So we feel very good about our case with the Supreme Court. Leave that to aside for a moment. Separately, the ballot sponsors actually have to go and get 770,000 signatures verified by February 1 next year.
They're at, as of this week, about 310,000. So they've been at it for 8 months and they've gathered less. They verified less than half of the signatures they need. There's not 8 months left for them to gather the rest. On top of that, appropriately, the governor just signed HB 5, which was a bill that puts into place some regulations around how these ballot signatures are actually gathered.
And so we'll see what that means for the signature gathering effort going forward. But if you believe the ballot gatherers, right, who all came out against that legislation, it's going to make it extremely difficult for them to continue to gather enough signatures to get there. So not only does it have to get through the Supreme Court hurdle, it has to get through the hurdle of getting enough signatures. And then finally, let's say both of those things happen, and I think the odds of both of those happening are extremely low. We have a great story to tell.
We won't be afraid to tell it and you can be sure we will tell it and if it was ever on the ballot, we will win. So we spend a lot of time on it because we think it's really terrible energy policy for the state. It would reverse what has been an amazing right? I mean, you just look at the FPL story over the last 30 years, it's an amazing story. There's not a story like it in the rest of the country.
And so to think that some policy would be put in place that would unwind that really doesn't make any sense. And I think in the end, common sense would prevail.
So I
don't know, Eric, if you have anything you want to add to that.
Yes, a couple of things just to add. First off, it's important to recognize that anybody can start a ballot initiative just like anybody can file a lawsuit. Okay? So this is just the way unfortunately the world is working now in a lot of areas. The governor signed this legislation and not because of this, but because the last time we had no the last election cycle, there were 12 ballot initiatives that got put on the constitutional ballot of which all but one passed.
The one actually would have reduced tax burden for folks, but they didn't understand it. But they passed up like no vaping in the public along with no offshore drilling. That was one vote you had to cast, right? So it's gotten a little bit of nutty of trying to legislate through constitutional ballots. So anybody can do this.
It's going through the process, as Jim said. The Supreme Court has to review it based on some very specific legal tests, which not only we, but every one of those groups Jim laid out filed briefs on saying they failed the tests on multiple fronts, okay? The legal test, it's not a review of the benefits or costs associated with deregulation. Supreme Court doesn't look at the merits. It's looking at does it meet certain legal tests?
We think it fails there. But to Jim's point and by the way, the court is also very different than it was 2 years ago. Governor DeSantis has appointed 3 different Supreme Court justices. Now it is and his big litmus test was not having justices that adjudicate from the bench from the standpoint of legislative trying to pass legislation from the bench, right? Strict constructionist type of approach.
So we'll see what happens on that. But as Jim said, we're very, very prepared if we have to to be able to argue our case to the voters. Remember the voters are half of the voters are our customers. We have the lowest bills in the state and have among the lowest in the country for years on end. Our reliability continues to be among the best of the country.
Our customer satisfaction is in the mid-ninety percent mid-90s to 96% depending on whether it's business or residential. Any politician would love to have customer sat ratings like that. So we'll tell our story, I think, to a relatively receptive audience. And I think the real Achilles' heel of this particular amendment is the fact that it would actually ban any current investor owned utility from being able to have generation or even own distribution or transmission. And I think our customers based on our customer satisfaction like us being in the business.
I'll take that one to the voters if needed. But I don't think we're going to get there.
Yeah. Why don't we Michael is in the middle there. Michael, please. We'll get there. I promise you, we're going to get to everyone's questions.
Hey, guys. Thank you for taking my questions. I had 2, one very easy one and one kind of thinking about the environment. First, the easy one, does your plan assume at the NE level either no equity or no convertible securities issued up there? Or does it assume there's some?
And that's kind of fine because you all make very opportunistic uses of the convertible market over the years. The other question is, when you're looking at the environment for M and A for regulated companies today versus what it was like 2 or 3 years ago, 3 or 4 years ago, given where equity valuations are, where financing is, where your balance sheet is, Is the environment more attractive, less attractive? And if so, why?
So on the first one, obviously, we always are going to use all the we've always had a toolkit of financing that we've made ourselves available of. And a lot of it's driven
a lot of it is going to
be driven by how successful we are against the ranges that we laid out here, right? And so if we meet or beat some of the capital ranges that we've laid out, we've added a ton of capital at FPL that obviously has used until we go through the rate case for 2022 rates that uses some balance sheet capacity. So it's going to be driven by how successful we are on the stuff that we do now. We won't do anything that isn't accretive, right? And so our goal is always not to issue equity and that's always our goal.
That's my goal. And if we have to, it will only be because that we have these great opportunities that I'll be excited about and we'll be chasing after. On the M and A front, is it a better or it's always been for 20 years, it's been a tough it's always been a tough environment for M and A. It's a lot of challenges. Mark can tell you when you look at it and you assume you pay a premium and then you assume there's give back to customers and that math rarely works even when you're doing the things that Marlene laid out to improve the underlying operations, right?
So I would tell you that it's about the same. We'll continue to be opportunistic and only go after things that we think makes sense.
Yes.
Hi. Steve Fleishman at Wolfe. So just first on tax credits for renewables, what's your either thoughts or even position on PTC or ITC extension that's starting to be talked about again and also potential for like a storage ITC or safe harbor extension and any of those things that we should be watching for? So on PTC, ITC, I think it is very low odds of any change there. Listen, we supported the phase down.
We think the economics post John laid out, we think the economics post credits are going to be very competitive. There obviously have been some efforts in the House to try to extend things. I think those are low odds in the near term. On the storage front, never say never there. There is a chance that something like that could happen, but I wouldn't like anything in Washington, I would not put it at much above 20% if I was an odds maker.
So, but fundamentally, the industry is moving past the need for credits. And Safe Harbor, any chance that gets extended beyond 4 years? Maybe. But again, I wouldn't hold my breath, Steve. And then one other just high level question on, if you look at a lot of the folks who are really supportive of renewables, environmentalists, some of a lot of them are also become anti gas.
And you are
obviously doing both and continue to grow your gas business. So just how are you thinking about natural gas in the context of everything else that you're doing? So the thing that mystifies me, like for example, the opposition to the East Coast pipelines, MVP and ACP, the piece of it that mystifies me, and this is coming from the largest owner of renewables in the world, right? The thing that mystifies me is that this is enabling these pipelines are enabling shutting coal plants down, right, enabling 30%, 40%, 50% reductions in those states of CO2 emissions. And so it is a complete head scratcher for me.
Natural gas is going to be an important part of the equation for a long time. This country has literally 100 and 100 and 100 of years in natural gas. Remember, I don't there's still a ton of I mean, think about this, there's still a ton of fuel oil that's burned in the Northeast that can be replaced by natural gas. That would be a huge CO2 improvement. You still need natural gas for heating in a lot of places.
So the opposition to it honestly mystifies me. I guess folks want to be cold in the winter and burn a lot of cold. So I think it is really misguided. And but it's real. It's real.
And hopefully, we're going to be able to start to have a more rational discussion about energy policy in this country, right? I mean, this is a energy policy has been very polarizing. The left is the left loves offshore wind, the right loves new nuclear, the environmentalists hate gas. What we need is to decarbonize and to bring low cost solutions to customers, right? And that includes renewables and storage and natural gas.
And that will be we'll decarbonize and it will be better than free. We'll be taking we'll be lowering customer bills.
Thanks. Paul Fremont with Mizuho. Can you give us an update on sort of the balance sheet capacity for acquisitions, I guess, which you've talked about in the past? Does the very high multiple paid for El Paso recently or offered for El Paso, does that make you sort of less confident that you would engage in an acquisition? And also, is there any update that you can provide on where things stand with Sandy Cooper?
Sure. So I will talk about one of those. I'm going to let Mark talk about C and C and C and I'll let Rebecca talk about balance sheet capacity. But in terms of the multiple that was paid for El Paso, listen, anytime there's an auction, right, it's very hard in this space to figure out a way to create value in M and A scenario, right? So like I said, we're going to be opportunistic and we're going to be disciplined.
And it makes me no more or less bullish than I've always been, which is I think we have found opportunities in complex situations, situations where we can move quickly, where we can in a $1,000,000,000 regulated utility acquisition, there's 1,000 infrastructure funds that would love to stroke a $1,000,000,000 check right now. There's not a lot of folks though who have the ability to do what we did, for example, in Gulf, right? So it's going to be very situation dependent. Mark, you want to talk about Santee and then Sure.
Over the course of the last month, there was legislation Administration, which is within the Governor's office in South Carolina to hire financial and legal advisors with a goal of running a process to select one party who submits the best proposal to purchase Santee Cooper, one party to submit who submits the best proposal for a The Department of Administration is currently has an RFP seeking to hire financial and legal advisors. There's language in the legislation, which effectively conflicts out a lot of financial advisors just because of the fact that it basically says that they can't have relationships with the participants. So it's probably going to take over the course of the month of July for them to get the financial and legal advisers in place and for those financial and legal advisers to come up to speed to the point where they can run a process. So we're talking about a process that will probably take place in earnest in the August to December timeframe. The Department of Administration basically has until the Q1 of next year, maybe toward the end of Q1 of next year to make a recommendation on a sale, a management contract and the Santee reform.
And from that point, it will be up to the
about about and Jim talked about at the outset of this discussion this morning, we remain unyieldingly, unflinchingly committed to having a strong balance sheet, which generally means there's capacity there. We aren't running it to the close to the very edge. And it's specifically in order to be able to take advantage of the types of opportunities that we talked about, what we've executed on, whether it was Gulf Power or investing incremental capital at Florida Power and Light Company that we talked about earlier this year or some of the opportunities that we might have in the marketplace. So we'll continue to operate the way that we've been operating.
Just a couple of quick questions. Just on the undergrounding, how many year opportunity is that? Because I guess you can only do a certain amount every year. It's covering probably like gas pipeline replacement. I'm just curious how many years out you have visibility.
We don't have it
specifically, but you're talking about 25, 30 years, right, to do this in a manner that would be kind of a stepwise approach. We'll be reviewing that with the commission. As we get into this, I fully expect that we're going to see incremental savings as you get into a programmatic way to do this. So cost will come down on it. Now I'm speaking generally, there are certain areas like really urban areas that will be more expensive than rural areas.
So we'll have to take a look at all of that, but it's a multi decade approach.
Okay. And then on the PTC, are you maybe better off without it being extended longer term just because you have such a competitive advantage over everyone else? Or is that a wrong way to look at it?
Yes. I mean one way to think about it, Andy, is that a lot of our smaller competitors raise capital through tax equity financing to be able to be competitive and win. And it's going to put more financing constraints on smaller competitors as they move forward. As we're able to push the cost advantage as
we get into 2021,
2022 and beyond, I think that's really what leverages our playbook. And so I think it's going to be more difficult for them to really make up that ground. And on the financing side, the ability to raise capital efficiently, that's another competitive advantage we have in the borrowing cost side. So I think it plays a bit to our advantage.
And then just two more questions. Just on the kind of 8% growth rate,
well, you're
6% to
8%, we'll call it 8%.
But what gets you just on an annual basis, not each year, but on an annual basis, how do you grow above 8 in 1 year? What would kind of do it for you? And I assume there's that opportunity at times.
So I think what we best do, Andy, is deliver very steady, right, predictable growth to our investors. And so, so in any given year, there's always things that are going to have you be above or beyond above or below that. But the goal is always to be pretty much pretty steady and as the team knows. So I would think about that as our ability to continue to deliver pretty steady and predictable 8% of your growth off our base, including the
Got you to say And then my last question is just on the dividend growth rate. Could you just clarify that and what we should be expecting? It's been 12% to 14% for the last several years.
Yes. It's a Board decision, Andy. We're going to talk to the Board about it and we're going to give you we've got to as I said, we're going to keep some news
held back. We're going to
have some we'll have some news on that in the Q1 next year.
All right. Go ahead.
Abe Azar with Deutsche Bank. So obviously, there are huge benefits for Gulf connecting into the FP and L system and potentially merging with FPL. What are the benefits to FPL customers from doing those kind of things?
Well, again, we haven't made any decision doing that. We're just now getting into looking at what are the advantages going to be. There's always advantage if you can add customers and have scale. And additional scale brings them the opportunity. You spread the cost over more customers.
So FPL customers would benefit from that as well. There are areas where Gulf has done a good job too. We always continue to learn from their experiences. So we're going to take a look at all the puts and takes on this and make sure that whatever we do is going to be, 1st off, in the best interest of making sure all customers, FPL and Gulf customers, there's a benefit that we can articulate in front of the commission, make sure they're comfortable with it. And it's not just short term, but also long term.
And here's an example of that. Once the line is built, it's very possible that solar in Gulf territory, Marlin territory is very valuable because it is time shifted from where most of the load is, right? And so Gulf
is in the central time zone.
Right, Gulf is in central time zone and you will be able to deliver solar at that last hour when the sun is setting, but it hasn't set yet where Gulf is. That's very valuable actually. And so this power is going to flow both ways on that one. So this could be a big benefits for FPL as well as we look at it.
And then on NEP, the wind repowering, how much investment does NEP expect to spend there? And what's the financing plan for that?
So I mean the investment is between the two is probably a couple of 100,000,000, Rebecca, in total. And we will finance it kind of in the normal course of how we finance NEP through the year. And there's going to be a big piece that's going to come from tax equity and there'll be another piece that will come from kind of the general way we finance NEP on a going forward basis. So we have certainly the room in the financial plan to do it.
Yes. We had on the page that we're going to raise Pega tax equity in the context of that financing. There are some existing projects financed that is on those two projects and we're going to use the proceeds to pay down that project and the tax equity proceeds.
I think we have time for one more question.
I guess, I'm glad we're not going to take your questions. The first in the back is headed to end up the longest.
It's Paul Patterson at Glenrock. How are you doing? So just on NEP, I've been looking at the SEC filings and what have you and it is quite complicated. And I was just wondering if you could maybe provide us an idea about what the CAFD outlook would be without any acquisitions, without the PG and E fluctuation, just sort of an organic sort of outlook as to what the ongoing cash flow would be over, I don't know, 24 or 5 years or something like that. Given the way the CAFD works, the way the financing works, it's not easy to project, at least for me, to project what the ongoing cash flow would be just organically without so what you guys did with Slide 200 on NextEra, that kind of an idea over sort of multi year situation with NEB.
I was just wondering if there if you guys could give us a little bit more flavor about what that would look like? And then just finally on Slide 151, the supply and trading business, what's driving that just in general? I mean, is that just an outgrowth of having more business, more portfolio to work around? Or is there something else that you're doing there?
So Paul, to answer your last question, yes, it's just a normal course. We've continued to grow that business in line with how John's business has grown over the last 15 years. In terms of NEP, I think how I answer that is, look at the run rate, we gave the run rate cash flow, both EBITDA and cash flow for the portfolio as of the end of last year. And we've given a view of what the run rate EBITDA and CAFD are.
In year on 'nineteen, we were without PG and E.
Yes. And so I think that and we've given a very clear walk too in the appendix of all the quarterly
Because the financing which are somewhat complicated and creative and interesting, the way they work, a substantial amount of the cash impact, which you guys went through is sort of a near term element of it. But longer term, it wasn't really completely clear about what the cash flow impact would be because of that. I could talk to you guys offline about it if it's just to get but if you could say that.
I would just say that as I talked about in my prepared remarks that the transaction that we did earlier this year put well positions us to achieve our 2019 run rate guidance. And then we also had the slide that spoke about to the extent we execute on the organic growth opportunity at the natural gas pipeline and the wind repowering along with freeing up the trash cash at any peak, you can see we talked about that being another year and a half. So you can logically get to somewhere in the middle of 2021 just based on that embedded growth. And then there's all the things we talk about in terms of operation improvements we're going to make and the like. So at least I know that doesn't get you all the way to 2024, but it gets you pretty far there just through those opportunities.
Terrific. Thank you guys very much. Again, we appreciate all of your time and attention, and thank you for joining us today.