XPLR Infrastructure Aktie

Ladies and gentlemen, thank you for standing by. Hello, and welcome to XPLR Infrastructure First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Kanghee Jeon, Director of Investor Relations. Please go ahead.

Thank you, Dustin. Good morning, everyone, and thank you for joining our first quarter 2026 financial results conference call for XPLR Infrastructure. With me this morning are Alan Liu, President and Chief Executive Officer of XPLR Infrastructure; and Jessica Geoffroy, Chief Financial Officer of XPLR Infrastructure.

Alan will walk through our business highlights, and Jessica will provide an overview of our financial results. After that, our executive team will be available to answer your questions. On this call, we'll be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties.

Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release, in the comments made during this conference call, in the Risk Factors section of the accompanying presentation or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, www.xplrinfrastructure.com.

We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for the definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. With that, I'll turn the call over to Alan.

Thank you, Kanghee. Good morning, everyone. We delivered a solid start to 2026. Performance across the business was consistent with our expectations as we continue to advance our strategy to simplify our capital structure and maximize the value of our portfolio.

The portfolio continues to deliver steady performance, and the team continues to execute in a disciplined manner with progress across our key focus areas. Our repowering program continues to progress well. To date, we have completed approximately 30% of the repowering projects planned for 2026. The remaining projects are on track and are expected to enhance output and longevity of XPLR's fleet and support overall portfolio performance over time, while positioning XPLR for the future in this growing power demand environment. We also completed the final expected draw from our project financing commitments secured in 2025, successfully funding certain of our repowering investments with long-term and low-cost asset level financing.

With the successful execution of planned refinancing and recapitalization activities in 2025, we have a relatively modest financing plan ahead of us with the next major corporate refinancing activity not expected until 2027. With respect to the previously announced interconnection sale and battery storage co-investment agreement with NextEra Energy Resources, XPLR completed its evaluation and exercised its options to co-invest in the storage projects. XPLR will participate with a 49% expected interest in each of the four projects, which are expected to add approximately 200 net megawatts of battery storage capacity to our portfolio by year-end 2027.

As a reminder, after asset level financing proceeds, the net equity required for XPLR is expected to be approximately $80 million, which XPLR plans to fund through the sale of certain interconnection assets and rights to NextEra Energy Resources and to the four to-be-formed joint ventures. We believe that the structure for the joint ventures represents a disciplined and capital-efficient way to add incremental growth, leveraging our existing platform while maintaining a focus on balance sheet strength.

Lastly, we continue to see improving power market fundamentals that we believe are supportive of the value and the optionality of our assets, and those favorable market dynamics are starting to translate into tangible opportunities. We recently recontracted roughly 90 megawatts at an existing wind site at a rate that is roughly $25 per megawatt hour higher than realized pricing on that project's generation over the past year. It's a small project, but the revenue uplift is meaningful on a percentage basis. And more importantly, we are optimistic that this is an early example of a broader opportunity set as legacy contracts expire.

Our team is pursuing additional opportunities to recontract and optimize existing contracts across multiple markets where there is strong demand growth. With that, let me turn it over to Jessica, who will review our first quarter 2026 results in more detail.

Thank you, Alan, and good morning, everyone. Let's begin with XPLR Infrastructure's detailed results. For the first quarter of 2026, XPLR portfolio generated approximately $435 million in adjusted EBITDA and $89 million in Free Cash Flow Before Growth. First quarter results from existing projects were affected by lower wind resource, which came in at approximately 99% of the long-term average compared to 103% in the prior year period. This impact was partially offset by contributions from repowered assets, which continue to enhance generation and cash flow across the portfolio.

Favorable weather and strong execution during the first quarter allowed us to pull ahead planned major component work from later in the year, which was the primary driver of higher year-over-year O&M costs. In addition, the results for both adjusted EBITDA and Free Cash Flow Before

Growth reflect the impact of asset dispositions completed in 2025. The year-over-year decline in Free Cash Flow Before Growth was consistent with the company's expectations as it was primarily driven by higher financing costs resulting from the balance sheet simplification and capital plan funding activities in 2025.

Specifically, XPLR Infrastructure's First Quarter 2026 Free Cash Flow Before Growth includes approximately $74 million of incremental corporate interest expense from the approximately $1.75 billion of unsecured notes issuances in March 2025. It also includes approximately $12 million higher year-over-year interest expense from project financings raised in 2025. As a reminder, Free Cash Flow Before Growth reflects actual cash interest payments within the measurement period. As a result, quarterly results can vary based on the timing of interest payments, along with the natural seasonality of wind and solar generation. Taken together, these factors typically result in a lighter contribution in the first quarter.

Specifically, XPLR's First Quarter 2026 Free Cash Flow Before

Growth is expected to represent roughly 12% to 15% of its expected full year results. Additional granularity on the timing of expected interest payments can be found in the appendix of today's presentation. For 2026, we continue to expect adjusted EBITDA of $1.75 billion to $1.95 billion and Free Cash Flow Before Growth of $600 million to $700 million. As always, our expectations assume our usual caveats, including normal weather and operating conditions. Let me close by reinforcing the key elements of the XPLR platform.

XPLR is a contracted infrastructure platform generating stable cash flows supported by long-term agreements and high credit quality counterparties.

Our strategy remains focused on two priorities: continuing to simplify the capital structure and executing on attractive investments into the existing asset base to create value for unitholders. We believe that consistent execution against these priorities supports both our financial flexibility and our strategic positioning. We believe that the combination of stable cash flow generation and a disciplined capital plan allows XPLR to allocate retained cash flows in a value-maximizing manner over time. That discipline underpins our strategy and positions XPLR to capture long-term value as U.S. power demand continues to grow. That concludes our prepared remarks, and we will now open the line for questions.

[Operator Instructions] We will take our first question from Nelson Ng from RBC Capital Markets.

Alan, you mentioned there was a small recontracting during the quarter with a $25 improvement in the power price. Are you able to provide the power price prior to the recontracting? I was just wondering what the percentage improvement was.

We didn't provide the prior contract price, so just commercial sensitivity of where the ultimate PPA landed here. But I would say, if you think about it, right, and we've given you some disclosure previously about on average, kind of the uplift. This is in line or even slightly better than kind of the uplift that we would have expected for this market. The opportunities, obviously, we've highlighted before, right? They're generally in SPP and ERCOT, and WACC. So it's a project in one of those markets and in line with where we expected, which is it's a multiple above where the previous price was.

Okay. And then just on the battery storage front, I think you previously agreed to sell interconnection rights to raise $45 million of the $80 million required for your equity contribution. Have you identified the rest of the projects that you're looking to sell? And then just a follow-up on that. Is there a time line in terms of when there could be another batch of projects that XPLR could co-invest in?

I'll address the first question, which is the funding for the existing storage JV. We're certainly working through a list of potential opportunities with NEER. As a reminder, construction for these projects aren't slated to begin until at the earliest end of this year, but most likely, it's throughout 2027 and then they are COD in late 2027. So we have some time. But with the list and the opportunities that we're looking at, we feel confident we will be able to fund those with additional asset sales.

I think your question about will there be additional storage opportunities? I think the right way to think about it is across our 10-gigawatt portfolio, we certainly have multiple gigawatts of surplus interconnection. Those represent potential opportunities. We certainly feel out of that set, there are opportunities for additional co-located storage or other development opportunities. But whether or not those projects are ultimately attractive to XPLR site location specific.

It comes down to a lot of factors, including the demand and the pricing that can be achieved for those specific projects. And then ultimately, whether or not we participate or monetize those, the value of that interconnect is going to fall under our existing capital allocation framework, right? It's subject to what else can we do with our money, are there better returning allocations or and then also it's subject to the balance sheet and our cost of financing. So a long way of saying, yes, there's opportunity. We have not committed to any incremental investments at this time, but we'll keep you posted.

And then just one last question. You mentioned the balance sheet. So looking at the balance sheet, there's about $943 million of cash and equivalents. I presume a lot of that cash is at the project level. But like roughly how much of that cash is readily available at the corporate level?

Nelson, it's Jessica. So you can see in our SEC filings, we break out the amount of cash held in reserves at the projects. Our 10-Q for this quarter will come out after market close today.

But looking back at the last quarter, there's roughly $300 million held in reserves at the projects.

[Operator Instructions]

And we will take our next question from the line of Mark Jarvi from CIBC Capital Markets.

Just going back to the recontracting opportunity. Can you comment at all in terms of like how big the funnel would be? Like how many megawatts across your portfolio are something you're actively exploring? And we're sort of -- I assume it's more weighted to wind just given the vintage of the contracts and assets. Is that right?

Mark, this is Alan. That is correct. I think that's the right way to think about it. The majority of the opportunity will exist in wind projects and obviously, in the specific markets. We've highlighted this before in prior presentations. In the near term, and we've given you a schedule a rough kind of chart that shows there are increasing opportunities as we get closer to 2030. But there's definitely going to be tangible opportunities that we're working on as we speak. But the majority, I would say, roughly 70% of the kind of opportunity exists beyond 2030. And we're hoping to continue to execute in the next few years leading up to that.

And obviously, the pricing you received was attractive. I think NextEra said around $20 a megawatt hour what they got. So that's a good uplift. Just curious in terms of what the tenor of the contracts are out there and sort of that trade-off between price and duration.

I believe it was a 15-year contract, but we'll confirm.

But that's generally what the counterparties are looking for, that sort of that term at this point? Or is there a real range out there of shorter duration? Yes.

Yes. So just to confirm, it was a 15-year busbar contract here. And as you know, there's always a trade-off between tenor, right, whether it's hub settled or busbar. And ultimately, for us, this made the most sense, right, between duration of the contract, like the fact that in this particular market, we prefer the busbar over a potentially higher hub settled contract here.

Got it. And just on the battery projects co-investment, are the costs all locked down for those projects, like everything locked down in terms of equipment, EPC, all that kind of stuff, just so that you know that the $80 million investment is more or less firm at this point?

So this is a true equity co-investment alongside NEER Energy Resources. So as with any equity investment, we -- if there are cost overruns, we, of course, would be as a partner funding that. But we feel good about this project. It's well advanced. Supply chain, we have the same benefits, right, the benefit of having NEER as a co-investment partner here is that we have access to that supply chain and the equipment. We feel very good about having secured.

There are no further questions on the queue. That concludes our question-and-answer session for today. That also concludes our call for today. Thank you all for joining, and you may now disconnect.

Good day, and welcome to the XPLR Infrastructure Fourth Quarter and Full-Year 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Kanghee Jeon, Director of Investor Relations. Please go ahead.

Thank you, Danielle. Good morning, everyone, and thank you for joining our fourth quarter and full-year 2025 financial results conference call for XPLR Infrastructure.

With me this morning are Alan Liu, President and Chief Executive Officer of XPLR Infrastructure; and Jessica Geoffroy, Chief Financial Officer of XPLR Infrastructure. Alan will start with opening remarks, and then Jessica will provide an overview of our results and near-term priorities. Our executive team will then be available to answer your questions.

On this call, we'll be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release and the comments made during this conference call, in the Risk Factors section of the accompanying presentation, or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, www. xplrinfrastructure.com. We do not undertake any duty to update any forward-looking statements.

Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure.

With that, I'll turn the call over to Alan.

Thank you, Kanghee. Good morning, everyone.

2025 was a pivotal year for XPLR as we transitioned to a capital allocation business model. Our strategy in the near-term is focused on simplifying XPLR's capital structure and executing on selected investments enabled by our existing portfolio of energy infrastructure assets. We believe executing on this strategy will enhance XPLR's financial and strategic flexibility, position XPLR to benefit over time from demand growth in the U.S. power markets and ultimately, maximize the long-term value of our assets for unitholders.

To that end, a year ago, we presented a plan that called for executing on selected asset sales, addressing near-term debt maturities, buying out certain convertible equity portfolio financings, or CEPFs, and investing in selected wind repowering projects with attractive returns. Today, I'm pleased to report the team has delivered on every major action item we laid out a year ago.

First, on operational and financial performance. XPLR delivered full-year adjusted EBITDA of $1.88 billion and free cash flow before growth of $746 million. We believe these results reflect the strong underlying cash flow generating capabilities of our assets. We also achieved capital structure simplification objectives by addressing 2 CEPFs, which resulted in a reduction of more than $1.1 billion in third-party non-controlling equity interests. We completed the sale of our investments in the Meade pipeline and certain distributed generation assets, generating approximately $160 million of net proceeds that were used to support a $250 million reduction in corporate debt issuance previously contemplated for 2026.

We achieved planned financing objectives by raising approximately $1.6 billion of project financing commitments to recapitalize certain assets and fund our wind repowering program. We also addressed near-term corporate debt maturities, including pre-funding 2026 maturities with an early notes issuance in November. As a result, we have now completed the financing plan we laid out for 2025 and 2026, and extended the duration of our debt maturity profile. We also made strong progress on our capital investment program. As of today, we have completed nearly 1.3 gigawatts of our previously announced repowering plans, with projects achieving commercial operations on time and on budget. All in all, we are pleased with the team's execution thus far.

Looking forward, we believe long-term fundamentals continue to improve for existing energy infrastructure assets, particularly those that provide efficient, clean energy. XPLR's large and diversified portfolio of power generation assets produce substantial cash flows under long-term contracts with a strong set of creditworthy customers. So, our thesis remains the same. In the near term, retaining the cash flows generated by our portfolio should allow XPLR to continue to advance its capital simplification strategy, while also maintaining balance sheet strength and prudently managing liabilities.

In using retained cash flows to fund selected CEPF buyouts, we plan to continue to reduce third-party investor ownership in assets that are highly valuable and that we believe could provide XPLR with future upside. Our cash flows are also supporting selected investments enabled by our existing assets, such as repowering projects that we expect will provide strong risk-adjusted return on capital and enhance the long-term value of our fleet. We believe XPLR's relationship with NextEra Energy provides meaningful competitive advantages when it comes to executing on these investments.

Through long-term service agreements with NextEra Energy, XPLR benefits from scale in operations, engineering and construction expertise and supply chain access. These are advantages that are difficult for stand-alone platforms to replicate. We believe our strategy, commitment to capital discipline and strong execution will continue to enhance XPLR's financial and strategic flexibility and position it well to realize its upside potential over time.

One example of how XPLR is unlocking embedded value in its portfolio is through the interconnection sale and battery storage co-investment agreement with NextEra Energy Resources that we are announcing today. Through this agreement, XPLR Infrastructure is monetizing surplus interconnection capacity and rights at certain of its existing project sites through sales to NextEra Energy Resources. XPLR will also have the ability to co-invest alongside NextEra Energy Resources in 4 of the new battery storage projects co-located with existing XPLR sites.

The storage projects, which total 400 megawatts of capacity, have long-dated capacity agreements with investment-grade off-takers and are expected to reach commercial operations by the end of 2027. For XPLR, we believe this agreement creates a clear and capital-efficient way to add up to approximately 200 net megawatts of storage capacity to our portfolio while generating strong project-level equity returns. By using proceeds from the planned sales of interconnection assets and rights to fund its net equity investment in these projects, XPLR can generate new cash flow streams with 0 expected net corporate capital commitment.

Let me talk through in detail how the agreement is structured. Each of the 4 projects co-located on existing XPLR sites is expected to be owned in a joint venture between XPLR and NextEra Energy Resources. XPLR has the right to invest up to a 49% ownership stake in each project. If XPLR elects to exercise its co-investment rights across all 4 projects, its expected net equity contribution is approximately $80 million after receipt of asset-level financing proceeds.

To partially fund this investment, XPLR has agreed to sell certain interconnection assets and rights to the 4 co-located battery storage projects for approximately $31 million. XPLR will also sell additional interconnection assets and rights to a subsidiary of NextEra Energy Resources to enable a 150-megawatt storage project co-located with XPLR's Palo Duro Wind site for approximately $14 million. To fund the balance of its expected net equity contributions, XPLR intends to sell to NextEra Energy Resources interconnection assets and rights to enable up to 500 megawatts of potential future battery storage projects on different XPLR sites. XPLR will not have co-investment rights on these additional projects or the storage project co-located at the Palo Duro site.

As part of the agreement, NextEra Energy Resources will provide development, engineering, construction services, as well as equipment to the 4 joint venture projects and will fund the balance of total project costs not invested by XPLR. This co-investment structure, which is subject to customary conditions, is expected to provide XPLR with the flexibility to bring high-quality projects to fruition on an accelerated time line with significantly reduced execution risk and is an efficient pathway to monetize non-cash flow generating surplus interconnection capacity embedded within existing assets.

Repowering is another way that XPLR enhances the value of its portfolio. Given our execution progress in 2025, today, we are updating our previously announced 1.6 gigawatt repowering plan to approximately 2.1 gigawatts through 2030. The 500 megawatts of repowerings added to our current program are expected to deliver strong equity returns and take advantage of a window of opportunity to execute projects that enhance the value and longevity of our fleet.

We anticipate that the new wind repowerings will be funded through a combination of retained cash flows and additional project-level financings. While the total repowering opportunity set in XPLR's portfolio is larger than the announced additions, we plan to continue to cadence our investments in a manner that maintains our near-term balance sheet priorities while achieving attractive returns.

Over time, another way that XPLR's portfolio could realize upside is through recontracting at higher prices as our existing power purchase agreements expire. Today, approximately 80% of the megawatt hours that we sell are contracted at prices that are below where the market prices are currently and where power prices are forecasted to be in the future when contracts mature. Using third-party forecasted power prices to illustrate potential for further upside, the existing portfolio is estimated to be able to deliver more than $200 million of incremental revenue by 2040, recognizing that actual outcomes will depend on market conditions at the time of recontracting and our execution.

In summary, XPLR is a scaled, contracted clean energy infrastructure platform with durable cash flows and a long operating runway. XPLR's assets are located across a diverse set of U.S. power markets that are experiencing increasing demand and tight supply. As those dynamics continue to play out, we believe our portfolio has significant embedded value and investment opportunities that can be harvested over time. We are taking actions to ensure XPLR is positioned to capture those opportunities as they may arise.

With that, let me turn it over to Jessica, who will review the 2025 results in more detail and discuss near-term priorities for the business.

Thank you, Alan, and good morning, everyone.

Let's begin with XPLR Infrastructure's detailed results. For the full-year 2025, XPLR's portfolio generated approximately $1.88 billion in adjusted EBITDA and $746 million in free cash flow before growth. The full-year adjusted EBITDA results were primarily impacted by the absence of an approximately $40 million one-time settlement payment that benefited the fourth quarter of 2024 and asset dispositions. As a reminder, XPLR sold its investments in the Meade pipeline and certain distributed generation assets in the third quarter of 2025. These impacts were partially offset by improved pricing, including contract escalators and more favorable market conditions at certain projects as well as lower net operating costs.

Our 2025 free cash flow before growth results further reflect the impact of higher interest expense on corporate debt, which was issued during the year as part of our refinancing and capital structure simplification efforts and the timing of tax credit monetization. Taken together, the 2025 results reflect a portfolio that continues to generate strong cash flows from long-duration, contracted assets. This performance provides a solid foundation as we continue to execute our capital allocation priorities and manage the business with a focus on cash flow and balance sheet discipline.

For 2026, we continue to expect adjusted EBITDA of $1.75 billion to $1.95 billion and free cash flow before growth of $600 million to $700 million. As always, our expectations assume our usual caveats, including normal weather and operating conditions.

Turning to our capital structure simplification efforts. We successfully addressed more than $1.1 billion in CEPFs in 2025. Specifically, we bought out the remaining third-party non-controlling equity interest in our CEPF 1 asset portfolio, and we used the proceeds from the sale of our investment in the Meade pipeline to address CEPF 2.

Before I talk through our plans for the remaining 3 CEPFs, I believe it is helpful to take a step back and explain how we think about these structures more broadly. CEPF's structures were designed to provide XPLR with flexibility over time. That flexibility includes the option to buy out the CEPF investors' equity interest in the assets under economic terms that were set at the time the CEPFs were formed.

Our decisions on whether or not to exercise the call options are investment decisions that we continuously evaluate relative to all other capital allocation opportunities and balance sheet priorities. To the extent XPLR chooses not to exercise the call option, it can pursue a sale of the underlying assets with the consent of the CEPF investor or alternatively, let substantially all of the cash flows from the underlying assets transferred to the CEPF investor.

For CEPF 3, we continue to evaluate our options, including a potential sale of the underlying assets. However, we do not have to make a definitive decision until the fourth quarter of 2027. At this time, given the expected equity returns on the buyouts and the potential upsides we see in the associated assets, we view the future buyouts on CEPF 4 and 5 as an attractive use of retained cash flows. We expect to exercise our call option on the first partial buyout for CEPF 5 later this year.

The first opportunity for XPLR to exercise a call option for increased equity in CEPF 4 is not until the end of 2028. We will continuously evaluate all of the CEPFs over time in the context of our capital allocation priorities and will remain open to all potential options to maximize value for unitholders. Putting it all together, XPLR's current plan would result in a more than $2 billion reduction in third-party non-controlling equity interest in our assets by 2030. Importantly, the plan is expected to deliver this outcome without putting undue pressure on the balance sheet or relying on the issuance of new equity.

As we look ahead to the next couple of years, our focus is on executing against the updated capital investment plan we have outlined today. We plan to increase our equity ownership in CEPF 5, with partial buyout investments of approximately $150 million in 2026 and $470 million in 2027. We expect to complete approximately 350 megawatts of incremental repowerings and add approximately 200 net megawatts of battery storage capacity to our portfolio through our new agreement with NextEra Energy Resources.

We are also focused on addressing upcoming maturities in a disciplined manner and continuing to optimize the portfolio where opportunities allow us to unlock embedded value. Our capital plan through the end of the decade is expected to be largely funded by retained cash flows from the existing portfolio. Where appropriate, we expect to supplement that with project-level financing and selective use of corporate debt, all within our overall framework to enhance financial flexibility and maintain appropriate leverage.

Our current capital plan is also supported by a strong and flexible liquidity position, including our fully undrawn revolving credit facility. We recently reduced the size of our corporate revolver from its previous level of $2.5 billion to its current level of $1.25 billion to further demonstrate discipline and align with our funding needs. Specifically, XPLR only has $750 million or less in corporate debt maturities over any 12-month period through year-end 2030. We believe that the combination of liquidity, robust cash flow generation and a disciplined capital plan allows XPLR to appropriately allocate retained cash flows in a value-maximizing manner as we execute over time. That discipline underpins our strategy and focus on long-term value creation as we take actions today that we believe strengthen XPLR's platform for the future.

That concludes our prepared remarks. And we will now open the line for questions.

[Operator Instructions] The first question comes from Nelson Ng from RBC Capital Markets.

The first question I have just relates to capital allocation. I know Slide 12 has some details for the 2025 to '30 period. But just let me know if I'm thinking about this correctly for the '26 to 2030 period. So if free cash flow without growth is about $600 million to $700 million per year going forward and if it's flat for the next 5 years, that's like $3 billion to $3.5 billion of cash, of which I think roughly $2.2 billion would be used for CEPF 4 and 5. So, does that mean there's about $1 billion of capital available for investments and debt reduction? And I think what I'm trying to get to is, can you just talk about whether there's room for unit buybacks or restarting distributions over the next 5 years?

And then the last part of that question is, I think for 2030, you have about $7.8 billion of total debt, tax equity and CEPFs at the end of 2030. I was just wondering what your assumptions are for the use of excess cash?

Nelson, this is Alan. I think what we've highlighted today is that in the operating environment that we're in, right, with what we feel is increasing fundamentals for power generation assets, it makes sense for us to continue to invest in this portfolio to position it well, such that we are able to realize upside in the portfolio and to enhance the value of the portfolio. So, I think what you're -- you need to also account for in your math there is that we have spent and have just announced today additional investments into the portfolio. And that's the capital -- CapEx piece that's outlined in that slide that you're referencing, right?

So, retained cash flows fully cover the set of buy-outs and the equity investments into our portfolio. You have some incremental cash flow of which is going to partially fund the investments that we've announced. And then there are selected use of project debt to be able to finance the balance of it.

Does that make sense?

Yes, that makes sense. And then just one quick follow-up. For CEPF 3, in your previous plan, I think you gave people the impression that you would look to sell the underlying assets. And I think now it's -- I think you're evaluating the options given that you don't have to make a decision until late next year. But can you just talk about what has changed since then? Or what has changed in the last few months?

So, no change in the plan, Nelson, right? So, I just want to be clear about that. However, we continue to think about how do we help investors and analysts understand the CEPFs. And I think the right way to think about it is there are partnerships in which our partners have given us a series of call options that can be exercised over a period of time. Now as we sit here today, this call option doesn't have to be exercised until 2027. And so therefore, we're just making sure people understand that we're not -- there's no need to exercise the call option early and there's no need to monetize that call option early.

To the extent that we don't choose to exercise it, as Jessica said, we have a number of options. Number one is you could potentially sell the underlying assets. So, this is similar to what we did with Meade. We sold the assets. We raised enough proceeds to be able to address the CEPF, as well as we took out excess proceeds from the sale. Now if we don't go down that pathway, we also have the ability to allow the majority or substantially all the cash flows to flip to the CEPF investor. So, those also continue to be our options, but we're just highlighting that it's a call option that there's still time and maturity on it, and we don't have to make a decision on that today.

The next question comes from Julien Dumoulin-Smith from Jefferies.

This is Hannah Vel�squez on for Julien. Congrats on the quarter. I just wanted to get a sense of timing on when these battery drop-downs might come to fruition and be reflected in your results. I don't think they're included in the 2026 bridge to free cash flow before growth.

That's correct. These are expected to reach commercial operations by the end of 2027. So, they would be adding to 2028 and beyond cash flows.

Okay. Got it. And then also as a follow-up, interesting to see the continued relationship or I suppose, the return to drop-downs with NextEra. How can we think about future opportunities there? Is there anything beyond batteries that you might consider?

So, I would say, first of all, we've made no commitments beyond the transaction that we announced today. I think this is also different. I wouldn't think of this as a drop-down, right? These are effectively co-located projects, projects that are co-located with existing XPLR sites. Each partner is contributing a piece to this, right? Obviously, we own interconnection assets. So, we are monetizing a portion of those physical interconnection assets to be able to enable the co-invest or the co-located storage.

NextEra Energy Resources is then coming in and providing all of the development, the construction, the equipment to take basically these rights and interconnection assets and to form it into a fully developed project. So it truly is a partnership that's come to fruition here. We really like this co-investment opportunity. But either way, basically, we're saying, hey, we're able to monetize it in multiple different ways, right? We can either monetize our surplus interconnection capacity as a sale for cash or a potential to roll it into a stream of contracted cash flows at our choosing. Hopefully, that clarifies the understanding of it.

Yes. And just as a follow-up there. Is there any intention to maybe in the longer term or beyond 2030 return to drop-downs?

We are only focused on kind of the capital plan that we've laid out at hand at this point, right? So, we haven't committed to anything beyond the deal that we're announcing today.

The next question comes from Christine Cho from Barclays.

Great to have these earnings calls again. On Slide 6, you list out these projects that you -- the battery storage agreements. I'm just curious, like some of these, you have the option to invest and some of these you don't. So, just curious how you and NEER determine which ones you are eligible to invest in?

So, I think the right way to think about it is we started with how do we create incremental cash flows for XPLR. But in the midst of everything else that we've outlined as capital priorities, not create incremental funding requirements, right, for XPLR. And so really, it's the self-equitize, if you will. And so as we thought through that, it was, hey, we're going to agree to identify additional projects that we can sell in order to fund our co-investment into the 4 projects. And that was how the deal was structured.

Okay. And so then you quantify $45 million from the sale of surplus interconnection. And then I guess, like this to be identified line item would bridge the additional $35 million that you would need for the $80 million for co-investment. How should we think about what the opportunity set for potential sales of surplus interconnections and rights is for your entire portfolio outside these assets?

Yes. I think many of our assets have surplus interconnection capacity, as we've alluded to and talked about before. But I think it's -- every project is different, right? Every location is different. So it really comes down to the project-specific economics and the opportunities of that project. So obviously, we're announcing this, and these are projects that we find very attractive today and the option to be able to co-invest in these storage projects, we like it a lot. So, I wouldn't read further into that other than we do have other interconnection assets, and we'll continue to think about how we optimize those for XPLR.

[Operator Instructions] The next question comes from Mark Jarvi from CIBC Capital Markets.

Some interesting updates today. Just on that last point about other assets where you could monetize interconnection rights. Is it fair to assume that the assets underlying the CEPF 3 to 5 wouldn't be sort of eligible at this point or likely to be?

Yes. So again, I think about -- I would point you back to CEPF is we have an equity partner in that business, right? So to the extent we're moving forward with any in that front, then the equity partner has a say in how those assets are monetized and ultimately, the economics would be shared, right?

Understood. And then can you comment a little bit on returns between the battery joint venture investments versus the repowerings and just how the next phase of repowerings are comparing versus the ones you've already acted on in 2025?

So we've said in the past that we're targeting minimum double-digit returns for repowerings and simply, those are, in our minds, very low-risk projects that are sites that we control, right? These are very attractive projects, particularly if you think about it as we've taken assets that weren't producing any cash flows and converting them into either cash proceeds or streams of cash flows. So, they're highly attractive projects.

And just in terms of the battery investment opportunity, would they be modestly lower returning projects versus the repowerings? Or they are still double digist?

Yes, I was referring to the storage projects, right? We [ found ] repowerings as double-digit minimum, these are very attractive. And particularly if you think about it as taking non-cash flow assets that are embedded in our portfolio and creating cash flow streams out of them.

And not that it's a big number, but can you just clarify, is the $80 million of equity financing around the monetization of the interconnection assets, is that essentially done now? And sort of, I guess, if it doesn't, is there a fallback plan in terms of that funding cap?

Yes. I think the way to think about it is with this transaction, you have a pathway to at least half of the proceeds, the net equity investment, right? Again, we have an option to co-invest. And really, the option is finalization of our evaluation of the development plan. And then the other half of it is we have an agreement with NextEra Energy Resources to identify and seek other asset sales to be able to fund the balance of it.

And when would you meet or plan to reach an investment decision on it?

We have, under the agreement, 45 days to finalize our evaluation of the development plan and make an election.

This concludes our question-and-answer session, and the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.