JUNO BEACH, Fla., Nov. 2, 2020 /PRNewswire/ -- NextEra Energy
Partners, LP (NYSE: NEP) today announced that it has entered into
an agreement with a subsidiary of NextEra Energy Resources, LLC to
acquire a 40% interest in an approximately 1,000-megawatt (MW)
renewables portfolio and a 100% interest in a 100-MW
solar-plus-storage project. Immediately following the
acquisition, NextEra Energy Partners will contribute interests in
the acquired projects and four existing renewables assets to a new
portfolio. In conjunction with the acquisition and creation of the
new portfolio, NextEra Energy Partners has entered into an
approximately $1.1 billion
convertible equity portfolio financing with a consortium of private
infrastructure investors.
"The transactions announced today demonstrate NextEra Energy
Partners' continued ability to execute its long-term growth plan
and continued access to attractive low-cost sources of capital,"
said Jim Robo, chairman and chief
executive officer. "The acquisition of the high-quality, long-term
contracted renewable energy assets, including the partnership's
first battery storage project, further enhances the diversity of
the partnership's existing portfolio. Combining this acquisition
with the recapitalization of four existing NextEra Energy Partners'
assets through the longest-dated and lowest-cost convertible equity
portfolio financing in the partnership's history is expected to
provide significant benefits for unitholders. By partnering with
private infrastructure investors, NextEra Energy Partners expects
to further strengthen its balance sheet and have access to
approximately $2.4 billion in capital
following the transaction to support future growth. This
significant access to low-cost capital leaves NextEra Energy
Partners uniquely positioned to take advantage of the disruptive
factors reshaping the energy industry and meet its long-term growth
objectives. In our view, NextEra Energy Partners has never been
better positioned to deliver unitholder value going forward."
Portfolio acquisition details
The contracted renewables portfolio of wind and solar assets has a
cash available for distribution (CAFD) weighted-remaining contract
life of approximately 19 years and average customer credit
rating of A- / A3. The assets included are:
- 100% of the membership interests in Wilmot Solar Energy
Center, a project company that owns a 100-MW solar and 30-MW
storage generation facility located in Arizona.
- 40% of the membership interests in a portfolio holding
company, which indirectly owns:
-
- Blue Summit III Wind Energy Center, a project company that
owns a 200.2-MW wind generation facility located in Texas.
- Ponderosa Wind Energy Center, a project company that owns a
200-MW wind generation facility located in Oklahoma.
- Harmony Florida Solar Energy Center, a project company that
owns a 74.5-MW solar generation facility located in Florida.
- Taylor Creek Solar Energy Center, a project company that
owns a 74.5-MW solar generation facility located in Florida.
- Saint Solar Energy Center, a project company that owns a
100-MW solar generation facility located in Arizona.
- Sanford Airport Solar Energy Center, a project company that
owns a 49.4-MW solar generation facility located in Maine.
- Soldier Creek Wind Energy Center, a project company that
owns a 300.4-MW wind generation facility in Kansas.
NextEra Energy Partners expects to acquire the interests in the
assets for a total net consideration of approximately $320 million, following the receipt of expected
tax equity proceeds, and subject to working capital and other
adjustments. The acquisition is expected to contribute adjusted
EBITDA of approximately $75 million
to $85 million and CAFD of
approximately $24 million to
$29 million, each on a five-year
average annual run-rate basis, beginning Dec. 31, 2020.
NextEra Energy Partners expects to complete the acquisition in
the fourth quarter of 2020, subject to customary closing conditions
and the receipt of certain regulatory approvals.
Creation of a new portfolio
Immediately following the
acquisition, NextEra Energy Partners will contribute its interests
in the newly acquired projects to a new portfolio alongside four of
the partnership's existing renewable assets. The assets to be
included by NextEra Energy Partners are Northern Colorado Wind
Energy Center, Baldwin Wind Energy Center, Elk City I Wind Energy
Center and the interests of the entity that owns Genesis Solar
Energy Center.
Financing details
In conjunction with the acquisition
and creation of the new portfolio, NextEra Energy Partners has
entered into an approximately $1.1
billion convertible equity portfolio financing agreement
with KKR, through its core infrastructure strategy, as well as its
partner institutions including Healthcare of Ontario Pension Plan
(HOOPP Infrastructure), the CAAT Pension Plan and Varma Mutual
Pension Insurance Company (the investors). Under the terms of the
financing, the investors will initially pay approximately
$750 million which will be
utilized to finance the acquisition as well as repay the currently
outstanding balance under the partnership's existing credit
facility. A second draw of approximately $350 million is expected to occur by the end of
the second quarter of 2021, with proceeds available for future
growth and general corporate purposes.
The investors are expected to earn an effective annual coupon of
approximately 4.4% on the outstanding investment over the initial
10-year period. The financing will provide NextEra Energy Partners
the flexibility to periodically buy out the investors' equity
interest at a fixed 6.75% pre-tax annual return (inclusive of all
prior distributions) between the five- and 10-year anniversaries of
the agreement. NextEra Energy Partners has the right to pay 100% of
the buyout amount in NextEra Energy Partners' common units, issued
at no discount to the then-current market price. This transaction
represents NextEra Energy Partners' lowest-cost and longest dated
convertible equity portfolio to date.
In addition to the total approximately $1.1 billion that is expected to be raised under
the current portfolio of assets between the first and second draws,
NextEra Energy Partners and KKR have entered into a non-binding
letter of intent relating to KKR's investment of up to an
additional $900 million convertible
equity portfolio financings on similar terms and conditions to
support future growth, subject to identifying project(s) that
are mutually acceptable and other conditions.
Outlook
NextEra Energy Partners is raising its
expectations of run rate adjusted EBITDA at Dec. 31, 2020, to a range of $1.3 billion to $1.48
billion. NextEra Energy Partners' expectations of run rate
CAFD for year-end 2020 are unchanged and remain in a range of
$560 million to $640 million, reflecting calendar year 2021
expectations for the portfolio at year-end 2020.
The expected repayment of the revolving credit facility
recapitalizes NextEra Energy Partners' balance sheet and preserves
significant capacity for future growth. The costs associated with
this recapitalization are expected to mostly offset the cash
available for distribution accretion from the transaction.
Following the transaction, the partnership is expected to have
approximately $2.4 billion in
available financing capacity under the corporate revolving credit
facility and commitments from investors in potential convertible
equity portfolio financing arrangements. NextEra Energy Partners
expects to end 2020 with its debt-to-EBITDA credit metrics below
4.0x, down from greater than 5.0x at year-end 2019.
NextEra Energy Partners also is introducing Dec. 31, 2021, run-rate expectations for adjusted
EBITDA in a range of $1.44 billion to
$1.62 billion and CAFD in a range of
$600 million to $680 million, reflecting calendar year 2022
expectations for the portfolio at year-end 2021. The midpoints of
these new ranges reflect 10% and 7% growth from the comparable
year-end 2020 run rate adjusted EBITDA and CAFD midpoints,
respectively. These expectations include the impact of incentive
distribution rights fees, as these fees are treated as an operating
expense.
From a base of its fourth-quarter 2019 distribution per common
unit at an annualized rate of $2.14
per common unit, NextEra Energy Partners continues to expect 12% to
15% per year growth in limited partner distributions as being a
reasonable range of expectations through at least 2024, subject to
the usual caveats. NextEra Energy Partners expects the annualized
rate of the fourth-quarter 2020 distribution, which is payable in
February 2021, to be in a range of
$2.40 to $2.46 per common unit. NextEra Energy Partners
expects to achieve its 2020 and 2021 distribution growth objectives
while maintaining a trailing 12-month payout ratio of approximately
70% and 80%, respectively.
This news release refers to adjusted EBITDA and CAFD
expectations. NextEra Energy Partners' adjusted EBITDA expectations
represent projected (a) revenue less (b) fuel expense, less (c)
project operating expenses, less (d) corporate G&A, plus (e)
other income less (f) other deductions including IDR fees.
Projected revenue as used in the calculations of projected EBITDA
represents the sum of projected (a) operating revenues plus (b) a
pre-tax allocation of production tax credits, plus (c) a pre-tax
allocation of investment tax credits plus (d) earnings impact from
convertible investment tax credits and plus (e) the reimbursement
for lost revenue received pursuant to a contract with NextEra
Energy Resources.
CAFD is defined as cash available for distribution and
represents adjusted EBITDA less (1) a pre-tax allocation of
production tax credits, less (2) a pre-tax allocation of investment
tax credits, less (3) earnings impact from convertible investment
tax credits, less (4) debt service, less (4) maintenance capital,
less (5) income tax payments less, (6) other non-cash items
included in adjusted EBITDA if any. CAFD excludes changes in
working capital and distributions to preferred equity
investors.
Adjusted EBITDA, CAFD, limited partner distribution and other
expectations assume, among other things, normal weather and
operating conditions; public policy support for wind and solar
development and construction; market demand and transmission
expansion support for wind and solar development; market demand for
pipeline capacity; and access to capital at reasonable cost and
terms. Please see the accompanying cautionary statements for a list
of the risk factors that may affect future results. Adjusted EBITDA
and CAFD do not represent substitutes for net income, as prepared
in accordance with GAAP. The adjusted EBITDA and CAFD run-rate
expectations have not been reconciled to GAAP net income because
NextEra Energy Partners' GAAP net income includes unrealized
mark-to-market gains and losses related to derivative transactions,
which cannot be determined at this time.
NextEra Energy Partners, LP
NextEra Energy Partners,
LP (NYSE: NEP) is a growth-oriented limited partnership formed by
NextEra Energy, Inc. (NYSE: NEE). NextEra Energy Partners acquires,
manages and owns contracted clean energy projects with stable,
long-term cash flows. Headquartered in Juno Beach, Florida, NextEra Energy Partners
owns interests in geographically diverse wind and solar projects in
the U.S. as well as natural gas infrastructure assets in
Texas and Pennsylvania. For
more information about NextEra Energy Partners, please visit:
www.NextEraEnergyPartners.com.
Cautionary Statements and Risk Factors That
May Affect Future Results
This news release contains "forward-looking statements" within
the meaning of the federal securities laws. Forward-looking
statements are not statements of historical facts, but instead
represent the current expectations of NextEra Energy Partners, LP
(together with its subsidiaries, NEP) regarding future operating
results and other future events, many of which, by their nature,
are inherently uncertain and outside of NEP's control.
Forward-looking statements in this news release include, among
others, statements concerning adjusted EBITDA, cash available for
distributions (CAFD) and unit distribution expectations, as well as
statements concerning NEP's future operating performance and
financing needs. In some cases, you can identify the
forward-looking statements by words or phrases such as "will," "may
result," "expect," "anticipate," "believe," "intend," "plan,"
"seek," "aim," "potential," "projection," "forecast," "predict,"
"goals," "target," "outlook," "should," "would" or similar words or
expressions. You should not place undue reliance on these
forward-looking statements, which are not a guarantee of future
performance. The future results of NEP and its business and
financial condition are subject to risks and uncertainties that
could cause NEP's actual results to differ materially from those
expressed or implied in the forward-looking statements. These risks
and uncertainties could require NEP to limit or eliminate certain
operations. These risks and uncertainties include, but are not
limited to, the following: NEP's ability to make cash distributions
to its unitholders is affected by wind and solar conditions at its
renewable energy projects; NEP's business, financial condition,
results of operations and prospects can be materially adversely
affected by weather conditions, including, but not limited to, the
impact of severe weather; Operation and maintenance of renewable
energy projects involve significant risks that could result in
unplanned power outages, reduced output, personal injury or loss of
life; Natural gas gathering and transmission activities involve
numerous risks that may result in accidents or otherwise affect
NEP's pipeline operations; NEP depends on certain of the renewable
energy projects and pipelines in its portfolio for a substantial
portion of its anticipated cash flows; NEP is pursuing the
expansion of natural gas pipelines and the repowering of wind
projects that will require up-front capital expenditures and expose
NEP to project development risks; Terrorist acts, cyberattacks or
other similar events could impact NEP's projects, pipelines or
surrounding areas and adversely affect its business; The ability of
NEP to obtain insurance and the terms of any available insurance
coverage could be materially adversely affected by international,
national, state or local events and company-specific events, as
well as the financial condition of insurers. NEP's insurance
coverage does not insure against all potential risks and it may
become subject to higher insurance premiums; Warranties provided by
the suppliers of equipment for NEP's projects may be limited by the
ability of a supplier to satisfy its warranty obligations, or by
the terms of the warranty, so the warranties may be insufficient to
compensate NEP for its losses; Supplier concentration at certain of
NEP's projects may expose it to significant credit or performance
risks; NEP relies on interconnection, transmission and other
pipeline facilities of third parties to deliver energy from its
renewable energy projects and to transport natural gas to and from
its pipelines. If these facilities become unavailable, NEP's
projects and pipelines may not be able to operate or deliver energy
or may become partially or fully unavailable to transport natural
gas; NEP's business is subject to liabilities and operating
restrictions arising from environmental, health and safety laws and
regulations, compliance with which may require significant capital
expenditures, increase NEP's cost of operations and affect or limit
its business plans; NEP's renewable energy projects or pipelines
may be adversely affected by legislative changes or a failure to
comply with applicable energy and pipeline regulations; Petroleos
Mexicanos (Pemex) may claim certain immunities under the Foreign
Sovereign Immunities Act and Mexican law, and the Texas pipeline entities' ability to sue or
recover from Pemex for breach of contract may be limited and may be
exacerbated if there is a deterioration in the economic
relationship between the U.S. and Mexico; NEP does not own all of the land on
which the projects in its portfolio are located and its use and
enjoyment of the property may be adversely affected to the extent
that there are any lienholders or land rights holders that have
rights that are superior to NEP's rights or the U.S. Bureau of Land
Management suspends its federal rights-of-way grants; NEP is
subject to risks associated with litigation or administrative
proceedings that could materially impact its operations, including,
but not limited to, proceedings related to projects it acquires in
the future; NEP's cross-border operations require NEP to comply
with anti-corruption laws and regulations of the U.S. government
and Mexico; NEP is subject to
risks associated with its ownership or acquisition of projects or
pipelines that are under construction, which could result in its
inability to complete construction projects on time or at all, and
make projects too expensive to complete or cause the return on an
investment to be less than expected; NEP relies on a limited number
of customers and is exposed to the risk that they may be unwilling
or unable to fulfill their contractual obligations to NEP or that
they otherwise terminate their agreements with NEP; NEP may not be
able to extend, renew or replace expiring or terminated power
purchase agreements (PPA), natural gas transportation agreements or
other customer contracts at favorable rates or on a long-term
basis; If the energy production by or availability of NEP's
renewable energy projects is less than expected, they may not be
able to satisfy minimum production or availability obligations
under their PPAs; NEP's growth strategy depends on locating and
acquiring interests in additional projects consistent with its
business strategy at favorable prices; Lower prices for other fuel
sources may reduce the demand for wind and solar energy; Reductions
in demand for natural gas in the United
States or Mexico and low
market prices of natural gas could materially adversely affect
NEP's pipeline operations and cash flows; Government laws,
regulations and policies providing incentives and subsidies for
clean energy could be changed, reduced or eliminated at any time
and such changes may negatively impact NEP's growth strategy; NEP's
growth strategy depends on the acquisition of projects developed by
NextEra Energy, Inc. (NEE) and third parties, which face risks
related to project siting, financing, construction, permitting, the
environment, governmental approvals and the negotiation of project
development agreements; Acquisitions of existing clean energy
projects involve numerous risks; Renewable energy procurement is
subject to U.S. state regulations, with relatively irregular,
infrequent and often competitive procurement windows; NEP may
continue to acquire other sources of clean energy and may expand to
include other types of assets. Any further acquisition of
non-renewable energy projects may present unforeseen challenges and
result in a competitive disadvantage relative to NEP's
more-established competitors; NEP faces substantial competition
primarily from regulated utilities, developers, independent power
producers, pension funds and private equity funds for opportunities
in North America; The natural gas
pipeline industry is highly competitive, and increased competitive
pressure could adversely affect NEP's business; NEP may not be able
to access sources of capital on commercially reasonable terms,
which would have a material adverse effect on its ability to
consummate future acquisitions; Restrictions in NEP and its
subsidiaries' financing agreements could adversely affect NEP's
business, financial condition, results of operations and ability to
make cash distributions to its unitholders; NEP's cash
distributions to its unitholders may be reduced as a result of
restrictions on NEP's subsidiaries' cash distributions to NEP under
the terms of their indebtedness or other financing agreements;
NEP's subsidiaries' substantial amount of indebtedness may
adversely affect NEP's ability to operate its business, and its
failure to comply with the terms of its subsidiaries' indebtedness
could have a material adverse effect on NEP's financial condition;
NEP is exposed to risks inherent in its use of interest rate swaps;
NEE has influence over NEP; Under the cash sweep and credit support
agreement, NEP receives credit support from NEE and its affiliates.
NEP's subsidiaries may default under contracts or become subject to
cash sweeps if credit support is terminated, if NEE or its
affiliates fail to honor their obligations under credit support
arrangements, or if NEE or another credit support provider ceases
to satisfy creditworthiness requirements, and NEP will be required
in certain circumstances to reimburse NEE for draws that are made
on credit support; NextEra Energy Resources, LLC (NEER) or one of
its affiliates is permitted to borrow funds received by NEP's
subsidiaries and is obligated to return these funds only as needed
to cover project costs and distributions or as demanded by NextEra
Energy Operating Partners' (NEP OpCo) . NEP's financial condition
and ability to make distributions to its unitholders, as well as
its ability to grow distributions in the future, is highly
dependent on NEER's performance of its obligations to return all or
a portion of these funds; NEP may not be able to consummate future
acquisitions; NEER's right of first refusal may adversely affect
NEP's ability to consummate future sales or to obtain favorable
sale terms; NextEra Energy Partners GP, Inc. (NEP GP) and its
affiliates may have conflicts of interest with NEP and have limited
duties to NEP and its unitholders; NEP GP and its affiliates and
the directors and officers of NEP are not restricted in their
ability to compete with NEP, whose business is subject to certain
restrictions; NEP may only terminate the Management Services
Agreement among, NEP, NextEra Energy Management Partners, LP (NEE
Management), NEP OpCo and NextEra Energy Operating Partners GP, LLC
(NEP OpCo GP) under certain specified conditions; If the agreements
with NEE Management or NEER are terminated, NEP may be unable to
contract with a substitute service provider on similar terms; NEP's
arrangements with NEE limit NEE's potential liability, and NEP has
agreed to indemnify NEE against claims that it may face in
connection with such arrangements, which may lead NEE to assume
greater risks when making decisions relating to NEP than it
otherwise would if acting solely for its own account; NEP's ability
to make distributions to its unitholders depends on the ability of
NEP OpCo to make cash distributions to its limited partners; If NEP
incurs material tax liabilities, NEP's distributions to its
unitholders may be reduced, without any corresponding reduction in
the amount of the IDR fee; Holders of NEP's units may be subject to
voting restrictions; NEP's partnership agreement replaces the
fiduciary duties that NEP GP and NEP's directors and officers might
have to holders of its common units with contractual standards
governing their duties; NEP's partnership agreement restricts the
remedies available to holders of NEP's common units for actions
taken by NEP's directors or NEP GP that might otherwise constitute
breaches of fiduciary duties; Certain of NEP's actions require the
consent of NEP GP; Holders of NEP's common units and preferred
units currently cannot remove NEP GP without NEE's consent; NEE's
interest in NEP GP and the control of NEP GP may be transferred to
a third party without unitholder consent; The IDR fee may be
assigned to a third party without unitholder consent; NEP may issue
additional units without unitholder approval, which would dilute
unitholder interests; Reimbursements and fees owed to NEP GP and
its affiliates for services provided to NEP or on NEP's behalf will
reduce cash distributions from NEP OpCo and from NEP to NEP's
unitholders, and there are no limits on the amount that NEP OpCo
may be required to pay; Discretion in establishing cash reserves by
NEP OpCo GP may reduce the amount of cash distributions to
unitholders; NEP OpCo can borrow money to pay distributions, which
would reduce the amount of credit available to operate NEP's
business; Increases in interest rates could adversely impact the
price of NEP's common units, NEP's ability to issue equity or incur
debt for acquisitions or other purposes and NEP's ability to make
cash distributions to its unitholders; The liability of holders of
NEP's units, which represent limited partnership interests in NEP,
may not be limited if a court finds that unitholder action
constitutes control of NEP's business; Unitholders may have
liability to repay distributions that were wrongfully distributed
to them; Provisions in NEP's partnership agreement may discourage
or delay an acquisition of NEP that NEP unitholders may consider
favorable, which could decrease the value of NEP's common units,
and could make it more difficult for NEP unitholders to change the
board of directors; The New York Stock Exchange does not require a
publicly traded limited partnership like NEP to comply with certain
of its corporate governance requirements; The issuance of preferred
units or other securities convertible into common units may affect
the market price for NEP's common units, will dilute common
unitholders' ownership in NEP and may decrease the amount of cash
available for distribution for each common unit; The preferred
units have rights, preferences and privileges that are not held by,
and will be preferential to the rights of, holders of the common
units; NEP's future tax liability may be greater than expected if
NEP does not generate net operating losses (NOLs) sufficient to
offset taxable income or if tax authorities challenge certain of
NEP's tax positions; NEP's ability to use NOLs to offset future
income may be limited; NEP will not have complete control over
NEP's tax decisions; A valuation allowance may be required for
NEP's deferred tax assets; Distributions to unitholders may be
taxable as dividends; and, The coronavirus pandemic may have a
material adverse impact on NEP's business, financial condition,
liquidity, results of operations and ability to make cash
distributions to its unitholders. NEP discusses these and other
risks and uncertainties in its annual report on Form 10-K for the
year ended December 31, 2019 and
other SEC filings, and this news release should be read in
conjunction with such SEC filings made through the date of this
news release. The forward-looking statements made in this news
release are made only as of the date of this news release and NEP
undertakes no obligation to update any forward-looking
statements.
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SOURCE NextEra Energy Partners, LP