JUNO BEACH, Fla., Sept. 5, 2018 /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 geographically diverse portfolio of 11 wind and solar
projects, collectively consisting of approximately 1,388 megawatts
(MW). In conjunction with the acquisition, NextEra Energy Partners
also has entered into a $750 million
convertible equity portfolio financing with a fund managed by
BlackRock Global Energy & Power Infrastructure (the
"Fund").
"The acquisition of these high-quality, contracted renewable
energy assets demonstrates the continued execution of our plan to
expand NextEra Energy Partners' portfolio for the benefit of our
unitholders," said Jim Robo,
chairman and chief executive officer. "This transaction replaces
the Canadian portfolio that we divested earlier this year with
higher-yielding assets in the U.S. that benefit from the lower
effective corporate tax rate and longer tax shield. In addition,
the transaction supports growing limited partner unit distributions
in a manner consistent with our previously stated expectations of
12 to 15 percent per year through at least 2023. The portfolio
financing is expected to be a very attractive, low-cost equity-like
product for NextEra Energy Partners. With the right to convert at
least 70 percent of the portfolio financing into NextEra Energy
Partners' common units, the financing provides additional
third-party confirmation of our growth outlook and high-quality,
long-term contracted portfolio backed by strong counterparty
credits. Without the need to sell common equity until 2020 at the
earliest, other than modest at-the-market issuances, today's
transaction further enhances our financing flexibility. We continue
to believe that NextEra Energy Partners is as well-positioned as
it's ever been, offering a best-in-class investor value proposition
with growth prospects that remain as strong as ever."
Acquisition details
The approximately 1,388-MW
portfolio of wind and solar assets has a cash available for
distribution weighted remaining contract life of approximately 18
years. The assets included are:
- Bluff Point Wind Energy Center, a 120-MW wind generation plant
in Jay and Randolph counties, Indiana;
- Breckinridge Wind Energy Center, a 98-MW wind generation plant
in Garfield County, Oklahoma;
- Carousel Wind Energy Center, a 150-MW wind generation plant in
Kit Carson County, Colorado;
- Cottonwood Wind Energy Center, a 90-MW wind generation plant in
Webster County, Nebraska;
- Golden Hills North Wind Energy Center, a 46-MW wind generation
plant in Alameda County,
California;
- Javelina II Wind Energy Center, a 200-MW wind generation plant
located in Webb County,
Texas;
- Kingman I and II Wind Energy Centers, two wind generation
plants with a combined generating capacity of 206 MW located in
Kingman County, Kansas;
- Ninnescah Wind Energy Center, a 208-MW wind generation plant
located in Pratt, Kingman and Sedgwick counties, Kansas;
- Rush Springs Wind Energy Center, a 250-MW wind generation plant
located in Grady and Stephens counties, Oklahoma; and
- Mountain View Solar Energy Center, a 20-MW photovoltaic solar
energy generating facility located in Clark County, Nevada.
NextEra Energy Partners expects to acquire the portfolio for
total consideration of approximately $1.275
billion, subject to working capital and other adjustments,
plus the assumption of approximately $930
million in tax equity financing and $38 million of non-recourse project debt as of
year-end 2018. The acquisition is expected to contribute adjusted
EBITDA of approximately $290 to
$310 million and cash available for
distribution (CAFD) of approximately $122 to $132
million, each on a five-year average annual run-rate basis,
beginning Dec. 31, 2018.
NextEra Energy Partners expects to complete the acquisition in
the fourth quarter of 2018, subject to customary closing conditions
and the receipt of certain regulatory approvals.
Financing details
NextEra Energy Partners intends to
initially finance the acquisition through a combination of the
$573 million USD proceeds from the
sale earlier this year of its Canadian assets and capacity under an
existing credit facility. Funds drawn under the credit facility are
expected to be immediately repaid with a new $750 million convertible equity portfolio
financing with a fund managed by BlackRock Global Energy &
Power Infrastructure.
Under the terms of the financing, the Fund will pay $750 million in exchange for an equity interest
in the entity that will own the approximately 1,388-MW portfolio
being acquired by NextEra Energy Partners. The Fund is expected to
earn an effective coupon of approximately 2.5 percent over the
initial three-year period, which represents the Fund's initial 15
percent allocation of distributable cash flow from the portfolio.
During the fourth year of the agreement, NextEra Energy Partners
expects to exercise its right to buy out the Fund's equity interest
for a fixed payment equal to $750
million, plus a fixed pre-tax return of 7.75 percent
(inclusive of all prior distributions). NextEra Energy Partners has
the right to pay at least 70 percent of the buyout amount in
NextEra Energy Partners common units, issued at no discount to the
then-current market price, with the balance paid in cash. Following
the initial three-year period, if NextEra Energy Partners has not
exercised its buyout right, the Fund's allocation of distributable
cash flow from the portfolio would increase to 80 percent.
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 wind and solar projects in the U.S., as well as
natural gas infrastructure assets in Texas. The renewable energy projects are
contracted, use industry-leading technology and are located in
regions that are favorable for generating energy from the wind and
sun. The seven natural gas pipelines in the portfolio are all
strategically located, serving power producers and municipalities
in South Texas, processing plants
and producers in the Eagle Ford Shale, and commercial and
industrial customers in the Houston area. The NET Mexico Pipeline, the
largest pipeline in the portfolio, provides a critical source of
natural gas transportation for low-cost, U.S.-sourced shale gas to
Mexico. For more information about
NextEra Energy Partners, please visit:
www.NextEraEnergyPartners.com.
Definitional Information
NextEra Energy Partners, LP adjusted EBITDA and CAFD
expectations for the acquisition of the 11 wind and solar
projects
This news release refers to adjusted EBITDA and CAFD
expectations for the acquisition of the portfolio of 11 wind and
solar projects. NextEra Energy Partners' adjusted EBITDA
expectations for this acquisition represent projected revenue less
fuel expense, project operating expenses, plus other income and
deductions. Projected revenue as used in the calculations of
projected EBITDA represents the sum of projected operating revenue
plus the earnings impact from the amortization of convertible
investment tax credits.
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 the
earnings impact from convertible investment tax credits, less (3)
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.
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 has a limited operating history and
its projects include renewable energy projects that have a limited
operating history. Such projects may not perform as expected; 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 the Texas pipelines' 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 in its
portfolio that will require up-front capital expenditures and
expose NEP to project development risks; NEP's ability to maximize
the productivity of the Texas
pipeline business and to complete potential pipeline expansion
projects is dependent on the continued availability of natural gas
production in the Texas pipelines'
areas of operation; Terrorist or similar attacks 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 the Texas pipelines. If these facilities become
unavailable, NEP's projects and pipelines may not be able to
operate, deliver energy or become partially or fully available 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 may be adversely affected by legislative changes or a
failure to comply with applicable energy regulations; A change in
the jurisdictional characterization of some of the Texas pipeline entities' assets, or a change
in law or regulatory policy, could result in increased regulation
of these assets, which could have a material adverse effect on
NEP's business, financial condition, results of operations and
ability to make cash distributions to its unitholders; NEP may
incur significant costs and liabilities as a result of pipeline
integrity management program testing and any necessary pipeline
repair or preventative or remedial measures; The Texas pipelines' operations could incur
significant costs if the Pipeline and Hazardous Materials Safety
Administration or the Railroad Commission of Texas adopts more stringent 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 leaseholders 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 non-U.S. jurisdictions; NEP is subject to risks associated with
its ownership or acquisition of projects or pipelines that remain
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 are 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) and natural gas transportation agreements at favorable rates
or on a long-term basis; If the energy production by or
availability of NEP's U.S. renewable energy projects is less than
expected, they may not be able to satisfy minimum production or
availability obligations under the U.S. Project Entities' PPAs;
NEP's growth strategy depends on locating and acquiring interests
in additional projects consistent with its business strategy at
favorable prices; NextEra Energy Operating Partners' (NEP OpCo)
partnership agreement requires that it distribute its available
cash, which could limit NEP's ability to grow and make
acquisitions; 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 the Texas pipelines' 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; 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; Currency exchange rate fluctuations may
affect NEP's operations; NEP is exposed to risks inherent in its
use of interest rate swaps; 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 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 to or from NEP OpCo and from NEP to NEP's
unitholders, and the amount and timing of such reimbursements and
fees will be determined by NEP GP 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 price of
NEP's common units may fluctuate significantly and unitholders
could lose all or part of their investment; The liability of
holders of NEP's common 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 board of
directors, a majority of which may be affiliated with NEE, decides
whether to retain separate counsel, accountants or others to
perform services for NEP; The New York Stock Exchange does not
require a publicly traded limited partnership like NEP to comply
with certain of its corporate governance requirements; Any issuance
of preferred 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; NEP
discusses these and other risks and uncertainties in its annual
report on Form 10-K for the year ended December 31, 2017 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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