JUNO BEACH, Fla., Oct. 22, 2021 /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 50% interest in an approximately 2,520-megawatt (MW)
renewables portfolio. In conjunction with the acquisition, NextEra
Energy Partners has also entered into an approximately $824 million convertible equity portfolio
financing with Apollo Global Management (Apollo).
"The transactions announced today support NextEra Energy
Partners' continued ability to execute on its long-term growth plan
and access 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 extends the partnership's
geographic footprint into three new states and expands its
ownership of battery storage assets, which would total nearly 90
megawatts at close. Additionally, the convertible equity portfolio
financing we are announcing today is the lowest cost in the
partnership's history, with a more than 250 basis points lower
implied return to the investor in the buyout price than the first
iterations of the structure in 2018 and early 2019. This
significant access to low-cost capital and access to NextEra Energy
Resources' industry-leading renewables portfolio enables NextEra
Energy Partners to be uniquely positioned to take advantage of the
clean energy transformation and meet its long-term growth
objectives."
Portfolio acquisition details
The contracted
renewables portfolio of wind, solar and solar-plus-storage assets
has a strong and diverse mix of investment-grade counterparties and
cash available for distribution (CAFD)- weighted remaining contract
life of approximately 19 years. The portfolio to be acquired
by NextEra Energy Partners consists of 50% of the indirect
membership interests in:
- White Mesa Wind, an approximately 501-MW wind generation
facility in Texas.
- Irish Creek Wind, an
approximately 301-MW wind generation facility in Kansas.
- Hubbard Wind, an approximately 300-MW wind generation
facility in Texas.
- Cool Springs Solar, an approximately 213-MW solar generation
and 40-MW solar storage facility in Georgia.
- Little Blue Wind, an approximately 251-MW wind generation
facility in Nebraska.
- Dodge Flat Solar, an approximately 200-MW solar generation
and 50-MW solar storage facility in Nevada.
- Elora Solar, an approximately
150-MW solar generation facility in Tennessee.
- Quitman II Solar, an approximately 150-MW solar generation
facility in Georgia.
- Fish Springs Ranch Solar, an approximately 100-MW solar
generation and 25-MW solar storage facility in Nevada.
- Minco Wind Energy III, an approximately 107-MW wind
generation facility in Oklahoma.
- Ensign Wind Energy, an approximately 99-MW wind generation
facility in Kansas.
- Borderlands Wind, an approximately 99-MW wind generation
facility in New Mexico.
- Quinebaug Solar, an approximately 49-MW solar generation
facility in Connecticut.
NextEra Energy Partners expects to acquire the interests in the
assets for a total consideration of approximately $849 million, subject to working capital and
other adjustments, plus NextEra Energy Partners' share of the
portfolio's total tax equity financings, which is estimated to be
approximately $866 million at the
time of closing. The acquisition is expected to contribute adjusted
EBITDA of approximately $184 million
to $194 million and CAFD of
approximately $58 million to
$67 million, each on a five-year
average annual run-rate basis, as of Dec.
31, 2022.
NextEra Energy Partners expects to close the acquisition later
this year or in early 2022, subject to customary closing conditions
and receipt of certain regulatory approvals.
Financing details
Immediately following the
acquisition, NextEra Energy Partners will contribute its interests
in the newly acquired assets to a new portfolio. In conjunction
with the acquisition and creation of the new portfolio, NextEra
Energy Partners has entered into an approximately $824 million convertible equity portfolio
financing agreement with Apollo.
The financing will provide NextEra Energy Partners with the
flexibility to periodically buy out the investor's equity interest
in the portfolio between the five- and 10-year anniversaries of the
agreement at a fixed pre-tax annual return of approximately 5.6%
(inclusive of all prior distributions). NextEra Energy Partners
will have the right to pay 100% of the buyout price in NextEra
Energy Partners' common units, issued at no discount to the
then-current market price.
When fully drawn, the convertible equity portfolio financing
agreement will allocate at least 35% of the portfolio's cash flows
to NextEra Energy Partners over the initial 10-year period, subject
to certain minimum buyout thresholds being met beginning at the end
of year six. This cash flow allocation implies an approximately
4.8% effective annual coupon on the investor's outstanding
investment over the initial period prior to NextEra Energy
Partners' anticipated initiation of periodic buyouts of the
investor's equity interest.
Outlook
NextEra Energy Partners continues to expect to be in the upper end
of its previously disclosed year-end 2021 run-rate adjusted EBITDA
and CAFD expectations ranges of $1.44
billion to $1.62 billion and
$600 million to $680 million, respectively. The current year-end
2021 adjusted EBITDA and CAFD expectations ranges exclude
contributions from the approximately 1,260 MW of acquisitions that
the partnership is announcing today due to uncertainty in
regulatory approval timelines. These contributions are included in
the partnership's previously disclosed year-end 2022 adjusted
EBITDA and CAFD expectations ranges.
NextEra Energy Partners' Dec. 31,
2022, run-rate expectations as announced on Oct. 20, 2021, remain unchanged. Adjusted EBITDA
is expected to be in a range of $1.775
billion to $1.975 billion and
CAFD is expected to be in a range of $675
million to $765 million,
reflecting calendar year 2023 expectations for the forecasted
portfolio at year-end 2022.
These expectations are subject to the usual caveats and include
the impact of incentive distribution rights (IDR) fees, as these
fees are treated as an operating expense.
From a base of its fourth-quarter 2020 distribution per common
unit at an annualized rate of $2.46
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 2021 distribution, which is payable in
February 2022, to be in a range of
$2.76 to $2.83 per common unit.
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 (5) maintenance capital,
less (6) income tax payments less, (7) 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; Operation and maintenance of renewable
energy projects and pipelines involve significant risks that could
result in unplanned power outages, reduced output or capacity,
personal injury or loss of life; 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; 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 repowering of wind projects and the expansion of natural gas
pipelines 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 provide protection
against all significant losses; 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 interests in 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; 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; 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 and pursue other growth opportunities; 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, LP (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; 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 limited circumstances; 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 and the NYSE does not require a publicly
traded limited partnership like NEP to comply with certain of its
corporate governance requirements; 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
currently cannot remove NEP GP without NEE's consent and provisions
in NEP's partnership agreement may discourage or delay an
acquisition of NEP that NEP unitholders may consider favorable;
NEE's interest in NEP GP and the control of NEP GP may be
transferred 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; 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; The issuance of securities
convertible into, or settleable with, 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; 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;
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, 2020 and other Securities and
Exchange Commission (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.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/nextera-energy-partners-lp-announces-agreement-to-acquire-a-50-interest-in-an-approximately-2-520-megawatt-portfolio-of-long-term-contracted-renewables-projects-and-enters-into-new-convertible-equity-portfolio-financing-301406310.html
SOURCE NextEra Energy Partners, LP