JUNO
BEACH, Fla., April 3,
2023 /PRNewswire/ -- NextEra Energy Partners, LP
(NYSE: NEP) today announced that during the first quarter of 2023
it exercised its option (the buyout right) to purchase 25% of the
outstanding minority equity interest in its 2019 STX Midstream
convertible equity portfolio financing from a fund managed by EIG,
an institutional investor to the global energy sector, subject to
post-closing covenants. NextEra Energy Partners provided total cash
consideration of approximately $200
million for the equity interest, which exceeds the minimum
buyout that was necessary to have occurred prior to June 2023.
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Transaction details
In December
2019, NextEra Energy Partners entered into a convertible
equity portfolio financing with EIG Net Holdings III, LLC. In
that financing, EIG paid $750 million in cash in
exchange for a non-controlling equity interest in a NextEra Energy
Partners subsidiary that owned a portfolio of seven natural gas
pipeline assets, one of which was sold in April 2022. The agreement that was entered into
at the time of the financing provides NextEra Energy
Partners with the right to repurchase EIG's equity interest
subject to certain terms and that would result in a pre-tax return
to EIG of 7.8% (inclusive of all prior distributions).
NextEra Energy Partners completed as of March 31, 2023, its first exercise of its buyout
right under the agreement for aggregate cash consideration of
approximately $200 million. To pay
its purchase price, NextEra Energy Partners used proceeds of
approximately $150 million from its
sale of 2.3 million common units under its at-the-market equity
issuance program with the balance being funded through a planned
draw on the subsidiary's revolving credit facility. The sale of the
2.3 million common units represents less than 3% of NextEra Energy
Partners' public float, and less than 5% of the average daily
trading volume based on the number of available trading days in the
quarter. In addition, it represents approximately three days of
trading volume for NextEra Energy Partners units.
Outlook and financing flexibility
From a base of its
fourth-quarter 2022 distribution per common unit at an annualized
rate of $3.25, NextEra Energy
Partners continues to see 12% to 15% growth per year in limited
partner distributions per unit as being a reasonable range of
expectations through at least 2026. NextEra Energy Partners expects
the annualized rate of the fourth-quarter 2023 distribution that is
payable in February 2024 to be in a
range of $3.64 to $3.74 per common unit.
NextEra Energy Partners' run-rate expectations for adjusted
EBITDA and cash available for distribution (CAFD) at Dec. 31, 2023, remain unchanged. Year-end 2023
run-rate adjusted EBITDA expectations are $2.22 billion to $2.42
billion and CAFD of $770
million to $860 million,
respectively, reflecting calendar-year 2024 contributions expected
from the forecasted portfolio at year-end 2023.
NextEra Energy Partners had approximately $3 billion available liquidity as of Dec. 31, 2022. NextEra Energy Partners expects to
continue to have significant financing capacity and ample liquidity
for growth. Additionally, NextEra Energy Partners continues to have
$6 billion of forward-starting
interest rate swaps, providing significant interest-rate protection
on near-term maturities as well as supporting future growth.
Additionally, separate from the at-the-market equity issuance
program transaction described above, in March 2023, NextEra Energy Partners initiated the
sale of common units under a portion of its recently established
$500 million at-the-market equity
issuance program, which is expected to result in proceeds of
approximately $135 million.
The expectations discussed herein 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.
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 and limited partner distributions and
other expectations assume, among other things, normal weather and
operating conditions; positive macroeconomic conditions in the
U.S.; 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;
access to capital at reasonable cost and terms; and no changes to
governmental policies or incentives. 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 expected net income because NextEra Energy Partners'
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, solar and energy storage
projects in the U.S. as well as natural gas
infrastructure assets in Texas and Pennsylvania.
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 long-term growth, adjusted EBITDA,
cash available for distributions (CAFD) and unit distribution
expectations, as well as statements concerning NEP's future
operating performance, financing needs and results of acquisitions.
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 the performance of its renewable
energy projects which could be impacted by wind and solar
conditions and in certain circumstances by market prices; 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 may pursue the repowering of renewable energy projects
or the expansion of natural gas pipelines that would require
up-front capital expenditures and could expose NEP to project
development risks; geopolitical factors, 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 subsidiaries' of NEP that directly own the
natural gas pipeline assets located in Texas 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 United States of America 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 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 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 utility holding companies,
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;
Widespread public health crises and epidemics or pandemics may have
material adverse impacts on NEP's business, financial condition,
liquidity, results of operations and ability to make cash
distributions to its unitholders; 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) and certain of its affiliates are
permitted to borrow funds received by NextEra Energy Operating
Partners, LP (NEP OpCo) or its 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; 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 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;
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 common units, or other limited partnership interests,
or securities convertible into, or settleable with, common units,
and any subsequent conversion or settlement, will dilute common
unitholders' ownership in NEP, may decrease the amount of cash
available for distribution for each common unit, will impact the
relative voting strength of outstanding NEP common units and
issuance of such securities, or the possibility of issuance of such
securities, as well as the resale, or possible resale following
conversion or settlement, may result in a decline in the market
price for NEP's 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; and, 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, 2022 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.
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SOURCE NextEra Energy Partners, LP