- Capitalizes on the clean energy transition and intends to reach
Real Zero carbon emissions in 2025
- Plans to sell natural gas pipeline assets and use proceeds to
complete all planned buyouts of convertible equity portfolio
financings through 2025
- Does not expect incremental equity to be required to finance
growth through 2024
- Enters into an agreement to suspend incentive distribution
rights fees to NextEra Energy through 2026
- Continues to expect to grow limited partner distributions per
unit by 12% to 15% through at least 2026
JUNO
BEACH, Fla., May 8, 2023
/PRNewswire/ -- NextEra Energy Partners, LP (NYSE: NEP) today is
announcing a plan to concentrate solely on growing its high-quality
renewable energy portfolio, capitalizing on the low-cost nature of
renewables and the significant capital investment needed to
decarbonize the U.S. economy. To execute on this vision, NextEra
Energy Partners will focus on its core strengths, eliminate a
significant amount of near-term convertible equity portfolio
financing obligations, reduce equity needs and simplify and
recapitalize the business, all of which are intended to deliver
long-term unitholder value.
"Since launching NextEra Energy Partners in 2014, we've
delivered significant growth, increased our renewables portfolio by
approximately nine times and have become one of the largest clean
energy generators in the world," said John
Ketchum, chairman and chief executive officer of NextEra
Energy Partners. "We have a terrific track record, but we believe
NextEra Energy Partners' future growth potential is not reflected
in its current valuation. We believe this disconnect is driven by a
combination of macroeconomic factors and concerns around the equity
required to finance the partnership's convertible equity portfolio
financing buyouts. Today, we are announcing plans to simplify the
partnership's capital structure and singularly focus on a 100%
renewable energy strategy. The U.S. economy's ongoing transition to
renewable energy is a significant driver of future renewable energy
investments, and we want NextEra Energy Partners to be well
positioned to capitalize on these investments.
"To lead this transition, we are launching a process to sell our
natural gas pipeline assets and we are suspending incentive
distribution rights fees to NextEra Energy through 2026. These
actions would both increase our renewable energy investments and
eliminate the equity issuance that would otherwise be required to
complete all three convertible equity portfolio financing buyouts
planned for 2023, 2024 and 2025," Ketchum said. "Under our plan, we
currently do not expect any equity to be required to finance our
growth plan through 2024 and do not expect any equity issuances to
finance convertible equity portfolio financing buyouts through
2025. The end result of these changes is intended to create the
leading 100% renewables pure-play investment opportunity for the
benefit of unitholders."
NextEra Energy Partners' plan to capitalize on the clean energy
transition includes the following:
- First, NextEra Energy Partners is launching a process to sell
its STX Midstream and Meade natural gas pipeline assets in 2023 and
2025, respectively. Upon closing of the sales, the excess proceeds
would be used to buy out the STX Midstream, 2019 NEP Pipelines and
NEP Renewables II convertible equity portfolio financings. Once
completed, the only planned convertible equity portfolio financing
buyouts with equity requirements through 2026 would be the Genesis
Holdings convertible equity portfolio financing, which is limited
to $294 million in 2026.
- Second, NextEra Energy Partners expects to use the excess
proceeds from the sale of its interest in natural gas pipeline
assets to finance its growth, eliminating all equity requirements
through 2024 other than opportunistic equity issuances under its
at-the-market equity issuance program to fund future growth beyond
2024.
- Third, to replace the cash available for distribution (CAFD)
from the expected divested pipeline assets, NextEra Energy, Inc.
(NYSE: NEE) and NextEra Energy Partners have entered into an
agreement to suspend NextEra Energy's incentive distribution rights
(IDR) fees in respect of all quarters in 2023 through 2026. By
suspending the IDR fees, the partnership will be able to use
that cash flow to largely replace the reduced CAFD that would be
associated with the sale of the natural gas pipeline assets.
Upon successfully completing the sales of the natural gas
pipeline assets, NextEra Energy Partners is expected to achieve
Real Zero carbon emissions in 2025 and become the leading 100%
renewables pure-play investment opportunity. The partnership
believes these changes could potentially invite a new class of
investors looking for a carbon-free, pure-play option to
participate in the energy transition.
In summary, the plan would eliminate the equity buyouts of the
three near-term convertible equity portfolio financings via the
divestiture of the partnership's interest in natural gas pipeline
assets, and the CAFD associated with the sale of the natural gas
pipeline assets would be largely replaced by the IDR fees
suspension. NextEra Energy Partners expects that it would have
excess proceeds from the natural gas pipeline sales available to
eliminate equity requirements to fund future growth through
2024.
NextEra Energy Partners believes it is well positioned to
execute against its plan due to its ample liquidity and significant
financing capacity. The partnership had approximately $2.8 billion of available liquidity as of
March 31, 2023.
Outlook
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. Given the current capital markets environment, the
partnership expects to grow distributions at or near the bottom end
of this range. 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
currently has no plans to issue incremental convertible equity
portfolio financings.
NextEra Energy Partners' run-rate expectations for adjusted
EBITDA and 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.
The expectations discussed herein are subject to the usual
caveats.
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. 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 NEP's simplification plan, long-term
growth, adjusted EBITDA, cash available for distributions (CAFD)
and unit distribution expectations, as well as statements
concerning NEP's future operating performance, equity issuance
expectations, financing needs, expected proceeds from asset sales
and results of acquisitions and dispositions. 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