JUNO BEACH, Fla., March 4, 2019 /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 six wind and solar
projects, collectively consisting of approximately 611 megawatts
(MW). In conjunction with the acquisition, NextEra Energy Partners
also has entered into a $900
million convertible equity portfolio financing with Kohlberg
Kravis Roberts ("KKR").
"The transactions announced today demonstrate NextEra Energy
Partners' continued ability to execute its long-term growth plan
for the benefit of our unitholders," said Jim Robo, chairman and chief executive officer.
"The acquisition of approximately 611 megawatts of high-quality,
contracted renewable energy assets enhances the diversity of the
partnership's existing portfolio. Combining this acquisition with
the recapitalization of existing project debt on four existing
NextEra Energy Partners' assets is expected to provide significant
benefits for unitholders. The convertible equity portfolio
financing is expected to be a very attractive, low-cost,
equity-like product that further improves the partnership's
financing flexibility. This combined transaction completes NextEra
Energy Partners' 2019 growth objectives and is expected to enable
the portfolio to bridge any cash distribution restrictions
resulting from the ongoing PG&E bankruptcy. With this in mind,
we are pleased to extend the earliest date that the partnership is
expected to need to sell common equity by one year, until 2021 at
the earliest, other than modest issuances under the at-the-market
program. NextEra Energy Partners continues to offer an attractive
investor value proposition, and is well-positioned to deliver on
its growth prospects with significant flexibility to finance that
growth."
Acquisition details
The approximately 611-MW unlevered
portfolio of wind and solar assets has a cash available for
distribution (CAFD) weighted remaining contract life of
approximately 15 years and average credit rating of A/A2. The
assets included are:
- A 100 percent interest in Ashtabula II Wind Energy Center, a
120-MW wind generation plant in Griggs and Steele counties, North Dakota;
- A 49.99 percent interest in Marshall Solar Energy Center, a
62.25-MW solar generation plant in Lyon
County, Minnesota;
- A 49.99 percent interest in Roswell Solar Energy Center, a
70-MW solar generation plant in Chaves
County, New Mexico;
- A 49.99 percent interest in Silver State South Solar Energy
Center, a 250-MW solar generation plant in Clark County, Nevada;
- A 100 percent interest in Story County II Wind Energy Center, a
150-MW wind generation plant in Hardin and Story counties, Iowa; and
- A 100 percent interest in White Oak Wind Energy Center, a
150-MW wind generation plant in McLean
County, Illinois.
NextEra Energy Partners expects to acquire the unlevered
portfolio for total consideration of approximately $1.02 billion, subject to working capital and
other adjustments. The acquisition is expected to contribute
adjusted EBITDA of approximately $100
million to $115 million and
CAFD of approximately $97 million to
$107 million, each on a five-year
average annual run-rate basis, beginning Dec. 31, 2019.
NextEra Energy Partners expects to complete the acquisition in
the second quarter of 2019, subject to customary closing conditions
and the receipt of certain regulatory approvals
Recapitalization of existing NextEra Energy Partners
assets
Immediately following the acquisition, NextEra Energy
Partners will contribute the 611 megawatts of acquired projects and
four existing wind assets to a new portfolio. The assets to be
included by NextEra Energy Partners are:
- Perrin Ranch Wind Energy Center, a 99-MW wind generation plant
in Coconino County, Arizona;
- Tuscola Bay Wind Energy Center, a 120-MW wind generation plant
in Bay, Saginaw and Tuscola counties, Michigan;
- Ashtabula III Wind Energy Center, a 62-MW wind generation plant
in Barnes County, North Dakota;
and
- Stateline Holdings Wind Energy Center, a 300-MW wind generation
plant in Umatilla County, Oregon
and Walla Walla County,
Washington.
As part of the transaction, NextEra Energy Partners expects to
recapitalize the $220 million of
existing non-recourse project debt that is currently outstanding on
these four projects with a portion of the proceeds of the
convertible equity portfolio financing described below. Following
the recapitalization, the five-year average annual CAFD from these
projects is expected to be $42
million to $48 million, an
increase of approximately $25 million
as a result of the reduction in debt service.
Financing details
NextEra Energy Partners intends to
raise the approximately $1.25 billion
in total transaction funding required for the acquisition and
recapitalization through capacity under an existing credit
facility. Funds drawn under the credit facility are immediately
expected to be partially repaid with the estimated $893 million of net proceeds prior to offering
expenses from a new convertible equity portfolio financing with
KKR.
Under the terms of the financing, KKR's third Global
Infrastructure Investors Fund will pay $900 million in exchange for an equity
interest in the partnership that will own the approximately 611-MW
portfolio being acquired by NextEra Energy Partners, along with the
581 MW of recapitalized wind assets. KKR is expected to earn an
effective coupon of less than 1 percent over the initial six-year
period, which represents KKR's initial 5 percent allocation of
distributable cash flow from the portfolio. NextEra Energy Partners
expects to periodically exercise its right to buy out KKR's equity
interest for a fixed payment equal to $900
million, plus a fixed pre-tax annual return of approximately
8.3 percent (inclusive of all prior distributions) in partial
interests between the three and a half and six-year anniversaries
of the agreement. 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
six-year period, if NextEra Energy Partners has not exercised its
entire buyout right, or following year four and a half if certain
minimum buyouts have not occurred, KKR's allocation of
distributable cash flow from the portfolio for the portion of the
partnership it still owns would increase to 99 percent.
Outlook
From a base of its fourth-quarter 2018
distribution per common unit at an annualized rate of $1.86, NextEra Energy Partners continues to
expect 12 to 15 percent per year growth in limited partner
distributions as being a reasonable range of expectations through
at least 2023. The partnership expects to grow its 2019
distribution at 15 percent, resulting in the annualized rate of the
fourth-quarter 2019 distribution, which is payable in February 2020, to be $2.14 per common unit, regardless of cash
available from Pacific Gas and Electric Company (PG&E)-related
projects.
NextEra Energy Partners' previously announced Dec. 31, 2019, run-rate expectations, reflecting
calendar year 2019 expectations for the forecasted portfolio at
year-end 2019, remain unchanged with adjusted EBITDA of
$1.2 billion to $1.375 billion and CAFD of $410 million to $480
million. Adjusted EBITDA expectations include full
contributions from projects related to PG&E as revenue is
expected to continue to be recognized; CAFD expectations exclude
all contributions from PG&E related projects due to the risk
that cash distributions may remain restricted by certain financing
provisions. If these PG&E related cash distributions were
included, Dec. 31, 2019, run-rate
CAFD expectations would be $485
million to $555 million.
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 six wind and solar projects
This news release refers to adjusted EBITDA and CAFD
expectations for the acquisition of the portfolio of six 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's portfolio includes 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 acts, cyber-attacks or other similar
events could impact NEP's projects, pipelines or surrounding areas
and adversely affect its business; The ability of NEP to obtain
insurance and the terms of any available insurance coverage could
be materially adversely affected by international, national, state
or local events and company-specific events, as well as the
financial condition of insurers. NEP's insurance coverage does not
insure against all potential risks and it may become subject to
higher insurance premiums; Warranties provided by the suppliers of
equipment for NEP's projects may be limited by the ability of a
supplier to satisfy its warranty obligations, or by the terms of
the warranty, so the warranties may be insufficient to compensate
NEP for its losses; Supplier concentration at certain of NEP's
projects may expose it to significant credit or performance risks;
NEP relies on interconnection, transmission and other pipeline
facilities of third parties to deliver energy from its renewable
energy projects and to transport natural gas to and from 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 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 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 may be unwilling or unable to
fulfill their contractual obligations to NEP or that they otherwise
terminate their agreements with NEP; PG&E, which contributes a
significant portion of NEP's revenues, has filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. Any rejection by PG&E of a material portion of NEP's PPAs
with it or any material reduction in the prices we charge PG&E
under those PPAs that occurs in connection with PG&E's Chapter
11 proceedings, or any events of default under the financing
agreements of NEP's solar facilities that provide power and
renewable energy credits to PG&E under these PPAs as a result
of PG&E's reorganization activities, could have a material
adverse effect on NEP's results of operations, financial condition
or business; 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
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; 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; 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 from NEP OpCo and from NEP to NEP's unitholders, and
there are no limits on the amount that NEP OpCo may be required to
pay; Discretion in establishing cash reserves by NEP OpCo GP may
reduce the amount of cash distributions to unitholders; NEP OpCo
can borrow money to pay distributions, which would reduce the
amount of credit available to operate NEP's business; Increases in
interest rates could adversely impact the price of NEP's common
units, NEP's ability to issue equity or incur debt for acquisitions
or other purposes and NEP's ability to make cash distributions to
its unitholders; The 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 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; The issuance of preferred units or other
securities convertible into common units may affect the market
price for NEP's common units, will dilute common unitholders'
ownership in NEP and may decrease the amount of cash available for
distribution for each common unit; The preferred units have rights,
preferences and privileges that are not held by, and will be
preferential to the rights of, holders of the common units; NEP's
future tax liability may be greater than expected if NEP does not
generate net operating losses (NOLs) sufficient to offset taxable
income or if tax authorities challenge certain of NEP's tax
positions; NEP's ability to use NOLs to offset future income may be
limited; NEP will not have complete control over NEP's tax
decisions; A valuation allowance may be required for NEP's deferred
tax assets; Distributions to unitholders may be taxable as
dividends; NEP discusses these and other risks and uncertainties in
its annual report on Form 10-K for the year ended December 31, 2018 and other SEC filings, and this
news release should be read in conjunction with such SEC filings
made through the date of this news release. The forward-looking
statements made in this news release are made only as of the date
of this news release and NEP undertakes no obligation to update any
forward-looking statements.
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SOURCE NextEra Energy Partners, LP