Item 1. Financial Statements
NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(millions, except per unit amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
OPERATING REVENUES
|
|
|
|
|
|
|
|
Renewable energy sales
|
$
|
203
|
|
|
$
|
170
|
|
|
$
|
360
|
|
|
$
|
294
|
|
Texas pipelines service revenues
|
50
|
|
|
49
|
|
|
105
|
|
|
103
|
|
Total operating revenues(a)
|
253
|
|
|
219
|
|
|
465
|
|
|
397
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
Operations and maintenance(b)
|
89
|
|
|
82
|
|
|
180
|
|
|
157
|
|
Depreciation and amortization
|
66
|
|
|
63
|
|
|
133
|
|
|
124
|
|
Taxes other than income taxes and other
|
9
|
|
|
7
|
|
|
14
|
|
|
13
|
|
Total operating expenses - net
|
164
|
|
|
152
|
|
|
327
|
|
|
294
|
|
OPERATING INCOME
|
89
|
|
|
67
|
|
|
138
|
|
|
103
|
|
OTHER INCOME (DEDUCTIONS)
|
|
|
|
|
|
|
|
Interest expense
|
16
|
|
|
(207)
|
|
|
(823)
|
|
|
(362)
|
|
Equity in earnings of equity method investees
|
29
|
|
|
9
|
|
|
46
|
|
|
8
|
|
Equity in earnings (losses) of non-economic ownership interests
|
5
|
|
|
(4)
|
|
|
(18)
|
|
|
(11)
|
|
Other - net
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
Total other income (deductions) - net
|
51
|
|
|
(201)
|
|
|
(793)
|
|
|
(363)
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
140
|
|
|
(134)
|
|
|
(655)
|
|
|
(260)
|
|
INCOME TAX EXPENSE (BENEFIT)
|
13
|
|
|
(10)
|
|
|
(62)
|
|
|
(16)
|
|
NET INCOME (LOSS)
|
127
|
|
|
(124)
|
|
|
(593)
|
|
|
(244)
|
|
Net income attributable to preferred distributions
|
(2)
|
|
|
(6)
|
|
|
(4)
|
|
|
(12)
|
|
Net loss (income) attributable to noncontrolling interests
|
(78)
|
|
|
102
|
|
|
421
|
|
|
207
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP
|
$
|
47
|
|
|
$
|
(28)
|
|
|
$
|
(176)
|
|
|
$
|
(49)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common unit attributable to NextEra Energy Partners, LP - basic
|
$
|
0.71
|
|
|
$
|
(0.49)
|
|
|
$
|
(2.68)
|
|
|
$
|
(0.88)
|
|
Earnings (loss) per common unit attributable to NextEra Energy Partners, LP - assuming dilution
|
$
|
0.69
|
|
|
$
|
(0.49)
|
|
|
$
|
(2.68)
|
|
|
$
|
(0.88)
|
|
____________________
(a) Includes related party revenues of $7 million and $1 million for the three months ended June 30, 2020 and 2019, respectively, and $11 million and $2 million for the six months ended June 30, 2020 and 2019, respectively.
(b) Includes O&M expenses related to renewable energy projects of $48 million and $47 million for the three months ended June 30, 2020 and 2019, respectively, and $99 million and $85 million for the six months ended June 30, 2020 and 2019, respectively. Includes O&M expenses related to the Texas pipelines of $11 million and $8 million for the three months ended June 30, 2020 and 2019, respectively, and $22 million and $21 million for the six months ended June 30, 2020 and 2019, respectively. Total O&M expenses presented include related party amounts of $34 million and $24 million for the three months ended June 30, 2020 and 2019, respectively, and $66 million and $48 million for the six months ended June 30, 2020 and 2019, respectively.
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2019 Form 10-K.
NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
NET INCOME (LOSS)
|
$
|
127
|
|
|
$
|
(124)
|
|
|
$
|
(593)
|
|
|
$
|
(244)
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
|
|
|
|
|
|
|
|
Reclassification from AOCI to net income (net of $0, $0, $0 and $0 tax benefit, respectively)
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
Other comprehensive income related to equity method investees (net of $0, $0, $0 and $0 tax expense, respectively)
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Total other comprehensive income (loss), net of tax
|
1
|
|
|
—
|
|
|
1
|
|
|
(5)
|
|
COMPREHENSIVE INCOME (LOSS)
|
128
|
|
|
(124)
|
|
|
(592)
|
|
|
(249)
|
|
Comprehensive income attributable to preferred distributions
|
(2)
|
|
|
(6)
|
|
|
(4)
|
|
|
(12)
|
|
Comprehensive loss (income) attributable to noncontrolling interests
|
(79)
|
|
|
102
|
|
|
420
|
|
|
210
|
|
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP
|
$
|
47
|
|
|
$
|
(28)
|
|
|
$
|
(176)
|
|
|
$
|
(51)
|
|
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2019 Form 10-K.
NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2020
|
|
December 31, 2019
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
96
|
|
|
$
|
128
|
|
Accounts receivable
|
113
|
|
|
79
|
|
Other receivables
|
165
|
|
|
173
|
|
Due from related parties
|
64
|
|
|
17
|
|
Inventory
|
25
|
|
|
20
|
|
Other current assets
|
8
|
|
|
16
|
|
Total current assets
|
471
|
|
|
433
|
|
Non-current assets:
|
|
|
|
Property, plant and equipment - net
|
6,971
|
|
|
6,970
|
|
Intangible assets – PPAs - net
|
1,603
|
|
|
1,655
|
|
Intangible assets – customer relationships - net
|
619
|
|
|
627
|
|
Goodwill
|
609
|
|
|
609
|
|
Investments in equity method investees
|
1,653
|
|
|
1,653
|
|
Deferred income taxes
|
233
|
|
|
172
|
|
Other non-current assets
|
126
|
|
|
137
|
|
Total non-current assets
|
11,814
|
|
|
11,823
|
|
TOTAL ASSETS
|
$
|
12,285
|
|
|
$
|
12,256
|
|
LIABILITIES AND EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable and accrued expenses
|
$
|
133
|
|
|
$
|
122
|
|
Due to related parties
|
68
|
|
|
58
|
|
Current portion of long-term debt
|
13
|
|
|
12
|
|
Accrued interest
|
35
|
|
|
40
|
|
Derivatives
|
18
|
|
|
1
|
|
Accrued property taxes
|
15
|
|
|
21
|
|
Other current liabilities
|
41
|
|
|
47
|
|
Total current liabilities
|
323
|
|
|
301
|
|
Non-current liabilities:
|
|
|
|
Long-term debt
|
4,182
|
|
|
4,132
|
|
Asset retirement obligation
|
142
|
|
|
139
|
|
Derivatives
|
1,136
|
|
|
417
|
|
Non-current due to related party
|
35
|
|
|
34
|
|
Other non-current liabilities
|
184
|
|
|
167
|
|
Total non-current liabilities
|
5,679
|
|
|
4,889
|
|
TOTAL LIABILITIES
|
6,002
|
|
|
5,190
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
EQUITY
|
|
|
|
Preferred units (4.7 and 4.7 units issued and outstanding, respectively)
|
183
|
|
|
183
|
|
Common units (65.5 and 65.5 units issued and outstanding, respectively)
|
1,759
|
|
|
2,008
|
|
Accumulated other comprehensive loss
|
(8)
|
|
|
(8)
|
|
Noncontrolling interests
|
4,349
|
|
|
4,883
|
|
TOTAL EQUITY
|
6,283
|
|
|
7,066
|
|
TOTAL LIABILITIES AND EQUITY
|
$
|
12,285
|
|
|
$
|
12,256
|
|
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2019 Form 10-K.
NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
2019
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Net loss
|
$
|
(593)
|
|
|
$
|
(244)
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization
|
133
|
|
|
124
|
|
Intangible amortization - PPAs
|
51
|
|
|
21
|
|
|
|
|
|
Change in value of derivative contracts
|
736
|
|
|
277
|
|
Deferred income taxes
|
(62)
|
|
|
(16)
|
|
Equity in earnings of equity method investees, net of distributions received
|
3
|
|
|
(8)
|
|
Equity in losses of non-economic ownership interests
|
18
|
|
|
11
|
|
Other - net
|
10
|
|
|
10
|
|
Changes in operating assets and liabilities:
|
|
|
|
Other current assets
|
(22)
|
|
|
(20)
|
|
Other non-current assets
|
1
|
|
|
(3)
|
|
Other current liabilities
|
(15)
|
|
|
(20)
|
|
Other non-current liabilities
|
(1)
|
|
|
(2)
|
|
Net cash provided by operating activities
|
259
|
|
|
130
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
Acquisition of membership interests in subsidiaries - net
|
—
|
|
|
(1,028)
|
|
Capital expenditures and other investments
|
(121)
|
|
|
(6)
|
|
|
|
|
|
Payments to related parties under CSCS agreement - net
|
(46)
|
|
|
(671)
|
|
Distributions from equity method investee
|
8
|
|
|
—
|
|
Other
|
10
|
|
|
4
|
|
Net cash used in investing activities
|
(149)
|
|
|
(1,701)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Proceeds from issuance of common units - net
|
2
|
|
|
3
|
|
Issuances of long-term debt
|
61
|
|
|
1,150
|
|
Retirements of long-term debt
|
(15)
|
|
|
(310)
|
|
Debt issuance costs
|
(1)
|
|
|
(11)
|
|
|
|
|
|
Partner contributions
|
6
|
|
|
2
|
|
Partner distributions
|
(201)
|
|
|
(158)
|
|
Preferred unit distributions
|
(4)
|
|
|
(12)
|
|
Proceeds from differential membership investors
|
47
|
|
|
31
|
|
Payments to differential membership investors
|
(15)
|
|
|
(16)
|
|
Payments to Class B noncontrolling interests investors
|
(21)
|
|
|
(8)
|
|
Proceeds on sale of Class B noncontrolling interests - net
|
—
|
|
|
893
|
|
|
|
|
|
|
|
|
|
Change in amounts due to related parties
|
(1)
|
|
|
19
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
(142)
|
|
|
1,583
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
(32)
|
|
|
12
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD
|
132
|
|
|
166
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD
|
$
|
100
|
|
|
$
|
178
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
Partner noncash distributions
|
$
|
1
|
|
|
$
|
3
|
|
Partner noncash contributions
|
$
|
—
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
Change in noncash investments in equity method investees - net
|
$
|
—
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
Accrued property additions
|
$
|
30
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued preferred distributions
|
$
|
2
|
|
|
$
|
6
|
|
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2019 Form 10-K.
NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(millions)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Units
|
|
|
|
Common Units
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
Units
|
|
Amount
|
|
Units
|
|
Amount
|
|
Comprehensive
Loss
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
Balances, December 31, 2019
|
4.7
|
|
|
$
|
183
|
|
|
65.5
|
|
|
$
|
2,008
|
|
|
$
|
(8)
|
|
|
$
|
4,883
|
|
|
$
|
7,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
—
|
|
|
2
|
|
|
—
|
|
|
(222)
|
|
|
—
|
|
|
(500)
|
|
|
(720)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
Related party distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(62)
|
|
|
(62)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other differential membership investment activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
40
|
|
Payments to Class B noncontrolling interests investors
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
(10)
|
|
Distributions to unitholders(a)
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(35)
|
|
|
—
|
|
|
—
|
|
|
(37)
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2020
|
4.7
|
|
|
183
|
|
|
65.5
|
|
|
1,750
|
|
|
(8)
|
|
|
4,354
|
|
|
6,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
2
|
|
|
—
|
|
|
47
|
|
|
—
|
|
|
78
|
|
|
127
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Related party note receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Related party contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
Related party distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(69)
|
|
|
(69)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other differential membership investment activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
(8)
|
|
Payments to Class B noncontrolling interests investors
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11)
|
|
|
(11)
|
|
Distributions to unitholders(a)
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(36)
|
|
|
—
|
|
|
—
|
|
|
(38)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
1
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2020
|
4.7
|
|
|
$
|
183
|
|
|
65.5
|
|
|
$
|
1,759
|
|
|
$
|
(8)
|
|
|
$
|
4,349
|
|
|
$
|
6,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_________________________
(a) Distributions per common unit of $0.5550 and $0.5350 were paid during the three months ended June 30, 2020 and March 31, 2020, respectively. At June 30, 2020, $2 million of preferred unit distributions were accrued and are payable in August 2020.
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Units
|
|
|
|
Common Units
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
Units
|
|
Amount
|
|
Units
|
|
Amount
|
|
Comprehensive
Loss
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
Balances, December 31, 2018
|
14.0
|
|
|
$
|
548
|
|
|
56.1
|
|
|
$
|
1,804
|
|
|
$
|
(6)
|
|
|
$
|
3,192
|
|
|
$
|
5,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common units - net
|
—
|
|
|
—
|
|
|
0.1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
—
|
|
|
6
|
|
|
—
|
|
|
(22)
|
|
|
—
|
|
|
(105)
|
|
|
(121)
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
(3)
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Related party distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(51)
|
|
|
(51)
|
|
Changes in non-economic ownership interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
(6)
|
|
Other differential membership investment activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
24
|
|
Payments to Class B noncontrolling interests investors
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
(5)
|
|
Distributions to unitholders(a)
|
—
|
|
|
(6)
|
|
|
—
|
|
|
(26)
|
|
|
—
|
|
|
—
|
|
|
(32)
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2019
|
14.0
|
|
|
548
|
|
|
56.2
|
|
|
1,757
|
|
|
(8)
|
|
|
3,048
|
|
|
5,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common units - net
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Acquisition of subsidiaries with noncontrolling ownership interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
472
|
|
|
472
|
|
Net income (loss)
|
—
|
|
|
6
|
|
|
—
|
|
|
(28)
|
|
|
—
|
|
|
(102)
|
|
|
(124)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party note receivable
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Related party contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
Related party distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56)
|
|
|
(56)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other differential membership investment activity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
|
(8)
|
|
Payments to Class B noncontrolling interests investors
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
(3)
|
|
Distributions to unitholders(a)
|
—
|
|
|
(6)
|
|
|
—
|
|
|
(27)
|
|
|
—
|
|
|
—
|
|
|
(33)
|
|
Sale of Class B noncontrolling interest - net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
893
|
|
|
893
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2019
|
14.0
|
|
|
$
|
548
|
|
|
56.2
|
|
|
$
|
1,704
|
|
|
$
|
(8)
|
|
|
$
|
4,256
|
|
|
$
|
6,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________________________
(a) Distributions per common unit of $0.4825 and $0.4650 were paid during the three months ended June 30, 2019 and March 31, 2019, respectively.
This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2019 Form 10-K.
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The accompanying condensed consolidated financial statements should be read in conjunction with the 2019 Form 10-K. In the opinion of NEP management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. Certain amounts included in the prior year's condensed consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period generally will not give a true indication of results for the year.
1. Acquisitions
In June 2019, an indirect subsidiary of NEP completed the acquisition from NEER (June 2019 acquisition) of the following:
•100% of the membership interests in Ashtabula Wind II, LLC, a project company that owns a 120 MW wind generation facility located in North Dakota;
•100% of the membership interests in Garden Wind, LLC, a project company that owns a 150 MW wind generation facility (Story County II) located in Iowa;
•100% of the membership interests in White Oak Energy Holdings, LLC, which owns 100% of the membership interests of White Oak Energy LLC, which owns a 150 MW wind generation facility located in Illinois;
•100% of the Class C membership interests in Rosmar Holdings, LLC (Rosmar), which represent a 49.99% noncontrolling ownership interest in two solar generation facilities, Marshall and Roswell, with a total combined generating capacity of approximately 132 MW located in Minnesota and New Mexico, respectively; and
•49.99% of the membership interests, representing a controlling ownership interest, in Silver State South Solar, LLC (Silver State), which indirectly owns a 250 MW solar generation facility located in Nevada.
NEER retained ownership interests in Rosmar and Silver State and remains the managing member of Rosmar. Thus, NEP's interest in Rosmar is reflected within investments in equity method investees on the condensed consolidated balance sheets. NEER's remaining interest in Silver State is reflected within noncontrolling interests on the condensed consolidated balance sheets (see Note 10 - Noncontrolling Interests).
The purchase price included approximately $1,020 million in cash consideration, plus working capital of $12 million. Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair value. All fair value measurements of assets acquired and liabilities assumed were based on significant estimates and assumptions, including Level 3 (unobservable) inputs, which require judgment. Estimates and assumptions include the projected timing and amount of future cash flows, discount rates reflecting risk inherent in future cash flows and future market prices.
The following table summarizes the final amounts recognized by NEP for the estimated fair value of assets acquired and liabilities assumed in the June 2019 acquisition:
|
|
|
|
|
|
|
|
|
(millions)
|
Total consideration transferred
|
$
|
1,032
|
|
Identifiable assets acquired and liabilities assumed
|
|
Cash
|
$
|
4
|
|
Accounts receivable, other receivables and prepaid expenses
|
159
|
|
Property, plant and equipment – net
|
350
|
|
Intangible assets – PPAs
|
1,110
|
|
Goodwill
|
25
|
|
Other non-current assets
|
133
|
|
Accounts payable, accrued expenses and other current liabilities
|
(132)
|
|
|
|
Other non-current liabilities
|
(155)
|
|
Noncontrolling interest
|
(462)
|
|
Total net identifiable assets, at fair value
|
$
|
1,032
|
|
In November 2019, Meade Pipeline Investment, LLC (the Meade purchaser), an indirect subsidiary of NEP, acquired all of the ownership interests in Meade Pipeline Co LLC (Meade) which owns an approximately 39.2% aggregate ownership interest in the Central Penn Line (CPL), a 185-mile natural gas pipeline that operates in Pennsylvania and a 40% ownership interest in an expansion project (the expansion) of the gas pipeline. NEP's indirect ownership interest in Meade, including Meade's ownership interests in the CPL and the expansion, is reflected as investments in equity method investees.
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
2. Revenue
Revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. NEP's operating revenues are generated primarily from various non-affiliated parties under PPAs and natural gas transportation agreements. NEP's operating revenues from contracts with customers are partly offset by the amortization of intangible assets - PPAs. Revenue is recognized as energy and any related renewable energy attributes are delivered, based on rates stipulated in the respective PPAs, or natural gas transportation services are performed. NEP believes that the obligation to deliver energy and provide the natural gas transportation services is satisfied over time as the customer simultaneously receives and consumes benefits provided by NEP. In addition, NEP believes that the obligation to deliver renewable energy attributes is satisfied at multiple points in time, with the control of the renewable energy attribute being transferred at the same time the related energy is delivered. Included in NEP’s operating revenues for the three months ended June 30, 2020 is $198 million and $50 million, for the six months ended June 30, 2020 is $349 million and $104 million, for the three months ended June 30, 2019 is $174 million and $50 million, and for the six months ended June 30, 2019 is $300 million and $103 million, of revenue from contracts with customers for renewable energy sales and natural gas transportation services, respectively. NEP's accounts receivable are primarily associated with revenues earned from contracts with customers. Receivables represent unconditional rights to consideration and reflect the differences in timing of revenue recognition and cash collections. For substantially all of NEP's receivables, regardless of the type of revenue transaction from which the receivable originated, customer and counterparty credit risk is managed in the same manner and the terms and conditions of payment are similar.
NEP recognizes revenues as energy and any related renewable energy attributes are delivered or natural gas transportation services are performed, consistent with the amounts billed to customers based on rates stipulated in the respective PPAs. NEP considers the amount billed to represent the value of energy delivered or services provided to the customer. NEP’s customers typically receive bills monthly with payment due within 30 days.
The contracts with customers related to pipeline service revenues contain a fixed price related to firm natural gas transportation capacity with maturity dates ranging from 2020 to 2035. At June 30, 2020, NEP expects to record approximately $2.0 billion of revenues over the remaining terms of the related contracts as the capacity is provided. Revenues yet to be earned under contracts with customers to deliver energy and any related energy attributes, which have maturity dates ranging from 2026 to 2046, will vary based on the volume of energy delivered. At June 30, 2020, NEP expects to record approximately $207 million of revenues related to the fixed price components of one PPA through 2039 as the energy is delivered.
3. Income Taxes
Income taxes are calculated for NEP as a single taxpaying corporation for U.S. federal and state income taxes (based on its election to be taxed as a corporation). NEP recognizes in income its applicable ownership share of U.S. income taxes due to the disregarded tax status of substantially all of the U.S. projects under NEP OpCo. Net income or loss attributable to noncontrolling interests includes minimal U.S. taxes.
The effective tax rate for the three and six months ended June 30, 2020 was approximately 9% and 9%, respectively, and for the three and six months ended June 30, 2019 was approximately 7% and 6%, respectively, and was primarily affected by tax expense (benefit) attributable to noncontrolling interests of approximately $(16) million and $89 million for the three and six months ended June 30, 2020, respectively, and $21 million and $43 million for the three and six months ended June 30, 2019, respectively.
4. Fair Value Measurements
The fair value of assets and liabilities are determined using either unadjusted quoted prices in active markets (Level 1) or pricing inputs that are observable (Level 2) whenever that information is available and using unobservable inputs (Level 3) to estimate fair value only when relevant observable inputs are not available. NEP uses several different valuation techniques to measure the fair value of assets and liabilities relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those assets and liabilities that are measured at fair value on a recurring basis. Certain financial instruments may be valued using multiple inputs including discount rates, counterparty credit ratings and credit enhancements. NEP’s assessment of the significance of any particular input to the fair value measurement requires judgment and may affect the placement of those assets and liabilities within the fair value hierarchy levels. Non-performance risk, including the consideration of a credit valuation adjustment, is also considered in the determination of fair value for all assets and liabilities measured at fair value. Transfers between fair value hierarchy levels occur at the beginning of the period in which the transfer occurred.
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Cash Equivalents and Restricted Cash Equivalents - The fair value of money market funds that are included in cash and cash equivalents, other current assets and other non-current assets on the condensed consolidated balance sheets is estimated using a market approach based on current observable market prices.
Interest Rate Contracts - NEP estimates the fair value of its derivatives using an income approach based on a discounted cash flows valuation technique utilizing the net amount of estimated future cash inflows and outflows related to the agreements. The primary inputs used in the fair value measurements include the contractual terms of the derivative agreements, current interest rates and credit profiles. The significant inputs for the resulting fair value measurement are market-observable inputs and the measurements are reported as Level 2 in the fair value hierarchy.
NEP’s financial assets and liabilities and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
(millions)
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
—
|
|
|
59
|
|
|
59
|
|
|
—
|
|
|
9
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
4
|
|
|
$
|
59
|
|
|
$
|
63
|
|
|
$
|
16
|
|
|
$
|
9
|
|
|
$
|
25
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
$
|
—
|
|
|
$
|
1,213
|
|
|
$
|
1,213
|
|
|
$
|
—
|
|
|
$
|
427
|
|
|
$
|
427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
$
|
—
|
|
|
$
|
1,213
|
|
|
$
|
1,213
|
|
|
$
|
—
|
|
|
$
|
427
|
|
|
$
|
427
|
|
Financial Instruments Recorded at Other than Fair Value - The carrying amounts and estimated fair values of other financial instruments recorded at other than fair value are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
December 31, 2019
|
|
|
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
|
(millions)
|
|
|
|
|
|
|
Long-term debt, including current maturities(a)
|
$
|
4,195
|
|
|
$
|
4,249
|
|
|
$
|
4,144
|
|
|
$
|
4,235
|
|
____________________
(a) At June 30, 2020 and December 31, 2019, approximately $4,223 million and $4,211 million, respectively, of the fair value is estimated using a market approach based on quoted market prices for the same or similar issues (Level 2); the balance is estimated using an income approach utilizing a discounted cash flow valuation technique, considering the current credit profile of the debtor (Level 3).
5. Derivative Instruments and Hedging Activity
NEP uses derivative instruments (primarily interest rate swaps) to manage the interest rate cash flow risk associated with outstanding and expected future debt issuances and borrowings. NEP records all derivative instruments that are required to be marked to market as either assets or liabilities on its condensed consolidated balance sheets and measures them at fair value each reporting period. NEP does not utilize hedge accounting for its derivative instruments. All changes in the derivatives' fair value are recognized in interest expense in the condensed consolidated statements of income (loss). At June 30, 2020 and December 31, 2019, the net notional amounts of the interest rate contracts were approximately $7,076 million and $6,859 million, respectively.
During the six months ended June 30, 2019, NEP reclassified approximately $6 million from AOCI to interest expense primarily because the related future transactions being hedged were no longer going to occur. At June 30, 2020, NEP's AOCI does not include any amounts related to cash flow hedges. Cash flows from the interest rate contracts are reported in cash flows from operating activities in the condensed consolidated statements of cash flows.
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Fair Value of Derivative Instruments - The tables below present NEP's gross derivative positions, based on the total fair value of each derivative instrument, at June 30, 2020 and December 31, 2019, as required by disclosure rules, as well as the location of the net derivative positions, based on the expected timing of future payments, on the condensed consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Gross Basis
|
|
|
|
Net Basis
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
(millions)
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
$
|
59
|
|
|
$
|
1,213
|
|
|
$
|
—
|
|
|
$
|
1,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value by balance sheet line item:
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
—
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
$
|
18
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
1,136
|
|
Total derivatives
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
1,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Gross Basis
|
|
|
|
Net Basis
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
(millions)
|
|
|
|
|
|
|
Interest rate contracts
|
|
|
|
|
$
|
9
|
|
|
$
|
427
|
|
|
$
|
—
|
|
|
$
|
418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value by balance sheet line item:
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
Other non-current assets
|
|
|
|
|
|
|
|
|
—
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
|
|
|
|
$
|
1
|
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
417
|
|
Total derivatives
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
418
|
|
Financial Statement Impact of Derivative Instruments - Gains (losses) related to NEP's interest rate contracts are recorded in the condensed consolidated financial statements as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(millions)
|
|
|
|
|
|
|
Interest rate contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains reclassified from AOCI to interest expense
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Gains (losses) recognized in interest expense
|
$
|
56
|
|
(a)
|
$
|
(160)
|
|
|
$
|
(739)
|
|
|
$
|
(278)
|
|
____________________
(a) The valuation of certain interest rate swap transactions entered into during the fourth quarter of 2019 was corrected during the three months ended June 30, 2020, which resulted in a one-time gain of approximately $19 million.
Credit-Risk-Related Contingent Features - Certain of NEP's derivative instruments contain credit-related cross-default and material adverse change triggers, none of which contain requirements to maintain certain credit ratings or financial ratios. At June 30, 2020 and December 31, 2019, the aggregate fair value of NEP's derivative instruments with contingent risk features that were in a liability position was approximately $1,103 million and $420 million, respectively.
6. Variable Interest Entities
NEP has identified NEP OpCo, a limited partnership with a general partner and limited partners, as a VIE. NEP has consolidated the results of NEP OpCo and its subsidiaries because of its controlling interest in the general partner of NEP OpCo. At June 30, 2020, NEP owned an approximately 39.2% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 60.8% limited partner interest in NEP OpCo (NEE's noncontrolling interest). The assets and liabilities of NEP OpCo as well as the operations of NEP OpCo represent substantially all of NEP's assets and liabilities and its operations.
In addition, at June 30, 2020, NEP OpCo consolidated 12 VIEs related to certain subsidiaries that have sold differential membership interests in entities which own and operate 20 wind electric generation facilities. These entities are considered VIEs because the holders of the differential membership interests do not have substantive rights over the significant activities of these
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
entities. The assets, primarily property, plant and equipment - net, and liabilities, primarily asset retirement obligation and non-current due to related party, of the VIEs, totaled approximately $4,739 million and $117 million, respectively, at June 30, 2020 and $4,814 million and $122 million, respectively, at December 31, 2019.
At June 30, 2020, NEP OpCo also consolidated four VIEs related to the sales of noncontrolling Class B interests in certain NEP subsidiaries. See Note 10 - Noncontrolling Interests. These entities are considered VIEs because the holders of the noncontrolling Class B interests do not have substantive rights over the significant activities of the entities. The assets, primarily property, plant and equipment - net and intangible assets - PPAs, and the liabilities, primarily long-term debt, other long-term liabilities and asset retirement obligation, of these VIEs totaled approximately $7,810 million and $1,579 million, respectively, at June 30, 2020 and $7,900 million and $1,448 million, respectively, at December 31, 2019. These VIEs include three other VIEs related to Rosmar, Silver State and Meade. See Note 1. In addition, certain of these VIEs contain entities which have sold differential membership interests and approximately $2,090 million and $2,122 million of assets and $53 million and $53 million of liabilities are also included in the disclosure of the VIEs related to differential membership interests at June 30, 2020 and December 31, 2019, respectively.
NEP has an indirect equity method investment in three NEER solar projects with a total generating capacity of 277 MW. Through a series of transactions, a subsidiary of NEP issued 1,000,000 NEP OpCo Class B Units, Series 1 and 1,000,000 NEP OpCo Class B Units, Series 2, to NEER for approximately 50% of the ownership interests in the three solar projects (non-economic ownership interests). NEER, as holder of the NEP OpCo Class B Units, will retain 100% of the economic rights in the projects to which the respective Class B Units relate, including the right to all distributions paid by the project subsidiaries that own the projects to NEP OpCo. NEER has agreed to indemnify NEP against all risks relating to NEP’s ownership of the projects until NEER offers to sell economic interests to NEP and NEP accepts such offer, if NEP chooses to do so. NEER has also agreed to continue to manage the operation of the projects at its own cost, and to contribute to the projects any capital necessary for the operation of the projects, until NEER offers to sell economic interests to NEP and NEP accepts such offer. At June 30, 2020 and December 31, 2019, NEP's equity method investment related to the non-economic ownership interests of approximately $10 million and $11 million, respectively, is reflected as other non-current assets and $25 million and $7 million, respectively, is reflected as other non-current liabilities on the condensed consolidated balance sheets. All equity in earnings of the non-economic ownership interests is allocated to net income attributable to noncontrolling interests. NEP is not the primary beneficiary and therefore does not consolidate these entities because it does not control any of the ongoing activities of these entities, was not involved in the initial design of these entities and does not have a controlling interest in these entities.
7. Capitalization
Debt - Significant long-term debt issuances and borrowings by subsidiaries of NEP during the six months ended June 30, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date Issued/Borrowed
|
|
Debt Issuances/Borrowings
|
|
Interest
Rate
|
|
Principal
Amount
|
|
Maturity
Date
|
|
|
|
|
|
|
(millions)
|
|
|
February 2020
|
|
NEP OpCo senior secured revolving credit facility
|
|
Variable(a)
|
|
$
|
50
|
|
(b)
|
2025
|
January 2020 - June 2020
|
|
Senior secured limited-recourse debt
|
|
Variable(a)
|
|
$
|
11
|
|
(c)
|
2026
|
————————————
(a)Variable rate is based on an underlying index plus a margin.
(b)At June 30, 2020, $550 million of borrowings were outstanding and approximately $117 million of letters of credit were issued under the NEP OpCo credit facility.
(c)At June 30, 2020, approximately $831 million of borrowings were outstanding under the existing credit agreement of the Meade purchaser and Pipeline Investment Holdings, LLC.
In February 2020, NEP OpCo and its direct subsidiary (loan parties) entered into an amendment of their existing revolving credit facility. The amendments to the revolving credit facility include, among other things, an extension of the maturity from February 2024 to February 2025.
NEP OpCo and its subsidiaries' secured long-term debt agreements are secured by liens on certain assets and contain provisions which, under certain conditions, could restrict the payment of distributions or related party fee payments. At June 30, 2020, NEP and its subsidiaries were in compliance with all financial debt covenants under their financings except as discussed in Note 11 - PG&E Bankruptcy.
Equity - On July 23, 2020, the board of directors of NEP authorized a distribution of $0.5775 per common unit payable on August 14, 2020 to its common unitholders of record on August 6, 2020.
Earnings (Loss) Per Unit - Diluted earnings (loss) per unit is based on the weighted-average number of common units and potential common units outstanding during the period, including the dilutive effect of the convertible notes and preferred units. The dilutive effect of the convertible notes and preferred units is computed using the if-converted method.
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The reconciliation of NEP's basic and diluted earnings (loss) per unit for the three and six months ended June 30, 2020 and 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
(millions, except per unit amounts)
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NEP – basic
|
$
|
47
|
|
|
$
|
(28)
|
|
|
$
|
(176)
|
|
|
$
|
(49)
|
|
|
Adjustments for convertible notes and preferred units(a)
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net income (loss) attributable to NEP used to compute diluted earnings (loss) per unit
|
$
|
52
|
|
|
$
|
(28)
|
|
|
$
|
(176)
|
|
|
$
|
(49)
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average number of common units outstanding – basic
|
65.5
|
|
|
56.2
|
|
|
65.5
|
|
|
56.1
|
|
|
Effect of dilutive convertible notes and preferred units(a)
|
10.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Weighted-average number of common units outstanding and assumed conversions
|
75.8
|
|
|
56.2
|
|
|
65.5
|
|
|
56.1
|
|
|
Earnings (loss) per unit attributable to NEP:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.71
|
|
|
$
|
(0.49)
|
|
|
$
|
(2.68)
|
|
|
$
|
(0.88)
|
|
|
Assuming dilution
|
$
|
0.69
|
|
|
$
|
(0.49)
|
|
|
$
|
(2.68)
|
|
|
$
|
(0.88)
|
|
|
————————————
(a)Due to the net losses incurred during the six months ended June 30, 2020 and the three and six months ended June 30, 2019, the weighted-average number of common units issuable pursuant to the convertible notes and preferred units totaling approximately 10.3 million, 19.7 million and 19.7 million, respectively, were not included in the calculation of diluted loss per unit due to their antidilutive effect.
8. Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
Net Unrealized
Gains on
Cash Flow Hedges
|
|
|
|
Other Comprehensive
Income (Loss) Related to
Equity Method Investees
|
|
Total
|
|
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2019
|
$
|
—
|
|
|
|
|
$
|
(22)
|
|
|
$
|
(22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
—
|
|
|
|
|
—
|
|
|
—
|
|
Balances, March 31, 2020
|
—
|
|
|
|
|
(22)
|
|
|
(22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income related to equity method investee
|
—
|
|
|
|
|
1
|
|
|
1
|
|
Net other comprehensive income (loss)
|
—
|
|
|
|
|
1
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2020
|
$
|
—
|
|
|
|
|
$
|
(21)
|
|
|
$
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI attributable to noncontrolling interest
|
$
|
—
|
|
|
|
|
$
|
(13)
|
|
|
$
|
(13)
|
|
AOCI attributable to NEP
|
$
|
—
|
|
|
|
|
$
|
(8)
|
|
|
$
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
Net Unrealized
Gains on
Cash Flow Hedges
|
|
|
|
Other Comprehensive Income (Loss) Related to Equity Method Investee
|
|
Total
|
|
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2018
|
$
|
6
|
|
|
|
|
$
|
(24)
|
|
|
$
|
(18)
|
|
Amounts reclassified from AOCI to interest expense
|
(6)
|
|
|
|
|
—
|
|
|
(6)
|
|
Other comprehensive income related to equity method investee
|
—
|
|
|
|
|
1
|
|
|
1
|
|
Net other comprehensive income (loss)
|
(6)
|
|
|
|
|
1
|
|
|
(5)
|
|
Balances, March 31, 2019
|
—
|
|
|
|
|
(23)
|
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2019
|
$
|
—
|
|
|
|
|
$
|
(23)
|
|
|
$
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI attributable to noncontrolling interest
|
$
|
—
|
|
|
|
|
$
|
(15)
|
|
|
$
|
(15)
|
|
AOCI attributable to NEP
|
$
|
—
|
|
|
|
|
$
|
(8)
|
|
|
$
|
(8)
|
|
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
9. Related Party Transactions
Each project entered into O&M agreements and ASAs with subsidiaries of NEER whereby the projects pay a certain annual fee plus actual costs incurred in connection with certain O&M and administrative services performed under these agreements. These services are reflected as operations and maintenance in the condensed consolidated statements of income (loss). Additionally, a NEP subsidiary pays an affiliate for transmission services which are reflected as operations and maintenance in the condensed consolidated statements of income (loss). Certain projects have also entered into various types of agreements including those related to shared facilities and transmission lines, transmission line easements, technical support and construction coordination with subsidiaries of NEER whereby certain fees or cost reimbursements are paid to, or received by, certain subsidiaries of NEER.
Management Services Agreement - Under the MSA, an indirect wholly owned subsidiary of NEE provides operational, management and administrative services to NEP, including managing NEP’s day-to-day affairs and providing individuals to act as NEP’s executive officers and directors, in addition to those services that are provided under the existing O&M agreements and ASAs described above between NEER subsidiaries and NEP subsidiaries. NEP OpCo pays NEE an annual management fee equal to the greater of 1% of the sum of NEP OpCo’s net income plus interest expense, income tax expense and depreciation and amortization expense less certain non-cash, non-recurring items for the most recently ended fiscal year and $4 million (as adjusted for inflation beginning in 2016), which is paid in quarterly installments with an additional payment each January to the extent 1% of the sum of NEP OpCo’s net income plus interest expense, income tax expense and depreciation and amortization expense less certain non-cash, non-recurring items for the preceding fiscal year exceeds $4 million (as adjusted for inflation beginning in 2016). NEP OpCo also makes certain payments to NEE based on the achievement by NEP OpCo of certain target quarterly distribution levels to its unitholders. NEP’s O&M expenses for the three and six months ended June 30, 2020 include approximately $27 million and $53 million, respectively, and for the three and six months ended June 30, 2019 include $23 million and $44 million, respectively, related to the MSA.
Cash Sweep and Credit Support Agreement - NEP OpCo is a party to the CSCS agreement with NEER under which NEER and certain of its affiliates provide credit support in the form of letters of credit and guarantees to satisfy NEP’s subsidiaries’ contractual obligations. NEP OpCo pays NEER an annual credit support fee based on the level and cost of the credit support provided, payable in quarterly installments. NEP’s O&M expenses for the three and six months ended June 30, 2020 include approximately $1 million and $3 million, respectively, and for the three and six months ended June 30, 2019 include $1 million and $3 million, respectively, related to the CSCS agreement.
NEER and certain of its affiliates may withdraw funds (Project Sweeps) received by NEP OpCo under the CSCS agreement, or its subsidiaries in connection with certain long-term debt agreements, and hold those funds in accounts belonging to NEER or its affiliates to the extent the funds are not required to pay project costs or otherwise required to be maintained by NEP's subsidiaries. NEER and its affiliates may keep the funds until the financing agreements permit distributions to be made, or, in the case of NEP OpCo, until such funds are required to make distributions or to pay expenses or other operating costs or NEP OpCo otherwise demands the return of such funds. If NEER or its affiliates fail to return withdrawn funds when required by NEP's subsidiaries’ financing agreements, the lenders will be entitled to draw on any credit support provided by NEER or its affiliates in the amount of such withdrawn funds. If NEER or one of its affiliates realizes any earnings on the withdrawn funds prior to the return of such funds, it will be permitted to retain those earnings. At June 30, 2020 and December 31, 2019, the cash sweep amounts held in accounts belonging to NEER or its affiliates were approximately $58 million and $12 million, respectively, and are included in due from related parties on the condensed consolidated balance sheets.
Guarantees and Letters of Credit Entered into by Related Parties - Certain PPAs include requirements of the project entities to meet certain performance obligations. NEECH or NEER has provided letters of credit or guarantees for certain of these performance obligations and payment of any obligations from the transactions contemplated by the PPAs. In addition, certain financing agreements require cash and cash equivalents to be reserved for various purposes. In accordance with the terms of these financing agreements, guarantees from NEECH have been substituted in place of these cash and cash equivalents reserve requirements. Also, under certain financing agreements, indemnifications have been provided by NEECH. In addition, certain interconnection agreements and site certificates require letters of credit or a surety bond to secure certain payment or restoration obligations related to those agreements. NEECH also guarantees the Project Sweep amounts held in accounts belonging to NEER, as described above. At June 30, 2020, NEECH or NEER guaranteed or provided indemnifications, letters of credit or surety bonds totaling approximately $639 million related to these obligations. Agreements related to the sale of differential membership interests require NEER to guarantee payments due by the VIEs and the indemnifications to the VIEs' respective investors. At June 30, 2020, NEER guaranteed a total of approximately $11 million related to these obligations.
Due to Related Party - Non-current amounts due to related party on the condensed consolidated balance sheets primarily represent amounts owed by certain of NEP's wind projects to NEER to refund NEER for certain transmission costs paid on behalf of the wind projects. Amounts will be paid to NEER as the wind projects receive payments from third parties for related notes receivable recorded in other non-current assets on the condensed consolidated balance sheets.
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
Transportation and Fuel Management Agreements - A subsidiary of NEP assigned to a subsidiary of NEER certain gas commodity agreements in exchange for entering into transportation agreements and a fuel management agreement whereby the benefits of the gas commodity agreements (net of transportation paid to the NEP subsidiary) are passed back to the NEP subsidiary. NEP recognized revenues related to the transportation and fuel management agreements of approximately $6 million and $10 million during the three and six months ended June 30, 2020, respectively, and $2 million and $3 million during the three and six months ended June 30, 2019, respectively.
10. Summary of Significant Accounting and Reporting Policies
Restricted Cash - At June 30, 2020 and December 31, 2019, NEP had approximately $3 million and $3 million, respectively, of restricted cash included in other current assets on NEP's condensed consolidated balance sheets. Restricted cash at June 30, 2020 and December 31, 2019 is primarily related to collateral deposits from a counterparty. Restricted cash reported as current assets are recorded as such based on the anticipated use of these funds.
Reference Rate Reform - In March 2020, the Financial Accounting Standards Board (FASB) issued an accounting standards update which provides certain options to apply GAAP guidance on contract modifications and hedge accounting as companies transition from the London Inter-Bank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates that are yet to be determined or finalized. NEP’s contracts that reference LIBOR or other interbank offered rates mainly relate to debt and derivative instruments. The standards update was effective upon issuance and can be applied prospectively through December 31, 2022. NEP is currently evaluating whether to apply the options provided by the standards update with regard to its contracts that reference LIBOR or other interbank offered rates as an interest rate benchmark.
Noncontrolling Interests - At June 30, 2020, the Class B noncontrolling ownership interests (the Class B noncontrolling ownership interests in NEP Renewables sold in 2018 and NEP Renewables II, NEP Pipelines and STX Midstream sold in 2019), the differential membership interests, NEE's approximately 60.8% noncontrolling limited partner interest in NEP OpCo and NEER's approximately 50% noncontrolling ownership interest in Silver State, as well as a non-affiliated party's 10% interest in one of the Texas pipelines and the non-economic ownership interests are reflected as noncontrolling interests on the condensed consolidated balance sheets. The impact of the net income (loss) attributable to the differential membership interests and the Class B noncontrolling ownership interests are allocated to NEE's noncontrolling ownership interest and the net income attributable to NEP based on the respective ownership percentage of NEP OpCo. Details of the activity in noncontrolling interests are below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Noncontrolling Ownership Interests
|
|
Differential Membership Interests
|
|
NEER's Noncontrolling Ownership Interests in NEP OpCo and Silver State
|
|
Other Noncontrolling Ownership Interests
|
|
Total Noncontrolling
Interests
|
Six months ended June 30, 2020
|
|
(millions)
|
|
|
|
|
|
|
|
|
Balances, December 31, 2019
|
|
$
|
2,628
|
|
|
$
|
1,798
|
|
|
$
|
389
|
|
|
$
|
68
|
|
|
$
|
4,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NCI
|
|
52
|
|
|
(71)
|
|
|
(459)
|
|
|
(22)
|
|
|
(500)
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
Related party distributions
|
|
—
|
|
|
—
|
|
|
(60)
|
|
|
(2)
|
|
|
(62)
|
|
|
|
|
|
|
|
|
|
|
|
|
Differential membership investment contributions, net of distributions
|
|
—
|
|
|
40
|
|
|
—
|
|
|
—
|
|
|
40
|
|
Payments to Class B noncontrolling interest investors
|
|
(10)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2020
|
|
2,670
|
|
|
1,767
|
|
|
(130)
|
|
|
47
|
|
|
4,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party note receivable
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Net income (loss) attributable to NCI
|
|
53
|
|
|
(78)
|
|
|
97
|
|
|
6
|
|
|
78
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Related party contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
Related party distributions
|
|
—
|
|
|
—
|
|
|
(67)
|
|
|
(2)
|
|
|
(69)
|
|
|
|
|
|
|
|
|
|
|
|
|
Differential membership investment contributions, net of distributions
|
|
—
|
|
|
(8)
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
Payments to Class B noncontrolling interest investors
|
|
(11)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Balances, June 30, 2020
|
|
$
|
2,712
|
|
|
$
|
1,681
|
|
|
$
|
(97)
|
|
|
$
|
53
|
|
|
$
|
4,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Noncontrolling Ownership Interests
|
|
Differential Membership Interests
|
|
NEER's Noncontrolling Ownership Interests in NEP OpCo and Silver State
|
|
Other Noncontrolling Ownership Interests
|
|
Total Noncontrolling
Interests
|
Six months ended June 30, 2019
|
|
(millions)
|
|
|
|
|
|
|
|
|
Balances, December 31, 2018
|
|
$
|
751
|
|
|
$
|
2,019
|
|
|
$
|
342
|
|
|
$
|
80
|
|
|
$
|
3,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NCI
|
|
12
|
|
|
(60)
|
|
|
(50)
|
|
|
(7)
|
|
|
(105)
|
|
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(3)
|
|
Related party contributions
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Related party distributions
|
|
—
|
|
|
—
|
|
|
(50)
|
|
|
(1)
|
|
|
(51)
|
|
Changes in non-economic ownership interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
(6)
|
|
Differential membership investment contributions, net of distributions
|
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
24
|
|
Payments to Class B noncontrolling interest investors
|
|
(5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Balances, March 31, 2019
|
|
758
|
|
|
1,983
|
|
|
241
|
|
|
66
|
|
|
3,048
|
|
Sale of noncontrolling interest in a NEP OpCo subsidiary
|
|
893
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
893
|
|
Acquisition of subsidiaries with differential membership interests
|
|
—
|
|
|
—
|
|
|
472
|
|
|
—
|
|
|
472
|
|
Related party note receivable
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Net income (loss) attributable to NCI
|
|
25
|
|
|
(63)
|
|
|
(59)
|
|
|
(5)
|
|
|
(102)
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party contributions
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
Related party distributions
|
|
—
|
|
|
—
|
|
|
(54)
|
|
|
(2)
|
|
|
(56)
|
|
|
|
|
|
|
|
|
|
|
|
|
Differential membership investment contributions, net of distributions
|
|
—
|
|
|
(8)
|
|
|
—
|
|
|
—
|
|
|
(8)
|
|
Payments to Class B noncontrolling interest investors
|
|
(3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2019
|
|
$
|
1,673
|
|
|
$
|
1,912
|
|
|
$
|
612
|
|
|
$
|
59
|
|
|
$
|
4,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. Commitments and Contingencies
Development, Engineering and Construction Commitments - At June 30, 2020, indirect subsidiaries of NEP had several engineering, procurement and construction contracts and a funding commitment related to the repowering of certain wind facilities and expansion projects at certain pipelines. Those contracts have varying payment terms and some include performance obligations that allow the NEP subsidiaries to receive liquidated damages if the contractor does not perform. As of June 30, 2020, the NEP subsidiaries had purchased approximately $166 million related to these projects, of which $36 million was purchased from NEER. Such costs primarily have been capitalized in property, plant and equipment - net on the condensed consolidated balance sheets. As of June 30, 2020, the NEP subsidiaries have remaining commitments under these contracts of approximately $205 million.
PG&E Bankruptcy - During the six months ended June 30, 2020, approximately $19 million of net income attributable to NEP relates to PPAs that the Genesis, Desert Sunlight and Shafter solar projects have with PG&E. On January 29, 2019, PG&E filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. PG&E’s Chapter 11 filing, or related events, caused events of default under the related financings which, among other things, blocked the distribution of cash generated by those projects. On July 1, 2020, PG&E emerged from bankruptcy, curing the related events of default that remained outstanding. On July 23, 2020, NEP received a distribution of approximately $65 million from Desert Sunlight.
Coronavirus Pandemic - NEP is closely monitoring the global outbreak of the novel coronavirus (COVID-19) and is taking steps intended to mitigate the potential risks to NEP posed by COVID-19. NEP has implemented its pandemic plan, which includes various processes and procedures intended to limit the impact of COVID-19 on its business. These processes and procedures include the pandemic plan implemented by NEER related to services NEER provides to NEP. To date, there has been no material impact on NEP's operations, financial performance, or liquidity as a result of COVID-19; however, the ultimate severity or duration of the outbreak or its effects on the global, national or local economy, the capital and credit markets, the services NEER provides to NEP, or NEP's customers and suppliers is uncertain. NEP cannot predict whether COVID-19 will have a material impact on its business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
NEP is a growth-oriented limited partnership formed to acquire, manage and own contracted clean energy projects with stable long-term cash flows. NEP consolidates the results of NEP OpCo and its subsidiaries through its controlling interest in the general partner of NEP OpCo. At June 30, 2020, NEP owned an approximately 39.2% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 60.8% limited partner interest in NEP OpCo. Through NEP OpCo, NEP has ownership interests in a portfolio of contracted renewable generation assets consisting of wind and solar projects and a portfolio of contracted natural gas pipeline assets. NEP's financial results are shown on a consolidated basis with financial results attributable to NEE Equity reflected in noncontrolling interests.
This discussion should be read in conjunction with the Notes contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2019 Form 10-K. The results of operations for an interim period generally will not give a true indication of results for the year. In the following discussions, all comparisons are with the corresponding items in the prior year period.
In June 2019, an indirect subsidiary of NEP completed the acquisition from NEER of indirect membership interests in three wind and three solar generation facilities with a combined net generating capacity of approximately 611 MW. In November 2019, an indirect subsidiary of NEP acquired all of the ownership interests in Meade, which owns interests in a natural gas pipeline. See Note 1.
NEP is closely monitoring the global outbreak of COVID-19 and is taking steps intended to mitigate the potential risks to NEP posed by COVID-19. See Note 11 - Coronavirus Pandemic.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(millions)
|
|
|
|
|
|
|
Statement of Income (Loss) Data:
|
|
|
|
|
|
|
|
OPERATING REVENUES
|
|
|
|
|
|
|
|
Renewable energy sales
|
$
|
203
|
|
|
$
|
170
|
|
|
$
|
360
|
|
|
$
|
294
|
|
Texas pipelines service revenues
|
50
|
|
|
49
|
|
|
105
|
|
|
103
|
|
Total operating revenues
|
253
|
|
|
219
|
|
|
465
|
|
|
397
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
Operations and maintenance
|
89
|
|
|
82
|
|
|
180
|
|
|
157
|
|
Depreciation and amortization
|
66
|
|
|
63
|
|
|
133
|
|
|
124
|
|
Taxes other than income taxes and other
|
9
|
|
|
7
|
|
|
14
|
|
|
13
|
|
Total operating expenses - net
|
164
|
|
|
152
|
|
|
327
|
|
|
294
|
|
OPERATING INCOME
|
89
|
|
|
67
|
|
|
138
|
|
|
103
|
|
OTHER INCOME (DEDUCTIONS)
|
|
|
|
|
|
|
|
Interest expense
|
16
|
|
|
(207)
|
|
|
(823)
|
|
|
(362)
|
|
Equity in earnings of equity method investees
|
29
|
|
|
9
|
|
|
46
|
|
|
8
|
|
Equity in earnings (losses) of non-economic ownership interests
|
5
|
|
|
(4)
|
|
|
(18)
|
|
|
(11)
|
|
Other - net
|
1
|
|
|
1
|
|
|
2
|
|
|
2
|
|
Total other income (deductions) - net
|
51
|
|
|
(201)
|
|
|
(793)
|
|
|
(363)
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
140
|
|
|
(134)
|
|
|
(655)
|
|
|
(260)
|
|
INCOME TAX EXPENSE (BENEFIT)
|
13
|
|
|
(10)
|
|
|
(62)
|
|
|
(16)
|
|
NET INCOME (LOSS)
|
127
|
|
|
(124)
|
|
|
(593)
|
|
|
(244)
|
|
Net income attributable to preferred distributions
|
(2)
|
|
|
(6)
|
|
|
(4)
|
|
|
(12)
|
|
Net loss (income) attributable to noncontrolling interests
|
(78)
|
|
|
102
|
|
|
421
|
|
|
207
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP
|
$
|
47
|
|
|
$
|
(28)
|
|
|
$
|
(176)
|
|
|
$
|
(49)
|
|
Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019
Operating Revenues
Renewable energy sales increased approximately $33 million during the three months ended June 30, 2020 reflecting an increase of approximately $21 million related to the projects acquired in June 2019 and an increase of $12 million primarily related to higher wind and solar resource.
Operating Expenses
Operations and Maintenance
O&M expenses increased approximately $7 million during the three months ended June 30, 2020 primarily reflecting an increase of $5 million in higher IDR fees related to growth in NEP's distributions to its common unitholders and an increase of $2 million related to the projects acquired in June 2019.
Other Income (Deductions)
Interest Expense
Interest expense decreased approximately $223 million during the three months ended June 30, 2020 primarily due to a favorable change of $216 million related to mark-to-market activity.
Equity in Earnings of Equity Method Investees
Equity in earnings of equity method investees increased approximately $20 million during the three months ended June 30, 2020 primarily due to earnings related to the ownership interests in Meade acquired in November 2019 (see Note 1).
Equity in Earnings (Losses) of Non-Economic Ownership Interests
The earnings related to non-economic ownership interests increased approximately $9 million during the three months ended June 30, 2020 due to higher earnings at the related projects primarily related to favorable mark-to-market activity.
Income Taxes
For the three months ended June 30, 2020, NEP recorded income tax expense of approximately $13 million on income before income taxes of $140 million, resulting in an effective tax rate of 9%. The tax expense is comprised primarily of income tax expense of approximately $29 million at the statutory rate of 21%, partly offset by $16 million of income tax benefit attributable to noncontrolling interests.
For the three months ended June 30, 2019, NEP recorded income tax benefit of approximately $10 million on loss before income taxes of $134 million, resulting in an effective tax rate of 7%. The tax benefit is comprised primarily of income tax benefit of approximately $28 million at the statutory rate of 21% and $3 million of state income taxes, partly offset by $21 million of income tax attributable to noncontrolling interests.
Net Loss (Income) Attributable to Noncontrolling Interests
For the three months ended June 30, 2020 and 2019, net loss (income) attributable to noncontrolling interests reflects the net income or loss attributable to NEE's noncontrolling interest in NEP OpCo, a non-affiliated party's 10% interest in one of the Texas pipelines, the loss allocated to differential membership interest investors and the income allocated to the Class B noncontrolling interests in NEP Renewables and NEP Renewables II as well as NEER's approximately 50% noncontrolling interest in Silver State. Additionally, for the three months ended June 30, 2020, net loss (income) attributable to noncontrolling interests reflects the income allocated to the Class B noncontrolling interests in NEP Pipelines and STX Midstream sold in the fourth quarter of 2019. See Note 10 - Noncontrolling Interests.
Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
Operating Revenues
Renewable energy sales increased approximately $66 million during the six months ended June 30, 2020 reflecting an increase of approximately $39 million related to the projects acquired in June 2019 and an increase of $27 million primarily related to higher wind and solar resource.
Operating Expenses
Operations and Maintenance
O&M expenses increased approximately $23 million during the six months ended June 30, 2020 primarily reflecting increases of $9 million in higher IDR fees related to growth in NEP's distributions to its common unitholders, $6 million related to the projects acquired in June 2019 and $8 million in other project operating expenses.
Depreciation and Amortization
Depreciation and amortization expense increased approximately $9 million during the six months ended June 30, 2020 primarily as a result of $7 million of depreciation related to the projects acquired in June 2019.
Other Income (Deductions)
Interest Expense
Interest expense increased approximately $461 million during the six months ended June 30, 2020 primarily due to $461 million of unfavorable mark-to-market activity.
Equity in Earnings of Equity Method Investees
Equity in earnings of equity method investees increased approximately $38 million during the six months ended June 30, 2020 primarily due to earnings related to the ownership interests in Meade acquired in November 2019 (see Note 1).
Equity in Losses of Non-Economic Ownership Interests
The losses related to non-economic ownership interests increased approximately $7 million during the six months ended June 30, 2020 due to lower earnings at the related projects primarily related to unfavorable mark-to-market activity.
Income Taxes
For the six months ended June 30, 2020, NEP recorded an income tax benefit of approximately $62 million on loss before income taxes of $655 million, resulting in an effective tax rate of 9%. The tax benefit is comprised primarily of income tax benefit of approximately $138 million at the statutory rate of 21% and state tax benefit of $10 million, partly offset by $89 million of income tax attributable to noncontrolling interests. Despite NEP's loss before income taxes, primarily driven by unfavorable mark-to-market activity related to its derivative contracts, NEP currently estimates that it will be able to realize its deferred tax assets. The assumptions used in NEP's evaluation require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates NEP is using to manage the underlying businesses.
For the six months ended June 30, 2019, NEP recorded income tax benefit of approximately $16 million on loss before income taxes of $260 million, resulting in an effective tax rate of 6%. The tax benefit is comprised primarily of income tax benefit of approximately $55 million at the statutory rate of 21% and $4 million of state income taxes, partly offset by $43 million of income tax attributable to noncontrolling interests.
Net Loss Attributable to Noncontrolling Interests
For the six months ended June 30, 2020 and 2019, net loss attributable to noncontrolling interests reflects the net income or loss attributable to NEE's noncontrolling interest in NEP OpCo, a non-affiliated party's 10% interest in one of the Texas pipelines, the loss allocated to differential membership interest investors and the income allocated to the Class B noncontrolling interests in NEP Renewables and NEP Renewables II as well as NEER's approximately 50% noncontrolling interest in Silver State. Additionally, for the six months ended June 30, 2020, net loss attributable to noncontrolling interests reflects the income allocated to the Class B noncontrolling interests in NEP Pipelines and STX Midstream sold in the fourth quarter of 2019. See Note 10 - Noncontrolling Interests.
Liquidity and Capital Resources
NEP’s ongoing operations use cash to fund O&M expenses, maintenance capital expenditures, debt service payments and distributions to common and preferred unitholders and holders of noncontrolling interests. NEP expects to satisfy these requirements primarily with internally generated cash flow. In addition, as a growth-oriented limited partnership, NEP expects from time to time to make acquisitions and other investments. These acquisitions and investments are expected to be funded with borrowings under credit facilities or term loans, issuances of indebtedness, issuances of additional NEP common units or preferred units, capital raised pursuant to other financing structures, cash on hand and cash generated from operations.
These sources of funds are expected to be adequate to provide for NEP's short-term and long-term liquidity and capital needs, although its ability to make future acquisitions, fund additional expansion or repowering of existing projects and increase its distributions to common unitholders will depend on its ability to access capital on acceptable terms.
As a normal part of its business, depending on market conditions, NEP expects from time to time to consider opportunities to repay, redeem, repurchase or refinance its indebtedness. In addition, NEP expects from time to time to consider potential investments in new acquisitions and the expansion or repowering of existing projects. These events may cause NEP to seek additional debt or equity financing, which may not be available on acceptable terms or at all. Additional debt financing, if available, could impose operating restrictions, additional cash payment obligations and additional covenants.
NEP OpCo has agreed to allow NEER or one of its affiliates to withdraw funds received by NEP OpCo or its subsidiaries and to hold those funds in accounts of NEER or one of its affiliates to the extent the funds are not required to pay project costs or otherwise required to be maintained by NEP's subsidiaries, until the financing agreements permit distributions to be made, or, in the case of NEP OpCo, until such funds are required to make distributions or to pay expenses or other operating costs. NEP OpCo will have a claim for any funds that NEER fails to return:
• when required by its subsidiaries’ financings;
• when its subsidiaries’ financings otherwise permit distributions to be made to NEP OpCo;
• when funds are required to be returned to NEP OpCo; or
• when otherwise demanded by NEP OpCo.
In addition, NEER and certain of its affiliates may withdraw funds in connection with certain long-term debt agreements and hold those funds in accounts belonging to NEER or its affiliates and provide credit support in the amount of such withdrawn funds. If NEER fails to return withdrawn funds when required by NEP's subsidiaries’ financing agreements, the lenders will be entitled to draw on any credit support provided by NEER in the amount of such withdrawn funds.
If NEER or one of its affiliates realizes any earnings on the withdrawn funds prior to the return of such funds, it will be permitted to retain those earnings.
Liquidity Position
At June 30, 2020, NEP's liquidity position was approximately $737 million. The table below provides the components of NEP’s liquidity position:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
Maturity Date
|
|
(millions)
|
|
|
Cash and cash equivalents
|
$
|
96
|
|
|
|
Amounts due under the CSCS agreement
|
58
|
|
|
|
Revolving credit facilities(a)
|
1,250
|
|
|
2025
|
Less borrowings
|
(550)
|
|
|
|
Less issued letters of credit
|
(117)
|
|
|
|
Total(b)
|
$
|
737
|
|
|
|
____________________
(a) Excludes certain credit facilities due to restrictions on the use of the borrowings.
(b) Excludes current restricted cash of approximately $3 million at June 30, 2020. See Note 10 - Restricted Cash.
Management believes that NEP's liquidity position and cash flows from operations will be adequate to finance O&M, maintenance capital expenditures, distributions to its unitholders and liquidity commitments. Management continues to regularly monitor NEP's financing needs consistent with prudent balance sheet management.
Financing Arrangements
In February 2020, NEP OpCo and its direct subsidiary entered into an amendment of their existing revolving credit facility to extend the maturity date to February 2025. During the six months ended June 30, 2020, $50 million was drawn under the NEP OpCo revolving credit facility and $10 million was repaid. In addition, approximately $11 million was borrowed under a senior secured limited recourse term loan for the Meade expansion and $4 million was repaid. See Note 7 - Debt.
NEP OpCo and certain indirect subsidiaries are subject to financings that contain financial covenants and distribution tests, including debt service coverage ratios. In general, these financings contain covenants customary for these types of financings, including limitations on investments and restricted payments. Certain of NEP's financings provide for interest payable at a fixed interest rate. However, certain of NEP's financings accrue interest at variable rates based on an underlying index plus a margin. Interest rate contracts were entered into for certain of these financings to hedge against interest rate movements with respect to interest payments on the related borrowings. In addition, under the project-level financings, each project will be permitted to pay distributions out of available cash so long as certain conditions are satisfied, including that reserves are funded with cash or credit support, no default or event of default under the applicable financings has occurred and is continuing at the time of such distribution or would result therefrom, and each project is otherwise in compliance with the project-level financing’s covenants. For the majority of the project-level financings, minimum debt service coverage ratios must be satisfied in order to make a distribution. For one project-level financing, the project must maintain a leverage ratio and an interest coverage ratio in order to make a distribution. At June 30, 2020, NEP's subsidiaries were in compliance with all financial debt covenants under their financings except for events of default as discussed in Note 11 - PG&E Bankruptcy.
Contractual Obligations
NEP's contractual obligations at June 30, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remainder of 2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
|
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt, including interest(a)
|
$
|
399
|
|
|
$
|
158
|
|
|
$
|
159
|
|
|
$
|
363
|
|
|
$
|
1,399
|
|
|
$
|
2,607
|
|
|
$
|
5,085
|
|
Other contractual obligations(b)
|
164
|
|
|
38
|
|
|
29
|
|
|
14
|
|
|
14
|
|
|
139
|
|
|
398
|
|
Asset retirement activities(c)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
566
|
|
|
566
|
|
MSA and credit support(d)
|
4
|
|
|
8
|
|
|
8
|
|
|
8
|
|
|
8
|
|
|
182
|
|
|
218
|
|
Total
|
$
|
567
|
|
|
$
|
204
|
|
|
$
|
196
|
|
|
$
|
385
|
|
|
$
|
1,421
|
|
|
$
|
3,494
|
|
|
$
|
6,267
|
|
____________________
(a) Includes principal, interest, fees on credit facilities and interest rate contracts. Variable rate interest was computed using June 30, 2020 rates.
(b) Primarily reflects commitments related to construction activities (see Note 11 - Development, Engineering and Construction Commitments), lease payment obligations and payments related to the acquisition of certain development rights.
(c) Represents expected cash payments adjusted for inflation for estimated costs to perform asset retirement activities.
(d) Represents minimum fees under the MSA and CSCS agreement. See Note 9.
Capital Expenditures
Annual capital spending plans are developed based on projected requirements for the projects. Capital expenditures primarily represent the estimated cost of capital improvements, including construction expenditures that are expected to increase NEP OpCo’s operating income or operating capacity over the long term. Capital expenditures for projects that have already commenced commercial operations are generally not significant because most expenditures relate to repairs and maintenance and are expensed when incurred. For the six months ended June 30, 2020 and 2019, NEP had capital expenditures of approximately $121 million and $6 million, respectively. NEP expects to have capital expenditures totaling approximately $128 million related to an expansion investment at one of the Texas pipelines expected to be in-service during the fourth quarter of 2020 and $90 million of additional investment in CPL related to an expansion scheduled for commercial operation by mid-2022. In addition, NEP expects to have capital expenditures totaling approximately $200 million related to repowering investments at two wind generation facilities expected to be completed in 2020. See Note 11 - Development, Engineering and Construction Commitments. These estimates are subject to continuing review and adjustments and actual capital expenditures may vary significantly from these estimates.
Cash Distributions to Unitholders
During the six months ended June 30, 2020, NEP distributed approximately $71 million to its common unitholders. On July 23, 2020, the board of directors of NEP authorized a distribution of $0.5775 per common unit payable on August 14, 2020 to its common unitholders of record on August 6, 2020. During the six months ended June 30, 2020, NEP distributed approximately $4 million to its preferred unitholders and, at June 30, 2020, NEP accrued $2 million in preferred distributions to be paid in August 2020.
Cash Flows
Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019
The following table reflects the changes in cash flows for the comparative periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Change
|
|
(millions)
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
Net cash provided by operating activities
|
$
|
259
|
|
|
$
|
130
|
|
|
$
|
129
|
|
Net cash used in investing activities
|
$
|
(149)
|
|
|
$
|
(1,701)
|
|
|
$
|
1,552
|
|
Net cash provided by (used in) financing activities
|
$
|
(142)
|
|
|
$
|
1,583
|
|
|
$
|
(1,725)
|
|
Net Cash Provided by Operating Activities
The increase in net cash provided by operating activities was primarily driven by cash from operations associated with the projects acquired in June 2019 (see Note 1) and higher wind and solar resource as well as distributions received associated with the ownership interests in Meade acquired in November 2019 (see Note 1).
Net Cash Used in Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
(millions)
|
|
|
Six Months Ended June 30,
|
|
|
|
Acquisition of membership interests in subsidiaries - net
|
$
|
—
|
|
|
$
|
(1,028)
|
|
Capital expenditures and other investments
|
(121)
|
|
|
(6)
|
|
Payments to related parties under CSCS agreement - net
|
(46)
|
|
|
(671)
|
|
|
|
|
|
Distributions from equity method investee
|
8
|
|
|
—
|
|
Other
|
10
|
|
|
4
|
|
Net cash used in investing activities
|
$
|
(149)
|
|
|
$
|
(1,701)
|
|
The decrease in net cash used in investing activities was primarily driven by the absence of the June 2019 acquisition and lower cash sweeps under the CSCS agreement in 2020 due to higher cash balances related to financing activity in June of 2019, partly offset by higher capital expenditures in 2020 primarily related to the pipeline expansion projects and repowering of certain wind facilities (see Capital Expenditures).
Net Cash Provided by (Used in) Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
(millions)
|
|
|
Six Months Ended June 30,
|
|
|
|
Proceeds from issuance of common units - net
|
$
|
2
|
|
|
$
|
3
|
|
Issuances (retirements) of long-term debt - net
|
46
|
|
|
840
|
|
Partner contributions
|
6
|
|
|
2
|
|
Partner distributions
|
(201)
|
|
|
(158)
|
|
|
|
|
|
Change in amounts due to related parties
|
(1)
|
|
|
19
|
|
Proceeds related to differential membership interests - net
|
32
|
|
|
15
|
|
Proceeds related to Class B noncontrolling interests - net
|
(21)
|
|
|
885
|
|
Other
|
(5)
|
|
|
(23)
|
|
Net cash provided by (used in) financing activities
|
$
|
(142)
|
|
|
$
|
1,583
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The change in net cash provided by (used in) financing activities primarily reflects the absence of proceeds related to the sale of Class B noncontrolling interests and lower net issuances of long-term debt in 2020 compared to 2019, both of which were primarily related to the June 2019 acquisition.
New Accounting Rules and Interpretations
Reference Rate Reform - In March 2020, the FASB issued an accounting standards update which provides certain options to apply GAAP guidance on contract modifications and hedge accounting as companies transition from LIBOR and other interbank offered rates to alternative reference rates that are yet to be determined or finalized. See Note 10 - Reference Rate Reform.