- Announces agreement to acquire a 49% interest in an
approximately 1.5-gigawatt renewables portfolio and approximately
100% of the indirect membership interests in an approximately
345-MW portfolio of operating wind assets
- Enters into agreement for a 10-year convertible equity
portfolio financing for $805 million
that includes the newly acquired assets plus six existing NextEra
Energy Partners' wind projects
JUNO
BEACH, Fla., Nov. 18,
2022 /PRNewswire/ -- NextEra Energy Partners, LP
(NYSE: NEP) today announced that it has entered into an agreement
with subsidiaries of NextEra Energy Resources, LLC to acquire a 49%
interest in an approximately 1.5-gigawatt renewables portfolio and
approximately 100% of the indirect membership interests in an
approximately 345-megawatt (MW) portfolio of operating wind assets.
Immediately following the acquisition, NextEra Energy Partners will
contribute its interests in the newly acquired projects and in six
existing renewables assets to a new portfolio. In conjunction with
the acquisition and creation of the new portfolio, NextEra Energy
Partners has entered into a convertible equity portfolio financing
with Ontario Teachers' Pension Plan Board (Ontario Teachers'), a
leading global infrastructure investor, to invest $805 million into the new portfolio.
"The transactions announced today demonstrate NextEra Energy
Partners' continued ability to execute on its long-term growth plan
and continued access to attractive low-cost sources of capital,"
said John Ketchum, chairman and
chief executive officer. "The acquisition of the high-quality,
long-term contracted renewable energy assets further enhances the
diversity of the partnership's existing portfolio. Combining this
acquisition with the recapitalization of six existing NextEra
Energy Partners' assets through the convertible equity portfolio
financing with a global infrastructure investor is expected to
provide significant benefits for unitholders, including a low cash
coupon and the ability to retain upside from the share price
appreciation for up to 10 years. This significant access to
low-cost capital leaves NextEra Energy Partners uniquely positioned
to take advantage of the transformation underway in the energy
industry and meet its long-term growth objectives. In our view,
NextEra Energy Partners remains well positioned to deliver
unitholder value going forward."
Portfolio acquisition
details
The contracted renewables portfolio of wind and solar assets to
be acquired has a cash available for distribution (CAFD)-weighted
remaining contract life of approximately 15 years and average
customer credit rating of A+ at S&P and A2 at Moody's Investors
Service. The assets included are:
- 49% of the membership interests in Emerald Breeze, an existing portfolio holding
company, which indirectly owns:
-
- Great Prairie Wind, an approximately 1,029-MW wind
generation facility located in Texas and Oklahoma.
- Appaloosa Run Wind, an approximately 172-MW wind generation
facility located in Texas.
- Eight Point Wind, an approximately 111-MW wind generation
facility located in New
York.
- Yellow Pine Solar, an approximately 125-MW solar generation
and 65-MW storage facility located in Nevada.
- 100% of the indirect membership interests in:
-
- Elk City Wind II, an approximately 107-MW wind generation
facility located in Oklahoma.
- Sac County Wind, an approximately 80-MW wind generation
facility located in Iowa.
- Sholes Wind, an approximately 160-MW wind generation
facility located in Nebraska.
NextEra Energy Partners expects to acquire the interests in the
assets for total consideration of approximately $805 million, plus the assumption of its share of
the portfolio's estimated $1.5
billion in tax equity financing, subject to working capital
and other adjustments. NextEra Energy Partners expects to complete
the acquisition later this year, subject to customary closing
conditions. At the time of the closing, all of the assets other
than Appaloosa Run Wind, Eight Point Wind and Yellow Pine Solar
will be in operation, with Appaloosa Run Wind and Eight Point Wind
expected to be in service in December
2022 and Yellow Pine Solar scheduled to begin initial
operations by the end of the third quarter of 2023. If any of those
projects do not achieve commercial operation by Nov. 30, 2023, NextEra Energy Partners will have
the right to require the seller to repurchase the ownership
interests in such projects for the same purchase price paid by
NextEra Energy Partners. Following the acquisition and all of the
projects achieving commercial operation, the portfolio of assets is
expected to contribute adjusted EBITDA of approximately
$210 million to $230 million and CAFD of approximately
$62 million to $72 million, each on a five-year average annual
run-rate basis, beginning Dec. 31,
2023.
Creation of a new
portfolio
Immediately following the acquisition, NextEra Energy Partners
will contribute its interests in the newly acquired projects to a
new portfolio alongside six of the partnership's existing wind
assets: Alta Wind VIII, Brady Wind,
Brady Wind II, Golden West Wind, Osborn
Wind and Oliver Wind III.
Financing details
In conjunction with the acquisition and creation of the new
portfolio, NextEra Energy Partners has entered into a convertible
equity portfolio financing agreement of approximately $805 million with Ontario Teachers' (the
investor). Under the terms of the financing, the investor will
initially fund approximately $645
million, which will be used by NextEra Energy Partners to
finance its acquisition of the newly acquired assets. A second
funding of approximately $160 million
is expected to occur by the end of the third quarter of 2023 upon
the achievement of the commercial operations of Appaloosa Run Wind,
Eight Point Wind and Yellow Pine Solar.
The investor is expected to earn an effective annual coupon of
approximately 2.8% on the outstanding investment over its initial
10-year period. The financing is expected to provide NextEra Energy
Partners the flexibility to periodically buy out the investor's
equity interest at a fixed approximately 7.0% pre-tax annual return
(inclusive of all prior distributions) between the 5-year and
10-year anniversaries of the agreement. NextEra Energy Partners has
the right to pay 100% of the buyout amount in NextEra Energy
Partners common units, issued at no discount to the then-current
market price.
Outlook
From a base of its fourth quarter 2021 distribution per common
unit at an annualized rate of $2.83,
NextEra Energy Partners continues to expect 12% to 15% growth per
year in limited partner distributions per unit as being a
reasonable range of expectations through at least 2025, subject to
the usual caveats. NextEra Energy Partners expects the annualized
rate of the fourth-quarter 2022 distribution that is payable in
February 2023 to be in a range of
$3.17 to $3.25 per common unit.
NextEra Energy Partners continues to expect year-end 2022
run-rate adjusted EBITDA and CAFD in the ranges of $1.785 billion to $1.985
billion and $685 million to
$775 million, respectively,
reflecting calendar year 2023 contributions from the forecasted
portfolio at the end of 2022.
NextEra Energy Partners also continues to expect Dec. 31, 2023, run-rate expectations for adjusted
EBITDA in a range of $2.220 billion
to $2.420 billion and CAFD in a range
of $770 million to $860 million, reflecting calendar year 2024
expectations for the portfolio at year-end 2023.
These expectations are subject to the usual caveats and include
the impact of incentive distribution rights (IDR) fees, as these
fees are treated as an operating expense.
This news release refers to adjusted EBITDA and CAFD
expectations. NextEra Energy Partners' adjusted EBITDA expectations
represent projected (a) revenue less (b) fuel expense, less (c)
project operating expenses, less (d) corporate G&A, plus (e)
other income less (f) other deductions including IDR fees.
Projected revenue as used in the calculations of projected EBITDA
represents the sum of projected (a) operating revenues plus (b) a
pre-tax allocation of production tax credits, plus (c) a pre-tax
allocation of investment tax credits plus (d) earnings impact from
convertible investment tax credits and plus (e) the reimbursement
for lost revenue received pursuant to a contract with NextEra
Energy Resources.
CAFD is defined as cash available for distribution and
represents adjusted EBITDA less (1) a pre-tax allocation of
production tax credits, less (2) a pre-tax allocation of investment
tax credits, less (3) earnings impact from convertible investment
tax credits, less (4) debt service, less (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 and distributions to preferred equity
investors.
Adjusted EBITDA, CAFD and limited partner distributions and
other expectations assume, among other things, normal weather and
operating conditions; positive macroeconomic conditions in the
U.S.; public policy support for wind and solar development and
construction; market demand and transmission expansion support for
wind and solar development; market demand for pipeline capacity;
access to capital at reasonable cost and terms; and no changes to
governmental policies or incentives. Please see the accompanying
cautionary statements for a list of the risk factors that may
affect future results. Adjusted EBITDA and CAFD do not represent
substitutes for net income, as prepared in accordance with GAAP.
The adjusted EBITDA and CAFD run-rate expectations have not been
reconciled to expected net income because NextEra Energy Partners'
net income includes unrealized mark-to-market gains and losses
related to derivative transactions, which cannot be determined at
this time.
NextEra Energy Partners,
LP
NextEra Energy Partners, LP (NYSE: NEP) is a growth-oriented
limited partnership formed by NextEra Energy, Inc. (NYSE: NEE).
NextEra Energy Partners acquires, manages and owns contracted clean
energy projects with stable, long-term cash flows. Headquartered in
Juno Beach, Florida, NextEra
Energy Partners owns interests in geographically diverse wind,
solar and energy storage projects in the U.S. as well as natural
gas infrastructure assets in Texas
and Pennsylvania. For more
information about NextEra Energy Partners, please visit:
www.NextEraEnergyPartners.com.
Cautionary Statements and Risk
Factors That May Affect Future Results
This news release contains "forward-looking statements" within
the meaning of the federal securities laws. Forward-looking
statements are not statements of historical facts, but instead
represent the current expectations of NextEra Energy Partners, LP
(together with its subsidiaries, NEP) regarding future operating
results and other future events, many of which, by their nature,
are inherently uncertain and outside of NEP's control.
Forward-looking statements in this news release include, among
others, statements concerning adjusted EBITDA, cash available for
distribution (CAFD) and unit distribution expectations, as well as
statements concerning NEP's future operating performance, financing
needs and results of acquisitions. In some cases, you can identify
the forward-looking statements by words or phrases such as "will,"
"may result," "expect," "anticipate," "believe," "intend," "plan,"
"seek," "aim," "potential," "projection," "forecast," "predict,"
"goals," "target," "outlook," "should," "would" or similar words or
expressions. You should not place undue reliance on these
forward-looking statements, which are not a guarantee of future
performance. The future results of NEP and its business and
financial condition are subject to risks and uncertainties that
could cause NEP's actual results to differ materially from those
expressed or implied in the forward-looking statements. These risks
and uncertainties could require NEP to limit or eliminate certain
operations. These risks and uncertainties include, but are not
limited to, the following: NEP's ability to make cash distributions
to its unitholders is affected by wind and solar conditions at its
renewable energy projects; operation and maintenance of renewable
energy projects and pipelines involve significant risks that could
result in unplanned power outages, reduced output or capacity,
personal injury or loss of life; NEP's business, financial
condition, results of operations and prospects can be materially
adversely affected by weather conditions, including, but not
limited to, the impact of severe weather; NEP depends on certain of
the renewable energy projects and pipelines in its portfolio for a
substantial portion of its anticipated cash flows; NEP may pursue
the repowering of wind projects or the expansion of natural gas
pipelines that would require up-front capital expenditures and
could expose NEP to project development risks; terrorist acts,
cyberattacks or other similar events could impact NEP's projects,
pipelines or surrounding areas and adversely affect its business;
the ability of NEP to obtain insurance and the terms of any
available insurance coverage could be materially adversely affected
by international, national, state or local events and
company-specific events, as well as the financial condition of
insurers. NEP's insurance coverage does not provide protection
against all significant losses; NEP relies on interconnection,
transmission and other pipeline facilities of third parties to
deliver energy from its renewable energy projects and to transport
natural gas to and from its pipelines. If these facilities become
unavailable, NEP's projects and pipelines may not be able to
operate or deliver energy or may become partially or fully
unavailable to transport natural gas; NEP's business is subject to
liabilities and operating restrictions arising from environmental,
health and safety laws and regulations, compliance with which may
require significant capital expenditures, increase NEP's cost of
operations and affect or limit its business plans; NEP's renewable
energy projects or pipelines may be adversely affected by
legislative changes or a failure to comply with applicable energy
and pipeline regulations; Petroleos Mexicanos (Pemex) may claim
certain immunities under the Foreign Sovereign Immunities Act and
Mexican law, and the Texas
pipeline entities' ability to sue or recover from Pemex for breach
of contract may be limited and may be exacerbated if there is a
deterioration in the economic relationship between the U.S. and
Mexico; NEP does not own all of
the land on which the projects in its portfolio are located and its
use and enjoyment of the property may be adversely affected to the
extent that there are any lienholders or land rights holders that
have rights that are superior to NEP's rights or the U.S. Bureau of
Land Management suspends its federal rights-of-way grants; NEP is
subject to risks associated with litigation or administrative
proceedings that could materially impact its operations, including,
but not limited to, proceedings related to projects it acquires in
the future; NEP's operations require NEP to comply with
anti-corruption laws and regulations of the U.S. government and
Mexico; NEP is subject to risks
associated with its ownership interests in projects that are under
construction, which could result in its inability to complete
construction projects on time or at all, and make projects too
expensive to complete or cause the return on an investment to be
less than expected; NEP relies on a limited number of customers and
is exposed to the risk that they may be unwilling or unable to
fulfill their contractual obligations to NEP or that they otherwise
terminate their agreements with NEP; NEP may not be able to extend,
renew or replace expiring or terminated power purchase agreements
(PPA), natural gas transportation agreements or other customer
contracts at favorable rates or on a long-term basis; if the energy
production by or availability of NEP's renewable energy projects is
less than expected, they may not be able to satisfy minimum
production or availability obligations under their PPAs; NEP's
growth strategy depends on locating and acquiring interests in
additional projects consistent with its business strategy at
favorable prices; reductions in demand for natural gas in
the United States or Mexico and low market prices of natural gas
could materially adversely affect NEP's pipeline operations and
cash flows; government laws, regulations and policies providing
incentives and subsidies for clean energy could be changed, reduced
or eliminated at any time and such changes may negatively impact
NEP's growth strategy; NEP's growth strategy depends on the
acquisition of projects developed by NextEra Energy, Inc. (NEE) and
third parties, which face risks related to project siting,
financing, construction, permitting, the environment, governmental
approvals and the negotiation of project development agreements;
acquisitions of existing clean energy projects involve numerous
risks; NEP may continue to acquire other sources of clean energy
and may expand to include other types of assets. Any further
acquisition of non-renewable energy projects may present unforeseen
challenges and result in a competitive disadvantage relative to
NEP's more-established competitors; NEP faces substantial
competition primarily from regulated utilities, developers,
independent power producers, pension funds and private equity funds
for opportunities in North
America; the natural gas pipeline industry is highly
competitive, and increased competitive pressure could adversely
affect NEP's business; NEP may not be able to access sources of
capital on commercially reasonable terms, which would have a
material adverse effect on its ability to consummate future
acquisitions and pursue other growth opportunities; restrictions in
NEP and its subsidiaries' financing agreements could adversely
affect NEP's business, financial condition, results of operations
and ability to make cash distributions to its unitholders; NEP's
cash distributions to its unitholders may be reduced as a result of
restrictions on NEP's subsidiaries' cash distributions to NEP under
the terms of their indebtedness or other financing agreements;
NEP's subsidiaries' substantial amount of indebtedness may
adversely affect NEP's ability to operate its business, and its
failure to comply with the terms of its subsidiaries' indebtedness
could have a material adverse effect on NEP's financial condition;
NEP is exposed to risks inherent in its use of interest rate swaps;
widespread public health crises and epidemics or pandemics may have
material adverse impacts on NEP's business, financial condition,
liquidity, results of operations and ability to make cash
distributions to its unitholders; NEE has influence over NEP; under
the cash sweep and credit support agreement, NEP receives credit
support from NEE and its affiliates. NEP's subsidiaries may default
under contracts or become subject to cash sweeps if credit support
is terminated, if NEE or its affiliates fail to honor their
obligations under credit support arrangements, or if NEE or another
credit support provider ceases to satisfy creditworthiness
requirements, and NEP will be required in certain circumstances to
reimburse NEE for draws that are made on credit support; NextEra
Energy Resources, LLC (NEER) or one of its affiliates is permitted
to borrow funds received by NEP's subsidiaries and is obligated to
return these funds only as needed to cover project costs and
distributions or as demanded by NextEra Energy Operating Partners,
LP (NEP OpCo). NEP's financial condition and ability to make
distributions to its unitholders, as well as its ability to grow
distributions in the future, is highly dependent on NEER's
performance of its obligations to return all or a portion of these
funds; NEER's right of first refusal may adversely affect NEP's
ability to consummate future sales or to obtain favorable sale
terms; NextEra Energy Partners GP, Inc. (NEP GP) and its affiliates
may have conflicts of interest with NEP and have limited duties to
NEP and its unitholders; NEP GP and its affiliates and the
directors and officers of NEP are not restricted in their ability
to compete with NEP, whose business is subject to certain
restrictions; NEP may only terminate the Management Services
Agreement among, NEP, NextEra Energy Management Partners, LP (NEE
Management), NEP OpCo and NextEra Energy Operating Partners GP, LLC
(NEP OpCo GP) under certain limited circumstances; if the
agreements with NEE Management or NEER are terminated, NEP may be
unable to contract with a substitute service provider on similar
terms; NEP's arrangements with NEE limit NEE's potential liability,
and NEP has agreed to indemnify NEE against claims that it may face
in connection with such arrangements, which may lead NEE to assume
greater risks when making decisions relating to NEP than it
otherwise would if acting solely for its own account; NEP's ability
to make distributions to its unitholders depends on the ability of
NEP OpCo to make cash distributions to its limited partners; if NEP
incurs material tax liabilities, NEP's distributions to its
unitholders may be reduced, without any corresponding reduction in
the amount of the IDR fee; holders of NEP's units may be subject to
voting restrictions; NEP's partnership agreement replaces the
fiduciary duties that NEP GP and NEP's directors and officers might
have to holders of its common units with contractual standards
governing their duties and the NYSE does not require a publicly
traded limited partnership like NEP to comply with certain of its
corporate governance requirements; NEP's partnership agreement
restricts the remedies available to holders of NEP's common units
for actions taken by NEP's directors or NEP GP that might otherwise
constitute breaches of fiduciary duties; certain of NEP's actions
require the consent of NEP GP; holders of NEP's common units
currently cannot remove NEP GP without NEE's consent and provisions
in NEP's partnership agreement may discourage or delay an
acquisition of NEP that NEP unitholders may consider favorable;
NEE's interest in NEP GP and the control of NEP GP may be
transferred to a third party without unitholder consent; NEP may
issue additional units without unitholder approval, which would
dilute unitholder interests; reimbursements and fees owed to NEP GP
and its affiliates for services provided to NEP or on NEP's behalf
will reduce cash distributions from NEP OpCo and from NEP to NEP's
unitholders, and there are no limits on the amount that NEP OpCo
may be required to pay; increases in interest rates could adversely
impact the price of NEP's common units, NEP's ability to issue
equity or incur debt for acquisitions or other purposes and NEP's
ability to make cash distributions to its unitholders; the
liability of holders of NEP's units, which represent limited
partnership interests in NEP, may not be limited if a court finds
that unitholder action constitutes control of NEP's business;
unitholders may have liability to repay distributions that were
wrongfully distributed to them; the issuance of securities
convertible into, or settleable with, common units may affect the
market price for NEP's common units, will dilute common
unitholders' ownership in NEP and may decrease the amount of cash
available for distribution for each common unit; NEP's future tax
liability may be greater than expected if NEP does not generate net
operating losses (NOLs) sufficient to offset taxable income or if
tax authorities challenge certain of NEP's tax positions; NEP's
ability to use NOLs to offset future income may be limited; NEP
will not have complete control over NEP's tax decisions; and,
distributions to unitholders may be taxable as dividends. NEP
discusses these and other risks and uncertainties in its annual
report on Form 10-K for the year ended December 31, 2021 and other Securities and
Exchange Commission (SEC) filings, and this news release should be
read in conjunction with such SEC filings made through the date of
this news release. The forward-looking statements made in this news
release are made only as of the date of this news release and NEP
undertakes no obligation to update any forward-looking
statements.
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SOURCE NextEra Energy Partners, LP