NextEra Energy Partners, LP exercises its option to buy out the remaining equity interest in its 2018 convertible equity portfolio financing

Rhea-AI Summary

NextEra Energy Partners, LP (NYSE: NEP) announced the early exercise of its buyout option for a minority equity interest in wind and solar assets acquired in 2018. The transaction, valued at approximately $885 million, involves issuing 7.25 million common units and paying $265 million in cash. This strategic move reflects strong asset performance and supports long-term growth objectives. The buyout is set to close on November 19, 2021. The company aims to fund the cash portion via existing credit facilities and project-level debt.

Positive

• Acquisition of high-quality renewable energy assets valued at approximately $885 million enhances NEP's portfolio.
• Early exercise of buyout reflects strong asset performance and supports long-term growth objectives.
• Issuing only 7.25 million common units represents more than 50% fewer units than if financed through common equity.

Negative

• None.

JUNO BEACH, Fla., Nov. 18, 2021 /PRNewswire/ -- NextEra Energy Partners, LP (NYSE: NEP) today announced that it has exercised its option (the buyout right) to purchase 100% of the outstanding minority equity interest in the portfolio of wind and solar assets supporting its 2018 convertible equity portfolio financing with a fund managed by Global Energy & Power Infrastructure II Advisors, LLC (BlackRock or the fund). NextEra Energy Partners will pay a total consideration of approximately $885 million for the acquisition, consisting of approximately 7.25 million newly issued NextEra Energy Partners common units and approximately $265 million in cash. The buyout right was exercised approximately one month earlier than originally expected through an early exercise agreement between NextEra Energy Partners and the fund.

"This transaction highlights the benefits to our unitholders of NextEra Energy Partners' convertible equity portfolio financing structures," said Jim Robo, chairman and chief executive officer of NextEra Energy Partners. "Relative to issuing the same amount of common equity in 2018 to fund our growth needs, this innovative financing has now allowed us to issue more than 50% fewer units while retaining the more than 80% increase in the NextEra Energy Partners unit price over the last three years. Our decision to buy out of the remaining equity interest in this portfolio of high-quality, contracted renewable energy assets is reflective of the strong performance of the underlying assets in the portfolio and attractiveness of its cash flows and further supports execution of NextEra Energy Partners' long-term growth objectives. We continue to believe that NextEra Energy Partners is as well-positioned as it has ever been, offering a best-in-class investor value proposition with growth prospects that remain as strong as ever."

"We are pleased to move into this next stage of our investment with NextEra Energy Partners with whom we have partnered on several opportunities," said Mark Florian, Head of BlackRock's Global Energy & Power Infrastructure team. "We greatly value our relationship with NextEra Energy Partners and look forward to continuing our partnership on behalf of our clients."

Transaction details
In September 2018, NextEra Energy Partners entered into its first convertible equity portfolio financing with the fund. Under that initial agreement, the fund paid $750 million in cash in exchange for an equity interest in the entity that would own the approximately 1,388-megawatt portfolio that was being acquired by NextEra Energy Partners. The agreement provided NextEra Energy Partners with the right to buy out the fund's equity interest for a fixed payment, resulting in a pre-tax return to the fund of 7.75% (inclusive of all prior distributions).

NextEra Energy Partners exercised its buyout right under the early exercise agreement and will pay an aggregate consideration of approximately $885 million. NextEra Energy Partners will pay 70% of the buyout price in common units, issued at $85.38, representing the 15-day volume weighted average price on Nov. 12, 2021, with the balance of approximately $265 million paid in cash. NextEra Energy Partners expects the buyout to close on Nov. 19, 2021.

To initially fund the cash portion of the buyout price, NextEra Energy Partners intends to use available capacity under an existing credit facility. In the near term, the partnership intends to issue project-level debt on a subset of the assets in the portfolio to permanently fund the cash portion of the buyout as well as to support previously announced NextEra Energy Partners' growth investments.

Investors and other interested parties can access a copy of the presentation materials at www.NextEraEnergyPartners.com.

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 and solar 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. 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 is pursuing the repowering of wind projects and the expansion of natural gas pipelines that will require up-front capital expenditures and 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 cross-border 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 or pipelines 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; 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; Distributions to unitholders may be taxable as dividends; and, The coronavirus pandemic may have a material adverse impact on NEP's business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders. NEP discusses these and other risks and uncertainties in its annual report on Form 10-K for the year ended December 31, 2020 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

FAQ

What is the significance of NextEra Energy Partners' recent buyout of minority equity interests?

NextEra Energy Partners exercised its buyout option for minority equity interests in its 2018 convertible equity portfolio, enhancing its renewable energy asset portfolio and reflecting strong financial performance.

What are the financial terms of the buyout by NextEra Energy Partners?

The buyout is valued at approximately $885 million, consisting of 7.25 million common units and $265 million in cash.

When is the buyout by NextEra Energy Partners expected to close?

The buyout is expected to close on November 19, 2021.

How will NextEra Energy Partners fund the cash portion of the buyout?

NextEra Energy Partners plans to fund the cash portion using available capacity from an existing credit facility.

What does the buyout mean for NextEra Energy Partners' growth objectives?

The buyout aligns with NextEra Energy Partners' long-term growth objectives by acquiring contracted renewable energy assets that generate stable cash flows.