NextEra Energy Partners (NEP) to Take Minority Stake in Desert Sunlight Investment Holdings

September 8, 2016 4:30 PM EDT

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NextEra Energy Partners, LP (NYSE: NEP) announced that it has entered into an agreement with a subsidiary of its sponsor, NextEra Energy Resources, LLC, to acquire an indirect 24 percent interest in Desert Sunlight Investment Holdings, LLC. When completed, the acquisition will expand NextEra Energy Partners' portfolio of contracted renewable energy projects to approximately 2,788 megawatts (MW).1

"This acquisition further demonstrates our ability to acquire assets at attractive yields that will be accretive for our investors, as well as the continued strength of the pipeline of growth opportunities that our sponsor, NextEra Energy Resources, provides," said Jim Robo, chairman and chief executive officer. "In addition, NextEra Energy Partners' continued ability to access the equity markets aligns with our previously communicated flexible and opportunistic approach to advance our growth strategy and deliver unitholder distributions consistent with the expectations we've outlined. NextEra Energy Partners, in our view, remains the premier YieldCo in the space."

Desert Sunlight Investment Holdings, LLC owns two project entities, which together make up the Desert Sunlight Solar Energy Center, a 550-MW solar generation plant located in Riverside County, Calif. The high-quality solar energy center consists of 8 million panels capable of generating enough power for 160,000 homes. The projects are fully contracted under long-term power purchase agreements with strong creditworthy counterparties and remaining average contract lives of 21 years. NextEra Energy Resources, which currently owns 50 percent of the projects, will remain the managing member upon completion of the transaction.

NextEra Energy Partners expects to complete the acquisition in the fourth quarter of 2016, subject to the satisfaction of customary closing conditions, for a purchase price of $218 million. The purchase price considers approximately $258 million of the existing non-recourse project debt and is subject to working capital adjustments. The partnership expects to fund the transaction through the net proceeds of an issuance of common units.

NextEra Energy Partners expects the acquisition to contribute adjusted EBITDA of approximately $43 million to $53 million and cash available for distribution (CAFD) of approximately $21 million to $26 million, each on an annual run-rate basis as of Dec. 31, 2016. The acquisition is expected to contribute to an increase in the third-quarter distribution to an annualized rate of $1.365 per common unit from a current annualized rate of $1.32 per common unit. The acquisition is also expected to increase NextEra Energy Partners estimated incremental debt capacity at the holding company to approximately $375 million to $475 million and support NextEra Energy Partners' current expectations of 12 to 15 percent per year growth in limited partner distributions through 2020 off a base of its fourth-quarter 2015 distribution per common unit at an annualized rate of $1.23. Following this acquisition, NextEra Energy Partners affirms its previously announced expectations of a $230 million to $290 million CAFD run rate for the NextEra Energy Partners portfolio as of year-end 2016, net of incentive distribution rights fees.

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