NextEra Energy Partners (NEP) to acquire approximately 400-megawatt portfolio of long-term contracted wind assets for $733 million
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NextEra Energy Partners, LP (NYSE: NEP) today announced that it has entered into a definitive agreement with Brookfield Renewable, a global owner and operator of renewable power assets, to acquire a 391-megawatt (MW) portfolio of four operating wind assets located in California and New Hampshire for a base purchase price of $733 million, subject to closing adjustments.
"This transaction demonstrates NextEra Energy Partners' continued ability to execute its long-term growth plan," said Jim Robo, chairman and chief executive officer. "This acquisition of approximately 400 megawatts of long-term contracted wind projects with high-credit-quality customers further enhances the diversity of the partnership's existing portfolio. This portfolio is an attractive acquisition for NextEra Energy Partners and is supported by our ability to leverage NextEra Energy Resources' best-in-class operating platform to reduce costs and create value for LP unitholders. The assets are well-situated in strong markets with long-term renewables demand, providing long-term optionality for the portfolio. The transaction also provides an accretive investment opportunity to deploy the proceeds from the second draw of our 2020 convertible equity portfolio financing, illustrating NextEra Energy Partners' ability to leverage its value-enhancing financing structures to support long-term growth. NextEra Energy Partners remains on a trajectory to grow our LP distributions per unit by 12% to 15% through 2024, and, in our view, the partnership has never been better positioned to deliver unitholder value going forward."
Portfolio acquisition and financing detailsThe portfolio is comprised of four wind generation facilities, totaling 391 MW. Almost all of the portfolio's capacity is contracted with investment-grade counterparties and a cash available for distribution (CAFD)-weighted remaining contract life of approximately 13 years at the time of closing. The assets are located in markets with significant long-term renewables demand, supporting potential re-contracting or repowering opportunities after the initial contract terms. The assets included are:
- Alta Wind VIII, 150-MW wind generating facility in California.
- Windstar,120-MW wind generating facility in California.
- Coram, 22-MW wind generating facility in California.
- Granite, 99-MW wind generating facility in New Hampshire.
NextEra Energy Partners expects to acquire the unlevered portfolio for a base purchase price of $733 million, subject to closing adjustments. NextEra Energy Partners plans to fund the transaction with a combination of undrawn funds remaining from the 2020 convertible equity portfolio financing and existing debt capacity. The acquired assets are expected to contribute adjusted EBITDA and CAFD of approximately $63 to $70 million, each on a five-year average run-rate basis, beginning Dec. 31, 2021.
The transaction is subject to approval from the Federal Energy Regulatory Commission and New Hampshire Site Evaluation Committee, as well as expiration or termination of the waiting period under the Hart-Scott-Rodino Act. NextEra Energy Partners expects to complete the acquisition in the third quarter of 2021, subject to customary closing conditions and the receipt of regulatory approvals.
OutlookNextEra Energy Partners now expects a Dec. 31, 2021, run rate for adjusted EBITDA in the upper end of its previously announced range of $1.44 billion to $1.62 billion and CAFD in the upper end of its previously announced range of $600 million to $680 million, reflecting calendar year 2022 expectations for the portfolio at year-end 2021.
From a base of its fourth-quarter 2020 distribution per common unit at an annualized rate of $2.46 per common unit, NextEra Energy Partners continues to expect 12% to 15% per year growth in limited partner distributions as being a reasonable range of expectations through at least 2024. NextEra Energy Partners expects the annualized rate of the fourth-quarter 2021 distribution, which is payable in February 2022, to be in a range of $2.76 to $2.83 per common unit. These expectations are subject to the usual caveats and include the impact of incentive distribution rights 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, limited partner distribution and other expectations assume, among other things, normal weather and operating conditions; 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; and access to capital at reasonable cost and terms. 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 GAAP net income because NextEra Energy Partners' GAAP net income includes unrealized mark-to-market gains and losses related to derivative transactions, which cannot be determined at this time.
AdvisorsCiti is serving as sole financial advisor to NextEra Energy Partners, and Pillsbury Winthrop Shaw Pittman LLP is acting as counsel to the partnership.
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.
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