- Revises limited partner distribution per unit growth
expectations to 5% to 8% per year through at least 2026, with a
target of 6% growth
- Expects no growth equity until 2027
JUNO
BEACH, Fla., Sept. 27,
2023 /PRNewswire/ -- NextEra Energy Partners, LP
(NYSE: NEP) today announced that it is revising its growth rate to
better position the partnership to continue to deliver long-term
value for unitholders. The partnership is revising its limited
partner distribution per unit growth rate to 5% to 8% per year
through at least 2026, with a target growth rate of 6%.
"NextEra Energy Partners is revising its long-term growth rate
expectations for limited partner distributions to increase its
flexibility as it continues to execute on its growth
opportunities," said John Ketchum,
chairman and chief executive officer. "Tighter monetary policy and
higher interest rates obviously affect the financing needed to grow
distributions at 12%, and the burden of financing this growth has
had an impact on NextEra Energy Partners' unit price and yield. In
the current market environment, the partnership believes revising
its growth expectations for now is the appropriate decision for
unitholders and better positions it to continue to deliver
long-term value."
By reducing its growth rate and executing on its previously
announced transition plans as outlined in May, which includes the
sale of the natural gas pipelines and the buyouts of the
convertible equity portfolio financing payments due through 2025,
NextEra Energy Partners does not expect to require growth equity to
meet its revised growth expectations until 2027. If favorable
market conditions exist, the partnership may elect to
opportunistically issue equity, which would likely be executed
through its at-the-market equity issuance program.
NextEra Energy Partners also plans to repower the majority of
its wind portfolio in the coming years, which it believes can be
accomplished at attractive cash available for distribution (CAFD)
yields. It also expects to continue to look to acquire wind, solar
and storage assets from NextEra Energy Resources and other third
parties at favorable yields.
"Reducing growth expectations will allow NextEra Energy Partners
to focus on higher-yielding growth opportunities, such as organic
repowerings in the short- to medium-term, and reduce new capital
requirements," said Ketchum. "Over the near and longer term,
NextEra Energy Resources' industry-leading portfolio of renewables
projects, which is expected to total up to 58 gigawatts through
2026, together with organic growth and third-party acquisitions,
will continue to provide NextEra Energy Partners with excellent
growth opportunities. Through continued execution of its plans,
NextEra Energy Partners is charting a course to a sustainable
future with significant growth visibility."
Outlook
Consistent with the reduction to its
growth-rate expectations, NextEra Energy Partners is revising its
year-end run-rate expectations for adjusted EBITDA and CAFD.
NextEra Energy Partners expects run-rate contributions for adjusted
EBITDA and CAFD from its forecasted portfolio at Dec. 31, 2023, to be in the ranges of
$1,900 million to $2,100 million and $730
million to $820 million,
respectively, reflecting calendar-year 2024 contributions from the
forecasted portfolio at year-end 2023.
NextEra Energy Partners now expects the annualized rates of its
third-quarter 2023 distribution per common unit to be $3.47, payable in November
2023, and its fourth-quarter 2023 distribution per common
unit to be $3.52, payable in February
of 2024.
Presentation at 2023 Wolfe Research Utilities, Midstream
& Clean Energy Conference
John
Ketchum is scheduled to present at the 2023 Wolfe Research
Utilities, Midstream & Clean Energy Conference in New York City on Sept.
27, 2023, at 11 a.m. ET. He
plans to discuss, among other things, NextEra Energy Partners'
growth-rate expectations. A live audio webcast and a copy of the
presentation materials will be available at
www.NextEraEnergyPartners.com. For those unable to listen to the
live webcast, a replay will be available for 90 days by accessing
the link listed above.
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.
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 (5) maintenance capital,
less (6) income tax payments less, (7) 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 distributions, equity
issuances 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; no
changes to governmental policies or incentives; and completion of
the partnership's transition plans announced in May 2023. 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.
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 NEP's transition plans, adjusted
EBITDA, cash available for distributions (CAFD), and unit
distribution expectations, as well as statements concerning NEP's
future operating performance, equity issuance expectations,
financing needs, expected proceeds from asset sales, and results of
dispositions. 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 the performance of its renewable
energy projects which could be impacted by wind and solar
conditions and in certain circumstances by market prices; 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 renewable energy projects
or the expansion of natural gas pipelines that would require
up-front capital expenditures and could expose NEP to project
development risks; geopolitical factors, 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 subsidiaries' of NEP that directly own the
natural gas pipeline assets located in Texas 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 U.S. 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 utility
holding companies, 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's plan to sell its natural gas
pipeline assets for adequate proceeds may be unsuccessful, and NEP
may have to rely on other sources of capital in order to purchase
noncontrolling membership interests in certain subsidiaries and to
finance future growth; 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) and certain
of its affiliates are permitted to borrow funds received by NextEra
Energy Operating Partners, LP (NEP OpCo) or its subsidiaries and is
obligated to return these funds only as needed to cover project
costs and distributions or as demanded by 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 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 New York Stock Exchange 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;
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 common units, or other limited partnership interests,
or securities convertible into, or settleable with, common units,
and any subsequent conversion or settlement, will dilute common
unitholders' ownership in NEP, may decrease the amount of cash
available for distribution for each common unit, will impact the
relative voting strength of outstanding NEP common units and
issuance of such securities, or the possibility of issuance of such
securities, as well as the resale, or possible resale following
conversion or settlement, may result in a decline in the market
price for NEP's common units; 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, 2022 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