NextEra Energy Partners LP has entered into an agreement with subsidiaries of NextEra Energy Resources LLC to acquire a 49% interest in an approximately 1.5 GW renewables portfolio and approximately 100% of the indirect membership interests in an approximately 345 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 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,” states John Ketchum, chairman and CEO. “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,” Ketchum adds. “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.”
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. It includes 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; and Yellow Pine Solar, an approximately 125 MW solar generation and 65 MW storage facility located in Nevada. The company will have 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; and 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.
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.