JUNO BEACH, Fla., Oct. 5, 2015 /PRNewswire/ -- NextEra Energy
Partners, LP (NYSE: NEP) today announced that it has completed the
previously announced acquisition of NET Midstream, a privately held
developer, owner and operator of a portfolio of seven long-term
contracted natural gas pipeline assets located in Texas. NextEra Energy Partners also announced
the completion of the acquisition of the 149-megawatt (MW) Jericho
Wind Energy Center in Ontario,
Canada, from a subsidiary of its sponsor, NextEra Energy
Resources, LLC. In addition, the partnership has closed
$600 million of term loans, which
completes its financing for the NET Midstream and Jericho
acquisitions.
"I'm very pleased that we have completed the necessary financing
and closed these two acquisitions, which support our growth
strategy," said Jim Robo, chairman
and chief executive officer. "The NET Midstream acquisition
establishes NextEra Energy Partners' presence in the long-term
contracted natural gas pipeline space and complements the
partnership's existing renewables portfolio by reducing the impact
of resource variability on our total portfolio. The Jericho
acquisition further expands NextEra Energy Partners' renewables
portfolio, demonstrating the strength of the pipeline for dropdowns
from its sponsor. We expect both of these acquisitions to provide
attractive yields to our investors, and we continue to view NextEra
Energy Partners as the premier yieldco in the space."
The seven natural gas pipelines in the portfolio are all
strategically located, serving power producers and municipalities
in South Texas, processing plants
and producers in the Eagle Ford Shale, and residential, commercial
and industrial customers in the Houston area. The NET Mexico Pipeline, the
largest pipeline in the portfolio, provides a critical source of
natural gas transportation for low-cost, U.S.-sourced shale gas to
Mexico under a 20-year ship-or-pay
contract with a BBB+-rated, wholly owned subsidiary of Pemex Gas y
Petroquimica Basica, a division of PEMEX, the Mexican state-owned
oil and gas company. The NET Mexico Pipeline is 10 percent owned by
a PEMEX subsidiary. The combined acquisition portfolio includes 3.0
billion cubic feet (Bcf) per day of ship-or-pay contracts, with on
average investment-grade counterparty credit and long-term
contracted assets with a 16-year average contract life. The three
largest pipelines in the portfolio have planned growth and
expansion projects that, if completed, are expected to provide
approximately 1.0 Bcf per day of additional contracted volumes.
NextEra Energy Partners acquired NET Midstream for a total
transaction value of approximately $2.1
billion, including $934
million in cash consideration and the assumption of
approximately $654 million in
existing debt, and excluding post-closing working capital and other
adjustments. Of the $2.1 billion,
roughly $500 million will be
deferred, with $200 million payable
18 months after closing contingent upon no breach of
representations and warranties by the seller, up to $200 million payable for certain expansion
projects contingent upon satisfaction of certain financial
performance and capital expenditure thresholds, and, if successful,
up to approximately $100 million of
capital expenditures for the expansion projects. The $300 million for the expansion projects is
expected to be financed almost entirely with incremental future
debt.
NextEra Energy Partners expects the NET Midstream acquisition to
contribute adjusted EBITDA and CAFD of approximately $145 million to $155 million and $110 million to $120 million, respectively, on an
annual run rate basis as of Dec. 31,
2015. If certain expansion projects are completed as
planned, the acquisition is expected to contribute adjusted EBITDA
and CAFD of approximately $190 million to
$210 million and $135 million to $155
million, respectively, on an annual run rate basis as of
Dec. 31, 2017.
For the NET Midstream acquisition, Wells Fargo Securities served
as financial advisor to NextEra Energy Partners and Locke Lord served as legal counsel to the
partnership.
In addition, NextEra Energy Partners acquired the 149-MW Jericho
Wind Energy Center from its sponsor, NextEra Energy Resources, for
a total purchase price of approximately $210
million in cash consideration, plus approximately
$19 million in working capital
(subject to post-closing adjustments), and assumed approximately
$294 million in existing debt. The
addition of the Jericho Wind Energy Center in Ontario, Canada, increases NextEra Energy
Partners' renewables portfolio to more than 2,072 MW.
NextEra Energy Partners expects the Jericho acquisition to
contribute adjusted EBITDA and CAFD of approximately $40 million to $45 million and approximately
$20 million to $25 million,
respectively, on an annual run rate basis as of Dec. 31, 2015. See Definitional Information below
for definitions of adjusted EBITDA and CAFD for the NET Midstream
and Jericho acquisitions.
The annual run rates for the NET Midstream and Jericho
acquisitions are included in NextEra Energy Partners' previously
provided annual run rate expectations as of Dec. 31, 2015 and Dec. 31,
2016.
In addition, NextEra Energy Partners (through a subsidiary) has
completed the financing of its previously disclosed $1.5 billion capital need through the execution
of several U.S. term loans totaling $600
million in the aggregate. With the term loans, as well as
$213 million from the previously
announced public issuance of common units representing limited
partner interests in NextEra Energy Partners and the $702 million investment by NextEra Energy in
additional NextEra Energy Partners operating company units, the
partnership has completed its necessary financing for the payment
of the NET Midstream acquisition cash purchase price, payment of
the cash purchase price for the Jericho acquisition and repayment
of the $313 million term loan for the
purchase of the four wind assets acquired during the second
quarter.
NextEra Energy Partners expects to reach a distribution level at
an annualized rate of $1.23 per unit
by the end of 2015 and, after 2015, expects per unit distributions
to grow about 12 to 15 percent per year through 2020. These
distribution levels 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 and access to
capital at reasonable cost and terms. NextEra Energy Partners'
adjusted EBITDA and CAFD expectations should be viewed in
conjunction with NextEra Energy Partners' cautionary statements and
risk factors set forth below and in NextEra Energy Partners'
filings with the Securities and Exchange Commission. Adjusted
EBITDA and CAFD do not represent substitutes for net income, as
prepared in accordance with generally accepted accounting
principles. The expected run rates have not been reconciled to GAAP
net income because NextEra Energy Partners did not prepare
estimates of the effect of any acquisitions on certain GAAP line
items that would be necessary to provide a forward-looking estimate
of GAAP net income, and the information necessary to provide such a
forward-looking estimate is not available without unreasonable
effort.
NextEra Energy Partners, LP
NextEra Energy Partners,
LP (NYSE: NEP) is a growth-oriented limited partnership formed by
NextEra Energy, Inc. (NYSE: NEE) to acquire, manage and own
contracted clean energy projects with stable, long-term cash flows.
Headquartered in Juno Beach, Fla.,
NextEra Energy Partners owns interests in wind and solar projects
in North America, as well as
natural gas infrastructure assets in Texas. The renewable energy projects are fully
contracted, use industry-leading technology and are located in
regions that are favorable for generating energy from the wind and
sun. The seven natural gas pipelines in the portfolio are all
strategically located, serving power producers and municipalities
in South Texas, processing plants
and producers in the Eagle Ford Shale, and residential, commercial
and industrial customers in the Houston area. The NET Mexico Pipeline, the
largest pipeline in the portfolio, provides a critical source of
natural gas transportation for low-cost, U.S.-sourced shale gas to
Mexico. For more information about
NextEra Energy Partners, please visit:
www.NextEraEnergyPartners.com.
Definitional Information
NextEra Energy Partners, LP Adjusted EBITDA and CAFD
Expectations for the NET Midstream and Jericho Acquisitions
This news release refers to adjusted EBITDA and CAFD
expectations for the NET Midstream and Jericho acquisitions.
NextEra Energy Partners' adjusted EBITDA expectations for these
acquisitions represent projected revenue less fuel expense, project
operating expenses, plus other income, less other deductions.
Projected revenue as used in the calculations of projected EBITDA
represents the sum of projected operating revenue plus the earnings
impact from the amortization of convertible investment tax
credits.
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 the
earnings impact from convertible investment tax credits, less (3)
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.
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, or may require it to limit or eliminate certain
operations. These risks and uncertainties include, but are not
limited to, the following: NEP has a limited operating history and
its projects may not perform as expected; NEP's ability to make
cash distributions to its unitholders is affected by wind and solar
conditions at its projects; operation and maintenance of energy
projects involve significant risks that could result in unplanned
power outages or reduced output; the wind turbines at some of NEP's
projects and at some of NextEra Energy Resources, LLC's (NEER)
right of first offer projects (ROFO Projects) are not generating
the amount of energy estimated by their manufacturers' original
power curves, and the manufacturers may not be able to restore
energy capacity at the affected turbines; NEP depends on certain of
the projects in its portfolio for a substantial portion of its
anticipated cash flows; terrorist or similar attacks could impact
NEP's projects or surrounding areas and adversely affect its
business; NEP's energy production may be substantially below its
expectations if a natural disaster or meteorological conditions
damage its turbines, solar panels, other equipment or facilities;
NEP is not able to insure against all potential risks and it may
become subject to higher insurance premiums; warranties provided by
the suppliers of equipment for NEP's projects may be limited by the
ability of a supplier to satisfy its warranty obligations or if the
term of the warranty has expired or liability limits, which could
reduce or void the warranty protections, or the warranties may be
insufficient to compensate NEP's losses; supplier concentration at
certain of NEP's projects may expose it to significant credit or
performance risks; NEP relies on interconnection and transmission
facilities of third parties to deliver energy from its projects
and, if these facilities become unavailable, NEP's projects may not
be able to operate or deliver energy; NEP's business is subject to
liabilities and operating restrictions arising from environmental,
health and safety laws and regulations; NEP's projects may be
adversely affected by legislative changes or a failure to comply
with applicable energy regulations; NEP's partnership agreement
restricts the voting rights of unitholders owning 20% or more of
its common units, and under certain circumstances this could be
reduced to 10%; 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 leaseholders that have rights that are superior
to NEP's rights or the BLM 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 future proceedings related to projects it
subsequently acquires; the Summerhaven, Conestogo and Bluewater projects are subject to Canadian
domestic content requirements under their Feed-in-Tariff (FIT)
contracts; NEP's cross-border operations require NEP to comply with
anti-corruption laws and regulations of the U.S. government and
non-U.S. jurisdictions; NEP is subject to risks associated with its
ownership or acquisition of projects that remain 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 energy sale
counterparties and NEP is exposed to the risk that they are
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
agreements, such as its power purchase agreements (PPAs), Renewable
Energy Standard Offer Program (RESOP) Contracts and FIT Contracts,
at favorable rates or on a long-term basis; if the energy
production by or availability of NEP's U.S. projects is less than
expected, they may not be able to satisfy minimum production or
availability obligations under NEP's U.S. project entities' PPAs;
NEP's growth strategy depends on locating and acquiring interests
in additional projects consistent with its business strategy at
favorable prices; NextEra Energy Operating Partners, LP's (NEP
OpCo) partnership agreement requires that it distribute its
available cash, which could limit its ability to grow and make
acquisitions; lower prices for other fuel sources reduce the demand
for wind and solar energy; government regulations providing
incentives and subsidies for clean energy could change 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; NEP's ability to effectively consummate
future acquisitions depends on its ability to arrange the required
or desired financing for acquisitions; acquisitions of existing
clean energy projects involve numerous risks; renewable energy
procurement is subject to U.S. state and Canadian provincial
regulations, with relatively irregular, infrequent and often
competitive procurement windows; while NEP currently owns only wind
and solar projects, NEP may acquire other sources of clean energy,
including natural gas and nuclear projects, and may expand to
include other types of assets including transmission projects, and
any future acquisition of non-renewable energy projects, including
transmission projects, may present unforeseen challenges and result
in a competitive disadvantage relative to NEP's more-established
competitors. A failure to successfully integrate such acquisitions
with NEP's then-existing projects as a result of unforeseen
operational difficulties or otherwise, could have a material
adverse effect on NEP's business, financial condition, results of
operations and ability to grow its business and make cash
distributions to its unitholders; NEP faces substantial competition
primarily from regulated utilities, developers, independent power
producers (IPPs), pension funds and private equity funds for
opportunities in North America;
restrictions in NEP OpCo's subsidiaries' revolving credit facility
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; 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; currency
exchange rate fluctuations may affect NEP's operations; NEP is
exposed to risks inherent in its use of interest rate swaps; NEE
exercises substantial influence over NEP and NEP is highly
dependent on NEE and its affiliates; NEP is highly dependent on
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; NEER or
one of its affiliates is permitted to borrow funds received by
NEP's subsidiaries, including NEP OpCo, as partial consideration
for its obligation to provide credit support to NEP, and NEER will
use these funds for its own account without paying additional
consideration to NEP 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 a portion of these funds;
NEP may not be able to consummate future acquisitions from NEER;
NextEra Energy Partners GP, Inc. (NEP GP), NEP's general partner,
and its affiliates, including NEE, have conflicts of interest with
NEP and limited duties to NEP and its unitholders and they may
favor their own interests to the detriment of NEP and holders of
NEP's common units; NEE and other affiliates of NEP GP are not
restricted in their ability to compete with NEP; NEP may be unable
to terminate the management services agreement among NEP, NextEra
Energy Management Partners, LP (NEE Management), NEP OpCo and NEP
GP (Management Services Agreement); if NEE Management terminates
the Management Services Agreement, NEER terminates the management
services subcontract between NEE Management and NEER (Management
Sub-Contract) or either of them defaults in the performance of its
obligations thereunder, NEP may be unable to contract with a
substitute service provider on similar terms, or at all; NEP's
arrangements with NEE limit NEE's 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; the credit and risk profile of NEP GP
and its owner, NEE, could adversely affect any NEP credit ratings
and risk profile, which could increase NEP's borrowing costs or
hinder NEP's ability to raise capital; 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 (as defined in the Management Services Agreement)
payable to NEE Management under the Management Services Agreement;
holders of NEP's common units have limited voting rights and are
not entitled to elect its general partner or its general partner's
directors; NEP's partnership agreement restricts the remedies
available to holders of NEP's common units for actions taken by its
general partner that might otherwise constitute breaches of
fiduciary duties; NEP's partnership agreement replaces NEP GP's
fiduciary duties to holders of NEP's common units with contractual
standards governing its duties; even if holders of NEP's common
units are dissatisfied, they cannot initially remove NEP GP, as
NEP's general partner, without NEE's consent; NEP GP's interest in
NEP and the control of NEP GP may be transferred to a third party
without unitholder consent; the IDR fee 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 to or from NEP OpCo and from NEP to NEP's
unitholders, and the amount and timing of such reimbursements and
fees will be determined by NEP GP and there are no limits on the
amount that NEP OpCo may be required to pay; discretion in
establishing cash reserves by NextEra Energy Operating Partners GP,
LLC (NEE Operating GP), the general partner of NEP OpCo, may reduce
the amount of cash distributions to NEP's unitholders; while NEP's
partnership agreement requires NEP to distribute its available
cash, NEP's partnership agreement, including provisions requiring
NEP to make cash distributions, may be amended; NEP OpCo can borrow
money to pay distributions, which would reduce the amount of credit
available to operate NEP's business; 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 price of NEP's common units may fluctuate
significantly and unitholders could lose all or part of their
investment and a market that will provide unitholders with adequate
liquidity may not develop; the liability of holders of NEP's common
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; except in
limited circumstances, NEP GP has the power and authority to
conduct NEP's business without unitholder approval; contracts
between NEP, on the one hand, and NEP GP and its affiliates, on the
other hand, will not be the result of arm's-length negotiations;
unitholders have no right to enforce the obligations of NEP GP and
its affiliates under agreements with NEP; NEP GP decides whether to
retain separate counsel, accountants or others to perform services
for NEP; 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 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 utilize NOLs to offset future income may be limited; NEP will
not have complete control over NEP's tax decisions; a valuation
allowance may be required for NEP's deferred tax assets;
distributions to unitholders may be taxable as dividends; NEP may
fail to realize the growth prospects anticipated as a result of the
NET Midstream acquisition; uncertainties associated with the NET
Midstream acquisition may cause a loss of management personnel and
other key employees that could adversely affect NEP's future
business, operations and financial results following the NET
Midstream acquisition; as a result of the NET Midstream
acquisition, the scope and size of NEP's operations and business
will substantially change and NEP cannot provide assurance that
NEP's expansion into the midstream natural gas industry will be
successful; NET Midstream depends on a key customer for a
significant portion of its revenues, the loss of such customer
could result in a decline in NEP's revenues and cash available to
make distributions to NEP's unitholders; NEP may be unable to
secure renewals of long-term natural gas transportation agreements,
which could expose its revenues to increased volatility; NEP may
not succeed in realizing the anticipated benefits of NET Mexico's
pipeline joint venture with a subsidiary of PEMEX; NEP may for the
first time pursue the development of pipeline expansion projects
that will require up-front capital expenditures and expose NEP to
project development risks; NEP's ability to maximize the
productivity of the NET Midstream business and to complete
potential pipeline expansion projects will be dependent on the
continued availability of natural gas production in NET Midstream's
areas of operation; NET Midstream does not own all of the land on
which the NET Midstream pipelines are located, which could disrupt
its operations; the natural gas pipeline industry is highly
competitive, and increased competitive pressure could adversely
affect NEP's business; if third-party pipelines and other
facilities interconnected to the NET Midstream pipelines become
partially or fully unavailable to transport natural gas, NEP's
revenues and cash available for distribution to unitholders could
be adversely affected; a change in the jurisdictional
characterization of some of the NET Midstream assets, or a change
in law or regulatory policy, could result in increased regulation
of these assets; NEP may incur significant costs and liabilities as
a result of pipeline integrity management program testing and any
necessary pipeline repair or preventative or remedial measures; NET
Midstream's pipeline operations could incur significant costs if
the Pipeline and Hazardous Materials Safety Administration or the
Railroad Commission of Texas
adopts more stringent regulations governing NEP's business; NEP
could be exposed to liabilities under the U.S. Foreign Corrupt
Practices Act and other anti-corruption laws (including non-U.S.
laws); PEMEX may claim certain immunities under the Foreign
Sovereign Immunities Act and Mexican law, and NET Midstream's
ability to sue or recover from PEMEX for breach of contract may be
limited; FERC is investigating certain commodities trading
activities by an employee of NET Midstream; natural gas operations
are subject to numerous environmental laws and regulations,
compliance with which may require significant capital expenditures,
increase NEP's cost of operations and affect or limit its business
plans, or expose NEP to liabilities; reductions in demand for
natural gas in the United States
or Mexico and low market prices of
commodities could adversely affect NET Midstream's operations and
cash flows; natural gas gathering and transmission activities
involve numerous risks that may result in accidents or otherwise
affect NET Midstream's operations; the assumptions underlying NEP's
projections of future revenues from the NET Midstream acquisition
are inherently uncertain and are subject to significant business,
economic, financial, regulatory and competitive risks and
uncertainties that could cause actual results to differ materially
from those forecasted; NEP's future net operating losses, or NOLs,
may be less than expected, and its ability to use its NOLs may be
limited by certain ownership changes in the future, both of which
would increase or accelerate its future tax liability and thus
reduce its future cash available for distribution to unitholders.
NEP discusses these and other risks and uncertainties in its annual
report on Form 10-K for the year ended December 31, 2014 and other 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.
Logo - http://photos.prnewswire.com/prnh/20140701/123841
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/nextera-energy-partners-lp-completes-the-acquisition-of-natural-gas-pipelines-in-texas-300153927.html
SOURCE NextEra Energy Partners, LP