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NextEra Energy Partners Issues Debt to Fund Asset Purchase


NextEra Energy Partners, LP NEP announced that it has completed the sale of $300-million convertible senior notes due 2020. These notes will pay interest semi-annually, at the rate of 1.50% per annum, and will mature on Sep 15, 2020. These notes can be converted to equity at a 25% premium according to the closing price of $42.29 per common unit on Sep 6, 2017.

Purpose of the Offering

The capital accumulated from this offering will be utilized to fund the company’s expansion plans in the current year. The partnership is aiming to use a portion of the proceeds from this offering to acquire renewable assets either from NextEra Energy Resources or third parties. The partnership might utilize the proceeds to fund the initial cost of the capped call transaction and use the balance proceeds for general partnership purposes.

The partnership has already received offers to buy the following assets from NextEra Energy Resources — 25.9% interest in Desert Sunlight 250 and Desert Sunlight 300 at Riverside County, CA; Brady Wind I and Brady Wind II at Stark and Hettinger counties, ND and Javelina I at Webb County, TX. However, the partnership is under no obligation to buy these assets.

Expansion of Renewable Portfolio

NextEra Energy NEE formed NextEra Energy Partners to own, manage and acquire contracted clean energy projects with stable and long-term cash flows.

The partnership evaluates and adds high-quality renewable assets to its portfolio. During the second quarter, it completed the acquisition of 250 megawatts (MW) Golden West Wind project from NextEra Energy Resources for approximately $238 million.

Why Renewable Energy?

With global warming on the rise, it is important to plan energy consumption carefully. It is important to note that non-renewable energy sources are limited and will be exhausted in the near future. Therefore, major energy providers like NextEra Energy, Duke Energy Corporation DUK, Xcel Energy Inc. XEL and others are gradually switching to low or no-emission energy resources, such as solar, wind, hydro etc., which are available abundantly.

According to U.S. Energy Information Administration, in 2016, approximately 10% of total energy consumption in the United States was from renewable energy sources. We expect contribution from the renewable sources to the total generation mix to rise due to lower cost of power production from renewable sources and government’s initiatives to provide more impetus to renewable generation projects.

Price Movement

Units of NextEra Energy Partners have returned 49%, outperforming the industry’s increase of 14.6% in the last one year.

This outperformance could be attributed to the company’s growing renewable portfolio which has boosted its performance.

Zacks Rank

NextEra Energy Partners carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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