There are still plenty of asset transactions taking place in the world of alternative and renewable energy sources. A transaction was announced on Monday by NextEra Energy Partners L.P. (NYSE: NEP) to acquire a geographically diverse portfolio wind and solar projects. NextEra Energy Partners entered into a $900 million convertible equity portfolio financing agreement with a unit of KKR & Co. Inc. (NYSE: KKR) in the transaction.
The deal covers six wind and solar projects with a combined capacity of approximately 611 megawatts (MW) that will continue to enhance NEP’s existing portfolio. Also noted was that this effectively will recapitalize existing project debt on four existing NextEra Energy Partners’ assets. NEP described this as being a very attractive, low-cost, equity-like product that further improves the partnership’s financing flexibility.
NEP said that it expects to acquire the unlevered portfolio for total price of roughly $1.02 billion. That dollar amount is subject to working capital and other adjustments, but NEP said that it is expected to contribute adjusted EBITDA of approximately $100 million to $115 million and cash flow available for distribution of approximately $97 million to $107 million, each on a five-year average annual run-rate basis starting at the end of 2019.
KKR’s investment will be an equity interest in a newly formed structured partnership with NEP in which it will have certain rights to acquire KKR’s interest over time at predetermined return levels between 3.5 and 7.0 years. KKR’s share of partnership cash flows will increase to 99% if those call options are not exercised within certain milestones.
KKR further noted that its $900 million investment will be funded by new term loan financing and also with equity from its third $7.4 billion Global Infrastructure Investors fund, which closed last year. NEP’s press release showed that the assets included are:
- 100% interest in Ashtabula II Wind Energy Center (120 MW plant in Griggs and Steele counties, North Dakota)
- 100% interest in Story County II Wind Energy Center (150 MW plant in Hardin and Story counties, Iowa)
- 100% interest in White Oak Wind Energy Center (150 MW plant in McLean County, Illinois)
- 49.99% interest in Silver State South Solar Energy Center (250 MW plant in Clark County, Nevada)
- 49.99% interest in Marshall Solar Energy Center (62.25 MW plant in Lyon County, Minnesota)
- 49.99% interest in Roswell Solar Energy Center (70 MW plant in Chaves County, New Mexico)
NEP’s press release indicated that this completes its 2019 growth objectives while bridging cash distribution restrictions from the Pacific Gas & Electric bankruptcy and that it also extends the earliest date that the partnership is expected to need to sell common equity by one year (out to 2021) other than modest issuances under the at-the-market program.
Next Era’s statement said of its outlook for the year:
This combined transaction completes NextEra Energy Partners’ 2019 growth objectives and is expected to enable the portfolio to bridge any cash distribution restrictions resulting from the ongoing PG&E bankruptcy. With this in mind, we are pleased to extend the earliest date that the partnership is expected to need to sell common equity by one year, until 2021 at the earliest, other than modest issuances under the at-the-market program. NextEra Energy Partners continues to offer an attractive investor value proposition, and is well-positioned to deliver on its growth prospects with significant flexibility to finance that growth.