NextEra Energy Partners, BlackRock agrees acquisition of 1,388 MW renewable energy projects of NextEra Energy Resources

NextEra Energy Partners, LP has entered into an agreement with a subsidiary of NextEra Energy Resources, LLC to acquire a geographically diverse portfolio of 11 wind and solar projects, collectively consisting of approximately 1,388 megawatts (MW). In conjunction with the acquisition, NextEra Energy Partners also has entered into a $750 million convertible equity portfolio financing with a fund managed by BlackRock Global Energy & Power Infrastructure (Fund).

The approximately 1,388-MW portfolio of wind and solar assets has a cash available for distribution weighted remaining contract life of approximately 18 years. 

NextEra Energy Partners expects to acquire the portfolio for total consideration of approximately $1.275 billion, subject to working capital and other adjustments, plus the assumption of approximately $930 million in tax equity financing and $38 million of non-recourse project debt as of year-end 2018. The acquisition is expected to contribute adjusted EBITDA of approximately $290 to $310 million and cash available for distribution (CAFD) of approximately $122 to $132 million, each on a five-year average annual run-rate basis, beginning Dec. 31, 2018.

NextEra Energy Partners intends to initially finance the acquisition through a combination of the $573 million USD proceeds from the sale earlier this year of its Canadian assets and capacity under an existing credit facility. Funds drawn under the credit facility are expected to be immediately repaid with a new $750 million convertible equity portfolio financing with a fund managed by BlackRock Global Energy & Power Infrastructure.

Under the terms of the financing, the Fund will pay $750 million in exchange for an equity interest in the entity that will own the approximately 1,388-MW portfolio being acquired by NextEra Energy Partners. The Fund is expected to earn an effective coupon of approximately 2.5 percent over the initial three-year period, which represents the Fund's initial 15 percent allocation of distributable cash flow from the portfolio. During the fourth year of the agreement, NextEra Energy Partners expects to exercise its right to buy out the Fund's equity interest for a fixed payment equal to $750 million, plus a fixed pre-tax return of 7.75 percent (inclusive of all prior distributions). NextEra Energy Partners has the right to pay at least 70 percent of the buyout amount in NextEra Energy Partners common units, issued at no discount to the then-current market price, with the balance paid in cash. Following the initial three-year period, if NextEra Energy Partners has not exercised its buyout right, the Fund's allocation of distributable cash flow from the portfolio would increase to 80 percent.

NextEra Energy Partners expects to complete the acquisition in the fourth quarter of 2018, subject to customary closing conditions and the receipt of certain regulatory approvals.