NextEra Energy Partners yieldco acquires interest in 550-MW solar plant

Written By: Stratton Report
September 8, 2016

Next Era

On September 8, NextEra Energy Partners, LP announced that it will acquire an indirect 24 percent interest in Desert Sunlight Investment Holdings, LLC from a subsidiary of its sponsor, NextEra Energy Resources, LLC.

NextEra Energy Partners is paying a purchase price of $218 million. The purchase price involves approximately $258 million of the existing non-recourse project debt and is subject to working capital adjustments.

Desert Sunlight Investment Holdings, LLC owns two project entities, which together make up the Desert Sunlight Solar Energy Center, a 550-MW solar generation plant located in Riverside County, Calif. The projects are fully contracted under long-term power purchase agreements for which the remaining average contract lives are 21 years. NextEra Energy Resources, which currently owns 50 percent of the projects, will remain the managing member upon completion of the transaction.

According to the yieldco, when the acquisition is completed, NextEra Energy Partners’ portfolio of contracted renewable energy projects will total approximately 2,788 MW. NextEra expects to complete the acquisition in the fourth quarter of 2016.

Jim Robo, chairman and chief executive officer noted:

“This acquisition further demonstrates our ability to acquire assets at attractive yields that will be accretive for our investors, as well as the continued strength of the pipeline of growth opportunities that our sponsor, NextEra Energy Resources, provides. In addition, NextEra Energy Partners’ continued ability to access the equity markets aligns with our previously communicated flexible and opportunistic approach to advance our growth strategy and deliver unitholder distributions consistent with the expectations we’ve outlined. NextEra Energy Partners, in our view, remains the premier YieldCo in the space.”

The partnership expects to fund the transaction through the net proceeds of an issuance of common units.

NextEra Energy Partners expects the acquisition to add adjusted EBITDA of approximately $43 million to $53 million and cash available for distribution of approximately $21 million to $26 million, each on an annual run-rate basis as of Dec. 31, 2016.

The acquisition is expected by NextEra to contribute to an increase in the third-quarter distribution to an annualized rate of $1.365 per common unit from a current annualized rate of $1.32 per common unit.

The acquisition is also expected to increase NextEra Energy Partners estimated incremental debt capacity at the holding company to approximately $375 million to $475 million and support NextEra Energy Partners’ current expectations of 12 to 15 percent per year growth in limited partner distributions through 2020 off a base of its fourth-quarter 2015 distribution per common unit.