Business context and reporting period
Filing: Form 10-Q for the quarter ended March 31, 2020. The filing identifies the registrant as NextEra Energy Partners, LP (NYSE: NEP); the request metadata names XPLR Infrastructure, LP. Confirm the intended issuer before relying on this summary.
NEP owns contracted renewable generation and natural gas pipeline interests. It consolidates NEP OpCo, in which it held an approximately 39.2% limited partner interest; NEE Equity held the remaining 60.8%. Results include substantial noncontrolling interests.
Key financial results
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Operating revenue | $212 million | $177 million |
| Operating income / margin | $49 million / 23.1% | $34 million / 19.2% |
| Net loss attributable to NEP | $222 million | $22 million |
| Loss per common unit | $3.39 | $0.38 |
| Cash from operations | $99 million | $19 million |
| Capital expenditures and other investments | $52 million | $3 million |
| Cash, cash equivalents and restricted cash, quarter-end | $123 million | $144 million |
| Long-term debt, including current maturities | $4.192 billion | $4.144 billion at December 31, 2019 |
| Liquidity, as defined by management | $753 million | — |
Renewable energy sales were $157 million, up $34 million, while Texas pipeline service revenue was $55 million, up $1 million. O&M expense rose to $92 million from $76 million. The operating margin shown above is operating income divided by operating revenue; the filing does not present it as a reported non-GAAP margin.
Material changes and unusual items
- Revenue growth reflected approximately $18 million from projects acquired in June 2019 and $16 million primarily from stronger wind resources. The acquisitions added about 611 MW of wind and solar capacity; NEP also acquired an interest in the Meade pipeline in November 2019.
- Interest expense increased to $839 million from $155 million. This included a $795 million loss from marking interest-rate derivatives to market; management attributed $677 million of the year-over-year increase to unfavorable mark-to-market activity. The reported loss was therefore heavily affected by derivatives, rather than solely by operating performance.
- At March 31, net derivative liabilities were $1.214 billion, versus $418 million at year-end 2019. These contracts primarily manage interest-rate exposure; NEP does not apply hedge accounting and records fair-value changes in interest expense.
- Operating cash flow improved by $80 million, primarily due to acquired projects, higher wind resource, Meade distributions and timing of receivables. Investing cash flow was negative $88 million, including $48 million of net payments under the CSCS agreement, compared with $21 million of cash provided in the prior-year quarter.
- Total liabilities were $6.042 billion, versus $5.190 billion at year-end; the increase included derivatives. Total equity declined to $6.279 billion from $7.066 billion.
Liquidity, outlook, and risks
- Management said liquidity and operating cash flows should cover operating costs, maintenance capital, distributions and liquidity commitments. The $753 million liquidity measure included $115 million cash, $60 million due under the CSCS agreement, and $1.250 billion of revolving capacity less $550 million drawn and $122 million of letters of credit.
- Planned capital expenditures included about $128 million for a Texas pipeline expansion expected in service in Q4 2020, $90 million for the Central Penn Line expansion targeted for mid-2022, and approximately $200 million for wind repowering expected to be completed in 2020. These estimates may change. Remaining commitments under specified construction and funding contracts were approximately $253 million.
- The board authorized a May 2020 common-unit distribution of $0.555 per unit, up from $0.535 paid in Q1 2020. The filing did not provide broader earnings or distribution-growth guidance.
- COVID-19 had not materially affected operations, financial performance or liquidity as of the filing, but its duration and consequences remained uncertain; NEP added it as a risk to business, liquidity and distributions.
- PG&E’s Chapter 11 case created financing defaults at the Genesis and Shafter projects and blocked distributions from those projects. Approximately $51 million of cumulative Shafter and Desert Sunlight distributions remained undistributed; Shafter had about $25 million of debt outstanding, with a waiver extending to April 2021. PG&E’s proposed reorganization plan contemplated assuming the PPAs, but rejection remained a risk.
- NEP reported compliance with financial debt covenants except for the PG&E-related events of default. Other notable risks include dependence on counterparties and NEE/NEER support, access to capital, interest-rate exposure, and project and weather variability.
Important facts for investors to verify
- Confirm that this NEP filing—not an XPLR Infrastructure filing—is the intended issuer and reporting period.
- Assess the sensitivity of reported earnings and derivative liabilities to interest-rate changes, and distinguish mark-to-market effects from cash interest costs.
- Track availability of cash held or swept under CSCS arrangements and the terms and actual availability of revolving credit capacity.
- Monitor PG&E PPA and bankruptcy developments, the restricted project distributions, and the Shafter financing waiver.
- Compare planned pipeline and repowering spending with execution, funding needs, and the ability to sustain distributions.