Business context and reporting period
Important entity discrepancy: The request identifies XPLR Infrastructure, LP, but the supplied Form 10-Q is for NextEra Energy Partners, LP (NEP), NYSE ticker NEP. This summary covers NEP’s unaudited quarter ended March 31, 2023, compared with Q1 2022.
NEP owns contracted renewable energy, battery storage and natural gas pipeline assets. At quarter-end, NEP held approximately 46.9% of NEP OpCo’s limited partner interest; NEE Equity held the remaining 53.1% noncontrolling interest. NEP reported 88.9 million common units outstanding.
Key financial results
| Metric (millions, except per-unit data) | Q1 2023 | Q1 2022 |
|---|---|---|
| Operating revenue | $301 | $281 |
| Operating income | $3 | $34 |
| Net income (loss) | $(151) | $333 |
| Net income (loss) attributable to NEP | $(14) | $144 |
| Basic and diluted earnings (loss) per unit | $(0.17) | $1.72 |
| Net cash from operating activities | $82 | $120 |
| Capital expenditures and other investments | $401 | $467 |
Revenue rose about 7%. Renewable energy sales were $245 million, up from $224 million; Texas pipeline service revenue was $56 million, versus $57 million. Operating margin fell to approximately 1% from 12% as operating expenses grew faster than revenue. Reported interest expense was $(210) million, compared with $284 million of income in Q1 2022; NEP attributed the approximately $494 million unfavorable change primarily to derivative mark-to-market activity, with $163 million of losses in 2023 versus $328 million of gains in 2022. These valuation movements materially affected reported earnings.
At March 31, 2023, cash and cash equivalents were $238 million; total debt, including current maturities, was $5.345 billion. Total assets were $22.647 billion and total liabilities were $8.068 billion. Reported liquidity was approximately $2.769 billion, including cash, amounts due under the CSCS agreement, available revolving credit capacity and expected NEP Renewables IV final funding. Management said liquidity and operating cash flows should be adequate for operating costs, maintenance capital expenditures, distributions and liquidity commitments, while noting that growth and distribution increases depend on access to capital on acceptable terms.
Material changes and notable items
- Operating costs increased: O&M rose $25 million, primarily due to existing projects, acquired projects and higher corporate costs; depreciation and amortization increased $29 million, mainly reflecting 2022 acquisitions.
- Management cited lower renewable resource and market prices as offsets to acquisition-related revenue growth. Operating cash flow declined by $38 million, attributed mainly to working-capital timing and lower operating income.
- Q1 investing cash flow was $199 million provided, compared with $70 million used in Q1 2022, reflecting higher net receipts under the CSCS agreement. Financing cash use increased to $276 million, including a $196 million payment to buy out part of the STX Midstream Class B interests.
- NEP issued approximately 2.3 million common units through its ATM program for approximately $152 million net proceeds and renewed the program with up to $500 million of sales capacity. It issued a further approximately 2.4 million units for $134 million net proceeds in April.
- NEP’s January sale of a 62 MW wind project generated approximately $50 million; approximately $45 million was distributed to a Class B investor. In March, it sold differential membership interests in Eight Point Wind for approximately $92 million.
- In April, NEP agreed to acquire a portfolio of approximately 688 MW of wind and solar projects for approximately $566 million cash, while assuming approximately $142 million of debt and swaps and estimated $165 million of differential membership interests. Closing was expected in Q2 2023, subject to customary conditions.
Outlook, risks and contingencies
No specific earnings or distribution-growth guidance is stated in the supplied filing text. The board authorized a $0.8425-per-unit distribution payable May 15, 2023; the Q1 distribution paid was $0.8125 per unit. NEP said it expects to fund operations primarily with cash on hand and operating cash flow, and growth investments with a mix of debt, equity and other financing.
Key risks include resource and weather variability, project operating and construction risks, customer and contract concentration, interest-rate and counterparty exposure, debt covenants and distribution restrictions, dependence on access to financing, and reliance on NEE/NEER for services, credit support and return of swept funds. Cash held by NEER or affiliates under the CSCS arrangement was $21 million at quarter-end, down from $298 million at year-end. NEP also reported $721 million of structured-payables obligations with a corresponding receivable from related parties. The filing states that subsidiaries complied with financial debt covenants and that there were no material changes to previously disclosed risk factors; no legal proceedings were reported.
Investor verification points
- Confirm whether the intended company is NEP or XPLR Infrastructure, LP; the supplied filing is NEP’s.
- Review derivative mark-to-market effects and distinguish them from recurring operating performance and cash generation.
- Assess the composition, availability and conditions of the stated $2.769 billion liquidity position, including expected final funding.
- Track ATM issuance and unit exchanges, which increase common units and may dilute existing holders.
- Verify closing, funding and acquired-project performance for the announced 688 MW acquisition, and the economics of the STX Midstream buyout.
- Monitor related-party balances, CSCS cash sweeps, structured payables and dependence on NEE/NEER credit support and services.