Business context and reporting period
This is NextEra Energy Partners, LP’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2023. The filing identifies the registrant as NextEra Energy Partners, LP (NYSE: NEP), not “XPLR Infrastructure, LP”; verify the intended company before relying on this summary. NEP owns contracted renewable generation, battery storage and natural gas pipeline interests. NEE Equity held a 51.4% noncontrolling limited partner interest in NEP OpCo at quarter-end.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Operating revenue | $367 million | $302 million | $1,018 million | $945 million |
| Operating income | $73 million | $49 million | $140 million | $216 million |
| Net income attributable to NEP | $53 million | $79 million | $88 million | $443 million |
| EPS, basic and diluted | $0.57 | $0.93 | $0.96 | $5.25 |
| Operating margin | 19.9% | 16.2% | 13.8% | 22.9% |
Operating margin is calculated as operating income divided by revenue. Nine-month earnings comparisons were heavily affected by derivative mark-to-market activity: management cites $45 million of interest-rate derivative losses in 2023 versus $986 million of gains in 2022. Accordingly, the reported decline in earnings is not solely a measure of underlying operating performance.
- Revenue and costs: Q3 revenue increased 22% year over year, mainly from renewable projects acquired in 2022 and 2023. Nine-month revenue increased 8%; higher acquired-project revenue was partly offset by unfavorable renewable resources. Depreciation and amortization rose to $412 million for nine months from $315 million. O&M was $412 million versus $417 million.
- Cash flow: Nine-month operating cash flow was $552 million, down from $611 million. Investing used $564 million, compared with $38 million in 2022, reflecting acquisitions and capital spending. Financing provided $109 million, versus $499 million used in 2022. Cash, cash equivalents and restricted cash totaled $381 million at September 30.
- Debt and liquidity: Long-term debt, including current maturities, was $6.481 billion, versus $5.288 billion at December 31, 2022; $1.342 billion was classified as current. Management reported liquidity of approximately $2.504 billion. NEP and its subsidiaries were in compliance with financial debt covenants at quarter-end.
- Distributions and equity: NEP paid $2.5090 per common unit during the first nine months of 2023. The board later authorized a $0.8675 per-unit distribution payable November 14, 2023. NEP issued approximately 5.1 million units through its ATM program for net proceeds of about $314 million during the nine-month period.
Material changes and notable transactions
- NEP acquired a portfolio of approximately 688 MW of wind and solar facilities in June 2023 for approximately $598 million of total consideration, including assumed debt and noncontrolling interests.
- NEP bought out 75% of the originally issued Class B interests in STX Midstream during the first nine months for approximately $390 million and exercised its option to buy the remaining interests in October for approximately $201 million.
- In November 2023, NEP agreed to sell its Texas pipeline interests to a Kinder Morgan subsidiary for $1.815 billion in cash, subject to debt repayment, adjustments and closing conditions. The expected closing is in the first half of 2024. NEP plans to use proceeds in part to repay borrowings and fund other Class B interest buyouts.
- The MSA was amended to suspend IDR fee payments for calendar quarters from January 1, 2023 through December 31, 2026. Lower IDR fees contributed to lower corporate O&M expense.
Outlook, risks and unusual items
Management said available liquidity and operating cash flows are expected to cover operating costs, maintenance capital expenditures, distributions and liquidity commitments. The filing does not provide a specific earnings or cash-flow forecast. NEP’s ability to pursue acquisitions, refinance maturities and maintain or increase distributions depends in part on continued access to capital on acceptable terms.
- The Texas pipeline sale is a key financing assumption; it requires antitrust approval, satisfactory amendments to certain contracts and other customary closing conditions. If it does not close as planned, NEP may need other debt, equity, asset-sale proceeds or available cash flows to fund planned transactions and repay borrowings.
- NEP reported approximately $1.25 billion of NEP and NEP OpCo debt maturities in 2024, which it expects to refinance. Credit ratings were Ba1 from Moody’s, BB from S&P and BB+ from Fitch as of November 6, 2023.
- Approximately 86% of long-term debt was fixed-rate or financially hedged at September 30. NEP entered into $1.85 billion of forward-starting interest-rate swaps in October 2023.
- Key ongoing risks include resource and weather variability, project performance and customer concentration, financing and interest-rate exposure, counterparty risk, reliance on NEE/NEER credit support and related-party arrangements, and the possibility of restrictions on subsidiary distributions.
- NEP tested goodwill after a significant decline in its unit trading price late in Q3 and concluded goodwill was not impaired. The filing reports no legal proceedings and no material change to previously disclosed risk factors other than the updated Texas pipeline sale risk.
Important facts for investors to verify
- Confirm whether the requested issuer is NEP or XPLR Infrastructure, LP; the filing is for NEP.
- Review the Texas pipeline sale agreement, closing conditions, expected net proceeds and planned allocation of proceeds.
- Assess 2024 refinancing requirements, debt costs, available credit capacity and compliance with project-level distribution tests.
- Separate operating trends from derivative mark-to-market effects when evaluating the large year-over-year earnings decline.
- Evaluate whether operating cash flow and financing access can support distributions and planned buyouts; the filing does not guarantee future distribution levels.