NextEra Energy Partners announced that it has completed the acquisition of about 285 MW of contracted renewables projects from a unit of its sponsor, NextEra Energy Resources. Included in the acquisition are two modern wind facilities, commissioned in 2015 with GE technology.
The acquisition expands the contracted renewable energy projects in NextEra Energy Partners' portfolio to about 2,656 MW (excluding ownership interests in equity method investments).
"This transaction once again demonstrates the strong and visible runway for future growth opportunities from our sponsor, NextEra Energy Resources, which we believe is a core strength of the partnership's value proposition," said Jim Robo, chairman and CEO. "The partnership's already strong and flexible financial position for the year is further advanced by the addition of these high-quality projects expected to provide an attractive yield to investors. At the same time, the utilization of debt to fund a portion of the initial purchase price reflects the partnership's flexible and opportunistic approach to financing. As we continue to execute on our growth strategy and increase our portfolio, we remain well-positioned to deliver value to our investors. In our view, NextEra Energy Partners remains the premier YieldCo in the space."
Cedar Bluff Wind Energy Center is an about 199 MW facility located in Kansas. Golden Hills Wind Energy Center is an about 86 MW facility located in California. Both are fully contracted under long-term power purchase contracts with strong creditworthy counterparties and remaining contract lives of about 20 years.
NextEra Energy Partners acquired the assets for a total consideration of about $312 million, plus the assumption of about $253 million in liabilities related to tax equity financing. The purchase price is subject to working capital and other adjustments. The partnership financed the transaction, in part, through proceeds of an issuance of a $100 million non-amortizing term loan at the holding company, with the balance of the purchase price funded with cash on hand and through a draw under a unit of NextEra Energy Partners' revolving credit facility.
The use of a term loan at the holding company to fund a portion of the initial purchase price is consistent with the partnership's previously announced target for a long-term capital structure utilizing holding company leverage of about 3.5 times project distributions after project debt service.
As discussed on the first-quarter 2016 earnings call on April 28, 2016, NextEra Energy Partners estimated that it had incremental debt capacity at the holding company of about $300 million to $400 million. Since the acquired projects' incremental cash flow creates debt capacity about equivalent to the amount raised through the term loan, the partnership continues to estimate incremental debt capacity at the holding company of about $300 million to $400 million after completing this transaction. Looking ahead, NextEra Energy Partners expects to continue to be flexible and opportunistic on the timing and amount of debt and equity it raises.
NextEra Energy Partners expects the acquisition to contribute adjusted EBITDA, including grossed up (pre-tax) tax credits, of about $70 million to $80 million and cash available for distribution of about $29 million to $34 million, each on an annual run-rate basis as of Dec. 31, 2016.
The acquisition is expected to contribute to a 3.5 percent increase in the second-quarter distribution to an annualized rate of $1.320 per common unit and, assuming this distribution level, increase the current portfolio's run-rate CAFD to $230 million to $260 million as of Dec. 31, 2016. The acquisition also is expected to help support NextEra Energy Partners' current expectations of 12 to 15 percent per year growth in limited partner distributions through 2020 off a $1.23 annualized rate baseline.