NEXTERA ENERGY PARTNERS LP
For the period ended Sep 30, 2024. Filed Oct 23, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 23, 2024
XIFR$7.32+0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-24.
0001603145-24-000016
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-23.
0001603145-24-000025
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 91 previous paragraphs and 95 current paragraphs.
56 unchanged; 23 reworded; 16 added; 10 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
O&M expenses increased $7 million during the three months ended September 30, 2024 primarily reflecting higher operating costs, partly offset by an adjustment to an asset retirement obligation in 2024.
Current report
Gains on Disposal of Businesses/Assets – net
Current report
The $14 million net gain on disposal of businesses/assets recognized during the three months ended September 30, 2024 primarily reflects insurance recoveries on three permanently damaged wind turbines.
Current report
Equity in earnings of equity method investees decreased $8 million during the three months ended September 30, 2024 primarily reflecting less favorable mark-to-market activity on interest rate swaps at various equity method investees in 2024.
Current report
For the three months ended September 30, 2024, NEP recorded income tax expense of $30 million on loss from continuing operations before income taxes of $53 million, resulting in an effective tax rate of (57)%. The tax expense is comprised primarily of income tax expense of approximately $40 million attributable to noncontrolling interests and $7 million of state taxes, partly offset by income tax benefit of $11 million at the statutory rate of 21% and $8 million attributable to PTCs.
Current report
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Current report
Taxes Other than Income Taxes and Other – net
Current report
Taxes Other than Income Taxes and other – net increased $7 million during the nine months ended September 30, 2024 primarily due to the absence of property tax refunds of approximately $8 million.
Current report
Gains on Disposal of Businesses/Assets – net
Current report
The $13 million net gain on disposal of businesses/assets recognized during the nine months ended September 30, 2024 primarily reflects insurance recoveries on three permanently damaged wind turbines.
Current report
For the nine months ended September 30, 2024, NEP recorded income tax expense of $38 million on income from continuing operations before income taxes of $47 million, resulting in an effective tax rate of 81%. The tax expense is comprised primarily of income tax expense of approximately $41 million attributable to noncontrolling interests, $10 million at the statutory rate of 21% and state taxes of $9 million, partly offset by income tax benefit of $25 million attributable to PTCs.
Current report
For the nine months ended September 30, 2023, NEP recorded income tax expense of $8 million on loss from continuing operations before income taxes of $18 million, resulting in an effective tax rate of (44)%. The tax expense is comprised primarily of income tax expense of approximately $27 million attributable to noncontrolling interests and state taxes of $4 million, partly offset by income tax benefit of $22 million attributable to PTCs and $4 million at the statutory rate of 21%.
Current report
(b) Approximately $4 million of such borrowings have a maturity date in 2025 and an additional $4 million have a maturity date in 2028.
Current report
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Current report
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Current report
Critical accounting policies are those that NEP believes are both most important to the portrayal of its financial condition and results of operations, and require complex, subjective judgments, often as a result of the need to make estimates and assumptions about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. NEP’s critical accounting policies were reported in NEP’s 2023 Form 10-K. There have been no material changes regarding these critical accounting policies. See Management’s Discussion – Overview for a discussion regarding the potential sale of NEP’s ownership interest in Meade.
Removed paragraphs (10)
Previous report
O&M expenses increased $16 million during the three months ended June 30, 2024 primarily reflecting approximately $9 million of higher operating costs and $7 million related to the renewable energy projects acquired in 2023.
Previous report
Equity in earnings of non-economic ownership interests decreased $10 million during the three months ended June 30, 2024 primarily relating to debt payoff and related swap settlements and loss on extinguishment of the debt.
Previous report
For the three months ended June 30, 2024, NEP recorded income tax expense of $21 million on income from continuing operations before income taxes of $79 million, resulting in an effective tax rate of 27%. The tax expense is comprised primarily of income tax expense of approximately $17 million at the statutory rate of 21% and $12 million attributable to noncontrolling interests, partly offset by income tax benefit of $9 million attributable to PTCs.
Previous report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Previous report
Depreciation and Amortization
Previous report
Other – net
Previous report
For the six months ended June 30, 2024, NEP recorded income tax expense of $8 million on income from continuing operations before income taxes of $100 million, resulting in an effective tax rate of 8%. The tax expense is comprised primarily of income tax expense of approximately $21 million at the statutory rate of 21%, partly offset by income tax benefit of $16 million attributable to PTCs.
Previous report
For the six months ended June 30, 2023, NEP recorded income tax benefit of $20 million on loss from continuing operations before income taxes of $146 million, resulting in an effective tax rate of 14%. The tax benefit is comprised primarily of income tax benefit of approximately $31 million at the statutory rate of 21% and $14 million attributable to PTCs, partly offset by income tax expense of $26 million attributable to noncontrolling interests.
Previous report
(b) In July 2024, NEP OpCo repaid $700 million principal amount of 4.25% senior unsecured notes.
Previous report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Reworded paragraphs (23)
Previous wording
In January 2023, NEP completed the sale of a 62 MW wind project located in North Dakota. See Note 11 – Disposal of Wind Project. In March 2023, in connection with the December 2022 acquisition from NEER, a wind generation facility with a net generating capacity of approximately 54 MW was transferred to a subsidiary of NEP. In June 2023, an indirect subsidiary of NEP completed the acquisition of ownership interests in a portfolio of wind and solar generation facilities with a combined net generating capacity totaling approximately 688 MW from NEER (see Note 1). In July 2023, Yellow Pine Solar, a 125 MW solar generation and 65 MW storage facility in Nevada, which was part of the December 2022 acquisition from NEER, achieved commercial operations. In December 2023, NEP sold its Texas pipelines which has been presented as discontinued operations (see Note 2).
Current wording
In January 2023, NEP completed the sale of a 62 MW wind project located in North Dakota. See Note 11 – Disposal of Wind Project. In March 2023, in connection with the December 2022 acquisition from NEER, a wind generation facility with a net generating capacity of approximately 54 MW was transferred to a subsidiary of NEP. In June 2023, an indirect subsidiary of NEP completed the acquisition of ownership interests in a portfolio of wind and solar generation facilities with a combined net generating capacity totaling approximately 688 MW from NEER (see Note 1). In July 2023, Yellow Pine Solar, a 125 MW solar generation and 65 MW storage facility in Nevada, which was part of the December 2022 acquisition from NEER, achieved commercial operations. In December 2023, NEP sold its Texas pipelines which has been presented as discontinued operations (see Note 2). NEP is evaluating options relating to the potential sale of its ownership interest in Meade, including Meade’s ownership interest in the Central Penn Line. NEP accounts for the investment under the equity method of accounting and the investment has a carrying value of approximately $1.2 billion as of September 30, 2024. NEP is monitoring the carrying value of its investment in relation to the potential sale price.
Previous wording
Operating revenues increased $67 million for the three months ended June 30, 2024. The increase primarily reflects higher revenues of approximately $37 million associated with the renewable energy projects acquired in 2023, $25 million due to favorable wind resource (103% of long-term average wind speeds in 2024 compared to 88% in 2023) and $12 million resulting from an amendment to a derivative contract, partly offset by a $6 million decrease relating to lower solar generation.
Current wording
Operating revenues increased $11 million for the three months ended September 30, 2024. The increase primarily reflects higher revenues due to favorable wind and solar resource.
Previous wording
The increase in interest expense of $42 million during the three months ended June 30, 2024 primarily reflects higher interest expense due to increased average debt outstanding and $21 million of unfavorable mark-to-market activity ($28 million of gains recorded in 2024 compared to $49 million of gains in 2023).
Current wording
The increase in interest expense of $189 million during the three months ended September 30, 2024 primarily reflects higher interest expense due to approximately $185 million of unfavorable mark-to-market activity ($88 million of losses recorded in 2024 compared to $97 million of gains in 2023).
Previous wording
Equity in Earnings of Non-Economic Ownership Interests
Current wording
Equity in Earnings of Equity Method Investees
Previous wording
For the three months ended June 30, 2023, NEP recorded income tax expense of $16 million on income from continuing operations before income taxes of $72 million, resulting in an effective tax rate of 22%. The tax expense is comprised primarily of income tax expense of approximately $15 million at the statutory rate of 21%, $4 million of state taxes and $4 million attributable to noncontrolling interests, partly offset by income tax benefits of $7 million attributable to PTCs.
Current wording
For the three months ended September 30, 2023, NEP recorded income tax expense of $28 million on income from continuing operations before income taxes of $128 million, resulting in an effective tax rate of 22%. The tax expense is comprised primarily of income tax expense of approximately $27 million at the statutory rate of 21%, $6 million of state taxes and $1 million attributable to noncontrolling interests, partly offset by income tax benefits of $8 million attributable to PTCs.
Previous wording
For the three months ended June 30, 2024, the change in net loss (income) attributable to noncontrolling interests primarily reflects a higher net loss allocation of approximately $61 million to differential membership investors resulting from higher PTCs, a lower net income allocation of $5 million to Class B noncontrolling interest investors primarily due to buyouts in 2023 and lower net income of $5 million from non-economic ownership interests, partly offset by higher net income allocation of $27 million to NEE Equity's noncontrolling interest in 2024 compared to 2023. See Note 11 – Noncontrolling Interests.
Current wording
For the three months ended September 30, 2024, the change in net loss (income) attributable to noncontrolling interests primarily reflects lower net income allocation of approximately $94 million to NEE Equity's noncontrolling interest in 2024 compared to 2023, a higher net loss allocation of $16 million to differential membership investors resulting from higher PTCs, a lower net income allocation of $8 million to Class B noncontrolling interest investors primarily due to buyouts in 2023 and lower net income of $4 million from non-economic ownership interests. See Note 11 – Noncontrolling Interests.
Previous wording
Operating revenues increased $80 million for the six months ended June 30, 2024. The increase primarily reflects higher revenues of approximately $60 million associated with the renewable energy projects acquired or placed in service in 2023 and higher revenues of $17 million primarily due to favorable wind resource (100% of long-term average wind speeds in 2024 compared to 95% in 2023).
Current wording
Operating revenues increased $89 million for the nine months ended September 30, 2024. The increase primarily reflects higher revenues of approximately $60 million associated with the renewable energy projects acquired or placed in service in 2023 and higher revenues of $33 million primarily due to favorable wind resource (98% of long-term average wind speeds in 2024 compared to 94% in 2023).
Previous wording
O&M expenses decreased $8 million during the six months ended June 30, 2024 primarily reflecting lower corporate operating expenses of approximately $44 million primarily relating to the suspension of the IDR fee in May 2023, partly offset by $22 million of higher operating costs and $14 million related to the renewable energy projects acquired in 2023.
Current wording
O&M expenses decreased $1 million during the nine months ended September 30, 2024 primarily reflecting lower corporate operating expenses of approximately $44 million primarily relating to the suspension of the IDR fee announced in May 2023, partly offset by $29 million of higher operating costs and $14 million related to the renewable energy projects acquired in 2023.
Previous wording
Depreciation and amortization expense increased $12 million during the three months ended June 30, 2024 primarily reflecting depreciation and amortization associated with the renewable energy projects acquired or placed in service in 2023.
Current wording
Depreciation and amortization expense increased $27 million during the nine months ended September 30, 2024 primarily reflecting depreciation and amortization associated with the renewable energy projects acquired or placed in service in 2023.
Previous wording
The decrease in interest expense of $151 million during the six months ended June 30, 2024 primarily reflects approximately $197 million of favorable mark-to-market activity ($97 million of gains recorded in 2024 compared to $100 million of losses in 2023), partly offset by higher interest expense due to increased average debt outstanding.
Current wording
The increase in interest expense of $39 million during the nine months ended September 30, 2024 primarily reflects approximately $54 million of higher interest expense due to increased average debt outstanding, partly offset by $13 million of favorable mark-to-market activity ($9 million of gains recorded in 2024 compared to $4 million of losses in 2023).
Previous wording
For the three months ended June 30, 2024, the change in other – net primarily reflects interest income of approximately $15 million due from NEER for cash sweep amounts held relating to proceeds from the sale of the Texas pipelines (see Note 2).
Current wording
For the nine months ended September 30, 2024, the change in other – net primarily reflects interest income of approximately $36 million from NEER for cash sweep amounts held relating to proceeds from the sale of the Texas pipelines (see Note 2).
Previous wording
For the six months ended June 30, 2024, the change in net loss (income) attributable to noncontrolling interests primarily reflects a higher net income allocation of approximately $144 million to NEE Equity's noncontrolling interest in 2024 compared to 2023, partly offset by a higher net loss allocation of $49 million to differential membership investors resulting from higher PTCs due to favorable wind resource, a higher net loss allocation of $21 million to differential membership investors resulting from the renewable energy projects acquired in 2023 and $16 million of lower net income allocation to Class B noncontrolling interest investors primarily due to buyouts in 2023. See Note 11 – Noncontrolling Interests.
Current wording
For the nine months ended September 30, 2024, the change in net loss (income) attributable to noncontrolling interests primarily reflects a higher net loss allocation of approximately $63 million to differential membership investors resulting from higher PTCs due to favorable wind resource, a higher net loss allocation of $20 million to differential membership investors resulting from the renewable energy projects acquired in 2023 and $24 million of lower net income allocation to Class B noncontrolling interest investors primarily due to buyouts in 2023, partly offset by a higher net income allocation of $49 million to NEE Equity's noncontrolling interest in 2024 compared to 2023. See Note 11 – Noncontrolling Interests.
Previous wording
At June 30, 2024, NEP's liquidity position was approximately $3,412 million. The table below provides the components of NEP’s liquidity position:
Current wording
At September 30, 2024, NEP's liquidity position was approximately $2,616 million. The table below provides the components of NEP’s liquidity position:
Previous wording
(a) Approximately $50 million of the NEP OpCo credit facility expires in 2025 and an additional $50 million expires in 2028. In July 2024, $50 million was drawn under the NEP OpCo credit facility.
Current wording
(a) Approximately $50 million of the NEP OpCo credit facility expires in 2025 and an additional $50 million expires in 2028.
Previous wording
NEP OpCo and certain indirect subsidiaries are subject to financings that contain financial covenants and distribution tests, including debt service coverage ratios. In general, these financings contain covenants customary for these types of financings, including limitations on investments and restricted payments. Certain of NEP's financings provide for interest payable at a fixed interest rate. However, certain of NEP's financings accrue interest at variable rates based on an underlying index plus a margin. Interest rate contracts were entered into for certain of these financings to hedge against interest rate movements with respect to interest payments on the related borrowings. In addition, under the project-level financing structures, each project or group of projects will be permitted to pay distributions out of available cash so long as certain conditions are satisfied, including that reserves are funded with cash or credit support, no default or event of default under the applicable financing has occurred and is continuing at the time of such distribution or would result therefrom, and each project or group of projects is otherwise in compliance with the related covenants. For substantially all of the project-level financing structures, minimum debt service coverage ratios must be satisfied in order to make a distribution. For one project-level financing, the project must maintain a leverage ratio and an interest coverage ratio in order to make a distribution. At June 30, 2024, NEP's subsidiaries were in compliance with all financial debt covenants under their financings.
Current wording
NEP OpCo and certain indirect subsidiaries are subject to financings that contain financial covenants and distribution tests, including debt service coverage ratios. In general, these financings contain covenants customary for these types of financings, including limitations on investments and restricted payments. Certain of NEP's financings provide for interest payable at a fixed interest rate. However, certain of NEP's financings accrue interest at variable rates based on an underlying index plus a margin. Interest rate contracts were entered into for certain of these financings to hedge against interest rate movements with respect to interest payments on the related borrowings. In addition, under the project-level financing structures, each project or group of projects will be permitted to pay distributions out of available cash so long as certain conditions are satisfied, including that reserves are funded with cash or credit support, no default or event of default under the applicable financing has occurred and is continuing at the time of such distribution or would result therefrom, and each project or group of projects is otherwise in compliance with the related covenants. For substantially all of the project-level financing structures, minimum debt service coverage ratios must be satisfied in order to make a distribution. For one project-level financing, the project must maintain a leverage ratio and an interest coverage ratio in order to make a distribution. At September 30, 2024, NEP and its subsidiaries were in compliance with all financial debt covenants under their financings.
Previous wording
During the three months ended June 30, 2024, NEP exercised its buyout right and purchased 15% of the originally issued Class B membership interests in NEP Renewables II. See Note 9 – Class B Noncontrolling Interests.
Current wording
During the nine months ended September 30, 2024, NEP exercised its buyout right and purchased 15% of the originally issued Class B membership interests in NEP Renewables II. See Note 9 – Class B Noncontrolling Interests.
Previous wording
Annual capital spending plans are developed based on projected requirements for the projects. Capital expenditures primarily represent the estimated cost of capital improvements, including construction expenditures that are expected to increase NEP OpCo’s operating income or operating capacity over the long term. Capital expenditures for projects that have already commenced commercial operations are generally not significant because most expenditures relate to repairs and maintenance and are expensed when incurred. For the six months ended June 30, 2024 and 2023, NEP had capital expenditures of approximately $133 million and $807 million, respectively. The 2023 capital expenditures primarily relate to the assets acquired from NEER in December 2022 which were acquired under construction or had recently been placed in service. Such expenditures were reimbursed by NEER as contemplated in the acquisition. Estimates of planned capital expenditures, including those relating to expected wind turbine repowerings, are subject to continuing review and adjustments and actual capital expenditures may vary significantly from these estimates.
Current wording
Annual capital spending plans are developed based on projected requirements for the projects. Capital expenditures primarily represent the estimated cost of capital improvements, including construction expenditures that are expected to increase NEP OpCo’s operating income or operating capacity over the long term. Capital expenditures for projects that have already commenced commercial operations are generally not significant because most expenditures relate to repairs and maintenance and are expensed when incurred. For the nine months ended September 30, 2024 and 2023, NEP had capital expenditures of approximately $189 million and $1,064 million, respectively. The 2023 capital expenditures primarily relate to the assets acquired from NEER in December 2022 which were acquired under construction or had recently been placed in service. Such expenditures were reimbursed by NEER as contemplated in the acquisition. Estimates of planned capital expenditures, including those relating to expected wind turbine repowerings, are subject to continuing review and adjustments and actual capital expenditures may vary significantly from these estimates.
Previous wording
During the six months ended June 30, 2024, NEP distributed approximately $166 million to its common unitholders. On July 23, 2024, the board of directors of NEP authorized a distribution of $0.9050 per common unit payable on August 14, 2024 to its common unitholders of record on August 6, 2024.
Current wording
During the nine months ended September 30, 2024, NEP distributed approximately $250 million to its common unitholders. On October 22, 2024, the board of directors of NEP authorized a distribution of $0.9175 per common unit payable on November 14, 2024 to its common unitholders of record on November 6, 2024.
Previous wording
The increase in net cash provided by operating activities was primarily driven by higher operating cash flows from the renewable energy projects acquired in 2023 and lower corporate O&M expenses due to the suspension of the IDR fee, partly offset by the timing of transactions impacting working capital.
Current wording
The decrease in net cash provided by operating activities was primarily driven by the loss of cash flows from the Texas pipelines, partly offset by lower corporate O&M expenses due to the suspension of the IDR fee, higher operating cash flows from the renewable energy projects acquired in 2023 and the timing of transactions impacting working capital.
Previous wording
The change in net cash provided by (used in) investing activities was primarily driven by the absence of payments to acquire membership interests in subsidiaries and higher payments received from NEER subsidiaries (net of amounts paid) under the CSCS agreement, partly offset by the absence of proceeds from sale of a business.
Current wording
The change in net cash provided by (used in) investing activities was primarily driven by higher payments received from NEER subsidiaries (net of amounts paid) under the CSCS agreement and the absence of payments to acquire membership interests in subsidiaries, partly offset by the absence of proceeds from sale of a business.
Previous wording
The change in net cash provided by (used in) financing activities primarily reflects retirements of long-term debt in 2024 compared to issuances of long-term debt in 2023 and lower proceeds related to the issuance of common units– net, partly offset by lower payments to buy out Class B noncontrolling interest investors and proceeds related to differential membership interests in 2024 compared to payments to differential membership interests in 2023.
Current wording
The change in net cash provided by (used in) financing activities primarily reflects retirements of long-term debt in 2024 compared to issuances of long-term debt in 2023 and lower proceeds related to the issuance of common units– net, partly offset by lower payments to buy out Class B noncontrolling interest investors and higher proceeds related to differential membership interests.
Previous wording
NEP has long-term debt instruments that subject it to the risk of loss associated with movements in market interest rates. At June 30, 2024, approximately 98% of the long-term debt, including current maturities, was not exposed to fluctuations in interest expense as it was either fixed rate debt or financially hedged. At June 30, 2024, the estimated fair value of NEP's long-term debt was approximately $5.6 billion and the carrying value of the long-term debt was $5.8 billion. See Note 5 – Financial Instruments Recorded at Other than Fair Value. Based upon a hypothetical 10% decrease in interest rates, the fair value of NEP's long-term debt would increase by approximately $48 million at June 30, 2024.
Current wording
NEP has long-term debt instruments that subject it to the risk of loss associated with movements in market interest rates. At September 30, 2024, approximately 95% of the long-term debt, including current maturities, was not exposed to fluctuations in interest expense as it was either fixed rate debt or financially hedged. At September 30, 2024, the estimated fair value of NEP's long-term debt was approximately $5.1 billion and the carrying value of the long-term debt was $5.2 billion. See Note 5 – Financial Instruments Recorded at Other than Fair Value. Based upon a hypothetical 10% decrease in interest rates, the fair value of NEP's long-term debt would increase by approximately $39 million at September 30, 2024.
Previous wording
At June 30, 2024, NEP had interest rate contracts with a net notional amount of approximately $3.1 billion related to managing exposure to the variability of cash flows associated with outstanding and expected future debt issuances and borrowings. Based upon a hypothetical 10% decrease in rates, NEP’s net derivative assets at June 30, 2024 would decrease by approximately $57 million.
Current wording
At September 30, 2024, NEP had interest rate contracts with a net notional amount of approximately $3.1 billion related to managing exposure to the variability of cash flows associated with outstanding and expected future debt issuances and borrowings. Based upon a hypothetical 10% decrease in rates, NEP’s net derivative assets at September 30, 2024 would decrease by approximately $46 million.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Depreciation and amortization expense increased $25 million during the six months ended June 30, 2024 primarily reflecting depreciation and amortization associated with the renewable energy projects acquired or placed in service in 2023.
Previous report — wording carried elsewhere
For the six months ended June 30, 2024, the change in other – net primarily reflects interest income of approximately $34 million due from NEER for cash sweep amounts held relating to proceeds from the sale of the Texas pipelines (see Note 2).