United States

United States

NextEra braces for possible PG&E fallout

NextEra Energy Partners has announced a series of measures to offset potential fallout from Californian utility Pacific Gas & Electric's (PG&E's) bankruptcy, including securing $900 million in project refinancing.

NextEra Energy Partners will create a new 1.2GW renewables portfolio including the 300MW Stateline Holdings Wind Energy Center
NextEra Energy Partners will create a new 1.2GW renewables portfolio including the 300MW Stateline Holdings Wind Energy Center

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The yieldco owned by utility and renewables company NextEra Energy will acquire 611MW of wind and solar projects and group these projects into a new portfolio along with four existing wind farms, for a combined capacity of just under 1.2GW.

It plans to recapitalise these four existing wind farms with an existing credit facility to be repaid with a $900 million investment from private equity firm Kohlberg Kravis Roberts (KKR).

NextEra Energy Partners’ CEO Jim Robo said these actions would "enable the portfolio to bridge any cash distribution restrictions resulting from the ongoing PG&E bankruptcy".

Californian utility PG&E filed for bankruptcy in January in the wake of mounting liabilities related to 2017 and 2018 wildfire seasons.

NextEra Energy Partners owns several wind and solar projects that sell electricity to PG&E.

In February, it asked a US District Court — not the bankruptcy court — to rule on whether PG&E can block the Federal Energy Regulatory Commission (FERC) from having jurisdiction over power purchase agreements (PPAs).

Acquisition

NextEra Energy Partners will acquire three wind farms in North Dakota, Iowa and Illinois with a combined capacity of 420MW from a subsidiary of sister company NextEra Energy Resources, the company stated.

The three projects are part of a renewables portfolio that also includes 49.99% stakes in three solar PV sites with a combined capacity of 382.25MW.

NextEra Energy Partners will acquire the portfolio — which has a net capacity of just over 611MW — for approximately $1.02 billion and expects it to contributed adjusted Ebitda of approximately $100-115 million and cash available for distribution (CAFD) of approximately $97-107 million on a five-year average annual run-rate basis from the end of 2019.

The portfolio consists of:

  • The 120MW Ashtabula II wind farm in North Dakota;
  • The 150MW Story County II wind farm in Iowa;
  • The 150MW White Oak wind farm in Illinois;
  • A 49.99% share of the 62.25MW Marshall Solar Energy Center in Minnesota;
  • A 49.99% share of the 70MW Roswell Solar Energy Center in New Mexico; and
  • A 49.99% share of the 250MW Silver State South Solar Energy Center in Iowa.

Recapitalisation

NextEra Energy Partners then plans to create a new portfolio including the acquired projects and four existing wind farms with a combined capacity of 581MW, it stated.

The company expects to recapitalise $220 million of existing non-recourse project debt currently outstanding on the four existing wind projects with proceeds from convertible equity portfolio financing worth $900 million.

After recapitalising the projects, NextEra expects the four wind farms to provide an annual average CAFD of between $42-48 million over five years.

The four existing wind farms are:

Financing

The 611MW portfolio and recapitalisation of the four wind farms will require approximately $1.25 billion in total transaction funding, NextEra stated. It plans to fund this through an existing credit facility, it stated.

The company plans to partially repay funds drawn under the credit facility with an estimated $893 million of net proceeds from a new convertible equity portfolio financing with private equity investors Kohlberg Kravis Roberts (KKR).

KKR’s third Global Investors Fund will pay NextEra Energy Partners $900 million for an equity interest in the partnership that will own the 611MW portfolio and four recapitalised wind farms.

"The convertible equity portfolio financing is expected to be a very attractive, low-cost, equity-like product that further improves the partnership's financing flexibility," NextEra Energy Partners CEO Robo added.

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