Funds managed by affiliates of Apollo Global Management Inc. announced the first close of an $816 million convertible equity financing transaction with NextEra Energy Partners LP in a roughly 2.5-GW renewable energy portfolio.
NextEra Energy Partners, or NEP, announced in October a deal to acquire a 50% stake in a portfolio of contracted renewable energy projects with a total capacity of about 2,520 MW, dropped down from corporate affiliate NextEra Energy Resources LLC, for a total consideration of approximately $849 million.
The portfolio consists of 13 utility-scale wind and solar assets, three of which include battery storage, located across nine U.S. states. The assets hold long-term power purchase agreements with diversified, investment-grade counterparties.
To fund the purchase, NEP announced in October that it entered an $824 million convertible equity portfolio financing with the Apollo funds. Under the financing, NEP can periodically buy out the investor's equity interest in the portfolio five to 10 years after the agreement at a fixed pretax annual return of about 5.6%. NEP can pay 100% of the buyout price in NEP's common units, issued at no discount to the then-current market price.
When fully drawn, the financing agreement will allocate a minimum of 35% of the portfolio's cash flows to NEP over the initial 10-year period, subject to minimum buyout thresholds being met.
Investors participating in the convertible equity portfolio financing include "leading" pensions and insurers in support of the clean energy transition, Apollo said in a Dec. 29 news release.
Allen & Overy LLP and Paul Weiss Rifkind Wharton & Garrison LLP were legal counsel to the Apollo funds.
NEP is a limited partnership formed by NextEra Energy Inc., which is also the parent company of NextEra Energy Resources.