NextEra Energy Partners agreed to acquire a 1,388-MW portfolio of wind and solar projects from NextEra Energy Resources LLC for $1.28 billion, subject to working capital and other adjustments.
The partnership also will assume $930 million in tax equity financing and $38 million of nonrecourse project debt as of year-end 2018.
"This transaction replaces the Canadian portfolio that we divested earlier this year with higher-yielding assets in the U.S. that benefit from the lower effective corporate tax rate and longer tax shield," NextEra Energy Partners Chairman and CEO Jim Robo said.
The partnership plans to initially finance the acquisition with the $573 million proceeds from the sale of its Canadian assets and with capacity under an existing credit facility. NextEra Energy Partners said funds drawn under the credit facility will be immediately replaced with a new $750 million convertible equity portfolio financing with a BlackRock Global Energy & Power Infrastructure-managed fund.
BlackRock Global Energy & Power Infrastructure is managed by asset manager BlackRock Inc.
The fund will provide the financing in exchange for an equity interest in the entity that will own the renewable portfolio. The fund is expected to earn an effective coupon of approximately 2.5% over the initial three-year period, representing its initial 15% allocation of distributable cash flow from the portfolio.
Under the financing agreement, NextEra Energy Partners plans to exercise its right to buy out the fund's equity interest for a fixed payment equal to $750 million, plus a fixed pre-tax return of 7.75%. The partnership has the right to pay at least 70% of the buyout amount in NextEra Energy Partners common units and the balance in cash.
But if NextEra Energy opts not to exercise its buyout right, the fund's allocation of distributable cash flow from the portfolio would increase to 80%.
"Without the need to sell common equity until 2020 at the earliest, other than modest at-the-market issuances, today's transaction further enhances our financing flexibility. We continue to believe that NextEra Energy Partners is as well-positioned as it's ever been, offering a best-in-class investor value proposition with growth prospects that remain as strong as ever," Robo said.
The acquisition is expected to contribute adjusted EBITDA of approximately $290 million to $310 million and cash available for distribution of approximately $122 million to $132 million, each on a five-year average annual run-rate basis, beginning Dec. 31.
The portfolio consists of the 20-MW Mountain View Solar Plant in Clark County, Nev., and the following wind projects: the 120-MW Bluff Point facility in Jay and Randolph counties, Ind.; the 98-MW Breckinridge facility in Garfield County, Okla.; the 150-MW Carousel facility in Kit Carson County, Colo.; the 90-MW Cottonwood facility in Webster County, Neb.; the 46-MW Golden Hills North facility in Alameda County, Calif.; the 200-MW Javelina II facility in Webb County, Texas; the 206-MW Kingman I and II facilities in Kingman County, Kan.; the 208-MW Ninnescah facility in Pratt, Kingman and Sedgwick counties, Kan.; and the 250-MW Rush Springs facility in Grady and Stephens counties, Okla.
The assets have a cash available for distribution weighted remaining contract life of approximately 18 years. The deal is expected to close in the fourth quarter, subject to customary closing conditions and the receipt of certain regulatory approvals.
NextEra Energy Partners was formed by NextEra Energy Inc., which also is the parent of NextEra Energy Resources.