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NextEra yieldco eyeing 3rd-party M&A

NextEra Energy Partners could engage in third-party M&A to complement a just-announced $1.28 billion organic growth transaction, according to the CFO of NextEra Energy Inc.

Speaking Sept. 5 at the Barclays CEO Energy-Power Conference in New York, NextEra Executive Vice President of Finance and CFO John Ketchum said NextEra Energy Partners, NextEra's yieldco known as NEP, is eyeing both organic and third-party expansions to support its growth target of 12% to 15% annual distribution per unit, or DPU.

Earlier that day, NEP announced that it agreed to acquire a 1,388-MW portfolio of wind and solar projects from NextEra's competitive generation subsidiary, NextEra Energy Resources LLC, for $1.28 billion, a deal that NextEra Chairman and CEO Jim Robo said would replace the Canadian portfolio NEP divested in July.

However, the CFO said he wants to keep any acquisitions and organic growth plans consistent to avoid exerting "undue pressure" on NEP's 12% to 15% annual DPU growth.

"It's kind of the Goldilocks approach of what's the right fit at the right time," Ketchum said. "But as NEP gets bigger, third-party M&A is going to make sense."

Since its initial public offering in mid-2014, NEP has grown its DPU by 133%, with its stock growing 126% during the same time period — "well above where the rest of the S&P 500 or S&P 500 Utility Index has finished, and then obviously well above where other yieldcos have performed," Ketchum said.

Ketchum cited long contract terms and strong credit metrics as some of the NEP's advantages. "It's our operating model, and it's our ability to capitalize on disruption that we see in the industry," he said.