- NEP is a wind/solar 'carve-out' from NextEra Energy (NEE). NEE is an electric power company with a $43.6 billion market cap.
- For the year ending June '15 NEP is projecting a 3.75% yield at the price range mid-point of $20. The parent's yield is 2.9%.
- The projected annual pay-out growth is 12-15% over the next three years.
Based in Juno Beach, FL, NextEra Energy Partners, LP (NYSE:NEP) scheduled a $325 million IPO on the NYSE with a market capitalization of $1.52 billion at a price range midpoint of $20 for Friday, June 27, 2014.
The price range mid-point was recently moved to $24. The conclusion (see below) remains the same.
The full IPO calendar is available at IPOpremium.
Manager, Co-Managers: BofA Merrill Lynch, Goldman Sachs, Morgan Stanley
Joint Managers: Baird, Barclays, BMO Capital Markets, Credit Suisse, KeyBanc Capital Markets, RBC Capital Markets, UBS Investment Bank, Wells Fargo Securities
End of lockup (180 days): Wednesday, December 24, 2014
End of 25-day quiet period: Tuesday, July 22, 2014
NEP is a wind/solar 'carve-out' from NextEra Energy (NYSE:NEE). NEE is an electric power company with a $43.6 billion market cap.
For the year ending June '15 NEP is projecting a 3.75% yield at the price range mid-point of $20. The parent's yield is 2.9%.
The projected annual pay-out growth is 12-15% over the next three years.
Mrkt Cap (MM)
% offered in IPO
projected June '15 yr
NextEra Energy Partners, LP
NextEra Energy Partners, LP *
*Projected yield for June '15 yr
Parent/sponsor 2013 yr because seasonal
Abengoa Yield plc (NASDAQ:ABY)*
*Projected yield for June '15 yr
NRG Yield (NYSE:NYLD)*
Pattern Energy Group (NASDAQ:PEGI)*
NEP is an LP 'carve out' from a large company, NextEra Energy. NEE has a $43 billion market cap.
NEE plans to feed properties to NEP to produce a 12-15% increase in payout over the next three years.
The current projected payout for the 12 months ending June '15 is 3.75%
The rating on NEP is a buy.
To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.
NEP is a growth-oriented limited partnership formed by NextEra Energy, Inc. to own, operate and acquire contracted clean energy projects with stable, long-term cash flows through its limited partner interest in NEE Operating LP.
NEP will own a controlling, non-economic general partner interest and a 17.4% limited partner interest in NEE Operating LP.
NEP is a wind/solar 'carve-out' from NextEra Energy, Inc. is an electric power company with a $43.6 billion market cap.
NEE owns and operates approximately 17% of the installed base of United States wind power production capacity and operates approximately 14% of the installed base of United States utility-scale solar power production capacity as of December 31, 2012.
NEE has over 42,000 megawatt of generating capacity in 26 states in the United States and four provinces in Canada.
NEE also purchases electric power for resale to its customers and provides risk management services related to power and gas consumption for a limited number of customers.
NEP acquisitions from NEE
Upon the completion of this offering, NEP will own interests in ten wind and solar projects, nine of which will be operational and one of which is expected to be in the final stages of construction.
NEP intends to take advantage of favorable trends in the North American energy industry, including the ongoing trend of clean energy projects replacing aging or uneconomic projects, demand by utilities for renewable energy to meet state RPS requirements and the improving competitiveness of clean energy relative to other fuels.
NEP plans to focus on high-quality, long-lived projects operating under long-term contracts with creditworthy counterparties that are expected to produce stable long-term cash flows.
NEP believes its cash flow profile, geographic and technological diversity, cost-efficient business model and relationship with NextEra will provide NEP with a significant competitive advantage and enable it to execute its growth strategy.
NEP's objective is to pay stable and growing cash distributions to the holders of its common units. NEE Operating LP's partnership agreement will provide that NEE Operating LP will distribute all cash available for distribution to its unitholders on a quarterly basis and NEP intends to use the amount distributed to it to pay regular quarterly distributions to holders of its common units.
$0.75 per common unit on an annualized basis, which is 3.75% yield.
NEP intends to target a three-year annual growth rate in its cash available for distribution of 12% to 15% per common unit.
This target is based on NextEra's stated intention that it plans to offer NEP sufficient NEER ROFO Projects each year to produce such an increase.
NEP believes that the acquisition opportunities associated with NEE Operating LP's right of first offer for the NEER ROFO Projects, other NEER projects, as well as other acquisition opportunities in North America, all of which have many of the characteristics of the projects in its Initial Portfolio, will give NEP the opportunity to grow its cash available for distribution over time.
While NEP believes its targeted growth rate is reasonable, it is based on estimates and assumptions regarding a number of factors, many of which are beyond its control, and NEP may not be able to grow its business at a rate consistent with its expectations, if at all.
NEP competes on the basis of contract price and terms, as well as the location of its projects in an industry.
There is a wide variation in terms of the capabilities, resources, scale and scope of the companies with which NEP competes, depending on the market. NEP believes it has numerous competitors with a varied mix of characteristics.
In addition, competitive conditions may be substantially affected by various forms of energy legislation and regulation considered from time to time by federal, state, provincial and local legislatures and administrative agencies.
Such laws and regulations may substantially increase the costs of acquiring, constructing and operating projects, and some of NEP's competitors may be better able to adapt to and operate under such laws and regulations.
Use of proceeds
NEP expects to net $305 million from its IPO. Proceeds are allocated as follows:
$150 million of the net proceeds from this offering to purchase 7,994,883 NEE Operating LP common units from NEE Operating LP. NEE Operating LP will use such net proceeds for general corporate purposes, including to fund future acquisition opportunities.
$154.9 million of the net proceeds of this offering to purchase 8,255,117 NEE Operating LP common units (or 10,692,617 NEE Operating LP common units if the underwriters exercise in full their option to purchase additional common units) from NEE Equity.
Disclaimer: This NEP IPO report is based on a reading and analysis of NEP's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.