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NextEra Energy Partners LP: Plenty Of Steak, But Priced For Sizzle
- NEP IPO well-timed considering investors' appetite for solar power and dividend-paying equities such as MLPs.
- General partner NEE gives NEP a highly visible source of cash flow and distribution growth by virtue of its extensive renewable-energy assets.
- We like NEP's business model, but not the valuation. Investors should wait for a pullback or consider BEP.
NextEra Energy IPO Quiet Period Expiration Could Open A Clean Buying Opportunity For Investors
- July 21 marks the end of the 25-day quiet period on underwriter reports that began with the June 26 IPO of NEP.
- On July 22nd, NEP’s strong underwriters, including BofA, Morgan Stanley, Goldman Sachs, Barclays, and Credit Suisse, will likely attempt to push NEP’s share price higher with positive research reports.
- NEP has made solid gains post-IPO, has a good yield, growing business, and smart, experienced management.
- We see NEP’s quiet period expiration as another opportunity to get a piece of its success.
- 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.
- NEP is a limited partnership formed by NextEra Energy, Inc. to acquire, own, and operate clean energy projects.
- Given the annual yield of 3.75% at the midpoint of the expected IPO price range, we rate this IPO a buy if it prices within or below the expected range.
- We are also positive on NEP's impressive management team and strong underwriters.
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Tue, Jul. 29, 7:42 AM
Fri, Jun. 27, 6:12 PM
- While Michaels Companies launched trading to a tepid response today, NextEra Energy Partners (NEP), a business formed to own and operate renewable energy plants built by NextEra Energy (NEE), jumped 28% over its IPO which priced 16.25M units at $25 each.
- NEP will own an initial portfolio of 989.6 MW of wind and solar farms in the U.S. and Canada, according to its SEC filing, and use the revenue from selling electricity to buy more power plants and to pay dividends; NEE will own ~83% of NEP.
- NEP is one of at least a dozen developers in North America and Europe that have formed similar ventures to own portfolios of power plants.
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