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NextEra Energy Partners: A New-Era Yieldco

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NextEra Energy Partners

NextEra Energy Partners (NEP) owns and operates wind and solar projects in North America. The company raised $348 million, or $25 per share, in an IPO (initial public offering) in June 2014.

NEP was floated by NextEra Energy (NEE), a diversified electricity generation company. NEE is the largest provider of clean energy in the US. Coal, which is still the most widely used fuel for electricity generation in the US, accounted for just 3.5% of the company’s total generation in fiscal 2014. NEE is a part of the S&P 500 Index (SPY).

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Portfolio

NextEra Energy Partners (NEP) had a total portfolio of 1,240 MW (megawatt) at the time of its IPO. Wind accounts for around 950 MW, or 77 % of its portfolio, 207 MW of which are located in Canada. The remaining 743 MW are based in the US. Of its 290 MW solar capacity, or 23% of its portfolio, 250 MW are located in the US and 40 MW are located in Canada. The weighted average remaining life of contracts is 20 years.

Customer profile

Independent electricity system operators, or IESOs, offtake almost all supply from the company’s Canadian facilities. IESOs accounted for 42% of the company’s revenues in fiscal 2014. PG&E (PCG) accounted for another 29% of revenues. Public Service Company of Colorado, a subsidiary of Xcel Energy (XEL), and APS, a subsidiary of Pinnacle West Capital Corporation (PNW), are other major customers of NEP. All major customers hold investment-grade ratings.

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Dividend history

In fiscal 2014, the company paid out 18.75 cents a share in distributions. The company increased distributions in 1Q15 by 4% to 19.5 cents.

Bottom line

NextEra Energy Partners has the backing of the biggest provider of clean energy in the US. NextEra Energy’s (NEE) 1.5 GW renewable energy pipeline represents great potential for NEP.

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