It’s only March, but NextEra Energy Partners (NYSE:NEP) has already announced transactions that will allow it to meet its growth objectives for the year. That should pique the interest of investors, especially considering shares are trading roughly 10% below last year’s peak, and at more attractive valuations than other renewable energy yieldcos.
In addition to its progress on its near-term objectives, and its compelling stock valuation, the business has a lot to offer long-term investors. Those opportunities are highlighted by its advantageous relationship with subsidiary NextEra Energy Resources (NEER) — the energy generation business of NextEra Energy and the planet’s leading producer of electricity from the wind and sun — which gives it the ability to acquire stakes in renewable energy assets across the United States. As two recent acquisitions demonstrate, NextEra Energy Partners should be able to leverage that relationship to deliver significant growth for the foreseeable future.
On track to meet its growth objectives
Earlier this month, NextEra Energy Partners announced a string of purchases from NEER that should allow it to meet its 2019 guidance. Management’s growth objectives call for the business to exit the year with annual run rates of roughly $1.29 billion in adjusted EBITDA and $445 million in cash available for distribution (CAFD), compared to the $886 million and $339 million, respectively, that it delivered in 2018.
With those recent transactions, NextEra Energy Partners scooped up 611 megawatts of renewable energy projects — 420 megawatts of wind and 191 megawatts of solar — for roughly $1.02 billion. The acquired projects are expected to add approximately $107 million in adjusted EBITDA and $102 million in CAFD per year for the next five years.
Those deals follow the acquisition of 1,388 megawatts of wind and solar projects from NEER that closed in late 2018. Before that transaction, investors could only guess that NextEra Energy Partners’ close relationship with the world’s leading renewable power generator would be advantageous. Now, investors can likely extrapolate what it means to the parent company’s long-term viability. After all, those transactions alone, totaling nearly 2,000 megawatts, have driven most of the portfolio’s growth from 2,700 megawatts in early 2018 to nearly 5,300 megawatts today…
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