Xplr Infrastructure, Lp · NYSE:XIFR
Xplr Infrastructure, Lp — NextEra Energy Partners — Investor Presentation (October 2017)
35 slides from Xplr Infrastructure, Lp's investor presentation, October 2017
Slide 1: NextEra Energy Partners, LP October 2017 Investor Presentation
NextEra Energy Partners, LP October 2017 Investor Presentation 1
Slide 2: Cautionary Statements And Risk Factors That May Affect Future Results
Cautionary Statements And Risk Factors That May Affect Future Results This presentation includes forward-looking statements within the meaning of the federal securities laws. Actual results could differ materially from such forward- looking statements. The factors that could cause actual results to
Slide 3: NextEra Energy Partners is a best-in-class diversified clean energy growth company
NextEra Energy Partners is a best-in-class diversified clean energy growth company NextEra Energy Partners’ Portfolio(1) • Stable cash flows supported by: – Long-term contracts with credit- worthy counterparties – Geographic and asset diversity • ~3,700 MW of renewables(2) – ~3,100 MW wind – ~600 MW
Slide 4: Since the IPO, NEP has grown distributions by ~109% and delivered total unitholder return of 71%
Since the IPO, NEP has grown distributions by ~109% and delivered total unitholder return of 71% Annualized Total Unitholder Return LP Distributions(1) NEP vs. Indices $1.57 100% 90% 80% 71% 70% 60% 50% 40% 40% 40% 30% $0.75 20% 10% Yie 0% -10% (6%) (2) NEP S&P 500 S&P 500 YieldCo (3) Utilities Aver
Slide 5: NEP's value proposition is built upon four core strengths
NEP’s value proposition is built upon four core strengths NextEra Energy Partners’ Core Strengths High-Quality Portfolio(1) Financial Strength and Flexibility Issuer Credit ~3.7 GW Rating(4) Year-end 2017E 18-Yr A3 Renewables >90% Ba1/BB/BB+ Remaining Counterparty Capacity of Project Debt ~1.2x & Ta
Slide 6: NEP's structure creates tax advantages similar to MLPs
NEP’s structure creates tax advantages similar to MLPs Structural Tax Advantages Federal Income Earnings & Profits C-Corp for Tax Tax Shield Tax Shield Purposes • Driven by existing and • NEP distributions are • Investors receive a future NOLs treated as “return of 1099-DIV as opposed generated prim
Slide 7: NEP continues to focus on investing in clean energy assets with stable cash flows
NEP continues to focus on investing in clean energy assets with stable cash flows Asset Suitability Long-Term Contract Clean Energy Technology Creditworthy Counterparty “NEP-Able” Asset Stable Regulatory Environment Limited or Monetized Tax Credits Strong Operations Any clean energy asse
Slide 8: With continued technology improvements and cost declines, wind and solar are expected to be competitive into the next decade
With continued technology improvements and cost declines, wind and solar are expected to be competitive into the next decade Wind and Solar Technology Levelized Cost of Levelized Cost of Electricity from Wind Electricity from Solar (Including Production Tax Credits) (Including Investment Tax Credits
Slide 9: Demand for both wind and solar energy is expected to be robust through the end of the decade
Demand for both wind and solar energy is expected to be robust through the end of the decade Industry Estimates of Wind & Solar Market Potential 2017 - 2020(1) Wind Additions Solar Additions 45 45 40 40 37 Avg: 36 GW 40 35 35 32 35 30 30 25 26 GW 25 GW 25 24 Avg: 22 GW 20 20 15 15 13 10 10 5 5 0 0 B
Slide 10: Battery efficiency improvements and cost declines are expected to expand the storage market
Battery efficiency improvements and cost declines are expected to expand the storage market and enable even greater renewables expansion Storage Technology Lithium-ion 4-Hour Battery Pack Cost(1) Battery Storage Adder(2) $/kWh $/MWh $1,200 $80 $71-$81 $1,000 $70 $1,000 $60 $800 $45-$55 $50 $642 $38-
Slide 11: The all-in cost of wind and solar will continue to compete with existing generation resources
The all-in cost of wind and solar will continue to compete with existing generation resources as tax credits phase down Estimated Costs of Generation Resources Post – 2020(1) (cents/kWh) 4 - 5¢ w/ storage adder 4 - 5¢ 3.5 - 5¢ 3 - 4¢ w/ storage adder 3 - 4¢ 3 - 4¢ 2 - 3¢ (2) (2) New Wind New Solar N
Slide 12: Acquisitions from Energy Resources, organic growth and third party M&A provide clear visibility to future growth
Acquisitions from Energy Resources, organic growth and third party M&A all provide NEP with clear visibility to future growth Growth Opportunities Potential Acquisition of Potential Organic Clean Energy Potential for 3rd Prospects for Assets at Energy Party Texas Pipelines Resources, Acquisitions an
Slide 13: We have implemented certain governance changes at NEP to enhance LP unitholder rights
We have implemented certain governance changes at NEP in order to enhance LP unitholder rights Enhancing Unitholder Governance Rights Prior Structure New Structure • BOD at NEP GP • New BOD at NEP LP Board of • Three Directors appointed by GP (NEE) Directors • NEE appointed all Directors • • Four Di
Slide 14: NEP's ongoing financing optimization is expected to minimize the need for common equity
NEP’s ongoing financing optimization is expected to minimize the need for common equity Optimizing The Capital Structure Investor IDR Fee Low double-digit Investor Demand Modification ROEs on acquisitions Demand Access Access to Utilized high-yield Dividend Alternative to Low Low Cost Financing debt
Slide 15: NEP's credit ratings increase financing flexibility and debt capacity
NEP’s credit ratings increase financing flexibility and debt capacity due to greater market access Corporate Credit Rating and Debt Capacity • NEP corporate credit ratings: High-Yield Term Loan B Moody’s S&P Fitch Debt Revolving Credit Ba1 BB BB+ Convertible Facility Stable Stable Stable Preferred O
Slide 16: NEP's ongoing financing initiatives are expected to minimize the need for common equity
NEP’s ongoing financing initiatives are expected to minimize the need for common equity NEP Financing Update • $550 MM Convertible Preferred Offering – 4.50% coupon – 15% conversion premium • $300 MM Convertible Debt/Capped Call Transaction – 1.5% coupon for 3 years – Initial conversion rate represe
Slide 17: NextEra Energy Partners Adjusted EBITDA and CAFD Expectations
NextEra Energy Partners Adjusted EBITDA and CAFD Expectations(1) Adjusted EBITDA CAFD 12/31/17 Run Rate(2) $875 - $975 MM $310 - $340 MM 12/31/18 Run Rate(3) $1,050 - $1,200 MM $360 - $400 MM Unit Distributions 2017(4) $1.58 - $1.62 annualized rate by year-end 2016 – 2022(5) 12% - 15% average annual
Slide 18: NEP offers a superior value proposition and is better positioned than ever
We believe NEP offers a superior value proposition and is better positioned than ever to deliver upon its long-term expectations Investor Total Return Potential • Opportunity to earn a total return of ~4% 16% - 19% roughly 16% - 19% per year through at least 2022 12% - 15% • Diversified portfolio wi
Slide 19: Appendix
Appendix NExTera’ NexTera energy” ENERGY & PARTNERS 2 19
Slide 20: We continue to execute on our plan to expand NextEra Energy Partners' portfolio
We continue to execute on our plan to expand NextEra Energy Partners’ portfolio NextEra Energy Partners – Portfolio Additions • Acquisition from NEE is expected to close by year-end Contract Project Resource MW COD Expiration(1) Desert Sunlight Solar 142.5 2014 2037 Brady I Wind 149.7 2016 2046 Brad
Slide 21: NEP's portfolio is comprised of ~3.7 GW of renewable assets plus seven natural gas pipelines
NEP’s portfolio is comprised of ~3.7 GW of renewable assets plus seven natural gas pipelines with a ~18 year weighted average remaining contract life Portfolio Overview(1) Project COD Location Net MW Technology Counterparty Credit PPA Life Ashtabula III Dec-10 ND 62 Wind A3 21 Baldwin Dec-10 ND 102
Slide 22: U.S. Federal tax incentives for renewables projects have been extended into the next decade
U.S. Federal tax incentives for renewables projects have been extended into the next decade Extended U.S. Federal Tax Credits Wind Production Solar Investment Tax Credit (PTC) Tax Credit (ITC) Start of Start of Construction COD Wind Construction Solar Date Deadline PTC Date ITC During 2016 12/31/202
Slide 23: NEP's tax shield creates the need to employ tax equity financing
NEP’s tax shield creates the need to employ tax equity financing for projects that generate a large portion of their economics from tax credits PAYGO Tax Equity Financing • Tax equity financing is used Project Cash Flow Split(1) to monetize tax attributes • Under tax equity, an investor makes an up-
Slide 24: In June 2017, NEP announced an agreement to issue $550 MM of convertible preferred securities
In June 2017, NEP announced an agreement to issue $550 MM of convertible preferred securities Convertible Preferred Offering(1) • NEP’s 4.50% coupon is the Coupon at Issuance(2) lowest ever for a preferred security in the MLP or Yieldco 10.75% sector 9.5% 10.0% • Provides a low cash cost of 8.0% 8.0
Slide 25: NEP has issued $300 MM of convertible debt and entered into a capped call transaction
NEP has issued $300 MM of convertible debt and entered into a capped call transaction in connection with the offering Convertible Debt/Capped Call Transaction • Low 1.5% coupon for 3 years Impact of NEP Unit Price • Initial conversion rate At Conversion(1) represents a 25% premium $65 Cap Price ~$63
Slide 26: NEP has further de-risked LP distributions by refinancing its existing ~$1.1 B HoldCo debt
NEP has further de-risked LP distributions by refinancing its existing ~$1.1 B HoldCo debt balance at attractive rates and pushing its maturity into the middle of the next decade NEP HoldCo Debt Refinancing • NEP refinanced its ~$1.1 B NEP HoldCo Debt Maturity Profile HoldCo debt balance with $ MM s
Slide 27: NEP has upsized its revolving credit facility while also reducing borrowing costs
NEP has upsized its revolving credit facility while also reducing borrowing costs, extending the maturity date and increasing the size of its bank group NEP Credit Revolver Changes Old Revolver Amended Revolver Facility Size $250 MM $750 MM Pricing 3.0x Leverage Ratio(2): 225 bps 175 bps 4.0x Levera
Slide 28: NEP's holdco leverage to project distributions target of 4.0x – 5.0x is consistent with its credit ratings
NEP’s holdco leverage to project distributions metric target of 4.0x – 5.0x is consistent with its strong mid– to high–BB credit ratings Credit Metrics(1) BB Target Target (2) S&P Range YE 2017 YE 2018 Holdco Debt/EBITDA 4.0x - 5.0x 3.0x - 4.0x 4.0x - 5.0x Ba1 Target Target (3) Moody's Range YE 2017
Slide 29: Expected Cash Available for Distribution (December 31, 17 Run Rate CAFD)
Expected Cash Available for Distribution(1) (December 31, 2017 Run Rate CAFD) $960-$1,060 ($15-$25) ($60-$70) $875-$975 ($240-$290) ($270-$320) $ MM ($30-$35) ($3-$8) $310-$340 Project-Level Corporate IDR Fees Adjusted Debt Pre-Tax Non-Cash Maintenance Estimated Adjusted Expenses EBITDA Service (2)
Slide 30: Expected Cash Available for Distribution (December 31, 18 Run Rate CAFD)
Expected Cash Available for Distribution(1) (December 31, 2018 Run Rate CAFD) $1,150-$1,300 ($20-$30) ($75-$85) $1,050-$1,200 ($240-$320) ($380-$460) ($30-$35) ($5-$15) $360-$400 Project-Level Corporate IDR Fees Adjusted Debt Pre-Tax Non-Cash Maintenance Estimated Adjusted Expenses EBITDA Service (2
Slide 31: Definitional information
Definitional information NextEra Energy Partners, LP. Adjusted EBITDA and CAFD Expectations This presentation refers to adjusted EBITDA and CAFD expectations. NEP’s adjusted EBITDA expectations represent projected (a) revenue less (b) fuel expense, less (c) project operating expenses, less (d) corpo
Slide 32: Cautionary Statement And Risk Factors That May Affect Future Results
Cautionary Statement And Risk Factors That May Affect Future Results This presentation contains “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are not statements of historical facts, but instead represent the current expectations of NextEra
Slide 33: Cautionary Statement And Risk Factors That May Affect Future Results (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) A change in the jurisdictional characterization of some of the Texas pipeline entities' assets, or a change in law or regulatory policy, could result in increased regulation of these assets, which could have a material adve
Slide 34: Cautionary Statement And Risk Factors That May Affect Future Results (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) The natural gas pipeline industry is highly competitive, and increased competitive pressure could adversely affect NEP's business; NEP may not be able to access sources of capital on commercially reasonable terms, which wou
Slide 35: Cautionary Statement And Risk Factors That May Affect Future Results (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) Holders of NEP's common units currently cannot remove NEP GP without NEE’s consent; NEE’s interest in NEP GP and the control of NEP GP may be transferred to a third party without unitholder consent; The IDR fee may be assig
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