• Adjusted EBITDA (2024): Approximately $1.96 billion.
• Adjusted EBITDA (2026 Forecast): $1.75 billion to $1.95 billion.
• Free Cash Flow Before Growth (2026 Forecast): $600 million to $700 million.
• Debt Financing for CEPF Buyouts and Investments: Approximately $4.4 billion, including $1.5 billion of new debt.
• CEPF Buyouts (2025-2027): $945 million in 2025, $150 million in 2026, and $465 million in 2027.

• Warning! GuruFocus has detected 8 Warning Signs with NEP.

Release Date: January 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NextEra Energy Partners LP (NYSE:NEP) is transitioning to a self-funded growth model, eliminating the need for equity issuance and preserving balance sheet strength.
• The company plans to focus on high-return investments such as wind repowerings and co-located storage, which are expected to generate double-digit returns.
• NEP's diverse portfolio includes 10 gigawatts of high-quality renewable energy assets, providing long-term visibility with a weighted average remaining contract life of 13 years.
• The strategic repositioning includes a new management team led by Alan Liu, who brings extensive experience in electric infrastructure and financing.
• NEP's close relationship with NextEra Energy provides access to operational expertise and investment opportunities, enhancing its ability to capitalize on the growing demand for clean energy.

Negative Points

• NEP has suspended distributions to unitholders indefinitely, which may be unfavorable for investors seeking regular income.
• The company faces significant debt obligations, with plans to raise approximately $4.4 billion in debt financing over the next two years.
• The expected sale of the Meade Pipeline investment in 2025 will result in a decline in adjusted EBITDA by approximately $105 million.
• NEP's decision to not issue equity could limit its flexibility in funding future growth opportunities if cash flows are insufficient.
• The transition to a new business model and management team introduces execution risks, particularly in achieving the anticipated returns on new investments.

Q & A Highlights

Q: How much of the free cash flow before growth is driven by the ITC and PTC? A: Alan Liu, President and CEO, explained that the tax credits up to 2026 are detailed in the appendix of the presentation. The free cash flow before growth is expected to remain relatively consistent through the end of the decade.

Q: How do you think about the run rate EBITDA in terms of growth CapEx and asset sales? A: Alan Liu stated that the focus is on actual cash flows available for allocation rather than run rate. The project-level cash flows are consistent, and the capital structure changes are primarily due to the decision not to issue equity. Brian Bolster, CFO, added that EBITDA is expected to be flat, with changes primarily due to the Meade Pipeline sale.

Q: Can you provide more color on the timing and quantum of expected growth investments? A: Alan Liu mentioned that most planned CapEx expenditures will occur in 2025, with some in 2026. The guidance does not currently include growth beyond the CEPF buyouts and repowering projects.

Q: How should we think about the funding of new CapEx? A: Alan Liu indicated that the funding will be a combination of project-level and tax equity, with the majority expected at the project level.

Q: Are the EBITDA and free cash flow before growth guidance figures calendar year figures? A: Alan Liu confirmed that the guidance figures are for the calendar year, focusing on the cash available each year for capital allocation decisions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.