Xplr Infrastructure, Lp · NYSE:XIFR
Xplr Infrastructure, Lp — NextEra Energy Partners — Investor Presentation (March 2020)
45 slides from Xplr Infrastructure, Lp's investor presentation, March 2020
Slide 1: NextEra Energy Partners Convertible Equity Portfolio Financings
NextEra Energy Partners (NEP) Convertible Equity Portfolio Financings March 2020
Slide 2: Cautionary Statements And Risk Factors That May Affect Future Results
Cautionary Statements And Risk Factors That May Affect Future Results These presentations include 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: CEPFs are an efficient way for NEP to issue equity
Convertible equity portfolio financings (CEPFs) are an efficient way for NEP to issue equity Efficient Equity Issuance through CEPFs No Issuance Avoid issuance Buyout equity issued at Discount discount then-current market price Low initial Low upfront Initial effective coupons cash cost cash cos
Slide 4: CEPFs utilize a partnership structure with three distinct phases
CEPFs utilize a partnership structure with three distinct phases Three Phases of CEPFs Closing Investor pays cash to NEP for an Phase 1 equity interest in a portfolio of assets Low Cash Investor receives minority of Phase 2 Cost Period distributions for the first 3 – 6 years, representing low annual
Slide 5: NEP maintains significant flexibility in managing the buyout of the CEPFs
NEP maintains significant flexibility in managing the buyout of the CEPFs CEPF Buyout Flexibility Base Case Issue NEP equity Several tailwinds support NEP’s long- at higher prices term unit price upside, which is in the future expected to reduce equity dilution Alternative Time buyout If NEP’s uni
Slide 6: Agenda
Agenda Background Structure & Flexibility Accounting Appendix 6
Slide 7: Built a best-in-class diversified clean energy company
In the five years since the IPO, NextEra Energy Partners has built a best-in-class diversified clean energy company NextEra Energy Partners’ Portfolio(1) • Stable cash flows supported by: – Long-term contracts with credit- worthy counterparties – Geographic and asset diversity • ~5,330 MW of renewab
Slide 8: NEP positioned to benefit from wind and solar growth
NEP is well positioned to benefit from the significant wind and solar growth that is expected over the coming years NEP & Long-Term Renewables Demand U.S. Renewable Energy Capacity through 2030 U.S. Renewables Penetration ~500 GW ~40% ~15% CAGR in MWh generation ~200 GW ~100 GW 8% ~24 GW – 32 GW ~5
Slide 9: Tailwinds support NEP's long-term unit price upside
Several tailwinds support NEP’s long-term unit price upside, which is expected to limit equity dilution from the CEPFs NextEra Energy Partners’ Unit Price Upside Overall renewables CEPF buyouts market growing 3 – 6 years ~15% after issuance, allowing NEP to annually through execute on growth 2030 st
Slide 10: Evolution of NEP's Financing Plan
Utilization of low-cash cost equity-like financing products starting in 2017 broaden the suite of financing tools available to finance NEP’s growth Evolution of NEP’s Financing Plan Total Unitholder Return • NEP began to diversify away NEP vs. Indices(2) from straight common equity Since June 2014 I
Slide 11: Conversions increased public float and daily trading volume
Recent conversions of the preferred have helped increase NEP’s public float and daily trading volume, which is adding to investor appeal and will aid future conversions NEP’s Public Float and Trading Volume NEP Dollar Trading Volume(1) • NEP’s outstanding public 90-day DDVL ($ MM) float has increase
Slide 12: Comparison of Select Financing Alternatives
NEP introduced the CEPF in 2018, which combines the best attributes of other well-known convertible products Comparison of Select Financing Alternatives Convertible Preferred Mandatory Convertible Debt Equity Convertible Equity Portfolio <2.5% Cash Cost Retains 50%+ Unit Price Upside >5 Year
Slide 13: Comparison of Common Equity to CEPFs
By leveraging private infrastructure capital, CEPFs are expected to provide a more efficient way for NEP to issue equity Comparison of Common Equity to CEPFs Common Equity CEPF Efficient access to capital New issuance limited by trading liquidity Significant infra. fund capital drives demand No
Slide 14: Agenda
Agenda Background Structure & Flexibility Accounting Appendix 14
Slide 15: CEPFs Structural Advantages
The CEPFs have several attractive features which make them an efficient equity issuance tool for NEP CEPFs Structural Advantages Significant Issue equity at Initial cash Infra. Retain costs as 100% no low as fund capital of unit discount <1% drives price upside demand Rating Equity ATM- agency dilut
Slide 16: Simplified Overview of CEPF Structure
The CEPF is created through a partnership structure where investors buy into assets with cash, and NEP has the option to buy out the investor with NEP common equity and/or cash Simplified Overview of CEPF Structure 1. Investor pays cash 2. NEP receives the 3. NEP can buyout to NEP for an interest ma
Slide 17: Evolution of NEP CEPF Transactions
More recent CEPF deals have provided even more flexibility than the first CEPF in 2018 Evolution of NEP CEPF Transactions(1) 2018 1H 2019 Meade TX Pipelines Length of 1 year(2) 3.5 years(3) 3 years 4 years Buyout Period (2021 – 2022) (2022 – 2026) (2023 – 2026) (2022 – 2026) Incrementally, Increment
Slide 18: CEPF Financing Flexibility – Potential Options
Although the base case buyout assumes equity issuance, CEPFs provide a significant amount of flexibility in managing the buyout CEPF Financing Flexibility – Potential Options Base Case Alternative 1 Alternative 2 Alternative 3 Time Re-lever Choose Issue whether to NEP buyout unlevered around assets
Slide 19: CEPFs reduce NEP's total asset and equity needs
CEPFs are expected to reduce NEP’s total asset and equity needs as a result of retained unit price upside, delayed LP distribution growth and lack of issuance discount 2018 CEPF Example – Base Case: CEPF vs. Common Equity Issuance(1) Units issued 2018 – Units issued in Units issued in 2021 2021 to g
Slide 20: CEPF buyouts lower annual percentage of float than historical issuance
We expect the CEPF buyouts will, on average, represent a lower annual percentage of float than NEP’s historical equity issuances Base Case: NEP Historical Equity and Illustrative Equity Issuance for CEPF Buyouts(1) 120% 39% Percent 15% 15% 11-13% 2-3% 8-12% 6-9% 3-6% of Public Float(2) ~$1,000 MM ~$
Slide 21: Alternative 1: Flex Timing of Buyout
If NEP’s unit price is temporarily dislocated during the buyout period, NEP has the option to delay the buyout until trading performance improves 2018 CEPF Example – Alternative 1: Flex Timing of Buyout 2018 CEPF Example – • If we believe the unit price is Flexed Buyout Calculation(1) undervalued, N
Slide 22: Alternative 2: Cash Buyout Alternatives
If NEP remains undervalued, NEP also has the flexibility to pay cash for buyouts, which may be funded through project finance on the unlevered assets 2018 CEPF Example – Alternative 2: Cash Buyout Alternatives • Because the portfolio is unlevered(1), NEP has the option to raise non-recourse project
Slide 23: Alternative 3: Smart Capital Allocation Illustration
Instead of deploying capital into CEPF buyouts, NEP can choose to invest elsewhere if CEPF assets have underperformed or if other opportunities are more attractive 2018 CEPF Example – Alternative 3: Smart Capital Allocation Illustration(1) Assets in CEPF 2018 CEPF – Buyout Year 2 Perform As atCEPF E
Slide 24: Agenda
Agenda Background Structure & Flexibility Accounting Appendix 24
Slide 25: CEPF Financial Reporting Overview
NEP presents the CEPFs as noncontrolling interests in its consolidated financial statements CEPF Financial Reporting Overview • Presented as equity transactions (noncontrolling interests, or NCI) Balance • Represents the CEPF investor’s economic ownership rights in the net Sheet assets of the partne
Slide 26: Example CEPF Financial Statement Impacts Through Time
The CEPF investor will receive their total return through distributable cash, and the issuance of LP units and/or cash at the time of buyout Example CEPF(1) – Financial Statement Impacts Through Time Year 0 1 2 3 Balance Sheet Rollforward: Noncontrolling Interests - Beginning of Period $750 $789 $83
Slide 27: CEPF Balance Sheet Presentation
NEP’s CEPFs are presented as equity transactions, along with other NCI components CEPF – Balance Sheet Presentation(1) Balance Sheet Total NCI NEP Note 2 – Noncontrolling Interests NCI related to CEPFs 27 1) As of 12/31/2019; source: NEP 2019 Form 10-K
Slide 28: CEPF Income Statement Presentation
NEP presents the costs associated with its CEPFs in net income attributable to NCI CEPF – Income Statement Presentation(1) Income Statement Total net loss (income) attributable to NCI NEP Note 2 – Noncontrolling Interests Net income attributable to CEPFs 28 1) Full year 2019; source: NEP 2019 Form 1
Slide 29: CEPF Cash Flow Statement Presentation
NEP presents all cash from and to the CEPF investor as financing cash flows CEPF – Cash Flow Statement Presentation(1) Cash Flow Statement Upfront cash proceeds from CEPF investor(s) Cash distributions to CEPF investor(s) 1) Twelve months ending 12/31/2019; source: NEP 2019 Form 10-K 29
Slide 30: NextEra Energy Partners Value Proposition
NextEra Energy Partners presents a compelling investment opportunity NextEra Energy Partners Value Proposition Drill-down of Russell 1000 Companies & NEP Total Return Potential ~4% 16% - 19% 705 Debt / EBITDA(1) < 5.25x 12% - 15% 141 Dividend yield > 3% 11 DPS growth > 100% past 4 years 2 ‘18 – ‘21E
Slide 31: Agenda
Agenda Background Structure & Flexibility Accounting Appendix 31
Slide 32: NEP CEPF Transactions
NEP CEPF Transactions(1) 2018 CEPF 2019 1H CEPF Meade CEPF Texas Pipes CEPF 1) Source: NEP 2019 10-K a) Increases to 95% if NEP has not exercised its entire buyout right by December 4, 2025. b) The buyout right is subject to certain limitations, including NEP being able to purchase a maximum of the
Slide 33: 2018 CEPF Buyout Scenario Illustrative Model
In December 2018, NextEra Energy Partners closed its first convertible equity portfolio financing as modeled below 2018 CEPF – Buyout Scenario Illustrative Model CEPF: 2018 % of Buyout in Units (at NEP's election): 70% Investor Contribution: $750 MM % of Buyout in Cash (Maximum, at Investor's Discre
Slide 34: 2018 CEPF – Summary Terms
2018 CEPF – Summary Terms(1) Key Terms Summary Funding Amount: BlackRock to fund $750 MM; NEP to fund the balance of the $1,275 MM Energy Resources portfolio purchase price Issuer: Newly-formed private HoldCo managed and operated by affiliates of NEP BlackRock to purchase Class B Common Equity Units
Slide 35: 2019 1H CEPF – Summary Terms
2019 1H CEPF – Summary Terms(1) Key Terms Summary KKR commitment of $900 MM; expected net proceeds after offering expenses of approximately $893 MM; NEP to fund the balance Funding Amount: of the $1,020 MM Energy Resources portfolio purchase price and approximately $220 MM pay down of existing proje
Slide 36: Meade CEPF - Summary Terms
Meade CEPF - Summary Terms(1) Key Terms Summary Funding Amount: BlackRock commitment of $168 MM; expected net proceeds after offering expenses of approximately $161 MM Issuer: Newly-formed private HoldCo managed and operated by affiliates of NEP Units: BlackRock to purchase Class B Common Equity Uni
Slide 37: 2019 Texas Pipes CEPF – Summary Terms
2019 Texas Pipes CEPF – Summary Terms(1) Key Terms Summary Funding Amount: EIG Global Energy Partners (“EIG”) commitment of $750 MM;~$734 MM expected proceeds after offering expenses Issuer: Newly-formed private HoldCo managed and operated by affiliates of NEP Units: EIG to purchase Class B Common E
Slide 38: Case Study – 2017 Convertible Preferred
NEP’s strong unit price performance since the convertible preferred offering has generated excess return for the investors in this instrument Case Study – 2017 Convertible Preferred Investor Unlevered IRR(1) • Investor IRR on the >15% convertible preferred is expected to exceed 15%(1) – Units issued
Slide 39: Case Study – 2017 Convertible Debt
While convertible debt is lower cost and allows LP unitholders to retain more upside, it does not receive any equity credit from the credit rating agencies Case Study – 2017 Convertible Debt • NEP issued convertible debt Implied Coupon of Offering at a 1.5% coupon and up 25% Unit Price @ $52.86 $61.
Slide 40: Convertible Debt Implied Coupon and Issuance Price
Convertible Debt Implied Coupon and Issuance Price Year 0 1 2 3 Unit Price at Maturity Convertible Principal 294.0 - - (300.0) Convert Convertible Coupon - (4.5) (4.5) (4.5) Price: Capped Call Cash Flow (12.3) - - - $52.86 Total Cash Flow 281.7 (4.5) (4.5) (304.5) Implied Coupon: 3.7% Convertible Pr
Slide 41: Asset Needs & Equity Issuance Comparison – 2018 CEPF vs. Common Equity
Asset Needs & Equity Issuance Comparison – 2018 CEPF vs. Common Equity CAFD Asset NEP Units Incremental Total Total Total Purchased Needs Trading Issuance Issuance Issued Financing CAFD Financing Net ($MM) ($MM)(1) Price Discount Price (MM) Cash Costs(2) Purchased Costs CAFD Common Year 1 $116 $1,16
Slide 42: 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 43: 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 44: Cautionary Statement And Risk Factors (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) PG&E, which contributes a significant portion of NEP's revenues, filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Any rejection by PG&E of a material portion of NEP's PPAs with it
Slide 45: Cautionary Statement And Risk Factors (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) NEP's ability to make distributions to its unitholders depends on the ability of NEP OpCo to make cash distributions to its limited partners; If NEP incurs material tax liabilities, NEP's distributions to its unitholders ma
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