Xplr Infrastructure, Lp · NYSE:XIFR
Xplr Infrastructure, Lp — NextEra Energy Partners — Investor Presentation (December 2020)
48 slides from Xplr Infrastructure, Lp's investor presentation, Dec 23, 2020
Slide 1: NextEra Energy Partners (NEP) Convertible Equity Portfolio Financings
NextEra Energy Partners (NEP) Convertible Equity Portfolio Financings December 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 – 10 years, representing low annua
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: In the six years since the IPO, NEP has built a diversified clean energy company
In the six 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 • ~5,830 MW of renewabl
Slide 8: NEP is well 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% ~28 GW – 32 GW ~6
Slide 9: Several 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 CEPF buyouts Overall renewables market growing 3 – 10 ~15% years after issuance, annually through allowing NEP to 2030 execute on growth s
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 • NEP began to diversify away Total Unitholder Return from straight common equity NEP vs. Indices(2) Since June 2014 I
Slide 11: Recent conversions have increased public float and trading volume
Recent conversions of the preferred have helped increase NEP’s public float and daily trading volume NEP’s Public Float and Trading Volume(1) NEP Dollar Trading Volume • NEP’s outstanding public ($ MM) $40 float has increased by 30% Convertible ~$30 MM since the conversions began Notes $30 Conversio
Slide 12: Case Study – 2017 Convertible Debt
While convertible debt is lower cost and allows LP unitholders to retain some 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% 4% 3.7% – Capped call pr
Slide 13: 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 <4.5% Cash Cost Retains 50%+ Unit Price Upside >5 Year
Slide 14: 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 15: Agenda
Agenda Background Structure & Flexibility Accounting Appendix 15
Slide 16: 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 17: 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 18: 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 2020 1 year (2) 3.5 years(3) 3 years 4 years 5 years Length of (2021 – 2022) (2022 – 2026) (2023 – 2026) (2022 – 2026) (2026 – 2030) Buyout Per
Slide 19: The 2020 CEPF is the longest-dated and lowest-cost CEPF to date
The 2020 CEPF is the longest-dated and lowest-cost convertible equity portfolio financing to date Enhanced 10-Year CEPF Structure Commitment Largest CEPF equity Size ~$1.1 B partnership yet Draw Timing Can occur over multiple years Enhances flexibility and and in partial amounts provides liquidity P
Slide 20: Uses of NEP CEPF Transactions
These transactions have efficiently enabled execution of NEP’s growth plan through accretive acquisitions and opportunistic refinancings Uses of NEP CEPF Transactions(1) 2018 1H 2019 Meade TX Pipelines 2020 Gross $750 MM $900 MM $168 MM $750 MM $750 MM(2) Proceeds Fund Fund ~600 MW Fund Refinance Fu
Slide 21: CEPF buyouts as a lower annual percentage of float
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) Percent of 120% 39% Public 16% 15% 9-11% 0% 9-11% 5-7% 3-5% 2-3% 2-3% 2-3% 2-3% 2-3%
Slide 22: 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 • If we believe the unit price is 2018 CEPF Example – undervalued, NEP has option to Flexed Buyou
Slide 23: 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 24: Alternative 3: Smart Capital Allocation
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 25: Agenda
Agenda Background Structure & Flexibility Accounting Appendix 25
Slide 26: 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 27: 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: Annual Noncontrolling Interests - Beginning of Period $750 $
Slide 28: 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 28 1) As of 12/31/2019; source: NEP 2019 Form 10-K
Slide 29: 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 29 1) Full year 2019; source: NEP 2019 Form 1
Slide 30: 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 30
Slide 31: Agenda
Agenda Background Structure & Flexibility Accounting Appendix 31
Slide 32: 2018 CEPF – Buyout Scenario Illustrative Model
2018 CEPF – Buyout Scenario Illustrative Model CEPF: 2018 % of Buyout in Units (at NEP's election): 70% Investor Contribution: $750 MM % of Buyout in Cash (Maximum, at Investor's Discretion): 30% (1) Investor Return: 7.75% 100% Portfolio CAFD ($ MM) : $122-$132 MM Initial Investor % of CAFD: 15% Clo
Slide 33: NEP used 2018 CEPF proceeds to purchase ~1.4 GW of renewable projects
NEP used the 2018 CEPF proceeds to support its purchase of ~1.4 GW of renewable projects from Energy Resources in December 2018 NextEra Energy Partners – Portfolio Additions Remaining Project Resource MW COD (2) PPA Term Carousel Wind 149.7 2015 23 Bluff Point Wind 119.7 2017 19 Cottonwood Wind 89.7
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: 1H 2019 CEPF proceeds supported purchase of 611 MW portfolio
NEP used the 1H 2019 CEPF proceeds to support its purchase of a 611 MW portfolio of unlevered renewable projects from Energy Resources for $1.02 B(1) Portfolio Additions Asset MW Technology COD Remaining PPA Term(2) Story II 150 Wind 2010 11 Silver State(3) 125 Solar 2016 17 Ashtabula II 120 Wind 20
Slide 36: 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 of the Funding Amount: $1,020 MM Energy Resources portfolio purchase price and approximately $220 MM pay down of existing proje
Slide 37: Meade CEPF proceeds supported acquisition of Meade Pipeline
Proceeds from the Meade CEPF were used to support NEP’s acquisition of Meade Pipeline Co. (Meade) in 2019 Transaction Overview • Meade owns ~40% interest in Central Penn Line, a FERC regulated intrastate natural gas pipeline in Pennsylvania – Provides the Marcellus producing region access to large d
Slide 38: 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 39: 2019 Texas Pipelines CEPF recapitalization
NEP used proceeds from the 2019 Texas Pipelines CEPF to recapitalize its Texas pipeline assets, further strengthening its balance sheet and increasing flexibility Texas Pipelines Recapitalization(1) • ~$750 MM convertible equity portfolio financing (CEPF) – Proceeds to be used to refinance ~$625 MM
Slide 40: 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 41: 2020 CEPF proceeds to acquire interests in ~1,100-MW portfolio
NEP used proceeds from the 2020 CEPF to acquire interests in a ~1,100-MW portfolio of long-term contracted renewables projects from Energy Resources for ~$320 MM(1) NEP Portfolio Additions Remaining Project Technology MW(3) COD PPA Years Blue Summit III Wind 200 2019 14 Taylor Creek Solar 75 2020 20
Slide 42: 2020 CEPF – Summary Terms
2020 CEPF – Summary Terms(1) Key Terms Summary Funding Amount: Kohlberg Kravis Roberts & Co (“KKR”) commitment of $1,095.1 MM Draw Timing: Funds to be drawn in two separate closings, the first occurred on December 18, 2020, the second is expected by June 2021 Issuer: Genesis Solar Holdings, LLC, an
Slide 43: 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 44: Case Study – 2017 Convertible Debt Implied Coupon and Issuance Price
Case Study – 2017 Convertible Debt Implied Coupon and Issuance Price Year 0 1 2 3 Convertible Principal 294.0 - - (300.0) Assuming Convertible Coupon - (4.5) (4.5) (4.5) Conversion Capped Call Cash Flow (12.3) - - - at $52.86/unit Total Cash Flow 281.7 (4.5) (4.5) (304.5) Implied Coupon: 3.68% Conve
Slide 45: 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 46: 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 47: Cautionary Statement And Risk Factors (cont.)
Cautionary Statement And Risk Factors That May Affect Future Results (cont.) NEP may not be able to extend, renew or replace expiring or terminated power purchase agreements (PPA), natural gas transportation agreements or other customer contracts at favorable rates or on a long-term basis; If the en
Slide 48: 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
NextEra Energy Partners — Investor Presentation (December 2020) on 6ix