The Daley Note: May 17, 2023
NextEra Energy Partners (NEP) plans to divest its natural pipeline assets and transform into a pure-play renewables investment.
The process will begin later this year when NEP plans to sell its portfolio of South Texas pipeline assets, the company announced last Monday (May 8). NEP will finish the process in 2025 with the sale of Meade Pipeline Co., a holding company that represents a 39% interest in the Central Penn Line, a segment of Williams’ (WMB) Transcontinental pipeline system in Pennsylvania.
East Daley maintains asset-level models for NEP’s natural gas pipelines and renewable projects as part of our Financial Blueprints. NEP currently has ~4.3 Bcf/d of net capacity across its pipeline investments. These assets contribute ~20% to NEP’s total CAFD (cash available for distribution).
The largest asset in the South Texas portfolio, the NET Mexico pipeline, moves Eagle Ford shale gas from the Auga Dulce hub to a border crossing near Rio Grande City, TX (see map). The NET Mexico pipeline is contracted for 1.9 Bcf/d of capacity; flows over the last 30 days have averaged closer to 1.5 Bcf/d.
NEP acquired the interest in the Central Penn Line in late 2019 for $1.37B. This segment of the Transco line has been flowing at or near nameplate capacity.
In an investor call, NEP executives said the South Texas pipelines generated EBITDA of $185MM in 2022 while Meade Pipeline had EBITDA of $106MM.
NEP plans to use proceeds from the asset sales to simplify its capital structure (by repurchasing most of its convertible equity portfolio financings) and to self-fund growth capital needs, thereby eliminating the need for further equity issuances through 2024. Please reach out to AJ O’Donnell for more information about the NextEra asset model. –AJ O’Donnell Tickers: NEP, WMB.
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