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NextEra Energy Partners (NEP) Issues Notes to Fund Acquisition

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NextEra Energy Partners, LP (NEP - Free Report) announced that it has issued $500 million convertible notes due 2024 in a private placement to qualified institutional buyers. The proceeds from the issue will be utilized to fund the acquisition of a 391-megawatt portfolio of wind projects. The balance proceeds, if any, may be temporarily invested in short-term instruments or utilized for general partnership purposes.

The firm’s current ratio at the end of first-quarter 2021 was 1.67, which indicates that it has enough liquidity to meet short-term obligations. Moreover, the firm’s debt to capital at first quarter-end was 30.4%, much lower than the industry average of 48.02%. So, the firm can afford to have additional debt in its balance sheet as it has the strength to meet its obligations.

Long-Term Plans

The partnership aims to expand the existing operations through organic growth and selective acquisitions, which are in sync with the current renewable energy and natural gas pipeline projects in its portfolio. NextEra Energy Partners’ current portfolio has meaningful organic growth opportunities in the coming years. The assets acquired by the firm are providing it with additional long-term investment opportunities.

Recently, the firm entered into a definite agreement with Brookfield Renewable to acquire four operating wind assets from the latter for $733 million. The four wind assets are located in California and New Hampshire, and have a combined capacity of 391 MW. This is the firm’s first third-party acquisition, which is likely to boost EBITDA and CAFD in the long term.

Generally, the firm acquires renewable assets from NextEra Energy’s (NEE - Free Report) unit NextEra Energy Resources to expand its operation in the United States. The firm entered into an agreement with NextEra Energy Resources to acquire a 40% interest in a nearly 1-gigawatt renewables portfolio and 100% interest in a 100-megawatt solar-plus-storage project. Acquisitions are assisting the firm to expand renewable operations in the United States.

Rising Usage of Clean Sources

Utilities across the United States have started to focus on adding clean energy sources to their electricity generation portfolio. The ongoing research and development work is lowering the cost of installation and operation of utility scale renewable projects. Per the U.S. Energy Information Administration, electricity generations from renewable sources are likely to increase to 21% in 2021 and 23% in 2022 from 20% in 2020 due to addition of new solar and wind generation capacity in the system.

Duke Energy (DUK - Free Report) and Xcel Energy (XEL - Free Report) , among others, have plans to add new renewable assets and cut emission levels from their generation portfolio. Both these companies are aiming to achieve net-zero carbon emissions by 2050.

Zacks Rank

It currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

Units of NextEra Energy Partners have outperformed the industry in the past six months.

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