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NextEra Energy Partners (NEP) Closes Sale of Texas Natural Gas
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NextEra Energy Partners, LP (NEP - Free Report) completed the previously announced sale of its Texas natural gas pipeline portfolio for $1.815 billion to Kinder Morgan, Inc. (KMI - Free Report) .
Benefits of the Sale
The majority of the Texas natural gas pipeline portfolio consists of seven pipelines that supply natural gas to South Texas towns, power plants and Mexico. It is anticipated that the Texas natural gas pipeline portfolio's adjusted EBITDA for 2023 would total around $180 million, with the midstream pipelines accounting for 30% of the portfolio and the transmission portion for about 70%. The sale price was around ten times more than the projected adjusted EBITDA for 2023.
The sale's completion represents a milestone in NextEra Energy Partners' transitional strategy. The partnership expects to use the remaining net proceeds to complete the NEP Renewables II buyouts on its respective minimum buyout dates of June 2024 and June 2025, given that STX Midstream's convertible equity portfolio financing has already been completed.
NextEra Energy Partners received net proceeds of approximately $1.4 billion after the extinguishment of project related debt and associated interest rate swaps of approximately $430 million, following Hart-Scott-Rodino's antitrust approval and fulfilment of all the remaining closing conditions.
Focus on Emission Reduction
In May 2023, NextEra Energy Partners had agreed to sell its Texas natural gas pipeline assets to become a pure-play investment opportunity in 100% renewable energy. The firm aims at clean energy transition and intends to reach Real Zero carbon emissions in 2025.
The ongoing transition of utility companies to renewable energy is a significant driver of future renewable energy investments, and NextEra Energy Partners is well-positioned to capitalize on these investments.
Per a U.S. Energy Information Administration report (EIA), the decline in coal usage for electricity generation is offset by an increase in renewable sources of energy, which is expected to increase 22% in 2023 and 24% in 2024.
Along with NEP, some other utilities like Dominion Energy, Inc. (D - Free Report) and Xcel Energy Inc. (XEL - Free Report) are also adopting measures to meet clean-energy targets.
Dominion Energy aims to attain net-zero carbon and methane emissions from its electric generation and natural gas infrastructure by 2050. The company aims to cut emissions by 70-80% by 2035 from the 2005 level. By 2035, D also intends to make zero and low-emitting resources accountable for 99% of its electricity generation.
D’s long-term (three to five years) earnings growth rate is 4%. The company delivered an average earnings surprise of 3.3% in the last four quarters.
Xcel Energy is undertaking initiatives to produce and deliver clean energy to customers. The company is reducing coal usage and targets to lower emissions by at least 80% by 2030 and achieve carbon neutrality by 2050.
XEL’s long-term earnings growth rate is 6.02%. The Zacks Consensus Estimate for 2023 earnings indicates year-over-year growth of 5.4%.
Price Performance
In the past three months, shares of NextEra Energy Partners have risen 24.1% compared with the industry’s 12.9% growth.
Image: Bigstock
NextEra Energy Partners (NEP) Closes Sale of Texas Natural Gas
NextEra Energy Partners, LP (NEP - Free Report) completed the previously announced sale of its Texas natural gas pipeline portfolio for $1.815 billion to Kinder Morgan, Inc. (KMI - Free Report) .
Benefits of the Sale
The majority of the Texas natural gas pipeline portfolio consists of seven pipelines that supply natural gas to South Texas towns, power plants and Mexico. It is anticipated that the Texas natural gas pipeline portfolio's adjusted EBITDA for 2023 would total around $180 million, with the midstream pipelines accounting for 30% of the portfolio and the transmission portion for about 70%. The sale price was around ten times more than the projected adjusted EBITDA for 2023.
The sale's completion represents a milestone in NextEra Energy Partners' transitional strategy. The partnership expects to use the remaining net proceeds to complete the NEP Renewables II buyouts on its respective minimum buyout dates of June 2024 and June 2025, given that STX Midstream's convertible equity portfolio financing has already been completed.
NextEra Energy Partners received net proceeds of approximately $1.4 billion after the extinguishment of project related debt and associated interest rate swaps of approximately $430 million, following Hart-Scott-Rodino's antitrust approval and fulfilment of all the remaining closing conditions.
Focus on Emission Reduction
In May 2023, NextEra Energy Partners had agreed to sell its Texas natural gas pipeline assets to become a pure-play investment opportunity in 100% renewable energy. The firm aims at clean energy transition and intends to reach Real Zero carbon emissions in 2025.
The ongoing transition of utility companies to renewable energy is a significant driver of future renewable energy investments, and NextEra Energy Partners is well-positioned to capitalize on these investments.
Per a U.S. Energy Information Administration report (EIA), the decline in coal usage for electricity generation is offset by an increase in renewable sources of energy, which is expected to increase 22% in 2023 and 24% in 2024.
Along with NEP, some other utilities like Dominion Energy, Inc. (D - Free Report) and Xcel Energy Inc. (XEL - Free Report) are also adopting measures to meet clean-energy targets.
Dominion Energy aims to attain net-zero carbon and methane emissions from its electric generation and natural gas infrastructure by 2050. The company aims to cut emissions by 70-80% by 2035 from the 2005 level. By 2035, D also intends to make zero and low-emitting resources accountable for 99% of its electricity generation.
D’s long-term (three to five years) earnings growth rate is 4%. The company delivered an average earnings surprise of 3.3% in the last four quarters.
Xcel Energy is undertaking initiatives to produce and deliver clean energy to customers. The company is reducing coal usage and targets to lower emissions by at least 80% by 2030 and achieve carbon neutrality by 2050.
XEL’s long-term earnings growth rate is 6.02%. The Zacks Consensus Estimate for 2023 earnings indicates year-over-year growth of 5.4%.
Price Performance
In the past three months, shares of NextEra Energy Partners have risen 24.1% compared with the industry’s 12.9% growth.
Image Source: Zacks Investment Research
Zacks Rank
The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.