Sign in to follow this  
Followers 0
odyd

NextEra Energy Partners, LP (NEP)

53 posts in this topic

Couple interesting facts on NEP. If you look at their results for Q4 they look a lot like TERP. The difference is the amount of CAFD for the year being $126M versus three-quarters for TERP being 175M. However, TERP's does not deduct debt service while $126M does, $107M in interest payments and $80M in principal.

2016 CAFD expectations are $210M to $290M, after $220M to $260M in servicing debt. So in the essence, they are showing to double their CAFD from $126M in midd range. They have added major pipeline acquisition in October as well 149MW of wind.  Another 300MW of wind was added in February of this year. The common share sale paid for it. Total MW are around 2.5GW with Feb acquisition.

I snapped their ROFO portfolio nice to see adding solar.

I feel that yieldcos will pick up, and they will get a lot more attention. I think this one can trade as high as its parent at 2.95% yield and $1.41 end of 2016 this is $47 per share.

I think that a lot of material will be written to show strong yieldcos and people will flock to them when TERP, GLBL situation clears.

NEPROFO2016.png

0

Share this post


Link to post
Share on other sites

I was making balance sheet comparison to PEGI as well. I think this offers an opportunity for some interesting conversations as the structure for NEP is interesting and may have not as attractive characteristics to some due to partnership structure. Still the comparison shows a lot of strength in NEP and weaknesses in PEGI.

I am looking forward to the results for Q1. If I get comfortable to review the results I may write about it on SA. I think comparing it to PEGI could be an educational experience. 

0

Share this post


Link to post
Share on other sites

All the shares issued by NEP acquire ownership in NEP OpCo. Similar idea as Terra Operating LLC.  NEP with the recent offering will have around 29% ownership upon 40M shares of NEP. The value BV is around $29.6 per share. So stock at 26.31 is selling under the book. The total equity is about $1.5B.

Those pipelines in a pro forma statement offered around $548M in revenue for 2015 with net income of $72M. Estimates on Yahoo see around $783M, I expect a bit more in revenue for the 2.5GW, 300MW added in Q1 and 149MW added in Q4. Probably $800M in revenue for 2016 based on existing assets. $120M in net income. Having a hard time calculating the net income to NEP. It could be as low as $15M and as much as $39M.

0

Share this post


Link to post
Share on other sites

Robert, I have tried to look into NEP...seems too complicated to me due to their limited interest in the opco! Also their Dividend is already above minimum required for IDR...which means return on new projects will be rather low.

How do you account for their non-controlling interest..I was trying to value the Opco without considering non-controlling interest...if I put similar level of EV/EBITDA like others..or even higher and get an equity value from this...then NEP has only 23% economic interest in the Opco, on that basis it does not look at all cheap to me!

0

Share this post


Link to post
Share on other sites

I think NEP is more expensive because of less risk to it's ability to grow dividend. I still think it is hard to pick in this group as we have to discount so many future years of cashflow that cointains unknown growth ability through unknown cost of capital. So I keep the basket strategy for the yieldcos, collecting the growing dividends and trading the relative moves to grow that dividend base.

0

Share this post


Link to post
Share on other sites
3 hours ago, dk1 said:

Robert, I have tried to look into NEP...seems too complicated to me due to their limited interest in the opco! Also their Dividend is already above minimum required for IDR...which means return on new projects will be rather low.

How do you account for their non-controlling interest..I was trying to value the Opco without considering non-controlling interest...if I put similar level of EV/EBITDA like others..or even higher and get an equity value from this...then NEP has only 23% economic interest in the Opco, on that basis it does not look at all cheap to me!

As I wrote, NEP has issued 40M in shares, with the last 11M added in March. This is $1.1B in equity; They have around 1.6B in equity including NCI in the company with 655M being the NEE management or something like that. However, NEP Opco is owned by 71% interest by NEE. There is no accounting for it as NEE owns free shares. Every time NEP sells to public, it gives proceeds to OpCo and increases its ownership of the assets.

Attached illustrates the value of the company (NEP) as consolidated Opco. The critical part is that NCI is 633M, but there are shares which are free, and they have no value as equity. However, their economic interest is 71% of proceeds. EV for NEP LP is $29.60.  You are right IDR has a right to the CAFD, but IDR will be considered as an expense, which improves the cash flow. If you look at their math CAFD for 2016 running is around $290M, we are talking about after debt. PEGI reports CAFD without interest payments here all is paid.. at 50% of that amount you have $145M for CAFD. Distributions are only paid to NEP units, and there are only IDR fee payments to NEE management. I think the amount of dividend say at $2 would be only $80M, so in theory, you would need $160M to pay it. Again after debt service OpCo is having $290M CAFD.

The stock is a gem, and if people wake up to it, you could see the value of $1.1B for NEP stock plus a premium on quality. I am thinking in line of $35 relatively quick. For a patient person, $40s are possible.

 

nepcapital.PNG

0

Share this post


Link to post
Share on other sites

Sorry for asking again..but I don't fully understand it...

I think it does not matter that NEE shares are free, but they have a 71% claim...so they can claim 71% of cash generation..is that correct?

If that is the case, CAFD available to public is only 23% of total CAFD..on 290 that is about 67M...at share price of 28 and 40M shares total worth of this cash flow stream is 1120M...that does not sound very attractive to me.

I have another question...how much debt service is included in this calculation of CAFD..I looked into 10-K but can't see the calculation of CAFD in that....could you please help me with that?

Thanks for all your comments..really appreciate this informative discussion on the yieldco finances.

0

Share this post


Link to post
Share on other sites

Only nep shares get distribution. IDR fee is paid to other shares. The payout is 50% IDR 50% nep when it comes to division . I do not have a lot of time to go any further I explain all of in the post before, I will put more detail over the weekend

Sent from my HTC One_M8 using Tapatalk

0

Share this post


Link to post
Share on other sites

Last thing you are confusing ownership percentile with distribution percentile. Two different things.

Sent from my HTC One_M8 using Tapatalk

0

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!


Register a new account

Sign in

Already have an account? Sign in here.


Sign In Now
Sign in to follow this  
Followers 0