NEXTERA ENERGY PARTNERS, LP (NEP)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 revenue was $319 million, EPS was -$0.43, adjusted EBITDA was $453 million, and CAFD was $155 million; sequentially lower vs Q2 and down year over year, driven by the Texas pipeline divestiture and higher interest and project-level debt service costs .
• The board declared a quarterly distribution of $0.9175 per common unit (annualized $3.67), up nearly 6% year over year .
• Management raised the wind repowering target to approximately 1.9 GW through 2026 (from 1.3 GW) and added ~225 MW to the repowering backlog, bringing the total backlog to ~1.6 GW; this expands organic growth visibility .
• NEP continues to evaluate alternatives to address remaining convertible equity portfolio financing obligations and its cost of capital, with a plan to complete the review by the Q4 2024 call and provide updated distribution and run‑rate CAFD expectations then; management signaled potentially deploying more capital toward organic cash flow growth and less toward distributions, which is a key catalyst for the stock narrative going into Q4/Q1 .

What Went Well and What Went Wrong

What Went Well

• Raised wind repowering target: “we are now increasing our wind repowering target to approximately 1.9 gigawatts…through 2026” and announced ~225 MW of new repowerings, expanding the backlog to ~1.6 GW .
• Distribution increased: Declared $0.9175 per common unit (annualized $3.67), nearly 6% higher year over year, supporting income investors for now .
• Strategic positioning: Management emphasized attractive organic growth via repowerings and indicated flexibility in capital allocation alternatives that could improve cost of capital and long‑term cash flow growth .

Quotes:

• “NextEra Energy Partners owns a large portfolio of high-quality, long-term contracted clean energy assets and has attractive organic growth opportunities from the repowering of its existing wind portfolio.” — John Ketchum .
• “The partnership's organic growth opportunities have expanded, and we are increasing our wind repowering target to approximately 1.9 gigawatts…” — John Ketchum .

What Went Wrong

• Profitability/CFAD pressure: Adjusted EBITDA fell to $453 million and CAFD to $155 million; both declined year over year by ~$35 million and ~$92 million respectively, largely due to the pipeline divestiture and higher debt service and interest costs .
• Sequential downshift: Revenue, EPS, adjusted EBITDA, and CAFD all declined vs Q2, reflecting the same headwinds and incremental interest payments at holdco/project levels .
• Distribution growth guidance ambiguity: The prior 5–8% distribution growth target (6% current target) was not reiterated; management is reviewing capital allocation and may prioritize organic cash flow growth over distributions, increasing uncertainty for yield‑oriented holders .

Financial Results

Quarterly trend (2024)

Q3 year-over-year comparison

Notes:

• Third‑quarter declines reflect the year‑over‑year impact of the Texas pipeline portfolio divestiture and higher interest and project-level debt service (first interest payment on Dec 2023 holdco debt plus ~$23 million higher project-level debt service tied to 2023 acquisition financing) .

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “NextEra Energy Partners is pleased to announce the repowering of another approximately 225 megawatts…bringing the partnership's total backlog…to approximately 1.6 gigawatts…we are now increasing our wind repowering target to approximately 1.9 gigawatts…through 2026” — John Ketchum .
• “Third quarter adjusted EBITDA was $453 million, and cash available for distribution was $155 million…declined…from the same period last year…reflect the year‑over‑year impact of the divestiture of the Texas pipeline portfolio…first interest payment on…December 2023 holdco debt…as well as $23 million of higher project level debt service…” — Brian Bolster .
• “We’re completing our review regarding how to address [NEP’s] cost of capital…one of the things…we are evaluating is should we put deploying more of our capital towards really growing the underlying cash flow of the business and maybe less towards distributions.” — John Ketchum .

Q&A Highlights

• Framework agreements: Management outlined new framework agreements with two Fortune 50 non‑technology customers totaling up to 10.5 GW, plus Entergy JDA; approach provides flexibility and visibility into demand .
• Distribution policy clarity: NEP expects to conclude the review by the Q4 call, considering a strategic shift to emphasize organic cash flow growth over distributions .
• Profit headwinds: Year‑over‑year declines in adjusted EBITDA and CAFD tied to pipeline divestiture, initial holdco interest payment, and higher project‑level debt service .
• Safe harbor and supply chain: Program de‑risked through 2029; long critical equipment; risk transfer on tariffs to suppliers supports execution .
• Nuclear restart discussion (Duane Arnold): Under evaluation; would pursue only with attractive risk/return; reflects broader asset optionality narrative (NEE context) .

Estimates Context

• S&P Global consensus estimates could not be retrieved for NEP due to a mapping limitation in the CIQ company table; therefore, a formal “vs. consensus” comparison for Q3 2024 is unavailable via our S&P Global feed at this time. We will update when S&P mapping is available.*

Implications:

• Given the magnitude of CAFD decline ($92 million YoY) and adjusted EBITDA decrease ($35 million YoY), sell‑side models may need to reflect the pipeline divestiture and financing cost impacts more fully, alongside potential changes to the distribution trajectory discussed by management .

Key Takeaways for Investors

• Sequential and year‑over‑year softness: Q3 revenue, EPS, adjusted EBITDA, and CAFD declined vs Q2 and YoY, with reasons well‑articulated (pipeline sale and financing costs) — watch for stabilization as repowerings ramp .
• Organic growth visibility improving: The repowering target raise to 1.9 GW and 1.6 GW backlog through 2026 strengthen medium‑term cash flow growth prospects .
• Distribution policy is the swing factor: Management’s Q4 update on capital allocation and distribution/CAFD run‑rate guidance is a major narrative driver; potential reweighting toward organic growth could reduce payout growth but enhance durability .
• Cost of capital review nearing conclusion: Expect clarity by Q4 call; solutions to address convertible equity portfolio obligations and financing costs are pivotal to valuation .
• Demand tailwinds remain strong: Continued ~3 GW quarterly origination and new framework agreements underpin long‑term renewal/storage opportunities and asset monetization flexibility (NEE platform context) .
• Execution de‑risked: Safe harbor through 2029 and favorable supply chain positioning mitigate development risk; watch interest rate path but hedging reduces near‑term exposure .
• Trading implications: Near term, the Q4 call is the key catalyst (distribution policy clarity). Medium term, repowerings and cost‑of‑capital actions should support improved CAFD trajectory; model sensitivity to payout vs reinvestment mix is high .

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* Estimates unavailable: S&P Global consensus values could not be retrieved due to a company mapping limitation in our CIQ data feed.