• Definitive agreement represents key next step in executing transition plans
• Proceeds would address the majority of equity buyouts for convertible equity portfolio financings due through 2026

NextEraEnergy Partners has entered into a definitive agreement with Kinder Morgan to sell its Texas natural gas pipeline portfolio for $1.815 billion.

"This agreement is an important next step in NextEra Energy Partners' transition plans," said John Ketchum, chairman and chief executive officer. "Upon closing, the proceeds would be sufficient to pay off the outstanding project-related debt and address the equity buyouts of the STX Midstream and NEP Renewables II convertible equity portfolio financings."

Pipeline transaction

Under the agreement with Kinder Morgan, NextEra Energy Partners plans to sell its Texas natural gas pipeline portfolio for a purchase price of $1.815 billion. The closing of the sale, which is planned to occur in the first half of 2024, is subject to receipt of Hart-Scott-Rodino anti-trust approval, the effectiveness of certain contract amendments and customary closing conditions.

The Texas natural gas pipeline portfolio is primarily comprised of seven pipelines which provide natural gas to Mexico and power producers and municipalities in South Texas. The total 2023 calendar-year adjusted EBITDA for the Texas natural gas pipeline portfolio is expected to be approximately $181 million, with roughly 70% associated with the transmission portion of the portfolio and the remaining 30% associated with the midstream pipelines. The sale price represents an approximate 10 times multiple on the estimated calendar-year 2023 adjusted EBITDA.

In anticipation of entering into the pipeline portfolio sales agreement, in late September and early October, the partnership primarily used subsidiary and corporate revolvers to complete the final buyouts of approximately $402 million of the STX Midstream CEPF. In addition, in anticipation of a planned closing in the first half of 2024, the partnership plans to use the corporate revolver to complete the December 2023 NEP Renewables II buyout of approximately $180 million.

Upon closing of the Texas natural gas pipeline portfolio sale, NextEra Energy Partners intends to use the net proceeds from the sale to:

Pay off the outstanding Texas pipeline portfolio's project-related debt and associated interest rate swaps of approximately $425 million.Complete the $1.1 billion buyout remaining under the NEP Renewables II CEPF by June 2025.Use the remaining proceeds to pay down a portion of the outstanding corporate revolver.

"As a financing vehicle, it is important that NextEraEnergy Partners regains a competitive cost of capital," said Ketchum. "By addressing the majority of our CEPF equity buyout obligations through 2026, we believe this transaction is a critical next step in positioning the partnership for success going forward."

KeyFacts Energy: NextEra Energy US country profile