NextEra Energy Partners (NYSE: NEP) slumped in trading on Wednesday after the renewable energy company slashed its growth outlook. The limited partnership company, formed by NextEra Energy (NEE), will now target limited partner distribution per unit growth rates between 5% and 8% annually until at least 2026, with a target growth rate of 6%.
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This adjustment aims to accommodate tighter monetary policy and higher interest rates, which impact the financing needed for a 12% distribution growth rate. The company intends to execute transition plans, including the sale of natural gas pipelines and “buyouts of convertible equity portfolio financing payments” after slashing its growth estimates.
NEP believes that slashing its growth expectations will enable it to focus on higher-yield opportunities, such as repowering wind assets and acquiring renewable projects, with significant growth potential expected from NextEra Energy Resources’ portfolio.
The company updated its outlook for adjusted EBITDA and cash available for distribution (CAFD) run rate. Indeed, it now expects “run-rate contributions for adjusted EBITDA and CAFD from its forecasted portfolio at Dec. 31, 2023, to be in the ranges of $1,900 million to $2,100 million and $730 million to $820 million, respectively, reflecting calendar-year 2024 contributions from the forecasted portfolio at year-end 2023. “
NEP now anticipates the annualized rates of its Q3 distribution per common unit to be $3.47, payable in the month of November, and its fourth-quarter distribution per common unit to be $3.52, payable in February of next year.
Is NEP Stock a Good Buy?
Analysts are bullish about NEP stock, with a Strong Buy consensus rating based on five Buys and one Hold.
