NextEra Energy Partners initiated with an Outperform at Evercore ISI

Evercore ISI initiated coverage of NextEra Energy Partners with an Outperform rating and $43 price target. NextEra Energy Partners’ use of convertible equity portfolio financing since 2018 has added financial complexity to the structure and made the partnership reliant on stable capital markets and the strength of its unit price, while persistent weakness in NEP units due to high interest rates and financing concerns drove an unattractive cost of capital, raising questions about the partnership’s ability to execute, the analyst tells investors. However, the firm believes the partnership’s simplification strategy designed to reduce its cost of capital, in addition to its predictable cash flows, will enable it to deliver its new, “manageable” 6% distribution growth target, the analyst added.