NextEra to sell Texas natural gas pipeline portfolio for $1.815B to Kinder

NextEra Energy Partners (NEP) announced that it has entered into a definitive agreement with Kinder Morgan (KMI) to sell its Texas natural gas pipeline portfolio for $1.815B. Under the agreement with Kinder Morgan, NextEra Energy Partners plans to sell its Texas natural gas pipeline portfolio for a purchase price of $1.815B. 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 $181M, 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. 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 $425M; complete the $1.1B buyout remaining under the NEP Renewables II CEPF by June 2025; and use the remaining proceeds to pay down a portion of the outstanding corporate revolver. From a base of its Q2 distribution per common unit at an annualized rate of $3.42, NextEra Energy Partners continues to see 5%- 8% growth per year in limited partner distributions per unit, with a current target of 6% growth per year, as being a reasonable range of expectations through at least 2026. For FY23, the partnership expects the annualized rate of the Q4 distribution that is payable in February of 2024 to be $3.52 per common unit. Assuming successful closing of the pipeline transaction, the partnership does not expect to require growth equity until 2027. The partnership expects its payout ratio to be in the mid-90s through 2026. NextEra Energy Partners does not expect to need an acquisition in 2024 to meet the 6% growth in distribution per unit target.