NextEra Energy Partners(NEP) - 2020 Q2 - Quarterly Report

Financial Performance and Risks - NEP's ability to make cash distributions to unitholders is significantly influenced by weather conditions affecting its renewable energy projects[13]. - NEP's financial performance is highly dependent on the performance of its affiliate, NEER, regarding the return of funds for project costs[18]. - The coronavirus pandemic poses risks that could adversely impact NEP's business and financial condition[19]. - NEP's cash distributions may be reduced due to restrictions on its subsidiaries' cash distributions under financing agreements[18]. - Material tax liabilities could reduce distributions to unitholders without a corresponding reduction in IDR fees[20]. - Distributions to unitholders may be taxable as dividends, affecting net returns[20]. Growth Strategy and Competition - NEP's growth strategy relies on acquiring additional projects at favorable prices, with a focus on clean energy sources[18]. - The company is pursuing the expansion of natural gas pipelines and repowering of wind projects, which will require substantial upfront capital expenditures[13]. - The company faces competition from regulated utilities, developers, and private equity funds for opportunities in North America[18]. - Legislative changes affecting incentives for clean energy could negatively impact NEP's growth strategy[18]. Operational and Financial Management - NEP is subject to various operational risks, including severe weather and potential accidents affecting pipeline operations[13]. - NEP's long-term debt was approximately $4.2 billion as of June 30, 2020, with 13% exposed to fluctuations in interest rates[130]. - A hypothetical 10% decrease in interest rates would increase the fair value of NEP's long-term debt by approximately $44 million[130]. - NEP had interest rate contracts with a net notional amount of approximately $7.1 billion to manage cash flow variability associated with debt[132]. - A 10% decrease in interest rates would increase NEP's net derivative liabilities by approximately $71 million[132]. - NEP is exposed to counterparty credit risk, which could impact expected cash flows[133]. - NEP manages credit risk through credit policies, including a credit approval process and diversified counterparties[133]. Capital Structure and Unit Issuance - NEP's partnership agreement allows for the issuance of additional units without unitholder approval, potentially diluting interests[20]. - Increases in interest rates could adversely impact NEP's ability to issue equity or incur debt for acquisitions[20].