NextEra Energy Partners(NEP) - 2020 Q3 - Quarterly Report

Cash Distributions and Financial Risks - NEP's ability to make cash distributions to unitholders is significantly influenced by weather conditions affecting its renewable energy projects[14]. - NEP's cash distributions may be reduced due to restrictions on its subsidiaries' cash distributions under financing agreements[19]. - NEP's distributions to unitholders may be reduced if material tax liabilities are incurred[6]. - The partnership agreement allows NEP to issue additional units without unitholder approval, potentially diluting interests[6]. Growth Strategy and Market Competition - The company is pursuing the expansion of natural gas pipelines and repowering of wind projects, which will require substantial upfront capital expenditures[14]. - NEP's growth strategy relies on acquiring additional projects at favorable prices, with a focus on clean energy sources[19]. - The company faces competition from regulated utilities, developers, and private equity funds for opportunities in North America[19]. - Legislative changes affecting incentives for clean energy could negatively impact NEP's growth strategy[19]. Operational and Environmental Risks - The coronavirus pandemic poses risks that could adversely impact NEP's business and financial condition[20]. - NEP's renewable energy projects may not meet minimum production obligations under power purchase agreements if energy production is lower than expected[15]. - The company is subject to various operational risks, including severe weather and potential accidents affecting pipeline operations[14]. Financial Performance and Debt Management - NEP's financial performance is highly dependent on the performance of NEER, which is obligated to return funds received by NEP's subsidiaries[19]. - NEP's long-term debt was approximately $3.9 billion with an estimated fair value of $4.0 billion as of September 30, 2020[135]. - 14% of NEP's long-term debt was exposed to fluctuations in interest rates, while the remainder was either fixed rate or financially hedged[135]. - NEP had interest rate contracts with a net notional amount of approximately $7.1 billion to manage cash flow variability associated with debt issuances[137]. - A hypothetical 10% decrease in interest rates would increase the fair value of NEP's long-term debt by approximately $36 million[135]. - NEP's net derivative liabilities would increase by approximately $83 million with a hypothetical 10% decrease in rates[137]. - NEP is exposed to counterparty credit risk, which could impact expected cash flows[138]. - The company manages credit risk through credit policies, including a credit approval process and diversified counterparties[138]. Interest Rate Impact - Increases in interest rates could adversely impact NEP's ability to issue equity or incur debt for acquisitions[6].