NextEra Energy Partners(NEP) - 2025 Q2 - Quarterly Report

Forward-Looking Statements Risk Summary Numerous risks are outlined, categorized by performance, contract, financial, NEE relationship, and taxation, impacting actual results - Performance Risks: Business results are affected by wind/solar conditions, operational risks of energy projects, weather impacts, and reliance on a few key projects for cash flow[14] - Contract Risks: The company faces risks from expiring or terminated Power Purchase Agreements (PPAs) and potential inability to meet minimum production obligations[14] - Risks Related to NEE Relationship: NEE exerts significant influence over XPLR. The company relies on NEE for credit support, and potential conflicts of interest exist with XPLR GP and its affiliates[18] - Financial Risks: XPLR may face challenges accessing capital on reasonable terms, and its substantial indebtedness could adversely affect business operations. The company is also exposed to risks from interest rate swaps[17] PART I – FINANCIAL INFORMATION Item 1. Financial Statements Unaudited condensed consolidated financial statements for Q2 2025 include income, balance sheets, cash flows, and equity changes Condensed Consolidated Statements of Income (Loss) XPLR reported a Q2 2025 net income of $36 million and a H1 2025 net loss of $292 million due to goodwill impairment Income Statement Highlights (Three Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Operating Revenues | $342 | $360 | | Operating Income | $90 | $66 | | Net Income (Loss) | $36 | $58 | | Net Income (Loss) Attributable to XPLR | $79 | $62 | | EPS - basic | $0.84 | $0.66 | Income Statement Highlights (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Operating Revenues | $624 | $617 | | Operating Income (Loss) | ($143) | $45 | | Goodwill Impairment Charge | $253 | $0 | | Net Income (Loss) | ($292) | $92 | | Net Income (Loss) Attributable to XPLR | ($19) | $132 | | EPS - basic | ($0.20) | $1.41 | Condensed Consolidated Balance Sheets Total assets increased to $20.50 billion while total liabilities rose to $9.23 billion, leading to a decrease in total equity to $11.27 billion Balance Sheet Summary | Metric | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $1,456 | $860 | | Total Assets | $20,496 | $20,292 | | Total Current Liabilities | $1,895 | $1,087 | | Long-term Debt | $5,608 | $4,609 | | Total Liabilities | $9,225 | $7,426 | | Total Equity | $11,271 | $12,866 | - Goodwill was fully impaired, decreasing from $253 million at the end of 2024 to zero as of June 30, 2025[30] Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $322 million, investing cash decreased to $265 million, and financing activities shifted to a $15 million inflow Cash Flow Summary (Six Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $322 | $309 | | Net cash provided by investing activities | $265 | $748 | | Net cash provided by (used in) financing activities | $15 | ($1,030) | | Net increase in cash | $602 | $27 | Notes to Condensed Consolidated Financial Statements Detailed notes cover accounting policies, revenue recognition, derivatives, goodwill impairment, income taxes, VIEs, debt, equity, and related-party transactions - A non-cash goodwill impairment charge of approximately $253 million ($222 million after tax) was recognized in the first quarter of 2025, writing off the full remaining carrying value of goodwill[59] - In March 2025, XPLR OpCo issued $1.75 billion in senior unsecured notes and repurchased approximately $182 million of its 2020 convertible notes[69][70][72] - In April 2025, XPLR exercised its buyout right and purchased the remaining outstanding Class B membership interests in XPLR Renewables II for approximately $931 million[76] - On August 7, 2025, XPLR subsidiaries entered into an agreement to sell their ownership interests in Meade Pipeline Co LLC for approximately $1.1 billion in cash[96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a decrease in Q2 2025 operating revenues due to unfavorable wind resources, offset by lower O&M expenses. The six-month results were significantly impacted by a $253 million goodwill impairment charge and unfavorable mark-to-market activity on interest rate derivatives. The company maintains a strong liquidity position of approximately $3.3 billion and discusses recent financing activities, including new debt issuance and the buyout of noncontrolling interests. Management also addresses the impact of recent legislation like the OBBBA on clean energy tax credits Overview XPLR operates clean energy and natural gas pipeline assets, with NEE Equity holding a 51.2% noncontrolling interest, impacted by recent OBBBA tax legislation - At June 30, 2025, XPLR owned an approximately 48.8% limited partner interest in XPLR OpCo, with NEE Equity owning the remaining 51.2% noncontrolling interest[99] - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, modified tax legislation affecting clean energy tax credits, bonus depreciation, and interest deductions, which is pertinent to XPLR's operations[101][102] Results of Operations Q2 2025 operating revenues decreased by $18 million due to wind, while H1 2025 saw a $253 million goodwill impairment and increased interest expense - Q2 2025 operating revenues decreased by $18 million, primarily due to unfavorable wind resource ($11 million impact) as wind speeds were 97% of the long-term average compared to 103% in 2024[107] - Q2 2025 O&M expenses decreased by $37 million, mainly due to $35 million in vendor credits for unplanned O&M expenses[108] - Q2 2025 interest expense increased by $77 million, reflecting $55 million of unfavorable mark-to-market activity and $22 million from higher average debt[110] - For the six months ended June 30, 2025, a non-cash goodwill impairment charge of $253 million was recognized[118] Liquidity and Capital Resources XPLR maintains a strong liquidity of $3.3 billion as of June 30, 2025, supported by recent $1.75 billion senior note issuance and new term loan facilities Liquidity Position as of June 30, 2025 | Component | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $880 | | Amounts due under the CSCS agreement | $16 | | Revolving credit facility (net of letters of credit) | $2,400 | | Total | $3,296 | - During H1 2025, XPLR OpCo issued $1.75 billion in senior unsecured notes and repurchased $182 million of its 2020 convertible notes[135] - In August 2025, subsidiaries amended term loan facilities, making a combined total of up to $1,047 million available to finance wind repowering projects[135] Cash Flows Operating cash flow increased to $322 million, investing cash decreased, and financing activities shifted to a $15 million inflow due to debt issuance and buyouts Change in Cash Flows (Six Months Ended June 30) | Cash Flow Activity | 2025 (in millions) | 2024 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Operating Activities | $322 | $309 | $13 | | Investing Activities | $265 | $748 | ($483) | | Financing Activities | $15 | ($1,030) | $1,045 | Item 3. Quantitative and Qualitative Disclosures About Market Risk XPLR manages interest rate and counterparty credit risks, with 99% of long-term debt fixed or hedged as of June 30, 2025 - At June 30, 2025, approximately 99% of XPLR's long-term debt was not exposed to fluctuations in interest expense due to being fixed rate or financially hedged[148] - A hypothetical 10% decrease in interest rates would increase the fair value of XPLR's long-term debt by approximately $40 million and decrease the value of its net derivative assets by approximately $60 million[148][149] Item 4. Controls and Procedures CEO and CFO affirmed the effectiveness of disclosure controls and procedures as of June 30, 2025, with no material changes to internal controls - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that XPLR's disclosure controls and procedures were effective[152] - No changes occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, XPLR's internal control over financial reporting[153] PART II – OTHER INFORMATION Item 1. Legal Proceedings XPLR faces a federal securities class action lawsuit filed in July 2025 alleging false statements regarding its business model and distributions - A federal securities class action lawsuit was filed against XPLR and certain executives/directors in July 2025 in the U.S. District Court for the Southern District of California[97] - The lawsuit alleges false and misleading statements regarding XPLR's business model and distributions for securities purchased between September 27, 2023, and January 27, 2025[97] Item 1A. Risk Factors No material changes to risk factors were reported from the 2024 Form 10-K - There have been no material changes from the risk factors disclosed in the 2024 Form 10-K[157] Item 5. Other Information Subsidiaries amended term loan facilities on August 5, 2025, increasing capacity to $532 million and $515 million for renewable projects - On August 5, 2025, indirect subsidiaries amended and increased two term loan facilities, raising the total capacity to $532 million and $515 million, respectively[158] Item 6. Exhibits Exhibits include CEO and CFO certifications and XBRL interactive data files - Filed exhibits include certifications from the Chief Executive Officer and Chief Financial Officer as required by SEC rules[159]