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nep-20220930_g1.jpg

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission
File
Number
Exact name of registrant as specified in its
charter, address of principal executive offices and
registrant's telephone number
IRS Employer
Identification
Number
1-36518NEXTERA ENERGY PARTNERS, LP30-0818558


700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000

State or other jurisdiction of incorporation or organization:  Delaware

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading SymbolName of exchange
on which registered
Common unitsNEPNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.   Yes  þ    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.   Yes þ    No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

Large Accelerated Filer     þ Accelerated Filer Non-Accelerated Filer Smaller Reporting Company Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934.      

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).   Yes   No 

Number of NextEra Energy Partners, LP common units outstanding at September 30, 2022:  86,535,284


DEFINITIONS

Acronyms and defined terms used in the text include the following:
TermMeaning
2020 convertible notessenior unsecured convertible notes issued in 2020
2021 convertible notessenior unsecured convertible notes issued in 2021
2021 Form 10-KNEP's Annual Report on Form 10-K for the year ended December 31, 2021
ASAadministrative services agreement
BLMU.S. Bureau of Land Management
CITCconvertible investment tax credit
CSCS agreementamended and restated cash sweep and credit support agreement
Genesis HoldingsGenesis Solar Holdings, LLC
IDR feecertain payments from NEP OpCo to NEE Management as a component of the MSA which are based on the achievement by NEP OpCo of certain target quarterly distribution levels to its unitholders
IPPindependent power producer
ITCinvestment tax credit
limited partner interest in NEP OpCo
limited partner interest in NEP OpCo's common units
Management's DiscussionItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
March 2022 Form 10-QNEP's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022
MeadeMeade Pipeline Co LLC
Meade purchaserMeade Pipeline Investment, LLC
MSAamended and restated management services agreement among NEP, NEE Management, NEP OpCo and NEP OpCo GP
MWmegawatt(s)
NEENextEra Energy, Inc.
NEECHNextEra Energy Capital Holdings, Inc.
NEE EquityNextEra Energy Equity Partners, LP
NEE ManagementNextEra Energy Management Partners, LP
NEERNextEra Energy Resources, LLC
NEPNextEra Energy Partners, LP
NEP GPNextEra Energy Partners GP, Inc.
NEP OpCoNextEra Energy Operating Partners, LP
NEP OpCo credit facilitysenior secured revolving credit facility of NEP OpCo and its direct subsidiary
NEP OpCo GPNextEra Energy Operating Partners GP, LLC
NEP PipelinesNextEra Energy Partners Pipelines, LLC
NEP Renewables IINEP Renewables II, LLC
NEP Renewables IIINEP Renewables III, LLC
NOLsnet operating losses
Note __Note __ to condensed consolidated financial statements
O&Moperations and maintenance
Pemex
Petróleos Mexicanos
PPApower purchase agreement
preferred unitsSeries A convertible preferred units representing limited partner interests in NEP
PTCproduction tax credit
SECU.S. Securities and Exchange Commission
Silver StateSilver State South Solar, LLC
STX MidstreamSouth Texas Midstream, LLC
Texas pipelinesnatural gas pipeline assets located in Texas
Texas pipeline entitiesthe subsidiaries of NEP that directly own the Texas pipelines
U.S.United States of America
VIEvariable interest entity

Each of NEP and NEP OpCo has subsidiaries and affiliates with names that may include NextEra Energy, NextEra Energy Partners and similar references. For convenience and simplicity, in this report, the terms NEP and NEP OpCo are sometimes used as abbreviated references to specific subsidiaries, affiliates or groups of subsidiaries or affiliates. The precise meaning depends on the context. Discussions of NEP's ownership of subsidiaries and projects refers to its controlling interest in the general partner of NEP OpCo and NEP's indirect interest in and control over the subsidiaries of NEP OpCo. See Note 6 for a description of the noncontrolling interest in NEP OpCo. References to NEP's projects and NEP's pipelines generally include NEP's consolidated subsidiaries and the projects and pipelines in which NEP has equity method investments.
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TABLE OF CONTENTS


3

FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the federal securities laws. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, strategies, future events or performance (often, but not always, through the use of words or phrases such as may result, are expected to, will continue, anticipate, believe, will, could, should, would, estimated, may, plan, potential, future, projection, goals, target, outlook, predict and intend or words of similar meaning) are not statements of historical facts and may be forward looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on NEP's operations and financial results, and could cause NEP's actual results to differ materially from those contained or implied in forward-looking statements made by or on behalf of NEP in this Form 10-Q, in presentations, on its website, in response to questions or otherwise.

Operational Risks
NEP's ability to make cash distributions to its unitholders is affected by wind and solar conditions at its renewable energy projects.
Operation and maintenance of renewable energy projects and pipelines involve significant risks that could result in unplanned power outages, reduced output or capacity, personal injury or loss of life.
NEP's business, financial condition, results of operations and prospects can be materially adversely affected by weather conditions, including, but not limited to, the impact of severe weather.
NEP depends on certain of the renewable energy projects and pipelines in its portfolio for a substantial portion of its anticipated cash flows.
NEP may pursue the repowering of wind projects or the expansion of natural gas pipelines that would require up-front capital expenditures and could expose NEP to project development risks.
Terrorist acts, cyberattacks or other similar events could impact NEP's projects, pipelines or surrounding areas and adversely affect its business.
The ability of NEP to obtain insurance and the terms of any available insurance coverage could be materially adversely affected by international, national, state or local events and company-specific events, as well as the financial condition of insurers. NEP's insurance coverage does not provide protection against all significant losses.
NEP relies on interconnection, transmission and other pipeline facilities of third parties to deliver energy from its renewable energy projects and to transport natural gas to and from its pipelines. If these facilities become unavailable, NEP's projects and pipelines may not be able to operate or deliver energy or may become partially or fully unavailable to transport natural gas.
NEP's business is subject to liabilities and operating restrictions arising from environmental, health and safety laws and regulations, compliance with which may require significant capital expenditures, increase NEP's cost of operations and affect or limit its business plans.
NEP's renewable energy projects or pipelines may be adversely affected by legislative changes or a failure to comply with applicable energy and pipeline regulations.
Pemex may claim certain immunities under the Foreign Sovereign Immunities Act and Mexican law, and the Texas pipeline entities' ability to sue or recover from Pemex for breach of contract may be limited and may be exacerbated if there is a deterioration in the economic relationship between the U.S. and Mexico.
NEP does not own all of the land on which the projects in its portfolio are located and its use and enjoyment of the property may be adversely affected to the extent that there are any lienholders or land rights holders that have rights that are superior to NEP's rights or the BLM suspends its federal rights-of-way grants.
NEP is subject to risks associated with litigation or administrative proceedings that could materially impact its operations, including, but not limited to, proceedings related to projects it acquires in the future.
NEP's operations require NEP to comply with anti-corruption laws and regulations of the U.S. government and Mexico.
NEP is subject to risks associated with its ownership interests in projects that are under construction, which could result in its inability to complete construction projects on time or at all, and make projects too expensive to complete or cause the return on an investment to be less than expected.

Contract Risks
NEP relies on a limited number of customers and is exposed to the risk that they may be unwilling or unable to fulfill their contractual obligations to NEP or that they otherwise terminate their agreements with NEP.
NEP may not be able to extend, renew or replace expiring or terminated PPAs, natural gas transportation agreements or other customer contracts at favorable rates or on a long-term basis.
If the energy production by or availability of NEP's renewable energy projects is less than expected, they may not be able to satisfy minimum production or availability obligations under their PPAs.

Risks Related to NEP's Acquisition Strategy and Future Growth
NEP's growth strategy depends on locating and acquiring interests in additional projects consistent with its business strategy at favorable prices.
Reductions in demand for natural gas in the United States or Mexico and low market prices of natural gas could materially adversely affect NEP's pipeline operations and cash flows.
4

Government laws, regulations and policies providing incentives and subsidies for clean energy could be changed, reduced or eliminated at any time and such changes may negatively impact NEP's growth strategy.
NEP's growth strategy depends on the acquisition of projects developed by NEE and third parties, which face risks related to project siting, financing, construction, permitting, the environment, governmental approvals and the negotiation of project development agreements.
Acquisitions of existing clean energy projects involve numerous risks.
NEP may continue to acquire other sources of clean energy and may expand to include other types of assets. Any further acquisition of non-renewable energy projects may present unforeseen challenges and result in a competitive disadvantage relative to NEP's more-established competitors.
NEP faces substantial competition primarily from regulated utilities, developers, IPPs, pension funds and private equity funds for opportunities in North America.
The natural gas pipeline industry is highly competitive, and increased competitive pressure could adversely affect NEP's business.

Risks Related to NEP's Financial Activities
NEP may not be able to access sources of capital on commercially reasonable terms, which would have a material adverse effect on its ability to consummate future acquisitions and pursue other growth opportunities.
Restrictions in NEP and its subsidiaries' financing agreements could adversely affect NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
NEP's cash distributions to its unitholders may be reduced as a result of restrictions on NEP's subsidiaries’ cash distributions to NEP under the terms of their indebtedness or other financing agreements.
NEP's subsidiaries’ substantial amount of indebtedness may adversely affect NEP's ability to operate its business, and its failure to comply with the terms of its subsidiaries' indebtedness could have a material adverse effect on NEP's financial condition.
NEP is exposed to risks inherent in its use of interest rate swaps.
Widespread public health crises and epidemics or pandemics may have material adverse impacts on NEP’s business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders.

Risks Related to NEP's Relationship with NEE
NEE has influence over NEP.
Under the CSCS agreement, NEP receives credit support from NEE and its affiliates. NEP's subsidiaries may default under contracts or become subject to cash sweeps if credit support is terminated, if NEE or its affiliates fail to honor their obligations under credit support arrangements, or if NEE or another credit support provider ceases to satisfy creditworthiness requirements, and NEP will be required in certain circumstances to reimburse NEE for draws that are made on credit support.
NEER or one of its affiliates is permitted to borrow funds received by NEP's subsidiaries and is obligated to return these funds only as needed to cover project costs and distributions or as demanded by NEP OpCo. NEP's financial condition and ability to make distributions to its unitholders, as well as its ability to grow distributions in the future, is highly dependent on NEER’s performance of its obligations to return all or a portion of these funds.
NEER's right of first refusal may adversely affect NEP's ability to consummate future sales or to obtain favorable sale terms.
NEP GP and its affiliates may have conflicts of interest with NEP and have limited duties to NEP and its unitholders.
NEP GP and its affiliates and the directors and officers of NEP are not restricted in their ability to compete with NEP, whose business is subject to certain restrictions.
NEP may only terminate the MSA under certain limited circumstances.
If the agreements with NEE Management or NEER are terminated, NEP may be unable to contract with a substitute service provider on similar terms.
NEP's arrangements with NEE limit NEE's potential liability, and NEP has agreed to indemnify NEE against claims that it may face in connection with such arrangements, which may lead NEE to assume greater risks when making decisions relating to NEP than it otherwise would if acting solely for its own account.

Risks Related to Ownership of NEP's Units
NEP's ability to make distributions to its unitholders depends on the ability of NEP OpCo to make cash distributions to its limited partners.
If NEP incurs material tax liabilities, NEP's distributions to its unitholders may be reduced, without any corresponding reduction in the amount of the IDR fee.
Holders of NEP's units may be subject to voting restrictions.
NEP's partnership agreement replaces the fiduciary duties that NEP GP and NEP's directors and officers might have to holders of its common units with contractual standards governing their duties and the New York Stock Exchange does not require a publicly traded limited partnership like NEP to comply with certain of its corporate governance requirements.
NEP's partnership agreement restricts the remedies available to holders of NEP's common units for actions taken by NEP's directors or NEP GP that might otherwise constitute breaches of fiduciary duties.
Certain of NEP's actions require the consent of NEP GP.
Holders of NEP's common units currently cannot remove NEP GP without NEE's consent and provisions in NEP's partnership agreement may discourage or delay an acquisition of NEP that NEP unitholders may consider favorable.
5

NEE's interest in NEP GP and the control of NEP GP may be transferred to a third party without unitholder consent.
NEP may issue additional units without unitholder approval, which would dilute unitholder interests.
Reimbursements and fees owed to NEP GP and its affiliates for services provided to NEP or on NEP's behalf will reduce cash distributions from NEP OpCo and from NEP to NEP's unitholders, and there are no limits on the amount that NEP OpCo may be required to pay.
Increases in interest rates could adversely impact the price of NEP's common units, NEP's ability to issue equity or incur debt for acquisitions or other purposes and NEP's ability to make cash distributions to its unitholders.
The liability of holders of NEP's units, which represent limited partnership interests in NEP, may not be limited if a court finds that unitholder action constitutes control of NEP's business.
Unitholders may have liability to repay distributions that were wrongfully distributed to them.
The issuance of securities convertible into, or settleable with, common units may affect the market price for NEP's common units, will dilute common unitholders’ ownership in NEP and may decrease the amount of cash available for distribution for each common unit.

Taxation Risks
NEP's future tax liability may be greater than expected if NEP does not generate NOLs sufficient to offset taxable income or if tax authorities challenge certain of NEP's tax positions.
NEP's ability to use NOLs to offset future income may be limited.
NEP will not have complete control over NEP's tax decisions.
Distributions to unitholders may be taxable as dividends.

These factors should be read together with the risk factors included in Part I, Item 1A. Risk Factors in the 2021 Form 10-K and Part II, Item 1A. Risk Factors in the March 2022 Form 10-Q and investors should refer to those sections of the 2021 Form 10-K and the March 2022 Form 10-Q. Any forward-looking statement speaks only as of the date on which such statement is made, and NEP undertakes no obligation to update any forward-looking statement to reflect events or circumstances, including, but not limited to, unanticipated events, after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement.

Website Access to U.S. Securities and Exchange Commission (SEC) Filings. NEP makes its SEC filings, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, available free of charge on NEP's internet website, www.nexteraenergypartners.com, as soon as reasonably practicable after those documents are electronically filed with or furnished to the SEC. The information and materials available on NEP's website are not incorporated by reference into this Form 10-Q.

6

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(millions, except per unit amounts)
(unaudited)
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2022202120222021
OPERATING REVENUES
Renewable energy sales
$236 $193 $762 $543 
Texas pipelines service revenues
66 59 183 208 
Total operating revenues(a)
302 252 945 751 
OPERATING EXPENSES
Operations and maintenance(b)
153 110 417 302 
Depreciation and amortization
107 71 315 207 
Taxes other than income taxes and other
1 7 32 26 
Total operating expenses – net261 188 764 535 
GAINS (LOSSES) ON DISPOSAL OF BUSINESSES/ASSETS – NET8  35 (4)
OPERATING INCOME49 64 216 212 
OTHER INCOME (DEDUCTIONS)
Interest expense
155 (24)853 145 
Equity in earnings of equity method investees
52 47 154 131 
Equity in earnings of non-economic ownership interests20 12 56 26 
Other – net1 1 2 3 
Total other income – net228 36 1,065 305 
INCOME BEFORE INCOME TAXES277 100 1,281 517 
INCOME TAXES45 6 178 54 
NET INCOME(c)
232 94 1,103 463 
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS(153)(76)(660)(317)
NET INCOME ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$79 $18 $443 $146 
Earnings per common unit attributable to NextEra Energy Partners, LP – basic$0.93 $0.24 $5.25 $1.92 
Earnings per common unit attributable to NextEra Energy Partners, LP – assuming dilution$0.93 $0.24 $5.25 $1.92 
____________________
(a)    Includes related party revenues of $9 million and $5 million for the three months ended September 30, 2022 and 2021, respectively, and $21 million and $44 million for the nine months ended September 30, 2022 and 2021, respectively.
(b)    Includes O&M expenses related to renewable energy projects of $91 million and $52 million for the three months ended September 30, 2022 and 2021, respectively, and $247 million and $144 million for the nine months ended September 30, 2022 and 2021, respectively. Includes O&M expenses related to the Texas pipelines of $14 million and $11 million for the three months ended September 30, 2022 and 2021, respectively, and $34 million and $35 million for the nine months ended September 30, 2022 and 2021, respectively. Total O&M expenses presented include related party amounts of $70 million and $52 million for the three months ended September 30, 2022 and 2021, respectively, and $195 million and $151 million for the nine months ended September 30, 2022 and 2021, respectively.
(c)    For the three and nine months ended September 30, 2022, NEP recognized less than $1 million and $1 million, respectively, of other comprehensive income related to equity method investees, which was primarily attributable to noncontrolling interests. For the nine months ended September 30, 2021, NEP recognized $1 million of other comprehensive income related to equity method investees, which was primarily attributable to noncontrolling interests.












This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
7

NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)
September 30, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$225 $147 
Accounts receivable127 112 
Other receivables41 24 
Due from related parties217 1,061 
Inventory46 41 
Derivatives55  
Other88 25 
Total current assets799 1,410 
Other assets:
Property, plant and equipment – net11,443 11,417 
Intangible assets – PPAs – net2,061 2,175 
Intangible assets – customer relationships – net530 593 
Derivatives330 7 
Goodwill891 891 
Investments in equity method investees1,928 1,896 
Deferred income taxes187 322 
Other298 265 
Total other assets17,668 17,566 
TOTAL ASSETS$18,467 $18,976 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities:
Accounts payable and accrued expenses$179 $982 
Due to related parties80 104 
Current portion of long-term debt37 33 
Accrued interest17 26 
Derivatives11 26 
Accrued property taxes34 25 
Other61 65 
Total current liabilities419 1,261 
Other liabilities and deferred credits:
Long-term debt4,774 5,294 
Asset retirement obligations269 243 
Derivatives3 595 
Due to related parties39 41 
Other374 383 
Total other liabilities and deferred credits5,459 6,556 
TOTAL LIABILITIES5,878 7,817
COMMITMENTS AND CONTINGENCIES
REDEEMABLE NONCONTROLLING INTERESTS26 321 
EQUITY
Common units (86.5 and 83.9 units issued and outstanding, respectively)
3,420 2,985 
Accumulated other comprehensive loss(8)(8)
Noncontrolling interests9,151 7,861 
TOTAL EQUITY12,563 10,838 
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY$18,467 $18,976 

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
8

NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
Nine Months Ended September 30,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$1,103 $463 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
315 207 
Intangible amortization – PPAs109 82 
Change in value of derivative contracts
(986)(250)
Deferred income taxes
177 51 
Equity in earnings of equity method investees, net of distributions received
(20)(2)
Equity in earnings of non-economic ownership interests, net of distributions received(52)(19)
Losses (gains) on disposal of businesses/assets – net(35)4 
Other – net
2 9 
Changes in operating assets and liabilities:
Current assets(37)(33)
Noncurrent assets
 (7)
Current liabilities
35 (10)
Noncurrent liabilities
 (3)
Net cash provided by operating activities
611 492 
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of membership interests in subsidiaries – net(190)(800)
Capital expenditures and other investments
(958)(82)
Proceeds from CITCs
 75 
Proceeds from sale of a business204  
Payments to related parties under CSCS agreement – net(8)(295)
Distributions from equity method investee
15 1 
Reimbursements from related parties for capital expenditures895 10 
    Other4 22 
Net cash used in investing activities(38)(1,069)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common units – net147 50 
Issuances of long-term debt
92 624 
Retirements of long-term debt
(616)(98)
Debt issuance costs(5)(3)
Capped call transaction (31)
Partner contributions
1  
Partner distributions
(468)(387)
Proceeds on sale of differential membership interests 48 
Proceeds from differential membership investors
136 74 
Payments to differential membership investors
(30)(27)
    Proceeds on sale of Class B noncontrolling interests – net
408 493 
    Payments to Class B noncontrolling interest investors(144)(63)
Change in amounts due to related parties
(17)(12)
Payment of CITC obligation to third party 

(65)
Other(3)(1)
Net cash provided by (used in) financing activities(499)602 
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH74 25 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF PERIOD151 112 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF PERIOD$225 $137 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Change in noncash investments in equity method investees – net
$(1)$130 
Accrued property additions$175 $5 


This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
9

NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(millions)
(unaudited)



Common Units
Three Months Ended September 30, 2022UnitsAmountAccumulated Other Comprehensive LossNoncontrolling
Interests
Total EquityRedeemable Non-controlling Interests
Balances, June 30, 202283.9 $3,228 $(8)$8,739 $11,959 $117 
Issuance of common units – net(a)(b)
2.6 179 — — 179 — 
Acquisition of subsidiaries with differential membership interests and noncontrolling ownership interest— — — 242 242 — 
Net income— 79 — 151 230 2 
Related party distributions— — — (115)(115)— 
Other differential membership investment activity— — — 175 175 (93)
Payments to Class B noncontrolling interest investors— — — (41)(41)— 
Distributions to unitholders(c)
— (65)— — (65)— 
Sale of Class B noncontrolling interest – net
— (1)—  (1)— 
Balances, September 30, 202286.5 $3,420 $(8)$9,151 $12,563 $26 
_________________________
(a)    Includes NEE Equity's exchange of NEP OpCo common units for NEP common units. Includes deferred tax impact of approximately $14 million. See Note 8 - Common Unit Issuances.
(b)    See Note 8 – ATM Program for further discussion. Includes deferred tax impact of approximately $18 million.
(c)    Distributions per common unit of $0.7625 were paid during the three months ended September 30, 2022.     

Common Units
Nine Months Ended September 30, 2022UnitsAmountAccumulated Other Comprehensive LossNoncontrolling
Interests
Total EquityRedeemable Non-controlling Interests
Balances, December 31, 202183.9 $2,985 $(8)$7,861 $10,838 $321 
Issuance of common units – net(a)(b)
2.6 179 — — 179 — 
Acquisition of subsidiaries with differential membership interests and noncontrolling ownership interest— — — 242 242 — 
Net income— 443 — 651 1,094 9 
Other comprehensive income— — — 1 1 — 
Related party note receivable— — — 1 1 — 
Related party distributions— — — (282)(282)— 
Changes in non-economic ownership interests— — — 1 1 — 
Other differential membership investment activity— — — 410 410 (304)
Payments to Class B noncontrolling interest investors— — — (144)(144)— 
Distributions to unitholders(c)
— (186)— — (186)— 
Sale of Class B noncontrolling interest – net
— (1)— 408 407 — 
Other— — — 2 2 — 
Balances, September 30, 202286.5 $3,420 $(8)$9,151 $12,563 $26 
_________________________
(a)    Includes NEE Equity's exchange of NEP OpCo common units for NEP common units. Includes deferred tax impact of approximately $14 million. See Note 8 - Common Unit Issuances.
(b)    See Note 8 – ATM Program for further discussion. Includes deferred tax impact of approximately $18 million.
(c)    Distributions per common unit of $2.2025 were paid during the nine months ended September 30, 2022.     














This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
10

NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(millions)
(unaudited)

Common Units
Three Months Ended September 30, 2021UnitsAmountAccumulated Other Comprehensive LossNoncontrolling
Interests
Total
Equity
Balances, June 30, 202176.6 $2,363 $(8)$6,100 $8,455 
Net income— 18 — 76 94 
Related party distributions— — — (94)(94)
Changes in non-economic ownership interests
— — — 6 6 
Other differential membership investment activity— — — 24 24 
Payments to Class B noncontrolling interest investors— — — (28)(28)
Distributions to unitholders(a)
— (51)— — (51)
Other— (1)—  (1)
Balances, September 30, 202176.6 $2,329 $(8)$6,084 $8,405 
_____________________________
(a)    Distributions per common unit of $0.6625 were paid during the three months ended September 30, 2021.

Common Units
Nine Months Ended September 30, 2021UnitsAmountAccumulated Other Comprehensive LossNoncontrolling
Interests
Total
Equity
Balances, December 31, 202075.9 $2,362 $(8)$5,353 $7,707 
Issuance of common units – net(a)
0.7 56 — — 56 
Net income— 146 — 317 463 
Other comprehensive income— —  1 1 
Related party note receivable— — — 1 1 
Related party distributions— — — (243)(243)
Changes in non-economic ownership interests— — — 130 130 
Other differential membership investment activity— — — 47 47 
Payments to Class B noncontrolling interest investors— — — (63)(63)
Distributions to unitholders(b)
— (146)— — (146)
Sale of Class B noncontrolling interest — net— — — 493 493 
Sale of differential membership interest— — — 48 48 
Adoption of accounting standards update(c)
— (57)— 1 (56)
Capped call transaction— (31)—  (31)
Other— (1)— (1)(2)
Balances, September 30, 202176.6 $2,329 $(8)$6,084 $8,405 
_____________________________
(a)    See Note 8 – ATM Program for further discussion. Includes deferred tax impact of approximately $6 million.
(b)    Distributions per common unit of $1.9150 were paid during the nine months ended September 30, 2021.
(c)    See Note 7 for further discussion. Includes deferred tax impact of approximately $7 million.















This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2021 Form 10-K.
11


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The accompanying condensed consolidated financial statements should be read in conjunction with the 2021 Form 10-K. In the opinion of NEP management, all adjustments considered necessary for fair financial statement presentation have been made. All adjustments are normal and recurring unless otherwise noted. Certain amounts included in the prior year's condensed consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period generally will not give a true indication of results for the year.

1. Acquisitions

In August 2021, an indirect subsidiary of NEP acquired from a third party 100% of the ownership interests (August 2021 acquisition) in a portfolio of four operating wind assets with a combined generating capacity totaling approximately 391 MW located in California and New Hampshire.
In October 2021, an indirect subsidiary of NEP acquired from subsidiaries of NEER ownership interests (October 2021 acquisition) in a portfolio of wind and solar generation facilities with a combined net generating capacity totaling approximately 589 MW located in various states across the U.S.

In December 2021, an indirect subsidiary of NEP acquired from subsidiaries of NEER 100% of the Class A membership interests in Star Moon Holdings, LLC (Star Moon Holdings) which represents an indirect 50% controlling ownership interest in seven wind generation facilities and six solar generation facilities located in various states across the U.S., some of which include solar storage, with a combined net generating capacity totaling approximately 1,260 MW and net storage capacity totaling 58 MW. The wind and solar generation facilities were under construction by NEER when the acquisition was announced. At closing, three projects remained under construction and NEER agreed to continue to manage the construction of such projects after the acquisition, at its own cost, and to contribute to those projects any capital necessary for the construction of such projects. During the three months ended March 31, 2022, construction of the projects was completed and the projects entered service. In December 2021, NEER sold the remaining 50% noncontrolling ownership interest in the wind and solar generation facilities to a third party, which is reflected as noncontrolling interests on NEP's condensed consolidated balance sheets (see Note 10 - Noncontrolling Interests). NEER operates the wind and solar generation facilities under O&M and administrative service agreements (see Note 9).

In December 2021, an indirect subsidiary of NEP acquired from a third party a 102 MW wind generation facility (Coram II acquisition) located in California.

In September 2022, an indirect subsidiary of NEP acquired from NEER interests in Sunlight Renewables Holdings, LLC (Sunlight Renewables Holdings) which represent an indirect 67% controlling ownership interest in a battery storage facility in California with storage capacity of 230 MW. The purchase price consisted of cash consideration of approximately $191 million, plus working capital and other adjustments of $3 million. The purchase price was allocated primarily to property, plant and equipment — net of approximately $435 million and noncontrolling interests of $242 million, including $147 million relating to differential membership interests, based on the fair value of assets acquired and liabilities assumed. NEER operates the battery storage facility under O&M and administrative service agreements (see Note 9).

Supplemental Unaudited Pro forma Results of Operations

NEP’s pro forma results of operations in the combined entity had the August 2021 acquisition, the October 2021 acquisition and the Coram II acquisition been completed on January 1, 2020 are as follows:
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
(millions)
Unaudited pro forma results of operations:
Pro forma revenues
$276 $830 
Pro forma operating income
$69 $223 
Pro forma net income$91 $451 
Pro forma net income attributable to NEP$21 $153 
The unaudited pro forma consolidated results of operations include adjustments to:
reflect the historical results of the businesses acquired beginning on January 1, 2020 assuming consistent operating performance over all periods;
reflect the estimated depreciation and amortization expense based on the estimated fair value of property, plant and equipment – net and the intangible assets – PPAs;
reflect assumed interest expense related to funding the acquisitions; and
reflect related income tax effects.

The unaudited pro forma information is not necessarily indicative of the results of operations that would have occurred had the
12


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
transactions been made at the beginning of the periods presented or the future results of the consolidated operations.

NEP incurred approximately $2 million in acquisition-related costs during the nine months ended September 30, 2022 which are reflected as operations and maintenance in NEP's condensed consolidated statements of income.

2. Revenue

Revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. NEP's operating revenues are generated primarily from various non-affiliated parties under PPAs and natural gas transportation agreements. NEP's operating revenues from contracts with customers are partly offset by the net amortization of intangible asset – PPAs and intangible liabilities – PPAs. Revenue is recognized as energy and any related renewable energy attributes are delivered, based on rates stipulated in the respective PPAs, or natural gas transportation services are performed. NEP believes that the obligation to deliver energy and provide the natural gas transportation services is satisfied over time as the customer simultaneously receives and consumes benefits provided by NEP. In addition, NEP believes that the obligation to deliver renewable energy attributes is satisfied at multiple points in time, with the control of the renewable energy attribute being transferred at the same time the related energy is delivered. Included in NEP’s operating revenues for the three months ended September 30, 2022 is $232 million and $64 million, for the nine months ended September 30, 2022 is $747 million and $181 million, for the three months ended September 30, 2021 is $190 million and $58 million, and for the nine months ended September 30, 2021 is $530 million and $176 million, of revenue from contracts with customers for renewable energy sales and natural gas transportation services, respectively. NEP's accounts receivable are primarily associated with revenues earned from contracts with customers. Receivables represent unconditional rights to consideration and reflect the differences in timing of revenue recognition and cash collections. For substantially all of NEP's receivables, regardless of the type of revenue transaction from which the receivable originated, customer and counterparty credit risk is managed in the same manner and the terms and conditions of payment are similar.
NEP recognizes revenues as energy and any related renewable energy attributes are delivered or natural gas transportation services are performed, consistent with the amounts billed to customers based on rates stipulated in the respective agreements. NEP considers the amount billed to represent the value of energy delivered or services provided to the customer. NEP’s customers typically receive bills monthly with payment due within 30 days.
The contracts with customers related to pipeline service revenues contain a fixed price related to firm natural gas transportation capacity with maturity dates ranging from 2022 to 2035. At September 30, 2022, NEP expects to record approximately $1.6 billion of revenues over the remaining terms of the related contracts as the capacity is provided. Revenues yet to be earned under contracts with customers to deliver energy and any related energy attributes, which have maturity dates ranging from 2025 to 2052, will vary based on the volume of energy delivered. At September 30, 2022, NEP expects to record approximately $183 million of revenues related to the fixed price components of one PPA through 2039 as the energy is delivered.

3. Derivative Instruments and Hedging Activity

NEP uses derivative instruments (primarily interest rate swaps) to manage the interest rate cash flow risk associated with outstanding and expected future debt issuances and borrowings. NEP records all derivative instruments that are required to be marked to market as either assets or liabilities on its condensed consolidated balance sheets and measures them at fair value each reporting period. NEP does not utilize hedge accounting for its derivative instruments. All changes in the derivatives' fair value are recognized in interest expense in NEP's condensed consolidated statements of income. At September 30, 2022 and December 31, 2021, the net notional amounts of the interest rate contracts were approximately $7.8 billion and $7.9 billion, respectively. Cash flows from the interest rate contracts are reported in cash flows from operating activities in NEP's condensed consolidated statements of cash flows.

Fair Value Measurement of Derivative Instruments – The fair value of assets and liabilities are determined using either unadjusted quoted prices in active markets (Level 1) or pricing inputs that are observable (Level 2) whenever that information is available and using unobservable inputs (Level 3) to estimate fair value only when relevant observable inputs are not available. NEP uses several different valuation techniques to measure the fair value of assets and liabilities, relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those assets and liabilities that are measured at fair value on a recurring basis. Certain financial instruments may be valued using multiple inputs including discount rates, counterparty credit ratings and credit enhancements. NEP’s assessment of the significance of any particular input to the fair value measurement requires judgment and may affect the placement of those assets and liabilities within the fair value hierarchy levels. Non-performance risk, including the consideration of a credit valuation adjustment, is also considered in the determination of fair value for all assets and liabilities measured at fair value. Transfers between fair value hierarchy levels occur at the beginning of the period in which the transfer occurred.

13


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
NEP estimates the fair value of its derivative instruments using an income approach based on a discounted cash flows valuation technique utilizing the net amount of estimated future cash inflows and outflows related to the agreements. The primary inputs used in the fair value measurements include the contractual terms of the derivative agreements, current interest rates and credit profiles. The significant inputs for the resulting fair value measurement are market-observable inputs and the measurements are reported as Level 2 in the fair value hierarchy.

The tables below present NEP's gross derivative positions, based on the total fair value of each derivative instrument, at September 30, 2022 and December 31, 2021, as required by disclosure rules, as well as the location of the net derivative positions, based on the expected timing of future payments, on NEP's condensed consolidated balance sheets.

September 30, 2022
Level 1Level 2Level 3
Netting(a)
Total
(millions)
Assets:
Interest rate contracts$ $412 $ $(27)$385 
Liabilities:
Interest rate contracts$ $41 $ $(27)$14 
Net fair value by balance sheet line item:
Current derivative assets$55 
Noncurrent derivative assets330 
Total derivative assets$385 
Current derivative liabilities$11 
Noncurrent derivative liabilities3 
Total derivative liabilities$14 
December 31, 2021
Level 1Level 2Level 3
Netting(a)
Total
(millions)
Assets:
Interest rate contracts$ $17 $ $(10)$7 
Liabilities:
Interest rate contracts$ $631 $ $(10)$621 
Net fair value by balance sheet line item:
Current derivative assets$ 
Noncurrent derivative assets7 
Total derivative assets$7 
Current derivative liabilities$26 
Noncurrent derivative liabilities595 
Total derivative liabilities$621 
____________________
(a)    Includes the effect of the contractual ability to settle contracts under master netting arrangements.

Financial Statement Impact of Derivative InstrumentsGains related to NEP's interest rate contracts are recorded in NEP's condensed consolidated financial statements as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(millions)
Interest rate contracts:
Gains recognized in interest expense$201 $6 $978 $235 

Credit-Risk-Related Contingent Features – Certain of NEP's derivative instruments contain credit-related cross-default and material adverse change triggers, none of which contain requirements to maintain certain credit ratings or financial ratios. At
14


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
September 30, 2022 and December 31, 2021, the aggregate fair value of NEP's derivative instruments with credit-risk-related contingent features that were in a liability position was approximately $39 million and $608 million, respectively.

4. Non-Derivative Fair Value Measurements

Non-derivative fair value measurements consist of NEP's cash equivalents. The fair value of these financial assets is determined using the valuation techniques and inputs as described in Note 3 – Fair Value Measurement of Derivative Instruments. The fair value of money market funds that are included in cash and cash equivalents, current other assets and noncurrent other assets on NEP's condensed consolidated balance sheets is estimated using a market approach based on current observable market prices.
Recurring Non-Derivative Fair Value Measurements – NEP’s financial assets and liabilities and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:

September 30, 2022December 31, 2021
Level 1Level 2TotalLevel 1Level 2Total
(millions)
Assets:
Cash equivalents
$6 $ $6 $3 $ $3 
Total assets
$6 $ $6 $3 $ $3 

Financial Instruments Recorded at Other than Fair Value – The carrying amounts and estimated fair values of other financial instruments recorded at other than fair value are as follows:

September 30, 2022December 31, 2021
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
(millions)
Long-term debt, including current maturities(a)
$4,811 $4,656 $5,327 $5,529 
____________________
(a)    At September 30, 2022 and December 31, 2021, approximately $4,636 million and $5,506 million, respectively, of the fair value is estimated using a market approach based on quoted market prices for the same or similar issues (Level 2); the balance is estimated using an income approach utilizing a discounted cash flow valuation technique, considering the current credit profile of the debtor (Level 3). At September 30, 2022 and December 31, 2021, approximately $1,063 million and $1,188 million, respectively, of the fair value relates to the 2020 convertible notes and the 2021 convertible notes and is estimated using Level 2.

5. Income Taxes

Income taxes are calculated for NEP as a single taxpaying corporation for U.S. federal and state income taxes (based on NEP's election to be taxed as a corporation). NEP recognizes in income its applicable ownership share of U.S. income taxes due to the disregarded/partnership tax status of substantially all of the U.S. projects under NEP OpCo. Net income or loss attributable to noncontrolling interests includes minimal U.S. taxes.

The effective tax rates for the three and nine months ended September 30, 2022 were approximately 16% and 14%, respectively, and for the three and nine months ended September 30, 2021 were approximately 6% and 10%, respectively. The effective tax rates are below the U.S. statutory rate of 21% primarily due to tax expense (benefit) attributable to noncontrolling interests of approximately $(23) million and $(126) million for the three and nine months ended September 30, 2022, respectively, and $(14) million and $(64) million for the three and nine months ended September 30, 2021, respectively.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law which includes: (i) extensions for wind and solar tax credits on facilities that start construction before the later of 2034 or the end of the calendar year following the year in which greenhouse gas emissions from U.S. electric generation are reduced by 75% from 2022 levels; (ii) a new solar PTC and standalone battery ITC; (iii) the ability to transfer renewable energy tax credits to an unrelated transferee; and (iv) a 15% corporate profits minimum tax based on pre-tax income for years after 2022. This legislation does not require NEP to revalue its deferred income taxes given that there was no change to the corporate tax rate.

6. Variable Interest Entities

NEP has identified NEP OpCo, a limited partnership with a general partner and limited partners, as a VIE. NEP has consolidated the results of NEP OpCo and its subsidiaries because of its controlling interest in the general partner of NEP OpCo. At September 30, 2022, NEP owned an approximately 46.2% limited partner interest in NEP OpCo and NEE Equity owned a
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NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
noncontrolling 53.8% limited partner interest in NEP OpCo (NEE's noncontrolling interest). The assets and liabilities of NEP OpCo as well as the operations of NEP OpCo represent substantially all of NEP's assets and liabilities and its operations.

In addition, at September 30, 2022, NEP OpCo consolidated 17 VIEs related to certain subsidiaries which have sold differential membership interests in entities which own and operate 32 wind generation facilities as well as seven solar projects, including related battery storage facilities, and one battery storage facility. These entities are considered VIEs because the holders of the differential membership interests do not have substantive rights over the significant activities of these entities. The assets, primarily property, plant and equipment – net, and liabilities, primarily accounts payable and accrued expenses and asset retirement obligation, of the VIEs, totaled approximately $9,419 million and $537 million, respectively, at September 30, 2022 and $9,740 million and $1,310 million, respectively, at December 31, 2021.

At September 30, 2022, NEP OpCo also consolidated five