10-Q 1 nep-20210930.htm 10-Q nep-20210930
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nep-20210930_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, 2021

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, 2021:  76,619,403


DEFINITIONS

Acronyms and defined terms used in the text include the following:
TermMeaning
2017 convertible notessenior unsecured convertible notes issued in 2017
2020 convertible notessenior unsecured convertible notes issued in 2020
2021 convertible notessenior unsecured convertible notes issued in 2021
2020 Form 10-KNEP's Annual Report on Form 10-K for the year ended December 31, 2020
AOCIaccumulated other comprehensive income (loss)
ASAadministrative services agreement
BLMU.S. Bureau of Land Management
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
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
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 GPNextEra Energy Operating Partners GP, LLC
NEP PipelinesNextEra Energy Partners Pipelines, LLC
NEP RenewablesNEP Renewables, LLC
NEP Renewables IINEP Renewables II, 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
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 NEE Equity's 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.

2

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 result, are expected to, will continue, is anticipated, 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, 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 is pursuing the repowering of wind projects and the expansion of natural gas pipelines that will require up-front capital expenditures and 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 cross-border 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 of interests in projects or pipelines 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 the NEP 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.

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.
NEE's interest in NEP GP and the control of NEP GP may be transferred to a third party without unitholder consent.
5

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.

Coronavirus Pandemic Risks
The coronavirus pandemic may have a material adverse impact on NEP's business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders.

These factors should be read together with the risk factors included in Part I, Item 1A. Risk Factors in the 2020 Form 10-K and investors should refer to that section of the 2020 Form 10-K. 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 (LOSS)
(millions, except per unit amounts)
(unaudited)
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2021202020212020
OPERATING REVENUES
Renewable energy sales
$193 $187 $543 $546 
Texas pipelines service revenues
59 53 208 159 
Total operating revenues(a)
252 240 751 705 
OPERATING EXPENSES
Operations and maintenance(b)
110 93 302 273 
Depreciation and amortization
71 68 207 200 
Taxes other than income taxes and other
7 11 30 25 
Total operating expenses – net188 172 539 498 
OPERATING INCOME64 68 212 207 
OTHER INCOME (DEDUCTIONS)
Interest expense
(24)93 145 (730)
Equity in earnings of equity method investees
47 44 131 91 
Equity in earnings (losses) of non-economic ownership interests
12 11 26 (7)
Other – net1 4 3 4 
Total other income (deductions) – net36 152 305 (642)
INCOME (LOSS) BEFORE INCOME TAXES100 220 517 (435)
INCOME TAX EXPENSE (BENEFIT)6 25 54 (37)
NET INCOME (LOSS)(c)
94 195 463 (398)
NET INCOME ATTRIBUTABLE TO PREFERRED DISTRIBUTIONS (1) (5)
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS(76)(138)(317)284 
NET INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP
$18 $56 $146 $(119)
Earnings (loss) per common unit attributable to NextEra Energy Partners, LP – basic$0.24 $0.83 $1.92 $(1.80)
Earnings (loss) per common unit attributable to NextEra Energy Partners, LP – assuming dilution$0.24 $0.76 $1.92 $(1.80)
____________________
(a)    Includes related party revenues of $5 million and $2 million for the three months ended September 30, 2021 and 2020, respectively, and $44 million and $13 million for the nine months ended September 30, 2021 and 2020, respectively.
(b)    Includes O&M expenses related to renewable energy projects of $52 million and $51 million for the three months ended September 30, 2021 and 2020, respectively, and $144 million and $150 million for the nine months ended September 30, 2021 and 2020, respectively. Includes O&M expenses related to the Texas pipelines of $11 million and $10 million for the three months ended September 30, 2021 and 2020, respectively, and $35 million and $32 million for the nine months ended September 30, 2021 and 2020, respectively. Total O&M expenses presented include related party amounts of $52 million and $40 million for the three months ended September 30, 2021 and 2020, respectively, and $151 million and $107 million for the nine months ended September 30, 2021 and 2020, respectively.
(c)    For the nine month periods ended September 30, 2021 and 2020, NEP recognized approximately $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 2020 Form 10-K.
7

NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)
September 30,
2021
December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$133 $108 
Accounts receivable108 83 
Other receivables14 155 
Due from related parties322 28 
Inventory32 24 
Other26 16 
Total current assets635 414 
Other assets:
Property, plant and equipment – net7,159 7,163 
Intangible assets – PPAs – net1,917 1,572 
Intangible assets – customer relationships – net598 610 
Goodwill786 609 
Investments in equity method investees1,848 1,814 
Deferred income taxes213 249 
Other289 131 
Total other assets12,810 12,148 
TOTAL ASSETS$13,445 $12,562 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses$23 $143 
Due to related parties48 66 
Current portion of long-term debt14 12 
Accrued interest17 25 
Derivatives23 20 
Accrued property taxes24 22 
Other52 62 
Total current liabilities201 350 
Other liabilities and deferred credits:
Long-term debt3,969 3,376 
Asset retirement obligation156 144 
Derivatives529 782 
Due to related parties33 33 
Other152 170 
Total other liabilities and deferred credits4,839 4,505 
TOTAL LIABILITIES5,040 4,855
COMMITMENTS AND CONTINGENCIES
EQUITY
Common units (76.6 and 75.9 units issued and outstanding, respectively)
2,329 2,362 
Accumulated other comprehensive loss(8)(8)
Noncontrolling interests6,084 5,353 
TOTAL EQUITY8,405 7,707 
TOTAL LIABILITIES AND EQUITY$13,445 $12,562 





This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
8

NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
Nine Months Ended September 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)$463 $(398)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
207 200 
Intangible amortization – PPAs82 77 
Change in value of derivative contracts
(250)602 
Deferred income taxes
51 (44)
Equity in earnings of equity method investees, net of distributions received
(2)50 
Equity in losses (earnings) of non-economic ownership interests, net of
distributions received
(19)7 
Other – net
13 17 
Changes in operating assets and liabilities:
Current assets(33)(10)
Noncurrent assets
(7)1 
Current liabilities
(10)(16)
Noncurrent liabilities
(3)(4)
Net cash provided by operating activities
492 482 
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of membership interests in subsidiaries – net(800) 
Capital expenditures and other investments
(82)(236)
Proceeds from CITCs
75  
Payments to related parties under CSCS agreement – net(295)(70)
Distributions from equity method investee
1 8 
    Other32 15 
Net cash used in investing activities(1,069)(283)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common units – net50 2 
Issuances of long-term debt
624 68 
Retirements of long-term debt
(98)(17)
 Debt issuance costs(3)(1)
Capped call transaction
(31) 
Partner contributions
 7 
Partner distributions
(387)(320)
Preferred unit distributions
 (6)
Proceeds on sale of differential membership interests48  
Proceeds from differential membership investors
74 94 
Payments to differential membership investors
(27)(23)
    Proceeds on sale of Class B noncontrolling interests – net
493  
    Payments to Class B noncontrolling interest investors(63)(34)
Change in amounts due to related parties
(12)(2)
Payment of CITC obligation to third party(65)

 
Other(1) 
Net cash provided by (used in) financing activities602 (232)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH25 (33)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF PERIOD112 132 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF PERIOD$137 $99 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Change in noncash investments in equity method investees – net
$130 $7 
Accrued property and other additions$5 $67 
Conversion of convertible notes to common units$ $300 



This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.
9

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 2020 Form 10-K.
10




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

Preferred UnitsCommon UnitsAccumulated
Other
Three Months Ended September 30, 2020UnitsAmountUnitsAmountComprehensive
Loss
Noncontrolling
Interests
Total
Equity
Balances, June 30, 20204.7 $183 65.5 $1,759 $(8)$4,349 $6,283 
Issuance of common units - net(a)
(1.8)(71)7.5 418 — — 347 
Net income— 1 — 56 — 138 195 
Related party contributions— — — — — 1 1 
Related party distributions— — — — — (81)(81)
Changes in non-economic ownership interests
— — — — — (7)(7)
Other differential membership investment activity— — — — — 39 39 
Payments to Class B noncontrolling interest investors— — — — — (13)(13)
Distributions to unitholders(b)
— (1)— (39)— — (40)
Other— — —  — (1)(1)
Balances, September 30, 20202.9 $112 73 $2,194 $(8)$4,425 $6,723 
_____________________________
(a)    During the three months ended September 30, 2020, NEP issued 1.8 million NEP common units upon the conversion of preferred units on a one-for-one basis and issued approximately 5.7 million NEP common units upon the conversion of $300 million convertible notes (see Note 8 - Common Unit Issuances). NEP recognized a deferred tax asset of $47 million related to the issuance of NEP common units.
(b)    Distributions per common unit of $0.5775 were paid during the three months ended September 30, 2020.

Preferred UnitsCommon UnitsAccumulated
Other
Nine Months Ended September 30, 2020UnitsAmountUnitsAmountComprehensive
Loss
Noncontrolling
Interests
Total
Equity
Balances, December 31, 20194.7 $183 65.5 $2,008 $(8)$4,883 $7,066 
Issuance of common units - net(a)
(1.8)(71)7.5 418 — — 347 
Net income (loss)— 5 — (119)— (284)(398)
Other comprehensive income— — — —  1 1 
Related party note receivable— — — — — 1 1 
Related party contributions— — — — — 6 6 
Related party distributions— — — — — (212)(212)
Changes in non-economic ownership interests— — — — — (7)(7)
Other differential membership investment activity— — — — — 71 71 
Payments to Class B noncontrolling interest investors— — — — — (34)(34)
Distributions to unitholders(b)
— (5)— (110)— — (115)
Other— — — (3)— — (3)
Balances, September 30, 20202.9 $112 73.0 $2,194 $(8)$4,425 $6,723 
_____________________________
(a)    During the nine months ended September 30, 2020, NEP issued 1.8 million NEP common units upon the conversion of preferred units on a one-for-one basis and issued approximately 5.7 million NEP common units upon the conversion of $300 million convertible notes (see Note 8 - Common Unit Issuances). NEP recognized a deferred tax asset of $47 million related to the issuance of NEP common units.
(b)    Distributions per common unit of $1.6675 were paid during the nine months ended September 30, 2020.














This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 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 2020 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 December 2020, a subsidiary of NEP completed the acquisition from NEER (2020 acquisition) of 100% of the membership interests in Wilmot Energy Center, LLC (Wilmot) and 100% of the Class C membership interests in Pine Brooke Class A Holdings, LLC (Pine Brooke Holdings). Wilmot is an approximately 100 MW solar generation facility and 30 MW battery storage facility located in Arizona which entered service in the second quarter of 2021. The Class C membership interests in Pine Brooke Holdings represent an indirect 40% noncontrolling ownership interest in each of:

Soldier Creek Wind, LLC, a project company that owns an approximately 300 MW wind generation facility located in Kansas;
Ponderosa Wind, LLC, a project company that owns an approximately 200 MW wind generation facility located in Oklahoma;
Blue Summit III Wind, LLC, a project company that owns an approximately 200 MW wind generation facility located in Texas;
Saint Solar, LLC, a project company that owns an approximately 100 MW solar generation facility located in Arizona;
Taylor Creek Solar, LLC, a project company that owns an approximately 75 MW solar generation facility located in Florida;
Harmony Florida Solar, LLC, a project company that owns an approximately 75 MW solar generation facility located in Florida; and
Sanford Airport Solar, LLC, a project company that owns an approximately 49 MW solar generation facility located in Maine.

NEP's ownership interest in Pine Brooke Holdings is reflected as investments in equity method investees.

In August 2021, an indirect subsidiary of NEP completed the acquisition (2021 third-party acquisition) of 100% of the ownership interests in each of:

Highview Power Holdings, LLC, which indirectly owns a 150 MW wind generation facility (Alta Wind VIII) located in California;
Brookfield Windstar Holding, LLC, which indirectly owns a 120 MW wind generation facility (Windstar) located in California;
Brookfield Coram Wind Development, LLC, which indirectly owns a 22 MW wind generation facility (Coram) located in California; and
BAIF Granite Holdings, LLC, which indirectly owns a 99 MW wind generation facility (Granite) located in New Hampshire.

The purchase price included a base purchase price of approximately $733 million, plus closing adjustments primarily related to pre-acquisition debt make whole costs of $55 million and working capital of $27 million, including cash of $18 million.

Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair value. All fair value measurements of assets acquired and liabilities assumed were based on significant estimates and assumptions, including Level 3 (unobservable) inputs, which require judgment. Estimates and assumptions include the projected timing and amount of future cash flows, discount rates reflecting risk inherent in future cash flows and future market prices. The excess of the purchase price over the estimated fair value of assets acquired and liabilities assumed was recognized as goodwill at the acquisition date. The goodwill arising from the acquisition results largely from the assets being well-situated in strong markets with long-term renewables demand, providing long-term optionality for the assets. All of the goodwill is expected to be deductible for income tax purposes over a 15 year period. The valuation of the acquired net assets is subject to change as NEP obtains additional information for its estimates during the measurement period. The primary areas of the purchase price allocation that are not yet finalized relate to identifiable intangible assets and residual goodwill.
12


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The following table summarizes the preliminary amounts recognized by NEP for the estimated fair value of assets acquired and liabilities assumed in the 2021 third-party acquisition:
 (millions)
Total consideration transferred$815 
Identifiable assets acquired and liabilities assumed
Cash$18 
Accounts receivable, inventory and prepaid expenses14 
Property, plant and equipment – net191 
Intangible assets – PPAs(a)
432 
Goodwill177 
Other noncurrent assets1 
Accounts payable, accrued expenses and other current liabilities(5)
Other noncurrent liabilities(13)
Total net identifiable assets, at fair value
$815 
____________________
(a)    Intangible assets - PPAs are amortized into operating revenues on a straight-line basis over the remaining contract terms of the related PPAs. At September 30, 2021, amortization of the intangible assets - PPAs is expected to be approximately $12 million in 2021 and $35 million in each of the next four years.

In October 2021, an indirect subsidiary of NEP completed the acquisition of ownership interests in a portfolio of wind and solar generation facilities with a combined net generating capacity totaling approximately 589 MW from subsidiaries of NEER for a purchase price consisting of cash consideration of approximately $563 million, plus working capital and other adjustments of $26 million (subject to post-closing adjustments). NEP's share of the entities' debt and noncontrolling interests related to differential membership investors was approximately $270 million at the time of closing. NEP is in the process of evaluating the purchase accounting considerations, including the initial purchase price allocation. The acquisition included the following assets:

100% of the membership interests in HW CA Holdings, LLC, that indirectly owns an approximately 162 MW wind generation facility (High Winds) located in California;
100% of the membership interests in Dogwood Wind Holdings, LLC, that indirectly owns two wind generation facilities (Oliver III Wind and Osborn Wind) with a combined total generating capacity of approximately 300 MW located in North Dakota and Missouri;
100% of the membership interests in Southwest Solar Holdings, LLC, that indirectly owns an approximately 5 MW solar generation facility (Hatch Solar) located in New Mexico;
33.3% of the membership interests in Shaw Creek Solar Holdings, LLC, that indirectly owns an approximately 75 MW solar generation facility (Shaw Creek) located in South Carolina;
33.3% of the membership interests in Nutmeg Solar Holdings, LLC, that indirectly owns an approximately 20 MW solar generation facility (Nutmeg Solar) located in Connecticut; and
100% of the Class C membership interests (which represents 33.3% of the total ownership interest in the underlying projects) in Solar Holdings Portfolio 12, LLC, that has indirect ownership interests in:
two solar generation facilities (Westside Solar and Whitney Point Solar) with a combined total generating capacity of approximately 40 MW located in California;
the DG Portfolio 2019 portfolio, that indirectly owns multiple distributed solar generation facilities with a combined total generating capacity of approximately 217 MW located in various states across the U.S.; and
the DG Waipio portfolio, that indirectly owns multiple distributed solar generation facilities with a combined total generating capacity of approximately 13 MW located in Hawaii.

In October 2021, an indirect subsidiary of NEP entered into a purchase and sale agreement to acquire a 102 MW wind generation facility (Coram II) located in California. NEP expects to complete the acquisition by early 2022, subject to customary closing conditions and the receipt of regulatory approvals, for cash consideration of approximately $130 million, subject to working capital and other closing adjustments, plus the assumption of debt estimated to be approximately $150 million at the time of closing.

Additionally, an indirect subsidiary of NEP entered into an agreement in October 2021 with indirect subsidiaries of NEER to acquire ownership interests in a portfolio of wind and solar generation facilities with a combined net generating capacity totaling approximately 1,260 MW and net storage capacity totaling 58 MW for a purchase price consisting of cash consideration of $849 million, subject to customary working capital and other adjustments, plus NEP's share of the entities' noncontrolling interests related to differential membership investors estimated to be approximately $866 million at the time of closing. See Part II – Item 5 for further discussion.

NEP incurred approximately $11 million in acquisition-related costs during the nine months ended September 30, 2021 which are reflected as operations and maintenance in the condensed consolidated statements of income.

13


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
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 amortization of intangible assets - 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, 2021 is $190 million and $58 million, for the nine months ended September 30, 2021 is $530 million and $176 million, for the three months ended September 30, 2020 is $184 million and $53 million, and for the nine months ended September 30, 2020 is $533 million and $157 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 2021 to 2035. At September 30, 2021, NEP expects to record approximately $1.8 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 2026 to 2046, will vary based on the volume of energy delivered. At September 30, 2021, NEP expects to record approximately $194 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 the condensed consolidated statements of income (loss). At September 30, 2021 and December 31, 2020, the net notional amounts of the interest rate contracts were approximately $7,106 million and $7,088 million, respectively.

At September 30, 2021, NEP's AOCI does not include any amounts related to cash flow hedges. Cash flows from the interest rate contracts are reported in cash flows from operating activities in the 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.

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
14


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
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, 2021 and December 31, 2020, 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, 2021
Level 1Level 2Level 3
Netting(a)
Total
(millions)
Assets:
Interest rate contracts$ $30 $ $(30)$ 
Liabilities:
Interest rate contracts$ $582 $ $(30)$552 
Net fair value by balance sheet line item:
Current derivative liabilities$23 
Noncurrent derivative liabilities529 
Total derivative liabilities$552 
December 31, 2020
Level 1Level 2Level 3
Netting(a)
Total
(millions)
Assets:
Interest rate contracts$ $47 $ $(47)$ 
Liabilities:
Interest rate contracts$ $849 $ $(47)$802 
Net fair value by balance sheet line item:
Current derivative liabilities$20 
Noncurrent derivative liabilities782 
Total derivative liabilities$802 
____________________
(a)    Includes the effect of the contractual ability to settle contracts under master netting arrangements.

Financial Statement Impact of Derivative Instruments - Gains (losses) related to NEP's interest rate contracts are recorded in the condensed consolidated financial statements as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(millions)
Interest rate contracts:
Gains (losses) recognized in interest expense$6 $131 $235 $(609)

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 September 30, 2021 and December 31, 2020, the aggregate fair value of NEP's derivative instruments with contingent risk features that were in a liability position was approximately $550 million and $769 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.
15


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
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, 2021December 31, 2020
Level 1
Level 2TotalLevel 1Level 2Total
(millions)
Assets:
Cash equivalents
$1 $ $1 $2 $ $2 
Total assets
$1 $ $1 $2 $ $2 

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, 2021December 31, 2020
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
(millions)
Long-term debt, including current maturities(a)
$3,983 $4,135 $3,388 $3,529 
____________________