10-Q 1 nep-20220331.htm 10-Q nep-20220331
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nep-20220331_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 March 31, 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 March 31, 2022:  83,905,398


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
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
MACRSU.S. federal Modified Accelerated Cost Recovery System
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 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
RPSrenewable portfolio standards
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.

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 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 this Form 10-Q and investors should refer to those sections of the 2021 Form 10-K and this 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 
 March 31,
20222021
OPERATING REVENUES
Renewable energy sales
$224 $155 
Texas pipelines service revenues
57 91 
Total operating revenues(a)
281 246 
OPERATING EXPENSES
Operations and maintenance(b)
129 92 
Depreciation and amortization
103 67 
Taxes other than income taxes and other
15 9 
Total operating expenses – net247 168 
OPERATING INCOME34 78 
OTHER INCOME (DEDUCTIONS)
Interest expense
284 504 
Equity in earnings of equity method investees
45 43 
Equity in earnings of non-economic ownership interests19 14 
Other – net1 2 
Total other income (deductions) – net349 563 
INCOME BEFORE INCOME TAXES383 641 
INCOME TAXES50 70 
NET INCOME(c)
333 571 
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS(189)(369)
NET INCOME ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$144 $202 
Earnings per common unit attributable to NextEra Energy Partners, LP – basic$1.72 $2.66 
Earnings per common unit attributable to NextEra Energy Partners, LP – assuming dilution$1.72 $2.66 
____________________
(a)    Includes related party revenues of $5 million and $34 million for the three months ended March 31, 2022 and 2021, respectively.
(b)    Includes O&M expenses related to renewable energy projects of $76 million and $43 million for the three months ended March 31, 2022 and 2021, respectively. Includes O&M expenses related to the Texas pipelines of $8 million and $13 million for the three months ended March 31, 2022 and 2021, respectively. Total O&M expenses presented include related party amounts of $58 million and $45 million for the three months ended March 31, 2022 and 2021, respectively.
(c)    Comprehensive income, including comprehensive income attributable to noncontrolling interests and NextEra Energy Partners, LP, is the same as reported net income.

















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)
March 31, 2022December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents$168 $147 
Accounts receivable143 112 
Other receivables30 24 
Due from related parties692 1,061 
Inventory44 41 
Other205 25 
Total current assets1,282 1,410 
Other assets:
Property, plant and equipment – net11,227 11,417 
Intangible assets – PPAs – net2,142 2,175 
Intangible assets – customer relationships – net538 593 
Goodwill879 891 
Investments in equity method investees1,903 1,896 
Deferred income taxes274 322 
Other367 272 
Total other assets17,330 17,566 
TOTAL ASSETS$18,612 $18,976 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities:
Accounts payable and accrued expenses$595 $982 
Due to related parties77 104 
Current portion of long-term debt36 33 
Accrued interest17 26 
Derivatives11 26 
Accrued property taxes17 25 
Other47 65 
Total current liabilities800 1,261 
Other liabilities and deferred credits:
Long-term debt5,378 5,294 
Asset retirement obligation258 243 
Derivatives370 595 
Due to related parties41 41 
Other389 383 
Total other liabilities and deferred credits6,436 6,556 
TOTAL LIABILITIES7,236 7,817
COMMITMENTS AND CONTINGENCIES
REDEEMABLE NONCONTROLLING INTERESTS120 321 
EQUITY
Common units (83.9 and 83.9 units issued and outstanding, respectively)
3,070 2,985 
Accumulated other comprehensive loss(8)(8)
Noncontrolling interests8,194 7,861 
TOTAL EQUITY11,256 10,838 
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY$18,612 $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)
Three Months Ended March 31,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$333 $571 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
103 67 
Intangible amortization – PPAs39 26 
Change in value of derivative contracts
(327)(540)
Deferred income taxes
50 70 
Equity in earnings of equity method investees, net of distributions received
(4)(4)
Equity in earnings of non-economic ownership interests, net of distributions received(19)(14)
Other – net
 2 
Changes in operating assets and liabilities:
Current assets(31)(50)
Noncurrent assets
1  
Current liabilities
(25)(24)
Net cash provided by operating activities
120 104 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures and other investments
(467)(45)
Payments to related parties under CSCS agreement – net(78)(74)
Reimbursements from related parties for capital expenditures475 8 
    Other 4 
Net cash used in investing activities(70)(107)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common units – net2 3 
Issuances of long-term debt
89 102 
Retirements of long-term debt
(6)(2)
 Debt issuance costs (1)
Partner distributions
(137)(117)
Proceeds from differential membership investors
46 41 
Payments to differential membership investors
(9)(6)
    Payments to Class B noncontrolling interest investors(16)(14)
Change in amounts due to related parties
(1)(1)
Other(1)(1)
Net cash provided by (used in) financing activities(33)4 
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH17 1 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF PERIOD151 112 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF PERIOD$168 $113 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Accrued property additions$590 $21 
















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 March 31, 2022UnitsAmountAccumulated Other Comprehensive LossNoncontrolling
Interests
Total EquityRedeemable Non-controlling Interests
Balances, December 31, 202183.9 $2,985 $(8)$7,861 $10,838 $321 
Net income— 144 — 184 328 5 
Related party distributions— — — (78)(78)— 
Other differential membership investment activity— — — 242 242 (206)
Payments to Class B noncontrolling interest investors— — — (16)(16)— 
Distributions to unitholders(a)
— (59)— — (59)— 
Other— — — 1 1 — 
Balances, March 31, 202283.9 $3,070 $(8)$8,194 $11,256 $120 
_________________________
(a)    Distributions per common unit of $0.7075 were paid during the three months ended March 31, 2022.     
Common Units
Three Months Ended March 31, 2021UnitsAmountAccumulated Other Comprehensive LossNoncontrolling
Interests
Total
Equity
Balances, December 31, 202075.9 $2,362 $(8)$5,353 $7,707 
Net income— 202 — 369 571 
Related party distributions— — — (72)(72)
Changes in non-economic ownership interests— — — (3)(3)
Other differential membership investment activity— — — 35 35 
Payments to Class B noncontrolling interest investors— — — (14)(14)
Distributions to unitholders(a)
— (47)— — (47)
Adoption of accounting standards update(b)
— (57)— — (57)
Other—  — 1 
Balances, March 31, 202175.9 $2,460 $(8)$5,669 $8,121 
_____________________________
(a)    Distributions per common unit of $0.6150 were paid during the three months ended March 31, 2021.
(b)    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.
10


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 April 2022, an indirect subsidiary of NEP entered into an agreement with subsidiaries of NEER to acquire approximately 67% of the Class A membership interests in a battery storage facility under construction in California with storage capacity of approximately 230 MW. NEP expects to complete the acquisition during 2022, subject to the facility commencing commercial operations and customary closing conditions, for approximately $191 million, subject to closing adjustments. NEP’s share of the project’s noncontrolling interests related to differential membership interests is estimated to be approximately $80 million at the time of closing. See Part II – Item 5(b) for further discussion.

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
March 31, 2021
(millions)
Unaudited pro forma results of operations:
Pro forma revenues
$273 
Pro forma operating income
$81 
Pro forma net income$567 
Pro forma net income attributable to NEP$204 
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 transactions been made at the beginning of the periods presented or the future results of the consolidated operations.
11


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 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 March 31, 2022 is $220 million and $58 million, and for the three months ended March 31, 2021 is $149 million and $60 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 March 31, 2022, NEP expects to record approximately $1.7 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 March 31, 2022, NEP expects to record approximately $188 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 March 31, 2022 and December 31, 2021, the net notional amounts of the interest rate contracts were approximately $7,870 million and $7,873 million, 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.

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.

12


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
The tables below present NEP's gross derivative positions, based on the total fair value of each derivative instrument, at March 31, 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.

March 31, 2022
Level 1Level 2Level 3
Netting(a)
Total
(millions)
Assets:
Interest rate contracts$ $93 $ $ $93 
Liabilities:
Interest rate contracts$ $381 $ $ $381 
Net fair value by balance sheet line item:
Current other assets$8 
Noncurrent other assets85 
Total derivative assets$93 
Current derivative liabilities$11 
Noncurrent derivative liabilities370 
Total derivative liabilities$381 
December 31, 2021
Level 1Level 2Level 3
Netting(a)
Total
(millions)
Assets:
Interest rate contracts$ $17 $ $(10)$7 
Liabilities:
Interest rate contracts$ $631 $ $(10)$621 
Net fair value by balance sheet line item:
Current other assets$ 
Noncurrent other 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 March 31,
20222021
(millions)
Interest rate contracts:
Gains recognized in interest expense$320 $535 

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 March 31, 2022 and December 31, 2021, the aggregate fair value of NEP's derivative instruments with contingent risk features that were in a liability position was approximately $378 million and $608 million, respectively.

13


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
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:
March 31, 2022December 31, 2021
Level 1Level 2TotalLevel 1Level 2Total
(millions)
Assets:
Cash equivalents
$4 $ $4 $3 $ $3 
Total assets
$4 $ $4 $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:
March 31, 2022December 31, 2021
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
(millions)
Long-term debt, including current maturities(a)
$5,414 $5,505 $5,327 $5,529 
____________________
(a)    At March 31, 2022 and December 31, 2021, approximately $5,483 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 March 31, 2022 and December 31, 2021, approximately $1,179 million and $1,188 million 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 rate for the three months ended March 31, 2022 was approximately 13% and for the three months ended March 31, 2021 was approximately 11%. The effective tax rate is below the U.S. statutory rate of 21% primarily due to tax expense (benefit) attributable to noncontrolling interests of approximately $(39) million for the three months ended March 31, 2022 and $(78) million for the three months ended March 31, 2021.

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 March 31, 2022, NEP owned an approximately 45.3% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 54.7% 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 March 31, 2022, NEP OpCo consolidated 16 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. 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 $9,424 million and $897 million, respectively, at March 31, 2022 and $9,740 million and $1,310 million, respectively, at December 31, 2021.

At March 31, 2022, NEP OpCo also consolidated five VIEs related to the sales of noncontrolling Class B interests in certain NEP subsidiaries (see Note 10 - Noncontrolling Interests) which have ownership interests in and operate wind and solar facilities with
14


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
a combined net generating capacity of approximately 3,576 MW as well as ownership interests in eight natural gas pipeline assets. These entities are considered VIEs because the holders of the noncontrolling Class B interests do not have substantive rights over the significant activities of the entities. The assets, primarily property, plant and equipment - net, intangible assets - PPAs and investments in equity method investees, and the liabilities, primarily accounts payable and accrued expenses, long-term debt, other long-term liabilities and asset retirement obligation, of the VIEs totaled approximately $11,392 million and $2,059 million, respectively, at March 31, 2022 and $11,810 million and $2,480 million, respectively, at December 31, 2021. Certain of these VIEs include five other VIEs related to NEP's ownership interests in Rosmar, Silver State, Meade, Pine Brooke Holdings and Star Moon Holdings (see Note 1). In addition, certain of these VIEs contain entities which have sold differential membership interests and approximately $4,467 million and $4,749 million of assets and $756 million and $1,159 million of liabilities are also included in the disclosure of the VIEs related to differential membership interests at March 31, 2022 and December 31, 2021, respectively.

Certain subsidiaries of NEP OpCo have noncontrolling interests in entities accounted for under the equity method that are considered VIEs.

NEP has an indirect equity method investment in three NEER solar projects with a total generating capacity of 277 MW and battery storage capacity of 230 MW. Through a series of transactions, a subsidiary of NEP issued 1,000,000 NEP OpCo Class B Units, Series 1 and 1,000,000 NEP OpCo Class B Units, Series 2, to NEER for approximately 50% of the ownership interests in the three solar projects (non-economic ownership interests). NEER, as holder of the NEP OpCo Class B Units, will retain 100% of the economic rights in the projects to which the respective Class B Units relate, including the right to all distributions paid by the project subsidiaries that own the projects to NEP OpCo. NEER has agreed to indemnify NEP against all risks relating to NEP’s ownership of the projects until NEER offers to sell economic interests to NEP and NEP accepts such offer, if NEP chooses to do so. NEER has also agreed to continue to manage the operation of the projects at its own cost, and to contribute to the projects any capital necessary for the operation of the projects, until NEER offers to sell economic interests to NEP and NEP accepts such offer. At March 31, 2022 and December 31, 2021, NEP's equity method investment related to the non-economic ownership interests of approximately $65 million and $47 million, respectively, is reflected as noncurrent other assets on NEP's condensed consolidated balance sheets. All equity in earnings of the non-economic ownership interests is allocated to net income attributable to noncontrolling interests. NEP is not the primary beneficiary and therefore does not consolidate these entities because it does not control any of the ongoing activities of these entities, was not involved in the initial design of these entities and does not have a controlling interest in these entities.

7. Debt

Significant long-term debt issuances and borrowings by subsidiaries of NEP during the three months ended March 31, 2022 were as follows:
Date Issued/Borrowed
Debt Issuances/BorrowingsInterest
Rate
Principal
Amount
Maturity
Date
(millions)
February 2022NEP OpCo credit facility
Variable(a)
$86 
(b)
2027
January 2022 – March 2022Senior secured limited-recourse debt
Variable(a)
$3 
(c)
2026
————————————
(a)Variable rate is based on an underlying index plus a margin.
(b)At March 31, 2022, approximately $640 million of borrowings were outstanding and $117 million of letters of credit were issued under the NEP OpCo credit facility. Approximately $26 million of the outstanding borrowings have a maturity date in 2025.
(c)At March 31, 2022, approximately $871 million of borrowings were outstanding under the existing credit agreement of the Meade purchaser and Pipeline Investment Holdings, LLC.

In February 2022, the maturity date was extended from February 2026 to February 2027 for essentially all of the NEP OpCo credit facility.

NEP OpCo and its subsidiaries' secured long-term debt agreements are secured by liens on certain assets and contain provisions which, under certain conditions, could restrict the payment of distributions or related party fee payments. At March 31, 2022, NEP and its subsidiaries were in compliance with all financial debt covenants under their financings.

On January 1, 2021, NEP adopted an accounting standards update which updated the accounting guidance for financial instruments with the characteristics of liabilities and equity, including debt with conversion options and other equity-linked instruments such as the $600 million in principal amount of senior unsecured convertible notes issued in December 2020. NEP adopted the standards update by applying it retrospectively with the cumulative effect recognized as of January 1, 2021 (modified retrospective approach). Upon adoption, NEP reclassified approximately $64 million related to the embedded conversion feature for the 2020 convertible notes from common units equity to long-term debt.

15


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
8. Equity

Distributions – On April 20, 2022, the board of directors of NEP authorized a distribution of $0.7325 per common unit payable on May 12, 2022 to its common unitholders of record on May 5, 2022.

Earnings Per Unit – Diluted earnings per unit is based on the weighted-average number of common units and potential common units outstanding during the period, including the dilutive effect of convertible notes. The dilutive effect of the 2021 convertible notes and the 2020 convertible notes is computed using the if-converted method.

The reconciliation of NEP's basic and diluted earnings per unit for the three months ended March 31, 2022 and 2021 is as follows:
Three Months Ended March 31,
20222021
(millions, except per unit amounts)
Numerator – Net income attributable to NEP$144 $202 
Denominator:
Weighted-average number of common units outstanding – basic83.9 75.9 
Effect of dilutive convertible notes0.1 0.1 
Weighted-average number of common units outstanding and assumed conversions84.0 76.0 
Earnings per unit attributable to NEP:
Basic$1.72 $2.66 
Assuming dilution$1.72 $2.66 

Accumulated Other Comprehensive Income (Loss) – During the three months ended March 31, 2022 and 2021, NEP did not recognize any other comprehensive income (loss). At March 31, 2022 and 2021, NEP's accumulated other comprehensive loss totaled approximately $18 million and $20 million, respectively, of which $10 million and $12 million, respectively, was attributable to noncontrolling interest and $8 million and $8 million, respectively, was attributable to NEP.

9. Related Party Transactions

Each project entered into O&M agreements and ASAs with subsidiaries of NEER whereby the projects pay a certain annual fee plus actual costs incurred in connection with certain O&M and administrative services performed under these agreements. These services are reflected as operations and maintenance in NEP's condensed consolidated statements of income. Additionally, certain NEP subsidiaries pay affiliates for transmission and retail power services which are reflected as operations and maintenance in NEP's condensed consolidated statements of income. Certain projects have also entered into various types of agreements including those related to shared facilities and transmission lines, transmission line easements, technical support and construction coordination with subsidiaries of NEER whereby certain fees or cost reimbursements are paid to, or received by, certain subsidiaries of NEER.

Management Services Agreement – Under the MSA, an indirect wholly owned subsidiary of NEE provides operational, management and administrative services to NEP, including managing NEP’s day-to-day affairs and providing individuals to act as NEP’s executive officers and directors, in addition to those services that are provided under the existing O&M agreements and ASAs described above between NEER subsidiaries and NEP subsidiaries. NEP OpCo pays NEE an annual management fee equal to the greater of 1% of the sum of NEP OpCo’s net income plus interest expense, income tax expense and depreciation and amortization expense less certain non-cash, non-recurring items for the most recently ended fiscal year and $4 million (as adjusted for inflation beginning in 2016), which is paid in quarterly installments with an additional payment each January to the extent 1% of the sum of NEP OpCo’s net income plus interest expense, income tax expense and depreciation and amortization expense less certain non-cash, non-recurring items for the preceding fiscal year exceeds $4 million (as adjusted for inflation beginning in 2016). NEP OpCo also makes certain payments to NEE based on the achievement by NEP OpCo of certain target quarterly distribution levels to its unitholders. NEP’s O&M expenses for the three months ended March 31, 2022 include approximately $38 million and for the three months ended March 31, 2021 include approximately $31 million related to the MSA.

Cash Sweep and Credit Support Agreement – NEP OpCo is a party to the CSCS agreement with NEER under which NEER and certain of its affiliates provide credit support in the form of letters of credit and guarantees to satisfy NEP’s subsidiaries’ contractual obligations. NEP OpCo pays NEER an annual credit support fee based on the level and cost of the credit support provided, payable in quarterly installments. NEP’s O&M expenses for the three months ended March 31, 2022 include approximately $2 million and for the three months ended March 31, 2021 include approximately $1 million related to the CSCS agreement.
16


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

NEER and certain of its affiliates may withdraw funds (Project Sweeps) from NEP OpCo under the CSCS agreement, or its subsidiaries in connection with certain long-term debt agreements, and hold those funds in accounts belonging to NEER or its affiliates to the extent the funds are not required to pay project costs or otherwise required to be maintained by NEP's subsidiaries. NEER and its affiliates may keep the funds until the financing agreements permit distributions to be made, or, in the case of NEP OpCo, until such funds are required to make distributions or to pay expenses or other operating costs or NEP OpCo otherwise demands the return of such funds. If NEER or its affiliates fail to return withdrawn funds when required by NEP's subsidiaries’ financing agreements, the lenders will be entitled to draw on any credit support provided by NEER or its affiliates in the amount of such withdrawn funds. If NEER or one of its affiliates realizes any earnings on the withdrawn funds prior to the return of such funds, it will be permitted to retain those earnings. At March 31, 2022 and December 31, 2021, the cash sweep amounts held in accounts belonging to NEER or its affiliates were approximately $135 million and $57 million, respectively, and are included in due from related parties on NEP's condensed consolidated balance sheets.

Guarantees and Letters of Credit Entered into by Related Parties – Certain PPAs include requirements of the project entities to meet certain performance obligations. NEECH or NEER has provided letters of credit or guarantees for certain of these performance obligations and payment of any obligations from the transactions contemplated by the PPAs. In addition, certain financing agreements require cash and cash equivalents to be reserved for various purposes. In accordance with the terms of these financing agreements, guarantees from NEECH have been substituted in place of these cash and cash equivalents reserve requirements. Also, under certain financing agreements, indemnifications have been provided by NEECH. In addition, certain interconnection agreements and site certificates require letters of credit or a surety bond to secure certain payment or restoration obligations related to those agreements. NEECH also guarantees the Project Sweep amounts held in accounts belonging to NEER, as described above. In addition, NEECH and NEER provided guarantees associated with obligations, primarily incurred and future construction payables, associated with the December 2021 acquisition from NEER discussed in Note 1. At March 31, 2022, NEECH or NEER guaranteed or provided indemnifications, letters of credit or surety bonds totaling approximately $3,382 million related to these obligations.

Due to Related Parties – Noncurrent amounts due to related parties on NEP's condensed consolidated balance sheets primarily represent amounts owed by certain of NEP's wind projects to NEER to refund NEER for certain transmission costs paid on behalf of the wind projects. Amounts will be paid to NEER as the wind projects receive payments from third parties for related notes receivable recorded in noncurrent other assets on NEP's condensed consolidated balance sheets.

Transportation and Fuel Management Agreements – A subsidiary of NEP assigned to a subsidiary of NEER certain gas commodity agreements in exchange for entering into transportation agreements and a fuel management agreement whereby the benefits of the gas commodity agreements (net of transportation paid to the NEP subsidiary) are passed back to the NEP subsidiary. NEP recognized revenues related to the transportation and fuel management agreements of approximately $2 million during the three months ended March 31, 2022 and $33 million during the three months ended March 31, 2021. The decrease in the recognized revenues for the three months ended March 31, 2022 primarily relates to higher demand and the related impact on natural gas prices during extreme winter weather experienced primarily in Texas during February 2021 (February 2021 weather event).

10. Summary of Significant Accounting and Reporting Policies

Restricted Cash – At March 31, 2022 and December 31, 2021, NEP had less than $1 million and approximately $4 million, respectively, of restricted cash included in current other assets on NEP's condensed consolidated balance sheets. Restricted cash at March 31, 2022 and December 31, 2021 is primarily related to collateral deposits from a counterparty. Restricted cash reported as current assets are recorded as such based on the anticipated use of these funds.

Property, Plant and Equipment – Property, plant and equipment consists of the following:

March 31, 2022December 31, 2021
(millions)
Property, plant and equipment, gross$13,017 $13,124 
Accumulated depreciation(1,790)(1,707)
Property, plant and equipment – net$11,227 $11,417 
17


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

Noncontrolling Interests – At March 31, 2022, noncontrolling interests on NEP's condensed consolidated balance sheets primarily reflects the Class B noncontrolling ownership interests (the Class B noncontrolling ownership interests in NEP Renewables II, NEP Pipelines, STX Midstream, Genesis Holdings, and NEP Renewables III owned by third parties), the differential membership interests, NEE Equity's approximately 54.7% noncontrolling interest in NEP OpCo, NEER's approximately 50% noncontrolling ownership interest in Silver State, non-affiliated parties' 10% interest in one of the Texas pipelines and 50% interest in Star Moon Holdings and the non-economic ownership interests. The impact of the net income (loss) attributable to the differential membership interests and the Class B noncontrolling ownership interests are allocated to NEE Equity's noncontrolling ownership interest and the net income attributable to NEP based on the respective ownership percentage of NEP OpCo. Details of the activity in noncontrolling interests are below:

 Class B Noncontrolling Ownership Interests
Differential Membership Interests
NEE's Indirect Noncontrolling Ownership Interests(a)
Other Noncontrolling Ownership InterestsTotal Noncontrolling
Interests
Three months ended March 31, 2022(millions)
Balances, December 31, 2021$3,783 $3,150 $(38)$966 $7,861 
Net income (loss) attributable to noncontrolling interests69 (148)232 31 184 
Related party distributions— — (77)(1)(78)
Differential membership investment contributions, net of distributions— 36 — — 36 
Payments to Class B noncontrolling interest investors
(16)— — — (16)
Reclassification of redeemable noncontrolling interests— 206 — — 206 
Other(1) (5)7 1 
Balances, March 31, 2022$3,835 $3,244 $112 $1,003 $8,194 
 Class B Noncontrolling Ownership InterestsDifferential Membership Interests
NEE's Indirect Noncontrolling Ownership Interests(a)
Other Noncontrolling Ownership InterestsTotal Noncontrolling
Interests
Three months ended March 31, 2021(millions)
Balances, December 31, 2020$3,551 $1,758 $(14)$58 $5,353 
Net income (loss) attributable to noncontrolling interests67 (77)363 16 369 
Related party distributions— — (71)(1)(72)
Changes in non-economic ownership interests, net of distributions— — — (3)(3)
Differential membership investment contributions, net of distributions
— 35 — — 35 
Payments to Class B noncontrolling interest investors(14)— — — (14)
Other1 (1)1 — 1 
Balances, March 31, 2021$3,605 $1,715 $279 $70 $5,669 
————————————
(a)Primarily reflects NEE Equity's noncontrolling interest in NEP OpCo and NEER's noncontrolling interest in Silver State.

Redeemable Noncontrolling Interests – Prior to the acquisition in December 2021 from NEER (see Note 1), differential membership interests related to certain of the acquired solar facilities were sold to third party investors. If, subject to certain contingencies, certain events occurred that delayed or prevented completion of any underlying projects, NEP could have been obligated to reacquire all or a portion of the third party investors' interests in these projects for up to approximately $204 million. As these potential redemptions were outside of NEP’s control, the balances were classified as redeemable noncontrolling interests on NEP's condensed consolidated balance sheet as of December 31, 2021. During the three months ending March 31, 2022, the underlying projects were completed and the redeemable noncontrolling interests amount related to the completion of the projects was reclassified to noncontrolling interests.

18


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
(unaudited)
Reference Rate Reform – In March 2020, the Financial Accounting Standards Board (FASB) issued an accounting standards update which provides certain options to apply GAAP guidance on contract modifications and hedge accounting as companies transition from the London Inter-Bank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. NEP’s contracts that reference LIBOR or other interbank offered rates mainly relate to debt and derivative instruments. The standards update was effective upon issuance and can be applied prospectively through December 31, 2022. As agreements that reference LIBOR or other interbank offered rates as an interest rate benchmark are amended, NEP evaluates whether to apply the options provided by the standards update with regard to eligible contract modifications.

Disposal of Pipeline – In April 2022, subsidiaries of NEP sold (the pipeline sale) to a third party all of their ownership interests in an approximately 156-mile, 16-inch pipeline that transports natural gas in Texas for total consideration of approximately $203 million, subject to working capital and other adjustments. Approximately $67 million of the cash proceeds from the sale were distributed to the third-party owner of Class B membership interests in STX Midstream. In connection with the sale, NEP anticipates recording a gain of approximately $26 million ($23 million after tax) in the second quarter of 2022. The carrying amounts of the major classes of assets related to the pipeline that were classified as held for sale, which are included in current other assets on NEP's condensed consolidated balance sheets, were approximately $176 million at March 31, 2022 and primarily represent property, plant and equipment – net and intangible assets – customer relationships – net. Liabilities associated with assets held for sale, which are included in current other liabilities on NEP's condensed consolidated balance sheets, were less than $1 million at March 31, 2022.

11. Commitments and Contingencies
Development, Engineering and Construction Commitments – At March 31, 2022, an indirect subsidiary of NEP had a funding commitment related to a pipeline expansion project. As of March 31, 2022, the NEP subsidiary had invested approximately $79 million related to the expansion project which is reflected as investments in equity method investees on NEP's condensed consolidated balance sheets. As of March 31, 2022, the NEP subsidiary expects to invest approximately $4 million of additional funds under its commitment as the expansion project began operations in the fourth quarter of 2021.

19


Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

NEP is a growth-oriented limited partnership formed to acquire, manage and own contracted clean energy projects with stable long-term cash flows. NEP consolidates the results of NEP OpCo and its subsidiaries through its controlling interest in the general partner of NEP OpCo. At March 31, 2022, NEP owned an approximately 45.3% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 54.7% limited partner interest in NEP OpCo. Through NEP OpCo, NEP has ownership interests in a portfolio of contracted renewable generation assets consisting of wind, solar and solar-plus-storage projects and a portfolio of contracted natural gas pipeline assets. NEP's financial results are shown on a consolidated basis with financial results attributable to NEE Equity reflected in noncontrolling interests.

This discussion should be read in conjunction with the Notes contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2021 Form 10-K. The results of operations for an interim period generally will not give a true indication of results for the year. In the following discussions, all comparisons are with the corresponding items in the prior year period.

In 2021, indirect subsidiaries of NEP completed multiple acquisitions of ownership interests in wind and solar generation facilities, some of which include battery storage facilities, with a combined net generating capacity totaling approximately 2,342 MW and net storage capacity totaling 58 MW. In April 2022, an indirect subsidiary of NEP entered into an agreement with subsidiaries of NEER to acquire approximately 67% of the Class A membership interests in a battery storage facility under construction in California with storage capacity of approximately 230 MW. See Note 1. In April 2022, indirect subsidiaries of NEP sold their ownership interests in a pipeline in Texas. See Note 10 - Disposal of Pipeline.

Results of Operations
Three Months Ended 
 March 31,
20222021
(millions)
Statement of Income Data:
OPERATING REVENUES
Renewable energy sales
$224 $155 
Texas pipelines service revenues
57 91 
Total operating revenues281 246 
OPERATING EXPENSES
 Operations and maintenance129 92 
Depreciation and amortization
103 67 
Taxes other than income taxes and other
15 
Total operating expenses – net247 168 
OPERATING INCOME34 78 
OTHER INCOME (DEDUCTIONS)
Interest expense
284 504 
Equity in earnings of equity method investees
45 43 
Equity in earnings of non-economic ownership interests19 14 
Other – net
Total other income (deductions) – net349 563 
INCOME BEFORE INCOME TAXES383 641 
INCOME TAXES50 70 
NET INCOME333 571 
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS(189)(369)
NET INCOME ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$144 $202 

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Operating Revenues

Operating revenues increased $35 million for the three months ended March 31, 2022. Renewable energy sales increased $69 million during the three months ended March 31, 2022 primarily reflecting higher revenues of approximately $48 million associated with the renewable energy projects acquired in 2021 as well as higher revenues due to favorable resource and availability. Texas pipelines service revenues decreased $34 million during the three months ended March 31, 2022 primarily reflecting decreases of approximately $30 million related to the absence of higher revenues under transportation and fuel management agreements during the February 2021 weather event (see Note 9 – Transportation and Fuel Management
20


Agreements).

Operating Expenses

Operations and Maintenance
O&M expenses increased $37 million during the three months ended March 31, 2022 primarily reflecting higher O&M expenses of approximately $22 million associated with the renewable energy projects acquired in 2021, higher corporate operating expenses of $9 million primarily reflecting higher IDR fees related to growth in NEP's distributions to its common unitholders and higher net operating expenses at the existing NEP projects of $6 million.

Depreciation and Amortization
Depreciation and amortization expense increased $36 million during the three months ended March 31, 2022 primarily reflecting depreciation and amortization associated with the renewable energy projects acquired in 2021.

Taxes other than Income Taxes and Other
Taxes other than income taxes and other increased $6 million during the three months ended March 31, 2022 primarily reflecting expenses associated with the renewable energy projects acquired in 2021.

Other Income (Deductions)

Interest Expense
The change in interest expense of approximately $220 million during the three months ended March 31, 2022 primarily reflects $215 million of less favorable mark-to-market activity ($320 million of gains recorded in 2022 compared to $535 million of gains in 2021).

Income Taxes

For the three months ended March 31, 2022, NEP recorded income tax expense of approximately $50 million on income before income taxes of $383 million, resulting in an effective tax rate of 13%. The tax expense is comprised primarily of income tax expense of approximately $80 million at the statutory rate of 21% and $9 million of state taxes, partly offset by $39 million of income tax benefit attributable to noncontrolling interests.

For the three months ended March 31, 2021, NEP recorded income tax expense of approximately $70 million on income before income taxes of $641 million, resulting in an effective tax rate of 11%. The tax expense is comprised primarily of income tax expense of approximately $135 million at the statutory rate of 21% and $12 million of state taxes, partly offset by $78 million of income tax benefit attributable to noncontrolling interests.

Net Income Attributable to Noncontrolling Interests

For the three months ended March 31, 2022 and 2021, the decrease in net income attributable to noncontrolling interests primarily reflects a lower net income allocation to NEE Equity's noncontrolling interest due to a decrease in net income as compared to 2021. See Note 10 – Noncontrolling Interests.

Liquidity and Capital Resources

NEP’s ongoing operations use cash to fund O&M expenses, including related party fees discussed in Note 9, maintenance capital expenditures, debt service payments and related derivative obligations (see Note 7 and Note 3) and distributions to common unitholders and holders of noncontrolling interests (see Note 8 and Note 10 – Noncontrolling Interests). NEP expects to satisfy these requirements primarily with internally generated cash flow. In addition, as a growth-oriented limited partnership, NEP expects from time to time to make acquisitions and other investments (see Note 1 and Note 11 – Development, Engineering and Construction Commitments). These acquisitions and investments are expected to be funded with borrowings under credit facilities or term loans, issuances of indebtedness, issuances of additional NEP common units or preferred units, capital raised pursuant to other financing structures, cash on hand and cash generated from operations.

These sources of funds are expected to be adequate to provide for NEP's short-term and long-term liquidity and capital needs, although its ability to make future acquisitions, fund additional expansion or repowering of existing projects and increase its distributions to common unitholders will depend on its ability to access capital on acceptable terms.

As a normal part of its business, depending on market conditions, NEP expects from time to time to consider opportunities to repay, redeem, repurchase or refinance its indebtedness. In addition, NEP expects from time to time to consider potential investments in new acquisitions and the expansion or repowering of existing projects. These events may cause NEP to seek additional debt or equity financing, which may not be available on acceptable terms or at all. Additional debt financing, if available, could impose operating restrictions, additional cash payment obligations and additional covenants.

NEP OpCo has agreed to allow NEER or one of its affiliates to withdraw funds received by NEP OpCo or its subsidiaries and to hold those funds in accounts of NEER or one of its affiliates to the extent the funds are not required to pay project costs or
21


otherwise required to be maintained by NEP's subsidiaries, until the financing agreements permit distributions to be made, or, in the case of NEP OpCo, until such funds are required to make distributions or to pay expenses or other operating costs. NEP OpCo will have a claim for any funds that NEER fails to return:

•    when required by its subsidiaries’ financings;
•    when its subsidiaries’ financings otherwise permit distributions to be made to NEP OpCo;
•    when funds are required to be returned to NEP OpCo; or
•    when otherwise demanded by NEP OpCo.

In addition, NEER and certain of its affiliates may withdraw funds in connection with certain long-term debt agreements and hold those funds in accounts belonging to NEER or its affiliates and provide credit support in the amount of such withdrawn funds. If NEER fails to return withdrawn funds when required by NEP's subsidiaries’ financing agreements, the lenders will be entitled to draw on any credit support provided by NEER in the amount of such withdrawn funds.

If NEER or one of its affiliates realizes any earnings on the withdrawn funds prior to the return of such funds, it will be permitted to retain those earnings.

Liquidity Position

At March 31, 2022, NEP's liquidity position was approximately $1,204 million. The table below provides the components of NEP’s liquidity position:
March 31, 2022Maturity Date
(millions)
Cash and cash equivalents
$168 
Amounts due under the CSCS agreement
135 
Revolving credit facilities(a)
1,250 2027
Less borrowings(b)
(640)
Less issued letters of credit(117)
NEP Renewables III final funding(c)
408 
Total$1,204 
____________________
(a)    Approximately $50 million of the NEP OpCo credit facility expires in 2025. Excludes certain credit facilities due to restrictions on the use of the borrowings.
(b)    Approximately $26 million of such borrowings have a maturity date in 2025.
(c)    Expected to be received in the second quarter of 2022.

Management believes that NEP's liquidity position and cash flows from operations will be adequate to finance O&M, maintenance capital expenditures, distributions to its unitholders and liquidity commitments. Management continues to regularly monitor NEP's financing needs consistent with prudent balance sheet management.

Financing Arrangements

In February 2022, the maturity date was extended from February 2026 to February 2027 for essentially all of the NEP OpCo credit facility. During the three months ended March 31, 2022, approximately $86 million was drawn under the NEP OpCo credit facility. See Note 7.

NEP OpCo and certain indirect subsidiaries are subject to financings that contain financial covenants and distribution tests, including debt service coverage ratios. In general, these financings contain covenants customary for these types of financings, including limitations on investments and restricted payments. Certain of NEP's financings provide for interest payable at a fixed interest rate. However, certain of NEP's financings accrue interest at variable rates based on an underlying index plus a margin. Interest rate contracts were entered into for certain of these financings to hedge against interest rate movements with respect to interest payments on the related borrowings. In addition, under the project-level financings, each project will be permitted to pay distributions out of available cash so long as certain conditions are satisfied, including that reserves are funded with cash or credit support, no default or event of default under the applicable financings has occurred and is continuing at the time of such distribution or would result therefrom, and each project is otherwise in compliance with the project-level financing’s covenants. For substantially all of the project-level financings, minimum debt service coverage ratios must be satisfied in order to make a distribution. For one project-level financing, the project must maintain a leverage ratio and an interest coverage ratio in order to make a distribution. At March 31, 2022, NEP's subsidiaries were in compliance with all financial debt covenants under their financings.

22


Capital Expenditures

Annual capital spending plans are developed based on projected requirements for the projects. Capital expenditures primarily represent the estimated cost of capital improvements, including construction expenditures that are expected to increase NEP OpCo’s operating income or operating capacity over the long term. Capital expenditures for projects that have already commenced commercial operations are generally not significant because most expenditures relate to repairs and maintenance and are expensed when incurred. For t