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What changed in XPLR Infrastructure, LP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of XPLR Infrastructure, LP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+609 added−586 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-23)

Top changes in XPLR Infrastructure, LP's 2023 10-K

609 paragraphs added · 586 removed · 492 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

41 edited+10 added−17 removed23 unchanged
Biggest changeProjects with net generating capacity of approximately 1,485 MW are encumbered by liens against their assets securing various financings. (c) At December 31, 2022, NEP's net MW includes 61 MW of solar generating capacity and 32 MW of battery storage capacity which are under construction and expected to be placed in service in the third quarter 2023.
Biggest changeSee Note 2 – Noncontrolling Interests, Note 11 and Note 14 – Class B Noncontrolling Interests. Projects with net generating capacity of approximately 1,539 MW are encumbered by liens against their assets securing various financings.
The Inflation Reduction Act (IRA) expanded the PTC to include solar generation facilities and extended the 100% PTC and the 30% ITC to wind and solar generation facilities that start construction before the later of 2034 or the end of the calendar year following the year in which greenhouse gas emissions from U.S. electric generation are reduced by 75% from 2022 levels.
The Inflation Reduction Act of 2022 (IRA) expanded the PTC to include solar generation facilities and extended the 100% PTC and the 30% ITC to wind and solar generation facilities that start construction before the later of 2034 or the end of the calendar year following the year in which greenhouse gas emissions from U.S. electric generation are reduced by 75% from 2022 levels (phaseout).
Pursuant to the U.S. federal Modified Accelerated Cost Recovery System (MACRS), wind and solar facilities are depreciated for tax purposes over a five-year period even though the useful life of such facilities is generally much longer than five years.
Pursuant to the U.S. federal Modified Accelerated Cost Recovery System (MACRS), wind and solar generation facilities are depreciated for tax purposes over a five-year period even though the useful life of such facilities is generally much longer than five years.
In addition, the IRA expanded the 30% ITC to include storage projects placed in service after 2022 (previously, such projects qualified only if they were connected to and charged by a renewable generation facility that claimed the ITC), subject to certain other requirements.
In addition, the IRA expanded the 30% ITC to include storage projects placed in service after 2022 (previously, such projects qualified only if they were connected to and charged by a renewable generation facility that claimed the ITC), subject to the phaseout and certain other requirements.
The information and materials available on NEP's website (or any of its subsidiaries' or affiliates' websites) are not incorporated by reference into this Form 10-K. 10 Table of Contents
The information and materials available on NEP's website (or any of its subsidiaries' or affiliates' websites) are not incorporated by reference into this Form 10-K. 9 Table of Contents
NEP believes that it is well-positioned to execute its strategy and increase cash distributions to its common unitholders over the long term based on the following competitive strengths: NEE management and operational expertise. NEP believes it benefits from NEE’s experience, operational excellence and cost-efficient operations.
NEP believes that it is well-positioned to execute its strategy and deliver cash distributions to its common unitholders over the long term based on the following competitive strengths: NEE management and operational expertise. NEP believes it benefits from NEE’s experience, operational excellence and cost-efficient operations.
NEP has indirect equity method investments in projects with a net generating capacity of approximately 862 MW with ownership interests ranging from 33.3% to 50%. Additionally, NEP has indirect controlling ownership interests ranging from 49% to 67% in projects with a net generation capacity of approximately 2,033 MW and battery storage capacity of 244 MW.
NEP has indirect equity method investments in projects with a net generating capacity of approximately 862 MW with ownership interests ranging from 33.3% to 50%. Additionally, NEP has indirect controlling ownership interests ranging from 49% to 67% in projects with a net generation capacity of approximately 2,087 MW and battery storage capacity of 244 MW.
REGULATION NEP's projects and pipelines are subject to regulation by a number of U.S. federal, state and other organizations, including, but not limited to, the following: • the FERC, which oversees the acquisition and disposition of generation, transmission and other facilities, transmission of electricity and natural gas in interstate commerce and wholesale purchases and sales of electric energy, among other things; • the NERC, which, through its regional entities, establishes and enforces mandatory reliability standards, subject to approval by the FERC, to ensure the reliability of the U.S. electric transmission and generation system and to prevent major system blackouts; • the Environmental Protection Agency (EPA), which has the responsibility to maintain and enforce national standards under a variety of environmental laws.
REGULATION NEP's projects and the pipeline assets underlying its pipeline investment are subject to regulation by a number of U.S. federal, state and other organizations, including, but not limited to, the following: • the FERC, which oversees the acquisition and disposition of generation, transmission and other facilities, transmission of electricity and natural gas in interstate commerce and wholesale purchases and sales of electric energy, among other things; • the NERC, which, through its regional entities, establishes and enforces mandatory reliability standards, subject to approval by the FERC, to ensure the reliability of the U.S. electric transmission and generation system and to prevent major system blackouts; • the Environmental Protection Agency (EPA), which has the responsibility to maintain and enforce national standards under a variety of environmental laws.
A loss of or reduction in such incentives could decrease the attractiveness of renewable energy projects to developers, including NEE, which could reduce NEP's future acquisition opportunities. Such a loss or reduction could also reduce NEP's willingness to pursue or develop certain renewable energy projects due to higher operating costs or decreased revenues.
A loss of or reduction in such incentives could decrease the attractiveness of renewable energy projects to developers, including NEE, which could reduce NEP's future acquisition opportunities. Such a loss or reduction of incentives could also reduce NEP's willingness to pursue or develop certain renewable energy projects, including wind turbine repowerings, due to higher operating costs or decreased revenues.
Complying with these environmental laws and regulations could result in, among other things, changes in the design and operation of existing facilities and changes or delays in the location, design, construction and operation of any new facilities and failure to comply could result in fines, penalties, criminal sanctions or injunctions.
Complying with these environmental laws and regulations could result in, among other things, changes in the design and operation of, and additional costs associated with, existing facilities and changes or delays in the location, design, construction and operation of any new facilities and failure to comply could result in fines, penalties, criminal sanctions or injunctions.
The environmental laws in the U.S., including, among others, the Endangered Species Act, the Migratory Bird Treaty Act, and the Bald and Golden Eagle Protection Act (BGEPA), provide for the protection of numerous species, including endangered species and/or their habitats, migratory birds, bats and eagles. In 2022, the U.S.
The environmental laws in the U.S., including, among others, the Endangered Species Act (ESA), the Migratory Bird Treaty Act, and the Bald and Golden Eagle Protection Act (BGEPA), provide for the protection of numerous species, including endangered species and/or their habitats, migratory birds, bats and eagles. In 2023, the U.S.
In addition, NEP owns an approximately 50% non-economic ownership interest in three NEER solar projects with a total generating capacity of 277 MW and battery storage capacity of 230 MW. All equity in earnings of these non-economic ownership interests is allocated to net income attributable to noncontrolling interests. See Note 2 – Investments in Unconsolidated Entities.
(d) At December 31, 2023, NEP owns an approximately 50% non-economic ownership interest in three NEER solar projects with a total generating capacity of 277 MW and battery storage capacity of 230 MW. All equity in earnings of these non-economic ownership interests is allocated to net income attributable to noncontrolling interests. See Note 2 – Investments in Unconsolidated Entities.
NEP believes its primary competitors for opportunities in North America are regulated utility holding companies, developers, IPPs, pension funds and private equity funds. NEP's pipeline projects face competition with respect to retaining and obtaining firm transportation contracts and compete with other pipeline companies based on location, capacity, price and reliability.
NEP believes its primary competitors for opportunities in North America are regulated utility holding companies, developers, IPPs, pension funds and private equity funds. NEP's pipeline investment faces competition with respect to retaining and obtaining firm transportation contracts and competes with other pipeline companies based on location, capacity, price and reliability.
See Note 2 – Noncontrolling Interests. 4 Table of Contents At December 31, 2022, NEP owned interests in a portfolio of clean, contracted renewable energy projects located in 30 states as summarized below: NEP Acquisition/Investment Date Technology Net MW (a) Contract Expiration 2014 Solar Wind 250 492 2029 – 2039 2015 Solar Wind 20 913 2026 – 2041 2016 Solar Wind 132 584 2034 – 2039 2017 Solar Wind 143 798 2030 – 2046 2018 Solar Wind 20 1,368 2031 – 2042 2019 Solar Wind 191 420 2030 – 2042 2020 Battery Storage Solar Wind 30 219 280 2034 – 2045 2021 Battery Storage Solar Wind 58 558 1,784 2025 – 2052 2022 Battery Storage Solar Wind 186 61 931 2032 – 2042 9,438 (b)(c) ____________________ (a) MWs reflect NEP's net ownership in the renewable energy project capacity based on respective ownership interests.
See Note 2 – Noncontrolling Interests. 4 Table of Contents Renewable energy projects – At December 31, 2023, NEP owned interests in a portfolio of clean, contracted renewable energy projects located in 31 states as summarized below: NEP Acquisition/Investment Date Technology Net MW (a) Contract Expiration 2014 Solar Wind 250 492 2030 – 2039 2015 Solar Wind 20 851 (b) 2026 – 2041 2016 Solar Wind 132 584 2033 – 2040 2017 Solar Wind 143 798 2030 – 2046 2018 Solar Wind 20 1,368 2031 – 2042 2019 Solar Wind 191 420 2030 – 2042 2020 Battery Storage Solar Wind 30 219 280 2034 – 2045 2021 Battery Storage Solar Wind 58 558 1,784 2025 – 2051 2022 Battery Storage Solar Wind 186 61 931 2032 – 2043 2023 Solar Wind 196 546 2036 – 2046 10,118 (c)(d) ____________________ (a) MWs reflect NEP's net ownership in the renewable energy project capacity based on respective ownership interests.
The pipelines primarily operate under long-term firm transportation contracts under which counterparties pay for a fixed amount of capacity that is reserved by the counterparties and also generate revenues based on the volume of natural gas transported on the pipelines.
The pipeline assets in which NEP is invested primarily operate under long-term firm transportation contracts under which counterparties pay for a fixed amount of capacity that is reserved by the counterparties and also generate revenues based on the volume of natural gas transported on the pipeline.
NEP expects that these services will maximize the operational efficiencies of its portfolio. • Grow NEP's business and cash distributions through selective acquisitions of ownership interests in operating projects or projects under construction.
NEP expects that these services will maximize the operational efficiencies of its portfolio. • Grow NEP's business and deliver cash distributions through selective acquisitions of ownership interests in operating projects or projects under construction and wind turbine repowering at existing projects.
The EPA also works with industries and all levels of government, including federal and state governments, in a wide variety of voluntary pollution prevention programs and energy conservation efforts; • various agencies in Texas and Pennsylvania, which oversee safety, environmental and certain aspects of rates and transportation related to the pipeline projects; and • the Pipeline and Hazardous Materials Safety Administration and the Texas Railroad Commission's Pipeline Safety Division, which, among other things, oversee the safety of natural gas pipelines.
The EPA also works with industries and all levels of government, including federal and state governments, in a wide variety of voluntary pollution prevention programs and energy conservation efforts; • various agencies in Pennsylvania, which oversee safety, environmental and certain aspects of rates and transportation related to the pipeline project in which NEP is invested; and • the Pipeline and Hazardous Materials Safety Administration, which, among other things, oversees the safety of natural gas pipelines.
In addition, NEP's portfolio includes wind and solar generation facilities, solar-plus-storage projects and natural gas pipelines. A diverse portfolio tends to reduce the magnitude of individual project or regional deviations from historical resource conditions, providing a more stable stream of cash flows over the long term than a non-diversified portfolio.
In addition, NEP's portfolio consists of wind and solar generation facilities, solar-plus-storage projects, a stand-alone battery storage project and an investment in pipeline assets. A diverse portfolio tends to reduce the magnitude of individual project or regional deviations from historical resource conditions, providing a more stable stream of cash flows over the long term than a non-diversified portfolio.
NEP and NEP OpCo are parties to a right of first refusal (ROFR) agreement with NEER granting NEER and its subsidiaries (other than NEP OpCo and its subsidiaries) a right of first refusal on any proposed sale of any NEP OpCo ROFR assets.
NEP OpCo pays NEE an annual management fee. See Note 15 – Management Services Agreement. NEP and NEP OpCo are parties to a ROFR agreement with NEER granting NEER and its subsidiaries (other than NEP OpCo and its subsidiaries) a right of first refusal on any proposed sale of any NEP OpCo ROFR assets.
In addition, NEP believes the geographic diversity of its portfolio helps minimize the impact of adverse regulatory conditions in particular jurisdictions. Competitiveness of renewable energy. Renewable energy technology has improved in recent years.
In addition, NEP believes the geographic diversity of its portfolio helps minimize the impact of adverse regulatory conditions in particular jurisdictions.
In 2022, NEP derived approximately 14% and 13% of its consolidated revenues from its contracts with Pacific Gas and Electric Company and Mex Gas Supply S.L., respectively. See Item 1A for a discussion of risks related to NEP's counterparties and business relationship with Pemex.
In 2023, NEP derived approximately 14% of its consolidated revenues from its contracts with Pacific Gas and Electric Company. In 2023, NEP also derived approximately 11% of its consolidated revenues from its contracts with Mex Gas Supply S.L., which was related to the Texas pipelines (see Note 4). See Item 1A for a discussion of risks related to NEP's counterparties.
Through the MSA and other agreements with NEE and its subsidiaries, NEP's projects will receive the same benefits and expertise that NEE currently provides across its entire portfolio. Contracted projects with stable cash flows. The contracted nature of NEP's portfolio of projects supports expected stable long-term cash flows.
Through the MSA and other agreements with NEE and its subsidiaries, NEP's projects will receive the same benefits and expertise that NEE currently provides across its entire portfolio. Repowering opportunities.
See Note 2 – Investments in Unconsolidated Entities and – Noncontrolling Interests. (b) Third-party investors own noncontrolling Class B interests in the NEP subsidiaries that own interests in projects with net generating capacity of approximately 5,568 MW and battery storage capacity of 120 MW.
(c) Third-party investors own noncontrolling Class B membership interests in the NEP subsidiaries that own interests in projects with net generating capacity of approximately 5,622 MW and battery storage capacity of 120 MW. Third-party investors own differential membership interests in projects with net generating capacity of approximately 6,494 MW and battery storage capacity of 274 MW.
NEP believes that these standards and goals will create incremental demand for renewable energy in the future. 7 Table of Contents BUSINESS STRATEGY NEP's primary business objective is to acquire ownership interests in contracted clean energy projects from NEER or third parties that allow NEP to increase its cash distributions to the holders of its common units over time.
NEP believes that these standards and goals will create incremental demand for renewable energy in the future. 7 Table of Contents BUSINESS STRATEGY NEP's primary business objective is to deliver cash distributions to common unitholders which it plans to grow over time through accretively acquiring ownership interests in contracted clean energy projects, with a focus on renewable energy projects, from NEER or third parties and wind turbine repowering at existing projects.
The renewable energy projects and pipeline projects have a total weighted average remaining contract term of approximately 14 years at December 31, 2022 based on expected contributions to cash available for distribution. 8 Table of Contents New, well-maintained portfolio.
The renewable energy projects have a total weighted average remaining contract term of approximately 13 years at December 31, 2023 based on expected contributions to cash available for distribution. 8 Table of Contents Geographic and resource diversification. NEP's portfolio is geographically diverse across the U.S.
NEP intends to focus on acquiring ownership interests in clean energy projects in operation or under construction, maintaining a disciplined investment approach and taking advantage of opportunities to acquire ownership interests in additional projects from NEER and third parties in the future, which it believes will enable it to increase cash distributions to its common unitholders over the long term.
NEP intends to focus on acquiring ownership interests in clean energy projects in operation or under construction, maintaining a disciplined investment approach, taking advantage of opportunities to acquire ownership interests in additional projects from NEER and third parties in the future, and identifying wind turbine repowering opportunities at existing projects.
Through NEP OpCo, NEP owns a portfolio of contracted renewable generation assets consisting of wind, solar and solar-plus-storage projects, as well as contracted natural gas pipeline assets.
Through NEP OpCo, NEP owns, or has a partial ownership interest in, a portfolio of contracted renewable energy assets consisting of wind, solar and solar-plus-storage projects and a stand-alone battery storage project, as well as contracted natural gas pipeline assets (pipeline investment).
NEP intends to focus its investments in North America, where it believes industry trends present significant opportunities to acquire contracted clean energy projects in diverse regions and favorable locations. By focusing on North America, NEP believes it will be able to take advantage of NEE’s long-standing industry relationships, knowledge and experience. • Maintain a sound capital structure and financial flexibility.
By focusing on North America, NEP believes it will be able to take advantage of NEE’s long-standing industry relationships, knowledge and experience. • Maintain a sound capital structure and financial flexibility.
Item 1. Business NEP is a growth-oriented limited partnership formed to acquire, manage and own contracted clean energy projects with stable long-term cash flows. At December 31, 2022, NEP owned a controlling, non-economic general partner interest and a 46.2% limited partner interest in NEP OpCo.
Item 1. Business NEP is a growth-oriented limited partnership with a strategy that emphasizes acquiring, managing and owning contracted clean energy assets with stable long-term cash flows with a focus on renewable energy projects. At December 31, 2023, NEP owned a controlling, non-economic general partner interest and a 48.6% limited partner interest in NEP OpCo.
In addition, storage projects claiming an ITC are eligible for a 10 percentage point increase in the ITC rate if the facilities satisfy certain tax credit enhancement requirements. For taxable years beginning after 2022, renewable energy tax credits generated during the taxable year can be transferred to an unrelated transferee.
In addition, storage projects claiming an ITC are eligible for a 10 percentage point increase in the ITC rate if the facilities satisfy certain tax credit enhancement requirements.
Energy Information Administration, U.S. natural gas pipeline capacity additions were approximately 14.9 Bcf/d in 2021 and are estimated to be 13.9 Bcf/d in 2022. Policy Incentives Policy incentives in the U.S. have the effect of making the development of renewable energy projects more competitive by providing credits for a portion of the development costs or by providing favorable contract prices.
Policy Incentives Policy incentives in the U.S. have the effect of making the development of renewable energy projects more competitive by providing credits for a portion of the development costs or by providing favorable contract prices.
NEE Equity may tender its NEP OpCo common units and in exchange receive NEP common units on a one-for-one basis, or the value of such common units in cash, subject to the terms of an exchange agreement. See Part II, Item 5 – Unregistered Sales of Equity Securities and Use of Proceeds.
NEE Equity may tender its NEP OpCo common units and in exchange receive NEP common units on a one-for-one basis, or the value of such common units in cash, subject to the terms of an exchange agreement. (c) At December 31, 2023, certain project entities and the pipeline investment are subject to noncontrolling interests.
NEP intends to continually evaluate opportunities to finance future acquisitions or refinance its existing debt and seeks to limit recourse, optimize leverage, hedge exposure, extend maturities and increase cash distributions to common unitholders over the long term. • Take advantage of NEER’s operational excellence to maintain the value of the projects in NEP's portfolio.
Additionally, including for its refinancing, NEP seeks to limit recourse, optimize leverage, manage liquidity, hedge exposure and extend maturities to, among other things, maximize cash distributions to common unitholders. • Take advantage of NEER’s operational excellence to maintain the value of the projects in NEP's portfolio.
The following diagram depicts NEP's simplified ownership structure at December 31, 2022: (a) At December 31, 2022, NEE owns 617,882 NEP common units. (b) At December 31, 2022, NEE Equity owns approximately 53.8% of NEP OpCo's common units representing limited partnership interests and 100% of NEP OpCo's Class B partnership interests.
(b) At December 31, 2023, NEE Equity owns approximately 51.4% of NEP OpCo's common units representing limited partnership interests and 100% of NEP OpCo's Class B partnership interests.
Wind and solar energy generation are becoming the lowest cost energy generation technologies in many regions in the U.S. which is expected to lead to significant growth in the renewable energy industry.
Continuous improvements in renewable energy technology have resulted in wind and solar energy generation becoming the lowest cost energy generation technologies in many regions in the U.S.
The renewable energy projects in NEP's portfolio are contracted under long-term contracts that generally provide for fixed price payments over the contract term. Revenues from the Texas pipeline projects are primarily generated from firm transportation contracts based on the fixed amount of capacity reserved by the counterparties.
The contracted nature of NEP's portfolio of projects supports expected stable long-term cash flows. The renewable energy projects in NEP's portfolio are contracted under long-term contracts that generally provide for fixed price payments over the contract term.
(d) Through its ownership interest in Meade Pipeline Co, LLC, NEP has an indirect equity method investment in the Central Penn Line (CPL), which represents an approximately 39% aggregate ownership interest in the CPL. 5 Table of Contents At December 31, 2022, NEP's ownership interests in clean energy projects and pipelines in operation, excluding its non-economic ownership interests, are as follows: Each of the renewable energy projects sells substantially all of its output and related renewable energy attributes pursuant to long-term, fixed price PPAs to various counterparties.
See Note 4. 5 Table of Contents The following map shows NEP's ownership interests in clean energy projects in operation, excluding its non-economic ownership interests, and NEP's pipeline investment. Each of the renewable energy projects sells substantially all of its output and related renewable energy attributes pursuant to long-term, fixed price PPAs to various counterparties.
Wind technology is improving as a result of taller towers, longer blades and more efficient energy conversion equipment, which allow wind projects to more efficiently capture wind resource and produce more energy. Solar technology is also improving as solar cell efficiencies improve and solar equipment costs decline.
The improvements in these technologies, including taller wind towers, longer wind turbine blades, improved solar cell production and more efficient energy conversion equipment, allow the renewable energy projects to more efficiently capture resource and produce more energy which is expected to lead to continued growth in the renewable energy industry.
NEP plans to focus on high-quality, long-lived projects operating under long-term contracts that are expected to produce stable long-term cash flows. NEP believes its cash flow profile, geographic, technological and resource diversity, operational excellence and cost-efficient business model provide NEP with a significant competitive advantage and enable NEP to execute its business strategy.
NEP plans to focus on high-quality, long-lived projects operating under long-term contracts that are expected to produce stable long-term cash flows and organic growth through wind turbine repowering opportunities across its portfolio.
See further discussion of the MSA and other payments to NEE in Note 14.
HUMAN CAPITAL NEP does not have any employees and relies solely on employees of affiliates of the manager under the MSA, including employees of NEE and NEER, to serve as officers of NEP. See further discussion of the MSA and other payments to NEE in Note 15.
In January 2023, NEP sold its interest in a 62 MW wind project located in North Dakota as a result of a buyout option under the project's PPA. See Note 2 – Disposal of Wind Project.
See Note 2 – Investments in Unconsolidated Entities and – Noncontrolling Interests. (b) Reflects the sale of a 62 MW wind project in January 2023. See Note 2 – Disposal of Wind Project.
Removed
(c) At December 31, 2022, certain project and pipeline entities are subject to noncontrolling interests.
Added
NEP believes its cash flow profile, geographic, technological and resource diversity, operational excellence and cost-efficient business model provide NEP with a significant competitive advantage and enable NEP to execute its business strategy. The following diagram depicts NEP's simplified ownership structure at December 31, 2023: (a) At December 31, 2023, NEE owns 2,377,882 NEP common units.
Removed
Third-party investors own differential membership interests in projects with net generating capacity of approximately 6,526 MW and battery storage capacity of 274 MW. In January 2023, NEP bought out differential membership interests in projects with net generating capacity of approximately 500 MW. See Note 2 – Noncontrolling Interests, Note 10 and Note 13 – Class B Noncontrolling Interests.
Added
During 2023, NEP generated approximately 25.8 million MWh and 3.8 million MWh from wind and solar generating facilities, respectively. During 2022, NEP generated approximately 23.8 million MWh and 3.4 million MWh from wind and solar generating facilities, respectively.
Removed
At December 31, 2022, NEP owned interests in the following natural gas pipeline assets: Pipeline (a) Miles of Pipeline Diameter (inches) Net Capacity per day (b) Contracted Capacity per day (b) Contract Expiration In-Service Date Location NEP Acquisition/Investment Date NET Mexico (c) 120 42" / 48" 2.07 Bcf 1.94 Bcf 2023 – 2035 December 2014 Texas October 2015 Eagle Ford 158 16" / 24" – 30" 1.10 Bcf 0.65 Bcf 2023 – 2027 September 2011 / June 2013 Texas October 2015 Other 108 8" – 16" 0.40 Bcf 0.28 Bcf 2029 – 2035 Built in the 1960s – 1980s; upgraded in 2001 / others placed in service in 2002 – 2015 Texas October 2015 Investment in CPL (d) 191 30" / 42" 0.72 Bcf 0.72 Bcf 2033 – 2041 October 2018 / October 2021 Pennsylvania November 2019 ____________________ (a) NEP's ownership interests in the pipelines are pledged as collateral securing various financings.
Added
Pipeline investment – At December 31, 2023, through its ownership interest in Meade Pipeline Co, LLC, NEP has an indirect equity method investment in the Central Penn Line (CPL), natural gas pipeline assets in Pennsylvania with 191 miles of pipeline with 30 inch and 42 inch diameter pipes which is fully contracted with contract expirations between 2033 and 2041.
Removed
Additionally, third-party investors own noncontrolling Class B interests in the respective NEP subsidiaries that have ownership interests in these pipelines. See Note 2 – Noncontrolling Interests and Note 13 – Class B Noncontrolling Interests. (b) Reflects NEP's net ownership interest in pipeline capacity based on respective ownership interests as discussed in (c) and (d).
Added
NEP's net ownership interest represents an approximately 39% aggregate ownership interest in the CPL and net capacity of 0.73 billion cubic feet per day. In December 2023, NEP sold its interests in a portfolio of seven natural gas pipelines assets in Texas (Texas pipelines).
Removed
(c) A subsidiary of Pemex owns a 10% interest in the NET Mexico pipeline.
Added
Additionally, combining wind and solar energy generation facilities with battery storage projects allows for the utilization of energy stored when the renewable resource is not as strong and alleviates congestion.
Removed
NEP OpCo pays NEE an annual management fee and makes certain payments to NEE based on the achievement by NEP OpCo of certain target quarterly distribution levels to its common unitholders (incentive distribution rights fees, or IDRs). See Note 14 – Management Services Agreement.
Added
For taxable years beginning after 2022, renewable energy tax credits generated during the year can be transferred to an unrelated purchaser for cash, providing an additional path, along with sales of differential membership interests, for developers to monetize the value of the renewable energy tax credits.
Removed
In addition, certain subsidiaries of NEP are parties to transportation agreements and a fuel management agreement with a subsidiary of NEE. See Note 14 – Transportation and Fuel Management Agreements.
Added
NEP intends to focus its investments in North America, where it believes industry trends present significant opportunities to acquire contracted clean energy projects in diverse regions and favorable locations and repower existing wind projects.
Removed
Renewable energy technology has improved in recent years. Wind and solar energy generation are becoming the lowest cost energy generation technologies in many regions in the U.S. which is expected to lead to significant growth in the renewable energy industry.
Added
NEP intends to continually seek the most competitive cost of capital to finance growth associated with future acquisitions and wind turbine repowerings, with a focus on maintaining a positive spread between its cost to finance an investment or acquisition and the value of the incremental cash flows.
Removed
Natural Gas Pipeline Transportation Industry The U.S. natural gas pipeline network is a highly integrated network that transports natural gas through approximately 3 million miles of mainline and other pipelines that link natural gas production areas and storage facilities with consumers. Based on data compiled through October 27, 2022 by the U.S.
Added
NEP is focused on executing wind turbine repowering opportunities across its portfolio and expects that these investments will allow NEP to refresh and enhance the performance of the wind turbine equipment and start a new 10 years of PTCs, collectively resulting in attractive returns. Contracted projects with stable cash flows.
Removed
NEP believes its cash flow profile, its credit rating, the long-term nature of its contracts and its ability to raise capital provide flexibility for optimizing its capital structure and increasing distributions.
Added
Fish and Wildlife Service listed the northern long-eared bat as endangered, with two more bat species expected to be listed in 2024 and 2025.
Removed
Approximately 89 % of NEP's portfolio, based on expected contributions to cash available for distribution, of renewable energy projects and pipelines have been operating for fewer than nine years.
Removed
Because NEP's portfolio of projects is relatively new and uses what NEP believes is industry-leading technology, NEP believes that it will achieve the expected levels of availability and performance without incurring unexpected operating and maintenance costs. Geographic and resource diversification. NEP's portfolio is geographically diverse across the U.S.
Removed
Wind technology is improving as a result of taller towers, longer blades and more efficient energy conversion equipment, which allow wind projects to more efficiently capture wind resource and produce more energy. Solar technology is also improving as solar cell efficiencies improve and installation costs are declining.
Removed
Fish and Wildlife Services proposed new rules that would add two bat species to the endangered species list. If such rules are enacted, certain of NEP’s existing wind generating facilities would incur additional costs to comply with the proposed regulations.
Removed
In April 2022, a subsidiary of NEER entered into an agreement with the U.S. Department of Justice (DOJ) to implement an eagle management plan requiring, among other things, certain NEP wind sites to apply for eagle "take" permits under the BGEPA .
Removed
Under the agreement, the DOJ will not prosecute NEP or its subsidiaries for any eagle fatalities that have previously occurred, or may occur, at NEP's wind facilities operated by NEER nationwide prior to the earlier of the date such facility obtains a permit or the date that is up to ten years following court approval of the agreement, provided that the NEER subsidiary remains in compliance with its commitments under the agreement.
Removed
NEP voluntarily undertakes adaptive management practices designed to avoid and minimize eagle impacts and continues to believe that the criminal liability provisions of these laws were intended only to apply to hunting, poaching and other intentional activities, and do not apply to accidental collisions with wind turbines or other manufactured items, such as airplanes, locomotives, automobiles and buildings. 9 Table of Contents HUMAN CAPITAL NEP does not have any employees and relies solely on employees of affiliates of the manager under the MSA, including employees of NEE and NEER, to serve as officers of NEP.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

164 edited+17 added−23 removed172 unchanged
Biggest changeThere are risks associated with the operation of NEP's renewable energy projects and pipelines, including: • breakdown or failure of, or damage to, turbines, blades, blade attachments, solar panels, mirrors, pipelines and other equipment, which could reduce a project’s energy output or a pipeline's ability to transport natural gas at expected levels or result in personal injury or loss of life; • catastrophic events, such as fires, earthquakes, hurricanes, severe weather, tornadoes, ice or hail storms, other meteorological conditions, landslides and other similar events beyond NEP's control, which could severely damage or destroy all or a part of a project, pipeline or interconnection and transmission facilities, reduce its energy output or capacity, or result in personal injury or loss of life; • technical performance below expected levels, including, but not limited to, the failure of wind turbines, solar panels, mirrors and other equipment to produce energy as expected due to incorrect measures of expected performance provided by equipment suppliers; • interference from nearby wind projects or other structures; • leaks, explosions or mechanical problems at a pipeline, which could reduce a pipeline's ability to transport natural gas at expected levels or result in significant damage to property, environmental pollution, personal injury or loss of life; • increases in the cost of operating the projects; • operator, contractor or supplier error or failure to perform or to fulfill any warranty obligations; • serial design or manufacturing defects, which may not be covered by warranty; • extended events, including, but not limited to, force majeure, under certain PPAs that may give rise to a termination right of the customer under such a PPA (renewable energy counterparty); • failure to comply with permits and the inability to renew or replace permits that have expired or terminated; • the inability to operate within limitations that may be imposed by current or future governmental permits; • replacements for failed equipment, which may need to meet new interconnection standards or require system impact studies and compliance that may be difficult or expensive to achieve; • land use, environmental or other regulatory requirements; • disputes with the BLM, other owners of land on which NEP's projects are located or nearby landowners; • changes in laws, regulations, policies and treaties; • government or utility exercise of eminent domain power or similar events; • existence of liens, encumbrances and other imperfections in title affecting real estate interests; and • insufficient insurance, warranties or performance guarantees to cover any or all lost revenues or increased expenses from the foregoing.
Biggest changeThere are risks associated with the operation of NEP's renewable energy projects and pipelines, including: • breakdown or failure, including, but not limited to, leaks, fires, explosions, mechanical problems or other major events, of, or damage to, turbines, blades, blade attachments, solar panels, mirrors, pipelines, batteries and other equipment, which could reduce a project’s energy output or a pipeline's ability to transport natural gas at expected levels or result in significant property damage, environmental pollution, personal injury or loss of life; • catastrophic events, such as fires, earthquakes, hurricanes, severe weather, tornadoes, ice and hail storms, other meteorological conditions, landslides and other similar events beyond NEP's control, which could severely damage or destroy all or a part of a project, pipeline or interconnection and transmission facilities, reduce its energy output or capacity, or result in property damage, personal injury or loss of life; • technical performance below expected levels, including, but not limited to, the failure of wind turbines, solar panels, mirrors, batteries and other equipment to produce energy as expected due to incorrect measures of expected performance provided by equipment suppliers; • interference from nearby wind projects or other structures; • increases in the cost of operating the projects; • operator, contractor or supplier error or failure to perform or to fulfill any warranty obligations; • serial design, manufacturing or other defects, which may not be covered by warranty; • extended events, including, but not limited to, force majeure under certain PPAs that may give rise to a termination right of the customer under such a PPA (renewable energy counterparty); • failure to comply with permits and the inability to renew or replace permits that have expired or terminated; • the inability to operate within limitations that may be imposed by current or future governmental permits; • replacements for failed equipment, which may need to meet new interconnection standards or require system impact studies and compliance that may be difficult or expensive to achieve; • land use, environmental or other regulatory requirements; • risks associated with potential harm to wildlife; • disputes with the BLM, other owners of land on which NEP's projects are located or nearby landowners; • changes in laws, regulations, policies and treaties; • government or utility exercise of eminent domain power or similar events; • existence of liens, encumbrances and other imperfections in title affecting real estate interests; and • insufficient insurance, warranties or performance guarantees to cover any or all lost revenues or increased expenses from the foregoing.
A suspension of NEP activities within a federal right-of-way may be issued by BLM to protect public health or safety or the environment. An order to suspend NEP activities may be issued by BLM prior to an administrative proceeding. Such an order may be issued verbally or in writing, and may require immediate compliance by NEP.
A suspension of NEP activities within a federal right-of-way may be issued by the BLM to protect public health or safety or the environment. An order to suspend NEP activities may be issued by the BLM prior to an administrative proceeding. Such an order may be issued verbally or in writing, and may require immediate compliance by NEP.
Various factors could contribute to construction-cost overruns, construction halts or delays or failure to commence commercial operations, including: • delays in obtaining, or the inability to obtain, necessary permits and licenses; • delays and increased costs related to the interconnection of new projects to the transmission system; • the inability to acquire or maintain land use and access rights; • the failure to receive contracted third-party services; • interruptions to dispatch at the projects; • supply chain disruptions, including as a result of changes in international trade laws, regulations, agreements, treaties, taxes, tariffs, duties or policies of the U.S. or other countries in which NEP's suppliers are located; • work stoppages; • labor disputes; • weather interferences; • unforeseen engineering, environmental and geological problems, including, but not limited to, discoveries of contamination, protected plant or animal species or habitat, archaeological or cultural resources or other environment-related factors; • unanticipated cost overruns in excess of budgeted contingencies; and • failure of contracting parties to perform under contracts.
Various factors could contribute to construction-cost overruns, construction halts or delays or failure to commence commercial operations, including: • delays in obtaining, or the inability to obtain, necessary permits and licenses; • delays and increased costs related to the interconnection of new projects to the transmission system; • the inability to acquire or maintain land use and access rights; • the failure to receive contracted third-party services; • interruptions to dispatch at the projects; • supply chain disruptions, including as a result of changes in international trade laws, regulations, agreements, treaties, taxes, tariffs, duties or policies of the U.S. or other countries in which NEP's suppliers are located; • work stoppages; • labor disputes; • weather interferences; • unforeseen engineering, environmental and geological problems, including, but not limited to, discoveries of contamination, protected plant or animal species or habitat, archaeological or cultural resources or other environment-related factors; • unanticipated cost overruns in excess of budgeted contingencies; and • failure of contracting parties, including suppliers, to perform under contracts.
These factors include worldwide economic conditions; weather conditions and seasonal trends; the levels of domestic and Mexican natural gas production and consumer demand; fluctuations in demand from electric power generators and industrial customers; the availability of imported liquid natural gas (LNG); the ability to export LNG; the availability of transportation systems with adequate capacity; the volatility and uncertainty of regional pricing differences; the price and availability of alternative fuels; the effect of energy efficiency and conservation measures; the nature and extent of governmental regulation and taxation; worldwide political events, including, but not limited to, actions taken by foreign natural gas producing nations and changes in international trade laws, regulations, agreements, treaties or policies of the U.S. or other countries; and the anticipated future prices of natural gas, LNG and other commodities.
These factors include worldwide economic conditions; weather conditions and seasonal trends; the levels of domestic natural gas production and consumer demand; fluctuations in demand from electric power generators and industrial customers; the availability of imported liquid natural gas (LNG); the ability to export LNG; the availability of transportation systems with adequate capacity; the volatility and uncertainty of regional pricing differences; the price and availability of alternative fuels; the effect of energy efficiency and conservation measures; the nature and extent of governmental regulation and taxation; worldwide political events, including, but not limited to, actions taken by foreign natural gas producing nations and changes in international trade laws, regulations, agreements, treaties or policies of the U.S. or other countries; and the anticipated future prices of natural gas, LNG and other commodities.
In addition, since the number of third parties willing to make an offer for a NEP OpCo ROFR asset may be limited due to the ROFR agreement, NEP OpCo may consummate the sale of any NEP OpCo ROFR asset on less favorable terms, or may not be able to sell such asset, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
In addition, since the number of third parties willing to make an offer for a NEP OpCo ROFR asset may be limited due to the ROFR agreement, NEP OpCo may consummate the sale of any NEP OpCo ROFR asset on less favorable terms, or may not be able to sell such asset, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
If NEP cannot locate a service provider that is able to provide NEP with substantially similar services as NEE Management and NEER provide under the MSA and the management sub-contract, respectively, on similar terms, it would likely have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
If NEP cannot locate a service provider that is able to provide NEP with substantially similar services as NEE Management and NEER provide under the MSA and the management sub-contract, respectively, on similar terms, it would likely have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
For example, NEP’s partnership agreement provides that: • whenever NEP GP or the board, or any director or any committee of the board (including, but not limited to, the conflicts committee), makes a determination or takes, or declines to take, any other action in its respective capacity, they are required to act in good faith; • NEP GP will not have any liability to NEP or its unitholders for decisions made in its capacity as a general partner so long as such decisions are made in good faith; • NEP GP and its officers and directors and the officers and directors of NEP will not be liable for monetary damages to NEP or NEP's limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining such persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and • NEP GP and its affiliates and NEP’s directors will not be in breach of their obligations under NEP’s partnership agreement (including, but not limited to, any duties to NEP or its unitholders) if a transaction with an affiliate or the resolution of a conflict of interest is: • approved by the conflicts committee of the board, although the board is not obligated to seek such approval; • approved by the vote of a majority of the outstanding common units, excluding any common units owned by NEP GP and its affiliates if the conflict involves NEP GP or any of its affiliates; • determined by the board to be on terms no less favorable to NEP than those generally being provided to or available from unrelated third parties; or • determined by the board to be fair and reasonable to NEP, taking into account the totality of the relationships among the parties involved, including, but not limited to, other transactions that may be particularly favorable or advantageous to NEP.
For example, NEP’s partnership agreement provides that: • whenever NEP GP or the board, or any director or any committee of the board (including, but not limited to, the conflicts committee), makes a determination or takes, or declines to take, any other action in its respective capacity, they are required to act in good faith; 21 Table of Contents • NEP GP will not have any liability to NEP or its unitholders for decisions made in its capacity as a general partner so long as such decisions are made in good faith; • NEP GP and its officers and directors and the officers and directors of NEP will not be liable for monetary damages to NEP or NEP's limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining such persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and • NEP GP and its affiliates and NEP’s directors will not be in breach of their obligations under NEP’s partnership agreement (including, but not limited to, any duties to NEP or its unitholders) if a transaction with an affiliate or the resolution of a conflict of interest is: • approved by the conflicts committee of the board, although the board is not obligated to seek such approval; • approved by the vote of a majority of the outstanding common units, excluding any common units owned by NEP GP and its affiliates if the conflict involves NEP GP or any of its affiliates; • determined by the board to be on terms no less favorable to NEP than those generally being provided to or available from unrelated third parties; or • determined by the board to be fair and reasonable to NEP, taking into account the totality of the relationships among the parties involved, including, but not limited to, other transactions that may be particularly favorable or advantageous to NEP.
Any such loss or curtailment of NEP's rights to use the land on which its projects are or will be located as a result of any lienholders or leaseholders that have rights that are superior to NEP's rights or the BLM’s suspension of its federal rights-of-way grants could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
Any such loss or curtailment of NEP's rights to use the land on which its projects are or will be located as a result of any lienholders or leaseholders that have rights that are superior to NEP's rights or the BLM’s suspension of its federal rights-of-way grants could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
Any of these risks could cause NEP's financial returns on these investments to be lower than expected or otherwise delay or prevent the completion of such projects or distribution of cash to NEP, or could cause NEP to operate below expected capacity or availability levels, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
Any of these risks could cause NEP's financial returns on these investments to be lower than expected or otherwise delay or prevent the completion of such projects or distribution of cash to NEP, or could cause NEP to operate below expected capacity or availability levels, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
The failure of NEER to return funds to NEP's subsidiaries for any reason could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders. NEER's right of first refusal may adversely affect NEP's ability to consummate future sales or to obtain favorable sale terms.
The failure of NEER to return funds to NEP's subsidiaries for any reason could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders. NEER's right of first refusal may adversely affect NEP's ability to consummate future sales or to obtain favorable sale terms.
Changes in state regulatory treatment are unpredictable and could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders. The structure of the energy industry and regulation in the U.S. is currently, and may continue to be, subject to challenges and restructuring proposals.
Changes in state regulatory treatment are unpredictable and could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders. The structure of the energy industry and regulation in the U.S. is currently, and may continue to be, subject to challenges and restructuring proposals.
If laws, regulations or policies limit the availability of the PTC or the ITC, the projects could generate reduced revenues and reduced economic returns, experience increased financing costs and encounter difficulty obtaining financing on acceptable terms. Additionally, some states with RPS targets have met, or in the near future will meet, their renewable energy targets.
If laws, regulations or policies limit the availability or transferability of the PTC or the ITC, the projects could generate reduced revenues and reduced economic returns, experience increased financing costs and encounter difficulty obtaining financing on acceptable terms. Additionally, some states with RPS targets have met, or in the near future will meet, their renewable energy targets.
An inability to obtain financing on commercially reasonable terms could significantly limit NEP’s ability to consummate future acquisitions and pursue other growth opportunities. In addition, the issuance of NEP common units and securities convertible into, or settleable with, NEP common units could cause significant common unitholder dilution and reduce the cash distribution per common unit.
An inability to obtain financing on commercially reasonable terms could also significantly limit NEP’s ability to consummate future acquisitions and pursue other growth opportunities. In addition, the issuance of NEP common units and securities convertible into, or settleable with, NEP common units could cause significant common unitholder dilution and reduce the cash distribution per common unit.
Such events or actions could significantly decrease or eliminate the revenues of a project or pipeline, significantly increase its operating costs, cause a default under NEP's financing agreements or give rise to damages or penalties to a PPA or transportation agreement counterparty, another contractual counterparty, a governmental authority or other third parties or cause defaults under related contracts or permits.
Such events or actions could significantly decrease or eliminate the revenues of a project or pipeline, significantly increase its operating costs, cause a default under NEP's financing agreements or give rise to damages or penalties payable to a PPA or transportation agreement counterparty, another contractual counterparty, a governmental authority or other third parties or cause defaults under related contracts or permits.
Any of the foregoing could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders. Changes in weather can also affect the level of wind and solar resource available, and thus the production of electricity, at NEP's power generating facilities.
Any of the foregoing could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders. Changes in weather can also affect the level of wind and solar resource available, and thus the production of electricity, at NEP's power generating facilities.
If holders of the noncontrolling Class B interests, convertible notes or any convertible securities issued in the future, were to dispose of a substantial portion of these common units in the public market following such a conversion or settlement, whether in a single transaction or series of transactions, it could adversely affect the market price for NEP's common units.
If holders of the noncontrolling Class B membership interests, convertible notes or any convertible securities issued in the future, were to dispose of a substantial portion of these common units in the public market following such a conversion or settlement, whether in a single transaction or series of transactions, it could adversely affect the market price for NEP's common units.
NEP has issued and outstanding convertible notes and certain NEP OpCo subsidiaries have issued and outstanding noncontrolling Class B interests in their subsidiaries that may be settled in whole or in part as specified in the related limited liability company agreement, at NEP's election with NEP common units, and may issue similar securities in the future.
NEP has issued and outstanding convertible notes and certain NEP OpCo subsidiaries have issued and outstanding noncontrolling Class B membership interests in their subsidiaries that may be settled in whole or in part as specified in the related limited liability company agreement, at NEP's election with NEP common units, and may issue similar securities in the future.
In certain instances, rights-of-way may be subordinate to the rights of government agencies, which could result in costs or interruptions to NEP's service. Restrictions on NEP's ability to use rights-of-way could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
In certain instances, rights-of-way may be subordinate to the rights of government agencies, which could result in costs or interruptions to NEP's service. Restrictions on NEP's ability to use rights-of-way could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
If the values of these financial contracts change in a manner that NEP does not anticipate, or if a counterparty fails to perform under a contract, it could have a material adverse effect on its business, financial condition, results of operations and ability to make cash distributions to its unitholders.
If the values of these financial contracts change in a manner that NEP does not anticipate, or if a counterparty fails to perform under a contract, it could have a material adverse effect on its business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
Under the CSCS agreement, guarantees and letters of credit that have been provided by NEECH, NEER and other NEE affiliates to counterparties on behalf of NEP's subsidiaries to satisfy NEP's subsidiaries’ contractual obligations to provide credit support, including, but not limited to, under PPAs. These NEE affiliates also have provided credit support to lenders to fund reserve accounts.
Under the CSCS agreement, guarantees and letters of credit have been provided by NEECH, NEER and other NEE affiliates to counterparties on behalf of NEP's subsidiaries to satisfy NEP's subsidiaries’ contractual obligations to provide credit support, including, but not limited to, under PPAs. These NEE affiliates also have provided credit support to lenders to fund reserve accounts.
A failure to produce sufficient energy or to be sufficiently available to meet NEP's commitments under its PPAs could result in the payment of damages or the termination of PPAs and could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
A failure to produce sufficient energy or to be sufficiently available to meet NEP's commitments under its PPAs could result in the payment of damages or the termination of PPAs and could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
Under certain other financing agreements, noncontrolling Class B investors own interests in certain NEP subsidiaries and receive a portion of the related NEP subsidiaries’ cash distributions specified in the applicable limited liability company agreements. NEP has the option (buyout right), subject to certain limitations, to purchase 100% of the noncontrolling Class B interests during specified periods.
Under certain other financing agreements, noncontrolling Class B investors own membership interests in certain NEP subsidiaries and receive a portion of the related NEP subsidiaries’ cash distributions specified in the applicable limited liability company agreements. NEP has the option (buyout right), subject to certain limitations, to purchase 100% of the noncontrolling Class B membership interests during specified periods.
NEP will have the option to deliver NEP common units for the remainder, if any, of NEP's conversion obligation in excess of the aggregate principal amount of the notes being converted. NEP has the option, subject to certain limitations and extensions, to purchase the noncontrolling Class B interests in those NEP OpCo subsidiaries.
NEP will have the option to deliver NEP common units for the remainder, if any, of NEP's conversion obligation in excess of the aggregate principal amount of the notes being converted. NEP has the option, subject to certain limitations and extensions, to purchase the noncontrolling Class B membership interests in those NEP OpCo subsidiaries.
All of the foregoing events, including, but not limited to, a failure of NEP OpCo to have sufficient funds to satisfy its reimbursement obligations, could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
All of the foregoing events, including, but not limited to, a failure of NEP OpCo to have sufficient funds to satisfy its reimbursement obligations, could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
If the agreements with NEE Management or NEER are terminated, NEP may be unable to contract with a substitute service provider on similar terms. NEE's affiliates provide, or arrange for the provision of, administrative, O&M and construction management services under agreements with NEE Management and NEER, respectively.
If certain agreements with NEE Management or NEER are terminated, NEP may be unable to contract with a substitute service provider on similar terms. NEE's affiliates provide, or arrange for the provision of, administrative, O&M and construction management services under agreements with NEE Management and NEER, respectively.
The indemnification arrangements to which NEE Management and its affiliates are a party may also give rise to legal claims for indemnification, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
The indemnification arrangements to which NEE Management and its affiliates are a party may also give rise to legal claims for indemnification, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
In addition, NEP may choose to finance all or a portion of the development costs of any expansion or repowering project through the sale of additional common units or securities convertible into, or settleable with, common units, which could result in dilution to NEP’s unitholders, or through other financings which could result in additional expense.
In addition, NEP may choose to finance all or a portion of the development costs of any repowering project through the sale of additional common units or securities convertible into, or settleable with, common units, which could result in dilution to NEP’s unitholders, or through other financings which could result in additional expense.
The holders of the noncontrolling Class B interests generally have certain registration rights that would facilitate such dispositions promptly and NEP cannot guarantee that these holders will not dispose of a substantial portion or all of their common units promptly upon conversion or settlement.
The holders of the noncontrolling Class B membership interests generally have certain registration rights that would facilitate such dispositions promptly and NEP cannot guarantee that these holders will not dispose of a substantial portion or all of their common units promptly upon conversion or settlement.
If the FERC decreases the prices paid to NEP for energy delivered under any of its PPAs, NEP’s revenues could be below its projections and its business, financial condition, results of operations and ability to make cash distributions to its unitholders could be materially adversely affected.
If the FERC decreases the prices paid to NEP for energy delivered under any of its PPAs, NEP’s revenues could be below its projections and its business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders could be materially adversely affected.
The failure of some or all of NEP's projects to perform according to NEP's expectations as well as basis risk could have a material adverse effect on its business, financial condition, results of operations and ability to make cash distributions to its unitholders.
The failure of some or all of NEP's projects to perform according to NEP's expectations as well as basis risk could have a material adverse effect on its business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
NEP's ability to extend, renew or replace its existing PPAs, natural gas transportation agreements or other customer contracts depends on a number of factors beyond its control, including, but not limited to: • whether the PPA counterparty has a continued need for energy at the time of the agreement’s expiration, which could be affected by, among other things, the presence or absence of governmental incentives or mandates, prevailing market prices, and the availability of other energy sources; • the amount of commercial natural gas supply available to its pipelines' systems and changing natural gas supply flow patterns in North America; • the satisfactory performance of NEP's obligations under such PPAs, natural gas transportation agreements or other customer contracts; • the regulatory environment applicable to NEP's contractual counterparties at the time; • macroeconomic factors present at the time, such as population, business trends, international trade laws, regulations, agreements, treaties or policies of the U.S. or other countries and related energy demand; and • the effects of regulation on the contracting practices of NEP's contractual counterparties.
NEP's or its pipeline investment's ability to extend, renew or replace its existing PPAs, natural gas transportation agreements or other customer contracts depends on a number of factors beyond its control, including, but not limited to: • whether the PPA counterparty has a continued need for energy at the time of the agreement’s expiration, which could be affected by, among other things, the presence or absence of governmental incentives or mandates, prevailing market prices, and the availability of other energy sources; • the amount of commercial natural gas supply available to its pipeline investment's systems and changing natural gas supply flow patterns in North America; • the satisfactory performance of NEP's and its pipeline investment's obligations under such PPAs, natural gas transportation agreements or other customer contracts; • the regulatory environment applicable to NEP's contractual counterparties at the time; • macroeconomic factors present at the time, such as population, business trends, international trade laws, regulations, agreements, treaties or policies of the U.S. or other countries and related energy demand; and • the effects of regulation on the contracting practices of NEP's contractual counterparties.
A decision by NEP GP or the board to favor its own interests or the interests of NEE over NEP's interests and the interests of its unitholders could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
A decision by NEP GP or the board to favor its own interests or the interests of NEE over NEP's interests and the interests of its unitholders could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
Any cost overruns NEP experiences or liquidated damages NEP pays could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
Any cost overruns NEP experiences or liquidated damages NEP pays could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
NEP and its subsidiaries have entered into financing agreements which contain various covenants and restrictive provisions that may limit their ability to, among other things: • incur or guarantee additional debt; • make distributions on or redeem or repurchase common units; • make certain investments and acquisitions; • incur certain liens or permit them to exist; • enter into certain types of transactions with affiliates; • merge or consolidate with another company; and • transfer, sell or otherwise dispose of projects.
NEP and its subsidiaries have entered into financing agreements which contain various covenants and restrictive provisions and certain financial ratios that may limit their ability to, among other things: • incur or guarantee additional debt; • make distributions on or redeem or repurchase common units; • make certain investments and acquisitions; • incur certain liens or permit them to exist; • enter into certain types of transactions with affiliates; • merge or consolidate with another company; and • transfer, sell or otherwise dispose of projects.
In addition, although return-of-capital distributions are generally non-taxable to the extent of a unitholder’s basis in its units, such distributions will reduce the unitholder’s adjusted tax basis in its units, which will result in an increase in the amount of gain (or a decrease in the amount of loss) that will be recognized by the unitholder on a future disposition of NEP's common units, and to the extent any return-of-capital distribution exceeds a unitholder’s basis, such distributions will be treated as gain on the sale or exchange of the units. 25 Table of Contents Item 1B.
In addition, although return-of-capital distributions are generally non-taxable to the extent of a unitholder’s basis in its units, such distributions will reduce the unitholder’s adjusted tax basis in its units, which will result in an increase in the amount of gain (or a decrease in the amount of loss) that will be recognized by the unitholder on a future disposition of NEP's common units, and to the extent any return-of-capital distribution exceeds a unitholder’s basis, such distributions will be treated as gain on the sale or exchange of the units. 24 Table of Contents Item 1B.
Various factors could affect the availability of such projects to grow NEP's business, including, but not limited to, the following factors and those described in more detail in the additional risk factors below: • competing bids for a project from companies that may have substantially greater purchasing power, capital or other resources or a greater willingness to accept lower returns or more risk than NEP does; • a failure to agree to commercially reasonable financial or legal terms with sellers with respect to any proposed acquisitions; • fewer acquisition opportunities than NEP expects, which could result from, among other things, available projects having less desirable economic returns or higher risk profiles than NEP believes suitable for its acquisition strategy and future growth; • NEP's inability to obtain financing for acquisitions on economically acceptable terms; • NEP's failure to successfully complete construction of and finance projects, to the extent that it decides to acquire projects that are not yet operational or to otherwise pursue construction activities with respect to new projects; • NEP's inability to obtain regulatory approvals or other necessary consents to consummate an acquisition; and • the presence or potential presence of: ◦ pollution, contamination or other wastes at the project site; ◦ protected plant or animal species; ◦ archaeological or cultural resources; ◦ wind waking or solar shadowing effects caused by neighboring activities, which reduce potential energy production by decreasing wind speeds or reducing available insolation; ◦ land use restrictions and other environment-related siting factors; and ◦ local opposition to wind and solar projects and pipeline projects in certain markets due to concerns about noise, health, environmental or other alleged impacts of such projects.
Various factors could affect the availability of such acquisitions, including, but not limited to, the following factors and those described in more detail in the additional risk factors below: • competing bids for a project from companies that may have substantially greater purchasing power, capital or other resources or a greater willingness to accept lower returns or more risk than NEP does; • a failure to agree to commercially reasonable financial or legal terms with sellers with respect to any proposed acquisitions; • fewer acquisition opportunities than NEP expects, which could result from, among other things, available projects having less desirable economic returns or higher risk profiles than NEP believes suitable for its acquisition strategy and future growth; • NEP's inability to obtain financing for acquisitions on economically acceptable terms; • NEP's failure to successfully complete construction of and finance projects, to the extent that it decides to acquire projects that are not yet operational or to otherwise pursue construction activities with respect to new projects; • NEP's inability to obtain regulatory approvals or other necessary consents to consummate an acquisition; and • the presence or potential presence of: ◦ pollution, contamination or other wastes at the project site; 14 Table of Contents ◦ protected plant or animal species; ◦ archaeological or cultural resources; ◦ wind waking or solar shadowing effects caused by neighboring activities, which reduce potential energy production by decreasing wind speeds or reducing available insolation; ◦ land use restrictions and other environment-related siting factors; and ◦ local opposition to wind and solar projects in certain markets due to concerns about noise, health, environmental or other alleged impacts of such projects.
Any of these above factors could limit NEP's acquisition opportunities and prevent it from executing, or diminish its ability to execute, its growth strategy.
Any of these above factors could limit NEP's acquisition opportunities and prevent it from executing, or diminish its ability to execute, its acquisition strategy.
Any settlement of claims or unfavorable outcomes or developments relating to these proceedings or disputes, such as judgments for monetary damages, injunctions or denial or revocation of permits, could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
Any settlement of claims or unfavorable outcomes or developments relating to these proceedings or disputes, such as judgments for monetary damages, penalties, injunctions or denial or revocation of permits, could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
The FERC may revoke a project's market-based rate authorization if it determines that the project entity can exercise market power in transmission or generation, creates barriers to entry, has engaged in abusive affiliate transactions or fails to meet compliance requirements associated with such rates.
The FERC may impose penalties or revoke a project's market-based rate authorization if it determines that the project entity can exercise market power in transmission or generation, creates barriers to entry, has engaged in abusive affiliate transactions or fails to meet compliance requirements associated with such rates.
These conflicts include the following situations, among others: • No agreement requires NEE or its affiliates to pursue a business strategy that favors NEP or uses NEP's projects or dictates what markets to pursue or grow. 20 Table of Contents • NEE and its affiliates are not limited in their ability to compete with NEP, and neither NEP GP nor its affiliates have any obligation to present business opportunities to NEP. • So long as the officers of NEP are officers of NEE or its affiliates, they will also devote significant time to the business of NEE or its affiliates and will be compensated by NEE or its affiliates. • The board may cause NEP to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a payment of the IDR fee. • NEP's partnership agreement replaces the fiduciary duties that would otherwise be owed by NEP GP and the directors and officers of NEP with contractual standards governing their duties and limits NEP GP’s and such directors’ and officers' liabilities and the remedies available to NEP's unitholders for actions that, without these limitations, might constitute breaches of fiduciary duty under applicable Delaware law. • Except in limited circumstances, the board has the power and authority to conduct NEP's business without the approval of NEP GP or NEP's unitholders. • Actions taken by the board may affect the amount of cash available to pay distributions to NEP's unitholders. • NEP GP has limited liability regarding NEP's contractual and other obligations. • The board controls the exercise of the rights of NEP against NEE and its affiliates, and the enforcement of the obligations that NEE and its affiliates owe to NEP.
These conflicts include the following situations, among others: • No agreement requires NEE or its affiliates to pursue a business strategy that favors NEP or uses NEP's projects or dictates what markets to pursue or grow. • NEE and its affiliates are not limited in their ability to compete with NEP, and neither NEP GP nor its affiliates have any obligation to present business opportunities to NEP. • So long as the officers of NEP are officers of NEE or its affiliates, they will also devote significant time to the business of NEE or its affiliates and will be compensated by NEE or its affiliates. • The board may cause NEP to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to settle payment obligations to NEE. • NEP's partnership agreement replaces the fiduciary duties that would otherwise be owed by NEP GP and the directors and officers of NEP with contractual standards governing their duties and limits NEP GP’s and such directors’ and officers' liabilities and the remedies available to NEP's unitholders for actions that, without these limitations, might constitute breaches of fiduciary duty under applicable Delaware law. • Except in limited circumstances, the board has the power and authority to conduct NEP's business without the approval of NEP GP or NEP's unitholders. • Actions taken by the board may affect the amount of cash available to pay distributions to NEP's unitholders. • NEP GP has limited liability regarding NEP's contractual and other obligations. • The board controls the exercise of the rights of NEP against NEE and its affiliates, and the enforcement of the obligations that NEE and its affiliates owe to NEP.
These customers could become subject to insolvency or liquidation proceedings or otherwise suffer a deterioration of their financial condition when they have not yet paid for services delivered, any of which could result in underpayment or nonpayment under such agreements. • A default or failure by NEP to satisfy minimum energy or natural gas delivery requirements or mechanical availability levels under NEP's agreements could result in damage payments to the applicable customer or termination of the applicable agreement.
These customers could become subject to insolvency or liquidation proceedings or otherwise suffer a deterioration of their financial condition when they have not yet paid for services delivered, any of which could result in underpayment or nonpayment under such agreements. • A default or failure by NEP to satisfy minimum energy requirements or mechanical availability levels under NEP's agreements could result in damage payments to the applicable customer or termination of the applicable agreement.
If project developers, including, but not limited to, other affiliates of NEE, are unsuccessful in obtaining necessary licenses or permits on acceptable terms or encounter delays in obtaining or renewing such licenses or permits, or if regulatory authorities initiate any associated investigations or enforcement actions or impose penalties or reject projects, the potential number of projects that may be available for NEP to acquire may be reduced or potential transaction opportunities may be delayed.
If project developers, including, but not limited to, other affiliates of NEE, are unsuccessful in obtaining necessary licenses or permits on acceptable terms or encounter delays in obtaining or renewing such licenses or permits, or if regulatory 15 Table of Contents authorities initiate any associated investigations or enforcement actions or impose penalties or reject projects, the potential number of projects that may be available for NEP to acquire may be reduced or potential transaction opportunities may be delayed.
Any failure to extend, renew or replace a significant portion of NEP's existing PPAs, natural gas transportation agreements or other customer contracts, or extending, renewing or replacing them at lower prices or with other unfavorable terms, or the decommissioning of a project could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
Any failure to extend, renew or replace a significant portion of NEP's or its pipeline investment's existing PPAs, natural gas transportation agreements or other customer contracts, or extending, renewing or replacing them at lower prices or with other unfavorable terms, or the decommissioning of a project could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
NEP's projects and pipelines are subject to numerous environmental, health and safety laws, regulations, guidelines, policies, directives and other requirements governing or relating to the protection of avian and other wildlife; the storage, handling, use and transportation of natural gas as well as other hazardous or toxic substances and other regulated substances, materials, and/or chemicals; air emissions, water quality, releases of hazardous materials into the environment and the prevention of and responses to releases of hazardous materials into soil and groundwater; federal, state or local land use, zoning, building and transportation laws and requirements; the presence or discovery of archaeological, religious or cultural resources at or near NEP's projects or pipelines; and the protection of workers’ health and safety, among other things.
NEP's projects and pipeline investment are subject to numerous environmental, health and safety laws, regulations, guidelines, policies, directives and other requirements governing or relating to the protection of avian, bats and other wildlife; the storage, handling, use and transportation of natural gas as well as other hazardous or toxic substances and other regulated substances, materials, and/or chemicals; air emissions, water quality, releases of hazardous materials into the environment and the prevention of and responses to releases of hazardous materials into soil and groundwater; federal, state or local land use, zoning, building and transportation laws and requirements; the presence or discovery of archaeological, religious or cultural resources at or near NEP's projects or pipeline investment; and the protection of workers’ health and safety, among other things.
If NEP's projects or pipelines do not comply with such laws, regulations, environmental licenses, permits, inspections or other requirements, NEP may be required to incur significant expenditures, pay penalties or fines, or curtail or cease operations of the affected projects or pipelines and may also be subject to criminal sanctions or injunctions, such as restrictions on how it operates its facilities.
If NEP's projects or pipeline investment do not comply with such laws, regulations, environmental licenses, permits, inspections or other requirements, NEP may be required to incur significant expenditures, pay penalties or fines, or curtail or cease operations of the affected projects or pipeline investment and may also be subject to criminal sanctions or injunctions, such as restrictions on how it operates its facilities.
If it is not economical to make those expenditures, or if NEP's projects or pipelines violate any of these laws and regulations, it may be necessary to retire the affected project or pipeline or restrict or modify its operations, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
If it is not economical to make those expenditures, or if NEP's projects or pipeline investment violate any of these laws and regulations, it may be necessary to retire the affected project or pipeline or restrict or modify its operations, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
NEP's projects and pipelines also carry inherent environmental, health and safety risks, including, without limitation, the potential for related civil litigation, regulatory compliance actions, remediation orders, fines and other penalties. Proceedings related to any such litigation or actions could result in significant expenditures as well as the restriction or elimination of the ability to operate any affected project.
NEP's projects and pipeline investment also carry inherent environmental, health and safety risks, including, without limitation, the potential for related civil litigation, regulatory compliance actions, remediation orders, fines and other penalties. Proceedings related to any such litigation or actions could result in significant expenditures as well as the restriction or elimination of the ability to operate any affected project.
Any or all of NEP's customers may fail to fulfill their obligations under their contracts with NEP, whether as a result of the occurrence of any of the following factors or otherwise: • Specified events beyond NEP's control or the control of a customer may temporarily or permanently excuse the customer from its obligation to accept and pay for delivery of energy generated by a project.
Any or all of NEP's customers may fail to fulfill their obligations under their contracts with NEP, whether as a result of the occurrence of any of the factors listed below or otherwise. • Specified events beyond NEP's control or the control of a customer may temporarily or permanently excuse the customer from its obligation to accept and pay for delivery of energy generated by a project.
Under NEP OpCo’s partnership agreement, prior to making any distributions on its units, NEP OpCo will reimburse NEP GP and its affiliates, including, but not limited to, NEE, for out-of-pocket expenses they incur and payments they make on NEP's behalf and for certain payments made under credit support 23 Table of Contents arrangements provided by NEER on behalf of NEP's subsidiaries.
Under NEP OpCo’s partnership agreement, prior to making any distributions on its units, NEP OpCo will reimburse NEP GP and its affiliates, including, but not limited to, NEE, for out-of-pocket expenses they incur and payments they make on NEP's behalf and for certain payments made under credit support arrangements provided by NEER on behalf of NEP's subsidiaries.
For example, • failure to comply with the covenants in the agreements governing these obligations could result in an event of default under those agreements, which could be difficult to cure, result in bankruptcy or, with respect to subsidiary debt, result in loss of NEP OpCo's ownership interest in one or more of its subsidiaries or in some or all of their assets as a result of foreclosure; • NEP's subsidiaries’ debt service obligations require them to dedicate a substantial portion of their cash flow to pay principal and interest on their debt, thereby reducing their cash available for distribution to NEP; • NEP's subsidiaries’ substantial indebtedness could limit NEP's ability to fund operations of any projects acquired in the future and NEP's financial flexibility, which could reduce its ability to plan for and react to unexpected opportunities or challenges; • NEP's subsidiaries’ substantial debt service obligations make NEP vulnerable to adverse changes in general economic, credit markets, capital markets, industry, competitive conditions and government regulation that could place NEP at a disadvantage compared to competitors with less debt; and • NEP's subsidiaries’ substantial indebtedness could limit NEP's ability to obtain financing for working capital, including, but not limited to, collateral postings, capital expenditures, debt service requirements, acquisitions and general partnership or other purposes.
For example, • failure to comply with the covenants in the agreements governing these obligations could result in an event of default under those agreements, which could be difficult to cure, result in bankruptcy or, with respect to subsidiary debt, result in loss of NEP OpCo's ownership interest in one or more of its subsidiaries or in some or all of their assets as a result of foreclosure; • NEP's and its subsidiaries’ debt service obligations require them to dedicate a substantial portion of their cash flow to pay principal and interest on their debt, thereby reducing, in the case of NEP's subsidiaries, their cash available for distribution to NEP and, in the case of NEP, its cash available for distribution to its unitholders; • NEP's and its subsidiaries’ substantial indebtedness could limit NEP's ability to fund operations of any projects acquired in the future and NEP's financial flexibility, which could reduce its ability to plan for and react to unexpected opportunities or challenges; • NEP's and its subsidiaries’ substantial debt service obligations make NEP vulnerable to adverse changes in general economic, credit markets, capital markets, industry, competitive conditions and government regulation that could place NEP at a disadvantage compared to competitors with less debt; • NEP's and its subsidiaries’ substantial indebtedness could limit NEP's ability to obtain financing for working capital, including, but not limited to, collateral postings, capital expenditures, debt service requirements and events of default, as well as, acquisitions and general partnership or other purposes; and • NEP's and its subsidiaries' failure to repay or refinance debt at or prior to maturity could limit NEP's ability to obtain financing for working capital.
Since the number of customers that purchase wholesale bulk energy or require the transportation of natural gas is limited, NEP may be unable to find a new customer on similar or otherwise acceptable terms or at all. In some cases, there currently is no economical alternative counterparty to the original customer.
Since the number of customers that purchase wholesale bulk energy or require the transportation of natural gas is limited, NEP or its pipeline investment may be unable to find a new customer on similar or otherwise acceptable terms or at all. In some cases, there currently is no economical alternative counterparty to the original customer.
If NEP's subsidiaries are not able to generate sufficient operating cash flow to repay their outstanding indebtedness or otherwise are unable to comply with the terms of their indebtedness, NEP could be required to reduce overhead costs, reduce the scope of its projects, sell some or all of its projects or delay construction of projects NEP may acquire, all of which could have a material adverse effect on its business, financial condition, results of operations and ability to make cash distributions to its unitholders.
If NEP's subsidiaries are not otherwise able to generate sufficient cash to repay their outstanding indebtedness or are unable to comply with the terms of their indebtedness, NEP could be required to reduce overhead costs, reduce the scope of its projects, sell some or all of its projects or delay construction of projects NEP may acquire or repower, all of which could have a material adverse effect on its business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
Additionally, under the MSA, the liability of NEE Management and its affiliates is limited to the fullest extent permitted 21 Table of Contents by law to conduct involving bad faith, fraud, willful misconduct or recklessness or, in the case of a criminal matter, to action that was known to have been unlawful.
Additionally, under the MSA, the liability of NEE Management and its affiliates is limited to the fullest extent permitted by law to conduct involving bad faith, fraud, willful misconduct or recklessness or, in the case of a criminal matter, to action that was known to have been unlawful.
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.
Operation and maintenance of renewable energy projects and pipelines involve significant risks that could result in unplanned power outages, reduced output or capacity, property damage, personal injury or loss of life.
NEP expects NEECH, NEER and other NEE affiliates, upon NEP's request and at NEER’s option, to provide credit support on behalf of any projects NEP may acquire in the future on similar terms but they are under no obligation to do so.
NEP expects NEECH, NEER and other NEE affiliates, upon NEP's request and at NEER’s option, to provide credit support on behalf of any projects NEP may acquire in the future on similar terms but they are under no obligation to 18 Table of Contents do so.
Projects and pipelines in NEP's portfolio, as well as projects or pipelines it may acquire and the transmission and other facilities of third parties on which NEP's projects rely, may also be targets of terrorist acts and affected by responses to terrorist acts, each of which could fully or partially disrupt the ability of NEP's projects or pipelines to operate.
Projects and pipeline investment in NEP's portfolio, as well as projects it may acquire and the transmission and other facilities of third parties on which NEP's projects rely, may also be targets of terrorist acts and affected by responses to terrorist acts, each of which could fully or partially disrupt the ability of NEP's projects or pipeline investment to operate.
The unavailability of interconnection, transmission, pipeline or shared facilities could adversely affect the operation of NEP's projects and pipelines and the revenues received, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
The unavailability of interconnection, transmission, pipeline or shared facilities could adversely affect the operation of NEP's projects and pipeline investment and the revenues received, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
NEER is under no obligation to make any acquisition opportunities available to NEP. In addition, pursuant to NEP’s partnership agreement, its subsidiaries generally will not have any power or authority to solicit, review, respond to or otherwise participate in certain activities or lines of business.
NEER is under no obligation to make any acquisition 19 Table of Contents opportunities available to NEP. In addition, pursuant to NEP’s partnership agreement, its subsidiaries generally will not have any power or authority to solicit, review, respond to or otherwise participate in certain activities or lines of business.
The directors appointed by NEP GP will be, and one director elected by holders of NEP’s common units may be, officers or employees of NEE or its affiliates. In addition, NEE holds voting power over certain matters that require NEP unitholder approval.
Three directors will be appointed by NEP GP, in its sole discretion. The directors appointed by NEP GP will be, and one director elected by holders of NEP’s common units may be, officers or employees of NEE or its affiliates. In addition, NEE holds voting power over certain matters that require NEP unitholder approval.
Issuances of additional securities, or the possibility that these issuances may occur, including following the conversion or settlement of securities convertible into, or settleable with, NEP common units, could make it more difficult for NEP to sell NEP common units, or securities convertible into, or settleable with, NEP common units, in the future, as well as affect NEP's decision whether and when to issue common units to purchase previously issued securities of NEP OpCo subsidiaries that are settleable with NEP common units.
Issuances of additional securities, or the possibility that these issuances may occur, including following the conversion or settlement of securities convertible into, or settleable with, NEP common units, could make it more difficult for NEP to sell NEP common units, or securities convertible into, or settleable with, NEP common units, in the future, as 16 Table of Contents well as affect NEP's decision whether and when to issue common units to purchase previously issued securities of NEP OpCo subsidiaries that are or may be settleable with NEP common units.
As a result, NEP may be unable to make distributions to its unitholders. In 18 Table of Contents addition, the financing agreements contain events of default provisions, including, but not limited to, provisions relating to certain changes in ownership of NEP or its subsidiaries and other customary provisions.
As a result, NEP may be unable to make distributions to its unitholders. In addition, the financing agreements contain events of default provisions, including, but not limited to, provisions relating to certain changes in ownership of NEP or its subsidiaries and other customary provisions.
NEP may be unable to identify attractive non-renewable energy or transmission acquisition opportunities or acquire such projects at prices and on terms that are attractive.
NEP may be unable to identify attractive renewable energy or transmission acquisition opportunities or acquire such projects or assets at prices and on terms that are attractive.
Furthermore, NEP's physical plants could be placed at greater risk of damage should changes in the global climate produce unusual variations in temperature and weather patterns, resulting in more intense, frequent and extreme weather events and abnormal levels of precipitation.
Furthermore, NEP's physical plants could be placed at greater risk of damage should changes in the global climate produce unusual 10 Table of Contents variations in temperature and weather patterns, resulting in more intense, frequent and extreme weather events and abnormal levels of precipitation.
Additionally, the actions taken to address the potential for severe weather such as 11 Table of Contents additional winterizing of critical equipment and infrastructure, modifying or alternating plant operations and expanding load shedding options could result in significant increases in costs.
Additionally, the actions taken to address the potential for severe weather such as additional winterizing of critical equipment and infrastructure, modifying or alternating plant operations and expanding load shedding options could result in significant increases in costs.
Similarly, significant portions of NEP’s credit risk may be concentrated among a limited number of customers and the failure of even one of these key customers to fulfill its contractual obligations to NEP could significantly impact NEP's business and financial results.
Similarly, significant 13 Table of Contents portions of NEP’s credit risk may be concentrated among a limited number of customers and the failure of even one of these key customers to fulfill its contractual obligations to NEP could significantly impact NEP's business and financial results.
Any attacks on NEP’s projects, pipelines or the facilities of third parties on which its projects or pipelines rely could severely damage such projects or pipelines, disrupt business operations, result in loss of service to customers and require significant time and expense to repair.
Any attacks on NEP’s projects, pipeline investment or the facilities of third parties on which its projects or pipeline investment rely could severely damage such projects or the pipeline investment, disrupt business operations, result in loss of service to customers and require significant time and expense to repair.
If NEP's subsidiaries, including NEP OpCo, do not comply with their obligations under their debt instruments, they may need to refinance all or a part of their indebtedness, which they may not be able to do on similar terms or at all.
If NEP and its subsidiaries, including NEP OpCo, do not comply with their obligations under their debt instruments, they may need to refinance all or a part of their indebtedness, which they may not be able to do on similar terms or at all.
Consequently, the impairment or loss of any one or more of those projects or pipelines could materially and, depending on the relative size of the affected projects or pipelines, disproportionately reduce NEP’s cash flows and, as a result, have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
Consequently, the impairment or loss of any one or more of those projects or the pipeline investment could materially and, depending on the relative size of the affected projects or pipeline investment, disproportionately reduce NEP’s cash flows and, as a result, have a material adverse effect on NEP's business, financial condition, results of operations and ability to grow its business and make cash distributions to its unitholders.
Taxation Risks NEP's future tax liability may be greater than expected if NEP does not generate net operating losses (NOLs) sufficient to offset taxable income 24 Table of Contents or if tax authorities challenge certain of NEP's tax positions.
Taxation Risks NEP's future tax liability may be greater than expected if NEP does not generate net operating losses (NOLs) sufficient to offset taxable income or if tax authorities challenge certain of NEP's tax positions.
To the extent that resources are not available at planned levels, the financial results from these facilities may be less than expected. NEP depends on certain of the renewable energy projects and pipelines in its portfolio for a substantial portion of its anticipated cash flows.
To the extent that resources are not available at planned levels, the financial results from these facilities may be less than expected. NEP depends on certain of the renewable energy projects and the investment in pipeline assets in its portfolio for a substantial portion of its anticipated cash flows.
Accordingly, NEP's expansion and repowering efforts may not result in additional long-term contracted revenue streams that increase the amount of cash available to execute NEP's business plan and make cash distributions to its unitholders. Geopolitical factors, terrorist acts, cyberattacks or other similar events could impact NEP's projects, pipelines or surrounding areas and adversely affect its business.
Accordingly, NEP's repowering efforts may not result in additional long-term contracted revenue streams that increase, and could decrease, the amount of cash available to execute NEP's business plan and make cash distributions to its unitholders. Geopolitical factors, terrorist acts, cyberattacks or other similar events could impact NEP's projects, pipeline investment or surrounding areas and adversely affect its business.
NEP may not be able to maintain or obtain insurance of the type and amount NEP desires at reasonable rates and NEP may elect to self-insure some of its wind and solar projects and natural gas pipelines.
NEP may not be able to maintain or obtain insurance of the type and amount NEP desires at reasonable rates and NEP may elect to self-insure some of its wind and solar projects.
Further, the IRS or other tax authorities could challenge one or more tax positions NEP or NEP OpCo takes, such as the classification of assets under the income tax depreciation rules, the characterization of expenses (including, but not limited to, NEP's share of the IDR fee) for income tax purposes, the extent to which sales, use or goods and services tax applies to operations in a particular state or the availability of property tax exemptions with respect to NEP's projects.
Further, the IRS or other tax authorities could challenge one or more tax positions NEP or NEP OpCo takes, such as the classification of assets under the income tax depreciation rules, the characterization of expenses (including, but not limited to, fees paid to NEE) for income tax purposes, the extent to which sales, use or goods and services tax applies to operations in a particular state or the availability of property tax exemptions with respect to NEP's projects.
In addition, even if the MSA is terminated, it may not terminate in respect of provisions relating to the payment of the IDR fee payable to NEE Management under that agreement, which could result in NEE or its affiliates receiving payments that could otherwise be distributed to NEP's unitholders even though NEE Management would be no longer obligated to provide services to NEP under the MSA.
In addition, even if the MSA is terminated, it may not terminate in respect of provisions relating to all fees payable to NEE Management under that agreement, which could result in NEE or its affiliates receiving payments that could otherwise be distributed to NEP's unitholders even though NEE Management would be no longer obligated to provide services to NEP under the MSA.
These laws, regulations and policies have had a significant impact on the development of clean energy and they could be changed, reduced or eliminated at any time.
These laws, regulations and policies, such as the IRA, have had a significant impact on the development of clean energy and they could be changed, reduced or eliminated at any time.
The elimination of, loss of or reduction in such incentives, or the imposition of additional taxes, tariffs, duties or other assessments on clean energy or the equipment necessary to generate or deliver it, such as policies in place to limit certain imports from China and other Southeast Asian countries, could decrease the attractiveness of clean energy projects to developers, including, but not limited to, NEE, which could reduce NEP's acquisition opportunities.
The elimination of, loss of or reduction in such incentives, including qualifications for renewable energy tax credits, or the imposition of additional taxes, tariffs, duties or other assessments on clean energy or the equipment necessary to generate or deliver it, such as policies in place that limit certain imports from China and other Southeast Asian countries, could decrease the attractiveness of clean energy projects to developers, including, but not limited to, NEE, which could reduce NEP's acquisition opportunities.
Furthermore, there may not be sufficient availability under NEP OpCo’s subsidiaries’ revolving credit facility or the ability to obtain other financing arrangements on commercially reasonable terms when acquisition or other growth opportunities arise. An inability to obtain the required or desired financing could significantly limit NEP's ability to consummate acquisitions and pursue other growth opportunities.
Furthermore, there may not be sufficient availability under NEP OpCo’s direct subsidiary's revolving credit facility or the ability to obtain other financing arrangements on commercially reasonable terms when acquisition or other growth opportunities or capital needs arise. An inability to obtain the required or desired financing could significantly limit NEP's ability to consummate acquisitions and pursue other growth opportunities.
To the extent any directors or officers of NEP are also officers of NEE, such directors and officers will have fiduciary duties to both NEE and NEP, and the interests of NEE and NEP may be different or in conflict.
To the extent any directors or officers of NEP are also officers of NEE, such directors and officers will have fiduciary duties to NEE but not to NEP, and the interests of NEE and NEP may be different or in conflict.
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's subsidiaries’ substantial indebtedness could have important consequences.
NEP's and its 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 or refinance, extend or repay the indebtedness could have a material adverse effect on NEP's financial condition. NEP's and its subsidiaries’ substantial indebtedness could have important consequences.
An inability to effectively compete with regulated utility holding companies, developers, IPPs, pension funds and private equity funds for opportunities in North America could have a material adverse effect on NEP's ability to grow its business and to make cash distributions to its unitholders.
An inability to effectively compete with regulated utility holding companies, developers, IPPs, pension funds and private equity funds for opportunities in North America could have a material adverse effect on NEP's business, financial conditions, results of operations and its ability to grow its business and make cash distributions to its unitholders.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCharacter of Ownership The majority of NEP's generating facilities and pipelines are owned by NEP subsidiaries and are currently subject to NEE Equity's 53.8% noncontrolling limited partner interest in NEP OpCo.
Biggest changeCharacter of Ownership The majority of NEP's generating facilities and NEP's investment in natural gas pipeline assets are owned by NEP subsidiaries and are currently subject to NEE Equity's 51.4% noncontrolling limited partner interest in NEP OpCo. In addition, NEER owns noncontrolling ownership interests in certain NEP OpCo subsidiaries and third-party investors own noncontrolling interests in certain NEP OpCo subsidiaries.
Item 2. Properties NEP and its subsidiaries maintain properties consisting of renewable generation projects and natural gas pipeline assets which are adequate for their operations; the principal properties are described in Item 1. Business, which description is incorporated herein by reference.
Item 2. Properties NEP and its subsidiaries maintain properties consisting of renewable generation projects and, through an equity method investment, natural gas pipeline assets; the principal properties are described in Item 1. Business, which description is incorporated herein by reference.
Additionally, some of the generating facilities and pipelines occupy or use real property that is not owned by NEP subsidiaries, primarily through various easements, leases, rights-of-way, permits or licenses from private landowners or governmental entities.
See Item 1. Certain of the generating facilities and the natural gas pipeline assets are encumbered by liens securing various financings. Additionally, some of the generating facilities and the natural gas pipeline assets occupy or use real property that is not owned by NEP subsidiaries, primarily through various easements, leases, rights-of-way, permits or licenses from private landowners or governmental entities.
Removed
In addition, a subsidiary of Pemex owns a 10% interest in the NET Mexico pipeline, NEER owns noncontrolling ownership interests in certain NEP OpCo subsidiaries and third-party investors own noncontrolling interests in certain NEP OpCo subsidiaries. See Item 1. Certain of the generating facilities and all of the pipelines are encumbered by liens securing various financings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe right to receive the IDR fee is currently held by NEE Management, but may be assigned, subject to restrictions in the MSA. The following discussion assumes that NEE Management continues to own the IDRs.
Biggest changeThe right to receive the IDR fee is currently held by NEE Management, but may be assigned, subject to restrictions in the MSA.
The purpose of the program is not to cause NEP’s common units to be delisted from the NYSE or to cause the common units to be deregistered with the SEC. During 2022, 2021 and 2020, there were no purchases under the program.
The purpose of the program is not to cause NEP’s common units to be delisted from the NYSE or to cause the common units to be deregistered with the SEC. During 2023, 2022 and 2021, there were no purchases under the program.
If NEP OpCo's adjusted available cash for any quarter falls below the base incentive amount, the IDRs will be paid using the target quarterly distribution levels below calculated using the number of NEP OpCo common units outstanding on January 26, 2017, subject to certain adjustments for repurchases, splits and combinations: Total Quarterly Distribution per NEP OpCo Common Unit Target Amount Marginal Percentage Interest in Adjusted Available Cash NEP OpCo Common Unitholders NEE Management Minimum Quarterly Distribution $0.1875 100% —% First Target Quarterly Distribution Above $0.1875 up to $0.215625 100% —% Second Target Quarterly Distribution Above $0.215625 up to $0.234375 85% 15% Third Target Quarterly Distribution Above $0.234375 up to $0.281250 75% 25% Thereafter Above $0.281250 50% 50% During 2022, 2021 and 2020, NEP paid IDR fees of approximately $152 million, $129 million and $104 million, respectively.
If NEP OpCo's adjusted available cash for any quarter falls below the base incentive amount, the IDRs will be paid using the target quarterly distribution levels below calculated using the number of NEP OpCo common units outstanding on January 30, 2017, subject to certain adjustments for repurchases, splits and combinations: Total Quarterly Distribution per NEP OpCo Common Unit Target Amount Marginal Percentage Interest in Adjusted Available Cash NEP OpCo Common Unitholders NEE Management Minimum Quarterly Distribution $0.1875 100% —% First Target Quarterly Distribution Above $0.1875 up to $0.215625 100% —% Second Target Quarterly Distribution Above $0.215625 up to $0.234375 85% 15% Third Target Quarterly Distribution Above $0.234375 up to $0.281250 75% 25% Thereafter Above $0.281250 50% 50% During 2023, 2022 and 2021, NEP paid IDR fees of approximately $39 million, $152 million and $129 million, respectively.
At December 31, 2022, the dollar value of units that may yet be purchased under the program was approximately $114 million. Item 6. Reserved 28 Table of Contents
At December 31, 2023, the dollar value of units that may yet be purchased under the program was approximately $114 million. Item 6. Reserved 28 Table of Contents
As of January 31, 2023, there were 13 holders of record of NEP's common units. Incentive Distribution Rights Fee.
As of January 31, 2024, there were 13 holders of record of NEP's common units. Incentive Distribution Rights Fee.
In February 2023, NEP paid a distribution of $0.8125 per common unit to its unitholders of record on February 6, 2023. See Management's Discussion – Liquidity and Capital Resources – Financing Arrangements and Note 12 with respect to distribution restrictions. There are currently no restrictions in effect that limit NEP's ability to pay distributions to its unitholders.
In February 2024, NEP paid a distribution of $0.88 per common unit to its unitholders of record on February 6, 2024. See Management's Discussion – Liquidity and Capital Resources – Financing Arrangements and Note 14 with respect to distribution restrictions. There are currently no restrictions in effect that limit NEP's ability to pay distributions to its unitholders.
Removed
Unregistered Sales of Equity Securities and Use of Proceeds. On January 31, 2023, NEE Equity, a wholly owned subsidiary of NEE, delivered a written notice to NEP OpCo in accordance with the exchange agreement, dated as of July 1, 2014 (as amended, the exchange agreement), by and among NEE Equity, NEP OpCo, NEP GP and NEP.
Added
In May 2023, the MSA was amended to suspend the IDR fee to be paid by NEP in respect to each calendar quarter beginning with the IDR fee related to the period commencing on (and including) January 1, 2023 and expiring on (and including) December 31, 2026.
Removed
Pursuant to such written notice, NEE Equity has elected to exchange 860,000 NEP OpCo common units held by NEE Equity for the same number of NEP common units. In accordance with the exchange agreement, 860,000 NEP common units will be delivered to NEE Equity on or about April 3, 2023.
Added
The following discussion does not reflect that the IDR fee has been suspended as described in the preceding sentence and assumes that NEE Management continues to retain the right to receive the IDRs.
Removed
Upon exchange of NEP OpCo common units for NEP common units, a corresponding number of NEP special voting units will be cancelled in accordance with NEP’s partnership agreement. The NEP common units will be issued to NEE Equity in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, provided by Section 4(a)(2) thereof.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet Cash Used in Investing Activities 34 Table of Contents Years Ended December 31, 2022 2021 2020 (millions) Acquisitions of membership interests in subsidiaries – net $ (989) $ (2,352) $ (378) Capital expenditures and other investments (1,351) (113) (334) Proceeds from CITCs — 75 — Proceeds from the sale of a business 204 — — Payments from (to) related parties under CSCS agreement – net (240) (47) 2 Distributions from equity method investee 15 1 8 Distributions from non-economic ownership interests — 90 — Reimbursements from related parties for capital expenditures 1,161 15 — Other 6 30 21 Net cash used in investing activities $ (1,194) $ (2,301) $ (681) The decrease in net cash used in investing activities during 2022 was primarily driven by lower net cash used for acquisitions in 2022 compared to 2021 (see Note 3), higher reimbursement from NEER subsidiaries for capital expenditures and proceeds from the sale of interests in a natural gas pipeline (see Note 2 – Disposal of Pipeline), partly offset by higher capital expenditures in 2022 primarily related to completion of certain construction activities (see Capital Expenditures discussed above), higher payments to NEER subsidiaries (net of amounts received) under the CSCS agreement, no distributions from non-economic ownership interests received in 2022 (amounts distributed back to the non-economic ownership interests are reflected in partner distributions within financing activities) and no CITC proceeds received in 2022.
Biggest changeNet Cash Used in Investing Activities Years Ended December 31, 2023 2022 2021 (millions) Acquisitions of membership interests in subsidiaries – net $ (661) $ (989) $ (2,352) Capital expenditures and other investments (1,269) (1,351) (113) Proceeds from CITCs — — 75 Proceeds from sale of a business 1,885 204 — Payments to related parties under CSCS agreement – net (1,213) (240) (47) Distributions from equity method investee — 15 1 Distributions from non-economic ownership interests — — 90 Reimbursements from related parties for capital expenditures 1,063 1,161 15 Other – net 1 6 30 Net cash used in investing activities $ (194) $ (1,194) $ (2,301) The decrease in net cash used in investing activities in 2023 compared to 2022 was primarily driven by proceeds from the sale of the Texas pipelines (see Note 4), proceeds from the sale of a wind facility (see Note 2 – Disposal of Wind Project) and lower acquisition costs compared to 2022, partly offset by higher payments to NEER subsidiaries (net of amounts received) under the CSCS agreement.
Net income attributable to noncontrolling interests increased $357 million during the year ended December 31, 2022 primarily reflecting a higher net income allocation to NEE Equity's noncontrolling interest due to an increase in net income as compared to 2021, partly offset by higher losses allocated to differential membership interest investors due to higher wind resource resulting in higher PTCs.
Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests increased $357 million during the year ended December 31, 2022 primarily reflecting a higher net income allocation to NEE Equity's noncontrolling interest due to an increase in net income as compared to 2021, partly offset by higher losses allocated to differential membership interest investors due to higher wind resource resulting in higher PTCs.
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 or equity arrangements. In addition, NEP expects from time to time to consider potential investments in new acquisitions and the expansion or repowering of existing projects.
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 or equity arrangements. In addition, NEP expects from time to time to consider potential investments in new acquisitions and the repowering of existing projects.
NEP monitors and manages credit risk through credit policies that include a credit approval process 37 and the use of credit mitigation measures such as prepayment arrangements in certain circumstances. NEP also seeks to mitigate counterparty risk by having a diversified portfolio of counterparties.
NEP monitors and manages credit risk through credit policies that include a credit approval process and the use of credit mitigation measures such as prepayment arrangements in certain circumstances. NEP also seeks to mitigate counterparty risk by having a diversified portfolio of counterparties.
The Class B investors receive a specified allocation of the related subsidiaries' distributable cash, which would increase if certain minimum buyout rights are not exercised prior to specified deadlines.
The noncontrolling Class B investors receive a specified allocation of the related subsidiaries' distributable cash, which would increase if certain minimum buyout rights are not exercised prior to specified deadlines.
While NEP has the right to exercise the buyout right to purchase the noncontrolling Class B interests during a specified period of time as set forth in the related limited liability company agreement and may exercise the buyout right by paying cash, NEP may exercise, or begin to exercise if exercisable only in part, the buyout right on or at the beginning of the buyout period, and that the buyout price may consist of the maximum percentage of NEP non-voting common units or NEP common units, as specified in the related limited liability company agreement.
While NEP has the right to exercise the buyout right to purchase the noncontrolling Class B membership interests during a specified period of time as set forth in the related limited liability company agreement and may exercise the buyout right by paying cash, NEP may exercise, or begin to exercise if exercisable only in part, the buyout right on or at the beginning of the buyout period, and the buyout price may consist of the maximum percentage of NEP non-voting common units or NEP common units, as specified in the related limited liability company agreement.
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 otherwise required to be maintained by NEP's subsidiaries, until the financing agreements permit distributions to be made, or, in 31 Table of Contents the case of NEP OpCo, until such funds are required to make distributions or to pay expenses or other operating costs.
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 otherwise required to be maintained by NEP's subsidiaries, until the financing agreements permit distributions to be made, or, in 32 Table of Contents the case of NEP OpCo, until such funds are required to make distributions or to pay expenses or other operating costs.
In June 2022, the MSA was amended to cap the IDR fee paid by NEP at $39.25 million per quarter ($157 million per year) if quarterly distributions to NEP OpCo unitholders are at or above $0.7625 ($3.05 on an annualized basis) per NEP OpCo common unit. See Part II, Item 5 – Incentive Distribution Rights Fee.
In June 2022, the MSA was amended to cap the IDR fee paid by NEP at $39.25 million per quarter ($157 million per year) if quarterly distributions to NEP OpCo unitholders are at or above $0.7625 ($3.05 on an annualized basis) per NEP OpCo common unit. See Item 5 – Incentive Distribution Rights Fee.
Net Loss (Income) Attributable to Noncontrolling Interests Net loss (income) attributable to noncontrolling interests primarily reflects the net income or loss attributable to NEE Equity's noncontrolling interest in NEP OpCo, a non-affiliated party's interest in one of the Texas pipelines, a non-affiliated party's interest in Star Moon Holdings, LLC, the loss allocated to differential membership interest investors, the income allocated to Class B noncontrolling ownership interests and NEER's noncontrolling ownership interests in Silver State South Solar, LLC and Sunlight Renewables Holdings, LLC.
Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests primarily reflects the net income or loss attributable to NEE Equity's noncontrolling interest in NEP OpCo, a non-affiliated party's interest in one of the Texas pipelines, a non-affiliated party's interest in Star Moon Holdings, LLC, the loss allocated to differential membership interest investors, the income allocated to Class B noncontrolling membership interests and NEER's noncontrolling ownership interests in Silver State South Solar, LLC, Sunlight Renewables Holdings, LLC and Emerald Breeze Holdings, LLC.
Assessment of whether an investment is other-than-temporarily impaired involves, among other factors, consideration of the length of time that the fair value is below the carrying value, current expected performance relative to the expected performance when the investment was 36 Table of Contents initially made, performance relative to peers, industry performance relative to the economy, credit rating, regulatory actions and legal and permitting challenges.
Assessment of whether an investment is other-than-temporarily impaired involves, among other factors, consideration of the length of time that the fair value is below the carrying value, current expected performance relative to the expected performance when the investment was 37 Table of Contents initially made, performance relative to peers, industry performance relative to the economy, credit rating, regulatory actions and legal and permitting challenges.
Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from NEP's current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. See Note 7.
Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from NEP's current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. See Note 8.
Interest rate swaps are used to mitigate and adjust interest rate exposure when deemed appropriate based upon market conditions or when required by financing agreements (see Note 5). NEP has long-term debt instruments that subject it to the risk of loss associated with movements in market interest rates.
Interest rate swaps are used to mitigate and adjust interest rate exposure when deemed appropriate based upon market conditions or when required by financing agreements (see Note 6). NEP has long-term debt instruments that subject it to the risk of loss associated with movements in market interest rates.
During 2021, NEP issued $500 million in aggregate principal amount of 0% convertible senior notes due in 2024 and an indirect subsidiary of NEP borrowed $644 million under a limited-recourse senior secured variable rate term loan facility maturing in 2028. See Note 12.
During 2021, NEP issued $500 million in aggregate principal amount of 0% convertible senior notes due in 2024 and an indirect subsidiary of NEP borrowed $644 million under a senior secured limited-recourse variable rate term loan facility maturing in 2028. See Note 13.
NEP has buyout rights, subject to certain limitations and/or extensions, under which NEP has the right to pay a portion of the buyout price with respect to the Class B interests in NEP non-voting common units or NEP common units, as specified in the related limited liability company agreement.
NEP has buyout rights, subject to certain limitations and/or extensions, under which NEP has the right to pay a portion of the buyout price with respect to the noncontrolling Class B membership interests in NEP non-voting common units or NEP common units, as specified in the related limited liability company agreement.
A goodwill impairment charge would be recognized for the amount by which the carrying value of goodwill exceeds its reassessed fair value. NEP performed its annual goodwill impairment test in October 2022 and determined, based on the results, that no goodwill impairment charge was required.
A goodwill impairment charge would be recognized for the amount by which the carrying value of goodwill exceeds its reassessed fair value. NEP performed its annual goodwill impairment test in October 2023 and determined, based on the results, that no goodwill impairment charge was required.
Business Combinations Certain assumptions and estimates are employed in determining the fair value of assets acquired and liabilities assumed and, for business acquisitions, in determining the allocation of goodwill to a reporting unit. These estimates may be affected by factors such as changing market conditions, technological advances in the energy industry or changes in regulations governing that industry.
Purchase Accounting Certain assumptions and estimates are employed in determining the fair value of assets acquired and liabilities assumed and, for business acquisitions, in determining the allocation of goodwill to a reporting unit. These estimates may be affected by factors such as changing market conditions, technological advances in the energy industry or changes in regulations governing that industry.
Income Taxes NEP recognizes in income its applicable ownership share of U.S. income taxes due to the disregarded tax status of substantially all of the projects under NEP OpCo. Net income or loss attributable to noncontrolling interests includes minimal U.S. taxes.
Income Taxes NEP recognizes in income its applicable ownership share of income taxes due to the disregarded tax status of substantially all of the projects under NEP OpCo. Net income or loss attributable to noncontrolling interests includes minimal income taxes.
Depreciation and amortization expense increased $142 million during the year ended December 31, 2022 primarily due to depreciation related to projects acquired in the second half of 2021 and 2022.
Depreciation and Amortization Depreciation and amortization expense increased $143 million during the year ended December 31, 2022 primarily due to depreciation related to projects acquired in the second half of 2021 and in 2022.
O&M expenses increased $152 million during the year ended December 31, 2022 primarily due to approximately $92 million related to the projects acquired in the second half of 2021 and 2022, $24 million of higher repair and maintenance costs and $24 million in higher other corporate expenses, including higher IDR fees of $23 million related to growth in NEP's distributions to its common unitholders.
Operating Expenses Operations and Maintenance O&M expenses increased $153 million during the year ended December 31, 2022 primarily due to approximately $92 million related to the projects acquired in the second half of 2021 and in 2022, $24 million of higher repair and maintenance costs and $24 million in higher other corporate expenses, including higher IDR fees of $23 million related to growth in NEP's distributions to its common unitholders.
In 2021, NEP paid aggregate consideration of approximately $885 million, consisting of approximately 7.3 million NEP common units and $265 million in cash, for the buyout of the Class B noncontrolling membership interests in NEP Renewables. See Note 13 – Class B Noncontrolling Interests.
In 2021, NEP paid aggregate consideration of approximately $885 million, consisting of approximately 7.3 million NEP common units and $265 million in cash, for the buyout of the Class B noncontrolling membership interests in NEP Renewables, LLC. See Note 14 – Class B Noncontrolling Interests.
At December 31, 2022, approximately 99% of the long-term debt, including current maturities, was not exposed to fluctuations in interest expense as it was either fixed rate debt or financially hedged. At December 31, 2022, the estimated fair value of NEP's long-term debt was approximately $5.1 billion and the carrying value of the long-term debt was $5.3 billion.
At December 31, 2023, approximately 99% of the long-term debt, including current maturities, was not exposed to fluctuations in interest expense as it was either fixed rate debt or financially hedged. At December 31, 2023, the estimated fair value of NEP's long-term debt was approximately $6.1 billion and the carrying value of the long-term debt was $6.3 billion.
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 fails to return withdrawn funds when required by NEP OpCo'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.
Although, as described above, NEP currently expects that cash reserves would be established by the board solely to provide for the payment of NEP's income taxes, if any, NEP expects NEP OpCo to establish cash reserves prior to making distributions to NEP to pay costs and expenses of NEP's subsidiaries, in addition to NEP's expenses, as well as any debt service requirements and future capital expenditures.
Although, as described above, NEP currently expects that cash reserves would be established by the board solely to provide for the payment of NEP's income taxes, if any, NEP expects NEP OpCo to establish cash reserves prior to making distributions to NEP to pay costs and expenses of NEP's subsidiaries, in addition to NEP's expenses, as well as any forecasted payment of debt and other obligations and future capital expenditures.
ASC 740 provides that a tax benefit from an uncertain tax position will be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.
Accounting Standards Codification 740 – Income Taxes (ASC 740) provides that a tax benefit from an uncertain tax position will be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.
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, fund the purchase price payable in connection with the exercise of buyout rights and increase its distributions to common unitholders will depend on its ability to access capital on acceptable terms.
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 repowering of existing projects, fund the purchase price payable in connection with the exercise of buyout rights, refinance debt maturities and maintain and increase its distributions to common unitholders will depend on its ability to access capital on acceptable terms.
NEP has an at-the-market equity issuance program (ATM program), which was renewed in 2021, pursuant to which NEP may issue, from time to time, up to $300 million of its common units.
NEP has an at-the-market equity issuance program (ATM program), which was renewed in 2023, pursuant to which NEP may issue, from time to time, up to $500 million of its common units.
NEP estimates the fair value of a reporting unit using a combination of the income, market and cost approaches. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include revenue growth rates, future operating margins, the weighted average cost of capital, and future market conditions, among others.
Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include revenue growth rates, future operating margins, the weighted average cost of capital, and future market conditions, among others.
During 2022 and 2021, NEP distributed approximately $254 million and $198 million, respectively, to its common unitholders. In addition, NEP paid approximately $70 million in distributions to its common unitholders in February 2023. Credit Ratings NEP’s liquidity, ability to access credit and capital markets and cost of borrowings is dependent on its credit ratings.
During 2023 and 2022, NEP distributed approximately $309 million and $254 million, respectively, to its common unitholders. In addition, NEP paid approximately $$82 million in distributions to its common unitholders in February 2024. Credit Ratings NEP’s liquidity, ability to access credit and capital markets and cost of borrowings is dependent on its credit ratings.
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.
These events may cause NEP to seek additional debt or equity financing, which may not be available on acceptable terms or at all. If available, additional debt financing, including refinancing, could impose operating restrictions, additional cash payment obligations and additional covenants, including limitations on distributions to common unitholders.
In addition, under the project-level financings, each project will be permitted to pay 32 Table of Contents 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.
In addition, under the project-level financing structures, each project or group of projects 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 financing has occurred and is continuing at the time of such distribution or would result therefrom, and each project or group of projects is otherwise in compliance with the related covenants.
See Note 6 – Financial Instruments Recorded at Other than Fair Value. Based upon a hypothetical 10% decrease in interest rates, the fair value of NEP's long-term debt would increase by approximately $36 million at December 31, 2022.
See Note 7 – 38 Financial Instruments Recorded at Other than Fair Value. Based upon a hypothetical 10% decrease in interest rates, the fair value of NEP's long-term debt would increase by approximately $57 million at December 31, 2023.
During 2022 and 2021, NEP issued approximately 1.8 million common units and 0.7 million common units under the ATM program for gross proceeds of approximately $145 million and $50 million, respectively. As of December 31, 2022, NEP may issue up to approximately $155 million in additional common units under the ATM program. See Note 13 – ATM Program.
During 2023, 2022 and 2021, NEP issued approximately 5.1 million common units, 1.8 million common units and 0.7 million common units under the ATM program for gross proceeds of approximately $316 million, $145 million and $50 million, respectively. As of December 31, 2023, NEP may issue up to approximately $337 million in additional common units under the ATM program.
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 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, including under its ATM program, or capital raised pursuant to other financing structures, cash on hand and cash generated from operations and divestitures (see Note 4).
At December 31, 2022, NEP had interest rate contracts with a net notional amount of approximately $7.8 billion related to managing exposure to the variability of cash flows associated with outstanding and expected future debt issuances and borrowings. Based upon a hypothetical 10% decrease in rates, NEP’s net derivative liabilities at December 31, 2022 would increase by approximately $183 million.
At December 31, 2023, NEP had interest rate contracts with a net notional amount of approximately $3.1 billion related to managing exposure to the variability of cash flows associated with outstanding and expected future debt issuances and borrowings. Based upon a hypothetical 10% decrease in rates, NEP’s net derivative assets at December 31, 2023 would decrease by approximately $53 million.
Interest expense decreased approximately $806 million during the year ended December 31, 2022 primarily reflecting $865 million of favorable mark-to-market activity ($1,033 million of gains recorded in 2022 compared to $168 million of gains recorded in 2021), offset by higher interest expense due to increased average debt outstanding and higher interest rates.
Other Income (Deductions) Interest Expense Interest expense decreased approximately $798 million during the year ended December 31, 2022 primarily reflecting approximately $854 million of favorable mark-to-market activity ($1,017 million of gains recorded in 2022 compared to $163 million of gains recorded in 2021), offset by higher interest expense due to increased average debt outstanding and higher interest rates.
As of February 22, 2023, Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P) and Fitch Ratings, Inc.
As of February 20, 2024, Moody’s Investors Service, Inc. (Moody’s), S&P Global Ratings (S&P) and Fitch Ratings, Inc.
Net Cash Provided by (Used in) Financing Activities Years Ended December 31, 2022 2021 2020 (millions) Proceeds from issuance of common units – net $ 147 $ 50 $ 2 Issuances of long-term debt, including premiums and discounts 1,505 2,880 695 Retirements of long-term debt (1,544) (1,159) (1,166) Partner contributions 2 2 9 Partner distributions (636) (619) (442) Proceeds related to differential membership interests – net 202 87 243 Proceeds related to Class B noncontrolling interests – net 952 548 705 Debt issuance costs (17) (12) (1) Capped call transactions – net (31) (31) (33) Payment of CITC obligation to third party — (65) — Other (29) (18) (16) Net cash provided by (used in) financing activities $ 551 $ 1,663 $ (4) The change in net cash provided by financing activities in 2022 compared to 2021 is primarily due to lower issuances of long-term debt and higher retirements of long-term debt in 2022 compared to 2021, partly offset by higher net proceeds related to Class B noncontrolling interests (see Note 2 – Noncontrolling Interests and Note 13 – Class B Noncontrolling Interests), higher net proceeds related to differential membership interests and higher proceeds from issuance of common units.
Net Cash Provided by (Used in) Financing Activities Years Ended December 31, 2023 2022 2021 (millions) Proceeds from issuance of common units – net $ 315 $ 147 $ 50 Issuances of long-term debt, including premiums and discounts 2,362 1,505 2,880 Retirements of long-term debt (1,523) (1,544) (1,159) Partner contributions — 2 2 Partner distributions (741) (636) (619) Proceeds related to differential membership interests – net 20 202 87 Proceeds related to Class B noncontrolling interests – net 31 952 813 Buyout of Class B noncontrolling interest investors (972) — (265) Debt issuance costs (12) (17) (12) Capped call transactions — (31) (31) Payment of CITC obligation to third party — — (65) Other (7) (29) (18) Net cash provided by (used in) financing activities $ (527) $ 551 $ 1,663 The change in net cash provided by (used in) financing activities in 2023 compared to 2022 is primarily due to the buyout of Class B noncontrolling interest investors and lower proceeds related to differential membership interests – net (see Note 2 – Noncontrolling Interests and Note 14 – Class B Noncontrolling Interests), partly offset by higher issuances of long-term debt in 2023 compared to 2022.
The income tax expense is primarily comprised of income tax expense of approximately $271 million at the statutory rate of 21% and $35 million of state income tax expense, partly offset by income tax benefit of $135 million related to income tax attributable to noncontrolling interests. See Note 7.
The income tax expense is primarily comprised of federal income tax expense of approximately $237 million at the federal statutory rate of 21% and $33 million of state income tax expense, partly offset by income tax benefit of $110 million related to income tax attributable to noncontrolling interests. See Note 8.
The income tax expense is primarily comprised of income tax expense of approximately $99 million at the statutory rate of 21% and $12 million of state income tax expense, partly offset by income tax benefit of $59 million related to income tax attributable to noncontrolling interests. See Note 7.
The income tax expense is primarily comprised of federal income tax expense of approximately $237 million at the federal statutory rate of 21% and $33 million of state income tax expense, partly offset by income tax benefit of $110 million related to income tax attributable to noncontrolling interests. See Note 8.
Quantitative and Qualitative Disclosures about Market Risk NEP is exposed to several market risks in its normal business activities. Market risk is the potential loss that may result from market changes associated with its business. The types of market risks include interest rate and counterparty credit risks.
See Note 4. Quantitative and Qualitative Disclosures About Market Risk NEP is exposed to market risks in its normal business activities. Market risk is measured as the potential loss that may result from hypothetical reasonably possible market changes associated with its business over the next year. The types of market risks include interest rate and counterparty credit risks.
For the year ended December 31, 2022, NEP recorded income tax expense of $171 million on income before income taxes of $1,292 million, resulting in an effective tax rate of approximately 13%.
For the year ended December 31, 2022, NEP recorded income tax expense of $161 million on income from continuing operations before income taxes of $1,130 million, resulting in an effective tax rate of approximately 14%.
The amount of securities issuable by NEP is established from time to time by the board. Securities that may be issued under the registration statement include common units, preferred units, warrants, rights, debt securities, equity purchase contracts and equity purchase units. Capital Expenditures Annual capital spending plans are developed based on projected requirements for the projects.
Securities that may 34 Table of Contents be issued under the registration statement include common units, preferred units, warrants, rights, debt securities, equity purchase contracts and equity purchase units. Capital Expenditures Annual capital spending plans are developed based on projected requirements for the projects.
For the year ended December 31, 2021, NEP recorded income tax expense of $48 million on income before income taxes of $472 million, resulting in an effective tax rate of approximately 10%.
For the year ended December 31, 2021, NEP recorded income tax expense of $37 million on income from continuing operations before income taxes of $303 million, resulting in an effective tax rate of approximately 12%.
Operating revenues increased $229 million during the year ended December 31, 2022.
Operating revenues increased $109 million during the year ended December 31, 2023.
Through NEP OpCo, NEP has ownership interests in a portfolio of contracted renewable generation assets consisting of wind, solar and battery 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.
Through NEP OpCo, NEP owns, or has a partial ownership interest in, a portfolio of contracted renewable energy assets consisting of wind, solar and solar-plus-storage projects and a stand-alone battery storage project, as well as a pipeline investment. NEP's financial results are shown on a consolidated basis with financial results attributable to NEE Equity reflected in noncontrolling interests.
Goodwill and Other Intangible Assets Goodwill acquired in connection with business combinations represents the excess of consideration over the fair value of net assets acquired. For goodwill and intangible assets with indefinite lives, an assessment for impairment is performed annually or whenever an event indicating impairment may have occurred.
Goodwill Goodwill acquired in connection with business combinations represents the excess of consideration over the fair value of net assets acquired. For goodwill, an assessment for impairment is performed annually or whenever an event indicating impairment may have occurred. NEP completes the annual impairment test for goodwill using an assessment date of October 1.
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 December 31, 2022, NEP's liquidity position was approximately $3,093 million.
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 except as otherwise agreed upon with NEP OpCo. Liquidity Position At December 31, 2023, NEP's liquidity position was approximately $4,232 million.
Operating Expenses Operations and Maintenance O&M expenses include interconnection costs, labor expenses, turbine servicing costs, land payments, insurance, materials, supplies, shared services and administrative expenses attributable to NEP's projects, and costs and expenses under the MSA, ASAs and O&M agreements (see Note 14).
Additionally, project acquisitions or wind turbine repowering opportunities could impact future revenues. Operating Expenses Operations and Maintenance O&M expenses include interconnection costs, labor expenses, equipment servicing costs, land payments, insurance, materials, supplies, shared services and administrative expenses attributable to NEP's projects, and costs and expenses under the MSA, ASAs and O&M agreements (see Note 15).
Equity in Earnings of Non-Economic Ownership Interests 30 Table of Contents Equity in earnings of non-economic ownership interests increased $29 million for the year ended December 31, 2022 primarily reflecting favorable mark-to-market activity on interest rate contracts in 2022.
Equity in Earnings of Non-Economic Ownership Interests Equity in earnings of non-economic ownership interests decreased $52 million for the year ended December 31, 2023 primarily reflecting unfavorable mark-to-market activity on interest rate contracts in 2023.
Overview Company Description 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.
Overview Company Description NEP is a growth-oriented limited partnership with a strategy that emphasizes acquiring, managing and owning contracted clean energy assets with stable long-term cash flows with a focus on renewable energy projects. NEP consolidates the results of NEP OpCo and its subsidiaries through its controlling interest in the general partner of NEP OpCo.
Liquidity and Capital Resources NEP’s ongoing operations use cash to fund O&M expenses, including related party fees discussed in Note 14, maintenance capital expenditures, debt service payments and related derivative obligations (see Note 12 and Note 5), distributions to common unitholders, and distributions to the holders of noncontrolling interests and the payment of any cash portion of the purchase price payable in connection with the exercise of a buyout right (see Note 13 and Note 2 – Noncontrolling Interests).
Liquidity and Capital Resources NEP’s ongoing operations use cash to fund O&M expenses, including related party fees discussed in Note 15, maintenance capital expenditures, debt service payments and related derivative obligations (see Note 13 and Note 6), distributions to common unitholders, and distributions to the holders of noncontrolling interests.
Depreciation and amortization expense also includes a provision for wind and solar facility dismantlement, asset removal costs and accretion related to asset retirement obligations and the amortization of finite-lived intangible assets.
Depreciation and amortization expense also includes a provision for wind and solar facility dismantlement, asset removal costs and accretion related to asset retirement obligations and the amortization of finite-lived intangible assets. Depreciation and amortization expense increased $127 million during the year ended December 31, 2023 primarily due to depreciation related to projects acquired in late 2022 and 2023.
For the majority of the project-level financings, minimum debt service coverage ratios must be satisfied in order to make a distribution. For one project financing, the project must maintain a leverage ratio and an interest coverage ratio in order to make a distribution. At December 31, 2022, NEP's subsidiaries were in compliance with all financial debt covenants under their financings.
For substantially all of the project-level financing structures, 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.
Cash Flows The following table reflects the cash flows for the comparative periods: Years Ended December 31, 2022 2021 2020 (millions) Net cash provided by operating activities $ 776 $ 677 $ 665 Net cash used in investing activities $ (1,194) $ (2,301) $ (681) Net cash provided by (used in) financing activities $ 551 $ 1,663 $ (4) Net Cash Provided by Operating Activities The increase in net cash provided by operating activities in 2022 compared to 2021 was primarily driven by higher cash from operations associated with the ownership interests in projects acquired in the second half of 2021 and 2022 and the timing of transactions impacting working capital.
Cash Flows The following table reflects the cash flows for the comparative periods: Years Ended December 31, 2023 2022 2021 (millions) Net cash provided by operating activities $ 731 $ 776 $ 677 Net cash used in investing activities $ (194) $ (1,194) $ (2,301) Net cash provided by (used in) financing activities $ (527) $ 551 $ 1,663 35 Table of Contents Net Cash Provided by Operating Activities The decrease in net cash provided by operating activities in 2023 compared to 2022 was primarily driven by the timing of transactions impacting working capital, lower resource, and lower O&M costs primarily due to the suspension of the IDR fee which is recorded in O&M, partly offset by cash flows associated with the ownership interests in projects acquired in late 2022 and mid-2023.
Generally, available cash is all cash on hand at the date of determination relating to that quarter (including any expected distributions from NEP OpCo), less the amount of cash reserves established by the board. NEP currently expects that cash reserves would be established solely to provide for the payment of income taxes by NEP, if any.
Cash Distributions to Unitholders NEP's partnership agreement requires it to distribute available cash quarterly. Generally, available cash is all cash on hand at the date of determination relating to that quarter (including any expected distributions from NEP OpCo), less the amount of cash reserves established by the board.
The exchange of common units, and related issuance of NEP common units, is expected to occur in the second quarter of 2023. In July 2021, NEP filed a shelf registration statement with the SEC, which became effective upon filing, for an unspecified amount of securities.
In July 2021, NEP filed a shelf registration statement with the SEC, which became effective upon filing, for an unspecified amount of securities. The amount of securities issuable by NEP is established from time to time by the board.
NEP completes the annual impairment test for goodwill and indefinite-lived intangibles using an assessment date of October 1. Goodwill is reviewed for impairment by comparing the carrying value of a reporting unit’s net assets, including allocated goodwill, to the estimated fair value of a reporting unit.
Goodwill is reviewed for impairment by comparing the carrying value of a reporting unit’s net assets, including allocated goodwill, to the estimated fair value of a reporting unit. NEP estimates the fair value of a reporting unit using a combination of the income, market and cost approaches.
The increase in renewable energy sales of approximately $246 million primarily reflects an increase of approximately $214 million related to the projects acquired in the second half of 2021 and 2022 (see Note 3), as well as favorable resource and higher availability due to fewer maintenance outages in 2022.
See Note 2 – Noncontrolling Interests and Note 14 – Class B Noncontrolling Interests. 2022 Compared to 2021 Operating Revenues Operating revenues increased $247 million during the year ended December 31, 2022 and primarily reflect an increase of approximately $214 million related to the projects acquired in the second half of 2021 and in 2022 (see Note 3), as well as favorable wind resource and higher availability due to fewer maintenance outages in 2022.
The comparison of the cash flows for the years ended December 31, 2021 and 2020 are included in Management's Discussion in NEP's Annual Report on Form 10-K for the year ended December 31, 2021.
The comparison of the cash flows for the years ended December 31, 2022 and 2021 are included in Management's Discussion in NEP's Annual Report on Form 10-K for the year ended December 31, 2022. 36 Table of Contents Critical Accounting Policies and Estimates NEP's significant accounting policies are described in Note 2, which were prepared under generally accepted accounting principles in the U.S.
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 to the holders of noncontrolling interests and liquidity commitments. Management continues to regularly monitor NEP's financing needs consistent with prudent balance sheet management.
In February 2024, the maturity date for substantially all of the NEP OpCo credit facility was extended until 2029. Management believes that NEP's liquidity position and cash flows from operations will be adequate to finance O&M expenses, maintenance capital expenditures, distributions to its unitholders and to the holders of noncontrolling interests and liquidity commitments.
Equity Arrangements Certain NEP OpCo subsidiaries have issued and sold noncontrolling Class B interests in their subsidiaries.
At December 31, 2023, NEP's subsidiaries were in compliance with all financial debt covenants under their financings. Equity Arrangements Certain NEP OpCo subsidiaries have issued and sold noncontrolling Class B membership interests in their subsidiaries.
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 3).
In addition, as a growth-oriented limited partnership, NEP expects from time to time to make acquisitions (see Note 3), including in connection with the exercise of buyout rights (see Note 2 – Noncontrolling Interests and Note 14 – Class B Noncontrolling Interests), and other investments.
See Note 12 and Note 5 – Financial Statement Impact of Derivative Instruments. Equity in Earnings of Equity Method Investees Equity in earnings of equity method investees increased $23 million for the year ended December 31, 2022 primarily due to earnings related to NEP's investment in projects in October 2021 (see Note 3).
Equity in Earnings of Equity Method Investees Equity in earnings of equity method investees increased $19 million for the year ended December 31, 2022 primarily due to earnings related to NEP's investment in projects in October 2021 (see Note 3). 31 Table of Contents Equity in Earnings of Non-Economic Ownership Interests Equity in earnings of non-economic ownership interests increased $29 million for the year ended December 31, 2022 primarily reflecting favorable mark-to-market activity on interest rate contracts in 2022.
NEP may issue common units to fund NEP's conversion obligation in excess of the aggregate principal amount of the convertible notes being converted and expects to issue common units, or non-voting common units (convertible into common units), to fund the payment of the equity portion of the purchase price payable in connection with the exercise of buyout rights associated with certain noncontrolling interests (see Note 12, Note 13 and Note 2 – Noncontrolling Interests).
NEP may also utilize non-voting common units (convertible into common units) to fund the payment of specified portions of the purchase price payable in connection with the exercise of certain buyout rights (see Note 2 – Noncontrolling Interests and Note 14 – Class B Noncontrolling Interests). In addition, NEP expects to fund debt maturities through refinancing.
At December 31, 2022, no amounts were outstanding under the NEP OpCo credit facility. For a discussion of the NEP OpCo credit facility, see Note 12. During 2022, NEP issued $500 million in aggregate principal amount of 2.5% convertible senior notes due in 2026. See Note 12.
See Note 13 During 2022, NEP issued $500 million in aggregate principal amount of 2.50% convertible senior notes due in 2026. See Note 13.
In 2022, NEP issued 0.8 million NEP common units upon NEE Equity's exchange of NEP OpCo common units on a one-for-one basis. In January 2023, NEE Equity delivered notice to NEP OpCo of its election to exchange 0.9 million NEP OpCo common units for NEP common units on a one-for-one basis.
See Note 14 – ATM Program. During 2023 and 2022, NEP issued approximately 1.7 million NEP common units and 0.8 million NEP common units, respectively, upon NEE Equity's exchange of NEP OpCo common units on a one-for-one basis.
The table below provides the components of NEP’s liquidity position: December 31, 2022 Maturity Date (millions) Cash and cash equivalents (a) $ 235 Amounts due under the CSCS agreement 298 Revolving credit facilities (b) 2,500 2027 (c) Less issued letters of credit (118) NEP Renewables IV final funding (d) 178 Total $ 3,093 ____________________ (a) In January 2023, NEP bought out differential membership investors with ownership interests in two wind projects for approximately $187 million.
The table below provides the components of NEP’s liquidity position: December 31, 2023 Maturity Date (millions) Cash and cash equivalents $ 274 Amounts due under the CSCS agreement 1,511 Revolving credit facilities 2,500 2028 (a) Less issued letters of credit (53) Total $ 4,232 ____________________ (a) At December 31, 2023, approximately $50 million had a maturity date in 2025.
Wind and solar resource levels, weather conditions and the performance of NEP's renewable energy portfolio represent significant factors that could affect its operating results because these variables impact energy sales. Additionally, project acquisitions or expansion opportunities could impact future revenues.
The increase primarily reflects approximately $185 million related to the projects acquired in late 2022 and 2023 (see Note 3), partly offset by unfavorable wind resource in 2023. 29 Table of Contents Wind and solar resource levels, weather conditions and the performance of NEP's renewable energy portfolio represent significant factors that could affect its operating results because these variables impact energy sales.
Results of Operations Years Ended December 31, 2022 2021 2020 (millions) OPERATING REVENUES Renewable energy sales $ 966 $ 720 $ 703 Texas pipelines service revenues 245 262 214 Total operating revenues 1,211 982 917 OPERATING EXPENSES Operations and maintenance 571 419 363 Depreciation and amortization 430 288 271 Taxes other than income taxes and other 49 36 28 Total operating expenses – net 1,050 743 662 GAINS (LOSSES) ON DISPOSAL OF BUSINESSES/ASSETS – NET 36 (5) (2) OPERATING INCOME 197 234 253 OTHER INCOME (DEDUCTIONS) Interest expense 853 47 (620) Equity in earnings of equity method investees 183 160 108 Equity in earnings (losses) of non-economic ownership interests 56 27 (3) Other – net 3 4 5 Total other income (deductions) – net 1,095 238 (510) INCOME (LOSS) BEFORE INCOME TAXES 1,292 472 (257) INCOME TAX EXPENSE (BENEFIT) 171 48 (19) NET INCOME (LOSS) 1,121 424 (238) NET INCOME ATTRIBUTABLE TO PREFERRED DISTRIBUTIONS — — (5) NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS (644) (287) 188 NET INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP $ 477 $ 137 $ (55) 29 Table of Contents 2022 Compared to 2021 Operating Revenues Operating revenues primarily consist of income from the sale of energy under NEP's PPAs and services provided under natural gas transportation agreements, partly offset by the net amortization of intangible assets – PPAs and intangible liabilities – PPAs (see Note 2 – Intangible Assets – PPAs and – Intangible Liabilities – PPAs).
Results of Operations Years Ended December 31, 2023 2022 2021 (millions) OPERATING REVENUES $ 1,078 $ 969 $ 722 OPERATING EXPENSES Operations and maintenance 520 527 374 Depreciation and amortization 521 394 251 Taxes other than income taxes and other 65 40 28 Total operating expenses – net 1,106 961 653 GAINS (LOSSES) ON DISPOSAL OF BUSINESSES/ASSETS – NET — 36 (5) OPERATING INCOME (LOSS) (28) 44 64 OTHER INCOME (DEDUCTIONS) Interest expense (394) 848 50 Equity in earnings of equity method investees 152 177 158 Equity in earnings of non-economic ownership interests 4 56 27 Other – net 9 5 4 Total other income (deductions) – net (229) 1,086 239 INCOME (LOSS) BEFORE INCOME TAXES (257) 1,130 303 INCOME TAX EXPENSE (BENEFIT) (25) 161 37 INCOME (LOSS) FROM CONTINUING OPERATIONS (232) 969 266 INCOME FROM DISCONTINUED OPERATIONS, net of tax expense of $59 million, $10 million and $11 million, respectively 450 152 158 NET INCOME 218 1,121 424 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (18) (644) (287) NET INCOME ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP $ 200 $ 477 $ 137 2023 Compared to 2022 Operating Revenues Operating revenues primarily consist of income from the sale of energy under NEP's PPAs, partly offset by the net amortization of intangible assets – PPAs and intangible liabilities – PPAs (see Note 2 – Intangible Assets – PPAs and – Intangible Liabilities – PPAs).
At December 31, 2022, NEP owned an approximately 46.2% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 53.8% limited partner interest in NEP OpCo. See Part II, Item 5 – Unregistered Sales of Equity Securities and Use of Proceeds.
At December 31, 2023, NEP owned an approximately 48.6% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 51.4% limited partner interest in NEP OpCo.
During 2022, 2021 and 2020, NEP acquired interests in various projects as discussed in Note 3. During 2022, NEP sold its ownership interests in a pipeline and in early January 2023 NEP closed on the sale of a 62 MW wind project located in North Dakota (see Note 2 – Disposal of Pipeline and – Disposal of Wind Project).
In January 2023, NEP completed the sale of a 62 MW wind project located in North Dakota and in December 2023, NEP sold its Texas pipelines which has been presented as discontinued operations (see Note 2 – Disposal of Wind Project and – Assets Held for Sale and Discontinued Operations and Note 4).
For the years ended December 31, 2022 and 2021, NEP had capital expenditures, excluding the purchase prices of acquired projects, of approximately $1,351 million and $113 million, respectively, primarily reflecting costs associated with the three facilities acquired from NEER in December 2021 that were under construction, of which costs of $1,161 million and $15 million, respectively, were reimbursed by NEER through December 2022 (see Note 3), and expansion projects at certain pipelines.
For the years ended December 31, 2023 and 2022, NEP had capital expenditures, excluding the purchase prices of acquired projects, of approximately $1,269 million and $1,351 million, respectively.
Financing Arrangements NEP OpCo and its direct subsidiary are parties to a $2,500 million revolving credit facility (NEP OpCo credit facility) maturing in February 2028. During 2022, $951 million was drawn under the NEP OpCo credit facility and $1,505 million of the outstanding borrowings under this facility were repaid.
Management continues to regularly monitor NEP's financing needs consistent with prudent balance sheet management. 33 Table of Contents Financing Arrangements NEP OpCo and its direct subsidiary are parties to a $2,500 million revolving credit facility (NEP OpCo credit facility) maturing in February 2029.
NEP made investments in CPL related to an expansion that was completed in the fourth quarter of 2021. In the first quarter of 2022, the three facilities acquired from NEER in December 2021 were placed in service.
Costs of approximately $1,063 million and $1,161 million were reimbursed by NEER in 2023 and 2022, respectively. In the first quarter of 2022, the three facilities acquired from NEER in December 2021 were placed in service and in the third quarter of 2023, the under construction facilities acquired from NEER in December 2022 were placed in service.
NEP expects to have capital expenditures in 2023 related to the newly constructed renewable energy facilities, as well as the project that is under construction which was acquired from NEER in December 2022. Such expenditures will be reimbursed by NEER as contemplated in the acquisition (see Note 3).
The 2023 capital expenditures primarily relate to the assets acquired from NEER in December 2022 which were acquired under construction or recently placed in service, and the 2022 capital expenditures primarily relate to the three facilities acquired in December 2021 from NEER that were under construction (see Note 3).
Cash flow is generated from distributions NEP receives from NEP OpCo each quarter.
NEP currently expects that cash reserves would be established solely to provide for the payment of income taxes by NEP, if any. Cash flow is generated from distributions NEP receives from NEP OpCo each quarter.
Removed
The decrease in Texas pipeline service revenues of $17 million primarily reflects lower revenues of approximately $30 million associated with transportation and fuel management agreements revenues which were higher in 2021 due to extreme weather in February 2021 (see Note 14 – Transportation and Fuel Management Agreements), partly offset by higher volumes.
Added
During 2023, 2022 and 2021, NEP acquired interests in various projects as discussed in Note 3.
Removed
See Note 2 – Noncontrolling Interests and Note 13 – Class B Noncontrolling Interests. 2021 Compared to 2020 The comparison of the results of operations for the years ended December 31, 2021 and 2020 is included in Management's Discussion in NEP's Annual Report on Form 10-K for the year ended December 31, 2021.
Added
In 2022, NEP sold its ownership interests in a pipeline (see Note 2 – Disposal of Pipeline).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 43 Table of Contents NEXTERA ENERGY PARTNERS, LP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (millions) Years Ended December 31, 2022 2021 2020 NET INCOME (LOSS) $ 1,121 $ 424 $ (238) OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX Other comprehensive income related to equity method investee (net of $0 tax expense, $0 tax benefit and $0 tax benefit, respectively) 2 2 2 Total other comprehensive income (loss), net of tax 2 2 2 COMPREHENSIVE INCOME (LOSS) 1,123 426 (236) Comprehensive income attributable to preferred distributions — — (5) Comprehensive loss (income) attributable to noncontrolling interests (645) (290) 186 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP $ 478 $ 136 $ (55) The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 44 Table of Contents NEXTERA ENERGY PARTNERS, LP CONSOLIDATED BALANCE SHEETS (millions) December 31, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 235 $ 147 Accounts receivable 137 112 Other receivables 41 24 Due from related parties 1,131 1,061 Inventory 51 41 Derivatives 65 — Other 202 25 Total current assets 1,862 1,410 Other assets: Property, plant and equipment – net 14,949 11,417 Intangible assets – PPAs – net 2,010 2,175 Intangible assets – customer relationships – net 526 593 Derivatives 369 7 Goodwill 891 891 Investments in equity method investees 1,917 1,896 Deferred income taxes 195 322 Other 333 265 Total other assets 21,190 17,566 TOTAL ASSETS $ 23,052 $ 18,976 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY Current liabilities: Accounts payable and accrued expenses $ 868 $ 982 Due to related parties 92 104 Current portion of long-term debt 38 33 Accrued interest 28 26 Derivatives 12 26 Accrued property taxes 31 25 Other 257 65 Total current liabilities 1,326 1,261 Other liabilities and deferred credits: Long-term debt 5,250 5,294 Asset retirement obligations 299 243 Derivatives 2 595 Due to related parties 54 41 Intangible liabilities – PPAs – net 1,153 179 Other 196 204 Total other liabilities and deferred credits 6,954 6,556 TOTAL LIABILITIES 8,280 7,817 COMMITMENTS AND CONTINGENCIES REDEEMABLE NONCONTROLLING INTERESTS 101 321 EQUITY Common units (86.5 and 83.9 units issued and outstanding, respectively) 3,332 2,985 Accumulated other comprehensive loss (7) (8) Noncontrolling interests 11,346 7,861 TOTAL EQUITY 14,671 10,838 TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY $ 23,052 $ 18,976 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 45 Table of Contents NEXTERA ENERGY PARTNERS, LP CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) Years Ended December 31, 2022 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 1,121 $ 424 $ (238) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 430 288 271 Intangible amortization – PPAs 143 117 103 Change in value of derivative contracts (1,034) (189) 384 Deferred income taxes 171 46 (26) Equity in earnings of equity method investees, net of distributions received 3 21 85 Equity in losses (earnings) of non-economic ownership interests, net of distributions received (50) (21) 3 Losses (gains) on disposal of businesses/assets – net (36) 5 2 Costs related to retirement of debt – net — — 67 Other – net 10 11 13 Changes in operating assets and liabilities: Current assets (43) (6) 6 Noncurrent assets (2) (7) (4) Current liabilities 63 (10) (1) Noncurrent liabilities — (2) — Net cash provided by operating activities 776 677 665 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of membership interests in subsidiaries – net (989) (2,352) (378) Capital expenditures and other investments (1,351) (113) (334) Proceeds from CITCs — 75 — Proceeds from the sale of a business 204 — — Payments from (to) related parties under CSCS agreement – net (240) (47) 2 Distributions from equity method investee 15 1 8 Distributions from non-economic ownership interests — 90 — Reimbursements from related parties for capital expenditures 1,161 15 — Other 6 30 21 Net cash used in investing activities (1,194) (2,301) (681) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common units – net 147 50 2 Issuances of long-term debt, including premiums and discounts 1,505 2,880 695 Retirements of long-term debt (1,544) (1,159) (1,166) Debt issuance costs (17) (12) (1) Capped call settlement — — 30 Capped call transaction (31) (31) (63) Partner contributions 2 2 9 Partner distributions (636) (619) (442) Preferred unit distributions — — (7) Proceeds on sale of Class B noncontrolling interests – net 1,115 893 750 Payments to Class B noncontrolling interest investors (163) (80) (45) Buyout of Class B noncontrolling interest investors — (265) — Proceeds on sale of differential membership interests 101 48 179 Proceeds from differential membership investors 137 74 94 Payments to differential membership investors (36) (35) (30) Change in amounts due to related parties (18) (13) (3) Payment of CITC obligation to third party — (65) — Other (11) (5) (6) Net cash provided by (used in) financing activities 551 1,663 (4) NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 133 39 (20) CASH, CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF YEAR 151 112 132 CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF YEAR $ 284 $ 151 $ 112 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest, net of amounts capitalized $ 154 $ 126 $ 163 Cash paid for income taxes $ — $ 2 $ 6 Change in noncash investments in equity method investees – net $ (1) $ 127 $ 12 Accrued property additions $ 846 $ 971 $ 32 Conversion of 2017 convertible notes to common units $ — $ — $ 300 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 46 Table of Contents NEXTERA ENERGY PARTNERS, LP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (millions) Preferred Units Common Units Units Amount Units Amount Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Equity Redeemable Non-controlling Interests Balances, December 31, 2019 4.7 $ 183 65.5 $ 2,008 $ (8) $ 4,883 $ 7,066 $ — Issuance of common units – net (a) (4.7) (183) 10.4 543 — — 360 — Capped call settlement, including deferred taxes — — — 33 — — 33 — Capped call transaction — — — (63) — — (63) — Related party note receivable — — — — — 2 2 — Net income (loss) — 5 — (55) — (188) (238) — Other comprehensive income — — — — — 2 2 — Related party contributions — — — — — 7 7 — Related party distributions — — — — — (290) (290) — Changes in non-economic ownership interests — — — — — (12) (12) — Sale of differential membership interest — — — (3) — 179 176 — Other differential membership investment activity — — — — — 64 64 — Sale of Class B noncontrolling interest – net — — — (4) — 750 746 — Payments to Class B noncontrolling interest investors — — — — — (45) (45) — Distributions to unitholders (b) — (5) — (154) — — (159) — Conversion option of 2020 convertible notes, including deferred taxes — — — 57 — — 57 — Other – net — — — — — 1 1 — Balances, December 31, 2020 — — 75.9 2,362 (8) 5,353 7,707 — Issuance of common units – net — — 0.7 56 — — 56 — Acquisition of subsidiary with noncontrolling ownership interests — — — — — 2,494 2,494 321 Capped call transaction — — — (31) — — (31) — Related party note receivable — — — — — 2 2 — Net income — — — 137 — 287 424 — Other comprehensive income — — — — — 2 2 — Related party distributions — — — — — (424) (424) — Changes in non-economic ownership interests — — — — — 127 127 — Sale of differential membership interest — — — — — 48 48 — Other differential membership investment activity — — — — — 39 39 — Sale of Class B noncontrolling interests – net — — — (3) — 893 890 — Payments to Class B noncontrolling interest investors — — — — — (80) (80) — Distributions to unitholders (b) — — — (198) — — (198) — Adoption of accounting standards update — — — (57) — 1 (56) — Exercise of Class B noncontrolling interest buyout right (c) — — 7.3 719 — (879) (160) — Other – net — — — — — (2) (2) — Balances, December 31, 2021 — — 83.9 2,985 (8) 7,861 10,838 321 Issuance of common units – net (a) — — 2.6 179 — — 179 — Acquisition of subsidiaries with differential membership interests and noncontrolling ownership interests — — — — — 2,012 2,012 — Capped call transaction — — — (31) — — (31) — Related party note receivable — — — — — 2 2 — Net income — — — 477 — 635 1,112 9 Other comprehensive income — — — — 1 1 2 — Related party distributions — — — — — (382) (382) — Changes in non-economic ownership interests — — — — — 1 1 — Sale of differential membership interest — — — — — — — 101 Other differential membership investment activity — — — (21) — 264 243 (330) Sale of Class B noncontrolling interests – net — — — (3) — 1,115 1,112 — Payments to Class B noncontrolling interest investors — — — — — (163) (163) — Distributions to unitholders (b) — — — (254) — — (254) — Balances, December 31, 2022 — $ — 86.5 $ 3,332 $ (7) $ 11,346 $ 14,671 $ 101 ____________________________ (a) In 2022, includes NEE Equity's exchange of NEP OpCo common units for NEP common units and includes deferred tax impact of approximately $14 million (see Note 13 - Common Unit Issuances).
Biggest changeThe accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 44 Table of Contents NEXTERA ENERGY PARTNERS, LP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (millions) Years Ended December 31, 2023 2022 2021 NET INCOME $ 218 $ 1,121 $ 424 OTHER COMPREHENSIVE INCOME, NET OF TAX Other comprehensive income related to equity method investee (net of $0 tax expense, $0 tax expense and $0 tax benefit, respectively) 2 2 2 Total other comprehensive income, net of tax 2 2 2 COMPREHENSIVE INCOME 220 1,123 426 Comprehensive income attributable to noncontrolling interests (20) (645) (290) COMPREHENSIVE INCOME ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP $ 200 $ 478 $ 136 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 45 Table of Contents NEXTERA ENERGY PARTNERS, LP CONSOLIDATED BALANCE SHEETS (millions) December 31, 2023 2022 ASSETS Current assets: Cash and cash equivalents $ 274 $ 226 Accounts receivable 114 117 Other receivables 64 41 Due from related parties 1,575 1,127 Inventory 82 49 Assets held for sale — 95 Other 107 207 Total current assets 2,216 1,862 Other assets: Property, plant and equipment – net 14,837 14,191 Intangible assets – PPAs – net 1,987 2,010 Goodwill 833 812 Investments in equity method investees 1,853 1,875 Assets held for sale — 1,408 Other 785 894 Total other assets 20,295 21,190 TOTAL ASSETS $ 22,511 $ 23,052 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY Current liabilities: Accounts payable and accrued expenses $ 72 $ 867 Due to related parties 87 87 Current portion of long-term debt 1,348 38 Accrued interest 38 28 Accrued property taxes 43 23 Liabilities associated with assets held for sale — 21 Other 83 262 Total current liabilities 1,671 1,326 Other liabilities and deferred credits: Long-term debt 4,941 5,250 Asset retirement obligations 331 299 Due to related parties 53 54 Intangible liabilities – PPAs – net 1,210 1,153 Liabilities associated with assets held for sale — 3 Other 248 195 Total other liabilities and deferred credits 6,783 6,954 TOTAL LIABILITIES 8,454 8,280 COMMITMENTS AND CONTINGENCIES REDEEMABLE NONCONTROLLING INTERESTS — 101 EQUITY Common units (93.4 and 86.5 units issued and outstanding, respectively) 3,576 3,332 Accumulated other comprehensive loss (7) (7) Noncontrolling interests 10,488 11,346 TOTAL EQUITY 14,057 14,671 TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY $ 22,511 $ 23,052 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 46 Table of Contents NEXTERA ENERGY PARTNERS, LP CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) Years Ended December 31, 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 218 $ 1,121 $ 424 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 553 430 288 Intangible amortization – PPAs 82 143 117 Change in value of derivative contracts 284 (1,034) (189) Deferred income taxes 34 171 46 Equity in earnings of equity method investees, net of distributions received 32 3 21 Equity in earnings of non-economic ownership interests, net of distributions received (4) (50) (21) Losses (gains) on disposal of businesses/assets – net (375) (36) 5 Other – net 20 10 11 Changes in operating assets and liabilities: Current assets (34) (43) (6) Noncurrent assets (81) (2) (7) Current liabilities (14) 63 (10) Noncurrent liabilities 16 — (2) Net cash provided by operating activities 731 776 677 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of membership interests in subsidiaries – net (661) (989) (2,352) Capital expenditures and other investments (1,269) (1,351) (113) Proceeds from CITCs — — 75 Proceeds from sale of a business 1,885 204 — Payments to related parties under CSCS agreement – net (1,213) (240) (47) Distributions from equity method investee — 15 1 Distributions from non-economic ownership interests — — 90 Reimbursements from related parties for capital expenditures 1,063 1,161 15 Other – net 1 6 30 Net cash used in investing activities (194) (1,194) (2,301) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common units – net 315 147 50 Issuances of long-term debt, including premiums and discounts 2,362 1,505 2,880 Retirements of long-term debt (1,523) (1,544) (1,159) Debt issuance costs (12) (17) (12) Capped call transaction — (31) (31) Partner contributions — 2 2 Partner distributions (741) (636) (619) Proceeds on sale of Class B noncontrolling interests – net 177 1,115 893 Payments to Class B noncontrolling interest investors (146) (163) (80) Buyout of Class B noncontrolling interest investors (972) — (265) Proceeds on sale of differential membership interests 92 101 48 Proceeds from differential membership investors 153 137 74 Payments to differential membership investors (225) (36) (35) Change in amounts due to related parties (2) (18) (13) Payment of CITC obligation to third party — — (65) Other – net (5) (11) (5) Net cash provided by (used in) financing activities (527) 551 1,663 NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 10 133 39 CASH, CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF YEAR 284 151 112 CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF YEAR $ 294 $ 284 $ 151 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest, net of amounts capitalized $ 250 $ 154 $ 126 Cash paid (received) for income taxes – net $ (1) $ — $ 2 Change in noncash investments in equity method investees – net $ (9) $ (1) $ 127 Accrued property additions $ 77 $ 846 $ 971 The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 47 Table of Contents NEXTERA ENERGY PARTNERS, LP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (millions) Common Units Units Amount Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Equity Redeemable Non-controlling Interests Balances, December 31, 2020 75.9 $ 2,362 $ (8) $ 5,353 $ 7,707 $ — Issuance of common units – net (a) 0.7 56 — — 56 — Acquisition of subsidiary with noncontrolling ownership interests — — — 2,494 2,494 321 Capped call transaction — (31) — — (31) — Related party note receivable — — — 2 2 — Net income — 137 — 287 424 — Other comprehensive income — — — 2 2 — Distributions, primarily to related parties — — — (424) (424) — Changes in non-economic ownership interests — — — 127 127 — Sale of differential membership interest — — — 48 48 — Other differential membership investment activity — — — 39 39 — Sale of Class B noncontrolling interests – net — (3) — 893 890 — Payments to Class B noncontrolling interest investors — — — (80) (80) — Distributions to unitholders (b) — (198) — — (198) — Adoption of accounting standards update — (57) — 1 (56) — Buyout of Class B noncontrolling interest investor (c) 7.3 719 — (879) (160) — Other – net — — — (2) (2) — Balances, December 31, 2021 83.9 2,985 (8) 7,861 10,838 321 Issuance of common units – net (a)(d) 2.6 179 — — 179 — Acquisition of subsidiaries with differential membership interests and noncontrolling ownership interests — — — 2,012 2,012 — Capped call transaction — (31) — — (31) — Related party note receivable — — — 2 2 — Net income — 477 — 635 1,112 9 Other comprehensive income — — 1 1 2 — Distributions, primarily to related parties — — — (382) (382) — Changes in non-economic ownership interests — — — 1 1 — Sale of differential membership interest — — — — — 101 Other differential membership investment activity — (21) — 264 243 (330) Sale of Class B noncontrolling interests – net — (3) — 1,115 1,112 — Payments to Class B noncontrolling interest investors — — — (163) (163) — Distributions to unitholders (b) — (254) — — (254) — Balances, December 31, 2022 86.5 3,332 (7) 11,346 14,671 101 Issuance of common units – net (a)(d) 6.9 367 — — 367 — Acquisition of subsidiaries with differential membership interests — — — 165 165 — Acquisition of subsidiary with noncontrolling ownership interest — — — 72 72 — Net income — 200 — 14 214 4 Other comprehensive income — — 1 1 2 — Distributions, primarily to related parties — — — (432) (432) — Changes in non-economic ownership interests — — — 11 11 — Other differential membership investment activity — — — 315 315 (105) Sale of Class B noncontrolling interests – net — (1) — 177 176 — Payments to Class B noncontrolling interest investors — — — (146) (146) — Distributions to unitholders (b) — (309) — — (309) — Buyout of Class B noncontrolling interest investors — — — (972) (972) — Sale of subsidiary with noncontrolling ownership interest — — — (80) (80) — Other – net — (13) (1) 17 3 — Balances, December 31, 2023 93.4 $ 3,576 $ (7) $ 10,488 $ 14,057 $ — ____________________________ (a) See Note 14 – ATM Program for further discussion.
For the differential membership interests and Class B noncontrolling ownership interests, NEP has determined the allocation of economics between the controlling party and third-party investor should not follow the respective ownership percentages for each investment but rather the hypothetical liquidation of book value (HLBV) method based on the governing provisions in each respective limited liability company agreement.
For the differential membership interests and Class B noncontrolling membership interests, NEP has determined the allocation of economics between the controlling party and third-party investor should not follow the respective ownership percentages for each investment but rather the hypothetical liquidation of book value (HLBV) method based on the governing provisions in each respective limited liability company agreement.
Thus, the impact of the net income (loss) attributable to the Class B noncontrolling ownership interests and the differential membership interests are allocated to NEE Equity's noncontrolling ownership interest and the net income attributable to NEP based on their respective ownership percentage of NEP OpCo.
Thus, the impact of the net income (loss) attributable to the Class B noncontrolling membership interests and the differential membership interests are allocated to NEE Equity's noncontrolling ownership interest and the net income attributable to NEP based on their respective ownership percentage of NEP OpCo.
Distributions related to the noncontrolling interests, other than the differential membership interests and Class B noncontrolling interests, are reflected as partner distributions in NEP's consolidated statements of cash flows.
Distributions related to the noncontrolling interests, other than the differential membership interests and Class B noncontrolling membership interests, are reflected as partner distributions in NEP's consolidated statements of cash flows.
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.
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.
Related Party Transactions Each project entered into O&M and administrative services agreements (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 consolidated statements of income (loss).
Related Party Transactions Each project entered into O&M 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 consolidated statements of income.
In August 2021, an indirect subsidiary of NEP completed the acquisition (August 2021 acquisition) of 100% of the ownership interests in each of: • Highview Power Holdings, LLC, which indirectly owns a 150 MW wind generation facility located in California; • Brookfield Windstar Holding, LLC, which indirectly owns a 120 MW wind generation facility located in California; • Brookfield Coram Wind Development, LLC, which indirectly owns a 22 MW wind generation facility located in California; and • BAIF Granite Holdings, LLC, which indirectly owns a 99 MW wind generation facility located in New Hampshire.
Acquisitions In August 2021, an indirect subsidiary of NEP completed the acquisition (August 2021 acquisition) of 100% of the ownership interests in each of: • Highview Power Holdings, LLC, which indirectly owns a 150 MW wind generation facility located in California; • Brookfield Windstar Holding, LLC, which indirectly owns a 120 MW wind generation facility located in California; • Brookfield Coram Wind Development, LLC, which indirectly owns a 22 MW wind generation facility located in California; and • BAIF Granite Holdings, LLC, which indirectly owns a 99 MW wind generation facility located in New Hampshire.
NEP, through O&M and administrative services agreements with subsidiaries of NEER, operates and manages the wind, solar and battery storage projects, and consolidates the entities that directly and indirectly own the wind, solar and battery storage projects. The third-party investors are allocated earnings, tax attributes and cash flows in accordance with the respective limited liability company agreements.
NEP, through O&M and administrative services agreements (ASAs) with subsidiaries of NEER, operates and manages the wind, solar and battery storage projects, and consolidates the entities that directly and indirectly own the wind, solar and battery storage projects. The third-party investors are allocated earnings, tax attributes and cash flows in accordance with the respective limited liability company agreements.
(d) At December 31, 2020, NEP retained certain Class B membership interests in Genesis Holdings which were sold to the Class B investors for approximately $493 million at a final funding in June 2021. Prior to the final Class B funding, NEP received approximately 83% of Genesis Holdings’ cash distributions and the third-party investors received 17%.
(b) At December 31, 2020, NEP retained certain Class B membership interests in Genesis Holdings which were sold to the Class B investors for approximately $493 million at a final funding in June 2021. Prior to the final Class B funding, NEP received approximately 83% of Genesis Holdings’ cash distributions and the third-party investors received 17%.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Subsidiaries of NEP have sold Class B noncontrolling membership interests in NEP Renewables, LLC (NEP Renewables), NEP Renewables II, LLC (NEP Renewables II), NextEra Energy Partners Pipelines, LLC (NEP Pipelines), South Texas Midstream, LLC (STX Midstream), Genesis Solar Holdings, LLC (Genesis Holdings), NEP Renewables III, LLC (NEP Renewables III) and NEP Renewables IV, LLC (NEP Renewables IV) (collectively, Class B noncontrolling ownership interests).
Subsidiaries of NEP have sold Class B noncontrolling membership interests in NEP Renewables, LLC (NEP Renewables), NEP Renewables II, LLC (NEP Renewables II), NextEra Energy Partners Pipelines, LLC (NEP Pipelines), South Texas Midstream, LLC (STX Midstream), Genesis Solar Holdings, LLC (Genesis Holdings), NEP Renewables III, LLC (NEP Renewables III) and NEP Renewables IV, LLC (NEP Renewables IV) (collectively, Class B noncontrolling membership interests).
Changes in the ARO resulting from the passage of time are recognized as an increase in the carrying amount of the liability and as accretion expense, which is included in depreciation and amortization expense in NEP’s consolidated statements of income (loss).
Changes in the ARO resulting from the passage of time are recognized as an increase in the carrying amount of the liability and as accretion expense, which is included in depreciation and amortization expense in NEP’s consolidated statements of income.
All changes in the interest rate contract derivatives' fair value are recognized in interest expense and the equity method investees' related activity is recognized in equity in earnings of equity method investees in NEP's consolidated statements of income (loss).
All changes in the interest rate contract derivatives' fair value are recognized in interest expense and the equity method investees' related activity is recognized in equity in earnings of equity method investees in NEP's consolidated statements of income.
Quantitative and Qualitative Disclosures About Market Risk See Management's Discussion – Quantitative and Qualitative Disclosures About Market Risk. 38 Table of Contents Item. 8 Financial Statements and Supplementary Data MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING NextEra Energy Partners, LP's (NEP) management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f).
Quantitative and Qualitative Disclosures About Market Risk See Management's Discussion – Quantitative and Qualitative Disclosures About Market Risk. 39 Table of Contents Item. 8 Financial Statements and Supplementary Data MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING NextEra Energy Partners, LP's (NEP) management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f).
Additionally, certain NEP subsidiaries pay affiliates for transmission and retail power services which are reflected as operations and maintenance in NEP's consolidated statements of income (loss).
Additionally, certain NEP subsidiaries pay affiliates for transmission and retail power services which are reflected as operations and maintenance in NEP's consolidated statements of income.
Intangible Liabilities – PPAs – At December 31, 2022 and 2021 , NEP's consolidated balance sheets reflect intangible liabilities – PPAs primarily related to the December 2022 and December 2021 acquisitions from NEER discussed in Note 3 and will be amortized into operating revenues on a straight-line basis over the remaining contract terms of the PPAs, which approximates the period giving rise to the value.
Intangible Liabilities – PPAs – At December 31, 2023 and 2022 , NEP's consolidated balance sheets reflect intangible liabilities – PPAs primarily related to acquisitions from NEER discussed in Note 3 and will be amortized into operating revenues on a straight-line basis over the remaining contract terms of the PPAs, which approximates the period giving rise to the value.
Upon commencement of plant or pipeline operations, costs associated with construction work in progress are transferred to the appropriate category in property, plant and equipment – net. The American Recovery and Reinvestment Act of 2009, as amended, provided for an option to elect a cash grant (convertible investment tax credits) for certain renewable energy property.
Upon commencement of plant operations, costs associated with construction work in progress are transferred to the appropriate category in property, plant and equipment – net. The American Recovery and Reinvestment Act of 2009, as amended, provided for an option to elect a cash grant (convertible investment tax credits) for certain renewable energy property.
NEP’s share of earnings (losses) in the unconsolidated entities is included in equity in earnings of equity method investees and equity in earnings (losses) of non-economic ownership interests in NEP's consolidated statements of income (loss).
NEP’s share of earnings (losses) in the unconsolidated entities is included in equity in earnings of equity method investees and equity in earnings (losses) of non-economic ownership interests in NEP's consolidated statements of income.
Lease payments under the land use agreements, which convey exclusive use of the land during the arrangement, are either fixed based on the terms of the related lease agreement or variable primarily based on the amount of generation at the renewable energy project. NEP’s operating and finance leases with fixed payments have expiration dates ranging from 2028 to 2057.
Lease payments under the land use agreements, which convey exclusive use of the land during the arrangement, are either fixed based on the terms of the related lease agreement or variable primarily based on the amount of generation at the renewable energy project. NEP’s operating and finance leases with fixed payments have expiration dates ranging from 2028 to 2058.
(e) At December 31, 2021, NEP retained certain Class B membership interests in NEP Renewables III which were sold to the Class B investors for approximately $408 million at a final funding in June 2022. Prior to the final Class B funding, NEP received approximately 67.5% of NEP Renewables III's cash distributions and the third-party investors received 32.5%.
(c) At December 31, 2021, NEP retained certain Class B membership interests in NEP Renewables III which were sold to the Class B investors for approximately $408 million at a final funding in June 2022. Prior to the final Class B funding, NEP received approximately 67.5% of NEP Renewables III's cash distributions and the third-party investors received 32.5%.
In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of NEP as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of NEP as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
NEP records losses of the unconsolidated entities only to the extent of its investment unless there is an obligation to provide further financial support for the investee. All equity in earnings (losses) of the non-economic ownership interests is allocated to net income attributable to noncontrolling interests. See Note 9 and Note 10.
NEP records losses of the unconsolidated entities only to the extent of its investment unless there is an obligation to provide further financial support for the investee. All equity in earnings (losses) of the non-economic ownership interests is allocated to net income attributable to noncontrolling interests. See Note 10 and Note 11.
(i) NEP may elect to pay the buyout price in NEP non-voting common units or cash (or any combination thereof), subject to conditions and limitations set forth in the applicable agreements. Percentages shown represent the maximum percentages NEP expects it can pay in NEP non-voting common units without the acquiescence of the Class B investor, subject to applicable closing conditions.
(g) NEP may elect to pay the buyout price in NEP non-voting common units or cash (or any combination thereof), subject to conditions and limitations set forth in the applicable agreements. Percentages shown represent the maximum percentages NEP expects it can pay in NEP non-voting common units without the acquiescence of the Class B investor, subject to applicable closing conditions.
Accumulated other comprehensive loss at December 31, 2022 and 2021 reflects other comprehensive income (loss) attributable to NEP. Noncontrolling Interests – Noncontrolling interests represents the portion of net assets in consolidated entities that are not owned by NEP and are reported as a component of equity on NEP’s consolidated balance sheets.
Accumulated other comprehensive loss at December 31, 2023 and 2022 reflects other comprehensive income (loss) attributable to NEP. Noncontrolling Interests – Noncontrolling interests represents the portion of net assets in consolidated entities that are not owned by NEP and are reported as a component of equity on NEP’s consolidated balance sheets.
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.
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 other observable inputs (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.
If, upon conversion of the 2022 convertible notes, the price per NEP common unit during the relevant valuation period is above the strike price, there would generally be a payment to NEP (if NEP elects to cash settle) or an offset of potential dilution to NEP's common units (if NEP elects to settle in NEP common units).
If, upon conversion of the 2022 convertible notes, the price per NEP common unit during the relevant valuation period is above the strike price, there would generally be a payment to NEP (if NEP elects to cash settle) or an offset of potential dilution to NEP's common units up to the cap price (if NEP elects to settle in NEP common units).
During 2021, NEP issued $500 million principal amount of senior unsecured convertible notes (2021 convertible notes). The 2021 convertible notes are unsecured obligations of NEP and are absolutely and unconditionally guaranteed, on a senior unsecured basis, by NEP OpCo. A holder may convert all or a portion of its 2021 convertible notes in accordance with the related indenture.
During 2021, NEP issued $500 million principal amount of senior unsecured convertible notes due 2024 (2021 convertible notes). The 2021 convertible notes are unsecured obligations of NEP and are absolutely and unconditionally guaranteed, on a senior unsecured basis, by NEP OpCo. A holder may convert all or a portion of its 2021 convertible notes in accordance with the related indenture.
Management assessed the effectiveness of NEP's internal control over financial reporting as of December 31, 2022, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the Internal Control – Integrated Framework (2013) . Based on this assessment, management believes that NEP's internal control over financial reporting was effective as of December 31, 2022.
Management assessed the effectiveness of NEP's internal control over financial reporting as of December 31, 2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the Internal Control – Integrated Framework (2013) . Based on this assessment, management believes that NEP's internal control over financial reporting was effective as of December 31, 2023.
At December 31, 2022, the NEP OpCo credit facility provided up to $2.5 billion of revolving credit loans and included borrowing capacity of up to $400 million for letters of credit and incremental commitments to increase the NEP OpCo credit facility to up to $3.25 billion in the aggregate, subject to certain conditions.
At December 31, 2023, the NEP OpCo credit facility provided up to $2.5 billion of revolving credit loans and included borrowing capacity of up to $400 million for letters of credit and incremental commitments to increase the NEP OpCo credit facility to up to $3.25 billion in the aggregate, subject to certain conditions.
We read the third-party valuation report. 41 Table of Contents • We assessed the reasonableness of management’s forecasts of future cash flows by comparing the projections to similar generation facilities acquired in previous years. • We used personnel in our firm who specialize in energy transacting to assist in testing certain inputs in management's fair value models. • With the assistance of our fair value specialists, we (1) evaluated the reasonableness of the valuation methodology, (2) evaluated the reasonableness of the discount rates, including testing the source information underlying the determination of the discount rates, assessing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rates selected by management, and (3) assessed the mathematical accuracy of significant calculations in the valuation schedules. • We evaluated NEP’s disclosures related to the acquisition, including balances recorded and significant assumptions.
We read the third-party valuation report. • We assessed the reasonableness of management’s forecasts of future cash flows by comparing the projections to historical generation or similar generation facilities acquired in previous years. • We used personnel in our firm who specialize in energy transacting to assist in testing certain inputs in management's fair value models. • With the assistance of our fair value specialists, we (1) evaluated the reasonableness of the valuation methodology, (2) evaluated the reasonableness of the discount rates, including testing the source information underlying the determination of the discount rates, assessing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rates selected by management, and (3) assessed the mathematical accuracy of significant calculations in the valuation schedules. • We evaluated NEP’s disclosures related to the acquisition, including balances recorded and significant assumptions.
The long-term debt agreements listed above all contain provisions which, under certain conditions, restrict the payment of dividends and other distributions. At December 31, 2022, NEP and its subsidiaries were in compliance with all financial debt covenants under their respective financing agreements. During 2022, NEP issued $500 million principal amount of senior unsecured convertible notes (2022 convertible notes).
The long-term debt agreements listed above all contain provisions which, under certain conditions, restrict the payment of dividends and other distributions. At December 31, 2023, NEP and its subsidiaries were in compliance with all financial debt covenants under their respective financing agreements. During 2022, NEP issued $500 million principal amount of senior unsecured convertible notes due 2026 (2022 convertible notes).
(h) The buyout right is subject to certain limitations and/or extensions in the respective agreements, including, but not limited to, NEP being able to purchase a maximum of the Class B units following anniversaries specified in certain of the agreements.
(e) The buyout right is subject to certain limitations and/or extensions in the respective agreements, including, but not limited to, NEP being able to purchase a maximum of the Class B units following anniversaries specified in certain of the agreements.
Although the third-party investors own equity interests in the wind, solar and battery storage projects, NEP retains a controlling interest in the entities as of December 31, 2022 and therefore presents the differential membership interests as noncontrolling interests.
Although the third-party investors own equity interests in the wind, solar and battery storage projects, NEP retains a controlling interest in the entities as of December 31, 2023 and therefore presents the differential membership interests as noncontrolling interests.
See Note 5. Long-term Debt Costs – NEP recognizes interest expense using the effective interest method over the life of the related debt. Certain of NEP’s debt obligations include escalating interest rates that are incorporated into the effective interest rate for the related debt.
See Note 6. Long-term Debt Costs – NEP recognizes interest expense using the effective interest method over the life of the related debt. Certain of NEP’s debt obligations include escalating interest rates that are incorporated into the effective interest rate for the related debt.
(b) The NEP OpCo senior unsecured notes are absolutely and unconditionally guaranteed, on a senior unsecured basis, by NEP and a subsidiary of NEP OpCo. (c) Variable rate is based on an underlying index plus a margin. (d) Interest rate contracts, primarily swaps, have been entered into for a majority of these debt issuances. See Note 5.
(b) The NEP OpCo senior unsecured notes are absolutely and unconditionally guaranteed, on a senior unsecured basis, by NEP and a direct subsidiary of NEP OpCo. (c) Variable rate is based on an underlying index plus a margin. (d) Interest rate contracts, primarily swaps, have been entered into for a majority of these debt issuances. See Note 6.
Limited partners' equity in common units at December 31, 2022 and 2021 reflects the investment of NEP common unitholders, changes to net income attributable to NEP, distributions of available cash to common unitholders and other contributions from or distributions to NEP common unitholders.
Limited partners' equity in common units at December 31, 2023 and 2022 reflects the investment of NEP common unitholders, changes to net income attributable to NEP, distributions of available cash to common unitholders and other contributions from or distributions to NEP common unitholders.
In our opinion, NEP maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.
In our opinion, NEP maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.
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. 11.
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. 12.
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 years ended December 31, 2022, 2021 and 2020 include approximately $7 million, $6 million and $6 million, respectively, related to the CSCS agreement.
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 years ended December 31, 2023, 2022 and 2021 include approximately $8 million, $7 million and $6 million, respectively, related to the CSCS agreement.
NEP evaluates whether an entity is a VIE whenever reconsideration events as defined by the accounting guidance occur. See Note 10. Leases – NEP determines if an arrangement is a lease at inception.
NEP evaluates whether an entity is a VIE whenever reconsideration events as defined by the accounting guidance occur. See Note 11. Leases – NEP determines if an arrangement is a lease at inception.
May Controller and Chief Accounting Officer NextEra Energy Partners, LP 39 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the unitholders and the Board of Directors of NextEra Energy Partners, LP Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of NextEra Energy Partners, LP and subsidiaries (NEP) as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
May Controller and Chief Accounting Officer NextEra Energy Partners, LP 40 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the unitholders and the Board of Directors of NextEra Energy Partners, LP Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of NextEra Energy Partners, LP and subsidiaries (NEP) as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures included the following, among others: • We tested the effectiveness of controls over purchase accounting, including management’s review of the third-party specialist’s valuation report. • We evaluated the competency of the third-party specialist engaged by management to perform the valuations.
How the Critical Audit Matter Was Addressed in the Audit Our audit procedures included the following, among others: • We tested the effectiveness of controls over purchase accounting, including management’s review of the third-party 42 Table of Contents specialist’s valuation report. • We evaluated the competency of the third-party specialist engaged by management to perform the valuations.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), NEP’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2023 expressed an unqualified opinion on NEP’s internal control over financial reporting.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), NEP’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2024 expressed an unqualified opinion on NEP’s internal control over financial reporting.
Approximately $70 million of the cash proceeds from the sale were distributed to the third-party owner of Class B membership interests in STX Midstream (see Note 13 - Class B Noncontrolling Interests).
Approximately $70 million of the cash proceeds from the sale were distributed to the third-party owner of noncontrolling Class B membership interests in STX Midstream (see Note 14 – Class B Noncontrolling Interests).
In addition, approximately $8 million, $7 million and $6 million was recorded related to variable lease costs in 2022, 2021 and 2020, respectively. Other operating and finance lease-related amounts were not material to NEP’s consolidated statements of income (loss) or cash flows for the periods presented.
In addition, approximately $6 million, $8 million and $7 million was recorded related to variable lease costs in 2023, 2022 and 2021, respectively. Other operating and finance lease-related amounts were not material to NEP’s consolidated statements of income or cash flows for the periods presented.
Property, plant and equipment, excluding land and perpetual rights-of-way, is recorded at cost and depreciated on a straight-line basis over the estimated useful lives ranging from three to 50 years, commencing on the date the assets are placed in service or acquired (see Note 8). Maintenance and repairs of property, plant and equipment are charged to O&M expense as incurred.
Property, plant and equipment, excluding land and perpetual rights-of-way, is recorded at cost and depreciated on a straight-line basis over the estimated useful lives ranging from three to 39 years, commencing on the date the assets are placed in service or acquired (see Note 9). Maintenance and repairs of property, plant and equipment are charged to O&M expense as incurred.
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.
NEP uses 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 similar assets and liabilities for those assets and liabilities that are measured at fair value on a recurring basis.
Equity Method Investments At December 31, 2022, investments in equity method investees primarily includes the approximately 50% ownership interest in Desert Sunlight Investment Holdings, LLC, approximately 50% ownership interest in Rosmar Holdings, LLC (Rosmar), the ownership interest in Meade Pipeline Co, LLC (Meade), including Meade's ownership interest in the Central Penn Line (CPL), the 40% ownership interest in Pine Brooke Holdings and the 33.3% ownership interests in certain projects acquired in October 2021 (see Note 3).
Equity Method Investments At December 31, 2023, investments in equity method investees primarily includes the approximately 50% ownership interest in Desert Sunlight Investment Holdings, LLC, approximately 50% ownership interest in Rosmar Holdings, LLC (Rosmar), the ownership interest in Meade Pipeline Co, LLC (Meade), including Meade's ownership interest in the Central Penn Line (CPL), the 40% ownership interest in Pine Brooke Class A Holdings, LLC (Pine Brooke Holdings) and the 33.3% ownership interests in certain projects acquired in October 2021 (see Note 3).
NEP’s operating lease liabilities were calculated based on a weighted average discount rate of 4.04% and 4.01% based on the incremental borrowing rate at the lease commencement date and have a weighted-average remaining lease term of 25 years and 26 years, at December 31, 2022 and 2021, respectively.
NEP’s operating lease liabilities were calculated based on a weighted average discount rate of 4.25% and 4.04% based on the incremental borrowing rate at the lease commencement date and have a weighted-average remaining lease term of 26 years and 25 years, at December 31, 2023 and 2022, respectively.
Convertible investment tax credits (CITCs) are recorded as a reduction in property, plant and equipment – net on NEP's consolidated balance sheets and are amortized as a corresponding reduction to depreciation expense over the estimated life of the related asset. At December 31, 2022 and 2021 , CITCs, net of amortization, were approximately $451 million and $448 million, respectively.
Convertible investment tax credits (CITCs) are recorded as a reduction in property, plant and equipment – net on NEP's consolidated balance sheets and are amortized as a corresponding reduction to depreciation expense over the estimated life of the related asset. At December 31, 2023 and 2022 , CITCs, net of amortization, were approximately $431 million and $451 million, respectively.
The fair value of these financial assets is determined using the valuation techniques and inputs as described in Note 5 – Fair Value Measurements of Derivative Instruments.
The fair value of these financial assets is determined using the valuation techniques and inputs as described in Note 6 – Fair Value Measurements of Derivative Instruments.
In November 2021, NEP paid aggregate consideration of approximately $885 million, consisting of 7,253,580 NEP common units and approximately $265 million in cash to the third-party investor after electing to exercise the buyout right and purchase all of the Class B membership interests in NEP Renewables. 71 Table of Contents NEXTERA ENERGY PARTNERS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Accumulated Other Comprehensive Income (Loss) – Accumulated Other Comprehensive Income (Loss) Other Comprehensive Income (Loss) Related to Equity Method Investee Total (millions) Balances, December 31, 2019 $ (22) $ (22) Other comprehensive income related to equity method investee 2 2 Balances, December 31, 2020 (20) (20) Other comprehensive income related to equity method investee 2 2 Balances, December 31, 2021 (18) (18) Other comprehensive income related to equity method investee 2 2 Balances, December 31, 2022 $ (16) $ (16) AOCI attributable to noncontrolling interest, December 31, 2022 $ (9) $ (9) AOCI attributable to NextEra Energy Partners, December 31, 2022 $ (7) $ (7) 14.
In November 2021, NEP paid aggregate consideration of approximately $885 million, consisting of 7,253,580 NEP common units and approximately $265 million in cash to the third-party investor after electing to exercise the buyout right and purchase all of the Class B membership interests in NEP Renewables. 74 Table of Contents NEXTERA ENERGY PARTNERS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Accumulated Other Comprehensive Income (Loss) – Accumulated Other Comprehensive Income (Loss) Other Comprehensive Income (Loss) Related to Equity Method Investee Total (millions) Balances, December 31, 2020 $ (20) $ (20) Other comprehensive income related to equity method investee 2 2 Balances, December 31, 2021 (18) (18) Other comprehensive income related to equity method investee 2 2 Balances, December 31, 2022 (16) (16) Other comprehensive income related to equity method investee 2 2 Balances, December 31, 2023 $ (14) $ (14) AOCI attributable to noncontrolling interest, December 31, 2023 $ (7) $ (7) AOCI attributable to NextEra Energy Partners, December 31, 2023 $ (7) $ (7) 15.
Those economics are allocated primarily to the third-party investors until they receive a targeted return (the flip date) and thereafter to NEP. NEP has the right to call the third-party interests at specified amounts if and when the flip date occurs.
Those economics are allocated primarily to the third-party investors until they receive a targeted return (the flip date) and thereafter to NEP. NEP has the right to call the third-party interests at specified amounts if and when the flip date occurs. See Note 11.
Derivative Instruments and Hedging Activities – Derivative instruments, when required to be marked to market, are recorded on NEP’s consolidated balance sheets as either an asset or a liability measured at fair value. See Note 5.
See Note 4. Derivative Instruments and Hedging Activities – Derivative instruments, when required to be marked to market, are recorded on NEP’s consolidated balance sheets as either an asset or a liability measured at fair value. See Note 6.
NEP recognized approximately $2 million, $3 million and $3 million in 2022, 2021 and 2020, respectively, of operating lease costs associated with its ROU assets and lease obligations which are included in O&M expenses in NEP’s consolidated statements of income (loss).
NEP recognized approximately $2 million, $2 million and $3 million in 2023, 2022 and 2021, respectively, of operating lease costs associated with its ROU assets and lease obligations which are included in O&M expenses in NEP’s consolidated statements of income.
At December 31, 2022, the note payable was approximately $48 million and is included in long-term debt on NEP's consolidated balance sheets. The note payable does not bear interest and does not have a maturity date.
At December 31, 2023 and 2022, the note payable was approximately $62 million and $48 million, respectively and is included in long-term debt on NEP's consolidated balance sheets. The note payable does not bear interest and does not have a maturity date.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022 of NEP and our report dated February 22, 2023, expressed an unqualified opinion on those financial statements.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023 of NEP and our report dated February 20, 2024, expressed an unqualified opinion on those financial statements.
Intangible asset – PPAs are amortized into operating revenues on a straight-line basis over the remaining contract terms of the related PPAs, which approximates the period giving rise to the value. At December 31, 2022 and 2021, accumulated amortization related to the intangible asset – PPAs was approximately $454 million and $295 million, respectively.
Intangible asset – PPAs are amortized into operating revenues on a straight-line basis over the remaining contract terms of the related PPAs, which approximates the period giving rise to the value. At December 31, 2023 and 2022, accumulated amortization related to the intangible asset – PPAs was approximately $617 million and $454 million, respectively.
At December 31, 2022 and 2021, NEP's equity method investment related to the non-economic ownership interests of approximately $98 million and $47 million, respectively, is reflected as noncurrent other assets on NEP's consolidated balance sheets. All equity in earnings of the non-economic ownership interests is allocated to net income attributable to noncontrolling interests.
At December 31, 2023 and 2022, NEP's equity method investment related to the non-economic ownership interests of approximately $111 million and $98 million, respectively, is reflected as noncurrent other assets on NEP's consolidated balance sheets. All equity in earnings of the non-economic ownership interests is allocated to net income attributable to noncontrolling interests.
Operating lease expense is included in O&M expense, interest and amortization expense associated with finance leases are included in interest expense and depreciation and amortization expense, respectively, and rental income associated with operating leases and interest income associated with sales-type leases are included in operating revenues in NEP’s consolidated statements of income (loss). See Note 11.
Operating lease expense is included in O&M expense, interest and amortization expense associated with finance leases are included in interest expense and depreciation and amortization expense, respectively, and rental income associated with operating leases and interest income associated with sales-type leases are included in operating revenues in NEP’s consolidated statements of income. See Note 12.
If, upon conversion of the 2020 convertible notes, the price per NEP common unit during the relevant valuation period is above the strike price, there would generally be a payment to NEP (if NEP elects to cash settle) or an offset of potential dilution to NEP's common units (if NEP elects to settle in NEP common units). 13.
If, upon conversion of the 2020 convertible notes, the price per NEP common unit during the relevant valuation period is above the strike price, there would generally be a payment to NEP (if NEP elects to cash settle) or an offset of potential dilution to NEP's common units up to the cap price (if NEP elects to settle in NEP common units). 14.
At December 31, 2022, NEP had derivative commodity contracts for power with net notional volumes of approximately 5.7 million MW hours. Cash flows from the interest rate and commodity contracts are reported in cash flows from operating activities in NEP's consolidated statements of cash flows.
At December 31, 2023 and 2022, NEP had derivative commodity contracts for power with net notional volumes of approximately 4.6 million and 5.7 million MW hours, respectively. Cash flows from the interest rate and commodity contracts are reported in cash flows from operating activities in NEP's consolidated statements of cash flows.
The purchase price for the asset acquisition was allocated to the assets acquired and liabilities assumed, including the noncontrolling interests, 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.
Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed, including noncontrolling interests, 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.
Debt issuance costs include fees and costs incurred to obtain long-term debt and are amortized over the life of the related debt using the effective interest rate established at debt issuance. NEP incurred approximately $13 million and $12 million of debt issuance costs during the years ended December 31, 2022 and 2021, respectively.
Debt issuance costs include fees and costs incurred to obtain long-term debt and are amortized over the life of the related debt using the effective interest rate established at debt issuance. NEP incurred approximately $10 million and $13 million of debt issuance costs during the years ended December 31, 2023 and 2022, respectively.
DELOITTE & TOUCHE LLP Boca Raton, Florida February 22, 2023 40 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the unitholders and the Board of Directors of NextEra Energy Partners, LP Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of NextEra Energy Partners, LP and subsidiaries (NEP) as of December 31, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").
DELOITTE & TOUCHE LLP Boca Raton, Florida February 20, 2024 41 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the unitholders and the Board of Directors of NextEra Energy Partners, LP Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of NextEra Energy Partners, LP and subsidiaries (NEP) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").
( NEECH) or NEER has provided letters of credit or 72 Table of Contents NEXTERA ENERGY PARTNERS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded) guarantees for certain of these performance obligations and payment of any obligations from the transactions contemplated by the PPAs .
( NEECH) or NEER has provided letters of credit or 75 Table of Contents NEXTERA ENERGY PARTNERS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) guarantees for certain of these performance obligations and payment of any obligations from the transactions contemplated by the PPAs .
See Note 2 – Noncontrolling Interests and Note 13 – Class B Noncontrolling Interests. 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.
See Note 2 – Noncontrolling Interests and Note 14 – Class B Noncontrolling Interests. These entities are considered VIEs because the holders of the noncontrolling Class B membership interests do not have substantive rights over the significant activities of the entities.
The purchase price included total consideration of approximately $805 million, plus working capital and other adjustments of approximately $8 million (subject to certain post-closing adjustments) and NEP's share of the portfolio’s existing noncontrolling interests related to differential membership investors of approximately $1.4 billion at the time of closing.
The purchase price included total consideration of approximately $805 million, plus working capital and other adjustments of approximately $4 million and NEP's share of the portfolio’s existing noncontrolling interests related to differential membership investors of approximately $1.4 billion at the time of closing.
There was no allowance for doubtful accounts recorded at December 31, 2022 and 2021. Restricted Cash – At December 31, 2022 and 2021, NEP had approxima tely $49 million and $4 million, respectively, of restricted cash included in current other assets on NEP's consolidated balance sheets.
There was no allowance for doubtful accounts recorded at December 31, 2023 and 2022. Restricted Cash – At December 31, 2023 and 2022, NEP had approxima tely $20 million and $49 million, respectively, of restricted cash included in current other assets on NEP's consolidated balance sheets.
At December 31, 2022, the power sales agreements have expiration dates from 2037 to 2041 and NEP expects to receive approximately $118 million of lease payments over the remaining term of the power sales agreement with no one year being material.
At December 31, 2023, the power sales agreements have expiration dates from 2037 to 2041 and NEP expects to receive approximately $676 million of lease payments over the remaining term of the power sales agreement with no one year being material.
Earnings Per Unit – Diluted earnings per unit are based on the weighted-average number of common units and potential common units outstanding during the period, including the dilutive effect of the convertible notes and preferred units (see Preferred Units below).
Earnings Per Unit – Diluted earnings per unit are based on the weighted-average number of common units and potential common units outstanding during the period, including the dilutive effect of the convertible notes.
At December 31, 2022 and 2021 , the cash sweep amounts held in accounts belonging to NEER or its affiliates were approximately $298 million and $57 million, respectively, and are included in due from related parties on NEP’s consolidated balance sheets.
At December 31, 2023 and 2022 , the cash sweep amounts held in accounts belonging to NEER or its affiliates were approximately $1,511 million and $298 million, respectively, and are included in due from related parties on NEP’s consolidated balance sheets.
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 47 Table of Contents NEXTERA ENERGY PARTNERS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2022, 2021 and 2020 1.
The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. 48 Table of Contents NEXTERA ENERGY PARTNERS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2023, 2022 and 2021 1.
NEP's finance lease liabilities were calculated based on a weighted average discount rate of 3.55% and 3.55% with a weighted-average remaining lease term of 34 years and 35 years, at December 31, 2022 and 2021, respectively.
NEP's finance lease liabilities were calculated based on a weighted average discount rate of 3.55% and 3.55% with a weighted-average remaining lease term of 33 years and 34 years, at December 31, 2023 and 2022, respectively.
Acquisitions — Refer to Note 3 to the financial statements Critical Audit Matter Description As discussed in Note 3 to the financial statements, in December 2022, an indirect subsidiary of NEP completed the acquisition of ownership interests (December 2022 acquisition) in a portfolio of wind and solar-plus-storage generation facilities from subsidiaries of NextEra Energy Resources, LLC (NEER), a related party.
Acquisitions — Refer to Note 3 to the financial statements Critical Audit Matter Description As discussed in Note 3 to the financial statements, in June 2023, an indirect subsidiary of NEP completed the acquisition of ownership interests (2023 acquisition) in a portfolio of wind and solar generation facilities from subsidiaries of NextEra Energy Resources, LLC (NEER), a related party.
NEP recorded accretion expense of approximately $12 million, $7 million and $7 million in the years ended December 31, 2022, 2021 and 2020, respectively. Additional AROs were established amounting to approximately $37 million and $101 million in the years ended December 31, 2022 and 2021, respectively, related to the acquisitions in those periods (see Note 3) .
NEP recorded accretion expense of approximately $15 million, $12 million and $7 million in the years ended December 31, 2023, 2022 and 2021, respectively. Additional AROs were established amounting to approximately $19 million and $37 million in the years ended December 31, 2023 and 2022, respectively, related to the acquisitions in those periods (see Note 3) .
(c) Reflects the issuance of approximately 7.3 million NEP common units and recognition of a $105 million deferred tax asset in connection with the exercise of the Class B noncontrolling interest buyout right discussed in Note 13 – Class B Noncontrolling Interests.
(c) Reflects the issuance of approximately 7.3 million NEP common units and recognition of a $105 million deferred tax asset in connection with the exercise of the Class B noncontrolling interest buyout right relating to NEP Renewables discussed in Note 14 – Class B Noncontrolling Interests.
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 located in California; • 100% of the membership interests in Dogwood Wind Holdings, LLC, that indirectly owns two wind generation facilities 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 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 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 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 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.
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 located in California; • 100% of the membership interests in Dogwood Wind Holdings, LLC, that indirectly owns two wind generation facilities 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 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 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 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 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 55 Table of Contents NEXTERA ENERGY PARTNERS, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ◦ 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.
Additionally, in 2022, NEP recorded additional AROs of approximately $8 million for revisions in estimated cash flows due to revised cost estimates. Investments in Unconsolidated Entities – NEP accounts for the investments in its unconsolidated entities under the equity method.
Additionally, NEP recorded a reduction of AROs of approximately $6 million in 2023 and additional AROs of $8 million in 2022, for revisions in estimated cash flows due to revised cost estimates. Investments in Unconsolidated Entities – NEP accounts for the investments in its unconsolidated entities under the equity method.
At December 31, 2022 and 2021, the net notional amounts of the interest rate contracts were approximately $7,836 million and $7,873 million, respectively. All changes in commodity contract derivatives' fair value are recognized in operating revenues in NEP's consolidated statements of income (loss).
At December 31, 2023 and 2022, the net notional amounts of the interest rate contracts were approximately $3,138 million and $7,836 million, respectively. All changes in commodity contract derivatives' fair value are recognized in operating revenues in NEP's consolidated statements of income.

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