The sale of the pipelines will finance the company’s renewable energy growth plans through 2024, allowing the company to expand without issuing new shares or assuming debt in a high-interest environment, Ketchum said.
Ketchum said the company believes the transition to 100% renewable energy by 2025 will attract a new class of investor and potentially increase the company’s overall valuation.
NextEra Energy Partners has turned down buyers for its natural gas pipelines in the past, but it’s now time to sell, Ketchum told analysts Monday.
NextEra Energy Partners, a subsidiary of NextEra Energy that owns and operates a portfolio of energy projects spread across 30 states, aims to sell the Midstream pipeline in Texas by the end of this year. It will hold on to the Meade natural gas pipeline in Pennsylvania through 2025.
Although he did not give specific numbers, Ketchum said NextEra Energy Partners expects the proceeds from the sales to cover the cost of the company’s planned renewable energy expansion through 2024.
NextEra Energy Partners has enjoyed 12% to 15% annual growth since about 2022 and expects to continue at roughly that pace as demand for renewable energy surges. However, Ketchum said that rising interest rates were eating into the company’s earnings and limiting growth to the low end of that 12-15% range.
Beyond helping the company avoid high financing costs, the pipeline sales should position the company as one of the world’s largest renewable energy generators. Only six other companies, including parent company NextEra Energy, produce more renewable energy than NextEra Energy Partners, Ketchum said, and he expects to grow its project portfolio to 58 GW by 2026.
“NextEra Energy Partners is better positioned than ever to capitalize on the clean energy transition,” Ketchum said. “I am very confident NextEra Energy Partners can become the leading 100% renewables pure-play investment opportunity and that, in turn, will drive value for both NextEra Energy Partner unitholders and NextEra Energy shareholders.”
NextEra Energy Partners has repeatedly received feedback from investors that the company’s stock would be more attractive if the company were to become a “100% renewables pure-play,” Ketchum said. Interest from these investors should increase the company’s valuation, he said.
“Some investors believe the natural gas pipeline assets dilute an otherwise clean, renewable energy portfolio,” he said. “To address these issues, today we are announcing plans for NextEra Energy Partners to simplify and recapitalize its business, positioning the company to be what I believe will be a best-in-class 100% renewables pure-play investment opportunity.”
Shares soared nearly 14.5% to close Monday at $60.50.