Units of NextEra Energy Partners (NEP -0.89%) surged about 10% by 10:45 a.m. ET on Tuesday. Powering the renewable energy producer's big move higher was its solid third-quarter results.
Clear progress on its revised plans
NextEra Energy Partners has been under tremendous pressure this year. The renewable energy producer's unit price has plummeted due to a rising cost of capital, which forced it to slam the brakes on its dividend growth plan.
Despite its issues, the company generated strong third-quarter results. NextEra Energy Partners produced $488 million of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) (up 29% year over year) and $247 million of cash available for distribution (CAFD), a 33.5% year-over-year increase. The company benefited from new investments and reduced management fees charged by its parent, NextEra Energy.
NextEra Energy Partners also provided updates on its funding and growth plans. The company noted that it's in the process of selling its Texas natural gas pipeline portfolio. It intends to use those proceeds and the future sale of its Meade natural gas pipeline assets to buy out its STX Midstream, 2019 NEP Pipelines, and NEP Renewables II convertible equity portfolio financings due through 2025. It has already completed the final buyouts of $402 million of the STX Midstream financing, which it funded through its credit facility. The company expects to replenish that facility when it sells its Texas pipeline portfolio.
The company also provided more details of its revised long-term growth strategy. NextEra unveiled that it would repower about 740 megawatts of existing wind farms through 2026 by replacing legacy turbines with larger, more powerful ones. These investments will generate attractive returns to grow its CAFD, supporting its revised plan to increase its dividend by about 6% annually.
Time to buy?
NextEra Energy Partners generated strong third-quarter results as its earnings and cash-flow growth accelerated in the second half as anticipated. Meanwhile, the company provided more details on its revised financing and growth strategies. These updates helped show the market that the company can deliver on its revised growth strategy. With more clarity on its growth, the steep sell-off in NextEra Energy Partners (still down nearly 70% from its 52-week high even after today's rally) looks like a compelling buying opportunity.
