NextEra Energy needs to find about $20 billion in 2017 to finance its project pipeline and its acquisition of Oncor Electric Delivery Co., and is likely to tap a variety of sources, according to a report from Moody’s Investors Service.

Besides the $12 billion consideration to be paid for Oncor, NextEra has considerable capital expenditure requirements as it seeks to complete gas-pipelines due to come online this year and shifts its focus to repowering existing wind projects, according to the report, which was published on March 1.

The Florida-based utility and independent power producer holding company, which has a Baa1 rating from Moody’s and A- ratings from both S&P Global Ratings and Fitch Ratings, will likely use a mixture of asset sales, non-recourse project debt, tax equity, hybrid capital and common equity to raise the funds it needs, says Moody’s.

"Permanently financing some $20 billion of capital will be challenging and poses financing risk," reads the report. "We believe, however, that the capital markets will remain open over the next 12 to 18 months to well-positioned power and utility companies such as NextEra."

NextEra agreed to acquire 80% of Oncor from Energy Future Holdings for $9.5 billion in cash and shares in July, ending years of speculation over who would buy the Texas utility that began when its parent filed for bankruptcy in 2014 ( PFR. 7/29).

Then in October, the owners of the remaining 20% of Oncor agreed to sell their stakes to NextEra as well. NextEra is set to pay Singaporean sovereign wealth fund GIC and the Ontario Municipal Employees Retirement System a combined $2.4 billion and Oncor Management Investment $27 million to take full ownership of the utility under the terms of two separate deals ( PFR, 10/31).

NextEra has said it will use the proceeds of convertible equity, debt and equity offerings and "recycling capital"—which usually means asset sales—to finance the transactions.

Bank of America Merrill Lynch and Credit Suisse are leading a group of six banks that are advising NextEra on the three transactions. The other four advisers are Deutsche BankJP MorganUBS and  Wells Fargo.

Meanwhile, NextEra’s capital expenditures are likely to remain high. The company spent a record $5.7 billion on capex in 2016, according to Moody’s.

To finance its operations, the company raised $9.7 billion of financing, most of which—about $2.8 billion—took the form of non-recourse project debt, according to the report. Tax equity accounted for $1.9 billion, equity $1.5 billion and term loans $1.175 billion.

While the rating agency expects NextEra to continue to use project finance, tax equity, hybrid capital and equity in 2017, asset sales are also likely to play an important part.

"NextEra is asset-rich, and we expect recycling capital will be a key financing strategy to manage its debt levels," reads the Moodys’s report.

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