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
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
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
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
Morgan, UBS and
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.