NextEra Energy Partners is issuing a $700 million five-year senior unsecured bond, the proceeds of which will be used in part to fund a tender offer for bonds secured on a project contracted with Pacific Gas & Electric.
The unsecured bonds are being offered in 144A format through a mid-level financing vehicle called NextEra Energy Operating Partners but will be guaranteed by the parent company and an upstream subsidiary called NextEra Energy US Partners Holdings.
Citi and Goldman Sachs are left leads on the issuance, joined by underwriters Barclays, BNP Paribas, Bank of America Merrill Lynch, Crédit Agricole, JP Morgan, Key Bank, MUFG and TD Securities.
NextEra says it will use the first $450 million of proceeds to repay borrowings under its revolving credit facility, while the rest will be used to fund a previously announced buy-back of senior secured bonds associated with its 250 MW Genesis solar thermal project in Blythe, Calif., assuming the bondholders accept the offer. Goldman is also running the tender offer as dealer manager while U.S. Bank is the tender agent (PFR, 6/18).
The Genesis bonds were issued in 2014 as part of a holdco-opco structure and have been in technical default since PG&E, the project's offtaker under a 25-year power purchase agreement, filed for bankruptcy in January.
Distributions to the holdco have since been suspended, according to a recent report from Fitch Ratings. With cash being trapped at the project level, the holdco portion of the financing could suffer a payment default in September, the report notes.
Fitch has given the new $700 million corporate-level issuance a BB+ rating with a stable outlook.
Spokespeople for NextEra in Juno Beach, Fla., and Citi and Goldman Sachs in New York, did not immediately respond to requests for comment.
Meanwhile, NEP is also said to be in talks with banks to refinance a loan for its 500 MW Desert Sunlight solar project in Riverside County, Calif., which sells 275 MW of its output to PG&E (PFR, 6/14). The Desert Sunlight refinancing is understood to be a roughly $900 million, three-year loan.
A third NEP project, the 20 MW Shafter Solar Energy Center in Kern County, also sells its electricity to PG&E.
NEP is expected to derive 15% of its 2019 cash available for distribution from Genesis, Desert Sunlight and Shafter. However, PG&E’s bankruptcy filing has resulted in a default under each project financing agreement, halting distributions from the projects.