Six months after debuting its first levered convertible equity financing, NextEra Energy Partners designed an even more complex partnership with KKR & Co with a total transaction value of $1.092 billion to fund a 1,192 MW portfolio of ten utility-scale wind and solar projects.

As with the first deal, the yield company intends to use the partnership as a way to eventually buy an operating portfolio of contracted renewable energy projects from its developer/sponsor, NextEra Energy Resources.

This deal had several added wrinkles, however, the most technically challenging of which is that NextEra can buy KKR out of the partnership in multiple portions over time, requiring real-time dynamic resizing of the debt used by KKR to lever up its investment. The debt was provided by Citi and MUFG.

“The complexity of the deal was significant—structuring this so everyone has the right incentives wasn’t as simple as if it was a ‘one and done’ call option,” said Brandon Freiman, head of KKR’s Americas infrastructure business, at the time.

Another quirk was that NextEra Energy Partners contributed several assets from its existing portfolio to the partnership, rather than stocking it only with new assets from the developer/sponsor.

The yieldco put four wind projects totaling 581 MW into the partnership and the other six assets, totaling 611 MW, came from NextEra Energy Resources. NextEra can buy KKR out of its stake between years 3.5 and six.

The backdrop of Pacific Gas & Electric’s wildfire-related bankruptcy case added to the challenge, because some of the projects in the portfolio have power purchase agreements with another Californian utility, Southern California Edison.

For NextEra’s shareholders, however, the deal provided a cash flow bridge while revenues from PG&E contracts were trapped at the project level as a result of technical defaults.

Sponsors: NextEra Energy partners, KKR & Co

Total value: $1.092 billion

Convertible equity financing: $900 million

Debt: $600 million

Closing date: June 11, 2019

Lenders: Citi, MUFG

Counsel to NextEra: Skadden

Counsel to KKR: Kirkland & Ellis

Lenders’ counsel: Latham & Watkins

See all of the 2019/2020 awards

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