This behemoth of renewable energy dividend growth continues to forge ahead

NextEra Energy Partners (NYSE:NEP) generated excellent results during the second quarter despite the market turbulence caused by COVID-19. The strength of the company is based on its strong contract profile, its existing high performing assets and several recent acquisitions. For this reason, this owner and operator of clean energy projects remains on track to meet management’s dividend growth targets.

A look at NextEra Energy Partners’ second quarter results

Metric

Q2 2020

Q2 2019

Change

Adjusted EBITDA

$349 million

$284 million

21.6%

Cash available for distribution (CAFD)

$166 million

$114 million

45.6%

Data source: NextEra Energy Partners.

The company’s earnings and cash flow soared in the quarter due in large part to recent purchases. Last year he acquired a renewable energy his parent’s wallet, electric utility NextEra Energy (NYSE:NEE), and also purchased gas pipeline operator Meade Pipeline. These transactions contributed $51 million in incremental Adjusted EBITDA and $36 million in CAFD during the second quarter.

The company also benefited from strong results on its previously owned assets, which generated $17 million in additional adjusted EBITDA and $35 million in CAFD. The main driver of this growth has been an improvement in wind resources; in the second quarter of 2020, the level of wind available for power generation in its wind facilities was within the historical average, whereas a year ago the wind was only 94% of the norm .

Image source: Getty Images.

A glimpse of what awaits NextEra Energy Partners

Earlier this month, one of NextEra Energy Partners’ customers, the electric utility Pacific Gas and Electricity (NYSE: PCG), emerged from Chapter 11 bankruptcy. Because of this, NextEra Energy Partners now has access to trapped money from its Desert Sunlight projects that sell power to PG&E. The company received a distribution of $65 million in July and will have unlimited access to future cash flows generated by these assets.

The company also remains on track to complete 275 megawatts of wind repowering projects and certain gas pipeline expansions in Texas. The company expects these to come into service later this year, which will provide it with additional cash flow.

Based on all of these factors, NextEra Energy Partners is increasingly confident in its near-term dividend growth plan. The company estimates that it will have the financial flexibility to increase its dividend by 12% to 15% per year until 2022 without additional acquisitions. In the meantime, he thinks he can maintain that rate through 2024 by completing more deals, which could include purchasing renewable energy assets and gas pipelines from NextEra Energy.

The company is also well positioned to make more acquisitions. It ended the second quarter with approximately $650 million in liquidity (cash and available borrowing capacity). This number will increase thanks to Desert Sunlight’s cash distributions and the fact that it currently retains around 30% of its CAFD after paying its dividend. Meanwhile, it should not miss acquisition opportunities from NextEra Energy, which recently announced that its backlog of renewable energy expansion projects is larger than the combined wind and solar portfolios in operation. of all other companies except two.

An excellent stock for investors focused on dividend growth

NextEra Energy Partners had another strong quarter thanks to a combination of acquisitions over the past year and strong performance from its older assets. Factor in its soon-to-be-completed expansion plan and the boost it will get from PG&E’s exit from bankruptcy, and it’s clear that this company should have all the ingredients it needs to realize its growth plans. dividend growth through at least 2022. of that, it’s a great stock for investors who want a fast-growing income stream fueled by clean energy.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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