NextEra to Sell its Natural Gas Assets to Focus Solely on Renewables

The company expects to achieve zero carbon emissions by 2025


U.S.-based energy firm NextEra Energy announced that it would focus solely on growing its renewable energy portfolio and sell off its STX Midstream and Meade natural gas pipeline assets in 2023 and 2025.

The company aims to use the excess proceeds to buy out its convertible equity portfolio financings. It is also looking to capitalize on the low-cost nature of renewables.

Additionally, the company expects to have excess proceeds from the natural gas pipeline sales available to eliminate equity requirements to fund future growth through 2024. Upon completing the sales of the natural gas pipeline assets, NextEra is expected to achieve real zero carbon emissions in 2025 and become the leading 100% renewables pure-play investment opportunity.

NextEra said it is well positioned to execute its plan due to its ample liquidity and significant financing capacity, with approximately $2.8 billion of available liquidity as of March 31, 2023. The company’s strategy is expected to invite a new class of investors looking for a carbon-free, pure-play option to participate in the energy transition.

It also plans to suspend NextEra’s incentive distribution rights (IDR) fees for all quarters in 2023 through 2026 to replace the cash available for distribution (CAFD) from the expected divested pipeline assets.

According to John Ketchum, NextEra’s Chairman and Chief Executive Officer, the company has delivered significant growth since its launch in 2014, increasing its renewables portfolio by approximately nine times. However, he believes its current valuation needs to reflect NextEra’s future growth potential.

The company plans to simplify its capital structure and focus on a 100% renewable energy strategy to capitalize on the ongoing transition to renewable energy in the U.S. economy and be well-positioned to capitalize on these investments.

NextEra Energy Partners’ plan aims to eliminate the equity buyouts of the three near-term convertible equity portfolio financings via divesting the partnership’s interest in natural gas pipeline assets. The IDR fee suspension would replace the CAFD associated with selling the natural gas pipeline assets.

The company has posted a profit of $2.09 billion for the first quarter of the financial year 2023 against a loss of $451 million in Q1 FY 2022.

Last December, NextEra Energy Resources signed a renewable power purchase agreement with chemical company INEOS Olefins & Polymers USA for a 310 MW solar project in Texas.