NextEra Energy Partners 10Q 2021 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission

File

Number

Exact name of registrant as specified in its

charter, address of principal executive offices and

registrant's telephone number

IRS Employer

Identification

Number

1-36518

NEXTERA ENERGY PARTNERS, LP

30-0818558

700 Universe Boulevard

Juno Beach, Florida 33408

(561) 694-4000

State or other jurisdiction of incorporation or organization: Delaware

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange
on which registered

Common units

NEP

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

Large Accelerated Filer þ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☑

Number of NextEra Energy Partners, LP common units outstanding at September 30, 2021: 76,619,403

DEFINITIONS

Acronyms and defined terms used in the text include the following:


Term			Meaning
2017 convertible notes			senior unsecured convertible notes issued in 2017
2020 convertible notes			senior unsecured convertible notes issued in 2020
2021 convertible notes			senior unsecured convertible notes issued in 2021
2020 Form 10-K			NEP's Annual Report on Form 10-K for the year ended December 31, 2020
AOCI			accumulated other comprehensive income (loss)
ASA			administrative services agreement
BLM			U.S. Bureau of Land Management



CSCS agreement			amended and restated cash sweep and credit support agreement








Genesis Holdings			Genesis Solar Holdings, LLC
IDR fee			certain payments from NEP OpCo to NEE Management as a component of the MSA which are based on the achievement by NEP OpCo of certain target quarterly distribution levels to its unitholders
IPP			independent power producer


limited partner interest in NEP OpCo			limited partner interest in NEP OpCo's common units
Management's Discussion			Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Meade			Meade Pipeline Co LLC
Meade purchaser			Meade Pipeline Investment, LLC
MSA			amended and restated management services agreement among NEP, NEE Management, NEP OpCo and NEP OpCo GP
MW			megawatt(s)
NEE			NextEra Energy, Inc.
NEECH			NextEra Energy Capital Holdings, Inc.
NEE Equity			NextEra Energy Equity Partners, LP
NEE Management			NextEra Energy Management Partners, LP
NEER			NextEra Energy Resources, LLC
NEP			NextEra Energy Partners, LP
NEP GP			NextEra Energy Partners GP, Inc.
NEP OpCo			NextEra Energy Operating Partners, LP
NEP OpCo GP			NextEra Energy Operating Partners GP, LLC

NEP Pipelines			NextEra Energy Partners Pipelines, LLC
NEP Renewables			NEP Renewables, LLC
NEP Renewables II			NEP Renewables II, LLC

NOLs			net operating losses
Note __			Note __ to condensed consolidated financial statements
O&M			operations and maintenance

Pemex			Petróleos Mexicanos
PPA			power purchase agreement
preferred units			Series A convertible preferred units representing limited partner interests in NEP



SEC			U.S. Securities and Exchange Commission


Silver State			Silver State South Solar, LLC
STX Midstream			South Texas Midstream, LLC
Texas pipelines			natural gas pipeline assets located in Texas

Texas pipeline entities			the subsidiaries of NEP that directly own the Texas pipelines
U.S.			United States of America

VIE			variable interest entity

Each of NEP and NEP OpCo has subsidiaries and affiliates with names that may include NextEra Energy, NextEra Energy Partners and similar references. For convenience and simplicity, in this report, the terms NEP and NEP OpCo are sometimes used as abbreviated references to specific subsidiaries, affiliates or groups of subsidiaries or affiliates. The precise meaning depends on the context. Discussions of NEP's ownership of subsidiaries and projects refers to its controlling interest in the general partner of NEP OpCo and NEP's indirect interest in and control over the subsidiaries of NEP OpCo. See Note 6 for a description of NEE Equity's noncontrolling interest in NEP OpCo. References to NEP's projects and NEP's pipelines generally include NEP's consolidated subsidiaries and the projects and pipelines in which NEP has equity method investments.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the federal securities laws. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, strategies, future events or performance (often, but not always, through the use of words or phrases such as result, are expected to, will continue, is anticipated, believe, will, could, should, would, estimated, may, plan, potential, future, projection, goals, target, outlook, predict and intend or words of similar meaning) are not statements of historical facts and may be forward looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following important factors (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on NEP's operations and financial results, and could cause NEP's actual results to differ materially from those contained or implied in forward-looking statements made by or on behalf of NEP in this Form 10-Q, in presentations, on its website, in response to questions or otherwise.

Operational Risks

•NEP's ability to make cash distributions to its unitholders is affected by wind and solar conditions at its renewable energy projects.

•Operation and maintenance of renewable energy projects and pipelines involve significant risks that could result in unplanned power outages, reduced output, personal injury or loss of life.

•NEP's business, financial condition, results of operations and prospects can be materially adversely affected by weather conditions, including, but not limited to, the impact of severe weather.

•NEP depends on certain of the renewable energy projects and pipelines in its portfolio for a substantial portion of its anticipated cash flows.

•NEP is pursuing the repowering of wind projects and the expansion of natural gas pipelines that will require up-front capital expenditures and expose NEP to project development risks.

•Terrorist acts, cyberattacks or other similar events could impact NEP's projects, pipelines or surrounding areas and adversely affect its business.

•The ability of NEP to obtain insurance and the terms of any available insurance coverage could be materially adversely affected by international, national, state or local events and company-specific events, as well as the financial condition of insurers. NEP's insurance coverage does not provide protection against all significant losses.

•NEP relies on interconnection, transmission and other pipeline facilities of third parties to deliver energy from its renewable energy projects and to transport natural gas to and from its pipelines. If these facilities become unavailable, NEP's projects and pipelines may not be able to operate or deliver energy or may become partially or fully unavailable to transport natural gas.

•NEP's business is subject to liabilities and operating restrictions arising from environmental, health and safety laws and regulations, compliance with which may require significant capital expenditures, increase NEP's cost of operations and affect or limit its business plans.

•NEP's renewable energy projects or pipelines may be adversely affected by legislative changes or a failure to comply with applicable energy and pipeline regulations.

•Pemex may claim certain immunities under the Foreign Sovereign Immunities Act and Mexican law, and the Texas pipeline entities' ability to sue or recover from Pemex for breach of contract may be limited and may be exacerbated if there is a deterioration in the economic relationship between the U.S. and Mexico.

•NEP does not own all of the land on which the projects in its portfolio are located and its use and enjoyment of the property may be adversely affected to the extent that there are any lienholders or land rights holders that have rights that are superior to NEP's rights or the BLM suspends its federal rights-of-way grants.

•NEP is subject to risks associated with litigation or administrative proceedings that could materially impact its operations, including, but not limited to, proceedings related to projects it acquires in the future.

•NEP's cross-border operations require NEP to comply with anti-corruption laws and regulations of the U.S. government and Mexico.

•NEP is subject to risks associated with its ownership of interests in projects or pipelines that are under construction, which could result in its inability to complete construction projects on time or at all, and make projects too expensive to complete or cause the return on an investment to be less than expected.

Contract Risks

•NEP relies on a limited number of customers and is exposed to the risk that they may be unwilling or unable to fulfill their contractual obligations to NEP or that they otherwise terminate their agreements with NEP.

•NEP may not be able to extend, renew or replace expiring or terminated PPAs, natural gas transportation agreements or other customer contracts at favorable rates or on a long-term basis.

•If the energy production by or availability of NEP's renewable energy projects is less than expected, they may not be able to satisfy minimum production or availability obligations under their PPAs.

Risks Related to NEP's Acquisition Strategy and Future Growth

•NEP's growth strategy depends on locating and acquiring interests in additional projects consistent with its business strategy at favorable prices.

•Reductions in demand for natural gas in the United States or Mexico and low market prices of natural gas could materially adversely affect the NEP pipeline operations and cash flows.

•Government laws, regulations and policies providing incentives and subsidies for clean energy could be changed, reduced or eliminated at any time and such changes may negatively impact NEP's growth strategy.

•NEP's growth strategy depends on the acquisition of projects developed by NEE and third parties, which face risks related to project siting, financing, construction, permitting, the environment, governmental approvals and the negotiation of project development agreements.

•Acquisitions of existing clean energy projects involve numerous risks.

•NEP may continue to acquire other sources of clean energy and may expand to include other types of assets. Any further acquisition of non-renewable energy projects may present unforeseen challenges and result in a competitive disadvantage relative to NEP's more-established competitors.

•NEP faces substantial competition primarily from regulated utilities, developers, IPPs, pension funds and private equity funds for opportunities in North America.

•The natural gas pipeline industry is highly competitive, and increased competitive pressure could adversely affect NEP's business.

Risks Related to NEP's Financial Activities

•NEP may not be able to access sources of capital on commercially reasonable terms, which would have a material adverse effect on its ability to consummate future acquisitions and pursue other growth opportunities.

•Restrictions in NEP and its subsidiaries' financing agreements could adversely affect NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.

•NEP's cash distributions to its unitholders may be reduced as a result of restrictions on NEP's subsidiaries’ cash distributions to NEP under the terms of their indebtedness or other financing agreements.

•NEP's subsidiaries’ substantial amount of indebtedness may adversely affect NEP's ability to operate its business, and its failure to comply with the terms of its subsidiaries' indebtedness could have a material adverse effect on NEP's financial condition.

•NEP is exposed to risks inherent in its use of interest rate swaps.

Risks Related to NEP's Relationship with NEE

•NEE has influence over NEP.

•Under the CSCS agreement, NEP receives credit support from NEE and its affiliates. NEP's subsidiaries may default under contracts or become subject to cash sweeps if credit support is terminated, if NEE or its affiliates fail to honor their obligations under credit support arrangements, or if NEE or another credit support provider ceases to satisfy creditworthiness requirements, and NEP will be required in certain circumstances to reimburse NEE for draws that are made on credit support.

•NEER or one of its affiliates is permitted to borrow funds received by NEP's subsidiaries and is obligated to return these funds only as needed to cover project costs and distributions or as demanded by NEP OpCo. NEP's financial condition and ability to make distributions to its unitholders, as well as its ability to grow distributions in the future, is highly dependent on NEER’s performance of its obligations to return all or a portion of these funds.

•NEER's right of first refusal may adversely affect NEP's ability to consummate future sales or to obtain favorable sale terms.

•NEP GP and its affiliates may have conflicts of interest with NEP and have limited duties to NEP and its unitholders.

•NEP GP and its affiliates and the directors and officers of NEP are not restricted in their ability to compete with NEP, whose business is subject to certain restrictions.

•NEP may only terminate the MSA under certain limited circumstances.

•If the agreements with NEE Management or NEER are terminated, NEP may be unable to contract with a substitute service provider on similar terms.

•NEP's arrangements with NEE limit NEE's potential liability, and NEP has agreed to indemnify NEE against claims that it may face in connection with such arrangements, which may lead NEE to assume greater risks when making decisions relating to NEP than it otherwise would if acting solely for its own account.

Risks Related to Ownership of NEP's Units

•NEP's ability to make distributions to its unitholders depends on the ability of NEP OpCo to make cash distributions to its limited partners.

•If NEP incurs material tax liabilities, NEP's distributions to its unitholders may be reduced, without any corresponding reduction in the amount of the IDR fee.

•Holders of NEP's units may be subject to voting restrictions.

•NEP's partnership agreement replaces the fiduciary duties that NEP GP and NEP's directors and officers might have to holders of its common units with contractual standards governing their duties and the New York Stock Exchange does not require a publicly traded limited partnership like NEP to comply with certain of its corporate governance requirements.

•NEP's partnership agreement restricts the remedies available to holders of NEP's common units for actions taken by NEP's directors or NEP GP that might otherwise constitute breaches of fiduciary duties.

•Certain of NEP's actions require the consent of NEP GP.

•Holders of NEP's common units currently cannot remove NEP GP without NEE's consent and provisions in NEP's partnership agreement may discourage or delay an acquisition of NEP that NEP unitholders may consider favorable.

•NEE's interest in NEP GP and the control of NEP GP may be transferred to a third party without unitholder consent.

•NEP may issue additional units without unitholder approval, which would dilute unitholder interests.

•Reimbursements and fees owed to NEP GP and its affiliates for services provided to NEP or on NEP's behalf will reduce cash distributions from NEP OpCo and from NEP to NEP's unitholders, and there are no limits on the amount that NEP OpCo may be required to pay.

•Increases in interest rates could adversely impact the price of NEP's common units, NEP's ability to issue equity or incur debt for acquisitions or other purposes and NEP's ability to make cash distributions to its unitholders.

•The liability of holders of NEP's units, which represent limited partnership interests in NEP, may not be limited if a court finds that unitholder action constitutes control of NEP's business.

•Unitholders may have liability to repay distributions that were wrongfully distributed to them.

•The issuance of securities convertible into, or settleable with, common units may affect the market price for NEP's common units, will dilute common unitholders’ ownership in NEP and may decrease the amount of cash available for distribution for each common unit.

Taxation Risks

•NEP's future tax liability may be greater than expected if NEP does not generate NOLs sufficient to offset taxable income or if tax authorities challenge certain of NEP's tax positions.

•NEP's ability to use NOLs to offset future income may be limited.

•NEP will not have complete control over NEP's tax decisions.

•Distributions to unitholders may be taxable as dividends.

Coronavirus Pandemic Risks

•The coronavirus pandemic may have a material adverse impact on NEP's business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders.

These factors should be read together with the risk factors included in Part I, Item 1A. Risk Factors in the 2020 Form 10-K and investors should refer to that section of the 2020 Form 10-K. Any forward-looking statement speaks only as of the date on which such statement is made, and NEP undertakes no obligation to update any forward-looking statement to reflect events or circumstances, including, but not limited to, unanticipated events, after the date on which such statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained or implied in any forward-looking statement.

Website Access to U.S. Securities and Exchange Commission (SEC) Filings. NEP makes its SEC filings, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, available free of charge on NEP's internet website, www.nexteraenergypartners.com, as soon as reasonably practicable after those documents are electronically filed with or furnished to the SEC. The information and materials available on NEP's website are not incorporated by reference into this Form 10-Q.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NEXTERA ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(millions, except per unit amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
OPERATING REVENUES
Renewable energy sales	$	193	$	187	$	543	$	546
Texas pipelines service revenues	59		53		208		159
Total operating revenues(a)	252		240		751		705
OPERATING EXPENSES
Operations and maintenance(b)	110		93		302		273
Depreciation and amortization	71		68		207		200
Taxes other than income taxes and other	7		11		30		25
Total operating expenses – net	188		172		539		498
OPERATING INCOME	64		68		212		207
OTHER INCOME (DEDUCTIONS)
Interest expense	(24)		93		145		(730)
Equity in earnings of equity method investees	47		44		131		91
Equity in earnings (losses) of non-economic ownership interests	12		11		26		(7)
Other – net	1		4		3		4
Total other income (deductions) – net	36		152		305		(642)
INCOME (LOSS) BEFORE INCOME TAXES	100		220		517		(435)
INCOME TAX EXPENSE (BENEFIT)	6		25		54		(37)
NET INCOME (LOSS)(c)	94		195		463		(398)
NET INCOME ATTRIBUTABLE TO PREFERRED DISTRIBUTIONS	—		(1)		—		(5)
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(76)		(138)		(317)		284
NET INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP	$	18	$	56	$	146	$	(119)

Earnings (loss) per common unit attributable to NextEra Energy Partners, LP – basic	$	0.24	$	0.83	$	1.92	$	(1.80)
Earnings (loss) per common unit attributable to NextEra Energy Partners, LP – assuming dilution	$	0.24	$	0.76	$	1.92	$	(1.80)

____________________

(a) Includes related party revenues of $5 million and $2 million for the three months ended September 30, 2021 and 2020, respectively, and $44 million and $13 million for the nine months ended September 30, 2021 and 2020, respectively.

(b) Includes O&M expenses related to renewable energy projects of $52 million and $51 million for the three months ended September 30, 2021 and 2020, respectively, and $144 million and $150 million for the nine months ended September 30, 2021 and 2020, respectively. Includes O&M expenses related to the Texas pipelines of $11 million and $10 million for the three months ended September 30, 2021 and 2020, respectively, and $35 million and $32 million for the nine months ended September 30, 2021 and 2020, respectively. Total O&M expenses presented include related party amounts of $52 million and $40 million for the three months ended September 30, 2021 and 2020, respectively, and $151 million and $107 million for the nine months ended September 30, 2021 and 2020, respectively.

(c) For the nine month periods ended September 30, 2021 and 2020, NEP recognized approximately $1 million of other comprehensive income related to equity method investees, which was primarily attributable to noncontrolling interests.

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

NEXTERA ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(millions)

(unaudited)


	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	133	$	108
Accounts receivable	108		83
Other receivables	14		155
Due from related parties	322		28
Inventory	32		24
Other	26		16
Total current assets	635		414
Other assets:
Property, plant and equipment – net	7,159		7,163
Intangible assets – PPAs – net	1,917		1,572
Intangible assets – customer relationships – net	598		610
Goodwill	786		609
Investments in equity method investees	1,848		1,814
Deferred income taxes	213		249
Other	289		131
Total other assets	12,810		12,148
TOTAL ASSETS	$	13,445	$	12,562
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	23	$	143
Due to related parties	48		66
Current portion of long-term debt	14		12
Accrued interest	17		25
Derivatives	23		20
Accrued property taxes	24		22
Other	52		62
Total current liabilities	201		350
Other liabilities and deferred credits:
Long-term debt	3,969		3,376
Asset retirement obligation	156		144
Derivatives	529		782
Due to related parties	33		33
Other	152		170
Total other liabilities and deferred credits	4,839		4,505
TOTAL LIABILITIES	5,040		4,855
COMMITMENTS AND CONTINGENCIES	0		0
EQUITY

Common units (76.6 and 75.9 units issued and outstanding, respectively)	2,329		2,362
Accumulated other comprehensive loss	(8)		(8)
Noncontrolling interests	6,084		5,353
TOTAL EQUITY	8,405		7,707
TOTAL LIABILITIES AND EQUITY	$	13,445	$	12,562

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

NEXTERA ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions)

(unaudited)


	Nine Months Ended September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	463	$	(398)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	207		200
Intangible amortization – PPAs	82		77

Change in value of derivative contracts	(250)		602
Deferred income taxes	51		(44)
Equity in earnings of equity method investees, net of distributions received	(2)		50
Equity in losses (earnings) of non-economic ownership interests, net of distributions received	(19)		7
Other – net	13		17
Changes in operating assets and liabilities:
Current assets	(33)		(10)
Noncurrent assets	(7)		1
Current liabilities	(10)		(16)
Noncurrent liabilities	(3)		(4)
Net cash provided by operating activities	492		482
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of membership interests in subsidiaries – net	(800)		—
Capital expenditures and other investments	(82)		(236)
Proceeds from CITCs	75		—
Payments to related parties under CSCS agreement – net	(295)		(70)
Distributions from equity method investee	1		8
Other	32		15
Net cash used in investing activities	(1,069)		(283)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common units – net	50		2
Issuances of long-term debt	624		68
Retirements of long-term debt	(98)		(17)
Debt issuance costs	(3)		(1)
Capped call transaction	(31)		—
Partner contributions	—		7
Partner distributions	(387)		(320)
Preferred unit distributions	—		(6)
Proceeds on sale of differential membership interests	48		—
Proceeds from differential membership investors	74		94
Payments to differential membership investors	(27)		(23)
Proceeds on sale of Class B noncontrolling interests – net	493		—
Payments to Class B noncontrolling interest investors	(63)		(34)


Change in amounts due to related parties	(12)		(2)
Payment of CITC obligation to third party	(65)		—
Other	(1)		—
Net cash provided by (used in) financing activities	602		(232)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	25		(33)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – BEGINNING OF PERIOD	112		132
CASH, CASH EQUIVALENTS AND RESTRICTED CASH – END OF PERIOD	$	137	$	99
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:






Change in noncash investments in equity method investees – net	$	130	$	7


Accrued property and other additions	$	5	$	67




Conversion of convertible notes to common units	$	—	$	300

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

NEXTERA ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(millions)

(unaudited)


	Common Units
Three Months Ended September 30, 2021		Units	Amount		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
Balances, June 30, 2021		76.6	$	2,363	$	(8)	$	6,100	$	8,455



Net income		—	18		—		76		94



Related party distributions		—	—		—		(94)		(94)
Changes in non-economic ownership interests		—	—		—		6		6
Other differential membership investment activity		—	—		—		24		24
Payments to Class B noncontrolling interest investors		—	—		—		(28)		(28)
Distributions to unitholders(a)		—	(51)		—		—		(51)





Other		—	(1)		—		—		(1)
Balances, September 30, 2021		76.6	$	2,329	$	(8)	$	6,084	$	8,405

_________________________

(a) Distributions per common unit of $0.6625 were paid during the three months ended September 30, 2021.


	Common Units
Nine Months Ended September 30, 2021		Units	Amount		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
Balances, December 31, 2020		75.9	$	2,362	$	(8)	$	5,353	$	7,707

Issuance of common units – net(a)		0.7	56		—		—		56

Net income		—	146		—		317		463
Other comprehensive income		—	—		—		1		1
Related party note receivable		—	—		—		1		1

Related party distributions		—	—		—		(243)		(243)
Changes in non-economic ownership interests		—	—		—		130		130
Other differential membership investment activity		—	—		—		47		47
Payments to Class B noncontrolling interest investors		—	—		—		(63)		(63)
Distributions to unitholders(b)		—	(146)		—		—		(146)
Sale of Class B noncontrolling interest – net		—	—		—		493		493
Sale of differential membership interest		—	—		—		48		48
Adoption of accounting standards update(c)		—	(57)		—		1		(56)

Capped call transaction		—	(31)		—		—		(31)
Other		—	(1)		—		(1)		(2)
Balances, September 30, 2021		76.6	$	2,329	$	(8)	$	6,084	$	8,405

_________________________

(a) See Note 8 - ATM Program for further discussion. Includes deferred tax impact of approximately $6 million.

(b) Distributions per common unit of $1.9150 were paid during the nine months ended September 30, 2021.

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

NEXTERA ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(millions)

(unaudited)


	Preferred Units			Common Units			Accumulated Other
Three Months Ended September 30, 2020	Units	Amount		Units	Amount		Comprehensive Loss		Noncontrolling Interests		Total Equity
Balances, June 30, 2020	4.7	$	183	65.5	$	1,759	$	(8)	$	4,349	$	6,283

Issuance of common units - net(a)	(1.8)	(71)		7.5	418		—		—		347

Net income	—	1		—	56		—		138		195


Related party contributions	—	—		—	—		—		1		1
Related party distributions	—	—		—	—		—		(81)		(81)
Changes in non-economic ownership interests	—	—		—	—		—		(7)		(7)
Other differential membership investment activity	—	—		—	—		—		39		39
Payments to Class B noncontrolling interest investors	—	—		—	—		—		(13)		(13)
Distributions to unitholders(b)	—	(1)		—	(39)		—		—		(40)
Other	—	—		—	—		—		(1)		(1)





Balances, September 30, 2020	2.9	$	112	73	$	2,194	$	(8)	$	4,425	$	6,723

_____________________________

(a) During the three months ended September 30, 2020, NEP issued 1.8 million NEP common units upon the conversion of preferred units on a 1-for-one basis and issued approximately 5.7 million NEP common units upon the conversion of $300 million convertible notes (see Note 8 - Common Unit Issuances). NEP recognized a deferred tax asset of $47 million related to the issuance of NEP common units.

(b) Distributions per common unit of $0.5775 were paid during the three months ended September 30, 2020.


	Preferred Units			Common Units			Accumulated Other
Nine Months Ended September 30, 2020	Units	Amount		Units	Amount		Comprehensive Loss		Noncontrolling Interests		Total Equity
Balances, December 31, 2019	4.7	$	183	65.5	$	2,008	$	(8)	$	4,883	$	7,066

Issuance of common units - net(a)	(1.8)	(71)		7.5	418		—		—		347

Net income (loss)	—	5		—	(119)		—		(284)		(398)
Other comprehensive income	—	—		—	—		—		1		1
Related party note receivable	—	—		—	—		—		1		1
Related party contributions	—	—		—	—		—		6		6
Related party distributions	—	—		—	—		—		(212)		(212)
Changes in non-economic ownership interests	—	—		—	—		—		(7)		(7)
Other differential membership investment activity	—	—		—	—		—		71		71
Payments to Class B noncontrolling interest investors	—	—		—	—		—		(34)		(34)
Distributions to unitholders(b)	—	(5)		—	(110)		—		—		(115)
Other	—	—		—	(3)		—		—		(3)





Balances, September 30, 2020	2.9	$	112	73.0	$	2,194	$	(8)	$	4,425	$	6,723

_____________________________

(a) During the nine months ended September 30, 2020, NEP issued 1.8 million NEP common units upon the conversion of preferred units on a 1-for-one basis and issued approximately 5.7 million NEP common units upon the conversion of $300 million convertible notes (see Note 8 - Common Unit Issuances). NEP recognized a deferred tax asset of $47 million related to the issuance of NEP common units.

(b) Distributions per common unit of $1.6675 were paid during the nine months ended September 30, 2020.

This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 2020 Form 10-K.

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The accompanying condensed consolidated financial statements should be read in conjunction with the 2020 Form 10-K. In the opinion of NEP management, all adjustments considered necessary for fair financial statement presentation have been made. All adjustments are normal and recurring unless otherwise noted. Certain amounts included in the prior year's condensed consolidated financial statements have been reclassified to conform to the current year's presentation. The results of operations for an interim period generally will not give a true indication of results for the year.

1. Acquisitions

In December 2020, a subsidiary of NEP completed the acquisition from NEER (2020 acquisition) of 100% of the membership interests in Wilmot Energy Center, LLC (Wilmot) and 100% of the Class C membership interests in Pine Brooke Class A Holdings, LLC (Pine Brooke Holdings). Wilmot is an approximately 100 MW solar generation facility and 30 MW battery storage facility located in Arizona which entered service in the second quarter of 2021. The Class C membership interests in Pine Brooke Holdings represent an indirect 40% noncontrolling ownership interest in each of:

•Soldier Creek Wind, LLC, a project company that owns an approximately 300 MW wind generation facility located in Kansas;

•Ponderosa Wind, LLC, a project company that owns an approximately 200 MW wind generation facility located in Oklahoma;

•Blue Summit III Wind, LLC, a project company that owns an approximately 200 MW wind generation facility located in Texas;

•Saint Solar, LLC, a project company that owns an approximately 100 MW solar generation facility located in Arizona;

•Taylor Creek Solar, LLC, a project company that owns an approximately 75 MW solar generation facility located in Florida;

•Harmony Florida Solar, LLC, a project company that owns an approximately 75 MW solar generation facility located in Florida; and

•Sanford Airport Solar, LLC, a project company that owns an approximately 49 MW solar generation facility located in Maine.

NEP's ownership interest in Pine Brooke Holdings is reflected as investments in equity method investees.

In August 2021, an indirect subsidiary of NEP completed the acquisition (2021 third-party acquisition) of 100% of the ownership interests in each of:

•Highview Power Holdings, LLC, which indirectly owns a 150 MW wind generation facility (Alta Wind VIII) located in California;

•Brookfield Windstar Holding, LLC, which indirectly owns a 120 MW wind generation facility (Windstar) located in California;

•Brookfield Coram Wind Development, LLC, which indirectly owns a 22 MW wind generation facility (Coram) located in California; and

•BAIF Granite Holdings, LLC, which indirectly owns a 99 MW wind generation facility (Granite) located in New Hampshire.

The purchase price included a base purchase price of approximately $733 million, plus closing adjustments primarily related to pre-acquisition debt make whole costs of $55 million and working capital of $27 million, including cash of $18 million.

Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair value. All fair value measurements of assets acquired and liabilities assumed were based on significant estimates and assumptions, including Level 3 (unobservable) inputs, which require judgment. Estimates and assumptions include the projected timing and amount of future cash flows, discount rates reflecting risk inherent in future cash flows and future market prices. The excess of the purchase price over the estimated fair value of assets acquired and liabilities assumed was recognized as goodwill at the acquisition date. The goodwill arising from the acquisition results largely from the assets being well-situated in strong markets with long-term renewables demand, providing long-term optionality for the assets. All of the goodwill is expected to be deductible for income tax purposes over a 15 year period. The valuation of the acquired net assets is subject to change as NEP obtains additional information for its estimates during the measurement period. The primary areas of the purchase price allocation that are not yet finalized relate to identifiable intangible assets and residual goodwill.

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The following table summarizes the preliminary amounts recognized by NEP for the estimated fair value of assets acquired and liabilities assumed in the 2021 third-party acquisition:


	(millions)
Total consideration transferred	$	815
Identifiable assets acquired and liabilities assumed
Cash	$	18
Accounts receivable, inventory and prepaid expenses	14
Property, plant and equipment – net	191
Intangible assets – PPAs(a)	432
Goodwill	177
Other noncurrent assets	1
Accounts payable, accrued expenses and other current liabilities	(5)

Other noncurrent liabilities	(13)

Total net identifiable assets, at fair value	$	815

____________________

(a) Intangible assets - PPAs are amortized into operating revenues on a straight-line basis over the remaining contract terms of the related PPAs. At September 30, 2021, amortization of the intangible assets - PPAs is expected to be approximately $12 million in 2021 and $35 million in each of the next four years.

In October 2021, an indirect subsidiary of NEP completed the acquisition of ownership interests in a portfolio of wind and solar generation facilities with a combined net generating capacity totaling approximately 589 MW from subsidiaries of NEER for a purchase price consisting of cash consideration of approximately $563 million, plus working capital and other adjustments of $26 million (subject to post-closing adjustments). NEP's share of the entities' debt and noncontrolling interests related to differential membership investors was approximately $270 million at the time of closing. NEP is in the process of evaluating the purchase accounting considerations, including the initial purchase price allocation. The acquisition included the following assets:

•100% of the membership interests in HW CA Holdings, LLC, that indirectly owns an approximately 162 MW wind generation facility (High Winds) located in California;

•100% of the membership interests in Dogwood Wind Holdings, LLC, that indirectly owns 2 wind generation facilities (Oliver III Wind and Osborn Wind) with a combined total generating capacity of approximately 300 MW located in North Dakota and Missouri;

•100% of the membership interests in Southwest Solar Holdings, LLC, that indirectly owns an approximately 5 MW solar generation facility (Hatch Solar) located in New Mexico;

•33.3% of the membership interests in Shaw Creek Solar Holdings, LLC, that indirectly owns an approximately 75 MW solar generation facility (Shaw Creek) located in South Carolina;

•33.3% of the membership interests in Nutmeg Solar Holdings, LLC, that indirectly owns an approximately 20 MW solar generation facility (Nutmeg Solar) located in Connecticut; and

•100% of the Class C membership interests (which represents 33.3% of the total ownership interest in the underlying projects) in Solar Holdings Portfolio 12, LLC, that has indirect ownership interests in:

◦two solar generation facilities (Westside Solar and Whitney Point Solar) with a combined total generating capacity of approximately 40 MW located in California;

◦the DG Portfolio 2019 portfolio, that indirectly owns multiple distributed solar generation facilities with a combined total generating capacity of approximately 217 MW located in various states across the U.S.; and

◦the DG Waipio portfolio, that indirectly owns multiple distributed solar generation facilities with a combined total generating capacity of approximately 13 MW located in Hawaii.

In October 2021, an indirect subsidiary of NEP entered into a purchase and sale agreement to acquire a 102 MW wind generation facility (Coram II) located in California. NEP expects to complete the acquisition by early 2022, subject to customary closing conditions and the receipt of regulatory approvals, for cash consideration of approximately $130 million, subject to working capital and other closing adjustments, plus the assumption of debt estimated to be approximately $150 million at the time of closing.

Additionally, an indirect subsidiary of NEP entered into an agreement in October 2021 with indirect subsidiaries of NEER to acquire ownership interests in a portfolio of wind and solar generation facilities with a combined net generating capacity totaling approximately 1,260 MW and net storage capacity totaling 58 MW for a purchase price consisting of cash consideration of $849 million, subject to customary working capital and other adjustments, plus NEP's share of the entities' noncontrolling interests related to differential membership investors estimated to be approximately $866 million at the time of closing. See Part II – Item 5 for further discussion.

NEP incurred approximately $11 million in acquisition-related costs during the nine months ended September 30, 2021 which are reflected as operations and maintenance in the condensed consolidated statements of income.

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. Revenue

Revenue is recognized when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. NEP's operating revenues are generated primarily from various non-affiliated parties under PPAs and natural gas transportation agreements. NEP's operating revenues from contracts with customers are partly offset by the amortization of intangible assets - PPAs. Revenue is recognized as energy and any related renewable energy attributes are delivered, based on rates stipulated in the respective PPAs, or natural gas transportation services are performed. NEP believes that the obligation to deliver energy and provide the natural gas transportation services is satisfied over time as the customer simultaneously receives and consumes benefits provided by NEP. In addition, NEP believes that the obligation to deliver renewable energy attributes is satisfied at multiple points in time, with the control of the renewable energy attribute being transferred at the same time the related energy is delivered. Included in NEP’s operating revenues for the three months ended September 30, 2021 is $190 million and $58 million, for the nine months ended September 30, 2021 is $530 million and $176 million, for the three months ended September 30, 2020 is $184 million and $53 million, and for the nine months ended September 30, 2020 is $533 million and $157 million of revenue from contracts with customers for renewable energy sales and natural gas transportation services, respectively. NEP's accounts receivable are primarily associated with revenues earned from contracts with customers. Receivables represent unconditional rights to consideration and reflect the differences in timing of revenue recognition and cash collections. For substantially all of NEP's receivables, regardless of the type of revenue transaction from which the receivable originated, customer and counterparty credit risk is managed in the same manner and the terms and conditions of payment are similar.

NEP recognizes revenues as energy and any related renewable energy attributes are delivered or natural gas transportation services are performed, consistent with the amounts billed to customers based on rates stipulated in the respective agreements. NEP considers the amount billed to represent the value of energy delivered or services provided to the customer. NEP’s customers typically receive bills monthly with payment due within 30 days.

The contracts with customers related to pipeline service revenues contain a fixed price related to firm natural gas transportation capacity with maturity dates ranging from 2021 to 2035. At September 30, 2021, NEP expects to record approximately $1.8 billion of revenues over the remaining terms of the related contracts as the capacity is provided. Revenues yet to be earned under contracts with customers to deliver energy and any related energy attributes, which have maturity dates ranging from 2026 to 2046, will vary based on the volume of energy delivered. At September 30, 2021, NEP expects to record approximately $194 million of revenues related to the fixed price components of one PPA through 2039 as the energy is delivered.

3. Derivative Instruments and Hedging Activity

NEP uses derivative instruments (primarily interest rate swaps) to manage the interest rate cash flow risk associated with outstanding and expected future debt issuances and borrowings. NEP records all derivative instruments that are required to be marked to market as either assets or liabilities on its condensed consolidated balance sheets and measures them at fair value each reporting period. NEP does not utilize hedge accounting for its derivative instruments. All changes in the derivatives' fair value are recognized in interest expense in the condensed consolidated statements of income (loss). At September 30, 2021 and December 31, 2020, the net notional amounts of the interest rate contracts were approximately $7,106 million and $7,088 million, respectively.

At September 30, 2021, NEP's AOCI does not include any amounts related to cash flow hedges. Cash flows from the interest rate contracts are reported in cash flows from operating activities in the condensed consolidated statements of cash flows.

Fair Value Measurement of Derivative Instruments - The fair value of assets and liabilities are determined using either unadjusted quoted prices in active markets (Level 1) or pricing inputs that are observable (Level 2) whenever that information is available and using unobservable inputs (Level 3) to estimate fair value only when relevant observable inputs are not available. NEP uses several different valuation techniques to measure the fair value of assets and liabilities, relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those assets and liabilities that are measured at fair value on a recurring basis. Certain financial instruments may be valued using multiple inputs including discount rates, counterparty credit ratings and credit enhancements. NEP’s assessment of the significance of any particular input to the fair value measurement requires judgment and may affect the placement of those assets and liabilities within the fair value hierarchy levels. Non-performance risk, including the consideration of a credit valuation adjustment, is also considered in the determination of fair value for all assets and liabilities measured at fair value. Transfers between fair value hierarchy levels occur at the beginning of the period in which the transfer occurred.

NEP estimates the fair value of its derivative instruments using an income approach based on a discounted cash flows valuation technique utilizing the net amount of estimated future cash inflows and outflows related to the agreements. The primary inputs used in the fair value measurements include the contractual terms of the derivative agreements, current interest rates and credit profiles. The significant inputs for the resulting fair value measurement are market-observable inputs and the measurements are

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

reported as Level 2 in the fair value hierarchy.

The tables below present NEP's gross derivative positions, based on the total fair value of each derivative instrument, at September 30, 2021 and December 31, 2020, as required by disclosure rules, as well as the location of the net derivative positions, based on the expected timing of future payments, on NEP's condensed consolidated balance sheets.


	September 30, 2021
	Level 1		Level 2		Level 3		Netting(a)		Total
	(millions)
Assets:
Interest rate contracts	$	—	$	30	$	—	$	(30)	$	—
Liabilities:
Interest rate contracts	$	—	$	582	$	—	$	(30)	$	552

Net fair value by balance sheet line item:



Current derivative liabilities									$	23
Noncurrent derivative liabilities									529
Total derivative liabilities									$	552


	December 31, 2020

	Level 1		Level 2		Level 3		Netting(a)		Total
	(millions)
Assets:
Interest rate contracts	$	—	$	47	$	—	$	(47)	$	—
Liabilities:
Interest rate contracts	$	—	$	849	$	—	$	(47)	$	802

Net fair value by balance sheet line item:



Current derivative liabilities									$	20
Noncurrent derivative liabilities									782
Total derivative liabilities									$	802

____________________

(a) Includes the effect of the contractual ability to settle contracts under master netting arrangements.

Financial Statement Impact of Derivative Instruments - Gains (losses) related to NEP's interest rate contracts are recorded in the condensed consolidated financial statements as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(millions)
Interest rate contracts:


Gains (losses) recognized in interest expense	$	6	$	131	$	235	$	(609)

Credit-Risk-Related Contingent Features - Certain of NEP's derivative instruments contain credit-related cross-default and material adverse change triggers, none of which contain requirements to maintain certain credit ratings or financial ratios. At September 30, 2021 and December 31, 2020, the aggregate fair value of NEP's derivative instruments with contingent risk features that were in a liability position was approximately $550 million and $769 million, respectively.

4. Non-Derivative Fair Value Measurements

Non-derivative fair value measurements consist of NEP's cash equivalents. The fair value of these financial assets is determined using the valuation techniques and inputs as described in Note 3 - Fair Value Measurement of Derivative Instruments. The fair value of money market funds that are included in cash and cash equivalents, current other assets and noncurrent other assets on NEP's condensed consolidated balance sheets is estimated using a market approach based on current observable market prices.

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Recurring Non-Derivative Fair Value Measurements - NEP’s financial assets and liabilities and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:


	September 30, 2021						December 31, 2020
	Level 1		Level 2		Total		Level 1		Level 2		Total
	(millions)
Assets:
Cash equivalents	$	1	$	—	$	1	$	2	$	—	$	2




Total assets	$	1	$	—	$	1	$	2	$	—	$	2

Financial Instruments Recorded at Other than Fair Value - The carrying amounts and estimated fair values of other financial instruments recorded at other than fair value are as follows:


	September 30, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(millions)
Long-term debt, including current maturities(a)	$	3,983	$	4,135	$	3,388	$	3,529

____________________

(a) At September 30, 2021 and December 31, 2020, approximately $4,110 million and $3,503 million, respectively, of the fair value is estimated using a market approach based on quoted market prices for the same or similar issues (Level 2); the balance is estimated using an income approach utilizing a discounted cash flow valuation technique, considering the current credit profile of the debtor (Level 3). At September 30, 2021, approximately $1,122 million of the fair value relates to the 2020 convertible notes and the 2021 convertible notes and is estimated using Level 2.

5. Income Taxes

Income taxes are calculated for NEP as a single taxpaying corporation for U.S. federal and state income taxes (based on NEP's election to be taxed as a corporation). NEP recognizes in income its applicable ownership share of U.S. income taxes due to the disregarded tax status of substantially all of the U.S. projects under NEP OpCo. Net income or loss attributable to noncontrolling interests includes minimal U.S. taxes.

The effective tax rates for the three and nine months ended September 30, 2021 were approximately 6% and 10%, respectively, and for the three and nine months ended September 30, 2020 were approximately 11% and 9%, respectively. The effective tax rates were below the U.S. statutory rate of 21% primarily due to tax expense (benefit) attributable to noncontrolling interests of approximately $(14) million and $(64) million for the three and nine months ended September 30, 2021, respectively, and $(28) million and $61 million for the three and nine months ended September 30, 2020, respectively.

6. Variable Interest Entities

NEP has identified NEP OpCo, a limited partnership with a general partner and limited partners, as a VIE. NEP has consolidated the results of NEP OpCo and its subsidiaries because of its controlling interest in the general partner of NEP OpCo. At September 30, 2021, NEP owned an approximately 43.0% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 57.0% limited partner interest in NEP OpCo (NEE's noncontrolling interest). The assets and liabilities of NEP OpCo as well as the operations of NEP OpCo represent substantially all of NEP's assets and liabilities and its operations.

At September 30, 2021, NEP OpCo consolidated 13 VIEs related to certain subsidiaries which have sold differential membership interests in entities which own and operate 23 wind generation facilities as well as 1 solar facility. These entities are considered VIEs because the holders of the differential membership interests do not have substantive rights over the significant activities of these entities. The assets, primarily property, plant and equipment - net, and liabilities, primarily asset retirement obligation and noncurrent due to related parties, of the VIEs, totaled approximately $5,169 million and $137 million, respectively, at September 30, 2021 and $5,299 million and $224 million, respectively, at December 31, 2020.

At September 30, 2021, NEP OpCo also consolidated 5 VIEs related to the sales of noncontrolling Class B interests in certain subsidiaries (see Note 10 - Noncontrolling Interests) which have ownership interests in and operate wind and solar facilities with a combined net generating capacity of approximately 3,704 MW as well as ownership interests in 8 natural gas pipeline assets. These entities are considered VIEs because the holders of the noncontrolling Class B interests do not have substantive rights over the significant activities of these entities. The assets, primarily property, plant and equipment - net and intangible assets - PPAs, and the liabilities, primarily long-term debt, other long-term liabilities and asset retirement obligation, of the VIEs totaled approximately $9,121 million and $1,254 million, respectively, at September 30, 2021 and $9,410 million and $1,502 million, respectively, at December 31, 2020. Certain of these VIEs include 4 other VIEs related to NEP's ownership interests in Rosmar, Silver State, Meade and Pine Brooke Holdings (see Note 1). In addition, certain of these VIEs contain entities which have sold differential membership interests and approximately $2,621 million and $2,694 million of assets and $64 million

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

and $153 million of liabilities are also included in the disclosure of the VIEs related to differential membership interests at September 30, 2021 and December 31, 2020, respectively.

NEP has an indirect equity method investment in 3 NEER solar projects with a total generating capacity of 277 MW. Through a series of transactions, a subsidiary of NEP issued 1,000,000 NEP OpCo Class B Units, Series 1 and 1,000,000 NEP OpCo Class B Units, Series 2, to NEER for approximately 50% of the ownership interests in the 3 solar projects (non-economic ownership interests). NEER, as holder of the NEP OpCo Class B Units, will retain 100% of the economic rights in the projects to which the respective Class B Units relate, including the right to all distributions paid by the project subsidiaries that own the projects to NEP OpCo. NEER has agreed to indemnify NEP against all risks relating to NEP’s ownership of the projects until NEER offers to sell economic interests to NEP and NEP accepts such offer, if NEP chooses to do so. NEER has also agreed to continue to manage the operation of the projects at its own cost, and to contribute to the projects any capital necessary for the operation of the projects, until NEER offers to sell economic interests to NEP and NEP accepts such offer. At September 30, 2021 and December 31, 2020, NEP's equity method investment related to the non-economic ownership interests of approximately $138 million and $10 million, respectively, is reflected as noncurrent other assets and, at December 31, 2020, $21 million is reflected as noncurrent other liabilities on the condensed consolidated balance sheets. During the three months ended September 30, 2021, a subsidiary of NEER contributed certain assets to 1 of the 3 NEER solar projects discussed above which resulted in an increase in noncurrent other assets and a corresponding increase in noncontrolling interests on NEP's condensed consolidated balance sheets at September 30, 2021. All equity in earnings of the non-economic ownership interests is allocated to net income attributable to noncontrolling interests. NEP is not the primary beneficiary and therefore does not consolidate these entities because it does not control any of the ongoing activities of these entities, was not involved in the initial design of these entities and does not have a controlling interest in these entities.

7. Debt

Significant long-term debt issuances and borrowings by subsidiaries of NEP during the nine months ended September 30, 2021 were as follows:

Date Issued/Borrowed

Debt Issuances/Borrowings

Interest
Rate

Principal
Amount

Maturity
Date

(millions)

February 2021

NEP OpCo senior secured revolving credit facility

Variable(a)

(b)

2026

January 2021 - September 2021

Senior secured limited-recourse debt

Variable(a)

(c)

2026

June 2021

Senior unsecured convertible notes

500

(d)

2024

————————————

(a)Variable rate is based on an underlying index plus a margin.

(b)During the nine months ended September 30, 2021, all of the outstanding borrowings under the NEP OpCo credit facility were repaid. At September 30, 2021, approximately $116 million of letters of credit were issued under the NEP OpCo credit facility. In October 2021, $305 million was borrowed under the NEP OpCo credit facility and approximately $12 million of such borrowings have a maturity date in 2025.

(c)At September 30, 2021, approximately $868 million of borrowings were outstanding under the existing credit agreement of the Meade purchaser and Pipeline Investment Holdings, LLC (Meade credit agreement).

(d)See additional discussion of the 2021 convertible notes below.

In February 2021, NEP OpCo and its direct subsidiary entered into an amendment of their existing revolving credit facility. The amendments to the revolving credit facility include, among other things, an extension of the maturity from February 2025 to February 2026 for essentially all of the NEP OpCo credit facility.

In June 2021, NEP issued $500 million principal amount of senior unsecured convertible notes (2021 convertible notes). The 2021 convertible notes are unsecured obligations of NEP and are absolutely and unconditionally guaranteed, on a senior unsecured basis, by NEP OpCo. A holder may convert all or a portion of its 2021 convertible notes in accordance with the related indenture. Upon conversion of the 2021 convertible notes, NEP will pay cash up to the aggregate principal amount of the notes to be converted and pay or deliver, as the case may be, cash, NEP common units or a combination of cash and common units, at NEP's election, in respect of the remainder, if any, of NEP's conversion obligation in excess of the aggregate principal amount of the notes being converted. At September 30, 2021, the initial conversion rate, which is subject to certain adjustments, was 11.0492 NEP common units per $1,000 of the 2021 convertible notes, which is equivalent to an initial conversion price of approximately $90.5043 per NEP common unit. The conversion rate is subject to adjustment in certain circumstances, as set forth in the related indenture. Upon the occurrence of a fundamental change (as defined in the related indenture), holders of the 2021 convertible notes may require NEP to repurchase all or a portion of their convertible notes for cash in an amount equal to the principal amount of the 2021 convertible notes to be repurchased, plus accrued and unpaid special interest, if any. The 2021 convertible notes are not redeemable at NEP’s option prior to maturity. In connection with the issuance of the 2021 convertible notes, NEP entered into a registration rights agreement pursuant to which, among other things, NEP has agreed to file a shelf registration statement with the SEC and use its commercially reasonable efforts to cause such registration statement to become

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

effective on or prior to June 17, 2022, covering resales of NEP common units, if any, issuable upon a conversion of the 2021 convertible notes.

NEP entered into capped call transactions (2021 capped call) in connection with the issuance of the 2021 convertible notes. Under the 2021 capped call, NEP purchased capped call options with an initial strike price of $90.5043 and an initial cap price of $113.1300. The 2021 capped call was purchased for approximately $31 million, which was recorded as a reduction to common units equity on NEP's condensed consolidated balance sheets. If, upon conversion of the 2021 convertible notes, the price per NEP common unit during the relevant valuation period is above the strike price, there would generally be a payment to NEP (if NEP elects to cash settle) or an offset of potential dilution to NEP's common units up to the cap price (if NEP elects to settle in NEP common units).

NEP OpCo and its subsidiaries' secured long-term debt agreements are secured by liens on certain assets and contain provisions which, under certain conditions, could restrict the payment of distributions or related party fee payments. At September 30, 2021, NEP and its subsidiaries were in compliance with all financial debt covenants under their financings.

On January 1, 2021, NEP adopted an accounting standards update which updated the accounting guidance for financial instruments with the characteristics of liabilities and equity, including debt with conversion options and other equity-linked instruments such as the $600 million in principal amount of senior unsecured convertible notes issued in December 2020 (2020 convertible notes). NEP adopted the standards update by applying it retrospectively with the cumulative effect recognized as of January 1, 2021 (modified retrospective approach). Upon adoption, NEP reclassified approximately $64 million related to the embedded conversion feature for the 2020 convertible notes from common units equity to long-term debt.

8. Equity

Distributions - On October 19, 2021, the board of directors of NEP authorized a distribution of $0.6850 per common unit payable on November 12, 2021 to its common unitholders of record on November 4, 2021.

Earnings (Loss) Per Unit - Diluted earnings (loss) per unit is based on the weighted-average number of common units and potential common units outstanding during the period, including the dilutive effect of convertible notes and preferred units. The dilutive effect of the 2021 convertible notes, the 2020 convertible notes, and for the prior year periods, the 2017 convertible notes and the preferred units, is computed using the if-converted method.

The reconciliation of NEP's basic and diluted earnings (loss) per unit for the three and nine months ended September 30, 2021 and 2020 is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(millions, except per unit amounts)
Numerator:
Net income (loss) attributable to NEP – basic	$	18	$	56	$	146	$	(119)
Adjustments for 2017 convertible notes and preferred units(a)	—		2		—		—
Net income (loss) attributable to NEP used to compute diluted earnings (loss) per unit	$	18	$	58	$	146	$	(119)
Denominator:
Weighted-average number of common units outstanding – basic	76.6		67.7		76.3		66.2
Effect of dilutive convertible notes and preferred units(a)	—		8.2		—		—
Weighted-average number of common units outstanding and assumed conversions	76.6		75.9		76.3		66.2
Earnings (loss) per unit attributable to NEP:
Basic	$	0.24	$	0.83	$	1.92	$	(1.80)
Assuming dilution	$	0.24	$	0.76	$	1.92	$	(1.80)

————————————

(a)Due to the net losses incurred during the nine months ended September 30, 2020, the weighted-average number of common units issuable pursuant to the 2017 convertible notes and preferred units totaling approximately 9.6 million were not included in the calculation of diluted loss per unit due to their antidilutive effect.

ATM Program - During the nine months ended September 30, 2021, NEP issued approximately 0.7 million common units under its at-the-market equity issuance program (ATM program), which expired in July 2021, for gross proceeds of approximately $50 million. During the three months ended September 30, 2021 and the three and nine months ended September 30, 2020, NEP did not issue any common units under the ATM program. Fees related to the ATM program totaled less than $1 million during the nine months ended September 30, 2021.

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Common Unit Issuances - During the three and nine months ended September 30, 2020, NEP issued 1.8 million NEP common units upon the conversion of preferred units on a 1-for-one basis and issued approximately 5.7 million NEP common units upon the conversion of $300 million of the 2017 convertible notes. In October 2020, NEP received approximately $30 million in cash related to the unwinding of a capped call transaction that was entered into in connection with the issuance of the 2017 convertible notes and NEP issued approximately 1.2 million NEP common units upon the conversion of preferred units on a 1-for-one basis.

Class B Noncontrolling Interests - In May 2021, NEP and two of its indirect subsidiaries, Genesis Solar Holdings, LLC (Genesis Holdings) and Genesis Solar Funding, LLC (Genesis Funding), entered into an amendment of the existing membership interest purchase agreement (as amended, membership purchase agreement) with certain investors. The amendments to the membership purchase agreement included, among other things, an increase in the aggregate Class B purchase price to be paid by the investors from approximately $1,095 million to $1,243 million, with the incremental amount entitled to earn the same pre-tax annual return as the existing amounts. In June 2021, the remaining Class B membership interests were sold to the investors in connection with their additional funding of approximately $493 million of the Class B purchase price (final funding).

In connection with the amendments to the membership purchase agreement, an amendment to the third amended and restated limited liability company agreement of Genesis Holdings (as amended, the LLC agreement) was also entered into in May 2021 between Genesis Holdings and the investors, amending certain provisions of the LLC agreement. Under the LLC agreement, NEP, through its indirect ownership of Genesis Funding, generally receives 75% of Genesis Holdings’ cash distributions for the first ten years after the initial funding in December 2020 (initial funding), and the investors receive 25%, subject to certain adjustments, except that, until the final funding, NEP received approximately 83% of Genesis Holdings’ cash distributions and the investors received 17%. From the fifth to the tenth anniversary of the initial funding, NEP has the option (the buyout right), subject to certain limitations, to periodically purchase the Class B membership interests in Genesis Holdings at a buyout price that implies a fixed pre-tax annual return of approximately 6.76% to the investors (inclusive of all prior distributions). If exercised, NEP has the right to pay a maximum of 100% of the buyout price in NEP non-voting common units, issued at the then-current market price of NEP common units or cash (or any combination thereof), subject to conditions and limitations set forth in the LLC agreement. Under the LLC agreement, for all distribution dates after the tenth anniversary of the initial funding, or if certain minimum purchases under the buyout right have not occurred by any distribution date following June 18, 2026, then, in any such case, the investors' allocation of Genesis Holdings’ cash distributions payable with respect to Class B membership interests that the investors still own will increase to 99%, subject to certain adjustments.

In October 2021, NEP and two of its indirect subsidiaries entered into a membership interest purchase agreement with an investor. The investor has agreed to pay a total of approximately $824 million for 100% of the noncontrolling Class B membership interests of NEP Renewables III, LLC subject to certain closing conditions set forth in the membership purchase agreement. See Part II – Item 5 for further discussion.

Accumulated Other Comprehensive Income (Loss) - During the nine months ended September 30, 2021 and 2020, NEP recognized approximately $1 million of other comprehensive income related to equity method investees. During the three months ended September 30, 2021 and 2020, NEP did not recognize any other comprehensive income (loss). At September 30, 2021 and 2020, NEP's accumulated other comprehensive loss totaled approximately $19 million and $21 million, respectively, of which $11 million and $13 million, respectively, was attributable to noncontrolling interest and $8 million and $8 million, respectively, was attributable to NEP.

9. Related Party Transactions

Each project entered into O&M agreements and ASAs with subsidiaries of NEER whereby the projects pay a certain annual fee plus actual costs incurred in connection with certain O&M and administrative services performed under these agreements. These services are reflected as operations and maintenance in the condensed consolidated statements of income (loss). Additionally, certain NEP subsidiaries pay affiliates for transmission and retail power services which are reflected as operations and maintenance in the condensed consolidated statements of income (loss). Certain projects have also entered into various types of agreements including those related to shared facilities and transmission lines, transmission line easements, technical support and construction coordination with subsidiaries of NEER whereby certain fees or cost reimbursements are paid to, or received by, certain subsidiaries of NEER.

Management Services Agreement - Under the MSA, an indirect wholly owned subsidiary of NEE provides operational, management and administrative services to NEP, including managing NEP’s day-to-day affairs and providing individuals to act as NEP’s executive officers and directors, in addition to those services that are provided under the existing O&M agreements and ASAs described above between NEER subsidiaries and NEP subsidiaries. NEP OpCo pays NEE an annual management fee equal to the greater of 1% of the sum of NEP OpCo’s net income plus interest expense, income tax expense and depreciation and amortization expense less certain non-cash, non-recurring items for the most recently ended fiscal year and $4 million (as adjusted for inflation beginning in 2016), which is paid in quarterly installments with an additional payment each January to the

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

extent 1% of the sum of NEP OpCo’s net income plus interest expense, income tax expense and depreciation and amortization expense less certain non-cash, non-recurring items for the preceding fiscal year exceeds $4 million (as adjusted for inflation beginning in 2016). NEP OpCo also makes certain payments to NEE based on the achievement by NEP OpCo of certain target quarterly distribution levels to its unitholders. NEP’s O&M expenses for the three and nine months ended September 30, 2021 include approximately $36 million and $102 million, respectively, and for the three and nine months ended September 30, 2020 include $29 million and $82 million, respectively, related to the MSA.

Cash Sweep and Credit Support Agreement - NEP OpCo is a party to the CSCS agreement with NEER under which NEER and certain of its affiliates provide credit support in the form of letters of credit and guarantees to satisfy NEP’s subsidiaries’ contractual obligations. NEP OpCo pays NEER an annual credit support fee based on the level and cost of the credit support provided, payable in quarterly installments. NEP’s O&M expenses for the three and nine months ended September 30, 2021 include approximately $1 million and $4 million, respectively, and for the three and nine months ended September 30, 2020 include $1 million and $4 million, respectively, related to the CSCS agreement.

NEER and certain of its affiliates may withdraw funds (Project Sweeps) from NEP OpCo under the CSCS agreement, or its subsidiaries in connection with certain long-term debt agreements, and hold those funds in accounts belonging to NEER or its affiliates to the extent the funds are not required to pay project costs or otherwise required to be maintained by NEP's subsidiaries. NEER and its affiliates may keep the funds until the financing agreements permit distributions to be made, or, in the case of NEP OpCo, until such funds are required to make distributions or to pay expenses or other operating costs or NEP OpCo otherwise demands the return of such funds. If NEER or its affiliates fail to return withdrawn funds when required by NEP's subsidiaries’ financing agreements, the lenders will be entitled to draw on any credit support provided by NEER or its affiliates in the amount of such withdrawn funds. If NEER or one of its affiliates realizes any earnings on the withdrawn funds prior to the return of such funds, it will be permitted to retain those earnings. At September 30, 2021 and December 31, 2020, the cash sweep amounts held in accounts belonging to NEER or its affiliates were approximately $306 million and $10 million, respectively, and are included in due from related parties on the condensed consolidated balance sheets.

Guarantees and Letters of Credit Entered into by Related Parties - Certain PPAs include requirements of the project entities to meet certain performance obligations. NEECH or NEER has provided letters of credit or guarantees for certain of these performance obligations and payment of any obligations from the transactions contemplated by the PPAs. In addition, certain financing agreements require cash and cash equivalents to be reserved for various purposes. In accordance with the terms of these financing agreements, guarantees from NEECH have been substituted in place of these cash and cash equivalents reserve requirements. Also, under certain financing agreements, indemnifications have been provided by NEECH. In addition, certain interconnection agreements and site certificates require letters of credit or a surety bond to secure certain payment or restoration obligations related to those agreements. NEECH also guarantees the Project Sweep amounts held in accounts belonging to NEER, as described above. At September 30, 2021, NEECH or NEER guaranteed or provided indemnifications, letters of credit or surety bonds totaling approximately $587 million related to these obligations.

Due to Related Parties - Noncurrent amounts due to related parties on the condensed consolidated balance sheets primarily represent amounts owed by certain of NEP's wind projects to NEER to refund NEER for certain transmission costs paid on behalf of the wind projects. Amounts will be paid to NEER as the wind projects receive payments from third parties for related notes receivable recorded in noncurrent other assets on the condensed consolidated balance sheets.

Transportation and Fuel Management Agreements - A subsidiary of NEP assigned to a subsidiary of NEER certain gas commodity agreements in exchange for entering into transportation agreements and a fuel management agreement whereby the benefits of the gas commodity agreements (net of transportation paid to the NEP subsidiary) are passed back to the NEP subsidiary. NEP recognized revenues related to the transportation and fuel management agreements of approximately $4 million and $39 million during the three and nine months ended September 30, 2021, respectively, and $2 million and $12 million during the three and nine months ended September 30, 2020, respectively. The increase in the recognized revenues for the nine months ended September 30, 2021 primarily relates to higher demand and the related impact on natural gas prices during extreme winter weather experienced primarily in Texas during February 2021 (February weather event). At September 30, 2021, current due from related parties on the condensed consolidated balance sheets includes approximately $13 million related to the benefits of the gas commodity agreements.

10. Summary of Significant Accounting and Reporting Policies

Restricted Cash - At September 30, 2021 and December 31, 2020, NEP had approximately $4 million and $4 million, respectively, of restricted cash included in current other assets on NEP's condensed consolidated balance sheets. Restricted cash at September 30, 2021 and December 31, 2020 is primarily related to collateral deposits from a counterparty. Restricted cash reported as current assets are recorded as such based on the anticipated use of these funds.

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

Property, Plant and Equipment - Property, plant and equipment consists of the following:


	September 30, 2021		December 31, 2020
	(millions)
Property, plant and equipment, gross	$	8,792	$	8,606
Accumulated depreciation	(1,633)		(1,443)
Property, plant and equipment - net	$	7,159	$	7,163

Noncontrolling Interests - At September 30, 2021, the Class B noncontrolling ownership interests (the Class B noncontrolling ownership interests in NEP Renewables, NEP Renewables II, NEP Pipelines, STX Midstream and Genesis Holdings owned by third parties), the differential membership interests, NEE's approximately 57.0% noncontrolling limited partner interest in NEP OpCo and NEER's approximately 50% noncontrolling ownership interest in Silver State, as well as a third party's 10% interest in 1 of the Texas pipelines and the non-economic ownership interests are reflected as noncontrolling interests on the condensed consolidated balance sheets. The impact of the net income (loss) attributable to the differential membership interests and the Class B noncontrolling ownership interests are allocated to NEE Equity's noncontrolling ownership interest and the net income attributable to NEP based on the respective ownership percentage of NEP OpCo. Details of the activity in noncontrolling interests are below:


	Class B Noncontrolling Ownership Interests		Differential Membership Interests		Noncontrolling Ownership Interests in NEP OpCo and Silver State		Other Noncontrolling Ownership Interests		Total Noncontrolling Interests
	(millions)
Three months ended September 30, 2021
Balances, June 30, 2021	$	4,147	$	1,675	$	81	$	197	$	6,100



Net income (loss) attributable to noncontrolling interests	79		(66)		49		14		76


Related party distributions	—		—		(87)		(7)		(94)
Changes in non-economic ownership interests	—		—		—		6		6
Differential membership investment contributions, net of distributions	—		24		—		—		24
Payments to Class B noncontrolling interest investors	(28)		—		—		—		(28)


Other	—		—		1		(1)		—
Balances, September 30, 2021	$	4,198	$	1,633	$	44	$	209	$	6,084

Nine months ended September 30, 2021
Balances, December 31, 2020	$	3,550	$	1,759	$	(14)	$	58	$	5,353
Sale of Class B noncontrolling interest - net	493		—		—		—		493

Related party note receivable	—		—		1		—		1
Net income (loss) attributable to noncontrolling interests	217		(220)		288		32		317
Other comprehensive income	—		—		1		—		1

Related party distributions	—		—		(233)		(10)		(243)
Changes in non-economic ownership interests	—		—		—		130		130
Differential membership investment contributions, net of distributions	—		47		—		—		47
Payments to Class B noncontrolling interest investors	(63)		—		—		—		(63)
Sale of differential membership interest	—		48		—		—		48

Other	1		(1)		1		(1)		—
Balances, September 30, 2021	$	4,198	$	1,633	$	44	$	209	$	6,084

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)


	Class B Noncontrolling Ownership Interests		Differential Membership Interests		Noncontrolling Ownership Interests in NEP OpCo and Silver State		Other Noncontrolling Ownership Interests		Total Noncontrolling Interests
	(millions)
Three months ended September 30, 2020
Balances, June 30, 2020	$	2,712	$	1,681	$	(97)	$	53	$	4,349



Net income (loss) attributable to noncontrolling interests	55		(56)		126		13		138

Related party contributions	—		—		—		1		1
Related party distributions	—		—		(79)		(2)		(81)
Changes in non-economic ownership interests	—		—		—		(7)		(7)
Differential membership investment contributions, net of distributions	—		39		—		—		39
Payments to Class B noncontrolling interest investors	(13)		—		—		—		(13)


Other	—		(1)		—		—		(1)
Balances, September 30, 2020	$	2,754	$	1,663	$	(50)	$	58	$	4,425

Nine months ended September 30, 2020
Balances, December 31, 2019	$	2,628	$	1,798	$	389	$	68	$	4,883


Related party note receivable	—		—		1		—		1
Net income (loss) attributable to noncontrolling interests	160		(205)		(236)		(3)		(284)
Other comprehensive income	—		—		1		—		1
Related party contributions	—		—		—		6		6
Related party distributions	—		—		(206)		(6)		(212)
Changes in non-economic ownership interests	—		—		—		(7)		(7)
Differential membership investment contributions, net of distributions	—		71		—		—		71
Payments to Class B noncontrolling interest investors	(34)		—		—		—		(34)


Other	—		(1)		1		—		—
Balances, September 30, 2020	$	2,754	$	1,663	$	(50)	$	58	$	4,425

Leases - During the nine months ended September 30, 2021, a power sales agreement, accounted for as a sales-type lease, commenced related to the Wilmot battery storage facility that sells its electric output to a third party under the power sales agreement which provides the customer with the ability to dispatch the facility. For sales-type leases, the book value of the leased asset is removed from the balance sheet and a net investment in sales-type lease is recognized based on fixed payments under the contract and the residual value of the asset being leased. Interest income associated with the sales-type lease is included in operating revenues in NEP’s condensed consolidated statements of income (loss). At September 30, 2021, the net investment in the sales-type lease was approximately $16 million and is included in current and noncurrent other assets on NEP’s condensed consolidated balance sheets. At September 30, 2021, the power sales agreement has an expiration date of 2041 and NEP expects to receive approximately $29 million of lease payments over the remaining term of the power sales agreement with no one year being material.

Convertible Investment Tax Credits - At December 31, 2020, other receivables on NEP's condensed consolidated balance sheets included a convertible investment tax credit (CITC) receivable of approximately $124 million associated with one of NEP's solar projects. Additionally, at December 31, 2020, corresponding liabilities of approximately $100 million and $12 million related to the CITC payments required to be paid to the third party who constructed the project were reflected as accounts payable and accrued expenses and current other liabilities, respectively, and $12 million of CITC payments to be paid to NEER were reflected as current due to related parties on NEP's condensed consolidated balance sheets. After a settlement agreement related to the CITC receivable was reached in the second quarter of 2021, the CITC receivable and related payments to NEER and the third party were paid during the three months ended September 30, 2021.

NEXTERA ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)

(unaudited)

Reference Rate Reform – In March 2020, the Financial Accounting Standards Board (FASB) issued an accounting standards update which provides certain options to apply GAAP guidance on contract modifications and hedge accounting as companies transition from the London Inter-Bank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. NEP’s contracts that reference LIBOR or other interbank offered rates mainly relate to debt and derivative instruments. The standards update was effective upon issuance but can be applied prospectively through December 31, 2022. As agreements that reference LIBOR or other interbank offered rates as an interest rate benchmark are amended, NEP evaluates whether to apply the options provided by the standards update with regard to eligible contract modifications.

11. Commitments and Contingencies

Development, Engineering and Construction Commitments - At September 30, 2021, an indirect subsidiary of NEP had a funding commitment related to a pipeline expansion project. As of September 30, 2021, the NEP subsidiary had invested approximately $69 million related to the expansion project which is reflected as investments in equity method investees on the condensed consolidated balance sheets. As of September 30, 2021, the NEP subsidiary has a remaining commitment of approximately $11 million.

Coronavirus Pandemic - NEP is closely monitoring the global outbreak of the novel coronavirus (COVID-19) and is taking steps intended to mitigate the potential risks to NEP posed by COVID-19. NEP has implemented its pandemic plan, which includes various processes and procedures intended to limit the impact of COVID-19 on its business. These processes and procedures include the pandemic plan implemented by NEER related to services NEER provides to NEP. To date, there has been no material impact on NEP's operations, financial performance, or liquidity as a result of COVID-19; however, the ultimate severity or duration of the outbreak or its effects on the global, national or local economy, the capital and credit markets, the services NEER provides to NEP, or NEP's customers and suppliers is uncertain. NEP cannot predict whether COVID-19 will have a material impact on its business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

NEP is a growth-oriented limited partnership formed to acquire, manage and own contracted clean energy projects with stable long-term cash flows. NEP consolidates the results of NEP OpCo and its subsidiaries through its controlling interest in the general partner of NEP OpCo. At September 30, 2021, NEP owned an approximately 43.0% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 57.0% limited partner interest in NEP OpCo. Through NEP OpCo, NEP has ownership interests in a portfolio of contracted renewable generation assets consisting of wind and solar projects and a portfolio of contracted natural gas pipeline assets. NEP's financial results are shown on a consolidated basis with financial results attributable to NEE Equity reflected in noncontrolling interests.

This discussion should be read in conjunction with the Notes contained herein and Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in the 2020 Form 10-K. The results of operations for an interim period generally will not give a true indication of results for the year. In the following discussions, all comparisons are with the corresponding items in the prior year period.

In December 2020, an indirect subsidiary of NEP completed the acquisition from NEER of 100% of the membership interests in Wilmot and 100% of the Class C membership interests in Pine Brooke Holdings. In August 2021, an indirect subsidiary of NEP acquired indirect ownership interests in four wind generation facilities with a combined generating capacity of 391 MW. In October 2021, an indirect subsidiary of NEP completed the acquisition from NEER of the ownership interests in a portfolio of wind and solar generation facilities with a combined net generating capacity totaling approximately 589 MW. In October 2021, indirect subsidiaries of NEP entered into an agreement to acquire a 102 MW wind generation facility and an agreement with subsidiaries of NEER to acquire ownership interests in a portfolio of newly constructed or in-construction wind and solar generation facilities with a combined net generating capacity totaling approximately 1,260 MW and net storage capacity totaling 58 MW. See Note 1.

NEP is closely monitoring the global outbreak of COVID-19 and is taking steps intended to mitigate the potential risks to NEP posed by COVID-19. See Note 11 - Coronavirus Pandemic.

Results of Operations


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(millions)
Statement of Income (Loss) Data:
OPERATING REVENUES
Renewable energy sales	$	193	$	187	$	543	$	546
Texas pipelines service revenues	59		53		208		159
Total operating revenues	252		240		751		705
OPERATING EXPENSES
Operations and maintenance	110		93		302		273
Depreciation and amortization	71		68		207		200
Taxes other than income taxes and other	7		11		30		25
Total operating expenses – net	188		172		539		498
OPERATING INCOME	64		68		212		207
OTHER INCOME (DEDUCTIONS)
Interest expense	(24)		93		145		(730)
Equity in earnings of equity method investees	47		44		131		91
Equity in earnings (losses) of non-economic ownership interests	12		11		26		(7)
Other – net	1��		4		3		4
Total other income (deductions) – net	36		152		305		(642)
INCOME (LOSS) BEFORE INCOME TAXES	100		220		517		(435)
INCOME TAX EXPENSE (BENEFIT)	6		25		54		(37)
NET INCOME (LOSS)	94		195		463		(398)
NET INCOME ATTRIBUTABLE TO PREFERRED DISTRIBUTIONS	—		(1)		—		(5)
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(76)		(138)		(317)		284
NET INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP	$	18	$	56	$	146	$	(119)

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

Operating Revenues

During the three months ended September 30, 2021, total operating revenues increased by approximately $12 million. The increase in renewable energy sales of approximately $6 million primarily reflects increased revenues from acquisitions completed in December 2020 and August 2021 (see Note 1). In addition, Texas pipelines service revenues increased by approximately $6 million during the three months ended September 30, 2021 primarily related to higher revenues associated with a pipeline expansion project that went into service in the third quarter of 2020.

Operating Expenses

Operations and Maintenance

O&M expenses increased approximately $17 million during the three months ended September 30, 2021 primarily reflecting $8 million of acquisition-related costs discussed in Note 1 and an increase of $7 million in higher IDR fees related to growth in NEP's distributions to its common unitholders.

Other Income (Deductions)

Interest Expense

Interest expense increased approximately $117 million during the three months ended September 30, 2021 primarily reflecting less favorable mark-to-market activity ($6 million of gains recorded in 2021 compared to $131 million of gains in 2020), partly offset by decreased interest expense due to lower debt balances as compared to the prior year period.

Income Taxes

For the three months ended September 30, 2021, NEP recorded income tax expense of approximately $6 million on income before income taxes of $100 million, resulting in an effective tax rate of 6%. The tax expense is comprised primarily of income tax expense of approximately $21 million at the statutory rate of 21%, partly offset by $14 million of income tax benefit attributable to noncontrolling interests.

For the three months ended September 30, 2020, NEP recorded income tax expense of approximately $25 million on income before income taxes of $220 million, resulting in an effective tax rate of 11%. The tax expense is comprised primarily of income tax expense of approximately $46 million at the statutory rate of 21% and $3 million of state income taxes, partly offset by $28 million of income tax benefit attributable to noncontrolling interests.

Net Loss (Income) Attributable to Noncontrolling Interests

For the three months ended September 30, 2021 and 2020, net loss (income) attributable to noncontrolling interests reflects the net income or loss attributable to NEE Equity's noncontrolling interest in NEP OpCo, a third party's 10% interest in one of the Texas pipelines, the loss allocated to differential membership interest investors, the income allocated to the Class B noncontrolling interests and NEER's approximately 50% noncontrolling interest in Silver State. The net income attributable to noncontrolling interests in 2021 compared to net income attributable to noncontrolling interests in 2020 primarily reflects a lower allocation of income to NEE Equity's noncontrolling interest compared to the allocation of income in the prior year. See Note 10 - Noncontrolling Interests.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Operating Revenues

Operating revenues increased $46 million for the nine months ended September 30, 2021. Texas pipelines service revenues increased approximately $49 million during the nine months ended September 30, 2021 primarily reflecting increases of $30 million related to higher revenues under transportation and fuel management agreements during the February weather event (see Note 9 - Transportation and Fuel Management Agreements) and $13 million primarily related to higher revenues associated with a pipeline expansion project that went into service in the third quarter of 2020.

Operating Expenses

Operations and Maintenance

O&M expenses increased approximately $29 million during the nine months ended September 30, 2021 primarily reflecting an increase of $19 million in higher IDR fees related to growth in NEP's distributions to its common unitholders and $11 million of acquisition-related costs discussed in Note 1.

Other Income (Deductions)

Interest Expense

The decrease in interest expense of approximately $875 million during the nine months ended September 30, 2021 primarily reflects $844 million of favorable mark-to-market activity ($235 million of gains recorded in 2021 compared to $609 million of losses in 2020) and decreased interest expense due to lower debt balances as compared to the prior year period.

Equity in Earnings of Equity Method Investees

Equity in earnings of equity method investees increased approximately $40 million during the nine months ended September 30, 2021 primarily due to $29 million of earnings related to the ownership interests in Pine Brooke Holdings acquired in December 2020 as well as an increase of $11 million in earnings primarily related to the ownership interest in Desert Sunlight.

Equity in Earnings (Losses) of Non-Economic Ownership Interests

NEP recognized approximately $26 million of equity in earnings of non-economic ownership interests during the nine months ended September 30, 2021 compared to $7 million of losses in the prior year period. The change primarily reflects favorable mark-to-market activity in 2021 compared to unfavorable mark-to-market activity in 2020.

Income Taxes

For the nine months ended September 30, 2021, NEP recorded an income tax expense of approximately $54 million on income before income taxes of $517 million, resulting in an effective tax rate of 10%. The tax expense is comprised primarily of income tax expense of approximately $109 million at the statutory rate of 21% and $12 million of state taxes, partly offset by $64 million of income tax benefit attributable to noncontrolling interests.

For the nine months ended September 30, 2020, NEP recorded income tax benefit of approximately $37 million on loss before income taxes of $435 million, resulting in an effective tax rate of 9%. The tax benefit is comprised primarily of income tax benefit of approximately $91 million at the statutory rate of 21% and $6 million of state tax benefit, partly offset by $61 million of income tax attributable to noncontrolling interests.

Net Loss (Income) Attributable to Noncontrolling Interests

For the nine months ended September 30, 2021 and 2020, net loss (income) attributable to noncontrolling interests reflects the net income or loss attributable to NEE Equity's noncontrolling interest in NEP OpCo, a third party's 10% interest in one of the Texas pipelines, the loss allocated to differential membership interest investors, the income allocated to the Class B noncontrolling interests and NEER's approximately 50% noncontrolling interest in Silver State. The net income attributable to noncontrolling interests in 2021 compared to net loss attributable to noncontrolling interests in 2020 primarily reflects the net income allocation to NEE Equity's noncontrolling interest compared to the allocation of losses in the prior year. See Note 10 - Noncontrolling Interests.

Liquidity and Capital Resources

NEP’s ongoing operations use cash to fund O&M expenses, including related party fees discussed in Note 9, maintenance capital expenditures, debt service payments (see Note 7) and distributions to common unitholders and holders of noncontrolling interests (see Note 8 and Note 10 - Noncontrolling Interests). NEP expects to satisfy these requirements primarily with internally generated cash flow. In addition, as a growth-oriented limited partnership, NEP expects from time to time to make acquisitions and other investments (see Note 1 and Note 11 - Development, Engineering and Construction Commitments). These acquisitions and investments are expected to be funded with borrowings under credit facilities or term loans, issuances of indebtedness, issuances of additional NEP common units or preferred units, capital raised pursuant to other financing structures, cash on hand and cash generated from operations.

These sources of funds are expected to be adequate to provide for NEP's short-term and long-term liquidity and capital needs, although its ability to make future acquisitions, fund additional expansion or repowering of existing projects and increase its distributions to common unitholders will depend on its ability to access capital on acceptable terms.

As a normal part of its business, depending on market conditions, NEP expects from time to time to consider opportunities to repay, redeem, repurchase or refinance its indebtedness. In addition, NEP expects from time to time to consider potential investments in new acquisitions and the expansion or repowering of existing projects. These events may cause NEP to seek additional debt or equity financing, which may not be available on acceptable terms or at all. Additional debt financing, if available, could impose operating restrictions, additional cash payment obligations and additional covenants.

NEP OpCo has agreed to allow NEER or one of its affiliates to withdraw funds received by NEP OpCo or its subsidiaries and to hold those funds in accounts of NEER or one of its affiliates to the extent the funds are not required to pay project costs or otherwise required to be maintained by NEP's subsidiaries, until the financing agreements permit distributions to be made, or, in

the case of NEP OpCo, until such funds are required to make distributions or to pay expenses or other operating costs. NEP OpCo will have a claim for any funds that NEER fails to return:

• when required by its subsidiaries’ financings;

• when its subsidiaries’ financings otherwise permit distributions to be made to NEP OpCo;

• when funds are required to be returned to NEP OpCo; or

• when otherwise demanded by NEP OpCo.

In addition, NEER and certain of its affiliates may withdraw funds in connection with certain long-term debt agreements and hold those funds in accounts belonging to NEER or its affiliates and provide credit support in the amount of such withdrawn funds. If NEER fails to return withdrawn funds when required by NEP's subsidiaries’ financing agreements, the lenders will be entitled to draw on any credit support provided by NEER in the amount of such withdrawn funds.

If NEER or one of its affiliates realizes any earnings on the withdrawn funds prior to the return of such funds, it will be permitted to retain those earnings.

Liquidity Position

At September 30, 2021, NEP's liquidity position was approximately $1,573 million. The table below provides the components of NEP’s liquidity position:


	September 30, 2021		Maturity Date
	(millions)
Cash and cash equivalents	$	133
Amounts due under the CSCS agreement	306
Revolving credit facilities(a)	1,250		2026
Less borrowings(b)	—
Less issued letters of credit	(116)

Total	$	1,573

____________________

(a) Approximately $50 million of the NEP OpCo credit facility expires in 2025. Excludes certain credit facilities due to restrictions on the use of the borrowings.

(b) In October 2021, $305 million was borrowed under the NEP OpCo credit facility and approximately $12 million of such borrowings have a maturity date in 2025.

Management believes that NEP's liquidity position and cash flows from operations will be adequate to finance O&M, maintenance capital expenditures, distributions to its unitholders and liquidity commitments. Management continues to regularly monitor NEP's financing needs consistent with prudent balance sheet management.

Financing Arrangements

In February 2021, NEP OpCo and its direct subsidiary entered into an amendment of their existing revolving credit facility to extend the maturity date to February 2026. During the nine months ended September 30, 2021, $90 million was drawn under the NEP OpCo credit facility, which was repaid in June 2021. In addition, approximately $34 million was borrowed under the Meade credit agreement for the Meade expansion and $7 million was repaid. In October 2021, $305 million was borrowed under the NEP OpCo credit facility. See Note 7.

During the nine months ended September 30, 2021, NEP issued $500 million in aggregate principal amount of 0% convertible senior notes due in 2024 (see Note 7).

NEP OpCo and certain indirect subsidiaries are subject to financings that contain financial covenants and distribution tests, including debt service coverage ratios. In general, these financings contain covenants customary for these types of financings, including limitations on investments and restricted payments. Certain of NEP's financings provide for interest payable at a fixed interest rate. However, certain of NEP's financings accrue interest at variable rates based on an underlying index plus a margin. Interest rate contracts were entered into for certain of these financings to hedge against interest rate movements with respect to interest payments on the related borrowings. In addition, under the project-level financings, each project will be permitted to pay distributions out of available cash so long as certain conditions are satisfied, including that reserves are funded with cash or credit support, no default or event of default under the applicable financings has occurred and is continuing at the time of such distribution or would result therefrom, and each project is otherwise in compliance with the project-level financing’s covenants. For the majority of the project-level financings, minimum debt service coverage ratios must be satisfied in order to make a distribution. For one project-level financing, the project must maintain a leverage ratio and an interest coverage ratio in order to make a distribution. At September 30, 2021, NEP's subsidiaries were in compliance with all financial debt covenants under their financings.

Equity Arrangements

During the nine months ended September 30, 2021, a subsidiary of NEP issued and sold noncontrolling Class B interests in Genesis Holdings under the membership interest purchase agreement entered into in 2020 and amended in May 2021. NEP has buyout rights, subject to certain limitations and/or extensions, under which NEP has the right to pay a portion of the buyout price in NEP non-voting common units, as specified in the related agreement. The Class B investors receive a specified allocation of the related subsidiaries' distributable cash, which could increase if certain minimum buyout rights are not exercised or are not exercised during a certain period. See Note 8 - Class B Noncontrolling Interests. In October 2021, NEP and two of its indirect subsidiaries entered into a membership interest purchase agreement with an investor to sell 100% of the noncontrolling Class B membership interests of NEP Renewables III, LLC subject to certain closing conditions set forth in the membership purchase agreement. See Part II – Item 5 for further discussion.

During the nine months ended September 30, 2020, NEP issued 1.8 million NEP common units upon the conversion of preferred units on a one-for-one basis and issued approximately 5.7 million NEP common units upon the conversion of $300 million of convertible notes. In October 2020, NEP issued approximately 1.2 million NEP common units upon the conversion of preferred units on a one-for-one basis.

Capital Expenditures

Annual capital spending plans are developed based on projected requirements for the projects. Capital expenditures primarily represent the estimated cost of capital improvements, including construction expenditures that are expected to increase NEP OpCo’s operating income or operating capacity over the long term. Capital expenditures for projects that have already commenced commercial operations are generally not significant because most expenditures relate to repairs and maintenance and are expensed when incurred. For the nine months ended September 30, 2021 and 2020, NEP had capital expenditures of approximately $82 million and $236 million, respectively, primarily reflecting costs associated with the repowering of certain wind facilities and expansion projects at certain pipelines. In the third and fourth quarters of 2020, an expansion investment at one of the Texas pipelines and the repowered wind generation facilities were placed in service. NEP expects to make additional investments associated with its ownership interests in Meade related to an expansion that was completed in the fourth quarter of 2021. See Note 11 - Development, Engineering and Construction Commitments. These estimates are subject to continuing review and adjustments and actual capital expenditures may vary significantly from these estimates.

Cash Distributions to Unitholders

During the nine months ended September 30, 2021, NEP distributed approximately $146 million to its common unitholders. On October 19, 2021, the board of directors of NEP authorized a distribution of $0.6850 per common unit payable on November 12, 2021 to its common unitholders of record on November 4, 2021.

Cash Flows

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

The following table reflects the changes in cash flows for the comparative periods:


	2021		2020		Change
Nine Months Ended September 30,	(millions)
Net cash provided by operating activities	$	492	$	482	$	10
Net cash used in investing activities	$	(1,069)	$	(283)	$	(786)
Net cash provided by (used in) financing activities	$	602	$	(232)	$	834

Net Cash Provided by Operating Activities

The increase in net cash provided by operating activities was primarily driven by lower interest payments, partly offset by the timing of working capital and lower distributions from equity method investees which reflects the absence of an approximately $65 million distribution from Desert Sunlight in 2020 related to the resolution of an event of default.

Net Cash Used in Investing Activities


	2021		2020

Nine Months Ended September 30,	(millions)
Acquisition of membership interests in subsidiaries – net	$	(800)	$	—
Capital expenditures and other investments	(82)		(236)
Payments to related parties under CSCS agreement – net	(295)		(70)
Proceeds from CITCs	75		—
Distributions from equity method investee	1		8
Other	32		15
Net cash used in investing activities	$	(1,069)	$	(283)

The increase in net cash used in investing activities was primarily driven by the 2021 third party acquisition (see Note 1) and higher cash sweeps under the CSCS agreement in 2021, partly offset by lower capital expenditures in 2021 primarily related to the completion of one of the pipeline expansion projects and the repowering of certain wind facilities in the third and fourth quarters of 2020 (see Capital Expenditures) as well as the CITC proceeds received in the third quarter of 2021 (see Note 10 - Convertible Investment Tax Credits).

Net Cash Provided by (Used in) Financing Activities


	2021		2020
Nine Months Ended September 30,	(millions)
Proceeds from issuance of common units – net	$	50	$	2
Issuances (retirements) of long-term debt - net	526		51
Partner contributions	—		7
Partner distributions	(387)		(320)

Change in amounts due to related parties	(12)		(2)
Proceeds related to differential membership interests - net	95		71
Proceeds (payments) related to Class B noncontrolling interests - net	430		(34)
Payment of CITC obligation to third party	(65)		—
Other	(35)		(7)
Net cash provided by (used in) financing activities	$	602	$	(232)

The change in net cash provided by (used in) financing activities primarily reflects higher net issuances of long-term debt in 2021 (see Note 7) compared to 2020, proceeds related to the sale of Class B noncontrolling interests in 2021 (see Note 8 - Class B Noncontrolling Interests) and proceeds from the sale of NEP common units under the ATM, partly offset by amounts paid related to the CITC receivable settlement (see Note 10 - Convertible Investment Tax Credits) and higher partner distributions.

Quantitative and Qualitative Disclosures about Market Risk

NEP is exposed to several market risks in its normal business activities. Market risk is the potential loss that may result from market changes associated with its business. The types of market risks include interest rate and counterparty credit risks.

Interest Rate Risk

NEP is exposed to risk resulting from changes in interest rates associated with outstanding and expected future debt issuances and borrowings. NEP manages interest rate exposure by monitoring current interest rates, entering into interest rate contracts and using a combination of fixed rate and variable rate debt. Interest rate swaps are used to mitigate and adjust interest rate exposure when deemed appropriate based upon market conditions or when required by financing agreements (see Note 3).

NEP has long-term debt instruments that subject it to the risk of loss associated with movements in market interest rates. At September 30, 2021, substantially all of the long-term debt, including current maturities, was not exposed to fluctuations in interest expense as it was either fixed rate debt or financially hedged. At September 30, 2021, the estimated fair value of NEP's long-term debt was approximately $4.1 billion and the carrying value of the long-term debt was $4.0 billion. See Note 4 - Financial Instruments Recorded at Other than Fair Value. Based upon a hypothetical 10% decrease in interest rates, which is a reasonable near-term market change, the fair value of NEP's long-term debt would increase by approximately $28 million at September 30, 2021.

At September 30, 2021, NEP had interest rate contracts with a net notional amount of approximately $7.1 billion related to managing exposure to the variability of cash flows associated with outstanding and expected future debt issuances and borrowings. Based upon a hypothetical 10% decrease in rates, NEP’s net derivative liabilities at September 30, 2021 would increase by approximately $117 million.

Counterparty Credit Risk

Risks surrounding counterparty performance and credit risk could ultimately impact the amount and timing of expected cash flows. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties under the terms of their contractual obligations. NEP monitors and manages credit risk through credit policies that include a credit approval process and the use of credit mitigation measures such as prepayment arrangements in certain circumstances. NEP also seeks to mitigate counterparty risk by having a diversified portfolio of counterparties.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See Management's Discussion - Quantitative and Qualitative Disclosures About Market Risk.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of September 30, 2021, NEP had performed an evaluation, under the supervision and with the participation of its management, including its chief executive officer and chief financial officer, of the effectiveness of the design and operation of NEP's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the chief executive officer and the chief financial officer of NEP concluded that NEP's disclosure controls and procedures were effective as of September 30, 2021.

(b) Changes in Internal Control Over Financial Reporting

NEP is continuously seeking to improve the efficiency and effectiveness of its operations and of its internal controls. This results in refinements to processes throughout NEP. However, there has been no change in NEP's internal control over financial reporting (as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f)) that occurred during NEP's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, NEP's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None. With regard to environmental proceedings to which a governmental authority is a party, NEP's policy is to disclose any such proceeding if it is reasonably expected to result in monetary sanctions of greater than or equal to $1 million.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in the 2020 Form 10-K. The factors discussed in Part I, Item 1A. Risk Factors in the 2020 Form 10-K, as well as other information set forth in this report, which could materially adversely affect NEP's business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders should be carefully considered. The risks described in the 2020 Form 10-K are not the only risks facing NEP. Additional risks and uncertainties not currently known to NEP, or that are currently deemed to be immaterial, also may materially adversely affect NEP's business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders.

Item 5. Other Information

(a)On October 21, 2021, NextEra Energy Partners Acquisitions, LLC (NEP Acquisitions), an indirect subsidiary of NEP, entered into a purchase and sale agreement with NEP US SellCo, LLC, NEP US SellCo II, LLC (the seller) and ESI Energy, LLC, all of which are subsidiaries of NEER. Pursuant to the terms of the purchase and sale agreement, NEP Acquisitions agreed to acquire from the seller 100% of the Class A membership interests in Star Moon Holdings, LLC (Star Moon Holdings) for a total consideration of approximately $849 million, subject to customary working capital and other adjustments, plus NEP's share of the entities' noncontrolling interests related to differential membership investors estimated to be approximately $866 million at the time of closing.

NEP’s indirect ownership interest in Star Moon Holdings will represent an indirect 50% controlling ownership interest in wind generation facilities and solar generation facilities, some of which include solar storage, consisting of the following:

•White Mesa Wind, an approximately 501 MW wind generation facility located in Texas;

•Irish Creek Wind, an approximately 301 MW wind generation facility located in Kansas;

•Hubbard Wind, an approximately 300 MW wind generation facility located in Texas;

•Cool Springs Solar, an approximately 213 MW solar generation and 40 MW solar storage facility located in Georgia;

•Little Blue Wind, an approximately 251 MW wind generation facility located in Nebraska;

•Dodge Flat Solar, an approximately 200 MW solar generation and 50 MW solar storage facility located in Nevada;

•Elora Solar, an approximately 150 MW solar generation facility located in Tennessee;

•Quitman II Solar, an approximately 150 MW solar generation facility located in Georgia;

•Fish Springs Ranch Solar, an approximately 100 MW solar generation and 25 MW solar storage facility located in Nevada;

•Minco Wind Energy III, an approximately 107 MW wind generation facility located in Oklahoma;

•Ensign Wind Energy, an approximately 99 MW wind generation facility located in Kansas;

•Borderlands Wind, an approximately 99 MW wind generation facility located in New Mexico; and

•Quinebaug Solar, an approximately 49 MW solar generation facility located in Connecticut.

The acquisition of Star Moon Holdings is expected to close during the fourth quarter of 2021 or in early 2022, subject to the satisfaction of customary closing conditions and the receipt of regulatory approvals. The wind and solar generation facilities listed above are currently under construction by NEER. Three projects (Dodge Flat Solar, Elora Solar and Fish Springs Ranch Solar) are expected to continue to be under construction at closing of the acquisition. NEER has agreed to continue to manage the construction of such projects after the acquisition, at its own cost, and to contribute to those projects any capital necessary for the construction of the projects. If any of those projects do not achieve commercial operation by June 30, 2022, NEP Acquisitions will have the right to require NEER to repurchase the ownership interests in such projects for the same purchase price paid by NEP Acquisitions.

The purchase and sale agreement contains customary representations, warranties and covenants by the parties. The parties are obligated, subject to certain limitations, to indemnify each other for certain customary and other specified matters, including breaches of representations and warranties, nonfulfillment or breaches of covenants and for certain liabilities and third-party claims.

The terms of the purchase and sale agreement were unanimously approved by NEP’s conflicts committee, which is comprised of the independent members of the board of directors of NEP. The conflicts committee retained independent legal and financial advisors to assist in evaluating and negotiating the acquisition. In approving the acquisition, the conflicts committee based its decisions, in part, on an opinion from its independent financial advisor.

The foregoing description of the purchase and sale agreement is qualified in its entirety by reference to the agreements filed as Exhibits 2.1 and 2.2 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

On October 21, 2021, NEP and two of its indirect subsidiaries, NEP Renewables III Holdings, LLC (NEP Renewables III Holdings) and NEP Renewables III, LLC (NEP Renewables III) entered into a membership interest purchase agreement (membership purchase agreement) with Apollo Global Management, Inc. (Apollo) for the purpose of financing the Star Moon Holdings acquisition described above. NEP’s indirect interest in Star Moon Holdings will be contributed to NEP Renewables III at closing. Apollo has agreed to pay a total of approximately $824 million to NEP Renewables III Holdings for 100% of the noncontrolling Class B membership interests of NEP Renewables III, subject to certain closing conditions set forth in the membership purchase agreement. NEP Renewables III Holdings will retain 100% of the Class A membership interests of NEP Renewables III, and NEP will consolidate NEP Renewables III.

The closing of the membership purchase agreement and initial funding of approximately $412 million (initial funding) pursuant thereto is expected to occur in the fourth quarter of 2021 or in early 2022, and an additional funding of approximately $412 million (final funding) is expected by the end of the second quarter of 2022, in each case, subject to the satisfaction of customary closing conditions. At the initial funding, Apollo is expected to acquire approximately 50% of the total noncontrolling Class B membership interests in NEP Renewables III contemplated under the membership purchase agreement and the remaining approximately 50% at the final funding.

Under the amended and restated limited liability company agreement for NEP Renewables III (the LLC agreement) that will be entered into at closing of the membership purchase agreement, NEP, through its indirect ownership of NEP Renewables III Holdings, will receive 35% of NEP Renewables III’s cash distributions for the first ten years after closing, and Apollo will receive 65%, except that, for the period between the initial and final funding, NEP will receive approximately 67.5% of NEP Renewables III’s cash distributions and Apollo will receive 32.5%. From the fifth to the tenth anniversary of the initial funding, NEP has the option (the buyout right), subject to certain limitations, to periodically purchase Apollo's interest in NEP Renewables III at a buyout price that implies a fixed pre-tax annual return of approximately 5.6% to Apollo (inclusive of all prior distributions). If exercised, NEP has the right to pay 100% of the buyout price in NEP non-voting common units, issued at the then-current market price of NEP common units, or cash (or a combination thereof), subject to limitations described in the LLC agreement. If certain minimum buyouts have not occurred following the sixth anniversary of the initial funding, Apollo's allocation of NEP Renewables III’s cash distributions with respect to the Class B membership interests that Apollo still owns would increase to 99%. Under a registration rights agreement to be entered into at the initial funding, NEP will provide Apollo certain registration rights.

Following any exercise of the buyout right in which NEP issues non-voting common units, Apollo will have, among other rights, the right to receive pro rata quarterly cash distributions with respect to those NEP non-voting common units they own and the right, subject to certain limitations, to convert the NEP non-voting common units into NEP common units on a one-for-one basis.

The foregoing description of the membership purchase agreement is qualified in its entirety by reference to the agreement filed as Exhibit 2.3 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Item 6. Exhibits


Exhibit Number						Description
2.1*						Amended and Restated Purchase and Sale Agreement, dated as of February 22, 2016, by and between NEP US SellCo, LLC and NextEra Energy Partners Acquisitions, LLC, as amended by First Global Amendment to Amended and Restated Purchase and Sale Agreement, dated as of September 8, 2016, by and between NEP US SellCo, LLC, NextEra Energy Partners Acquisitions, LLC and ESI Energy, LLC (filed as Exhibit 2.1 to Form 10-Q for the quarter ended September 30, 2017, File No. 1-36518)
2.2						Amendment to Amended and Restated Purchase and Sale Agreement (2021-B Projects Annex), dated as of October 21, 2021, by and among NEP US SellCo LLC and NEP US SellCo II LLC, NextEra Energy Partners Acquisitions, LLC and ESI Energy, LLC
2.3						Membership Interest Purchase Agreement, dated as of October 21 , 2021, among NEP Renewables III Holdings, LLC, NextEra Energy Partners, LP, NEP Renewables III, LLC, and the Class B purchasers party thereto



31(a)						Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of NextEra Energy Partners, LP
31(b)						Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of NextEra Energy Partners, LP
32						Section 1350 Certification of NextEra Energy Partners, LP
101.INS						XBRL Instance Document - XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH						XBRL Schema Document
101.PRE						XBRL Presentation Linkbase Document
101.CAL						XBRL Calculation Linkbase Document
101.LAB						XBRL Label Linkbase Document
101.DEF						XBRL Definition Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

___________________________

* Incorporated herein by reference

NEP agrees to furnish to the SEC upon request any instrument with respect to long-term debt that NEP has not filed as an exhibit pursuant to the exemption provided by Item 601(b)(4)(iii)(A) of Regulation S-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 25, 2021


NEXTERA ENERGY PARTNERS, LP
(Registrant)


JAMES M. MAY
James M. May Controller and Chief Accounting Officer (Principal Accounting Officer)

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NextEra Energy Partners (NEP) 10-Q2021 Q3 Quarterly report

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