NextEra Energy announced this Monday it has entered into an amended agreement to upsize its existing convertible equity portfolio financing by $150 million. KKR, which is the investor, originally had a 10-year agreement with the company for a convertible equity portfolio financing.
Firstly, under the terms of the agreement, NextEra Energy will receive further $150 million as part of the second draw of the financing, which is expected to occur by the end of the second quarter of 2021.
Secondly, the second draw has now an amount of approximately $500 million; bringing the total expected proceeds from the 10-year convertible equity portfolio financing agreement to approximately $1.25 billion.
Thirdly, this upsizing will allow the company to partially fund substantial renewable energy projects; such as a portfolio of 400 megawatts in wind assets. This portfolio was recently announced by the company as part of its plans to expand into the renewable energy market.
Moreover, under the agreement, the investor will receive 25% of the cash distributions from the underlying portfolio, which includes the interests in assets that were acquired from NextEra Energy, late last year.
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Consequently, the agreement will allow KKR to reduce its effective annual coupon over the initial 10-year period to approximately 3.9%; below the originally expected 4.4%. On the other hand, NextEra will leverage from extended flexibility to periodically buy out the Investor’s equity interest at a fixed approximately 6.75% pre-tax annual return.
Furthermore, to date, NextEra didn’t have a convertible equity portfolio agreement with such low costs and long due date.
In addition, Jim Robo, chairman and CEO of NextEra energy, said. “The agreement announced today demonstrates the continued robust private infrastructure demand for the high-quality assets in NextEra Energy Partners’ portfolio; and also our strong relationship with KKR, which is providing us with an attractive low-cost source of capital.”
Finally, he noted. “This is a terrific source of capital for NextEra Energy Partners and supports funding for the acquisition of the previously announced 400-megawatt portfolio of wind projects.”