NextEra Energy Partners LP said July 25 it is on track to have its Texas Natural Gas Pipeline portfolio sold by the end of the year as it transitions to a renewables pure play.

The company in May announced its plans to sell the assets, which includes its STX Texas midstream assets in the Eagle Ford Shale. The limited partnership of NextEra Energy Inc., the largest U.S. electric utility by market capitalization, is also selling its Meade natural gas pipeline in Pennsylvania to streamline its finances.

Speaking during the company’s earnings call, NextEra Energy CEO John Ketchum said the company hopes to be in a position to announce a transaction—looking to hit the year-end sale’s target—by the end of the third quarter or early fourth quarter.

“In terms of valuation, we view these assets as unique...The Texas pipeline provides 25% of the natural gas supply to Mexico through contracts with Pemex, and the other pipeline assets that support the Texas pipeline are fully integrated with that pipe,” Ketchum told analysts. “They provide gas to Mexico’s Agua Dulce, which is a very liquid trading point. If you look around that area, these are very, very strategic for a number of players.”

The sale is one of several announced recently as midstream players reshape their portfolios, looking to maximize value while providing needed natural gas infrastructure amid the energy transition and regulatory headwinds.

Canada’s TC Energy Corp. announced on July 24 plans to sell its 40% interest in Columbia Gas Transmission LLC and Columbia Gulf Transmission to private equity firm Global Infrastructure Partners in a $3.9 billion (CA$5.2 billion) deal. The pipeline systems will operate as a joint venture partnership between TC Energy and GIP.

The deal came two weeks after Virginia-based Dominion Energy said it had completed its competitive sale process, agreeing to sell its 50% noncontrolling limited partner interest in Cove Point LNG to Berkshire Hathaway Energy in a $3.5 billion deal.

Though the midstream assets are different, the surge in M&A—which followed a robust 2022—has the industry watching for the next multibillion deal.

Yet, comparing pipelines can be difficult, Ketchum said. “But again, we remain, pleased with the progress that we continue to make up on the sales transaction.”

NextEra Energy Partners’ NET Mexico Pipeline, which is part of the sale, exports up to 2 Bcf of natural gas to Mexico daily, serving natural gas distribution companies and electric generation in South Texas and Mexico and gas producers in the Eagle Ford Shale production area, the company said.

NextEra’s Meade Pipeline LLC owns about a 40% interest in the 185-mile long Central Penn Line in eastern Pennsylvania. The interest is leased to Transcontinental Gas Pipe Line Co., which NextEra said owns the remaining interest in the Central Penn Line and operates it as part of the Transco system.

“NextEra Energy Partners expects to use the proceeds from the planned Texas pipeline portfolio sale, together with the Meade natural gas pipeline sale in 2025, to eliminate the equity buyouts on the three near-term convertible equity portfolio financings—STX Midstream, NEP Renewables II and 2019 NEP Pipelines,” NextEra Energy CFO Kirk Crews said. “Upon successful execution of the Texas pipeline portfolio sale, the partnership does not expect to require equity through 2024, other than opportunistic equity issuances under our at-the-market equity program to fund future growth beyond 2024.”

NextEra Energy Partners’ renewable portfolio grew to more than 10,000 MW following completion of its previously announced acquisition of about 690 MW of wind and solar assets.

“The partnership is well positioned to execute on its simplification plans to become a 100% renewables-focused company,” Crews said.

Looking at overall company financials, NextEra’s renewables energy unit helped to push the company’s second quarter revenue to $7.35 billion, up from about $5.2 billion a year earlier, as its backlog of renewable energy and storage projects jumped to about 20 gigawatts.

The growth was reported July 25 as incentives such as those in the Inflation Reduction Act and Bipartisan Infrastructure Law position the company to accelerate amid the shift to cleaner energy. NextEra Energy Partners aims to become a renewables pure play as its renewables arm NextEra Energy Resources looks to expand its capacity to between 32,700 MW and 41,800 MW by 2026.

“Renewables are here to stay. They’re not going anywhere,” Ketchum said.

NextEra Energy reported quarterly earnings of nearly $1.8 billion, compared to about $1.6 billion in second quarter 2022. Cash flow from operating activities was about $4.3 billion for the quarter.

Comments