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Capitalization | 9 Months Ended
--- | ---
Sep. 30, 2019
Equity [Abstract] |
Capitalization | Capitalization Debt - Significant long-term debt issuances and borrowings by subsidiaries of NEP during the nine months ended September 30, 2019 were as follows:
Date Issued/Borrowed |  | Debt Issuances/Borrowings |  | Interest Rate |  | Principal Amount |  | Maturity Date
|  |  |  |  |  | (millions) |  |
May 2019 - June 2019 |  | NEP OpCo senior secured revolving credit facility |  | Variable(a) |  | $ | 450 |  | (b)(c) | 2024
June 2019 |  | NEP OpCo senior unsecured notes |  | 4.25% |  | $ | 700 |  | (c) | 2024
September 2019 |  | NEP OpCo senior unsecured notes |  | 3.875% |  | $ | 500 |  |  | 2026
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(a) | Variable rate is based on an underlying index plus a margin.
(b) | Approximately $214 million of the funds drawn on the revolving credit facility was used to repay in full the outstanding indebtedness of certain projects under their respective limited-recourse financing agreements. During the three and nine months ended September 30, 2019, approximately $6 million of debt issuance costs were amortized related to the repayment of the project debt.
(c) | In July 2019, the $450 million outstanding balance under the revolving credit facility was repaid with proceeds from the issuance of the June senior unsecured notes. See additional discussion below.
On May 3, 2019, NEP OpCo and its direct subsidiary (loan parties) entered into an amendment of their existing revolving credit facility. The amendments to the revolving credit facility include, among other things, the following:
• | an increase in the revolving credit facility size from $750 million to $1,250 million,
•an extension of the maturity from October 2022 to February 2024, and •a reduction, at certain levels, of the applicable margin payable over the applicable interest rate. On June 27, 2019, NEP OpCo issued $700 million in aggregate principal amount of 4.25% senior unsecured notes due July 2024 (the June 2019 notes). The June 2019 notes are unsecured obligations of NEP OpCo and are absolutely and unconditionally guaranteed, on a senior unsecured basis, by NEP and a subsidiary of NEP OpCo. At any time prior to April 15, 2024, NEP OpCo may redeem some or all of the June 2019 notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus a make-whole premium and accrued and unpaid interest. On or after April 15, 2024, NEP OpCo may redeem some or all of the June 2019 notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest. On September 23, 2019, NEP OpCo issued $500 million in aggregate principal amount of 3.875% senior unsecured notes due October 2026 (the September 2019 notes). The September 2019 notes are unsecured obligations of NEP OpCo and are absolutely and unconditionally guaranteed, on a senior unsecured basis, by NEP and a subsidiary of NEP OpCo. At any time prior to July 15, 2026, NEP OpCo may redeem some or all of the September 2019 notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus a make-whole premium and accrued and unpaid interest. On or after July 15, 2026, NEP OpCo may redeem some or all of the September 2019 notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest. During the nine months ended September 30, 2019, approximately $236 million and $39 million principal amount of the Genesis HoldCo notes and the Genesis OpCo debt, respectively, were purchased. See Note 11 - PG&E Bankruptcy. On September 29, 2019, the Meade purchaser and Meade Pipeline Investment Holdings, LLC (Meade Holdings) entered into a credit agreement to finance a portion of the Meade acquisition and the expansion (see Note 1). Meade Holdings is an indirect subsidiary of NEP and the direct parent of the Meade purchaser. The credit agreement provides up to $918 million under three limited-recourse senior secured variable rate term loans (term loans) maturing in 2026. NEP expects to borrow, subject to the conditions specified in the credit agreement, approximately $820 million simultaneously with the closing of the Meade acquisition and the remaining amount available under the credit agreement regularly through the completion of the expansion. Interest on each of the term loans is based on an index plus a specified margin applicable to each such term loan. Under the credit agreement, the Meade purchaser is required to hedge against interest rate movements with respect to the interest payments on the principal amounts of the term loans. The term loans are secured by all of the assets of, and the equity interests in, the Meade purchaser and its subsidiaries. The credit agreement contains default and related acceleration provisions relating to the failure to make required payments or to observe other covenants in the credit agreement and related documents. All borrowings under the term loans are guaranteed by Meade Holdings and by the subsidiaries of the Meade purchaser. 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, 2019, NEP and its subsidiaries were in compliance with all financial debt covenants under their financings except as discussed in Note 11 - PG&E Bankruptcy. Equity - On October 21, 2019, the board of directors of NEP authorized a distribution of $0.5175 per common unit payable on November 14, 2019 to its common unitholders of record on November 6, 2019. On July 19, 2019, NEP converted approximately 4.67 million Series A convertible preferred units into NEP common units on a one-for-one basis. On June 11, 2019, NEP issued and sold 100% of the noncontrolling Class B membership interest in NEP Renewables II, LLC (NEP Renewables II) for approximately $900 million, under a membership interest purchase agreement dated as of March 4, 2019 between NEP, two of its indirect subsidiaries, NEP Renewables Holdings II, LLC (NEP Renewables Holdings II) and NEP Renewables II, and a third-party investor (NEP Renewables II investor). NEP Renewables Holdings II retained 100% of the Class A membership interest in NEP Renewables II, which includes the ownership interests acquired in the June 2019 acquisition described in Note 1 as well as 100% of the membership interests in entities that own: (1) Perrin Ranch Wind Energy Center, an approximately 99 MW wind generation facility located in Arizona; (2) Tuscola Bay Wind Energy Center, a 120 MW wind generation facility located in Michigan; (3) Ashtabula Wind III Energy Center, an approximately 62 MW wind generation facility located in North Dakota; and (4) Stateline Wind Energy Center, a 300 MW wind generation facility located in Oregon and Washington. NEP Renewables Holdings II retained a controlling interest in NEP Renewables II and therefore NEP presents the Class B interest as noncontrolling interests (see Note 10 - Noncontrolling Interests). Noncontrolling interests represents the portion of net assets in consolidated entities that are not owned by NEP and are reported as a component of equity in NEP’s consolidated balance sheet. NEP has determined the allocation of economics between NEP Renewables Holdings II and the NEP Renewables II investor should not follow the ownership percentages for NEP Renewables II but rather the HLBV method based on the governing provisions in the related limited liability company agreement. Under the HLBV method, the amounts of income and loss attributable to the noncontrolling interests reflects changes in the amount the owners would receive at each balance sheet date under the liquidation provisions, assuming the net assets of these entities were liquidated at the recorded amounts, after taking into account any capital transactions, such as contributions and distributions, between the entity and the owners. Under the amended and restated limited liability company agreement for NEP Renewables II (the LLC agreement), NEP, through its indirect ownership of NEP Renewables Holdings II, will receive approximately 95% of NEP Renewables II’s cash distributions for the first six years after closing, and the NEP Renewables II investor will receive 5%. From the third and one-half to the sixth anniversary of the closing, NEP has the option (the buyout right), subject to certain limitations and extensions, to periodically purchase the NEP Renewables II investor’s Class B membership interest in NEP Renewables II at a buyout price that implies a fixed pre-tax annual return of approximately 8.3% to the NEP Renewables II investor (inclusive of all prior distributions). If exercised, NEP has the right to pay at least 70% of the buyout price in NEP non-voting common units, issued at the then-current market price of NEP common units, with the balance paid in cash, subject to limitations as described in the LLC agreement. After June 11, 2025, if NEP has not exercised its entire buyout right, or after December 11, 2023, if certain minimum buyouts have not occurred, the NEP Renewables II investor’s allocation of distributable cash flow from the portfolio for the portion of the Class B membership interest that the NEP Renewables II investor still owns would increase to 99%. The NEP Renewables II investor has certain rights, beginning January 1, 2025, to require NEP, under certain circumstances, to initiate underwritten offerings for the units that may be issuable if NEP exercises the buyout right. Following any exercise of the buyout right, the NEP non-voting common units will have, among other terms, the right to receive pro rata quarterly cash distributions and the right to convert, subject to certain limitations, the NEP non-voting common units into NEP common units on a one-for-one basis. On September 29, 2019, NEP, NextEra Energy Partners Pipelines Holdings, LLC (NEP Pipelines Holdings) and NextEra Energy Partners Pipelines, LLC (NEP Pipelines) entered into a membership interest purchase agreement (membership purchase agreement) with a third-party investor (the NEP Pipelines Class B purchaser) for the purpose of financing a portion of the acquisition of Meade (see Note 1). The NEP Pipelines Class B purchaser has committed to pay $168 million to NEP Pipelines for 100% of the noncontrolling Class B interests in NEP Pipelines, subject to conditions specified in the membership purchase agreement. NEP Pipelines Holdings will hold 100% of the Class A interests and NEP will consolidate NEP Pipelines which will be considered a VIE because the NEP Pipelines Class B purchaser does not have substantive rights over the significant activities of Meade. Under the amended and restated limited liability company agreement of NEP Pipelines that will be entered into at closing, NEP, through its indirect ownership of NEP Pipelines Holdings, will receive approximately 99% of NEP Pipelines' cash distributions for the first six years after closing, and the NEP Pipelines Class B purchaser will receive approximately 1%. From the third and one half to the sixth and one half anniversary of the closing, NEP has the option (the NEP Pipelines buyout right), subject to certain limitations, to purchase the NEP Pipelines Class B purchaser’s interest in NEP Pipelines at a buyout price that implies a fixed pre-tax annual levered return of approximately 11% to the NEP Pipelines Class B purchaser (inclusive of all prior distributions). If exercised, subject to certain terms and conditions, NEP has the right to pay up to 100% of the buyout price in NEP non-voting common units, issued at the then-current market price of NEP common units. Following the sixth anniversary after closing, if NEP has not exercised its entire buyout right, or following the fifth anniversary after closing if certain minimum buyouts have not occurred, the NEP Pipelines Class B purchaser’s allocation of distributable cash flow from the portfolio for the portion of the Class B membership interests that have not been purchased by NEP would increase to 99%. NEP will give the NEP Pipelines Class B purchaser, under a registration rights agreement to be entered into at closing, certain rights to require NEP to file a shelf registration for the common units that are issuable if NEP exercises the buyout right. Earnings Per Unit - Diluted earnings per unit are based on the weighted-average number of common units and potential common units outstanding during the period, including the dilutive effect of the convertible notes and preferred units. The dilutive effect of the convertible notes and preferred units is computed using the if-converted method. Due to the net losses incurred during the three and nine months ended September 30, 2019, the weighted-average number of common units issuable pursuant to the convertible notes and preferred units totaling approximately 15.9 million and 18.4 million, respectively, were not included in the calculation of diluted earnings per unit due to their antidilutive effect. The reconciliation of NEP's basic and diluted earnings per unit for the three and nine months ended September 30, 2018 is as follows:
| Three Months Ended September 30, 2018 |  | Nine Months Ended September 30, 2018
| (millions, except per unit amounts)
Numerator: |  |  |
Net income attributable to NEP – basic | $ | 33 |  |  | $ | 189 |
Adjustments for convertible notes and preferred units | 10 |  |  | 52 |
Net income attributable to NEP – assuming dilution | $ | 43 |  |  | $ | 241 |
Denominator: |  |  |
Weighted-average number of common units outstanding – basic | 54.9 |  |  | 54.5 |
Convertible notes and preferred units | 19.7 |  |  | 19.7 |
Weighted-average number of common units outstanding – assuming dilution | 74.6 |  |  | 74.2 |
Earnings per unit attributable to NEP: |  |  |
Basic | $ | 0.60 |  |  | $ | 3.47 |
Assuming dilution | $ | 0.58 |  |  | $ | 3.25 |

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