Acquisitions

9 Months Ended

Sep. 30, 2023

Acquisitions

In September 2022, an indirect subsidiary of NEP acquired from NEER interests (September 2022 acquisition) in Sunlight Renewables Holdings, LLC (Sunlight Renewables Holdings) which represent an indirect 67% controlling ownership interest in a battery storage facility in California with storage capacity of 230 MW.

In December 2022, an indirect subsidiary of NEP acquired from subsidiaries of NEER ownership interests (December 2022 acquisition) in a portfolio of wind and solar-plus-storage generation facilities with a combined generating capacity totaling approximately 1,673 MW and 65 MW of storage capacity located in various states across the U.S. In March 2023, upon regulatory approvals and the achievement of commercial operations of the facility, Eight Point Wind (Eight Point), an approximately 111 MW wind generation facility in New York, was transferred to Emerald Breeze Holdings, LLC (Emerald Breeze), which was part of the December 2022 acquisition. In March 2023, NEP sold differential membership interests in Eight Point to third-party investors for proceeds of approximately $92 million. See Note 6 and Note 8 – Class B Noncontrolling Interests. In July 2023, Yellow Pine Solar, a 125 MW solar generation and 65 MW storage facility in Nevada, which was part of the December 2022 acquisition, achieved commercial operations.

In June 2023, an indirect subsidiary of NEP acquired from indirect subsidiaries of NEER ownership interests in a portfolio of wind and solar generation facilities with a combined generating capacity totaling approximately 688 MW (2023 acquisition) for cash consideration of approximately $566 million, plus working capital of $32 million and the assumption of the portfolio’s existing debt and related interest rate swaps of approximately $141 million at time of closing. The acquired portfolio also includes noncontrolling interests related to differential membership investors of approximately $165 million at time of closing. The acquisition included the following assets:

•Montezuma II Wind, an approximately 78 MW wind generation facility located in California;

•Chaves County Solar, an approximately 70 MW solar generation facility located in New Mexico;

•Live Oak Solar, an approximately 51 MW solar generation facility located in Georgia;

•River Bend Solar, an approximately 75 MW solar generation facility located in Alabama;

•Casa Mesa Wind, an approximately 51 MW wind generation facility located in New Mexico;

•New Mexico Wind, an approximately 204 MW wind generation facility located in New Mexico;

•Langdon I, an approximately 118 MW wind generation facility located in North Dakota; and

•Langdon II, an approximately 41 MW wind generation facility located in North Dakota.

Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed, including noncontrolling interests, 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 following table summarizes the final amounts recognized by NEP for the estimated fair value of assets acquired and liabilities assumed in the 2023 acquisition:


	(millions)
Total consideration transferred	$	598
Identifiable assets acquired and liabilities assumed
Cash	$	15
Accounts receivable, inventory and prepaid expenses	17
Current derivative assets	4
Property, plant and equipment – net	764
Intangible assets – PPAs – net	141
Goodwill	21
Noncurrent derivative assets	8
Noncurrent other assets	5
Accounts payable, accrued expenses and current other liabilities	(5)
Long-term debt	(153)
Asset retirement obligation	(12)
Intangible liabilities – PPAs – net	(37)
Noncurrent other liabilities	(5)
Noncontrolling interest	(165)
Total net identifiable assets, at fair value	$	598

NEP incurred approximately $3 million in acquisition-related costs during the nine months ended September 30, 2023 which are reflected as operations and maintenance in the condensed consolidated statements of income.

Supplemental Unaudited Pro forma Results of Operations

NEP’s pro forma results of operations in the combined entity had the 2023 acquisition been completed on January 1, 2022 are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(millions)
Unaudited pro forma results of operations:
Pro forma revenues	$	367	$	324	$	1,059	$	1,010
Pro forma operating income	$	73	$	59	$	159	$	249
Pro forma net income	$	132	$	243	$	77	$	1,144
Pro forma net income attributable to NEP	$	53	$	82	$	98	$	455

The unaudited pro forma consolidated results of operations include adjustments to:

•reflect the historical results of the business acquired beginning on January 1, 2022 assuming consistent operating performance over all periods;

•reflect the estimated depreciation and amortization expense based on the estimated fair value of property, plant and equipment – net, intangible assets – PPAs – net and intangible liabilities – PPAs – net;

•reflect assumed interest expense related to funding the acquisition; and

•reflect related income tax effects.

The unaudited pro forma information is not necessarily indicative of the results of operations that would have occurred had the transaction been made at the beginning of the periods presented or the future results of the consolidated operations.