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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q
FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019March 31, 2020

OR

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
1-36518NEXTERA ENERGY PARTNERS, LP30-0818558



700 Universe Boulevard
Juno Beach, Florida 33408
(561) 694-4000

Juno Beach, Florida33408
(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 classTrading Symbol
Name of exchange

on which registered
Common unitsNEPNew 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 June 30, 2019:  56,149,912March 31, 2020:  65,529,364




DEFINITIONS

Acronyms and defined terms used in the text include the following:
TermMeaning
20182019 Form 10-KNEP's Annual Report on Form 10-K for the year ended December 31, 20182019
AOCIaccumulated other comprehensive income (loss)
ASAadministrative services agreement
BLMU.S. Bureau of Land Management
Canadian HoldingsNextEra Energy Canada Partners Holdings, ULC and subsidiaries
CITCconvertible investment tax credit
CODcommercial operation date
CSCS agreementamended and restated cash sweep and credit support agreement
FITFeed-in-Tariff
Genesis HoldCoGenesis Solar Funding, LLC
HLBVhypothetical liquidation at book value
IDR feecertain 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
IPPindependent power producer
limited partner interest in NEP OpColimited partner interest in NEP OpCo's common units
Management's DiscussionItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
March 2019 Form 10-QMSANEP's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019
MSAamended and restated management services agreement among NEP, NEE Management, NEP OpCo and NEP OpCo GP
MWmegawatt(s)
NEENextEra Energy, Inc.
NEECHNextEra Energy Capital Holdings, Inc.
NEE EquityNextEra Energy Equity Partners, LP
NEE ManagementNextEra Energy Management Partners, LP
NEERNextEra Energy Resources, LLC
NEPNextEra Energy Partners, LP
NEP GPNextEra Energy Partners GP, Inc.
NEP OpCoNextEra Energy Operating Partners, LP
NEP OpCo GPNextEra Energy Operating Partners GP, LLC
NOLs
NEP PipelinesNextEra Energy Partners Pipelines, LLC
NEP RenewablesNEP Renewables, LLC
NEP Renewables IINEP Renewables II, LLC
NOLsnet operating losses
Note __Note __ to condensed consolidated financial statements
O&Moperations and maintenance
PemexPetróleos Mexicanos
PPApower purchase agreement which could include contracts under a FIT or RESOP
preferred unitsSeries A convertible preferred units representing limited partner interests in NEP
RESOPRenewable Energy Standard Offer Program
SEC
SECU.S. Securities and Exchange Commission
STX MidstreamSouth Texas Midstream, LLC
Texas pipelinesnatural gas pipeline assets located in Texas
Texas pipelines acquisitionacquisition of NET Holdings Management, LLC (the Texas pipeline business)
Texas pipeline entitiesthe subsidiaries of NEP that directly own the Texas pipelines
U.S.United States of America
U.S. Project Entitiesproject entities located within the U.S.
VIEvariable 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 theNEE'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.
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TABLE OF CONTENTS


Page No.
Page No.
 


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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 portfolio includes renewable energy projects that have a limited operating history. Such projects may not perform as expected.
NEP's ability to make cash distributions to its unitholders is affected by wind and solar conditions at its renewable energy projects.
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.
Operation and maintenance of renewable energy projects involve significant risks that could result in unplanned power outages, reduced output, personal injury or loss of life.
Natural gas gathering and transmission activities involve numerous risks that may result in accidents or otherwise affect the Texas pipelines’NEP's pipeline operations.
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 expansion of natural gas pipelines in its portfolioand the repowering of wind projects that will require up-front capital expenditures and expose NEP to project development risks.
NEP's ability to maximize the productivity of the Texas pipeline business and to complete potential pipeline expansion projects is dependent on the continued availability of natural gas production in the Texas pipelines’ areas of operation.
Terrorist acts, cyber-attackscyberattacks 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 insure against all potential risks and it may become subject to higher insurance premiums.
Warranties provided by the suppliers of equipment for NEP's projects may be limited by the ability of a supplier to satisfy its warranty obligations, or by the terms of the warranty, so the warranties may be insufficient to compensate NEP for its losses.
Supplier concentration at certain of NEP's projects may expose it to significant credit or performance risks.
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 the Texasits 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.
A change in the jurisdictional characterization of some of the Texas pipeline entities' assets, or a change in law or regulatory policy, could result in increased regulation of these assets, which could have a material adverse effect on NEP's business, financial condition, results of operations and ability to make cash distributions to its unitholders.
NEP may incur significant costs and liabilities as a result of pipeline integrity management program testing and any necessary pipeline repair or preventative or remedial measures.
The Texas pipelines’ operations could incur significant costs if the Pipeline and Hazardous Materials Safety Administration or the Railroad Commission of Texas adopts more stringent 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 non-U.S. jurisdictions.Mexico.
NEP is subject to risks associated with its ownership or acquisition of projects or pipelines that remainare 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.
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PG&E, which contributes a significant portion of NEP's revenues, has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Any rejection by PG&E of a material portion of NEP's PPAs with it or any material reduction in the prices NEP charges PG&E under those PPAs that occurs in connection with PG&E's Chapter 11 proceedings or any events of default under the financing agreements of NEP's solar facilities that provide power and renewable energy credits to PG&E under these PPAs as a result of PG&E's reorganization activities, could have a material adverse effect on NEP's results of operations, financial condition or business.
NEP may not be able to extend, renew or replace expiring or terminated PPAs, and 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.
NEP OpCo's partnership agreement requires that it distribute its available cash, which could limit NEP's ability to grow and make acquisitions.
Lower prices for other fuel sources may reduce the demand for wind and solar energy.
Reductions in demand for natural gas in the United States or Mexico and low market prices of natural gas could materially adversely affect the Texas pipelines’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.
Renewable energy procurement is subject to U.S. state regulations, with relatively irregular, infrequent and often competitive procurement windows.
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.
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.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 exercises significanthas 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.
NEP may not be able to consummate future acquisitions.
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 specified conditions.
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
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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.
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 and preferred units currently cannot remove NEP GP without NEE's consent.
NEE's interest in NEP GP and the control of NEP GP may be transferred to a third party without unitholder consent.
The IDR fee may be assigned 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.
Discretion in establishing cash reserves by NEP OpCo GP may reduce the amount of cash distributions to unitholders.
NEP OpCo can borrow money to pay distributions, which would reduce the amount of credit available to operate NEP's business.
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 price of NEP's common units may fluctuate significantly and unitholders could lose all or part of their investment.
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.
Provisions in NEP's partnership agreement may discourage or delay an acquisition of NEP that NEP unitholders may consider favorable, which could decrease the value of NEP's common units, and could make it more difficult for NEP unitholders to change the board.
The board, a majority of which may be affiliated with NEE, decides whether to retain separate counsel, accountants or others to perform services for NEP.
The New York Stock Exchange does not require a publicly traded limited partnership like NEP to comply with certain of its corporate governance requirements.
The issuance of preferred units or other securities convertible into 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.
.
The preferred units have rights, preferences and privileges that are not held by, and are preferential to the rights of, holders of the common units.

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.
A valuation allowance may be required for NEP's deferred tax assets.
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 20182019 Form 10-K and Part II, Item 1A. Risk Factors in the March 2019this Form 10-Q and investors should refer to those sections of the 20182019 Form 10-K and the March 2019this Form 10-Q. 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.
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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 
 June 30,
 Six Months Ended 
 June 30,
 2019 
2018(a)
 2019 
2018(a)
OPERATING REVENUES       
Renewable energy sales$170
 $169
 $294
 $325
Texas pipelines service revenues49
 56
 103
 112
Total operating revenues(b)
219
 225
 397
 437
OPERATING EXPENSES (INCOME)       
Operations and maintenance(c)
82
 63
 157
 125
Depreciation and amortization63
 49
 124
 102
Gain on disposal of Canadian Holdings
 (153) 
 (153)
Taxes other than income taxes and other7
 5
 13
 11
Total operating expenses (income) - net152
 (36) 294
 85
OPERATING INCOME67
 261
 103
 352
OTHER INCOME (DEDUCTIONS)       
Interest expense(207) (21) (362) (124)
Equity in earnings of equity method investees9
 13
 8
 16
Equity in earnings (losses) of non-economic ownership interests(4) 7
 (11) 13
Other - net1
 11
 2
 13
Total other income (deductions) - net(201) 10
 (363) (82)
INCOME (LOSS) BEFORE INCOME TAXES(134) 271
 (260) 270
INCOME TAX BENEFIT(10) (21) (16) (2)
NET INCOME (LOSS)(124) 292
 (244) 272
Net income attributable to preferred distributions(6) (6) (12) (12)
Net loss (income) attributable to noncontrolling interests102
 (204) 207
 (103)
NET INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$(28) $82
 $(49) $157
        
Weighted average number of common units outstanding - basic56.2

54.3
 56.1
 54.3
Weighted average number of common units outstanding - assuming dilution75.8

74.0
 75.8
 74.0
Earnings (loss) per common unit attributable to NextEra Energy Partners, LP - basic$(0.49)
$1.51
 $(0.88) $2.88
Earnings (loss) per common unit attributable to NextEra Energy Partners, LP - assuming dilution$(0.49)
$1.42
 $(0.88) $2.67
Three Months Ended 
 March 31,
20202019
OPERATING REVENUES
Renewable energy sales$157  $123  
Texas pipelines service revenues55  54  
Total operating revenues(a)
212  177  
OPERATING EXPENSES
Operations and maintenance(b)
92  76  
Depreciation and amortization66  61  
Taxes other than income taxes and other  
Total operating expenses - net163  143  
OPERATING INCOME49  34  
OTHER INCOME (DEDUCTIONS)
Interest expense(839) (155) 
Equity in earnings of equity method investees18  —  
Equity in losses of non-economic ownership interests(23) (7) 
Total other deductions - net(844) (162) 
LOSS BEFORE INCOME TAXES(795) (128) 
INCOME TAX BENEFIT(75) (7) 
NET LOSS(720) (121) 
Net income attributable to preferred distributions(2) (6) 
Net loss attributable to noncontrolling interests500  105  
NET LOSS ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$(222) $(22) 
Loss per common unit attributable to NextEra Energy Partners, LP - basic$(3.39) $(0.38) 
Loss per common unit attributable to NextEra Energy Partners, LP - assuming dilution$(3.39) $(0.38) 
____________________
(a)Prior-period financial information has been retrospectively adjusted to include the adoption of an accounting standards update related to leases.
(b)
(a) Includes related party revenues of $4 million and $1 million for the three months ended March 31, 2020 and $1 million for the three months ended June 30, 2019, and 2018, respectively, and $2 million and $2 million for the six months ended June 30, 2019 and 2018, respectively.
(c)Includes O&M expenses related to renewable energy projects of $47 million and $32 million for the three months ended June 30, 2019 and 2018, respectively, and $85 million and $62 million for the six months ended June 30, 2019 and 2018, respectively. Includes O&M expenses related to the Texas pipelines of $8 million and $11 million for the three months ended June 30, 2019 and 2018, respectively, and $21 million and $22 million for the six months ended June 30, 2019 and 2018, respectively. Total O&M expenses presented include related party amounts of $24 million and $24 million for the three months ended June 30, 2019 and 2018, respectively, and $48 million and $48 million for the six months ended June 30, 2019 and 2018, respectively.


(b) Includes O&M expenses related to renewable energy projects of $50 million and $38 million for the three months ended March 31, 2020 and 2019, respectively. Includes O&M expenses related to the Texas pipelines of $11 million and $13 million for the three months ended March 31, 2020 and 2019, respectively. Total O&M expenses presented include related party amounts of $32 million and $24 million for the three months ended March 31, 2020 and 2019, respectively.


















This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 20182019 Form 10-K.
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NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(millions)
(unaudited)

Three Months Ended 
 March 31,
20202019
NET LOSS$(720) $(121) 
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Reclassification from AOCI to net income (net of $0 and $0 tax benefit, respectively)—  (6) 
Other comprehensive income related to equity method investees (net of $0 and $0 tax expense, respectively)—   
Total other comprehensive loss, net of tax—  (5) 
COMPREHENSIVE LOSS(720) (126) 
Comprehensive income attributable to preferred distributions(2) (6) 
Comprehensive loss attributable to noncontrolling interests500  108  
COMPREHENSIVE LOSS ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$(222) $(24) 




 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 
2018(a)
 2019 
2018(a)
NET INCOME (LOSS)$(124) $292
 $(244) $272
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX       
Reclassification from AOCI to net income (net of $0, $0 tax expense, $0 tax benefit and $1 tax expense, respectively)
 1
 (6) 2
Net unrealized losses on foreign currency translation (net of $0, $0 tax benefit, $0 and $1 tax benefit, respectively)
 (2) 
 (6)
Other comprehensive income (loss) related to equity method investees (net of $0, $0 tax benefit, $0 tax expense and $0, respectively)
 (4) 1
 
Total other comprehensive income (loss), net of tax
 (5) (5) (4)
Impact of disposal of Canadian Holdings (net of $0, $3 tax expense, $0 and $3 tax expense, respectively)
 107
 
 107
COMPREHENSIVE INCOME (LOSS)(124) 394
 (249) 375
Comprehensive income attributable to preferred distributions(6) (6) (12) (12)
Comprehensive loss (income) attributable to noncontrolling interests102
 (305) 210
 (206)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$(28) $83
 $(51) $157

____________________
(a)Prior-period financial information has been retrospectively adjusted to include the adoption of an accounting standards update related to leases.



































This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 20182019 Form 10-K.
8


NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(millions)
(unaudited)

 June 30,
2019
 December 31, 2018
ASSETS   
Current assets:   
Cash and cash equivalents$163
 $147
Accounts receivable101
 63
Other receivables164
 17
Due from related parties738
 68
Restricted cash4
 8
Other current assets29
 37
Total current assets1,199
 340
Non-current assets:   
Property, plant and equipment - net7,071
 6,770
Deferred income taxes123
 108
Investments in equity method investees319
 214
Investments in non-economic ownership interests3
 20
Intangible assets – customer relationships - net635
 644
Intangible assets – PPAs - net1,676
 617
Goodwill598
 584
Other non-current assets144
 108
Total non-current assets10,569
 9,065
TOTAL ASSETS$11,768
 $9,405
LIABILITIES AND EQUITY   
Current liabilities:   
Accounts payable and accrued expenses$111
 $10
Due to related parties59
 45
Current portion of long-term debt599
 707
Accrued interest31
 31
Accrued property taxes15
 19
Other current liabilities57
 47
Total current liabilities872
 859
Non-current liabilities:   
Long-term debt3,676
 2,728
Deferred income taxes10
 12
Asset retirement obligation135
 95
Derivatives371
 104
Non-current due to related party57
 34
Other non-current liabilities147
 35
Total non-current liabilities4,396
 3,008
TOTAL LIABILITIES5,268
 3,867
COMMITMENTS AND CONTINGENCIES

 

EQUITY   
Preferred units (14.0 and 14.0 units issued and outstanding, respectively)548
 548
Common units (56.2 and 56.1 units issued and outstanding, respectively)1,704
 1,804
Accumulated other comprehensive loss(8) (6)
Noncontrolling interests4,256
 3,192
TOTAL EQUITY6,500
 5,538
TOTAL LIABILITIES AND EQUITY$11,768
 $9,405

March 31,
2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents$115  $128  
Accounts receivable90  79  
Other receivables160  173  
Due from related parties68  17  
Other current assets39  36  
Total current assets472  433  
Non-current assets:
Property, plant and equipment - net6,972  6,970  
Intangible assets – PPAs - net1,629  1,655  
Intangible assets – customer relationships - net623  627  
Goodwill609  609  
Investments in equity method investees1,640  1,653  
Deferred income taxes244  172  
Other non-current assets132  137  
Total non-current assets11,849  11,823  
TOTAL ASSETS$12,321  $12,256  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses$144  $122  
Due to related parties62  58  
Current portion of long-term debt13  12  
Accrued interest24  40  
Accrued property taxes11  21  
Other current liabilities50  48  
Total current liabilities304  301  
Non-current liabilities:
Long-term debt4,179  4,132  
Asset retirement obligation141  139  
Derivatives1,199  417  
Non-current due to related party34  34  
Other non-current liabilities185  167  
Total non-current liabilities5,738  4,889  
TOTAL LIABILITIES6,042  5,190
COMMITMENTS AND CONTINGENCIES
EQUITY
Preferred units (4.7 and 4.7 units issued and outstanding, respectively)183  183  
Common units (65.5 and 65.5 units issued and outstanding, respectively)1,750  2,008  
Accumulated other comprehensive loss(8) (8) 
Noncontrolling interests4,354  4,883  
TOTAL EQUITY6,279  7,066  
TOTAL LIABILITIES AND EQUITY$12,321  $12,256  






This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 20182019 Form 10-K.
9


NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions)
(unaudited)
Three Months Ended March 31,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(720) $(121) 
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization66  61  
Intangible amortization - PPAs26   
Change in value of derivative contracts795  115  
Deferred income taxes(75) (7) 
Equity in earnings of equity method investees, net of distributions received  
Equity in losses of non-economic ownership interests23   
Other - net  
Changes in operating assets and liabilities:
Other current assets (13) 
Other non-current assets—  (3) 
Other current liabilities(31) (36) 
Other non-current liabilities(1) —  
Net cash provided by operating activities99  19  
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures and other investments(52) (3) 
Payments from (to) related parties under CSCS agreement - net(48) 24  
Distributions from equity method investee —  
    Other —  
Net cash provided by (used in) investing activities(88) 21  
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common units - net  
Issuances of long-term debt57  —  
Retirements of long-term debt(11) (24) 
Debt issuance costs(1) —  
Partner contributions  
Partner distributions(97) (74) 
Preferred unit distributions(2) (6) 
Proceeds from differential membership investors46  32  
Payments to differential membership investors(6) (8) 
    Payments to Class B noncontrolling interests investors(10) (5) 
Change in amounts due to related parties(1) 19  
Net cash used in financing activities(20) (62) 
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(9) (22) 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD132  166  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD$123  $144  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Partner noncash distributions$—  $ 
Accrued property additions$31  $—  
    Accrued preferred distributions$ $ 
 Six Months Ended June 30,
 2019 
2018(a)
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income (loss)$(244) $272
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization124
 102
Intangible amortization - PPA21
 
Change in value of derivative contracts277
 10
Deferred income taxes(16) 7
Equity in earnings of equity method investees, net of distributions received(8) 2
Equity in losses (earnings) of non-economic ownership interests11
 (13)
Gain on disposal of Canadian Holdings
 (153)
Other - net10
 (4)
Changes in operating assets and liabilities:   
Other current assets(20) (15)
Other non-current assets(3) 2
Other current liabilities(20) (27)
Other non-current liabilities(2) 
Net cash provided by operating activities130
 183
CASH FLOWS FROM INVESTING ACTIVITIES   
Acquisition of membership interests in subsidiaries - net(1,028) 
Capital expenditures(6) (7)
Proceeds from the sale of Canadian Holdings - net
 517
Payments from (to) related parties under CSCS agreement - net(671) (50)
Other4
 
Net cash provided by (used in) investing activities(1,701) 460
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from issuance of common units - net3
 
Issuances of long-term debt1,150
 
Retirements of long-term debt(310) (55)
Deferred financing costs(11) 
Partner contributions2
 31
Partner distributions(158) (134)
Preferred unit distributions(12) (9)
Proceeds from differential membership investors31
 28
Payments to differential membership investors(16) (11)
Payments to Class B noncontrolling interests investors(8) 
Proceeds on sale of Class B noncontrolling interest - net893
 
Change in amounts due to related parties19
 (1)
Net cash provided by (used in) financing activities1,583
 (151)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 (2)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH12
 490
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD166
 198
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD$178
 $688
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:   
Partner noncash distributions$3
 $17
Partner noncash contributions$11
 $
Change in noncash investments in equity method investees - net$6
 $5
Accrued preferred distributions$6
 $6

_________________________
(a)Prior-period financial information has been retrospectively adjusted to include the adoption of an accounting standards update related to leases.










This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 20182019 Form 10-K.
10


NEXTERA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(millions)
(unaudited)


Preferred UnitsCommon UnitsAccumulated
Other
UnitsAmountUnitsAmountComprehensive
Loss
Noncontrolling
Interests
Total
Equity
Balances, December 31, 2019Balances, December 31, 20194.7  $183  65.5  $2,008  $(8) $4,883  $7,066  
Net income (loss)Net income (loss)—   —  (222) —  (500) (720) 
Related party contributionsRelated party contributions—  —  —  —  —    
Related party distributionsRelated party distributions—  —  —  —  —  (62) (62) 
Other differential membership investment activityOther differential membership investment activity—  —  —  —  —  40  40  
Payments to Class B noncontrolling interests investorsPayments to Class B noncontrolling interests investors—  —  —  —  —  (10) (10) 
Distributions to unitholders(a)
Distributions to unitholders(a)
—  (2) —  (35) —  —  (37) 
OtherOther—  —  —  (1) —  —  (1) 
Preferred Units Common Units      
Units Amount Units Amount Accumulated
Other
Comprehensive
Loss
 Non-controlling
Interests
 Total
Equity
Balances, December 31, 201814.0
 $548
 56.1
 $1,804
 $(6) $3,192
 $5,538
Issuance of common units - net
 
 0.1
 1


 
 1
Net income (loss)
 6
 
 (22) 
 (105) (121)
Other comprehensive loss
 
 
 
 (2) (3) (5)
Related party contributions
 
 
 
 
 1
 1
Related party distributions
 
 
 
 
 (51) (51)
Changes in non-economic ownership interests
 
 
 
 
 (6) (6)
Differential membership interests activity
 
 
 
 
 24
 24
Payments to Class B noncontrolling interests investors
 
 
 
 
 (5) (5)
Distributions to unitholders(a)

 (6) 
 (26) 
 
 (32)
Other
 
 
 
 
 1
 1
Balances, March 31, 201914.0
 548
 56.2
 1,757
 (8) 3,048
 5,345
Issuance of common units - net
 
 
 1
 
 
 1
Acquisition of subsidiaries with noncontrolling ownership interest
 
 
 
 
 472
 472
Net income (loss)
 6
 
 (28) 
 (102) (124)
Related party note receivable
 
 
 
 
 1
 1
Related party contributions
 
 
 
 
 11
 11
Related party distributions
 
 
 
 
 (56) (56)
Differential membership interests activity
 
 
 
 
 (8) (8)
Payments to Class B noncontrolling interests investors
 
 
 
 
 (3) (3)
Distributions to unitholders(a)

 (6) 
 (27) 
 
 (33)
Sale of Class B noncontrolling interest - net
 
 
 
 
 893
 893
Other
 
 
 1
 
 
 1
Balances, June 30, 201914.0
 $548
 56.2
 $1,704
 $(8) $4,256
 $6,500
Balances, March 31, 2020Balances, March 31, 20204.7  $183  65.5  $1,750  $(8) $4,354  $6,279  
_________________________
(a)Distributions per common unit of $0.4825 and $0.4650 were paid during the three months ended June 30, 2019 and March 31, 2019, respectively. At June 30, 2019, $6 million of preferred unit distributions were accrued and are payable in August 2019.
(a) Distributions per common unit of $0.5350 were paid during the three months ended March 31, 2020. At March 31, 2020, $2 million of preferred unit distributions were accrued and are payable in May 2020.
.
 Preferred Units Common Units      
 Units Amount Units 
Amount(b)
 Accumulated
Other
Comprehensive
Income
 
Non-
controlling
Interests
(b)
 
Total
Equity
(b)
Balances, December 31, 201714.0
 $548
 54.3
 $1,641
 $1
 $34
 $2,224
Net income (loss)
 6
 
 74
 
 (99) (19)
Other comprehensive income
 
 
 
 
 1
 1
Related party note receivable
 
 
 
 
 29
 29
Related party distributions
 
 
 
 
 (64) (64)
Changes in non-economic ownership interests
 
 
 
 
 (6) (6)
Differential membership interests activity
 
 
 
 
 23
 23
Distributions to unitholders(a)

 (6) 
 (22) 
 
 (28)
Adoption of accounting standards update
 
 
 9
 
 1,414
 1,423
Balances, March 31, 201814.0
 548
 54.3
 1,702
 1
 1,332
 3,583
Net income
 6
 
 82
 
 204
 292
Other comprehensive loss
 
 
 
 (1) (4) (5)
Related party note receivable
 
 
 
 
 2
 2
Related party distributions
 
 
 
 
 (41) (41)
Changes in non-economic ownership interests
 
 
 
 
 1
 1
Differential membership interests activity
 
 
 
 
 (6) (6)
Distributions to unitholders(a)

 (6) 
 (23) 
 
 (29)
Disposal of Canadian Holdings
 
 
 
 2
 105
 107
Adoption of accounting standards update
 
 
 (2) 
 2
 
Balances, June 30, 201814.0
 $548
 54.3
 $1,759
 $2
 $1,595
 $3,904



.
Preferred UnitsCommon UnitsAccumulated
Other
UnitsAmountUnitsAmountComprehensive
Loss
Noncontrolling
Interests
Total
Equity
Balances, December 31, 201814.0  $548  56.1  $1,804  $(6) $3,192  $5,538  
Issuance of common units - net—  —  0.1   —  —   
Net income (loss)—   —  (22) —  (105) (121) 
Other comprehensive income—  —  —  —  (2) (3) (5) 
Related party contributions—  —  —  —  —    
Related party distributions—  —  —  —  —  (51) (51) 
Changes in non-economic ownership interests—  —  —  —  —  (6) (6) 
Other differential membership investment activity—  —  —  —  —  24  24  
Payments to Class B noncontrolling interests investors—  —  —  —  —  (5) (5) 
Distributions to unitholders(a)
—  (6) —  (26) —  —  (32) 
    Other—  —  —  —  —    
Balances, March 31, 201914.0  $548  56.2  $1,757  $(8) $3,048  $5,345  
_____________________________
(a)Distributions per common unit of $0.4200 and $0.4050 were paid during the three months ended June 30, 2018 and March 31, 2018, respectively.
(b)Prior-period financial information has been retrospectively adjusted to include the adoption of an accounting standards update related to leases.
(a) Distributions per common unit of $0.4650 were paid during the three months ended March 31, 2019.



















This report should be read in conjunction with the Notes herein and the Notes to Consolidated Financial Statements appearing in the 20182019 Form 10-K.
11


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


The accompanying condensed consolidated financial statements should be read in conjunction with the 20182019 Form 10-K. In the opinion of NEP management, all adjustments (consisting of normal recurring accruals) considered necessary for fair financial statement presentation have been made. Certain amounts included in the prior year's condensed consolidated financial statements have been reclassified to conform to the current year's presentation. In addition, certain prior year amounts have been retrospectively adjusted to include the adoption of an accounting standards update related to leases. The results of operations for an interim period generally will not give a true indication of results for the year.

1. Acquisitions
In June 2019, an indirect subsidiary of NEP completed the acquisition from NEER (June 2019 acquisition) of the following:

100% of the membership interests in Ashtabula Wind II, LLC, a project company that owns a 120 MW wind generation facility located in North Dakota;
100% of the membership interests in Garden Wind, LLC, a project company that owns a 150 MW wind generation facility (Story County II) located in Iowa;
100% of the membership interests in White Oak Energy Holdings, LLC, which owns 100% of the membership interests of White Oak Energy LLC, which owns a 150 MW wind generation facility located in Illinois;
100% of the Class C membership interests in Rosmar Holdings, LLC (Rosmar), which represent a 49.99% noncontrolling ownership interest in two2 solar generation facilities, Marshall and Roswell, with a total combined generating capacity of approximately 132 MW located in Minnesota and New Mexico, respectively; and
49.99% of the membership interests, representing a controlling ownership interest, in Silver State South Solar, LLC (Silver State), which indirectly owns a 250 MW solar generation facility located in Nevada.
NEER retained ownership interests in Rosmar and Silver State and remains the managing member of Rosmar. Thus, NEP's interest in Rosmar is reflected within investments in equity method investees on the condensed consolidated balance sheets. NEER's remaining interest in Silver State is reflected within noncontrolling interests on the condensed consolidated balance sheets (see Note 10 - Noncontrolling Interests).
The purchase price included approximately $1,020 million in cash consideration, plus working capital of $12 million (subject to post-closing working capital and other adjustments). Under the acquisition method, the purchase price was allocated to the assets acquired and liabilities assumed on June 11, 2019 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 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.
The following table summarizes the amounts recognized by NEP for the estimated fair value of assets acquired and liabilities assumed in the June 2019 acquisition:
 As of June 11, 2019
 (millions)
Total consideration transferred$1,032
Identifiable assets acquired and liabilities assumed 
Cash$4
Accounts receivable, other receivables and prepaid expenses159
Property, plant and equipment - net400
Intangible assets – PPAs(a)
1,080
Goodwill14
Other non-current assets133
Accounts payable, accrued expenses and other current liabilities(132)
Other non-current liabilities(154)
Noncontrolling interest(472)
Total net identifiable assets, at fair value(b)
$1,032
______________________
(a)Intangible assets - PPAs are amortized into operating revenues on a straight-line basis over the remaining contract terms of the related PPAs. At June 30, 2019, amortization of the intangible assets - PPAs is expected to be approximately $38 million in 2019 and $69 million in each of the next four years.
(b)Includes a right of use asset of approximately $20 million and operating lease liabilities of approximately $21 million primarily related to a land use agreement that conveys exclusive use of the land for one of the acquired projects, which were calculated based on a discount rate of 4.57% based on the incremental borrowing rate and a remaining lease term of approximately 26 years as of the date of acquisition. At June 30, 2019, NEP expects to make fixed lease payments of approximately $2 million annually over the next five years and $25 million thereafter.

NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



The amounts of the revenues, operating income, net income and net income attributable to NEP related to the June 2019 acquisition included in NEP’s consolidated statements of income (loss) for the period from June 11, 2019 through June 30, 2019 were not material.

In December 2018, aNovember 2019, Meade Pipeline Investment, LLC (the Meade purchaser), an indirect subsidiary of NEP, completedacquired all of the acquisition from NEERownership interests in Meade Pipeline Co LLC (Meade) which owns an approximately 39.2% aggregate ownership interest in the Central Penn Line (CPL), a 185-mile natural gas pipeline that operates in Pennsylvania and a 40% ownership interest in an expansion project (the expansion) of NEP Renewables, LLC (NEP Renewables), which indirectly owns ten windthe gas pipeline. NEP's indirect ownership interest in Meade, including Meade's ownership interests in the CPL and one solar generation facilities with a combined generating capacity of approximately 1,388 MW.the expansion, is reflected as investments in equity method investees.

Supplemental Unaudited Pro forma Results of Operations

NEP’s pro forma results of operations, had the acquisition of NEP Renewables been completed on January 1, 2017, are as follows:
 Three Months Ended 
 June 30, 2018
 Six Months Ended 
 June 30, 2018
 (millions)
Unaudited pro forma results of operations:   
Pro forma revenues$258
 $500
Pro forma operating income$269
 $367
Pro forma net income$298
 $269
Pro forma net income attributable to NEP$88
 $211


The unaudited pro forma consolidated results of operations include adjustments to:2. Revenue

reflect the historical results of NEP Renewables beginning on January 1, 2017;
reflect the estimated depreciation and amortization expense based on the estimated fair value of property, plant and equipment - net and the intangible assets - PPAs;
reflect allocations of income to noncontrolling interests related to the financing transaction to fund the acquisition; and
reflect related income tax effects.

The unaudited pro forma informationRevenue is not necessarily indicativerecognized when control of the results of operationspromised goods or services is transferred to customers at an amount that would have occurred hadreflects the transaction been made atconsideration to which the beginning of the periods presented or the future results of the consolidated operations.

2. Revenue

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 June 30, 2019March 31, 2020 is approximately $174$151 million and $50$54 million, for the six months ended June 30, 2019 is $300 million and $103 million, for the three months ended June 30, 2018March 31, 2019 is $153$125 million and $56 million, and for the six months ended June 30, 2018 is $297 million and $110$52 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 PPAs. 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 2020 to 2035. At June 30, 2019,March 31, 2020, NEP expects to record approximately $2.2$2.0 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 2030 to 2046, will vary
12


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



2046, will vary based on the volume of energy delivered. At June 30, 2019,March 31, 2020, NEP expects to record approximately $218$209 million of revenues related to the fixed price components of one PPA through 2039 as the energy is delivered.

3. Income Taxes

Income taxes are calculated for NEP as a single taxpaying corporation for U.S. federal and state income taxes (based on its 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. Prior to the sale of Canadian Holdings in June 2018, NEP's former Canadian subsidiaries were all Canadian taxpayers, and therefore NEP recognized in income all of the Canadian taxes. Net income or loss attributable to noncontrolling interests includes minimal U.S. taxes and NEER's applicable ownership share of Canadian taxes.

The effective tax rate for the three and six months ended June 30,March 31, 2020 and 2019 was approximately 7%9% and 6%5%, respectively, and was primarily affected by taxes attributable to the noncontrolling interests of approximately $105 million and $21 million, and $43 million, respectively. During the three and six months ended June 30, 2018, the effective tax rate was approximately (8)% and (1)%, respectively. During the three and six months ended June 30, 2018, the disposal of Canadian Holdings (see Note 10 - Disposal of Canadian Holdings) resulted in an overall tax benefit of approximately $47 million. The benefit resulted from the removal of the historical Canadian deferred tax liabilities of approximately $69 million offset by U.S. tax expense of $22 million related to the gain. During the six months ended June 30, 2018, NEP recorded an income tax charge of approximately $20 million related to the $231 million adjustment to differential membership interests as a result of the change in federal corporate income taxes due to the Tax Cuts and Jobs Act that became effective January 1, 2018 (see Note 10 - Noncontrolling Interests).


4. Fair Value Measurements

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.

Cash Equivalents and Restricted Cash Equivalents - The fair value of money market funds that are included in cash and cash equivalents, restricted cashother current assets and other non-current assets on the condensed consolidated balance sheets is estimated using a market approach based on current observable market prices.

Interest Rate Contracts - NEP estimates the fair value of its derivatives 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 reported as Level 2 in the fair value hierarchy.

13


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



NEP’s financial assets and liabilities and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:
March 31, 2020December 31, 2019
Level 1Level 2TotalLevel 1Level 2Total
(millions)
Assets:
Cash equivalents$11  $—  $11  $16  $—  $16  
Restricted cash equivalents —   —  —  —  
Interest rate contracts—  54  54  —  99
Total assets$16  $54  $70  $16  $ $25  
Liabilities:
Interest rate contracts$—  $1,268  $1,268  $—  $427  $427  
Total liabilities$—  $1,268  $1,268  $—  $427  $427  
 June 30, 2019 December 31, 2018
 Level 1 Level 2 Total Level 1 Level 2 Total
 (millions)
Assets:           
Cash equivalents$53
 $
 $53
 $71
 $
 $71
Restricted cash equivalents(a)
10
 
 10
 12
 
 12
Interest rate contracts
 5
 5
 
 24
 24
Total assets$63
 $5
 $68
 $83
 $24
 $107
Liabilities:           
Interest rate contracts$
 $379
 $379
 $
 $116
 $116
Total liabilities$
 $379
 $379
 $
 $116
 $116

____________________
(a)At June 30, 2019 and December 31, 2018, approximately $9 million and $9 million, respectively, of restricted cash equivalents are included in other non-current assets on NEP's condensed consolidated balance sheets.

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:
 June 30, 2019 December 31, 2018
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 (millions)
Long-term debt, including current maturities(a)
$4,275
 $4,287
 $3,435
 $3,301
March 31, 2020December 31, 2019
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
(millions)
Long-term debt, including current maturities(a)
$4,192  $4,122  $4,144  $4,235  
____________________
(a)At June 30, 2019 and December 31, 2018, approximately $3,853 million and $2,826 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).

(a)At March 31, 2020 and December 31, 2019, approximately $4,098 million and $4,211 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).

5. Derivative Instruments and Hedging Activity

NEP uses derivative instruments (primarily interest rate swaps) to manage the interest rate cash flow risk associated primarily 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). In general, the commencement and termination dates of the interest rate swap agreements and the related hedging relationship coincide with the corresponding dates of the underlying variable-rate debt instruments. At June 30, 2019March 31, 2020 and December 31, 2018,2019, the combinednet notional amounts of the interest rate contracts were approximately $9,040$7,071 million and $9,256$6,859 million, respectively.

During the sixthree months ended June 30,March 31, 2019, NEP reclassified approximately $6 million from AOCI to interest expense primarily because the related future transactions being hedged were no longer going to occur. At June 30, 2019,March 31, 2020, NEP's AOCI does not include any amounts related to discontinued cash flow hedges. Cash flows from the interest rate swap contracts are reported in cash flows from operating activities in the condensed consolidated statements of cash flows.

Prior to the sale of Canadian Holdings in June 2018, NEP entered into certain foreign currency exchange contracts to economically hedge its cash flows from foreign currency rate fluctuations. During the three and six months ended June 30, 2018, NEP recorded approximately $11 million and $13 million, respectively, of gains related to the foreign currency contracts in other - net in the condensed consolidated statements of income (loss).


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



Fair Value of Derivative Instruments - The tables below present NEP's gross derivative positions, based on the total fair value of each derivative instrument, at June 30, 2019March 31, 2020 and December 31, 2018,2019, as required by disclosure rules, as well as the location of the net derivative positions, based on the expected timing of future payments, on the condensed consolidated balance sheets.
March 31, 2020
Gross BasisNet Basis
AssetsLiabilitiesAssetsLiabilities
(millions)
Interest rate contracts$54  $1,268  $—  $1,214  
Net fair value by balance sheet line item:
Other current assets$—  
Other non-current assets—  
Other current liabilities$15  
Derivatives1,199  
Total derivatives$—  $1,214  
 June 30, 2019
 Gross Basis Net Basis
 Assets Liabilities Assets Liabilities
 (millions)
Interest rate contracts$5
 $379
 $2
 $376
        
Net fair value by balance sheet line item:       
Other current assets    $2
  
Other non-current assets    
  
Other current liabilities      $5
Derivatives      371
Total derivatives    $2
 $376

 December 31, 2018
 Gross Basis Net Basis
 Assets Liabilities Assets Liabilities
 (millions)
Interest rate contracts$24
 $116
 $13
 $105
        
Net fair value by balance sheet line item:       
Other current assets    $7
  
Other non-current assets    6
  
Other current liabilities      $1
Derivatives      104
Total derivatives    $13
 $105

14


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
December 31, 2019
Gross BasisNet Basis
AssetsLiabilitiesAssetsLiabilities
(millions)
Interest rate contracts$ $427  $—  $418  
Net fair value by balance sheet line item:
Other current assets$—  
Other non-current assets—  
Other current liabilities$ 
Derivatives417  
Total derivatives$—  $418  

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 March 31,
20202019
(millions)
Interest rate contracts:
Gains reclassified from AOCI to interest expense$—  $ 
Losses recognized in interest expense$(795) $(118) 
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (millions)
Interest rate contracts: 
Gains (losses) reclassified from AOCI to interest expense$
 $(1) $6
 $(3)
Gains (losses) recognized in interest expense$(160) $33
 $(278) $(19)


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 June 30, 2019March 31, 2020 and December 31, 2018,2019, the aggregate fair value of NEP's derivative instruments with contingent risk features that were in a liability position was approximately $339$1,147 million and $108$420 million, 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 June 30, 2019,March 31, 2020, NEP owned an approximately 35.6%39.2% limited partner interest in NEP OpCo and NEE Equity owned a noncontrolling 64.4%60.8% 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.

In addition, at June 30, 2019,March 31, 2020, NEP OpCo consolidated 12 VIEs related to certain subsidiaries that have sold differential membership interests in entities which own and operate 20 wind electric generation facilities. 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 non-current due to

NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



related party, of the VIEs, totaled approximately $4,875$4,768 million and $115$112 million, respectively, at June 30, 2019March 31, 2020 and $4,937$4,814 million and $132$122 million, respectively, at December 31, 2018.2019.

At June 30, 2019,March 31, 2020, NEP OpCo also consolidated a VIE4 VIEs related to athe sales of noncontrolling Class B noncontrolling interestinterests in certain NEP Renewables. This entity issubsidiaries. See Note 10 - Noncontrolling Interests. These entities are considered a VIEVIEs because the holderholders of the noncontrolling Class B noncontrolling interest doesinterests do not have substantive rights over the significant activities of the entity.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 VIEthese VIEs totaled approximately $2,300$7,876 million and $92$1,584 million, respectively, at June 30, 2019March 31, 2020 and $2,339$7,900 million and $89$1,448 million, respectively, at December 31, 2018. Substantially all2019. These VIEs include 3 other VIEs related to Rosmar, Silver State and Meade. See Note 1. In addition, certain of the indirect subsidiaries of NEP Renewablesthese VIEs contain entities which have sold differential membership interests and approximately $2,106 million and $2,122 million of assets and $51 million and $53 million of liabilities are also included in the disclosure of the VIEs related to differential membership interests.interests at March 31, 2020 and December 31, 2019, respectively.

At June 30, 2019, NEP OpCo also consolidated a VIE related to the June 2019 sale of a Class B noncontrolling interest in NEP Renewables II. This entity is considered a VIE because the holder of the Class B noncontrolling interest does not have substantive rights over the significant activities of the entity. The assets, primarily intangible assets - PPA and property, plant and equipment - net and liabilities, primarily other long-term liabilities and asset retirement obligation, of the VIE totaled approximately $2,242 million and $320 million, respectively, at June 30, 2019. NEP Renewables II includes two VIEs related to the Rosmar and Silver State entities. See Note 1 and Note 7 - Equity.

NEP has an indirect equity method investment in three3 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 three3 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
15


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
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 June 30, 2019March 31, 2020 and December 31, 2018,2019, NEP's equity method investment related to the non-economic ownership interests of approximately $10 million and $11 million, respectively, is reflected as investments in non-economic ownership interestsother non-current assets and $29 million and $7 million, respectively, is reflected as other non-current liabilities on the condensed consolidated balance sheets. 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. Capitalization
7. Capitalization

Debt - Significant long-term debt issuances and borrowings by subsidiaries of NEP during the sixthree months ended June 30, 2019March 31, 2020 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
Date Issued/BorrowedDebt Issuances/BorrowingsInterest
Rate
Principal
Amount
Maturity
Date
(millions)
February 2020NEP OpCo senior secured revolving credit facility
Variable(a)
$50  
(b)
2025
January 2020 - March 2020Senior secured limited-recourse debt
Variable(a)
$ 
(c)
2026
————————————
(a)
(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 six months ended June 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 senior unsecured notes. See additional discussion below.

On May 3, 2019,(b)At March 31, 2020, $550 million of borrowings were outstanding and approximately $122 million of letters of credit were issued under the NEP OpCo credit facility.
(c)At March 31, 2020, approximately $829 million of borrowings were outstanding under the existing credit agreement of the Meade purchaser and Pipeline Investment Holdings, LLC.

In February 2020, 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 2022February 2024 to February 2024, and2025.

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 notes). The 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 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 notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest.

NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)




See Note 11 - PG&E Bankruptcy for a discussion of the purchase of Genesis HoldCo notes in June 2019 and July 2019.

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 June 30, 2019,March 31, 2020, 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 July 23, 2019,April 21, 2020, the board of directors of NEP authorized a distribution of $0.5025$0.555 per common unit payable on August 14, 2019May 15, 2020 to its common unitholders of record on August 6, 2019.May 7, 2020.

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.

EarningsLoss Per Unit - Diluted earningsloss per unit areis 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.

The reconciliation of NEP's basic and diluted earnings per unit is as follows:

16


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



 Three Months Ended June 30, 2018 Six Months Ended June 30, 2018
 (millions, except per unit amounts)
Numerator:   
Net income attributable to NEP – basic$82
 $157
Adjustments for convertible notes and preferred units23
 41
Net income attributable to NEP – assuming dilution$105
 $198
Denominator:   
Weighted-average number of common units outstanding – basic54.3
 54.3
Convertible notes and preferred units19.7
 19.7
Weighted-average number of common units outstanding – assuming dilution74.0
 74.0
Earnings per unit attributable to NEP:   
Basic$1.51
 $2.88
Assuming dilution$1.42
 $2.67


The reconciliation of NEP's basic and diluted loss per unit for the three months ended March 31, 2020 and 2019 is as follows:
Three Months Ended March 31,
20202019
(millions, except per unit amounts)
Numerator:
Net loss attributable to NEP – basic$(222) $(22) 
Adjustments for convertible notes and preferred units(a)
—  —  
Net loss attributable to NEP used to compute diluted loss per unit$(222) $(22) 
Denominator:
Weighted-average number of common units outstanding – basic65.5  56.1  
Effect of dilutive convertible notes and preferred units(a)
—  —  
Weighted-average number of common units outstanding and assumed conversions65.5  56.1  
Loss per unit attributable to NEP:
Basic$(3.39) $(0.38) 
Assuming dilution$(3.39) $(0.38) 
————————————
(a)Due to the net losses incurred during the three months ended March 31, 2020 and 2019, the weighted-average number of common units issuable pursuant to the convertible notes and preferred units thattotaling approximately 10.3 million and 19.7 million, respectively, were not included in the calculation of diluted earningsloss per unit due to their antidilutive effect totaled approximately 19.7 million for both the three and six months ended June 30, 2019.

effect.

8. Accumulated Other Comprehensive Income (Loss)
 Accumulated Other Comprehensive Income (Loss)
 Net Unrealized
Gains on
Cash Flow Hedges
 
Other Comprehensive
Income (Loss) Related to
Equity Method Investees
 Total
 (millions)
      
Balances, December 31, 2018$6
 $(24) $(18)
Amounts reclassified from AOCI to interest expense(6) 
 (6)
Other comprehensive income related to equity method investees
 1
 1
Net other comprehensive income (loss)(6) 1
 (5)
Balances, March 31, 2019
 (23) (23)
Net other comprehensive income (loss)
 
 
Balances, June 30, 2019$
 $(23) $(23)
AOCI attributable to noncontrolling interest$
 $(15) $(15)
AOCI attributable to NEP$
 $(8) $(8)
Accumulated Other Comprehensive Income (Loss)
Net Unrealized
Gains on
Cash Flow Hedges
Other Comprehensive
Income (Loss) Related to
Equity Method Investees
Total
(millions)
Balances, December 31, 2019$—  $(22) $(22) 
Net other comprehensive income (loss)—  —  —  
Balances, March 31, 2020$—  $(22) $(22) 
AOCI attributable to noncontrolling interest$—  $(14) $(14) 
AOCI attributable to NEP$—  $(8) $(8) 


Accumulated Other Comprehensive Income (Loss)
Net Unrealized
Gains on
Cash Flow Hedges
Other Comprehensive Income (Loss) Related to Equity Method InvesteeTotal
(millions)
Balances, December 31, 2018$ $(24) $(18) 
Amounts reclassified from AOCI to interest expense(6) —  (6) 
Other comprehensive income related to equity method investee—    
Net other comprehensive income (loss)(6)  (5) 
Balances, March 31, 2019$—  $(23) $(23) 
AOCI attributable to noncontrolling interest$—  $(15) $(15) 
AOCI attributable to NEP$—  $(8) $(8) 
17


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



 Accumulated Other Comprehensive Income (Loss)
 Net Unrealized
Gains on
Cash Flow Hedges
 Net Unrealized
Losses on
Foreign Currency
Translation
 
Other Comprehensive
Income (Loss) Related to
Equity Method Investee
 Total
 (millions)
        
Balances, December 31, 2017$1
 $(98) $(30) $(127)
Amounts reclassified from AOCI to interest expense1
 
 
 1
Net unrealized losses on foreign currency translation
 (4) 
 (4)
Other comprehensive income related to equity method investee
 
 4
 4
Net other comprehensive income (loss)1
 (4) 4
 1
Balances, March 31, 20182
 (102) (26) (126)
Amounts reclassified from AOCI to interest expense1
 
 
 1
Net unrealized losses on foreign currency translation
 (2) 
 (2)
Other comprehensive income related to equity method investee
 
 (4) (4)
Net other comprehensive income (loss)1
 (2) (4) (5)
Impact of disposal of Canadian Holdings$3
 $104
 $
 $107
Balances, June 30, 2018$6
 $
 $(30) $(24)
AOCI attributable to noncontrolling interest$6
 $
 $(32) $(26)
AOCI attributable to NEP$
 $
 $2
 $2

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, a NEP subsidiary pays an affiliate for transmission 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 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 six months ended June 30,March 31, 2020 and 2019 include approximately $23$26 million and $44 million, respectively, and for the three and six months ended June 30, 2018 include $19 million and $37$22 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 six months ended June 30,March 31, 2020 and 2019 include approximately $1 million and $3 million, respectively, and for the three and six months ended June 30, 2018 include $1 million and $2 million, respectively, related to the CSCS agreement.

NEER and certain of its affiliates may withdraw funds (Project Sweeps) received by 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

NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)



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 June 30, 2019March 31, 2020 and December 31, 2018,2019, the cash sweep amounts held in accounts belonging to NEER or its affiliates were approximately $737$60 million and $66$12 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 June 30, 2019,March 31, 2020, NEECH or NEER guaranteed or provided indemnifications, letters of credit or surety bonds totaling approximately $694$645 million related to these obligations. Agreements related to the sale of differential membership interests require NEER to guarantee payments due by the VIEs and the indemnifications to the VIEs' respective investors. At June 30, 2019,March 31, 2020, NEER guaranteed a total of approximately $69$11 million related to these obligations.

Due to Related Party - Non-current amounts due to related party 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 other non-current assets on the condensed consolidated balance sheets. During the six months ended June 30, 2019, a subsidiary of NEECH provided, pursuant to a debt service reserve guarantee (see discussion above), approximately $20 million to fund the debt payment of Genesis HoldCo which is reflected as non-current due to related party at June 30, 2019.

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
18


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)
subsidiary. During the three and six months ended June 30,March 31, 2020 and 2019, NEP recognized approximately $2$4 million and $3 million, respectively, and during the three and six months ended June 30, 2018 NEP recognized less than $1 million and approximately $1 million, respectively, in revenues related to the transportation and fuel management agreements.


10. Summary of Significant Accounting and Reporting Policies

Restricted Cash - ACurrentt March 31, 2020 and December 31, 2019, NEP had approximately $8 million and $3 million, respectively, of restricted cash included in other current assets on NEP's condensed consolidated balance sheets and approximately $11 million and $11 million of other non-current assets on NEP's condensed consolidated balance sheetssheets. Restricted cash at June 30, 2019 and DecemberMarch 31, 2018, respectively, are2020 is primarily held by certain subsidiaries to pay for certain capital or operating expenditures, as well as to fund required equity contributions pursuant to restrictions contained in the subsidiaries'a subsidiary's debt agreements.agreement and, at both March 31, 2020 and December 31, 2019, collateral deposits from a counterparty. Restricted cash reported as current assets are recorded as such based on the anticipated use of these funds.

Disposal of Canadian Holdings - In June 2018, a subsidiary of NEP completed the sale of Canadian Holdings for cash proceeds of approximately CAD $740 million (USD $563 million at June 29, 2018), subject to post-closing working capital adjustments of approximately $1 million. In addition, the purchaser assumed approximately $676 million of existing debt. Canadian Holdings owned four wind generation facilities and two solar generation facilities located in Ontario, Canada with a generating capacity totaling approximately 396 MW. NEP recognized a gain of approximately $153 million ($201 million after tax) which is reflected as gain on disposal of Canadian Holdings in NEP's condensed consolidated statements of income. Income before income taxes associated with Canadian Holdings was approximately $19 million and $47 million for the three and six months ended June 30, 2018, respectively.

Noncontrolling Interests - At June 30, 2019, NEE's approximately 64.4% noncontrolling limited partner interest in NEP OpCo, a non-affiliated party's 10% interest in one of the Texas pipelines, NEER's approximately 50% noncontrolling ownership interest in Silver State, the interests related to differential membership interests andMarch 31, 2020, the Class B noncontrolling ownership interests (the Class B noncontrolling ownership interests in NEP Renewables sold in 2018 and NEP Renewables II, NEP Pipelines and STX Midstream sold in 2019), the differential membership interests, NEE's approximately 60.8% noncontrolling limited partner interest in NEP OpCo and NEER's approximately 50% noncontrolling ownership interest in Silver State, as well as a non-affiliated 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's noncontrolling ownership interest and the net income attributable to NEP based on their respective ownership percentage of NEP OpCo. Details of the activity in noncontrolling interests are below:
 Class B Noncontrolling Ownership InterestsDifferential Membership InterestsNEER's Noncontrolling Ownership Interests in NEP OpCo and Silver StateOther Noncontrolling Ownership InterestsTotal Noncontrolling
Interests
Three months ended March 31, 2020(millions)
Balances, December 31, 2019$2,628  $1,798  $389  $68  $4,883  
Net income (loss) attributable to NCI52  (71) (459) (22) (500) 
Related party contributions—  —  —    
Related party distributions—  —  (60) (2) (62) 
Differential membership investment contributions, net of distributions—  40  —  —  40  
Payments to Class B noncontrolling interest investors(10) —  —  —  (10) 
Balances, March 31, 2020$2,670  $1,767  $(130) $47  $4,354  

 Class B Noncontrolling Ownership InterestsDifferential Membership InterestsNEER's Noncontrolling Ownership Interests in NEP OpCo and Silver StateOther Noncontrolling Ownership InterestsTotal Noncontrolling
Interests
Three months ended March 31, 2019(millions)
Balances, December 31, 2018$751  $2,019  $342  $80  $3,192  
Net income (loss) attributable to NCI12  (60) (50) (7) (105) 
Other comprehensive loss—  —  (3) —  (3) 
Related party contributions—  —   —   
Related party distributions—  —  (50) (1) (51) 
Changes in non-economic ownership interests—  —  —  (6) (6) 
Differential membership investment contributions, net of distributions—  24  —  —  24  
Payments to Class B noncontrolling interest investors(5) —  —  —  (5) 
Other—  —   —   
Balances, March 31, 2019$758  $1,983  $241  $66  $3,048  

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
19


NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(Concluded)
(unaudited)



   Class B Noncontrolling Ownership Interests Differential Membership Interests Noncontrolling Ownership Interests in NEP OpCo, Silver State and Texas pipeline Total Noncontrolling
Interests
Six months ended June 30, 2019 (millions)
Balances, December 31, 2018 $751
 $2,019
 $422
 $3,192
Net income (loss) attributable to NCI 12
(a) 
(60)
(b) 
(57) (105)
Other comprehensive loss 
 
 (3) (3)
Related party contributions 
 
 1
 1
Related party distributions 
 
 (51) (51)
Changes in non-economic ownership interests 
 
 (6) (6)
Differential membership interests contributions, net of distributions 
 24
 
 24
Payments to Class B noncontrolling interest investors (5) 
 
 (5)
Other 
 
 1
 1
Balances, March 31, 2019 758
 1,983
 307

3,048
Sale of Class B noncontrolling interest - net 893
 
 
 893
Acquisition of subsidiaries with noncontrolling ownership interest 
 
 472
 472
Related party note receivable 
 
 1
 1
Net income (loss) attributable to NCI 25
(a) 
(63)
(b) 
(64) (102)
Related party contributions 
 
 11
 11
Related party distributions 
 
 (56) (56)
Differential membership interests contributions, net of distributions 
 (8) 
 (8)
Payments to Class B noncontrolling interest investors (3) 
 
 (3)
Balances, June 30, 2019 $1,673
 $1,912
 $671

$4,256
____________________
(a)For the three months ended March 31, 2019 and June 30, 2019, approximately $8 million and $16 million, respectively, of the income attributable to the Class B noncontrolling interest investors relates to NEE's noncontrolling interest and $4 million and $9 million, respectively, is reflected as net income attributable to NEP.
(b)Represents the benefits associated with differential membership interests recognized as third-party investors received their portion of the economic attributes of the related facilities. For the three months ended March 31, 2019 and June 30, 2019, approximately $39 million and $41 million, respectively, of the loss attributable to differential membership interests benefits NEE's noncontrolling interest and $21 million and $22 million, respectively, is reflected as net income attributable to NEP.

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 Texas pipeline Total Noncontrolling
Interests
Six months ended June 30, 2018 (millions)
Balances, December 31, 2017 $
 $
 $34
 $34
Related party note receivable 
 
 29
 29
Net income (loss) attributable to NCI 
 (269)
(a) 
170
 (99)
Other comprehensive income 
 
 1
 1
Related party distributions 
 
 (64) (64)
Changes in non-economic ownership interests 
 
 (6) (6)
Differential membership interests contributions, net of distributions 
 23
 
 23
Adoption of accounting standards update 
 1,413
 1
 1,414
Balances, March 31, 2018 
 1,167
 165

1,332
Related party note receivable 
 
 2
 2
Net income (loss) attributable to NCI 
 (39)
(a) 
243
 204
Other comprehensive income 
 
 (4) (4)
Related party distributions 
 
 (41) (41)
Changes in non-economic ownership interests 
 
 1
 1
Differential membership investment contributions, net of distributions 
 (6) 
 (6)
Disposal of Canadian Holdings 
 
 105
 105
Adoption of accounting standards update 
 
 2
 2
Balances, June 30, 2018 $
 $1,122
 $473

$1,595
____________________
(a)Represents the benefits associated with differential membership interests recognized as third-party investors received their portion of the economic attributes of the related facilities. For the three months ended March 31, 2018 and June 30, 2018, approximately $175 million and $26 million, respectively, of the loss attributable to differential membership interests benefits NEE's noncontrolling interest and $94 million and $13 million, respectively, is reflected as net income attributable to NEP. For the three months ended March 31, 2018, includes approximately $231 million (after-tax $211 million) related to the reduction of differential membership interests as a result of the change in federal corporate income tax rates effective January 1, 2018.


transition from the London Inter-Bank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates that are yet to be determined or finalized. 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 and can be applied prospectively through December 31, 2022. NEP is currently evaluating whether to apply the options provided by the standards update with regard to its contracts that reference LIBOR or other interbank offered rates as an interest rate benchmark.

11. Commitments and Contingencies

Development, Engineering and Construction Commitments
- At March 31, 2020, indirect subsidiaries of NEP had several engineering, procurement and construction contracts and a funding commitment related to the repowering of certain wind facilities and expansion projects at certain pipelines. Those contracts have varying payment terms and some include performance obligations that allow the NEP subsidiaries to receive liquidated damages if the contractor does not perform. As of March 31, 2020, the NEP subsidiaries had purchased approximately $101 million related to these projects, of which $36 million was purchased from NEER. Such costs primarily have been capitalized in property, plant and equipment - net on the condensed consolidated balance sheets. As of March 31, 2020, the NEP subsidiaries have remaining commitments under these contracts of approximately $253 million.
Letter of Credit Facilities -
Two of NEP’s projects have letter of credit (LOC) facilities under which the LOC lenders may issue standby letters of credit not to exceed approximately $65 million in the aggregate. These LOC facilities have maturity dates of June 2022 and July 2022. At June 30, 2019, approximately $51 million of LOCs was outstanding primarily related to debt service reserves and as security for certain of the projects' agreements, including a PPA.

PG&E Bankruptcy - During the sixthree months ended June 30, 2019,March 31, 2020, approximately $11$3 million of net income attributable to NEP relates to PPAs that the Genesis, Desert Sunlight and Shafter solar projects have with PG&E. On January 29, 2019, PG&E filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. While PG&E or other stakeholders in the bankruptcy proceeding could seek to reject some or all of the PPAs, PG&E's proposed plan of reorganization specifies that PG&E would assume all of the PPAs. The Genesisbankruptcy court approved PG&E's Disclosure Statement and Shafter solar projects are financed with various formsExit Financing Plan and the Governor of indebtedness.California has filed a letter in support of PG&E’s plan, assuming certain changes will be made regarding PG&E’s governance, safety operations and the California Public Utilities Commission’s oversight. PG&E’s Chapter 11 filing, or related events, have caused events of default under the financings for the Genesis and Shafter projects blockingwhich, among other things, blocked the distribution of cash generated by those projects.

In AprilDuring 2019, a waiveran indirect subsidiary of the PG&E-related eventNEP repaid or redeemed all of default was obtained related to the Shafter solar project indebtedness which, subject to certain conditions, waived the lenders’ ability to accelerate the repayment of borrowings thereunder and therefore the debt outstanding related to Shafter was reclassified to long-term debt. At June 30, 2019, the debt outstanding under the Genesis andfinancings. At March 31, 2020, the debt outstanding under the Shafter financingsfinancing totaled approximately $612$25 million, substantially all of which $586 million related to Genesis with scheduled final maturity dates in 2038 was classified as currentlong-term debt on the condensed consolidated balance sheets.

Lenders under the Genesis financings could accelerate the repayment of borrowings thereunder or foreclose upon the projects’ equity or assets as a result of events of defaults caused by PG&E’s bankruptcy, which could have a material adverse impact on NEP. In addition, PG&E could seekdefault waiver obtained in April 2019 that extends to reject some or all of the PPAs. PG&E’s bankruptcy petition stated that PG&E has not yet made any decisions regarding whether to assume or reject any PPAs in its Chapter 11 case.April 2021.

In June 2019, an indirect wholly owned subsidiary of NEP (the offeror) commenced a cash tender offer to purchase the approximately

NEXTERA ENERGY PARTNERS, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
(unaudited)

$240 million of outstanding principal of Genesis HoldCo 5.600% senior secured notes due 2038 (Genesis HoldCo notes). Genesis HoldCo is the indirect owner of the Genesis solar project. The offeror accepted for purchase approximately $115 million in aggregate principal of the Genesis HoldCo notes at a purchase price of $950 per $1,000 principal amount, which was settled in July 2019. In addition, the offeror purchased approximately $56 million from one holder in June 2019 under the same pricing terms as the tender offer.

Based on the estimated future cash flows related to the Genesis, Shafter and Desert Sunlight solar projects, no0 impairment adjustment was recorded at June 30, 2019.March 31, 2020. NEP will continue to monitor its investments in these projects. At June 30, 2019,March 31, 2020, cumulative cash distributions of approximately $45$51 million from thesethe Shafter and Desert Sunlight solar projects were not distributed as a result of the events of default under the financings that arose due to PG&E’s bankruptcy filing.

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.
20


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 June 30, 2019,March 31, 2020, NEP owned a controlling, non-economic generalan approximately 39.2% limited partner interest in NEP OpCo and an approximately 35.6%NEE Equity owned a noncontrolling 60.8% limited partner interest in NEP OpCo. Through NEP OpCo, NEP ownshas 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 20182019 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 June 2018, a subsidiary of NEP completed the sale of Canadian Holdings which owns four wind generation facilities and two solar generation facilities located in Ontario, Canada with a generating capacity totaling approximately 396 MW. See Note 10 - Disposal of Canadian Holdings.

In December 2018, a subsidiary of NEP completed the acquisition from NEER of NEP Renewables, which indirectly owns ten wind and one solar generation facilities with a combined generating capacity of approximately 1,388 MW. In June 2019, an indirect subsidiary of NEP completed the acquisition from NEER of indirect membership interests in three wind and three solar generation facilities with a combined net generating capacity of approximately 611 MW. In November 2019, an indirect subsidiary of NEP acquired all of the ownership interests in Meade, which owns interests in a natural gas pipeline. See Note 1.

In January 2019, PG&E, a significant customer of NEP, filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. See Note 11 - PG&E Bankruptcy.

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 
 March 31,
20202019
(millions)
Statement of Income (Loss) Data:
OPERATING REVENUES
Renewable energy sales$157  $123  
Texas pipelines service revenues55  54  
Total operating revenues212  177  
OPERATING EXPENSES
 Operations and maintenance92  76  
Depreciation and amortization66  61  
Taxes other than income taxes and other  
Total operating expenses - net163  143  
OPERATING INCOME49  34  
OTHER INCOME (DEDUCTIONS)
Interest expense(839) (155) 
Equity in earnings of equity method investees18  —  
Equity in losses of non-economic ownership interests(23) (7) 
Total other deductions - net(844) (162) 
LOSS BEFORE INCOME TAXES(795) (128) 
INCOME TAX BENEFIT(75) (7) 
NET LOSS(720) (121) 
Net income attributable to preferred distributions(2) (6) 
Net loss attributable to noncontrolling interests500  105  
NET LOSS ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$(222) $(22) 
 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 
2018(a)
 2019 
2018(a)
 (millions)
Statement of Income (Loss) Data:   
OPERATING REVENUES       
Renewable energy sales$170
 $169
 $294
 $325
Texas pipelines service revenues49
 56
 103
 112
Total operating revenues219
 225
 397
 437
OPERATING EXPENSES (INCOME)       
Operations and maintenance82
 63
 157
 125
Depreciation and amortization63
 49
 124
 102
Gain on disposal of Canadian Holdings
 (153) 
 (153)
Taxes other than income taxes and other7
 5
 13
 11
Total operating expenses (income) - net152
 (36) 294
 85
OPERATING INCOME67
 261
 103
 352
OTHER INCOME (DEDUCTIONS)       
Interest expense(207) (21) (362) (124)
Equity in earnings of equity method investees9
 13
 8
 16
Equity in earnings (losses) of non-economic ownership interests(4) 7
 (11) 13
Other - net1
 11
 2
 13
Total other income (deductions) - net(201) 10
 (363) (82)
INCOME (LOSS) BEFORE INCOME TAXES(134) 271
 (260) 270
INCOME TAX BENEFIT(10) (21) (16) (2)
NET INCOME (LOSS)(124) 292
 (244) 272
Net income attributable to preferred distributions(6) (6) (12) (12)
Net loss (income) attributable to noncontrolling interests102
 (204) 207
 (103)
NET INCOME (LOSS) ATTRIBUTABLE TO NEXTERA ENERGY PARTNERS, LP$(28) $82
 $(49) $157

_________________________
(a)Prior-period financial information has been retrospectively adjusted to include the adoption of an accounting standards update related to leases.


Three Months Ended June 30, 2019March 31, 2020 Compared to Three Months Ended June 30, 2018March 31, 2019

Operating Revenues

Operating revenues primarily consist of income from the sale of energy under PPAs and services provided under natural gas transportation agreements, partly offset by the amortization of intangible assets - PPAs. Renewable energy sales increased approximately $1$34 million during the three months ended June 30, 2019. The increase in renewable energy sales reflects an increase ofMarch 31, 2020. Revenues
21


increased approximately $39$18 million related to the projects acquired in December 2018 and June 2019 offset by decreased revenues of $32 million due to the sale of Canadian Holdings at the end of the second quarter of 2018 and $6$16 million primarily due to lower wind resource. Texas pipelines service revenues decreased approximately $7 million primarily due to the absence of certain deferred revenues recognized in 2018 related to new contracts.higher wind resource.

Operating Expenses

Operations and Maintenance
O&M expenses include interconnection costs, labor expenses, turbine servicing costs, royalty payments, insurance, materials, supplies, shared services and administrative expenses attributable to NEP's projects, and costs and expenses under the MSA, ASAs and O&M agreements. See Note 9. O&M expenses also include the cost of maintaining and replacing certain parts for the projects in the portfolio to maintain, over the long-term, operating income or operating capacity. O&M expenses increased approximately $19$16 million during the three months ended June 30, 2019March 31, 2020 primarily due to increases of $13$5 million related to the projects acquired in December 2018 and June 2019, and $7$6 million in higher other corporate expenses, including higher IDR fees related to growth in NEP's distributions to its common unitholders, partly offset by a decrease of $3and $5 million due to the sale of Canadian Holdings at the end of the second quarter of 2018.in other project operating expenses.

Depreciation and Amortization
Depreciation and amortization expense reflects costs associated with depreciation and amortization of NEP's assets, based on depreciable asset lives and consistent depreciation methodologies. Depreciation and amortization expense also includes a provision for wind and solar facility dismantlement, asset removal costs and accretion related to asset retirement obligations and the amortization of finite-lived intangible assets.

Depreciation and amortization expense increased approximately $14$5 million during the three months ended June 30, 2019March 31, 2020 primarily as a result of $4 million of depreciation related to the projects acquired in December 2018 and June 2019.

Gain on Disposal of Canadian Holdings
During the three months ended June 30, 2018, a subsidiary of NEP completed the sale of Canadian Holdings and NEP recognized a pre-tax gain of approximately $153 million. See Note 10 - Disposal of Canadian Holdings.

Other Income (Deductions)

Interest Expense
Interest expense primarily consists of interest on debt and mark-to-market gains and losses on interest rate contracts. Interest expense increased approximately $186$684 million during the three months ended June 30, 2019March 31, 2020 primarily due to $677 million of unfavorable mark-to-market activity of $187 million and $6 million ofa net increase in interest expensecosts primarily related to higher long-term debt issuance costs associated with the repayment of certain outstanding debt (see Note 7 - Debt), partly offset by a decrease in interest costsbalances as a result of financing activities in 2019 to support growth in the sale of Canadian Holdings at the end of the second quarter of 2018.business.

Equity in Earnings of Equity Method Investees
Equity in earnings of equity method investees decreasedincreased by approximately $4$18 million during the three months ended June 30,March 31, 2020 primarily due to earnings related to the ownership interest in Meade acquired in November 2019 (see Note 1).

Equity in Losses of Non-Economic Ownership Interests
The losses related to non-economic ownership interests increased by approximately $16 million during the three months ended March 31, 2020 due to lower earnings at the related projects.

Equity in Earnings (Losses) of Non-Economic Ownership Interests
Equity in earnings (losses) of non-economic ownership interests decreased by approximately $11 million during the three months ended June 30, 2019 due to lower earnings at the related projects.

Other - net
The decrease in other - net for the three months ended June 30, 2019projects primarily reflects the absence of the 2018 gains related to foreign currency exchange contracts. See Note 5.unfavorable mark-to-market activity.

Income Taxes

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. Prior to the sale of Canadian Holdings in June 2018, NEP's former Canadian subsidiaries were all Canadian taxpayers, and therefore NEP recognized in income all of the Canadian taxes. Net income or loss attributable to noncontrolling interests includes minimal U.S. taxes and NEER's applicable ownership share of Canadian taxes.


For the three months ended June 30, 2019,March 31, 2020, NEP recorded an income tax benefit of approximately $10$75 million on loss before income taxes of $134$795 million, resulting in an effective tax rate of 7%9%. The tax benefit is comprised primarily of income tax benefitsbenefit of approximately $28$167 million at the statutory rate of 21% and $3state tax benefit of $12 million, partly offset by $105 million of stateincome tax attributable to noncontrolling interests. Despite NEP's loss before income taxes, partlyprimarily driven by unfavorable mark-to-market activity related to its derivative contracts, NEP currently estimates that it will be able to realize its deferred tax assets. The assumptions used in NEP's evaluation require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates NEP is using to manage the underlying businesses.

For the three months ended March 31, 2019, NEP recorded income tax benefit of approximately $7 million on loss before income taxes of $128 million, resulting in an effective tax rate of 5%. The tax benefit is comprised primarily of income tax benefit of approximately $27 million at the statutory rate of 21%, partially offset by $21 million of income tax attributable to noncontrolling interests.

Net Loss Attributable to Noncontrolling Interests

For the three months ended June 30, 2018, NEP recorded income tax benefit of approximately $21 million on income before income taxes of $271 million, resulting in an effective tax rate of (8)%. The tax benefit is comprised primarily of income tax expenses of approximately $57 million at the statutory rate of 21%, offset by income tax benefits of $69 million related to the removal of the historical Canadian deferred tax liabilities (see Note 3)March 31, 2020 and $15 million of income tax benefits attributable to noncontrolling interests.

Net Loss (Income) Attributable to Noncontrolling Interests

For the three months ended June 30, 2019, and 2018, net loss (income) attributable to noncontrolling interests reflects the net income or loss attributable to NEE's noncontrolling interest in NEP OpCo, a non-affiliated party's 10% interest in one of the Texas pipelines, and the loss allocated to differential membership interest investors.investors and the income allocated to the Class B noncontrolling interests in NEP Renewables sold in 2018. Additionally, for the three months ended June 30, 2019,March 31, 2020, net loss attributable to noncontrolling interests reflects the income allocated to the Class B noncontrolling interests in NEP Renewables II, NEP Pipelines and STX Midstream sold in 2018 and NEP Renewables II sold in June 2019, as well as the approximately 50% noncontrolling interest in Silver State. See Note 10 - Noncontrolling Interests.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Operating Revenues

Renewable energy sales decreased approximately $31 million during the six months ended June 30, 2019. Revenues decreased approximately $78 million due to the sale of Canadian Holdings at the end of the second quarter of 2018 and $18 million primarily due to lower wind resource. These decreases were partly offset by an increase in revenues of approximately $65 million related to the projects acquired in December 2018 and June 2019. Texas pipelines service revenues decreased approximately $9 million primarily due to the absence of certain deferred revenues recognized in 2018 related to new contracts.

Operating Expenses

Operations and Maintenance
O&M expenses increased approximately $32 million during the six months ended June 30, 2019 primarily due to increases of $23 million related to the projects acquired in December 2018 and June 2019 and $10 million in higher other corporate expenses including higher IDR fees related to growth in NEP's distributions to its common unitholders, partly offset by a decrease of $7 million due to the sale of Canadian Holdings at the end of the second quarter of 2018.

Depreciation and Amortization
Depreciation and amortization expense increased approximately $22 million during the six months ended June 30, 2019 primarily as a result of $27 million of depreciation related to the projects acquired in December 2018 and June 2019, partly offset by a decrease of $5 million related to the sale of Canadian Holdings at the end of the second quarter of 2018.

Gain on Disposal of Canadian Holdings
During the six months ended June 30, 2018, a subsidiary of NEP completed the sale of Canadian Holdings and NEP recognized a pre-tax gain of approximately $153 million. See Note 10 - Disposal of Canadian Holdings.

Other Income (Deductions)

Interest Expense
Interest expense increased approximately $238 million during the six months ended June 30, 2019 primarily due to $254 million of unfavorable mark-to-market activity and interest expense of $6 million related to debt issuance costs associated with the repayment of certain outstanding debt (see Note 7 - Debt), partly offset by a decrease in interest costs as a result of the sale of Canadian Holdings at the end of the second quarter of 2018.

Equity in Earnings of Equity Method Investees
Equity in earnings of equity method investees decreased by approximately $8 million during the six months ended June 30, 2019 due to lower earnings at the related projects.

Equity in Earnings (Losses) of Non-Economic Ownership Interests
Equity in earnings (losses) of non-economic ownership interests decreased by approximately $24 million during the six months ended June 30, 2019 due to lower earnings at the related projects.

Other - net
The decrease in other - net for the six months ended June 30, 2019 primarily reflects the absence of the 2018 gains related to foreign currency exchange contracts. See Note 5.


Income Taxes

For the six months ended June 30, 2019, NEP recorded income tax benefit of approximately $16 million on loss before income taxes of $260 million, resulting in an effective tax rate of 6%. The tax benefit is comprised primarily of income tax benefits of approximately $55 million at the statutory rate of 21% and $4 million of state income taxes, partly offset by $43 million of income tax attributable to noncontrolling interests.

For the six months ended June 30, 2018, NEP recorded income tax benefit of approximately $2 million on income before income taxes of $270 million, resulting in an effective tax rate of (1)%. The tax benefit is comprised primarily of income tax expenses of approximately $57 million at the statutory rate of 21% and $20 million related to the adjustment to differential membership interests as a result of the change in federal corporate income tax rates due to tax reform (see Note 3), offset by income tax benefits of $69 million related to the removal of the historical Canadian deferred tax liabilities (see Note 3) and $17 million of income tax benefits attributable to noncontrolling interests.

Net Loss (Income) Attributable to Noncontrolling Interests

For the six months ended June 30, 2019 and 2018, net loss (income) attributable to noncontrolling interests reflects the net income or loss attributable to NEE's noncontrolling interest in NEP OpCo, a non-affiliated party's 10% interest in one of the Texas pipelines and the loss allocated to differential membership interest investors. Additionally, for the six months ended June 30, 2019, net loss attributable to noncontrolling interests reflects the income allocated to the Class B noncontrolling interests in NEP Renewables sold in 2018 and NEP Renewables II sold in June 2019 as well as the approximately 50% noncontrolling interest in Silver State. See Note 10 - Noncontrolling Interests.

Liquidity and Capital Resources

NEP’s ongoing operations use cash to fund O&M expenses, maintenance capital expenditures, debt service payments and distributions to common and preferred unitholders and holders of 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. 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, expandfund additional expansion or repowerrepowering of existing projects and increase its distributions to common unitholders will depend on its ability to access the capital markets on acceptable terms.
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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.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 June 30, 2019 and DecemberMarch 31, 2018,2020, NEP's liquidity position was approximately $1,864 million and $1,127 million, respectively.$753 million. The table below provides the components of NEP’s liquidity position:
 June 30, 2019 December 31, 2018
 (millions)
Cash and cash equivalents$163
 $147
Amounts due under the CSCS agreement737
 66
Revolving credit facilities1,400
 900
Less borrowings(450) 
Letter of credit facilities65
 82
Less letters of credit(51) (68)
Total(a)
$1,864
 $1,127
March 31, 2020Maturity Date
(millions)
Cash and cash equivalents$115  
Amounts due under the CSCS agreement60  
Revolving credit facilities(a)
1,250  2025
Less borrowings(550) 
Less issued letters of credit(122) 
Total(b)
$753  
____________________
(a)
Excludes current restricted cash of approximately $4 millionand $8 millionat June 30, 2019 and December 31, 2018, respectively. See Note 10 - Restricted Cash.

(a) Excludes certain credit facilities due to restrictions on the use of the borrowings.
(b) Excludes current restricted cash of approximately $8 million at March 31, 2020. See Note 10 - Restricted Cash.

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

Revolving Credit Facilities

In May 2019,February 2020, NEP OpCo and its direct subsidiary entered into an amendment of their existing revolving credit facility to increase the revolving credit facility size to $1,250 million and extend the maturity date to February 2024.2025. During the three months ended June 30, 2019, $450March 31, 2020, $50 million was drawn under the NEP OpCo revolving credit facility whichand $10 million was repaid in July 2019.repaid. In addition, approximately $7 million was borrowed under a senior secured limited recourse term loan for the Meade expansion and $1 million was repaid. See Note 7 - Debt.

Project Financings

Certain projects in the portfolioNEP OpCo and certain indirect subsidiaries are subject to project financings that contain certain 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 the London InterBank Offered Rate.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.payments on the related borrowings. In addition, under the projectproject-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 projectproject-level financing’s covenants and, forcovenants. For the majority of the projectproject-level financings, the applicable minimum debt service coverage ratio is satisfied. The majority of NEP's project financings include a minimum debt service coverage ratio of 1.20:1.00 thatratios must be satisfied.satisfied in order to make a distribution. For one projectproject-level financing, the project must maintain a leverage ratio of less than 5.0:1.0 and an interest coverage ratio of at least 2.75:1.00 in order to
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make a distribution. At June 30, 2019,March 31, 2020, NEP's subsidiaries were in compliance with all financial debt covenants under their financings except for events of default occurringas discussed in January 2019Note 11 - PG&E Bankruptcy.

Contractual Obligations

NEP's contractual obligations at March 31, 2020 were as follows:
Remainder of 20202021202220232024ThereafterTotal
(millions)
Debt, including interest(a)
$426  $163  $165  $367  $1,412  $2,605  $5,138  
Other contractual obligations(b)
214  36  29  14  14  139  446  
Asset retirement activities(c)
—  —  —  —  —  566  566  
MSA and credit support(d)
     182  220  
Total$646  $207  $202  $389  $1,434  $3,492  $6,370  
____________________
(a) Includes principal, interest, fees on credit facilities and interest rate contracts. Variable rate interest was computed using March 31, 2020 rates. Such amounts reflect scheduled payments under the financing agreements related tofor debt in default as the Genesis and Shafter solar projects.lenders have not issued any acceleration notices. See Note 11 - PG&E Bankruptcy.

Senior Notes

In June 2019, NEP OpCo issued $700 million in aggregate principal amount of 4.25% senior unsecured notes due July 2024. See Note 7 - Debt.

(b) Primarily reflects commitments related to construction activities (see Note 11 - Development, Engineering and Construction Commitments), lease payment obligations and payments related to the acquisition of certain development rights.
Equity(c) Represents expected cash payments adjusted for inflation for estimated costs to perform asset retirement activities.

Approximately $64 million of common units remain available to be issued(d) Represents minimum fees under NEP's at-the-market equity issuance program at June 30, 2019.

In June 2019, NEP sold 100% of the Class B noncontrolling interest in NEP Renewables II for approximately $900 million.MSA and CSCS agreement. See Note 7 - Equity.9.


Contractual Obligations

NEP's contractual obligations at June 30, 2019 were as follows:
              
 Remainder of 2019 2020 2021 2022 2023 Thereafter Total
 (millions)
Debt, including interest(a)
$546
 $724
 $245
 $761
 $177
 $2,884
 $5,337
Other contractual obligations(b)
7
 4
 13
 13
 13
 141
 191
Asset retirement activities(c)

 
 
 
 
 568
 568
MSA and credit support(d)
4
 8
 8
 8
 8
 82
 118
Total$557
 $736
 $266
 $782
 $198
 $3,675
 $6,214
____________________
(a)Includes principal, interest, fees on credit facilities and interest rate swaps. Variable rate interest was computed using June 30, 2019 rates. Such amounts reflect scheduled payments under the financing agreements for debt in default as the lenders have not issued any acceleration notices. See Note 11 - PG&E Bankruptcy. The July 2019 repayment of the $450 million drawn on the revolving credit facility is reflected in the remainder of 2019 column. See Note 7 - Debt.
(b)Primarily reflects lease payment obligations and payments related to the acquisition of certain development rights.
(c)Represents expected cash payments adjusted for inflation for estimated costs to perform asset retirement activities.
(d)Represents minimum fees under the MSA and CSCS agreement. See Note 9.

Capital Expenditures

Annual capital spending plans are developed based on projected requirements byfor 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 sixthree months ended June 30,March 31, 2020 and 2019, and 2018, NEP had capital expenditures of approximately $6$52 million and $7$3 million, respectively, excluding the purchase prices of acquired projects. NEP does not expect any significant capital expenditures for the remainder of 2019 through 2023 other than costs that may occur as acquisition, repowering or expansion opportunities arise. Subject to regulatory approvals,respectively. NEP expects to have capital expenditures totaling approximately $128 million related to a potentialan expansion investment at one of the Texas pipelines expected to be in-service during the fourth quarter of 2020.2020 and $90 million of additional investment in CPL related to an expansion scheduled for commercial operation by mid-2022. In addition, NEP expects to have capital expenditures totaling approximately $200 million related to potential repowering investments at two wind generation facilities expected to be completed in 2020. 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 sixthree months ended June 30, 2019,March 31, 2020, NEP distributed approximately $53$35 million to its common unitholders. On July 23, 2019,April 21, 2020, the board of directors of NEP authorized a distribution of $0.5025$0.555 per common unit payable on August 14, 2019May 15, 2020 to its common unitholders of record on August 6, 2019.May 7, 2020. During the sixthree months ended June 30, 2019,March 31, 2020, NEP distributed approximately $12$2 million to its preferred unitholders and, at June 30, 2019,March 31, 2020, NEP accrued $6$2 million in preferred distributions to be paid in August 2019.May 2020.

Cash Flows

SixThree Months Ended June 30, 2019March 31, 2020 Compared to SixThree Months Ended June 30, 2018March 31, 2019

The following table reflects the changes in cash flows for the comparative periods:
20202019Change
(millions)
Three Months Ended March 31,
Net cash provided by operating activities$99  $19  $80  
Net cash provided by (used in) investing activities$(88) $21  $(109) 
Net cash used in financing activities$(20) $(62) $42  
 2019 2018 Change
 (millions)
Six Months Ended June 30, 
Net cash provided by operating activities$130
 $183
 $(53)
Net cash provided by (used in) investing activities$(1,701) $460
 $(2,161)
Net cash provided by (used in) financing activities$1,583
 $(151) $1,734

Net Cash Provided by Operating Activities

The decreaseincrease in net cash provided by operating activities was primarily driven by the sale of Canadian Holdings, lower wind resource, the absence of distributionscash from the equity method investment in Desert Sunlight and higher corporate operating expenses, including higher IDR fees. The decreases were partly offset by cash flows fromoperations associated with the projects acquired in December 2018June 2019 (see Note 1) and June 2019.higher wind resource, distributions received associated with the ownership interest in Meade acquired in November 2019 (see Note 1) and the timing of certain receivables.
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Net Cash Provided by (Used in) Investing Activities
20202019
(millions)
Three Months Ended March 31,
Capital expenditures and other investments$(52) $(3) 
Payments from (to) related parties under CSCS agreement - net(48) 24  
Distributions from equity method investee —  
    Other —  
Net cash provided by (used in) investing activities$(88) $21  
 2019 2018
 (millions)
Six Months Ended June 30, 
Acquisition of membership interests in subsidiaries - net$(1,028) $
Capital expenditures(6) (7)
Proceeds from the sale of Canadian Holdings - net
 517
Payments from (to) related parties under CSCS agreement - net(671) (50)
Other4
 
Net cash provided by (used in) investing activities$(1,701) $460


The change in net cash provided by (used in) investing activities was primarily driven by the June 2019 acquisition (see Note 1) and higher cash sweeps under the CSCS agreement duein 2020 as compared to repayments in 2019 and higher cash balancescapital expenditures primarily related to financing activity in June of 2019the pipeline expansion projects (see Note 7 - Debt) as well as the absence of the proceeds from the 2018 sale of Canadian Holdings (see Note 10 - Disposal of Canadian Holdings)Capital Expenditures).


Net Cash Used in Financing Activities
20202019
(millions)
Three Months Ended March 31,
Proceeds from issuance of common units - net$ $ 
Issuances (retirements) of long-term debt - net46  (24) 
Partner contributions  
Partner distributions(97) (74) 
Change in amounts due to related parties(1) 19  
Proceeds related to differential membership interests - net40  24  
    Other(13) (11) 
Net cash used in financing activities$(20) $(62) 
 2019 2018
 (millions)
Six Months Ended June 30, 
Proceeds from issuance of common units - net$3
 $
Issuances (retirements) of long-term debt840
 (55)
Partner contributions2
 31
Partner distributions(158) (134)
Change in amounts due to related parties19
 (1)
Proceeds related to differential membership interests - net15
 17
Proceeds related to Class B noncontrolling interests - net885
 
Other(23) (9)
Net cash provided by (used in) financing activities$1,583
 $(151)

The change in net cash provided by (used in)used in financing activities primarily reflects net proceeds related to the Class B noncontrolling interests (see Note 10 - Noncontrolling Interests) and net issuances of long-term debt in 2020 (see Note 7 - Debt) primarilycompared to fundnet retirements of long-term debt in 2019 and higher proceeds from differential membership interests, partly offset by higher partner distributions and the acquisitionabsence of a related party payment that occurred in June 2019.

New Accounting Rules and Interpretations

Reference Rate Reform - In March 2020, the FASB issued an accounting standards update which provides certain options to apply GAAP guidance on contract modifications and hedge accounting as companies transition from LIBOR and other interbank offered rates to alternative reference rates that are yet to be determined or finalized. See Note 10 - Reference Rate Reform.

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 swap 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 5).

NEP has long-term debt instruments that subject it to the risk of loss associated with movements in market interest rates. At June 30, 2019,March 31, 2020, approximately 12%13% of the long-term debt, including current maturities, was exposed to fluctuations in interest expense while the remaining balance was either fixed rate debt or financially hedged. At June 30, 2019,March 31, 2020, the estimated fair value of NEP's long-term debt was approximately $4.3$4.1 billion and the carrying value of the long-term debt was $4.3$4.2 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 $78$54 million at June 30, 2019.March 31, 2020.

At June 30, 2019,March 31, 2020, NEP had interest rate contracts with a net notional amount of approximately $9.0$7.1 billion related to managing exposure to the variability of cash flows associated with outstanding and expected future debt issuances and borrowings. Based
25


upon a hypothetical 10% decrease in rates, NEP’s net derivative liabilities at June 30, 2019March 31, 2020 would increase by approximately $269$66 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. See Note 11 - PG&E Bankruptcy for a discussion of risks related to PG&E.


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 June 30, 2019,March 31, 2020, 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 June 30, 2019.March 31, 2020.

(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.


26


PART II - OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in the 20182019 Form 10-K except as follows:

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.

NEP is closely monitoring the March 2019 Form 10-Q. global outbreak of the novel coronavirus (COVID-19). At this time, NEP is unable to determine the ultimate severity or duration of the outbreak or its effects on, among other things, the global, national or local economy, the capital and credit markets, NEP’s customers and suppliers or the services NEER provides to NEP. As a result, NEP cannot predict whether COVID-19 will have a material adverse impact on its business, financial condition, liquidity, results of operations and ability to make cash distributions to its unitholders.

The factors discussed in Part I, Item 1A. Risk Factors in the 20182019 Form 10-K, and Part II, Item 1A. Risk Factors in the March 2019 Form 10-Q, 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 available for distribution and prospectsdistributions to its unitholders should be carefully considered. The risks described above and in the 20182019 Form 10-K and the March 2019 Form 10-Q 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 availabledistributions to its unitholders.

Item 5. Other Information

(a)NEP held its 2020 Annual Meeting of Unitholders (2020 Annual Meeting) on April 21, 2020. At the 2020 Annual Meeting, NEP's unitholders elected all of NEP’s nominees for distributiondirector and prospects.approved two proposals. The proposals are described in detail in NEP's definitive proxy statement on Schedule 14A for the 2020 Annual Meeting (Proxy Statement), filed with the Securities and Exchange Commission on March 6, 2020. The voting results below reflect any applicable voting limitations and cutbacks as described in the Proxy Statement.

The final voting results with respect to each proposal voted upon at the 2020 Annual Meeting are set forth below.

Proposal 1

NEP's unitholders elected each of the four nominees to NEP's Board of Directors (Board) until the next annual meeting of unitholders by a majority of the votes cast, as set forth below:
FOR
% VOTES
CAST FOR
AGAINSTABSTENTIONS
BROKER
NON-VOTES
Susan D. Austin56,455,00798.7 %748,09971,4579,961,491
Robert J. Byrne56,331,28498.7 %746,046197,2339,961,491
Peter H. Kind56,329,78998.7 %744,876199,8989,961,491
James L. Robo47,940,65284.0 %9,100,361233,5509,961,491

Without giving effect to the voting limitation and cutbacks that apply to the election of directors as described in the Proxy Statement, the percent of the votes cast FOR Ms. Austin and Messrs. Byrne and Kind would have been 99.5% and FOR Mr. Robo would have been 94.3%.

Proposal 2

NEP's unitholders ratified the appointment of Deloitte & Touche LLP as NEP's independent registered public accounting firm for 2020, as set forth below:
FOR
% VOTES
CAST FOR
AGAINSTABSTENTIONS
BROKER
NON-VOTES
159,914,65899.96%68,395110,842

Proposal 3

NEP's unitholders approved, by non-binding advisory vote, NEP's compensation of its named executive officers as disclosed in the Proxy Statement, as set forth below:
FOR
% VOTES
CAST FOR
AGAINSTABSTENTIONS
BROKER
NON-VOTES
141,970,59594.7%7,877,006284,8039,961,491
27



Item 6. Exhibits
Exhibit
Number
Description
3.1*
4.1*
4.2*
4.3*31(a)
10.1*

10.2*
31(a)
31(b)
32
101.INSXBRL 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.SCHXBRL Schema Document
101.PREXBRL Presentation Linkbase Document
101.CALXBRL Calculation Linkbase Document
101.LABXBRL Label Linkbase Document
101.DEFXBRL Definition Linkbase Document
104Cover 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.
28


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:  July 24, 2019April 23, 2020

NEXTERA ENERGY PARTNERS, LP
(Registrant)
(Registrant)
JAMES M. MAY
James M. May
Controller and Chief Accounting Officer
(Principal Accounting Officer)


35
29