Intrinsic value of NextEra Energy Partners, LP - NEP

Previous Close

$46.32

  Intrinsic Value

$20.15

stock screener

  Rating & Target

str. sell

-57%

Previous close

$46.32

 
Intrinsic value

$20.15

 
Up/down potential

-57%

 
Rating

str. sell

We calculate the intrinsic value of NEP stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  786
  805
  825
  848
  874
  902
  933
  966
  1,002
  1,041
  1,082
  1,126
  1,172
  1,222
  1,275
  1,331
  1,390
  1,452
  1,518
  1,588
  1,662
  1,739
  1,821
  1,908
  1,998
  2,094
  2,195
  2,300
  2,412
  2,529
Variable operating expenses, $m
  478
  485
  493
  502
  511
  522
  533
  546
  559
  573
  404
  421
  438
  457
  476
  497
  519
  543
  567
  594
  621
  650
  681
  713
  747
  783
  820
  860
  901
  945
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  478
  485
  493
  502
  511
  522
  533
  546
  559
  573
  404
  421
  438
  457
  476
  497
  519
  543
  567
  594
  621
  650
  681
  713
  747
  783
  820
  860
  901
  945
Operating income, $m
  308
  319
  332
  347
  363
  381
  400
  421
  443
  467
  678
  705
  734
  765
  798
  833
  870
  910
  951
  995
  1,041
  1,089
  1,141
  1,195
  1,252
  1,311
  1,374
  1,441
  1,511
  1,584
EBITDA, $m
  740
  757
  776
  798
  822
  849
  878
  909
  943
  979
  1,017
  1,059
  1,103
  1,149
  1,199
  1,252
  1,307
  1,366
  1,428
  1,494
  1,563
  1,636
  1,713
  1,794
  1,880
  1,970
  2,064
  2,164
  2,269
  2,379
Interest expense (income), $m
  166
  220
  229
  239
  251
  265
  280
  296
  314
  334
  355
  377
  401
  427
  455
  484
  514
  547
  582
  618
  657
  698
  741
  786
  834
  885
  938
  994
  1,053
  1,115
  1,180
Earnings before tax, $m
  88
  91
  93
  96
  98
  101
  103
  106
  109
  112
  300
  304
  307
  311
  315
  319
  323
  328
  333
  338
  343
  348
  354
  360
  367
  373
  380
  388
  396
  404
Tax expense, $m
  24
  25
  25
  26
  26
  27
  28
  29
  29
  30
  81
  82
  83
  84
  85
  86
  87
  89
  90
  91
  93
  94
  96
  97
  99
  101
  103
  105
  107
  109
Net income, $m
  64
  66
  68
  70
  72
  74
  76
  78
  80
  82
  219
  222
  224
  227
  230
  233
  236
  239
  243
  246
  250
  254
  259
  263
  268
  273
  278
  283
  289
  295

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  9,590
  9,811
  10,063
  10,346
  10,660
  11,004
  11,379
  11,785
  12,222
  12,691
  13,192
  13,728
  14,298
  14,904
  15,547
  16,228
  16,949
  17,712
  18,518
  19,369
  20,266
  21,213
  22,211
  23,263
  24,370
  25,536
  26,763
  28,055
  29,414
  30,843
Adjusted assets (=assets-cash), $m
  9,590
  9,811
  10,063
  10,346
  10,660
  11,004
  11,379
  11,785
  12,222
  12,691
  13,192
  13,728
  14,298
  14,904
  15,547
  16,228
  16,949
  17,712
  18,518
  19,369
  20,266
  21,213
  22,211
  23,263
  24,370
  25,536
  26,763
  28,055
  29,414
  30,843
Revenue / Adjusted assets
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
  0.082
Average production assets, $m
  7,414
  7,585
  7,780
  7,999
  8,241
  8,507
  8,797
  9,111
  9,448
  9,811
  10,199
  10,613
  11,054
  11,522
  12,019
  12,546
  13,103
  13,693
  14,316
  14,974
  15,668
  16,400
  17,171
  17,984
  18,840
  19,742
  20,691
  21,689
  22,739
  23,844
Working capital, $m
  34
  35
  35
  36
  38
  39
  40
  42
  43
  45
  47
  48
  50
  53
  55
  57
  60
  62
  65
  68
  71
  75
  78
  82
  86
  90
  94
  99
  104
  109
Total debt, $m
  3,572
  3,737
  3,926
  4,139
  4,374
  4,632
  4,913
  5,217
  5,545
  5,897
  6,273
  6,675
  7,102
  7,557
  8,039
  8,550
  9,091
  9,663
  10,267
  10,905
  11,579
  12,289
  13,037
  13,826
  14,657
  15,531
  16,452
  17,420
  18,439
  19,511
Total liabilities, $m
  7,193
  7,358
  7,547
  7,760
  7,995
  8,253
  8,534
  8,838
  9,166
  9,518
  9,894
  10,296
  10,723
  11,178
  11,660
  12,171
  12,712
  13,284
  13,888
  14,526
  15,200
  15,910
  16,658
  17,447
  18,278
  19,152
  20,073
  21,041
  22,060
  23,132
Total equity, $m
  2,398
  2,453
  2,516
  2,587
  2,665
  2,751
  2,845
  2,946
  3,055
  3,173
  3,298
  3,432
  3,574
  3,726
  3,887
  4,057
  4,237
  4,428
  4,629
  4,842
  5,067
  5,303
  5,553
  5,816
  6,093
  6,384
  6,691
  7,014
  7,353
  7,711
Total liabilities and equity, $m
  9,591
  9,811
  10,063
  10,347
  10,660
  11,004
  11,379
  11,784
  12,221
  12,691
  13,192
  13,728
  14,297
  14,904
  15,547
  16,228
  16,949
  17,712
  18,517
  19,368
  20,267
  21,213
  22,211
  23,263
  24,371
  25,536
  26,764
  28,055
  29,413
  30,843
Debt-to-equity ratio
  1.490
  1.520
  1.560
  1.600
  1.640
  1.680
  1.730
  1.770
  1.810
  1.860
  1.900
  1.940
  1.990
  2.030
  2.070
  2.110
  2.150
  2.180
  2.220
  2.250
  2.290
  2.320
  2.350
  2.380
  2.410
  2.430
  2.460
  2.480
  2.510
  2.530
Adjusted equity ratio
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250
  0.250

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  64
  66
  68
  70
  72
  74
  76
  78
  80
  82
  219
  222
  224
  227
  230
  233
  236
  239
  243
  246
  250
  254
  259
  263
  268
  273
  278
  283
  289
  295
Depreciation, amort., depletion, $m
  432
  437
  444
  451
  459
  468
  478
  488
  499
  512
  340
  354
  368
  384
  401
  418
  437
  456
  477
  499
  522
  547
  572
  599
  628
  658
  690
  723
  758
  795
Funds from operations, $m
  496
  504
  512
  521
  531
  542
  553
  566
  579
  594
  559
  575
  593
  611
  630
  651
  673
  696
  720
  746
  773
  801
  831
  862
  896
  931
  967
  1,006
  1,047
  1,090
Change in working capital, $m
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  5
  5
  5
Cash from operations, $m
  495
  503
  511
  520
  530
  540
  552
  564
  578
  592
  557
  573
  591
  609
  628
  649
  670
  693
  717
  743
  769
  798
  827
  859
  892
  927
  963
  1,002
  1,042
  1,085
Maintenance CAPEX, $m
  -242
  -247
  -253
  -259
  -267
  -275
  -284
  -293
  -304
  -315
  -327
  -340
  -354
  -368
  -384
  -401
  -418
  -437
  -456
  -477
  -499
  -522
  -547
  -572
  -599
  -628
  -658
  -690
  -723
  -758
New CAPEX, $m
  -146
  -171
  -195
  -219
  -242
  -266
  -290
  -314
  -338
  -363
  -388
  -414
  -441
  -468
  -497
  -527
  -558
  -590
  -623
  -658
  -694
  -732
  -772
  -813
  -856
  -901
  -949
  -998
  -1,050
  -1,105
Cash from investing activities, $m
  -388
  -418
  -448
  -478
  -509
  -541
  -574
  -607
  -642
  -678
  -715
  -754
  -795
  -836
  -881
  -928
  -976
  -1,027
  -1,079
  -1,135
  -1,193
  -1,254
  -1,319
  -1,385
  -1,455
  -1,529
  -1,607
  -1,688
  -1,773
  -1,863
Free cash flow, $m
  107
  85
  63
  42
  21
  0
  -21
  -43
  -64
  -86
  -158
  -180
  -204
  -228
  -253
  -279
  -306
  -333
  -362
  -392
  -424
  -457
  -491
  -527
  -564
  -603
  -644
  -687
  -731
  -778
Issuance/(repayment) of debt, $m
  137
  165
  189
  212
  235
  258
  281
  304
  328
  352
  376
  402
  428
  454
  482
  511
  541
  572
  604
  638
  673
  710
  748
  789
  831
  875
  920
  969
  1,019
  1,072
Issuance/(repurchase) of shares, $m
  0
  0
  0
  1
  7
  13
  18
  24
  30
  35
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  9
  19
  29
  40
  51
  62
Cash from financing (excl. dividends), $m  
  137
  165
  189
  213
  242
  271
  299
  328
  358
  387
  376
  402
  428
  454
  482
  511
  541
  572
  604
  638
  673
  710
  748
  789
  840
  894
  949
  1,009
  1,070
  1,134
Total cash flow (excl. dividends), $m
  244
  251
  252
  255
  263
  270
  278
  286
  293
  301
  219
  221
  224
  226
  229
  232
  235
  239
  242
  246
  250
  254
  258
  262
  276
  291
  306
  322
  339
  356
Retained Cash Flow (-), $m
  -52
  -55
  -63
  -71
  -78
  -86
  -94
  -101
  -109
  -117
  -125
  -134
  -143
  -151
  -161
  -170
  -180
  -191
  -201
  -213
  -224
  -237
  -249
  -263
  -277
  -292
  -307
  -323
  -340
  -357
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  193
  195
  189
  184
  184
  184
  184
  184
  184
  184
  93
  87
  81
  75
  69
  62
  55
  48
  41
  33
  25
  17
  8
  -1
  -1
  -1
  -1
  -1
  -1
  -1
Discount rate, %
  9.10
  9.56
  10.03
  10.53
  11.06
  11.61
  12.19
  12.80
  13.44
  14.12
  14.82
  15.56
  16.34
  17.16
  18.02
  18.92
  19.86
  20.86
  21.90
  23.00
  24.15
  25.35
  26.62
  27.95
  29.35
  30.82
  32.36
  33.97
  35.67
  37.46
PV of cash for distribution, $m
  177
  163
  142
  123
  109
  95
  82
  70
  59
  49
  20
  15
  11
  8
  6
  4
  3
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  99.7
  99.3
  98.7
  98.0
  97.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.1
  96.0
  95.7
  95.3
  94.8
  94.2
  93.5

Nextera Energy Partners, LP is a limited partnership formed to acquire, manage and own contracted clean energy projects. The Company, through its limited partnership interest in NextEra Energy Operating Partners, LP (NEP OpCo), owns a portfolio of contracted renewable generation assets consisting of wind and solar projects, as well as contracted natural gas pipeline assets. The Company's primary business objective is to invest in contracted clean energy projects. As of December 31, 2016, the Company's project portfolio of clean, contracted renewable energy assets (initial portfolio) included approximately 989 megawatts (MW) of wind and solar energy generating facilities located in the United States and Canada. As of December 31, 2016, the Company's portfolio included Genesis, Northern Colorado, Tuscola Bay, Elk City, Perrin Ranch, Bluewater, Moore, Sombra, Shafter, Palo Duro, Stateline, Mammoth Plains, Jericho, Cedar Bluff Wind and Golden Hills Wind.

FINANCIAL RATIOS  of  NextEra Energy Partners, LP (NEP)

Valuation Ratios
P/E Ratio 30.6
Price to Sales 3.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 7.7
Price to Free Cash Flow 55.8
Growth Rates
Sales Growth Rate 44.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 64.5%
Cap. Spend. - 3 Yr. Gr. Rate -15.2%
Financial Strength
Quick Ratio 2
Current Ratio 0.2
LT Debt to Equity 201.3%
Total Debt to Equity 206.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 3%
Ret/ On Assets - 3 Yr. Avg. 2.7%
Return On Total Capital 1.7%
Ret/ On T. Cap. - 3 Yr. Avg. 1.1%
Return On Equity 6.1%
Return On Equity - 3 Yr. Avg. 4.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 108%
EBITDA Margin - 3 Yr. Avg. 86.3%
Operating Margin 67%
Oper. Margin - 3 Yr. Avg. 53.1%
Pre-Tax Margin 56.1%
Pre-Tax Margin - 3 Yr. Avg. 35%
Net Profit Margin 11.5%
Net Profit Margin - 3 Yr. Avg. 7.4%
Effective Tax Rate 14%
Eff/ Tax Rate - 3 Yr. Avg. 5.6%
Payout Ratio 0%

NEP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEP stock intrinsic value calculation we used $771 million for the last fiscal year's total revenue generated by NextEra Energy Partners, LP. The default revenue input number comes from 0001 income statement of NextEra Energy Partners, LP. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NEP stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 9.1%, whose default value for NEP is calculated based on our internal credit rating of NextEra Energy Partners, LP, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of NextEra Energy Partners, LP.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NEP stock the variable cost ratio is equal to 61.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NEP stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.4% for NextEra Energy Partners, LP.

Corporate tax rate of 27% is the nominal tax rate for NextEra Energy Partners, LP. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NEP stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NEP are equal to 942.8%.

Life of production assets of 39.7 years is the average useful life of capital assets used in NextEra Energy Partners, LP operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NEP is equal to 4.3%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2346 million for NextEra Energy Partners, LP - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 56.146 million for NextEra Energy Partners, LP is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of NextEra Energy Partners, LP at the current share price and the inputted number of shares is $2.6 billion.

RELATED COMPANIES Price Int.Val. Rating
TERP TerraForm Powe 13.17 0.54  str.sell
RUN Sunrun Inc. 14.83 14.11  hold
PEGI Pattern Energy 21.77 1.96  str.sell

CONTACT US       ASSET ALLOCATION

About X-FIN       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2019. All rigths reserved.