SEC Comment Letter for XPLR Infrastructure, LP (XIFR) (CIK 0001603145) (XIFR) — May 5, 2014
XPLR Infrastructure, LP (XIFR) (CIK 0001603145)
Date: May 5, 2014 · CIK: 0001603145 · Accession: 0000000000-14-022727
AI Filing Summary & Sentiment
Reasoning
Letter
May 2, 2014 Via E -mail James L. Robo Chief Executive Officer NextEra Energy Partners, LP 700 Universe Boulevard Juno Beach, Florida 33408
Re: NextEra Energy Partners, LP Draft Registration Statement on Form S -1 Submitted April 4, 2014 CIK No. 0001603145
Dear Mr. Robo :
We have reviewed your draft registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this let ter by providing the requested information and either submitting an amended draft registration statement or publicly filing your registration statement on EDGAR. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments and your amended draft registration statement or filed registration statement, we may have additional comments.
General
1. Please supplementally provide us with copies of all written communications, as defined in Rule 405 under the Securities Act, that you , or anyone authorized to do so on your behalf , present to potential investors in reliance on Section 5(d) of the Securities Act, whether or not they retain copies of the communications. Similarly, please supplementally provide us with any research reports about you that are published or distributed in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is participating or will participate in your offering.
2. We note a number of blank spaces throughout your registration statement f or information that you are not entitled to omit under Rule 430A. Please revise throughout the prospectus to include all information that may not properly be excluded under Rule
James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 2
430A. Please provide all the information required with respect to the offering price, underwriting discounts and the number of shares. Please allow sufficient time to review your complete disclosure prior to any distribution of preliminary prospectuses. We may have further comments once items that are currently blank are completed.
3. Please supplementally provide us with copies of any graphical materials or artwork you intend to use in your prospectus. Upon review of these materials, we may have further comments. Please refer to Question 101.02 of our Compliance and Disclosure Interpr etations relating to Securities Act Forms, which are available on our website.
4. Prior to the effectiveness of this registration statement, please note we will need to receive a copy of the letter or a call from FINRA confirming that FINRA has completed its review and has no further concerns regarding the underwriting terms and arrangements pertaining to this offering.
5. With respect to all third -party statements in your prospectus - such as market data by Bloomberg New Energy Finance, the U.S. Energy Informa tion Administration and Fortune - please provide us with the relevant portion of the industry research reports you cite. To expedite our review, please clearly mark each source to highlight the applicable portion of the section containing the statistic, an d cross -reference it to the appropriate location in your prospectus. Also, please tell us whether any of the reports were prepared for you or in connection with the offering.
6. Please revise your filing to provide the tax disclosure contemplated by Securiti es Act Industry Guide 5 ( Preparation of registration s tatements relating to interests in real estate limited partnerships ) and Securities Act Release No. 33 -6900, as well as to provide a tax opinion satisfying the requirements of Item 601(b)(8) of Regulati on S-K and Staff Legal Bulletin No. 19 ( Legality and Tax Opinions in Registered Offerings ). Alternatively, if you believe such disclosure and opinion are not required, please tell us why.
Prospectus Cover Page
7. Please revise the cover page to provide a l ist of the most significant risks applicable to your transaction (e.g., a lack of sufficient cash to pay minimum quarterly distributions, conflicts of interest with your GP and its affiliates, debt, etc.). Please refer to Section II.A.3.a of Securities Ac t Release No. 33 -6900.
Prospectus Summary, page 1
8. Please provide support for your statement that you “intend to take advantage of favorable trends in the North American energy industry, including the ongoing trend of clean energy projects replacing aging or uneconomic projects, demand by utilities for renewable energy to meet state RPS requirements and the improving competitiveness of
James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 3
clean energy relative to other fuels.” This comment applies to the similar statements appearing on page 95.
9. We note you r disclosure on page 2 that NextEra has increased its portfolio at an average rate of 14% per year. Please disclose what this growth rate represents. For example, please disclose whether the portfolio has grown in terms of dollars or GW of renewable energy. This comment applies to the similar statement made on page 121.
Risk Factors, page 8
10. Please revise your disclosure to provide a list of the most significant risks applicable to your transaction.
The Offering, page 15
11. We note your disclosure regarding the purchase price adjustment on pages 17 and 70 that on a pro forma basis NEE Equity would have paid purchase price adjustments related to the year ended December 31, 2013 as NEE Operating LP’s unaudited pro forma cash available for distribution for that period would have been insufficient to pay a cash distribution equal to your minimum quarterly distribution. Please also tell us how you plan to account for any receipts of purchase price adjustments from NEE Equity in yo ur financial statements, the GAAP basis for such treatment and provide hypothetical journal entries.
Purchase price adjustment, page 17
12. We note your disclosure that any unpaid portion of the purchase price adjustment will accrue and be payable from dis tributions received by NEE Equity in each subsequent quarter. Please clarify the terms of these accruals, specifically whether the accruals will bear interest, and whether NEE Equity is obligated to pay past accruals prior to paying any quarterly purchase price adjustment.
Summary Historical and Pro Forma Financial Data, page 21
13. As you have included amounts attributable to non -controlling interests on a pro forma basis in arriving at “Net income attributable to NEE Partners” on pages 22 and 93, please tell us why you have not included an amount for the pro forma period within the “Adjusted EBITDA attributable to NextEra Energy Partners, LP” line item. Further, as this appears to be a non -GAAP measure, please incorporate this amount in your non - GAAP recon ciliation on pages 23 and 94 and include related non -GAAP disclosures.
14. Please confirm our assumption that you will include the December 31, 2013 pro forma balance sheet data of NEE Partners within the Balance Sheet Data (at period end) section on pages 22 and 93 once it is finalized.
James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 4
15. We note no placeholder for pro forma earnings per unit information either here or within selected financial data on page 93. Please explain the omission or confirm that you will include pro forma earnings per unit informatio n in these sections once it is available to you. Please also provide a footnote explaining why earnings per unit for the historical periods have been omitted.
Our Cash Distribution Policy and Restrictions on Distributions , page 65
Restrictions and Limit ations on Our Cash Distributions… , page 65
16. You disclose in the last bullet point on page 66 that with respect to the ability of the Manager or its affiliates to withdraw funds received by your subsidiaries, that to the extent the Manager and its affiliates choose not to return withdrawn funds to yo u and NEE Operating LP does not demand their return, the amount of cash available to be used for acquisitions, growth projects and distributions to unitholders would be reduced. You also disclose on page 81 that NEE Operating LP’s partnership agreement re quires it to distribute available cash, which appears to include “funds withdrawn by the Manager which remain unreturned.” Please explain how unreturned funds as described on page 66 would impact cash distributions to unitholders. Please specially tell u s if withdrawn funds are included in the definition of available cash. If our understanding is not correct, please clarify it. In this regard, you may want to explain for the staff’s benefit, the purpose of allowing NEER to withdraw funds received by your subsidiaries.
Minimum Quarterly Distribution of NEE Operating LP, page 69
17. We note your disclosure on page 70 that your pro forma historical and forecasted results presented in the sections beginning on pages 70 and 72 are that of NEE Operating LP. As the cash ultimately distributed by NEE Partners may vary from the distribution received by NEE Partners from NEE Operating LP, please ensure any differences are highlighted in a reconciliation format within your presentations of distributions for the pro fo rma historical and forecasted periods on pages 72, and 74, respectively. In other words, please reconcile the cash received by NEE Partners from NEE Operating LP to the distribution to common unitholders of NEE Partners and narrate any significant implici t assumptions, such as no estimated GP cash holdbacks, or the receipt of purchase price adjustments as contemplated on page 70.
Estimated Cash Available for Distribution for the Twelve -Month Period …, page 72
18. Please tell us what periods you plan to presen t for both your historical unaudited pro forma cash available for distribution and future estimated cash available for distribution disclosures currently provided on pages 70, and 72, respectively, if and when you update your Predecessor’s financial statem ents. When the periods presented are updated, please also disclose whether there are any events that have occurred or are expected to occur
James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 5
during the period after the end of the historical pro forma period and beginning of the projected pro forma period that would cause the omitted period to materially change the results of the projected or historical period if such omitted period was included in the applicable historical or projected period.
19. We note from your disclosure at the bottom of page 72 that you r forecast of estimated cash available for distribution is provided to support your belief that you will have sufficient cash available to allow you to pay cash distributions at the minimum quarterly distribution rate. We also note your disclosure on page 65 that you currently expect that cash reserves would be established solely to provide for the payment of income taxes. However, since the calculation of Available Cash, which governs the actual cash distribution that will be made, contemplates that the GP could hold cash back from distribution for certain reasons, please confirm the implicit assumption that no cash hold backs are anticipated d uring the 12 month period ending June 30, 2015. Please also disclose this fact to your investors. If cash hold backs are anticipated, your forecast should be adjusted for such cash reserves that would reduce the amount available to meet the minimum quarterly distribution.
Assumptions and Considerations , page 75
Operating Revenues, page 76
20. You disclose on page 77 your forecast assumes revenues of $322 million and 2.7 million MWh of energy produced for the twelve -month period ending June 30, 2015, as compared to revenues of $141.8 million and 1.7 million MWh of energy produced for the pro forma year ended December 31, 2013. Based on these assumptions, it appears the rate per MWh you are earning on energy produced for the forecasted period is significantly higher than the historical period. Please help us understand the non -lineal increase in revenues relative to M Wh production in the forecasted period with a view toward expanding your discussion of revenue, or otherwise explaining what the caused the non -lineal relationship.
Capital Expenditures, page 78
21. We have read your assumptions regarding capital expenditu res for expansion versus maintenance on page 78. Please discuss how you estimated maintenance capital expenditures of $3.5 million or the updated amount if a new estimate of future cash available for distribution is included in your next amendment. Pleas e be detailed in your description of how you develop this estimate including the specific type(s) of maintenance capital expenditures encompassed in your estimate considering the relative age of such assets. Additionally, please expand upon and provide a bridge between the narrative description of the expansion capital expenditures to the estimated dollar amount, discussing the specific type of expenditures you expect, including the number of
James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 6
and types of assets, or tell us why you do not believe this info rmation is useful in understanding your assumptions.
22. Please refer to your disclosures concerning forecasted capital expenditures on page 78. We note that you have subdivided your total forecasted capital expenditures into either maintenance capital expen ditures or expansion capital expenditures. Please tell us whether you anticipate any capital expenditures during the forecasted period that would have characteristics of both maintenance and expansion. If so, please revise your disclosure to explain usin g relevant examples of how you determine the portion to be allocated to maintenance and the portion to be allocated to expansion. We believe this is useful information for your investors because the methodology for allocating capital expenditures with asp ects of both maintenance and expansion involves significant judgment. Additionally, please quantify the capital expenditures that you expect will have characteristics of both maintenance and expansion, and quantify the portion of such expenditures that yo u have allocated to expansion.
Provisions of the Partnership Agreements and Other Arrangements…, page 80
Distributions of Available Cash by NEE Operating LP, page 81
23. You disclose on page 81 that NEE Operating is required to distribute its available cash to unitholders, and on page 82 that amounts necessary to pay IDR Fee payments “effectively reduce” available cash. Additionally, you disclose on page 88 that NEE Opera ting LP will make distributions of 100% of available cash from operating surplus, and on page 83 that the IDR Fee is an operating expenditure that reduces operating surplus. As the IDR Fee appears to be determined based on the cash distributed, which is determined by the amount of available cash and operating surplus, the description of this calculation appears to have components that are circular in nature. If our understanding of your characterization is incorrect, please clarify it or make whatever tex tual changes are necessary. Additionally, please provide us a hypothetical example of the quarterly process by which a distribution amount is determined under the terms of the partnership agreement, both where amounts are earned pursuant to the IDR waterf all as well as no amounts are earned. Please be comprehensive in your example.
Incentive Distribution Right Fee, page 88
24. You disclose in the last sentence in the first paragraph under this section as well as in the first sentence on page 90, that alth ough cash used to pay the IDR
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May 2, 2014 Via E -mail James L. Robo Chief Executive Officer NextEra Energy Partners, LP 700 Universe Boulevard Juno Beach, Florida 33408 Re: NextEra Energy Partners, LP Draft Registration Statement on Form S -1 Submitted April 4, 2014 CIK No. 0001603145 Dear Mr. Robo : We have reviewed your draft registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this let ter by providing the requested information and either submitting an amended draft registration statement or publicly filing your registration statement on EDGAR. If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response. After reviewing the information you provide in response to these comments and your amended draft registration statement or filed registration statement, we may have additional comments. General 1. Please supplementally provide us with copies of all written communications, as defined in Rule 405 under the Securities Act, that you , or anyone authorized to do so on your behalf , present to potential investors in reliance on Section 5(d) of the Securities Act, whether or not they retain copies of the communications. Similarly, please supplementally provide us with any research reports about you that are published or distributed in reliance upon Section 2(a)(3) of the Securities Act of 1933 added by Section 105(a) of the Jumpstart Our Business Startups Act by any broker or dealer that is participating or will participate in your offering. 2. We note a number of blank spaces throughout your registration statement f or information that you are not entitled to omit under Rule 430A. Please revise throughout the prospectus to include all information that may not properly be excluded under Rule James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 2 430A. Please provide all the information required with respect to the offering price, underwriting discounts and the number of shares. Please allow sufficient time to review your complete disclosure prior to any distribution of preliminary prospectuses. We may have further comments once items that are currently blank are completed. 3. Please supplementally provide us with copies of any graphical materials or artwork you intend to use in your prospectus. Upon review of these materials, we may have further comments. Please refer to Question 101.02 of our Compliance and Disclosure Interpr etations relating to Securities Act Forms, which are available on our website. 4. Prior to the effectiveness of this registration statement, please note we will need to receive a copy of the letter or a call from FINRA confirming that FINRA has completed its review and has no further concerns regarding the underwriting terms and arrangements pertaining to this offering. 5. With respect to all third -party statements in your prospectus - such as market data by Bloomberg New Energy Finance, the U.S. Energy Informa tion Administration and Fortune - please provide us with the relevant portion of the industry research reports you cite. To expedite our review, please clearly mark each source to highlight the applicable portion of the section containing the statistic, an d cross -reference it to the appropriate location in your prospectus. Also, please tell us whether any of the reports were prepared for you or in connection with the offering. 6. Please revise your filing to provide the tax disclosure contemplated by Securiti es Act Industry Guide 5 ( Preparation of registration s tatements relating to interests in real estate limited partnerships ) and Securities Act Release No. 33 -6900, as well as to provide a tax opinion satisfying the requirements of Item 601(b)(8) of Regulati on S-K and Staff Legal Bulletin No. 19 ( Legality and Tax Opinions in Registered Offerings ). Alternatively, if you believe such disclosure and opinion are not required, please tell us why. Prospectus Cover Page 7. Please revise the cover page to provide a l ist of the most significant risks applicable to your transaction (e.g., a lack of sufficient cash to pay minimum quarterly distributions, conflicts of interest with your GP and its affiliates, debt, etc.). Please refer to Section II.A.3.a of Securities Ac t Release No. 33 -6900. Prospectus Summary, page 1 8. Please provide support for your statement that you “intend to take advantage of favorable trends in the North American energy industry, including the ongoing trend of clean energy projects replacing aging or uneconomic projects, demand by utilities for renewable energy to meet state RPS requirements and the improving competitiveness of James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 3 clean energy relative to other fuels.” This comment applies to the similar statements appearing on page 95. 9. We note you r disclosure on page 2 that NextEra has increased its portfolio at an average rate of 14% per year. Please disclose what this growth rate represents. For example, please disclose whether the portfolio has grown in terms of dollars or GW of renewable energy. This comment applies to the similar statement made on page 121. Risk Factors, page 8 10. Please revise your disclosure to provide a list of the most significant risks applicable to your transaction. The Offering, page 15 11. We note your disclosure regarding the purchase price adjustment on pages 17 and 70 that on a pro forma basis NEE Equity would have paid purchase price adjustments related to the year ended December 31, 2013 as NEE Operating LP’s unaudited pro forma cash available for distribution for that period would have been insufficient to pay a cash distribution equal to your minimum quarterly distribution. Please also tell us how you plan to account for any receipts of purchase price adjustments from NEE Equity in yo ur financial statements, the GAAP basis for such treatment and provide hypothetical journal entries. Purchase price adjustment, page 17 12. We note your disclosure that any unpaid portion of the purchase price adjustment will accrue and be payable from dis tributions received by NEE Equity in each subsequent quarter. Please clarify the terms of these accruals, specifically whether the accruals will bear interest, and whether NEE Equity is obligated to pay past accruals prior to paying any quarterly purchase price adjustment. Summary Historical and Pro Forma Financial Data, page 21 13. As you have included amounts attributable to non -controlling interests on a pro forma basis in arriving at “Net income attributable to NEE Partners” on pages 22 and 93, please tell us why you have not included an amount for the pro forma period within the “Adjusted EBITDA attributable to NextEra Energy Partners, LP” line item. Further, as this appears to be a non -GAAP measure, please incorporate this amount in your non - GAAP recon ciliation on pages 23 and 94 and include related non -GAAP disclosures. 14. Please confirm our assumption that you will include the December 31, 2013 pro forma balance sheet data of NEE Partners within the Balance Sheet Data (at period end) section on pages 22 and 93 once it is finalized. James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 4 15. We note no placeholder for pro forma earnings per unit information either here or within selected financial data on page 93. Please explain the omission or confirm that you will include pro forma earnings per unit informatio n in these sections once it is available to you. Please also provide a footnote explaining why earnings per unit for the historical periods have been omitted. Our Cash Distribution Policy and Restrictions on Distributions , page 65 Restrictions and Limit ations on Our Cash Distributions… , page 65 16. You disclose in the last bullet point on page 66 that with respect to the ability of the Manager or its affiliates to withdraw funds received by your subsidiaries, that to the extent the Manager and its affiliates choose not to return withdrawn funds to yo u and NEE Operating LP does not demand their return, the amount of cash available to be used for acquisitions, growth projects and distributions to unitholders would be reduced. You also disclose on page 81 that NEE Operating LP’s partnership agreement re quires it to distribute available cash, which appears to include “funds withdrawn by the Manager which remain unreturned.” Please explain how unreturned funds as described on page 66 would impact cash distributions to unitholders. Please specially tell u s if withdrawn funds are included in the definition of available cash. If our understanding is not correct, please clarify it. In this regard, you may want to explain for the staff’s benefit, the purpose of allowing NEER to withdraw funds received by your subsidiaries. Minimum Quarterly Distribution of NEE Operating LP, page 69 17. We note your disclosure on page 70 that your pro forma historical and forecasted results presented in the sections beginning on pages 70 and 72 are that of NEE Operating LP. As the cash ultimately distributed by NEE Partners may vary from the distribution received by NEE Partners from NEE Operating LP, please ensure any differences are highlighted in a reconciliation format within your presentations of distributions for the pro fo rma historical and forecasted periods on pages 72, and 74, respectively. In other words, please reconcile the cash received by NEE Partners from NEE Operating LP to the distribution to common unitholders of NEE Partners and narrate any significant implici t assumptions, such as no estimated GP cash holdbacks, or the receipt of purchase price adjustments as contemplated on page 70. Estimated Cash Available for Distribution for the Twelve -Month Period …, page 72 18. Please tell us what periods you plan to presen t for both your historical unaudited pro forma cash available for distribution and future estimated cash available for distribution disclosures currently provided on pages 70, and 72, respectively, if and when you update your Predecessor’s financial statem ents. When the periods presented are updated, please also disclose whether there are any events that have occurred or are expected to occur James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 5 during the period after the end of the historical pro forma period and beginning of the projected pro forma period that would cause the omitted period to materially change the results of the projected or historical period if such omitted period was included in the applicable historical or projected period. 19. We note from your disclosure at the bottom of page 72 that you r forecast of estimated cash available for distribution is provided to support your belief that you will have sufficient cash available to allow you to pay cash distributions at the minimum quarterly distribution rate. We also note your disclosure on page 65 that you currently expect that cash reserves would be established solely to provide for the payment of income taxes. However, since the calculation of Available Cash, which governs the actual cash distribution that will be made, contemplates that the GP could hold cash back from distribution for certain reasons, please confirm the implicit assumption that no cash hold backs are anticipated d uring the 12 month period ending June 30, 2015. Please also disclose this fact to your investors. If cash hold backs are anticipated, your forecast should be adjusted for such cash reserves that would reduce the amount available to meet the minimum quarterly distribution. Assumptions and Considerations , page 75 Operating Revenues, page 76 20. You disclose on page 77 your forecast assumes revenues of $322 million and 2.7 million MWh of energy produced for the twelve -month period ending June 30, 2015, as compared to revenues of $141.8 million and 1.7 million MWh of energy produced for the pro forma year ended December 31, 2013. Based on these assumptions, it appears the rate per MWh you are earning on energy produced for the forecasted period is significantly higher than the historical period. Please help us understand the non -lineal increase in revenues relative to M Wh production in the forecasted period with a view toward expanding your discussion of revenue, or otherwise explaining what the caused the non -lineal relationship. Capital Expenditures, page 78 21. We have read your assumptions regarding capital expenditu res for expansion versus maintenance on page 78. Please discuss how you estimated maintenance capital expenditures of $3.5 million or the updated amount if a new estimate of future cash available for distribution is included in your next amendment. Pleas e be detailed in your description of how you develop this estimate including the specific type(s) of maintenance capital expenditures encompassed in your estimate considering the relative age of such assets. Additionally, please expand upon and provide a bridge between the narrative description of the expansion capital expenditures to the estimated dollar amount, discussing the specific type of expenditures you expect, including the number of James L. Robo NextEra Energy Partners, LP May 2, 2014 Page 6 and types of assets, or tell us why you do not believe this info rmation is useful in understanding your assumptions. 22. Please refer to your disclosures concerning forecasted capital expenditures on page 78. We note that you have subdivided your total forecasted capital expenditures into either maintenance capital expen ditures or expansion capital expenditures. Please tell us whether you anticipate any capital expenditures during the forecasted period that would have characteristics of both maintenance and expansion. If so, please revise your disclosure to explain usin g relevant examples of how you determine the portion to be allocated to maintenance and the portion to be allocated to expansion. We believe this is useful information for your investors because the methodology for allocating capital expenditures with asp ects of both maintenance and expansion involves significant judgment. Additionally, please quantify the capital expenditures that you expect will have characteristics of both maintenance and expansion, and quantify the portion of such expenditures that yo u have allocated to expansion. Provisions of the Partnership Agreements and Other Arrangements…, page 80 Distributions of Available Cash by NEE Operating LP, page 81 23. You disclose on page 81 that NEE Operating is required to distribute its available cash to unitholders, and on page 82 that amounts necessary to pay IDR Fee payments “effectively reduce” available cash. Additionally, you disclose on page 88 that NEE Opera ting LP will make distributions of 100% of available cash from operating surplus, and on page 83 that the IDR Fee is an operating expenditure that reduces operating surplus. As the IDR Fee appears to be determined based on the cash distributed, which is determined by the amount of available cash and operating surplus, the description of this calculation appears to have components that are circular in nature. If our understanding of your characterization is incorrect, please clarify it or make whatever tex tual changes are necessary. Additionally, please provide us a hypothetical example of the quarterly process by which a distribution amount is determined under the terms of the partnership agreement, both where amounts are earned pursuant to the IDR waterf all as well as no amounts are earned. Please be comprehensive in your example. Incentive Distribution Right Fee, page 88 24. You disclose in the last sentence in the first paragraph under this section as well as in the first sentence on page 90, that alth ough cash used to pay the IDR