NRG updates everything from solar projects to coal power

During a quarterly earnings call Aug. 8, NRG Energy (NYSE: NRG) CEO David Crane said no one has “raised their hands” and objected to NRG’s proposed merger with GenOn (NYSE: GEN).

As a result, Crane expressed confidence that the merger announced in July will go forward. NRG hopes to have the GenOn deal final by early 2013, enabling NRG to form the largest competitive power provider in the United States.

In other news, Crane said NRG will pass a major corporate milestone this summer when the company pays its first dividend to shareholders.

During the call, Crane and his management team hop-scotched across a wide variety of topics, from updating the progress of renewable energy projects to discussing how NRG gas plants in Southern California benefit from an outage at Edison International’s (NYSE: EIX) San Onofre nuclear plant.

Crane: Solar construction going well

The NRG CEO said the company’s solar construction is ahead of schedule and on budget with over 260 MW currently in operation and more than 850 MW under construction:

  • The Agua Caliente project in Arizona has achieved commercial operation of 200 MW following the U.S. Department of Energy’s permission to accelerate the block completion schedule. NRG expects to reach commercial operation on 228 MW of this capacity by year end 2012 and a full commercial operation date by March 2014, three months earlier than planned. Power generated by Agua Caliente will be sold under a 25‐year power purchase agreement (PPA) with Pacific Gas and Electric (PG&E).
  • The California Valley Solar Ranch will see power generation from the first phase in early September. “We continue to expect all other phases of the project to be completed earlier than the dates anticipated at the time the project was acquired, with 127 MW on line by the end of 2012 and the remaining 123 MW completed in the fourth quarter of 2013,”  Crane said. Power from this project will be sold to PG&E under a 25‐year contract.
  • Ivanpah 1 (126 MW) is expected to produce its first steam this November and be completed and producing power in early April of next year. The remaining two units (each at 133 MW) are expected to be completed in the latter half of 2013, several weeks ahead of schedule, NRG said. Power from units 1 and 3 will be sold to PG&E via two 25‐year PPAs, and power from unit 2 will be sold to SoCal Edison under a 20‐year agreement.

NRG Solar also has several other, smaller projects under construction that are expected to reach commercial operation within 2012, ranging from the Alpine project (66 MW under a 20‐year PPA with PG&E) to smaller distributed generation scale installations such as football stadium projects.

NRG sees opportunity in California market

NRG’s conventional natural gas fleet continues to grow, with two new units under construction at its El Segundo facility in California. These units, totaling 550 MW, are on track to reach commercial operation in August 2013, the company said.

The ongoing outage of the San Onofre nuclear plant has both increased market interest in power from NRG’s existing Encina power plant in Carlsbad, Calif., and improved the commercial prospects of NRG’s proposed new gas plant, Crane said. NRG has proposed the 558-MW Carlsbad Energy Center to replace the three older units at the existing Encina plant.

The San Onofre nuclear station is a big generator, with roughly 2,000 MW of capacity, and no one knows for sure when it will return to service, NRG officials said, adding that this has affected market demand in California.

Speaking of nuclear power, NRG’s Texas operations benefitted by increased generation at the South Texas nuclear plant during the second quarter. This was largely because South Texas 1 had its regularly scheduled refueling outage in the first quarter of 2011.  

Company officials noted that they are negotiating a new supply contract for the Limestone coal plant in Texas.

On another regional topic, Crane said there is increasing interest in some type of capacity market for Texas, although it will not necessarily resemble the one used in PJM.

NRG’s Cottonwood plant in East Texas saw an increase in generation of 81% as it benefitted from coal-to-gas switching. NRG’s Big Cajun II plant in Louisiana saw its expenses rise due to increased outage work.

In the Northeast, NRG was hit by a combination of lower average realized prices and a decline in coal generation as the region was significantly impacted by coal‐to‐gas switching. Eastern power conditions remain in flux with generators still deciding whether to retrofit or retire certain coal units to comply with tougher EPA standards.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.