NRG says GenOn merger going smoothly, solar growing

NRG Energy (NYSE: NRG) said during its earnings call Nov. 2 that its planned merger with GenOn (NYSE: GEN) is going smoothly and the company’s Northeast operations escaped significant damage during Hurricane Sandy.

NRG headquarters in New Jersey was still running on backup power as of Nov. 2, said CEO David Crane. But the Northeast generating plants did well and most were online during the storm period, the CEO said.

As for GenOn, completion of the combination is still expected by the first quarter of 2013.

The GenOn deal received approval from the Texas Public Utility Commission Oct. 25. A special meeting for shareholder approval at both NRG and GenOn is scheduled for Nov. 9 NRG said about $175m in cost “synergies” are anticipated through combination of the two independent producers.

“The approval process is still well on track and no major substantive issue has been raised,” Crane said.

As for operations, NRG’s Petra Nova subsidiary continues with the development of its peaking unit at NRG’s W.A. Parish Generating Station in Texas. On Aug. 14, it signed a $24m lump-sum, turnkey engineering, procurement and construction (EPC) contract.

Petra Nova is targeting a May 2013 commercial operation date, and it is anticipated that the unit will eventually be used as a cogeneration facility dedicated to a carbon capture utilization and storage project, sponsored in part by the Department of Energy, at the Parish facility. The peaking unit is being financed, in part with the proceeds of a $54m tax-exempt bond financing that was completed on May 3, of which NRG has drawn $16m through Sept. 30.

The Electric Reliability Commission of Texas (ERCOT) saw record monthly peak loads in June, July and September with near-normal weather, NRG said. The lack of consistent hot temperatures minimized scarcity pricing, however.

NRG’s ERCOT plans saw a 13% decline in coal generation due to longer plant outages in 2012. The company’s South Central region saw a 5% decline in coal generation that was partially offset by a 10% increase in generation at Cottonwood as compared to the third quarter of 2011.

Overall, NRG had roughly 335 MW of utility-scale solar projects online in the third quarter, including partner-owned capacity.

NRG bullish on solar development, Crane says

“We obviously are incredibly bullish on solar,” Crane said. Solar is driven by tax matters to an extent, but it is also capital driven, the CEO said.

** Agua Caliente has achieved commercial operation of 230 MW of solar PV as of Sept. 30, making it the largest such installation in the United States.  Overall, construction at Agua Caliente is several months ahead of schedule. Power generated by Agua Caliente will be sold under a 25-year power purchase agreement (PPA) with Pacific Gas and Electric, a PG&E (NYSE: PCG) subsidiary.

** California Valley Solar Ranch (CVSR) construction is advancing well with 22 MW achieving commercial operation Sept. 19. NRG expects to have 125 MW completed in the latter half of 2013. Power from this project will be sold to PG&E under 25-year PPAs.

** Ivanpah’s 124-MW Unit 1 is expected to produce its first steam in January 2013 and be completed and producing power in May 2013. The remaining two units (each at 127 MWs) are currently expected to be completed in the third and fourth quarter of 2013. 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 Edison International (NYSE: EIX) subsidiary Southern California Edison under a 20-year PPA.

NRG Solar also has several other smaller projects under construction that are expected to reach commercial operation within 2012; ranging from the Borrego project (26 MWs under a 25-year PPA with San Diego Gas and Electric) to smaller Distributed Generation scale installations, such as our “showcase” solar projects currently operating or under construction at four NFL stadiums.

NRG reported third quarter 2012 adjusted EBITDA of $657m with Wholesale contributing $449m, Retail contributing $173m and Solar projects contributing $35m. The company reported third quarter 2012 net loss of $1m, or ($0.01) per diluted common share compared, to a net loss of $55m, or ($0.24) per diluted common share, for the third quarter of 2011.

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.