NRG completes Yield IPO; brings on lots of new generation

NRG Energy (NYSE:NRG) has successfully spun off its NRG Yield unit and recently achieved commercial operation of some major new natural gas power plants in California, the company reported Aug. 9 in a quarterly earnings announcement.

“We are almost done,” with a major power plant building phase, NRG President and CEO David Crane told financial analysts during a conference call.

NRG is completing a $5bn construction program that includes the building of 1,407 MW of conventional generation and 835 MW of solar power generation. The conventional projects are now online and the solar projects should be completed by early 2014, NRG said.

The IPO gleaned $462m of net proceeds, NRG Energy said. In other financial highlights, NRG reported $594m of Adjusted EBITDA in the second quarter, including $140m delivered by NRG’s retail businesses.

NRG is also poised to reap more financial benefit from its recent merger with GenOn.

During the call, Crane observed that today’s market really does not support much construction of merchant generation, with the exception of “replacement” projects. An example is Southern California’s need to replace the output of the Edison International (NYSE:EIX) San Onofre nuclear plant, Crane said.

As far of potential mergers and acquisitions, there are many “willing sellers” around but they often have an unrealistic idea of what their assets are worth today, Crane said.

NRG built, bought power units so far in 2013

On the operational front, NRG reported that full commercial operation of the 550-MW El Segundo project was reached on Aug. 1. In addition, NRG also started commercial operation of the 720-MW Marsh Landing project during the second quarter.

Most recently NRG also achieved closed the acquisition of the 390-MW (160MWt) Gregory cogeneration project in Texas on Aug. 7.

In addition, NRG reported that its 75-MW natural gas peaking unit has come online at the W.A. Parish power plant in Texas. Likewise, NRG also completed 62 MW coal to gas conversion at its facility in Dover, Del.

NRG also Acquired a 26 MW contracted solar project in advanced development on Guam and announced the planned installation of solar arrays at the Mandalay Bay Resort Convention Center in Las Vegas.

NRG also expect full operation of the Ivanpah solar project by the 4th quarter.

Mild weather in Texas was one reason that NRG has decided to lower its financial guidance for 2013, Crane said. This could break a long-running NRG streak for meeting its guidance. The impact of the mild weather in Texas was blunted somewhat by a heat wave in the Northeast, NRG officials said.

The extended outage at the South Texas Project, which NRG is a major partner in, also hurt company results during the first six months, Crane said.

Crane also noted that he is hitting his 10-year anniversary with NRG and might soon be selling off a small portion of his NRG stock. The CEO stressed that he remains a major NRG stockholder and is bullish on the company. The executive said he wanted to alert analysts in advance so they wouldn’t be taken by surprise.

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.