NRG Energy (NYSE: NRG) said in its Nov. 12 quarterly earnings statement that it continued to enhance its competitiveness and strategic positioning through a wide range of growth initiatives, including the proposed acquisition of Edison Mission Energy.
On Oct. 18, NRG entered into an agreement with EME, certain of its owners and other stakeholders to acquire substantially all of EME’s assets for $2.6bn, including $1.1bn of cash on hand. Upon closing, this transaction would add about 8,000 MW of generation assets, including 1,600 MW of long-term, fully contracted assets eligible for future drop down to NRG Yield, which recently got its own IPO.
The EME transaction is subject to various approvals, including the approval of the U.S. Bankruptcy Court for the Northern District of Illinois. EME and many of its subsidiaries, including coal-fired generator Midwest Generation, have been in Chapter 11 bankruptcy protection since December 2012. Assuming all conditions are met, the transaction is expected to close in the first quarter of 2014.
In another development, on July 22, 22,511,250 shares of Class A common stock in NRG Yield (NYSE: NYLD) were issued to the public. NRG Yield is an investment vehicle that holds and seeks to invest in high quality, contracted and operating conventional, renewable generation and thermal energy infrastructure assets developed, constructed, owned and/or operated by NRG. Its capital allocation strategy is focused on dividend growth funded by reliable long term cash flows generated by its highly contracted portfolio of generating assets. NRG Energy received proceeds, net of underwriting discounts, commissions and fees, of about $462m from the offering.
There have also been recent developments on the solar power front.
- Agua Caliente – As of Sept. 30, NRG achieved commercial operations of 290 MW of capacity of Agua Caliente, making it the largest operating solar photovoltaic (PV) project in the world. Construction is several months ahead of schedule and is currently expected to reach full completion in early 2014. Power generated by Agua Caliente is being sold under a 25-year power purchase agreement (PPA) to Pacific Gas and Electric (PG&E). NRG owns a 51% interest in the project.
- CVSR – On Oct. 31, NRG achieved full and on time commercial operations of the 250 MW California Valley Solar Ranch (CVSR) project. Power from this project is being sold to PG&E under 25-year PPAs.
- Ivanpah – On Sept. 24, NRG achieved the critical “first sync” major milestone for the project – producing its first output of energy of the Ivanpah Solar Electric Generating System. All units (total of 378 MW) are currently expected to be completed in the 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 Southern California Edison (SCE) under a 20-year PPA.
In the conventional power area:
- Gregory – On Aug. 7, NRG closed on a buy of the approximately 400 MW, 160 MWt Gregory cogen in Corpus Christi, Texas, for about $245m, net of cash acquired. This deal expanded NRG’s growing cogen fleet and provided NRG with additional cost-effective baseload power in the Electric Reliability Council of Texas (ERCOT) region.
- El Segundo – On Aug. 1, NRG achieved commercial operations of twin units at its El Segundo Power Generating Station, a 550-MW fast start, gas turbine combined cycle facility in El Segundo, Calif. The facility was constructed under a 10-year, 550-MW PPA with SCE.
In the category of potential drop-down of assets to NRG Yield, NRG intends to offer the following NRG right of first offer assets to NRG Yield through 2014:
- TA High Desert – 20 MW solar facility located in LA County, Calif.
- RE Kansas South – 20 MW solar facility located in Kings County, Calif.
- El Segundo Energy Center – 550 MW fast start natural gas-fired facility located in LA County, Calif.
- CVSR – Remaining NRG interest in this 250 MW solar facility located in San Luis Obispo County, Calif.
The proceeds from these drop downs would increase NRG’s capital available for allocation.