Solar provides bright spot amid NRG Energy’s disappointing results

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NRG Energy solar assets provided a bright spot amid otherwise disappointing quarterly earnings, the company said today.

The largest Independent Power Producer in the US has had to adjust its earnings guidance for 2013 by 3%-4% because of mild weather in Texas and lower wholesale electricity prices. The adjusted EBITDA for 2013 was reduced to $2.55bn to $2.7bn.

David Crane, chief executive of NRG Energy, said: “If there is a silver lining it is that in 2014 we will be in a much better position to reap the benefit of long term strategic plan to diversify our financial performance away from 100% dependence on cyclical commodity risk into a broader and more resilient set of revenue streams.”

Crane pointed to the timely completion of almost all of 835MW solar projects, part of a $5bn construction programme, including parts of large-scale PV projects at Agua Caliente and the California Valley Solar Ranch (CVSR) facility. Over 265MW of 390MW aggregated power are operational.

Crane admitted that completion of the $2.2bn Ivanpah plant, co-owned by NRG Energy, BrightSource Energy and Google, had slipped to the fourth quarter of this year.

“At this point all units at Ivanpah are at or very near physically completed and the multi-stage commissioning process is being done. We are moving through the commissioning process deliberately and thoroughly to make sure it is done right.

“We are increasingly confident that this groundbreaking solar thermal project is going to be a big success when it achieves commercial operation in the fourth quarter of 2013.”

NRG Yield's initial public offering closed last month, raising $462 million in cash. The second quarter adjusted EBITDA was $61 million; $36 million higher than second quarter 2012. The improvement was driven by assets that achieved commercial operations in 2013, including the Borrego, Alpine and Avra Valley solar facilities.

NRG Yield is listed on the NYSE and is currently trading at $28.42/share, with an implied 2014 EBITDA multiple of 12.8x.

“NRG Yield significantly enhances our strategic competitiveness in two of our three critical business areas,” said Crane. “This is a very important development in terms of our growth aspirations for our renewables business because at long last there are signs at long last that the big strategic players in our industry are awakening from their long slumber and finally recognising both the opportunity and the risk to them that solar represents. And some of them are trying to get active with their lower cost of capital in acquiring contracted solar assets.

“NRG Yield goes a long way to reducing or eliminating our costs of capital which is an advantage to them making it possible for us to continue to win projects and opportunities based on our greater nimbleness and our understanding of the renewables space, in particular the solar business.”

NRG retains a 65.5% economic and voting interest in NRG Yield, which in turn holds a right of first offer for six additional contracted assets currently owned by NRG, which has a further 66MW in new utility scale projects including largest contiguous rooftop solar array in the world at Mandalay Bay Resort in Las Vegas.

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