NRG Energy gets Q2 earnings boost from yieldco

NRG Energy, the US integrated power giant, got a boost from its yieldco vehicle in the second quarter, although its in-house renewables business was weighed down by ongoing problems at the Ivanpah concentrated solar power (CSP) plant in California.

New Jersey-based NRG is among the largest independent power producers (IPPs) in the US, with more than 50GW of generating capacity, and – alongside its yieldco, NRG Yield – one of the country’s largest owners of both solar and wind assets.

Amid challenging conditions for US IPPs brought on by low commodity prices, NRG’s quarterly loss widened substantially to $276m, from a loss of $9m in the same quarter last year. Most of the loss was tied to one-off impairments and paying off debt.

Adjusted EBITDA rose 14% year on year to $779m, with NRG Yield now the second largest contributor to the company’s adjusted earnings – having overtaken NRG’s retail electricity business over the past year.

NRG owns a controlling stake in NRG Yield, which was launched in 2013 and is credited as being the first US renewables yieldco. NRG Yield owns nearly 5GW of generation capacity, including large-scale wind and solar, distributed solar, and thermal plants.

The performance of NRG’s in-house renewables business – which drops down projects to Yield – deteriorated in the second quarter. The renewables unit lost $58m in the quarter, compared to a $6m loss in Q2 last year, while its adjusted earnings dropped 14% year on year to $57m.

The result was due “primarily to unplanned outages at Ivanpah”, NRG said in a statement.

The 392MW Ivanpah is among the largest and most high-profile CSP plants in the world. Since its completion in 2014, however, Ivanpah has struggled to generate power at its expected levels, leading to concerns that it could lose its PPA with Pacific Gas & Electric.

Ivanpah has also been hit with bad publicity related to the deaths of birds.

NRG chief executive Mauricio Gutierrez did not specifically address the Ivanpah’s performance or outlook in a conference call on Tuesday. Google and BrightSource Energy also own stakes in the project.

Among large US power generators, NRG was an early-mover into the distributed solar sector, acquiring Roof Diagnostics Solar in 2014 under then chief executive David Crane.

But residential solar failed to deliver the results Crane had hoped for, leading to a restructuring last year that reportedly saw hundreds of NRG Home Solar workers let go. Crane was fired in December and replaced by Gutierrez, NRG’s long-time chief operating officer.

NRG had hoped to sell its Home Solar unit entirely under the restructuring, but could not find a buyer, and so settled on a new model whereby it originates residential solar contracts and sells them on to other companies, including Sunrun and Spruce Finance.

Speaking to analysts earlier this year, Gutierrez said that NRG’s residential solar unit – now wrapped into its retail power arm – is “not a business you can expect to hear about each quarter”.

NRG continues to be an active player in the commercial and industrial solar market, having last month completed the largest rooftop solar array in the US atop the Mandalay Bay Convention Center in Las Vegas.

Despite Gutierrez’s claim that NRG’s platform “performed exceptionally well” in the second quarter, investors sent the company’s shares down by more than 3% in early trading Tuesday, to $13.05.

NRG’s shares have lost one-third of their value over the past year, although they have rebounded somewhat since Crane’s departure.