NRG Energy CEO: Renewables business 'only getting stronger'

Large solar and wind have a solid future at NRG Energy, as they provide compelling opportunities for growth and to strengthen its “partnership” with majority-owned NRG Yield, according to chief executive Mauricio Gutierrez.

“This is an important business that is strong today and only getting stronger,” he said on a third quarter earnings call, describing renewables as among the fastest growing segments of the energy industry. NRG is the largest US competitive power generator, most coming from traditional energy sources.

“Renewables provide not just an opportunity to execute on low-cost growth, but also a way to enhance our value proposition by contributing to our stable base of earnings and providing visibility in to future cash flows,” he added.

The company is active developing renewable energy projects at commercial and utility scale, as well as those for community solar.

Gutierrez took over 11 months ago from David Crane, who was fired after engineering an expensive and money-losing foray into the residential solar business. Before his departure, NRG was the worst performing member of the S&P 500 Utilities Index in 2015 and the stock had cratered.

Under Gutierrez, who had been chief operating officer, NRG sought to unload its Home Solar unit but failed to find a buyer. It now originates residential solar contracts and sells them to other companies, including Sunrun and Spruce Finance.

Gutierrez said renewables have positive trends underpinning growth in demand: higher state renewable portfolio standards, increasing corporate sustainability targets and cost efficiencies.  .

He left no doubt that the company’s presence in the utility-scale solar and wind space will expand under his leadership.

Clear evidence of this was last September when NRG’s won bidding for a 1.5GW (ac) portfolio of US assets held by bankrupt SunEdison – 265MW in operation, 154MW in backlog for 2017-18 and a 1.1GW pipeline for 2018-2020 operation.

“Our scale, diverse platform and partnership with NRG Yield, afforded us significant advantages during the bidding process. And these same characteristics will continue to be advantageous as a developer and operator of these assets in the future,” he claimed.

Gutierrez called the transaction a “significant win” for NRG. It puts NRG in an excellent competitive position to “execute and play in this space in a meaningful way,” he said.

The deal will also strengthen NRG’s ties with its yieldco by enabling it to develop drop-down projects, according to Gutierrez.  NRG Yield's thirst for projects will enable NRG to quickly replenish capital spent developing them through sales to the yieldco, NRG executives believe.

The company now owns 4.4GW of wind and solar generation capacity, and has 800MW in near-term backlog assets and a further 2.6GW pipeline of projects. “We are focused on building up our pipeline and creating line of sight several years in to the future,” said Gutierrez.

NRG executives said they are not concerned over competition heating up in the US renewables space both in sources of permanent equity for assets as well as development,

“We think the current environment actually favors incumbent players with development and operational capabilities like our own, and with a significant access to both commercial and mass retail customers as well as utility customers that we service today,” said Craig Cornelius, senior vice president, renewables.

NRG reported earnings of $1.27 per share versus $0.18 per share a year earlier. Operating income was $755m versus $379m a year earlier.