NRG's Targeting Half-Finished Projects to Grow Renewables

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  • Company finishing wind, solar farms it bought from SunEdison
  • Activist investors have pressured NRG to reduce costs

NRG Energy Inc., the U.S. power generator that billionaire Paul Singer took an activist stake in two months ago, is looking at partially developed wind and solar projects to grow its renewable energy portfolio.

Consider the more than 1.5 gigawatts of wind and solar projects that NRG bought from bankrupt clean-energy giant SunEdison Inc. last year and is now working to bring online. The deal was the company’s largest renewables acquisition ever.

“When we think about growing that fleet, say, for a larger utility solar or wind project, we’re trying to put ourselves in situations like the one that we found with SunEdison -- where you have a portfolio of assets that will benefit from the capabilities of a large enterprise that can fix up contracts, that can get financing,” Craig Cornelius, NRG’s senior vice president of renewables, said in an interview at Bloomberg’s San Francisco office Monday. “We sort of feel like the sweet spot is to be a smart harvester of projects.”

The Princeton, New Jersey-based, company was expanding its renewables portfolio just as it began facing pressure to cut costs from Singer’s Elliott Management Corp. and another investment fund led by turnaround titan and former TXU Corp. chief C. John Wilder. In February, the company added Wilder to its board and said it’d pursue “strategic initiatives” including potential assets sales.

Cornelius declined to comment on what the review might mean for the future of NRG’s renewables business.

NRG fell 0.5 percent to $18.25 at 12:44 p.m. in New York. The shares have risen 49 percent this year, making the company the best performing member of the S&P 500 Utilities Index.

Plants running off fossil fuels such as coal and natural gas still account for the majority of NRG’s generation, and that conventional business has seen its profits squeezed by weakening U.S. demand and cheap gas weighing on electricity prices. The company has almost tripled its renewables portfolio to nearly 5 gigawatts since 2013.

‘Community Solar’

The SunEdison portfolio is proving to be a lucrative one. NRG has already recovered 100 percent of the purchase price through a 265-megawatt sale from that portfolio to its NRG Yield Inc. unit.

Being the nation’s biggest independent power producer with an active renewables arm, NRG is capable of bringing on an asset, potentially in distress, “and taking it to completion,” Nathan Serota, an analyst at Bloomberg New Energy Finance in New York, said. “That’s because of the in-house expertise they already have.”

A business known as “community solar” is meanwhile the fastest-growing segment within NRG’s renewable division, Cornelius said.

Under this model, customers buy stakes in small, ground-mounted solar farms built near their properties. The power these plants provide entitle them to a reduction in their electricity bills, a model that had been permitted in 14 states as of August.

The net present value of a megawatt from one of NRG’s community solar projects can be three times higher than that from a large-scale wind or solar plant because NRG’s able to sell power at a higher, retail rate, Cornelius said. The company is developing such solar farms in Colorado, Massachusetts and Minnesota and may enter New York this year, he said.

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