Over the previous year the yieldco sector has undergone a degree of crisis, with stock prices impacted not only by larger troubles in the sector but also a lack of investor comfort with the yieldco business model. And it did not help when the company that pioneered the solar yieldco, SunEdison, went bankrupt.
Today’s generally strong results by NRG Yield are another positive sign for yieldcos. The company reported a 10% year-over-year increase in revenue to $258 million, with $240 million in adjusted EBITDA and net income growing more than 50% to $58 million. The latter two metrics are on line with the company’s guidance.
Significantly, NRG Yield’s cash available for distribution (CAFD) more than doubled from the second quarter of 2015 to $63 million. On the basis of these solid numbers, the company re-affirmed its 2016 guidance of $805 million in adjusted EBITDA and $265 million in CAFD.
During the quarter NRG Yield raised $97.5 million in cash from new non-recourse project financing; at the end of the quarter the company held $89 million in cash and equivalents.
NRG Yield also announced today that it has signed a deal to acquire NRG’s 51% stake in the 250 MW California Valley Solar Ranch (CVSR) project. This will give NRG Yield full ownership of the project, and the transaction is expected to close in the third quarter of this year.
This will increase NRG Yield’s utility-scale solar portfolio to 610 MW, and the company additionally has the right of first offer on NRG’s 148 MW share of the Agua Caliente PV plant in Arizona.
The current 482 MW of solar in NRG Yield’s portfolio is only a small portion of the company’s 4.4 GW of assets, including 2 GW of wind and 1.9 GW of conventional generation.
This mix appears to be the result of calculation. Along with the company’s stated optimism for the future of renewable energy is a confidence that its fleet of natural gas plants, the large majority of which are in California, will continue to be in demand to meet evening demand as solar penetrations increase.
The company lists only 9 MW of distributed solar PV projects in its current operating assets, but also has invested in around 117 MW of residential and commercial and industrial solar to date through its distributed solar partnership with NRG.
As NRG Yield is investing in more utility-scale solar, it is pulling back from residential solar. The company invested only $8 million in distributed solar in the second quarter, and on August 5 amended an agreement with NRG to reduce its commitment under the residential solar partnership from $100 million to $60 million.
This is reflective of larger changes at NRG, which in May announced that Home Solar would get out of the installation business, and instead focus on origination and sales of contracts, in partnership with Sunrun and Spruce.
Update: This article was corrected at 8:30 AM Eastern Time (U.S.) on August 10 to clarify that NRG Yield is pulling back from residential solar, but not DG overall.