The collapse of SunEdison and resulting impact on its two yieldcos, along with a general investor skepticism about the yieldco model, has not only affected yieldco stock prices but has also led to greater conservatism in the management of these vehicles.
NRG Yield’s Q3 results follow this trend. The company reported strong output from its wind portfolio, raised considerable cash, and increased its Q4 dividend to $0.25 per share. And while it completed acquisition of the remaining 128 MW share of the California Valley Solar Ranch, the company is moving slowly and deliberately on its acquisition of future solar projects from its sponsor.
NRG Yield owned 610 MW of utility-scale solar at the end of the quarter, but only 9 MW of distributed solar, despite a commitment to purchase $210 million of NRG’s business renewables and residential solar portfolios by the end of 2017.
This is not due to inadequate cash. During the quarter the yieldco closed on $350 million on corporate level bond financing, which gives it $280 million in investible cash through 2017 to “deploy in growth opportunities” without have to access equity markets.
But what NRG Yield may be saving its pennies for is the 1.5 GW of renewable energy projects in several states which NRG recently acquired from SunEdison at very low prices. This includes a 50% share in 530 MW-AC of solar projects which came on line in Utah in September.
When questioned by analysts on the call, NRG Yield revealed that it expects NRG to make these assets available among its Right of First Offer portfolio, with those assets which are already completed – likely to include the Utah projects – available in early 2017.
In the shorter term, NRG Yield has committed to purchase a thermal project which is supplying district heating at the University of Pittsburgh Medical Center. This is in line with the company’s diversification; in addition to its 620 MW of solar and 2 GW of wind, NRG currently owns 1.9 GW of conventional assets and 1.6 GW of thermal projects.
Whatever the schedule of its acquisitions, NRG Yield is in a strong position financially. The company brought in $272 million in revenues during Q3, with a 43% operating margin, which enabled $140 million in cash available for distribution (CAFD) and a net income of $47 million.
On the back of the strong quarter and completion of the CVSR acquisition, NRG Yield has raised its CAFD guidance for 2016 from $265 to $290 million.
And despite the current dividend increase to $0.25 per share, when questioned if NRG planned to increase this dividend with the additional cash, management stated that it instead was more likely to invest in future project acquisitions.
This morning NRG Yield also announced that it has appointed Chad Plotkin as its new Chief Financial Officer (CFO) as of November 7. Plotkin will replace Kirkland Andrews, who currently serves as CFO of both NRG and NRG Yield and will continue as the CFO of NRG Energy and a member of the NRG Yield Board of Directors.
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