NRG Energy to Reorganize, Seeds New Renewables Company
NRG Energy has embarked on a “reset” that will see a separation of its core distributed generation and fossil fuel businesses.
The company, headquartered in Princeton, N.J., wants to “simplify” NRG Group to cut down expenses and debt. In a transition that will begin now and be fully effective on Jan. 1, 2016, it will separate its home solar business, renewable assets, and electric vehicle charging business into one green company—”GreenCo”—that will stand on its “own two feet financially and will have its own investment proposition,” CEO David Crane told investors in a hastily scheduled strategic update call on Sept. 18.
NRG will limit its financial commitment to GreenCo. to $125 million, allowing for a “disciplined allocation of capital for growth across all business segments,” he said.
Crane told investors that splitting the company would help NRG to better capitalize on opportunities posed by the increased penetration of solar and other distributed generation technologies.
“There are macrotrends affecting our society and our industry. Those macrotrends towards sustainability, towards consumer choice, towards technology-driven solutions … are continuing unabated,” he said. NRG “must and will remain responsive to societal trend.”
Offering a rare glimpse of how the utility views its customer base, Crane noted that a “vast majority of [NRG’s] actual or prospective customers, both individuals and businesses, are pragmatic ‘greens'” That is a term that the company uses internally to describe customers who favor sustainable energy, if it is available at moderate costs and without sacrificing reliability, he said.
For NRG, the distributed generation opportunities created are “high growth,” even if still small in absolute terms relative to NRG’s conventional businesses, he added.
“Our goal is to preserve … our ability to offer seamless conventional and sustainable energy products and services across our customer base. What has changed and will be changing as a result of our reset plan is how we organize ourselves to implement our strategy, which will be in a simplified and lower cost structure implemented primarily by the business separation of our new businesses into GreenCo.”
The second significant component of the “reset” is a broader capital strategy to unlock more than $1 billion of equity capital from both its CAPEX and OPEX budget for reallocation over the next 15 months, Crane said.
The investor presentation suggests that to free up capital, NRG will suspend the conversion to diesel of two coal-burning generators at its Portland Generating Station in Pennsylvania. It also indicates that the company is mulling retiring Units 2, 3, and 4 at the Dunkirk plant in New York instead of refueling them to natural gas as was planned. If that project is canceled, CAPEX savings would be realized, it says.
Finally, NRG will retire the 380-MW Huntley coal plant in Tonawanda, N.Y., by March 2016. However, it wants to complete the Petra Nova/Parish carbon capture project with about $117 million of remaining capital after 2015.
On Friday, Crane also announced that NRG would drop down a 75% stake in a portfolio of wind projects acquired from Edison Mission Energy in April 2014 to NRG Yield for $210 million. NRG Yield is a majority-owned affiliate company formed in 2012.
—Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)