By Tom Kleckner
NRG Energy continues to retrench after a dismal 2015, announcing last week it will sell its stake in the California Valley Solar Ranch and restructure its GenOn unit, whose acquisition in 2012 nearly doubled NRG’s generation portfolio.
New Jersey-based NRG also said it had sold two Illinois gas plants for $425 million, helping the corporation deliver $779 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter. NRG has generated almost $1.6 billion in adjusted EBITDA — or cash flow — this year, putting it in the upper range as it reaffirmed its guidance for 2016 ($3 billion to $3.2 billion).
“We have a lot of the summer ahead of us. I think it’s just prudent to keep our guidance the way we had it,” interim CEO Mauricio Gutierrez said during a conference call with analysts. “We’re very comfortable with the positon we have. We still have August and September, which can be really hot in Texas.”
NRG said it has reached agreement to sell its 51% stake in the 250-MW California Valley solar project for $78.5 million in cash plus assumed debt to NRG Yield. NRG Yield is a separate, publicly traded company that has 4,438 MW of renewable and conventional generation under contract; NRG Energy owns 55.1% of the yieldco’s outstanding common stock.
The company also said GenOn has appointed two independent directors and retained restructuring advisors “to help navigate the [restructuring] process efficiently and judiciously” in a bid to reduce its “excessive” leverage ratio.
GenOn, which has $2.6 billion in debt, is expected to generate only $335 million in EBITDA in 2016 — a leverage ratio of 7.7, far above the 4.2 ratio for the company as a whole and the 4.0 ratio the company is seeking to reach by the end of the year.
NRG’s $1.7 billion acquisition of GenOn boosted the company to 47 GW of generating capacity, making it the largest competitive generator in the U.S. But the 22.7 GW acquired from GenOn — coal, natural gas and oil — have not fared well due to the entry of increasingly competitive renewables and more efficient plants burning cheap shale gas.
NRG said its second quarter net loss of $276 million ($0.61/share) — worse than its $9 million loss a year ago — resulted from $198 million in impairments and losses on asset sales and an $80 million loss related to extinguishing debt.
Excluding one-time charges, the company’s loss was $0.04/share, below Zacks Investment Research’s consensus expectations of a $0.03/share profit. NRG reported $2.64 billion in quarterly revenues, well below Zacks’ consensus projection of $3.45 billion.
The company had a net loss of $229 million ($0.37/share) for the first six months of this year, after recording a $6.44 billion loss in the fourth quarter of 2015, which ended with the resignation of CEO David Crane.
NRG shares were down 5.6% in the two days following the Aug. 9 earnings announcement, closing off 75 cents at $12.76 Wednesday.
