About 85% of NRG Energy’s committed investments for the next three years will go to solar projects, mainly for three utility-scale projects that have received federal loan guarantees, the company said Thursday.
Next year, the independent power producer expects to spend $705 million on its solar projects compared with $120 million on conventional projects. From 2013 through 2014, the company intends to spend $315 million on its solar projects and $65 million on conventional projects.
Princeton, New Jersey-based NRG has $3 billion in federal loan guarantees for three projects, with the company having a combined 733-MW stake in the facilities. Now that the Department of Energy loan process has ended, NRG has started to look for entities that would like to buy some of the company’s solar stakes, David Crane, NRG president and CEO, said Thursday during a conference call with analysts.
Without the availability of federal loan guarantees, a program that ended in September, the wave of massive solar projects is probably over, according to Crane. Wall Street does not have the capacity to provide debt financing for the large projects, which have price tags of more than $1 billion, he said. Looking ahead, utility-scale projects will range from 20-MW to 100-MW, he said, noting that the company will pursue those types of projects.
Solar development will come more from rooftop projects, according to Crane. “The distributed, residential is going to end up swamping the bag-scale projects,” he said.
NRG plans to install 733 MW of solar panels over four years on warehouse owned by ProLogis under a partnership backed by DOE and Bank of America.
A form of Moore’s law – the doubling every two years of the number of transistors that can be placed on an integrated circuit – applies to photovoltaic technology, according to Crane. In the last two years, the delivered cost of energy from PV was cut in half, he said. NRG expects the cost to fall in half again in the next two years, which would make solar power less expensive than retail electricity in roughly 20 states, he said. The expected drop in solar costs has “the potential to revolutionize the hub and spoke power system, which currently makes up the power industry,” he said.
While the solar industry has benefitted from federal support, the driver for the industry has been state renewable portfolio standards, led by California’s 33% mandate, according to Crane.
In defense of solar in a “highly politicized post-Solyndra world,” Crane said that PV puts less strain on air, water and land resources than other forms of power generation. It is also more predictable and reliable than wind farms, he said.
Meanwhile, NRG is moving to build about 1,500 MW of natural gas-fired generation, Crane said. It has another 1,500 MW of gas-fired projects that have been permitted but lack power purchase agreements, he said.
The company is also open to buying coal-fired generation, Crane said. “We’re not afraid of owning conventional generation,” he said. “We would like to own more generation in the Northeast.” However, the outlook for coal plants in the Northeast is dim, according to Crane. “The economics of coal plants in the Northeast are phenomenally challenged right now,” he said. “It’s not a pretty picture.”
On the financial front, NRG lost $54 million, or 24 cents/share, in the third quarter compared with a $221 million, or 87 cents/share, gain a year ago. The loss was driven by a $160 million charge related to the Environmental Protection Agency’s Cross-State Air Pollution Rule as well as tough market conditions in August in Texas. Third-quarter revenue dipped to $2.67 billion from $2.69 billion.
Adjusted earnings before interest, taxes, depreciation and amortization fell to $458 million, down from $777 million in the year-ago quarter.
Adjusted EBITDA at Reliant, a retail provider in Texas, fell to $135 million from $209 million in the third quarter last year. Margin fell as the company sought to attract more customers with competitive offerings as power prices rose. Reliant’s customer count climbed for the third quarter in a row to 1.56 million customers.
Adjusted EBITDA from wholesale operations in Texas fell to $183 million from $388 million. In the Northeast, adjusted EBITDA fell to $47 million from $105 million on a drop in power prices and generation. South Central operations increased adjusted EBITDA to $44 million from $39 million on higher energy and capacity sales. Adjusted EBITDA from NRG’s Western operations increased to $35 million from $24 million on increased capacity sales and lower expenses.
Although NRG expects natural gas prices to remain low and capacity prices in the Northeast to stay weak, the company expects to post $1.825 billion to $2 billion in adjusted EBITDA next year on an increase in Texas heat rates and the contribution from NRG’s new businesses and assets.
– from plattsenergyweektv.com