NRG Yield, Inc. reported second quarter 2015 financial results including Adjusted EBITDA of $187 million and CAFD of $26 million. Net income attributable to Class A and Class C stockholders for the three months ended June 30, 2015 was $10 million or $0.15 per Class A and Class C common share.

 

“NRG Yield continues to be one of the most prudently robust and diverse yieldcos in the market, allowing us to continue to transform the energy industry at an accelerated pace,” said David Crane, Chairman and CEO of NRG Yield. “While the industry as a whole underperformed this quarter, as a result of historically low wind resource, NRG Yield’s diversified asset portfolio provides lower potential volatility, enabling us to reaffirm both our current dividend and our anticipated trajectory of dividend growth going forward.”

 

For second quarter 2015, NRG Yield maintained strong safety performance with a 0.97 incident rate. Generation in the renewable segment was 110% higher in the second quarter versus the same period in 2014 as a result of the Alta acquisition. Although overall renewable generation was substantially higher from the addition of assets, our wind assets continue to experience historically low wind resource leading to a downward adjustment to expected wind production over the balance of the year.

 

Distributed Generation Partnership

On May 8, 2015, NRG and NRG Yield completed the formation of a new partnership that will invest in and hold operating portfolios of distributed solar assets developed by NRG Renew, a subsidiary of NRG. Under the terms of the partnership agreement, NRG Yield will receive 95% of the portfolio economics until achieving a targeted return after which NRG will receive 95% of the economics.

 

NRG Yield has initially committed to invest up to $100 million of cash equity into the partnership, of which approximately $4 million has been invested to date. The partnership is expected to be fully funded within 18 months from formation.

 

Completed Acquisition of 25% Interest in Desert Sunlight

On June 29, 2015, NRG Yield acquired a 25 percent interest in the Desert Sunlight Solar Farm in Riverside, CA from GE for $285 million, subject to working capital adjustments, plus the assumption of $287 million of non-recourse project level debt2.

 

The acquisition, which results in an increase of 137.5 MW of operating solar capacity owned by NRG Yield, places the Company into a partnership with subsidiaries of NextEra Energy and Sumitomo Financial, who are the 50 percent and 25 percent owners of Desert Sunlight, respectively. The transaction is expected to contribute Adjusted EBITDA of $45 million and CAFD of $22 million on an annual run rate basis.

 

Completed Tax Equity Financing of Alta X and Alta XI Wind Facilities

On June 30, 2015, NRG Yield closed a new tax equity facility primarily to monetize production tax credits from the Alta Wind X and XI wind projects. This financing resulted in $119 million of cash proceeds after expenses. Proceeds from this transaction and a portion of the proceeds from the recently completed equity and debt offerings were utilized to repay the entire outstanding project indebtedness associated with Alta X and Alta XI wind facilities resulting in an increase in annual run rate CAFD of $28 million.

 

Completed Class C Common Stock Offering and Convertible Debt Issuance

On June 29, 2015, NRG Yield issued 28,198,000 shares of Class C common stock at $22.00 per share for net proceeds of $600 million. Additionally, NRG Yield issued $287.5 million of 3.25% convertible senior notes due 2020. The net proceeds of both of these issuances were used for the acquisition of a 25% interest in the Desert Sunlight Solar Farm for $285 million3, to repay a portion of the $491 million in debt associated with the Alta X and Alta XI wind facilities (in order to facilitate the tax equity financing transaction described above), and to repay a portion of the outstanding indebtedness under NRG Yield’s revolving credit facility.

 

Drop-Down of Assets from NRG

NRG offered the Company the opportunity to acquire a 75% stake in an 814 net MW portfolio of twelve wind projects consisting of assets acquired by NRG in the EME transaction and part of the expanded ROFO agreement. The portfolio is subject to a tax equity arrangement. The acquisition, subject to approval by NRG Yield’s independent directors, is expected to generate approximately $35 million in annual Adjusted EBITDA and $20 million of annual CAFD on a run rate basis4. The wind assets included in the portfolio are:

 

Elkhorn Ridge – 54 MW wind facility located in Bloomfield, NE

San Juan Mesa – 90 MW wind facility located in Elida, NM

Wildorado – 161 MW wind facility located in Vega, TX

Crosswinds – 21 MW wind facility located in Ayrshire, IA

Forward – 29 MW wind facility located in Berlin, PA

Hardin – 15 MW wind facility located in Jefferson, IA

Odin – 20 MW wind facility located in Odin, MN

Sleeping Bear – 95 MW wind facility located in Woodward, OK

Spanish Fork – 19 MW wind facility located in Spanish Fork, UT

Lookout – 38 MW wind facility located in Berlin, PA

Goat Wind – 150 MW wind facility located in Sterling City, TX

Elbow Creek – 122 MW wind facility located in Howard County, TX

 

Quarterly Dividend Updates

On May 20, 2015, the Company’s Board of Directors declared a quarterly dividend on each of the Company’s Class A and Class C common stock of $0.20 per share ($0.80 per share annualized) paid on June 15, 2015 to shareholders of record as of June 1, 2015. This equates to a 2.6% increase over the prior quarter.

 

On August 4, 2015, the Company announced the declaration of a quarterly dividend on Class A and Class C common stock of $0.21 per share ($0.84 per share annualized) payable on September 15, 2015 to shareholders of record as of September 1, 2015. This equates to a 5% increase over the prior quarter and a 15% increase year over year.

 

The Company's common stock dividend is subject to available capital, market conditions and compliance with associated laws and regulations.

 

Seasonality

NRG Yield’s quarterly operating results and CAFD are significantly impacted by seasonal factors. The majority of NRG Yield’s revenues are generated from the months of May through September, as contracted pricing and renewable resources are at their highest levels in the Company’s core markets. The factors driving the fluctuation in Adjusted EBITDA and CAFD include the following:

The Company has taken into consideration the timing of such revenues and costs to ensure sufficient funds are available for distribution on a quarterly basis.

 

Financial Guidance

Due to the continued unusually low wind production across the fleet, the Company has revised its expectations for wind production over the balance of 2015. As a result of these reduced expectations, combined with a lower expected pace of deployments of residential solar leases from NRG, NRG Yield is updating full year guidance for Adjusted EBITDA to $660 million and CAFD to $160 million. The Company does not expect the reduction in 2015 Adjusted EBITDA and CAFD guidance to have any impact on either its current dividend or expected long-term dividend growth.

 

Without any effect to future acquisitions or drop downs, the Company expects the current portfolio to generate $760 million of Adjusted EBITDA and $245 million of CAFD on an annual run rate basis. Based on these updated annual run-rate projections, the Company is also targeting a quarterly dividend of $0.25 per share ($1.00 per share annualized) on each of the Company’s Class A and Class C common stock by the 4th quarter of 2016. This represents a 19% increase over the current annualized dividend rate and 67% increase since NRG Yield’s first dividend in the fourth quarter of 2013.

 

For third quarter 2015, the Company expects Adjusted EBITDA of $195 million and CAFD of $110 million, although actual results may vary depending on the operating performance of the assets.

 

NRG Yield

www.nrgyield.com