NRG is probably the most advanced conventional energy company in the United States in terms of its acceptance that the future will be powered by renewable energy.
The company has moved both into residential solar and has built a yieldco to hold wind and solar assets. Furthermore, CEO David Crane's statements show an executive that is preparing for the future instead of fighting it.
Despite this leading strategic orientation, NRG announced in September that it would spin off its renewable energy business into a separate company in 2016. This was part of a larger restructuring undertaken under investor pressure.
In its Q3 results call, NRG indicated that everything is on track for the Greenco launch in January. The results also give a glimpse into the operations of the various components that will make up the Greenco.
NRG estimates that Home Solar has been experiencing a triple digit growth rate on an annual basis. During Q3 Home Solar booked 6,350 customers and installed 1,900 PV systems, and during first nine months of 2015 the company booked around 96 MW of PV systems but installed only 28 MW.
The imbalance between bookings and installations is a testament to this rapid growth, and a downside is Home Solar's $50 million loss in Q3 alone. The scale of the losses appear to be one of the reasons for investor pressure to separate the business.
On the Q3 earnings call, NRG CEO David Crane explained that the rapid growth of Home Solar involves complex logistics. It is a constant work in progress, notes Crane. You get this sales engine growing and you have to wait for installations to follow.
Home Solar has a goal to install and energize PV systems within 90 days of booking, and NRG Home Solar CEO Kelcy Pelger says that he expects to reach this goal in the first half of 2016.
NRG CEO Crane also notes that this is something that other residential solar companies have been experiencing. During SolarCity's Q3 results call the company announced a shift in strategy from rapid growth to cost reduction, but CEO Lyndon Rive also noted that the pace of growth it had undertaken in previous years was necessary to reach a scale which gave it a strong competitive advantage.
NRG has announced a $125 million runway for its Greenco on its way to becoming cash-positive. The company will hold all of NRG's renewable energy businesses and will also benefit from the positive cash flows from its yieldco.
During Q3 NRG's yieldco reported a $172 million EBITDA gain, and NRG cites the impacts of the acquisitions of the Desert Sunlight and Alta Wind projects. After heavy expenses for depreciation, amortization and interest NRG Yield still pulled in $34 million in net income.
NRG CEO Crane remains bullish about the prospects for the Greenco and especially for Home Solar. During the call he predicted that in the future there would be four main players in the U.S. residential solar market, and that Home Solar would be among them.
I see solar as a mortal threat to the utility business model, stated Crane. I would be surprised if in the next few months some big utility doesn't try to buy its way into this market.
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