NRG Home Solar to partner with Sunrun and Spruce as part of larger restructuring


American power company NRG has unveiled a significant reorganization of its renewable energy businesses in its first quarter 2016 results, which were announced this morning. The company describes this as a conclusion of its GreenCo process, wherein it spun off multiple renewable energy businesses into a single and financially constrained subsidiary seven months ago.

Perhaps the largest change will be at Home Solar, which will move from a full-service solar installer to a model where Home Solar enters into contracts with customers which they will then sell to third-party solar providers Sunrun and Spruce Finance. The company will also prioritize three markets – New York, Massachusetts and New Jersey – which it notes will “significantly reduce operating costs”.

NRG notes that it does reserve the option to operate Home Solar in Texas in the future, but will not do so at present. The company will also be folded back into NRG’s Retail business. Overall, this will result in US$20 million in restructuring costs, however NRG also expects Home Solar to break even on an EBITDA level by 2017.

"This new approach will help us achieve both short and long-term efficiencies and allow us to effectively remain in the residential solar business in a way that makes economic sense for us and will enable our customers to look to us as the energy provider for their whole home, regardless of the way the power is generated," stated NRG Retail President Elizabeth Killinger in a blog post.

NRG and more specifically its shareholders have clearly been uncomfortable with losses at Home Solar. The burning of cash in the business was a driving factor in the 2015 restructuring, during which visionary former CEO David Crane stepped down.

NRG also plans to reintegrate its utility-scale renewable energy business into the main company, and will get mostly out of its electric vehicle business by selling off a majority share. This will bring to a conclusion the GreenCo, which was given a clearly defined limit of funding through a $125 million revolving fund when it was spun off last year.

?GreenCo used “significantly less” of this capital than the company anticipated, and the revolver will now be terminated. NRG may be overcoming some of the concern about participation in renewable energy which led to last year’s restructuring, and has noted that it expects the utility-scale renewables business to both be cash-flow positive in 2016 and supply projects to yieldco NRG Yield.

NRG Yield was never part of the GreenCo and will remain a separate company. The yieldco currently holds at least a majority stake in 2.5 GW of wind and solar projects, and NRG plans to transfer roughly its 51% stake in the 250 MW California Valley Solar Ranch project to NRG Yield before the second quarter of 2016 is over.

Despite all of these changes, NRG has maintained its 2016 guidance of $1.54-1.67 billion in 2016 EBITDA for its generation business and renewables, $650-$725 million in Retail, as well as another $805 million in NRG Yield. This should result in a total EBITDA of $3.0-$3.2 billion.

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