NRG Yield, Inc. Reports Full Year 2017 Financial Results And Increases Quarterly Dividend
-
Cash from Operating Activities and Cash Available for Distribution
(CAFD) in line with expectations with an increase in the annualized
dividend by 15.2% in 2017 -
Declared 3.47% quarterly dividend increase to $0.298 per share in
first quarter 2018; continue to target annualized dividend per share
growth of 15% through 2018 -
Executed on growth investments in 2017 with $319 million in
accretive capital deployed -
Announced transformative agreement with Global Infrastructure
Partners (GIP) ("NRG Transaction") to become NRG Yield's new
controlling stockholder and sponsor; closing of the NRG Transaction is
expected in the second half of 2018 -
Over $450 million of new capital commitments in 2018, including the
binding agreements with NRG Energy, Inc. (NRG) to acquire the 154 MW
Buckthorn Solar Project and the 527 MW Carlsbad Energy Center, funding
for the University of Pittsburgh Medical Center (UPMC) thermal
project, and additional investments in the distributed generation
partnerships -
Recorded $112 million in non-cash charges relating to a deferred
tax asset write down from federal tax reform and asset impairment
charges; financial performance of the projects remain within
expectations
PRINCETON, N.J.–(BUSINESS WIRE)–NRG Yield, Inc. (NYSE: NYLD, NYLD.A) today reported full year 2017
financial results including Net Loss of $23 million, Adjusted EBITDA of
$933 million, Cash from Operating Activities of $516 million, and Cash
Available for Distribution (CAFD) of $267 million.
"2017 was a very successful year for NRG Yield with strong results
across our diversified portfolio as well as accretive capital
deployment," said Christopher Sotos, NRG Yield's President and Chief
Executive Officer. “As we work diligently to help facilitate a timely
close of the NRG Transaction in the second half of 2018, we look forward
to Global Infrastructure Partners becoming the Company’s new sponsor and
reigniting long-term growth across the platform. NRG Yield also
continues to execute on near-term growth with over $450 million in new
capital commitments already in place.”
Overview of Financial and Operating Results
Segment Results1
Table 1: Net (Loss)/Income
| ($ millions) | Three Months Ended | Twelve Months Ended | ||||||
| Segment | 12/31/17 | 12/31/16 | 12/31/17 | 12/31/16 | ||||
| Conventional | 33 | 45 | 120 | 153 | ||||
| Renewables | (50 | ) | (163 | ) | 9 | (86 | ) | |
| Thermal | 3 | 5 | 25 | 29 | ||||
| Corporate | (84 | ) | (2 | ) | (177 | ) | (94 | ) |
| Net (Loss) Income | (98 | ) | (115 | ) | (23 | ) | 2 |
1 In accordance with GAAP, 2016 results have been recast to
include the March 2017 and November 2017 Drop Down Assets as if the
combinations had been in effect from the beginning of the financial
statement period
Table 2: Adjusted EBITDA
| ($ millions) | Three Months Ended | Twelve Months Ended | ||||||
| Segment | 12/31/17 | 12/31/16 | 12/31/17 | 12/31/16 | ||||
| Conventional | 84 | 84 | 305 | 309 | ||||
| Renewables | 113 | 123 | 589 | 581 | ||||
| Thermal | 12 | 13 | 58 | 58 | ||||
| Corporate | (5 | ) | (6 | ) | (19 | ) | (16 | ) |
| Adjusted EBITDA | 204 | 214 | 933 | 932 |
Table 3: Cash from Operating Activities and Cash Available for
Distribution (CAFD)
| Three Months Ended | Twelve Months Ended | |||
| ($ millions) | 12/31/17 | 12/31/16 | 12/31/17 | 12/31/16 |
| Cash from Operating Activities | 142 | 128 | 516 | 577 |
| Cash Available for Distribution (CAFD) | 59 | 62 | 267 | 311 |
For the fourth quarter of 2017, NRG Yield reported a Net Loss of $98
million, Adjusted EBITDA of $204 million, Cash from Operating Activities
of $142 million, and CAFD of $59 million. Fourth quarter Net Loss
results were primarily due to the $68 million write down of the
revaluation of the existing net deferred tax asset pursuant to the
reduction in the corporate income tax rate to 21% in accordance with the
Tax Cut and Jobs Act and $31 million of non-cash asset impairments
within NRG Wind TE Holdco at two separate wind projects: Elbow Creek
located in Texas, and Forward Wind located in Pennsylvania. Fourth
quarter Adjusted EBITDA results were lower than 2016 primarily due to
lower wind production in 2017 versus fourth quarter 2016, partially
offset by growth in the distributed generation partnerships. CAFD
results were lower than 2016 primarily due to Adjusted EBITDA results,
partially offset by higher distributions received from Agua Caliente and
distributed generation partnerships.
For the twelve months ended December 31, 2017, NRG Yield reported a Net
Loss of $23 million, Adjusted EBITDA of $933 million, Cash from
Operating Activities of $516 million, and CAFD of $267 million. Full
year Net Loss results were impacted by the write down of the existing
net deferred tax asset and the non-cash asset impairments in the fourth
quarter, as well as a $13 million impairment taken by NRG in the third
quarter of 2017 in connection with the November 2017 Drop Down assets
sale to NRG Yield. In accordance with common control accounting rules,
NRG Yield recorded the impairment in its year-end financial statements
as if the November 2017 Drop Down Assets were part of the Company from
the beginning of the financial statement period. Adjusted EBITDA results
were higher than 2016 primarily due to the full year contribution of the
Utah solar assets which achieved commercial operation in 2016 and growth
in the distributed generation partnerships. This increase was offset by
lower renewable production in 2017 versus full year 2016. CAFD results
were lower than 2016 primarily due to lower renewable production,
additional debt service from both non-recourse project and
corporate-level financings raised in 2016, and additional maintenance
capital expenditures at the Walnut Creek facility. This decrease was
partially offset by higher distributions received from the distributed
generation partnerships.
Operational Performance
Table 4: Selected Operating Results
| (MWh and MWht in thousands) | Three Months Ended | Twelve Months Ended | ||
| 12/31/17 | 12/31/16 | 12/31/17 | 12/31/16 | |
| Equivalent Availability Factor (Conventional) | 98.3% | 99.1% | 93.4% | 95.3% |
| Renewables Generation Sold (MWh) | 1,491 | 1,686 | 6,844 | 7,291 |
|
Thermal Generation Sold (MWht)2 |
484 | 479 | 1,961 | 2,037 |
In the fourth quarter of 2017, generation in the Renewables segment was
below expectations and 12% lower than the fourth quarter of 2016
primarily due to weak wind resources across the portfolio. Renewable
energy conditions during the first quarter of 2018 have continued to
trend below expectations primarily from weak wind resources in the West
Coast.
During the first half of 2017, Walnut Creek experienced forced outages
due to mechanical failures of turbine parts that caused downstream
damage to several of the plant's units, primarily Unit 1. The repairs
necessary to return Unit 1 to service were completed in the second
quarter of 2017; the plant has performed reliably since then. The
financial impact from the Unit 1 outage was approximately $2 million
after recovery of insurance proceeds.
In the third quarter of 2017, the Company, through the Walnut Creek
project, executed an amendment to the contractual service agreement with
the original equipment manufacturer to improve long-term reliability.
The amendment provides for the original equipment manufacturer to
perform all required, currently available and future turbine reliability
upgrades in exchange for an investment of approximately $15 million that
would be paid over the next five years, of which $8 million is expected
to be paid in 2018.
On December 18, 2017, the Company amended the power purchase agreement
for its 29 MW Forward Wind project in Berlin, PA, to extend the maturity
date to December 31, 2022. The Forward Wind project is a part of the
Company’s NRG Wind TE Holdco portfolio.
2 Also includes Thermal MWh sold
Liquidity and Capital Resources
Table 5: Liquidity3
| ($ millions) | 12/31/17 | 9/30/17 | 12/31/16 |
| Cash and Cash Equivalents | 148 | 179 | 322 |
| Restricted Cash | 168 | 144 | 176 |
| Total Cash | 316 | 323 | 498 |
| Revolver Availability | 366 | 427 | 435 |
| Total Liquidity | 682 | 750 | 933 |
Total liquidity as of December 31, 2017 was $682 million, a decrease of
$251 million from December 31, 2016. This reflects a decrease in total
cash of $182 million4 resulting primarily from dividend
payments paid and the successful deployment of growth investments in
2017. Revolver availability during the same period decreased by $69
million due to $55 million in cash borrowings in the fourth quarter of
2017 to primarily fund distributed generation partnership investments
and increases in issued letters of credit.
Potential future sources of liquidity include excess operating cash flow
in the business, the $150 million at-the-market (ATM) program, of which
$115 million remains available at the end of 2017, and availability
under the corporate revolver.
Strategic Sponsorship with Global Infrastructure Partners (GIP)
On February 6, 2018, GIP entered into a purchase and sale agreement with
NRG for the acquisition of NRG's full ownership interest in NRG Yield
and NRG's renewable energy development and operations platform
consisting of a robust pipeline of over 6.4 GW of backlog and
development projects, as well as operational oversight of 2.4 GW across
17 states (the "NRG Transaction"). In connection with the NRG
Transaction, NRG Yield entered into a Consent and Indemnity Agreement
(the "C&I Agreement") with NRG and GIP setting forth the key terms and
conditions of NRG Yield's Corporate Governance, Conflicts, and
Nominating Committee's consent to the NRG Transaction. Refer to the
Company's press release on February 7, 2018 for further details.
Founded in 2006, GIP is an independent infrastructure fund with over $45
billion in assets under management that invests in infrastructure assets
and businesses in both OECD and select emerging market countries. GIP
targets investments in single assets and portfolios of assets and
companies in power and utilities, natural resources infrastructure, air
transport infrastructure, seaports, freight railroad, water distribution
and treatment and waste management.
GIP has a strong track record of investment and value creation in the
renewable energy sector with a portfolio that now includes approximately
$9 billion in equity committed or invested, 8 GW of operating renewable
assets, and over 14 GW of renewable assets under construction or in
development. Additionally, GIP has extensive experience with publicly
traded yield vehicles and development platforms, ranging from Europe's
first application of a YieldCo/DevCo model to the largest renewable
platform in Asia-Pacific.
The NRG Transaction is subject to certain closing conditions, including
customary legal and regulatory approvals. NRG Yield expects the NRG
Transaction to close in the second half of 2018.
3 In accordance with GAAP, 2016 results have been recast to
include the March 2017 and November 2017 Drop Down Assets as if the
combinations had been in effect from the beginning of the financial
statement period
4 See Appendix A-6 Sources and Uses of Cash and Cash
Equivalents for Twelve Months Ended December 31, 2017
Growth Investments
Buckthorn Solar Drop Down Transaction with NRG
On January 24, 2018, NRG Yield entered into a binding agreement to
purchase the 154 MW Buckthorn Solar utility-scale project from NRG for
cash consideration of $42.3 million, plus assumed non-recourse debt of
approximately $131 million. Buckthorn Solar will sell power under a
25-year PPA to the city of Georgetown, Texas starting in July 2018 when
it is expected to achieve commercial operation. The purchase price is
expected to be funded via revolver borrowings and cash on hand and is
expected to increase CAFD on an average annual basis by approximately $4
million5 starting in 2019. The transaction is expected to
close in the first quarter of 2018.
Carlsbad Energy Center Drop Down Transaction with NRG
On February 6, 2018, NRG Yield signed a binding agreement to purchase
the 527 MW Carlsbad Energy Center for cash consideration of $365
million, excluding working capital and other adjustments, plus assumed
non-recourse debt of $601 million at completion. The agreement to
acquire Carlsbad is subject to the closing of the NRG Transaction. The
project is expected to increase CAFD on an average annual basis by
approximately $40 million beginning in 2019.
Because the project is not expected to close until the fourth quarter of
2018, the Carlsbad transaction includes a number of other items and
conditions, including adjustments to the purchase price subject to (a)
final tested capacity, (b) final tested heat rate, (c) insurance costs,
and (d) NRG Yield's stock price prior to funding.
Per the C&I Agreement, GIP has committed to provide up to $400 million
in financing support for the Carlsbad Energy Center drop down
transaction. This commitment would be exercised if NRG Yield were unable
to efficiently raise third party capital by the closing of the Carlsbad
transaction and would entail GIP acquiring the project directly from NRG
to be dropped down to NRG Yield in the future subject to similar terms
and conditions.
University of Pittsburgh Medical Center (UPMC) Thermal Project and
Non-Recourse Thermal Financing
On October 31, 2016, NRG Business Services LLC, a subsidiary of NRG, and
NRG Energy Center Pittsburgh LLC (NECP), a subsidiary of NRG Yield,
entered into an Engineering, Procurement, and Construction (EPC)
agreement for the construction of an 80 MWt district energy system for
NECP to provide steam, chilled water and emergency backup power service
to UPMC. The initial term of the energy services agreement (under fixed
capacity payments) with UPMC will be for a period of twenty years from
the service commencement date. Pursuant to the terms of the EPC
Agreement, NECP shall pay NRG Business Services LLC $88 million, subject
to adjustment based upon certain conditions in the EPC Agreement, $84
million of which will be paid at substantial completion and $4 million
of which will be paid at final completion. The project is expected to
achieve commercial operations in the first half of 2018.
In connection with the UPMC project, NRG Energy Center Minneapolis LLC
established shelf facilities for the anticipated issuances of $70
million of Series E notes and $10 million of Series F notes. The
proceeds from the notes, if issued, will be utilized to make payments
with respect to the EPC Agreement described above. The UMPC project, net
of non-recourse financing, is expected to increase CAFD on an average
annual basis by approximately $4 million6 starting in 2019.
5 CAFD average over the 5-year period from 2019-2023
6 CAFD average over the 5-year period from 2019-2023
Investment Partnerships with NRG Energy
During the fourth quarter of 2017, NRG Yield invested approximately $24
million in the existing business-renewable focused distributed solar
partnerships bringing total capital invested to $208 million7
in the distributed solar investment partnerships. As of December 31,
2017, through the existing partnership agreements, NRG Yield owns
approximately 233 MW8 of distributed solar capacity with a
weighted average contract life by CAFD of approximately 20 years.
Award to Provide Black Start Services at Marsh Landing
On December 1, 2017, the California Independent System Operator selected
a proposal by NRG Yield's Marsh Landing project to provide black start
capability in the greater San Francisco Bay Area. In partnership with
NRG, the Company is evaluating options for the implementation of the
service, which based on preliminary assessment, would require an
investment between $10 and $12 million. The Company expects to make an
investment decision by the third quarter of 2018.
Quarterly Dividend Update
On February 15, 2018, NRG Yield’s Board of Directors declared a
quarterly dividend on Class A and Class C common stock of $0.298 per
share (approximately $1.19 per share annualized) payable on March 15,
2018, to stockholders of record as of March 1, 2018. This equates to a
3.47% increase over the prior quarter.
Seasonality
NRG Yield’s quarterly operating results are impacted by seasonal
factors, as well as variability in renewable energy resources. The
majority of NRG Yield’s revenues are generated from the months of May
through September, as contracted pricing and renewable resources are at
their highest levels in the Company’s core markets. The factors driving
the fluctuation in Net Income, Adjusted EBITDA, Cash from Operating
Activities, and CAFD include the following:
- Higher summer capacity prices from conventional assets;
- Higher solar insolation during the summer months;
- Higher wind resources during the spring months;
-
Debt service payments which are made either quarterly or
semi-annually; and -
Timing of maintenance capital expenditures and the impact of both
unforced and forced outages.
The Company takes into consideration the timing of these factors to
ensure sufficient funds are available for distribution on a quarterly
basis.
2018 Financial Guidance
NRG Yield is reconfirming 2018 full year financial guidance. This
financial guidance does not include growth investments under evaluation
or not yet completed. Financial guidance continues to be based on median
renewable energy production estimates.
| ($ millions) |
2018 Full |
| Net Income | 125 |
| Adjusted EBITDA | 950 |
| Cash from Operating Activities | 599 |
| Cash Available for Distribution (CAFD) | 280 |
NRG Yield is targeting dividend per share growth of 15% annually on each
of its Class A and Class C common stock through 2018.
7 Excludes $26 million for 14 MW of residential solar leases
acquired outside of partnerships, not adjusted for dividends received
8 Based on cash to be distributed; excludes 14 MW of
residential solar leases acquired outside of partnership
Earnings Conference Call
On March 1, 2018, NRG Yield will host a conference call at 9:15 a.m.
Eastern to discuss these results. Investors, the news media and others
may access the live webcast of the conference call and accompanying
presentation materials by logging on to NRG Yield’s website at http://www.nrgyield.com
and clicking on “Presentations & Webcasts.”
About NRG Yield
NRG Yield owns a diversified portfolio of contracted renewable and
conventional generation and thermal infrastructure assets in the United
States, including fossil fuel, solar and wind power generation
facilities that provide the capacity to support more than two million
American homes and businesses. Our thermal infrastructure assets provide
steam, hot water and/or chilled water, and in some instances
electricity, to commercial businesses, universities, hospitals and
governmental units in multiple locations. NRG Yield’s Class C and Class
A common stock are traded on the New York Stock Exchange under the
symbols NYLD and NYLD.A, respectively. Visit www.nrgyield.com
for more information.
Safe Harbor Disclosure
This news release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements are
subject to certain risks, uncertainties and assumptions, and typically
can be identified by the use of words such as “expect,” “estimate,”
“anticipate,” “forecast,” “plan,” “believe” and similar terms. Such
forward-looking statements include, but are not limited to, statements
regarding our Net Income, Adjusted EBITDA, Cash from Operating
Activities, cash available for distribution, the satisfaction of the
conditions to the Company’s consent to the sale by NRG Energy, Inc. of
its interests in the Company, the Company’s future revenues, income,
indebtedness, capital structure, strategy, plans, expectations,
objectives, projected financial performance and/or business results and
other future events, and views of economic and market conditions.
Although NRG Yield, Inc. believes that the expectations are reasonable,
it can give no assurance that these expectations will prove to be
correct, and actual results may vary materially. Factors that could
cause actual results to differ materially from those contemplated above
include, among others, general economic conditions, hazards customary in
the power industry, weather conditions, including wind and solar
performance, competition in wholesale power markets, the volatility of
energy and fuel prices, failure of customers to perform under contracts,
changes in the wholesale power markets, changes in government
regulations, the condition of capital markets generally, our ability to
access capital markets, cyber terrorism and inadequate cybersecurity,
the ability to engage in successful mergers and acquisitions activity,
potential risks to the company as a result of NRG’s sale of its
ownership interest in the Company, including the inability to meet
certain deadlines, failure of the conditions to be met, unanticipated
liabilities in connection with the sale or the reaction of customer,
partners or lenders to the transaction, unanticipated outages at our
generation facilities, adverse results in current and future litigation,
failure to identify, execute or successfully implement acquisitions
(including receipt of third party consents and regulatory approvals),
our ability to enter into new contracts as existing contracts expire,
our ability to acquire assets from NRG Energy, Inc. or third parties,
our ability to close drop down transactions, and our ability to maintain
and grow our quarterly dividends. Furthermore, any dividends are subject
to available capital, market conditions, and compliance with associated
laws and regulations.
NRG Yield, Inc. undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The Adjusted EBITDA and Cash Available for
Distribution are estimates as of today’s date, March 1, 2018, and are
based on assumptions believed to be reasonable as of this date. NRG
Yield expressly disclaims any current intention to update such guidance.
The foregoing review of factors that could cause NRG Yield’s actual
results to differ materially from those contemplated in the
forward-looking statements included in this news release should be
considered in connection with information regarding risks and
uncertainties that may affect NRG Yield’s future results included in NRG
Yield’s filings with the Securities and Exchange Commission at www.sec.gov.
In addition, NRG Yield makes available free of charge at www.nrgyield.com,
copies of materials it files with, or furnish to, the SEC.
|
NRG YIELD, INC. CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||
| Year ended December 31, | |||||||
|
(In millions, except per share amounts) |
2017 | 2016 | 2015 | ||||
| Operating Revenues | |||||||
| Total operating revenues | $ | 1,009 | $ | 1,035 | $ | 968 | |
| Operating Costs and Expenses | |||||||
| Cost of operations | 326 | 308 | 323 | ||||
| Depreciation and amortization | 334 | 303 | 303 | ||||
| Impairment losses | 44 | 185 | 1 | ||||
| General and administrative | 19 | 16 | 12 | ||||
| Acquisition-related transaction and integration costs | 3 | 1 | 3 | ||||
| Total operating costs and expenses | 726 | 813 | 642 | ||||
| Operating Income | 283 | 222 | 326 | ||||
| Other Income (Expense) | |||||||
| Equity in earnings of unconsolidated affiliates | 71 | 60 | 31 | ||||
| Other income, net | 4 | 3 | 3 | ||||
| Loss on debt extinguishment | (3 | ) |
– |
(9 | ) | ||
| Interest expense | (306 | ) | (284 | ) | (267 | ) | |
| Total other expense, net | (234 | ) | (221 | ) | (242 | ) | |
| Income Before Income Taxes | 49 | 1 | 84 | ||||
| Income tax expense (benefit) | 72 | (1 | ) | 12 | |||
| Net (Loss) Income | (23 | ) | 2 | 72 | |||
| Less: Pre-acquisition net income (loss) of Drop Down Assets | 8 | (4 | ) |
– |
|||
|
Net (Loss) Income Excluding Pre-acquisition Net Income (Loss) of Drop Down Assets |
(31 | ) | 6 | 72 | |||
| Less: Net (loss) income attributable to noncontrolling interests | (15 | ) | (51 | ) | 39 | ||
| Net (Loss) Income Attributable to NRG Yield, Inc. | $ | (16 | ) | $ | 57 | $ | 33 |
|
Earnings Per Share Attributable to NRG Yield, Inc. Class A and Class C Common Stockholders |
|||||||
|
Weighted average number of Class A common shares outstanding – basic and diluted |
35 | 35 | 35 | ||||
|
Weighted average number of Class C common shares outstanding – basic and diluted |
64 | 63 | 49 | ||||
|
(Loss) Earnings per Weighted Average Class A and Class C Common Share – Basic and Diluted |
$ | (0.16 | ) | $ | 0.58 | $ | 0.40 |
| Dividends Per Class A Common Share | 1.098 | 0.945 | $ | 1.015 | |||
| Dividends Per Class C Common Share | $ | 1.098 | $ | 0.945 | $ | 0.625 | |
Contacts
NRG Yield, Inc.
Media:
Sheri Woodruff,
609-524-4608
Marijke Shugrue, 609-524-5262
or
Investors:
Kevin
L. Cole, CFA, 609-524-4526
Lindsey Puchyr, 609-524-4527
