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Overview of NRG Yield: NRG Energy’s Green Yieldco

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NRG Yield

NRG Yield (NYLD) is the fourth operating segment of NRG Energy (NRG). Although NYLD accounted for just around 5% of NRG’s gross revenues, it is one of the only two profitable segments of the company—the other being NRG Home Retail. NYLD is a pioneer in the American yieldco space, being the first American green yieldco.

NRG Energy (NRG) floated NRG Yield (NYLD) in December 2012. The company completed its IPO in July 2013 on the NYSE and raised $468 million. In July 2014, the company raised $630 million in a secondary offering.

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NYLD: Operations and portfolio

Put simply, NYLD operates completed power plants under long-term contracts with customers, providing the company with highly predictable cash flows. The company distributes most of its cash flows, making it attractive for dividend-seeking investors.

As of June 30, 2015, NYLD operated 3,949 megawatts (or MW) of generating assets. The portfolio included full or partial interest in 1,945 MW of conventional assets, 491 MW of solar assets, 1,389 MW of wind assets, and 124 MW of thermal generation capacities.

In addition, NRG has recently agreed (as a part of NRG Reset program discussed in Part 1) to drop down 814 MW of wind assets to NYLD for total proceeds of $210 million in addition to transferring $242 million in debt.

Counterparties

Major counterparties of NYLD are investment-grade utilities (XLU) including Pacific Gas and Electric (PCG) and Southern California Edison (EIX).

NRG’s dividends

NRG Energy has exhibited growing dividends quarter-over-quarter since its inception. There was a stock split effective May 14, 2015, leading to a halving of its dividend per share. However, adjusted dividend payouts have continued to show an uptrend.

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