NRG to sell EV charging stake and revamp residential solar venture to cut costs

Dive Brief:

NRG Energy, which has struggled with its alternative energy business model and last year, removed its CEO, has announced changes in its approach to two segments that aim to shore up revenue and reduce costs.
The company will sell a majority stake in its EVgo car charging business to Vision Ridge Partners for approximately $50 million, resulting in the company reporting EVgo results on an equity earnings basis.
NRG will also be making significant changes to its home solar business, transitioning to an "originate-and-monetize" model where it will sell its contracts to Sunrun and Spruce Finance.

Dive Insight:

NRG officials said the first quarter returns showed "strong financial and operational performance," despite market challenges. As the company looks to cut costs and ensure revenue, it has made significant changes to two alternative energy initiatives that highlight how the company is trying to change.

In a statement announcing the company's Q1 results, NRG president and CEO Mauricio Gutierrez said the company would "sell a majority share of EVgo" while also announcing "the restructuring and simplification of the residential solar business.”

On the solar side, the company said it had concluded a strategic review process for residential solar "integrating it into NRG and streamlining both its model and market." As a result, the business segment will transition to an "originate-and-monetize to third party model," under contracts already signed with Sunrun and Sprice Finance.

"Both parties will be able to purchase NRG originated residential solar contracts and provide support over the life of the customer contract," the company said. NRG also intends to focus on three markets where it believes it has established a foothold -- New Jersey, New York and Massachusetts – while keeping an eye on developments in Texas as well.

NRG also said it has agreed to sell a majority stake in its EVgo business to Vision Ridge Partners for approximately $50 million, including of $19.5 million (subject to working capital adjustments) payable to NRG, with the remainder contributed as capital to the business. The company said it has future earnout potential of up to $70 million, and will retain its obligations under a 2012 California Public Utilities Commission settlement.

NRG's first quarter net income this year was $47 million, compared with a $136 million loss in Q1 2015.

The company's stock has fallen from about $25 to $15 in the past year, and before that, traded close to $40/share. The company is pulling back from speculative ventures to become more conservative after sacking former CEO David Crane last year. Crane did not view the company as a traditional energy provider and had attempted to maximize profits based around grid edge investments, but when the business model struggled the company brought in Gutierrez.