NRG Yield, Inc.
) has announced that it will acquire North America's largest wind
farm, the Alta Wind facility, from Terra-Gen Power LLC ("Terra-Gen
Power"). The transaction is valued at $0.87 billion. In addition,
the company may bear the non-recourse project financings of $1.6
billion, considering customary working capital adjustments. The
transaction is expected to be completed in third-quarter 2014,
subject to regulatory approvals.
Alta Wind facility is a part of Terra-Gen Power's strong
Californian wind portfolio. The facility is located on the 9,000
acre Alta Wind Energy Center (AWEC) in Tehachapi, CA. AWEC is
estimated to diminish carbon dioxide emissions by over 52 million
metric tons annually.
NRG Yield plans to utilize a combination of its cash, equities and
proceeds of the recently issued senior notes to finance the
acquisition. As of Mar 31, 2014, the company had a cash balance of
$0.42 billion. NRG Yield recently increased its limit under the
revolving credit facility to $0.45 billion.
NRG Yield, a unit of
NRG Energy, Inc.
), is primarily engaged into renewable-energy business. The company
owns solar and wind assets. The company also has exposure on
conventional-fuel based assets. Currently, NRG Yield has a total
generation capacity of 414 megawatts (MW) through renewable assets,
including 101 MW from wind. The latest acquisition will enable NRG
Yield to add 947 MW of capacity to its portfolio. The company will
also get a portfolio of land leases related to the Alta Wind
facility. Post acquisition, NRG Energy's total wind generation will
increase to 2,839 MW.
The acquisition will allow NRG Yield to enjoy the benefit of Alta
Wind's long-term power purchase agreements with Southern California
Edison a unit of
). Also, the deal is expected to boost earnings before interest,
taxes, depreciation, and amortization and cash available for
distribution by around $0.22 billion and $0.07 billion per year,
respectively, by 2016.
NRG Yield is currently pursuing a steady acquisition program. On
May 5, 2014, the company inked an agreement with NRG Energy to
acquire two solar facilities, TA High Desert and RE Kansas South,
and El Segundo Energy Center, a gas-fired facility. These
initiatives will enable the company to expand its scale of
operations besides diversifying generation mix.
Recently, the Obama administration rolled out its plan to curb
carbon emissions from power plants by 30% by 2030 from 2005 levels.
The rule will probably come into effect next year. We believe that
NRG Yield is well-positioned to meet stringent utility regulations,
having a well-balanced generation portfolio.
NRG Yield currently has a Zacks Rank #1 (Strong Buy). Another stock
in the utility sector looking equally good is
Black Hills Corporation
), carrying a Zacks Rank #1 (Strong Buy).
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