Seller Beware for NRG as Rival Clean-Power Company to Sell Cheap

(Bloomberg) -- This may not be the best moment to sell a clean-energy company.

America's top two solar manufacturers agreed this week to sell their 8Point3 Energy Partners LP renewable-energy joint venture for less than its market value. That deal may be a harbinger of tough pricing for NRG Energy Inc., which is seeking to sell NRG Yield Inc., a publicly traded unit that owns wind and solar farms.

These holding companies were initially formed a few years ago to help provide cheaper capital for their owners. The financing landscape has changed significantly since then, with a sweeping tax reform, rising interest rates and a glut of wind and solar farms on the market. That's making yieldcos less appealing to buyers.

“If this was disappointing for 8Point3, then NRG Yield might face some of the same issues,” Kit Konolige, a New York-based analyst at Bloomberg Intelligence, said in an interview Tuesday. An NRG spokeswoman declined to comment.

8Point3 fell the most on record Tuesday and NRG Yield, slumped as much as 7 percent, the most intraday since November 2016. It was down 5 percent to $17 at 2:04 p.m. in New York.

Pressed by activist investors Paul Singer and C John Wilder, NRG is seeking to divest as much as $4 billion of assets. The linchpin: NRG Yield Inc., which owns 5.2 gigawatts of U.S. assets, including more than 3.1 gigawatts of wind and solar farms.
The landscape for renewables sales has gotten tighter recently. While tax reform appears to be a windfall for many energy companies, it made renewables financing scarcer and more expensive. Interest rates have ticked up. And there's no shortage of wind and solar farms available today.

“They're not going to get the price they would've gotten a year ago,” said Travis Miller, a Chicago-based analyst at Morningstar Inc. “Yield instruments are sensitive to alternative income investments like bonds.”

QuickTake Q&A: Yieldcos, Fuel for Energy Projects, Draw Scrutiny

NRG Yield and 8Point3 are both holding companies formed to buy clean-power plants, but they have a few notable differences. 8Point3 focuses only on solar, and it has two sponsors. NRG Yield has a single sponsor, and it may be sold in package deal that also includes its parent's renewable-energy development unit.

Capital Dynamics agreed to pay First Solar Inc. and SunPower Corp $977 million for 8Point3, below its $1.1 billion market value Monday.

“We are surprised by the price, which is likely reflective of increasing interest rates and a large supply of renewable assets for sale, and could be a negative indicator for other renewable developers,” Mark Strouse, a New York-based analyst at JPMorgan Chase & Co., said Tuesday in a research note about 8Point3.

--With assistance from Joshua Fineman and Michael Bellusci

To contact the reporter on this story: Brian Eckhouse in New York at beckhouse@bloomberg.net.

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Will Wade, Tina Davis

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