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Energy generation company NRG Energy Inc. (NRG - Analyst Report) announced that its unit NRG Solar and SunPower Corporation (SPWRA) have entered into a joint venture agreement to produce solar power. The NRG unit will make an equity investment of $450 million in the California Valley Solar Ranch project over the next four years.
The construction work of the 250 megawatt (MW) California Valley Solar Ranch in San Luis Obispo County will begin next year. This project will create 350 jobs during the construction process and will be one of the biggest photovoltaic solar power plants in the world.
As per the agreement, NRG Energy will assume the ownership and will be responsible for financing the California Valley Solar Ranch, while it falls upon SunPower to develop, design, build, operate and maintain the power plant. The project will come online partially at the end of 2011 and gradually in full operation in 2012 and 2013.
This Californian solar power project has already executed a 25-year power purchase agreement with Pacific Gas & Electric (PG&E) for delivery of 250 MWs of power.
Recently, the rejection by Dynegy Inc.'s (DYN - Snapshot Report) shareholders of Blackstone Group L.P.'s (BX - Analyst Report) buyout offer was a setback for NRG Energy as the offer included a separate agreement by which a portion of Dynegy's Californian generation assets were to be sold to NRG Energy.
The rejection of the deal compelled NRG Energy to lower its 2010 and 2011 guidance as the company was banking on its expansion in California. We believe this new solar project will temper the setback and pave the way for NRG to extend its presence in California.
NRG Energy has been working on green power projects and has over 1,000 MW of solar development projects in the pipeline. In September 2010, the company entered into a joint venture with Eurus Energy to build three Avenal photovoltaic solar projects -- Avenal Park, Sun City and Sand Drag -- which together will generate a total of 45 MW of solar power.
NRG Energy currently retains a Zacks #3 Rank (short-term Hold rating).
Based in Princeton, New Jersey, NRG Energy Inc. operates as a wholesale power generation company. The company is also involved in trade of fuel and transportation services, and trade of energy, capacity, and related products in the United States and internationally.
Headquartered in San Jose, California, SunPower designs, develops, manufactures, markets and sells high-performance solar electric power technology products, systems and services worldwide for residential, commercial and utility-scale power plant customers.
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