NRG Energy has agreed to sell its renewable energy business and South Central generation assets in strategic move to streamline the company.
“Today’s announcement represents a significant milestone in simplifying our value proposition, optimizing our portfolio, and strengthening our balance sheet to create significant shareholder value,” said Mauricio Gutierrez, president and CEO of NRG Energy.
Global Infrastructure Partners (GIP) will acquire NRG's controlling stake and 46 percent economic interest in NRG Yield, as well as NRG’s renewable energy development and operations and maintenance businesses, for $1.375 billion in cash proceeds.
NRG’s renewable O&M platform currently manages 2.4 gigawatts of renewable power generation in 17 states. The company's renewable development platform has a total project pipeline of more than 6.4 gigawatts of renewable generation opportunities across the U.S., and 630 megawatts of identified “drop-down” assets, which are subject to a right of first offer from NRG Yield.
According to GIP, NRG Yield currently holds the largest project portfolio by installed capacity among all U.S. power YieldCos. NRG Yield holds a diverse portfolio of wind, solar and natural-gas technologies, with a total operating capacity of 5.1 gigawatts and a market cap of $3.2 billion.
"We view each of the three acquired businesses -- the [NRG Yield] stake, the O&M business, and the development business -- as highly complementary and well positioned to capitalize on the increasing market demand for low-cost, clean energy," said Adebayo Ogunlesi, chairman and managing partner of GIP, in a statement.
As part of the deal, GIP will provide backstop support for NRG Yield's agreed purchase of the 527-megawatt Carlsbad Energy Center natural gas project. NRG Yield has also signed an agreement to purchase the 154-megawatt Buckthorn Solar project from NRG. Carlsbad and Buckthorn drop-downs are expected to close before year-end, subject to achieving commercial operations and approvals, according to NRG.
Today's news marks a major shift for NRG, which took a strong position in the clean energy sector under former CEO David Crane. However, the sale of its renewable energy businesses "does not impact NRG’s commitment to provide comprehensive energy solutions for corporate and residential customers," the power company stated in a press release.
The transaction with GIP is expected to close in the second half of the year, subject to customary closing conditions and approvals.
NRG also announced today that it has entered into an agreement for Cleco Corporate Holdings to purchase NRG’s South Central business for a total purchase price and cash proceeds of $1 billion.
The South Central business owns and operates an approximately 3.5-gigawatt portfolio of generation assets. NRG's natural-gas facilities include the 225-megawatt Bayou Cove plant, the 176-megawatt Sterlington plant, and the 1,263-gigawatt Cottonwood plant. NRG will lease back Cottonwood through 2025, however. Cleco will also acquire 1,891 megawatts in coal-fired capacity from NRG's Big Cajun-I and Big Cajun-II plants.
The transaction is expected to close in the second half of the year.
Taken together, NRG’s asset sales will amount to $2.8 billion in anticipated cash proceeds and remove $7 billion in debt. NRG said it expects to announce additional asset sales over the course of 2018, and is revising its total asset sales cash proceeds target down to approximately $3.2 billion.
NRG's leadership announced a reorganization plan last summer seeking to raise $4 billion and reduce debt by $13 billion, in part through the sale of its renewable energy business.
We'll hear directly from NRG at our upcoming 11th annual Solar Summit 2018 in San Diego, May 1-2. Powered by the unique blend of research and economic analysis from the GTM Research team, this year's agenda will feature themes from beyond traditional project finance to innovations in solar and the transformation of electricity.