NRG Energy hoping to ‘reset’ business through sale of renewable unit to NRG Yield

The decision by NRG Energy (NYSE:NRG) to sell 75% of the equity interest of a major wind portfolio to affiliate NRG Yield (NYSE:NYLD) represents a significant ‘reset’ for NRG Energy.

NRG Energy will be working to “simplify” its corporate structure by placing many of its newer, clean energy businesses into a “Greenco” that should begin operation Jan. 1, 2016.

The company announced the move Sept. 18 and NRG President and CEO David Crane discussed the ongoing reorganization at NRG during a conference call with financial analysts.

The wind portfolio move is an effort to help “right-size the balance sheet of NRG,” Crane said. NRG is also implementing a company-wide cost reduction program. It will provide important “capital replenishment” for the parent company, Crane said.

During the next 12 months, NRG Energy hopes to “free up” about $1bn of capital, Crane said.

The company’s “integrated platform continues to serve us well,” Crane said.

At the same time, investors want to cater to “pragmatic greens” who want solar and distributed clean energy options at a reasonable cost, Crane said.

NRG Carbon360 will not be transferred to the new Greenco, but will remain under NRG Energy’s wholesale operations, Crane said.

NRG Energy will give only limited financial support to the new green affiliate, forcing the new entity to act more as an entrepreneurial concern, Crane said. NRG Energy is also opening in an ownership “partnership” with others on the Greenco company.

NRG Energy did a detailed review of the 140 generating units in its portfolio prior to launching its recent overhaul, Crane said. NRG still has about 4,800 MW of conventional generation and certain assets might be sold.

NRG Energy successfully spun off its NRG Yield company via IPO in August 2013. After peaking at more than $26/share, it appears that NRG Yield is now trading at around $15/share.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.