UBS assesses NRG sale of Aurora assets

The recent disclosure that NRG Energy (NYSE:NRG) is selling the Aurora Generating Station in Illinois to a subsidiary of LS Power Development shows that NRG is continuing to sell-down its GenOn fleet to meet debt obligations, according to an assessment by UBS Global Research.

NRG disclosed that its GenOn Energy subsidiary entered an agreement with RA Generation LLC to sell its 878MW Aurora Generating Station in Illinois for $365m ($416/kW) with the ultimate price subject to adjustment based on the outcome of the 2019/2020 PJM auction, according to a May 19 assessment led by Analyst Julien Dumoulin-Smith.

Aurora consists of ten gas combustion turbine units from 2001/2002 (7FA and LM6000 technology) which seldom operate (<1% capacity factor; ~40 hours annually), according to UBS.

The economics for Aurora are based entirely on capacity revenues, UBS said.

“The purchaser of Aurora is likely embedding upside from potential retirements in Illinois based on recent disclosures from Dynegy and Exelon, UBS said. “As more baseload coal and nuclear assets retire in Illinois that are replaced with intermittent wind resources there could be more price volatility to the benefit of peaking assets.”

“NRG stated on its 1Q16 earnings call that it would negotiate with GenOn creditors in the near term and according to media reports NRG plans to hire a restructuring advisor to help in the efforts,” UBS said.

The Aurora sale comes on of the heels of the 4Q 2015 asset sales involving the Seward plant in Pennsylvania and Shelby County facility in Illinois, UBS noted.

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.