NRG Review Said to Include Potential Sale of All Renewables

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  • NRG said to have received interest in whole renewables segment
  • U.S. power generator being pressed by activists to cut costs

A committee of NRG Energy Inc. board members is considering a recommendation to sell the company’s entire renewable energy business as the U.S. power generator faces pressure from billionaire investor Paul Singer to cut costs, people familiar with the situation said.

A potential sale, being weighed by a panel that NRG formed in February, could include wind and solar projects that NRG’s developing on its own and plants run by NRG Yield Inc., a unit it created and controls, the people said, asking not to be identified because the information isn’t public. Prospective buyers have informally expressed interest in the entire portfolio, though no formal offers have been made, they said. NRG owns 47 percent of the economic interest in NRG Yield, which has a market value of $3.1 billion.

A sale of the renewable portfolio would represent one of the largest-ever clean energy transactions. At least five gigawatts of total generation capacity would change hands with the sale of the yieldco alone. NRG, the nation’s biggest independent power generator, formed the committee to review its entire business, including the company’s fossil-fuel assets, after Singer’s Elliott Management Corp. and a company run by turnaround titan C. John Wilder took an activist stake in the company in January. Wilder, who was also appointed a board member, is leading the review panel.

NRG Yield rose 0.2 percent to $17.08 at 10:31 a.m. in New York. NRG Energy was little changed at $14.79.

Reviewing Options

The committee is still reviewing options and no decision has been made, according to people familiar with the situation. An NRG spokesman declined by email to comment. Citigroup Inc., which is advising the review committee, also declined to comment.

The ad hoc committee doesn’t have the authority to sell the business on its own. It will instead make recommendations to NRG’s board for consideration. The company has said it expects to provide results of the panel’s review by Aug. 15.

NRG’s renewables assets “might be their most highly-valued assets, and their most liquid assets,” Michael Morosi, a Nashville-based renewables consultant and former analyst at Avondale Partners LLC, said in an interview.

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

Last year, NRG’s renewables business and NRG Yield made up about a third of the company’s adjusted earnings before interest, taxes, depreciation and amortization, totaling $1.09 billion.

The sale of the yieldco could add to a crowded market of available wind and solar farms, and the companies that own them. First Solar Inc., the largest U.S. module manufacturer, is looking to unload its stake in the 8Point3 Energy Partners LP yieldco. Distressed Spanish clean-energy company Abengoa SA is working to sell its piece of Atlantica Yield Plc.

“Demand by both financial investors and strategic investors is at an all-time high,” Nathan Serota, a New York-based analyst at Bloomberg New Energy Finance, said in an interview. “Operational solar projects are rocks that spit out cash flows. They’re low-risk, yield-oriented investments.”

The asset review comes just months after NRG bought more than 1.5 gigawatts of wind and solar projects from bankrupt SunEdison Inc. -- its largest-ever renewables acquisition. By March, NRG had almost tripled its renewables portfolio to nearly 5 gigawatts from 2013.

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