NRG Energy makes moves to reduce debt, cut costs

Calling the program “NRG Reset”, company officials said Friday morning that separating its renewables business from its conventional power plants will build a simpler NRG Group, help “unlock capital” and shrink the balance sheet, according to SNL.

The investor presentation suggests that to free up capital, NRG will suspend the conversion to diesel of two coal-burning generators at its Portland Generating Station in Pennsylvania.

Additionally, NRG is selling 75-percent interest in its wind portfolio to NRG Yield Inc. for $210 million and plans to buy back $250 million in shares through 2016.

NRG Energy (NRG -3.6%) unveils several moves to reduce debt, buy back shares and raise cash through an asset sale, as it faces pressure over its expensive clean energy businesses. Such companies, which are known as yieldcos, are designed to appeal to investors by paying out hefty and growing dividends. NRG Energy took possession of these assets through its USD-2.64-billion (EUR 2.31bn) takeover of Edison Mission Energy (EME) that was completed in the spring of 2014. Shares of NRG Energy, Inc. appreciated by 4.47% during the last five trading days but lost 8.67% on a 4-week basis. On Friday, NRG Yield announced that it will acquire 75% stake in NRG’s wind projects.

Through those sales and additional cost cutting, the plan is to allocate more than $1 billion to debt reduction and share repurchases through 2016, he said. In addition to the drain of its home-solar business, it experienced lower wholesale prices for electricity.

Mr. Crane said he is looking for strategic partners for the unit but “wouldn’t be looking to sell 100%”. He also said that while the California solar market is strong, the Texas market has trailed expectations.

The company also plans to cut $150 million in costs starting next year. The enterprise lost $65 million pretax in 2014, while NRG as a whole earned $134 million.

Mr. Crane had little to say about NRG Yield, other than that it is facing headwinds from bearish investor sentiment. These are one year projections based on the research brokerages covering the stock polled by Zack’s Research.