Monday, February 18, 2019

NRG Announces $1 Billion Stock Buyback, $70 Million Sale

By Peter Key

NRG Energy said Thursday that its board has authorized the company to spend $1 billion to repurchase its own shares.

The company also said it has agreed to sell its Boston Energy Trading and Marketing subsidiary to Mitsubishi’s Diamond Generating unit for $70 million.

The moves are the latest in a series of steps NRG has taken to boost its share price in response to pressure from Elliott Management, a hedge fund run by billionaire Paul Singer, and Bluescape Energy Partners, a private investment firm, which announced in January 2017 that they had taken a 9.4% stake in the company.

NRG Energy GenOn Energy Repurchase Program

NRG Energy’s Princeton, N.J. headquarters | NRG

NRG last July announced a transformation plan that it said would improve its recurring costs and margins by $1.1 billion; raise from $2.5 billion to $4 billion in cash through asset sales; and remove $13 billion in debt from its balance sheet. The company took major steps to execute that plan last month when it agreed to sell its renewables business, its stake in NRG Yield and its South Central Generating subsidiary in transactions that will bring it $2.8 billion in cash and take $7 billion in debt off its books.

NRG Energy Mauricio Gutierrez Repurchase Program

NRG President and CEO Mauricio Gutierrez said the company has announced $3 billion in asset sales. NRG’s board of directors has authorized a $1 billion share repurchase. | NRG

The company also said last month that it expects to announce more sales this year and has revised its total asset sales cash proceeds target under the transformation plan to $3.2 billion. (See NRG Selling Renewables, Other Assets for $2.8 Billion.) With the announcement of the Boston Energy sale, the company has reported sales totaling more than $3 billion, all of which are on track to close by the end of the year, CEO Mauricio Gutierrez said during the company’s earnings call Thursday. As the closings progress and NRG completes the initial $500 million portion of its share repurchase program, it will look to kick off the second $500 million round of buybacks, he said.

Gutierrez also said NRG’s GenOn Energy subsidiary, which is operating under bankruptcy protection, could transition to becoming a standalone company as early as September. GenOn’s reorganization plan was approved by the U.S. Bankruptcy Court in Delaware in December, and its financial results are no longer included in NRG’s. On Tuesday, Platinum Equity said it has agreed to buy an 810-MW combined cycle gas-fired plant in Gettysburg, Pa., from GenOn for $520 million.

NRG posted a loss of $1.67 billion from continuing operations on revenue of $2.46 billion in the fourth quarter of 2017, compared to a loss of $891 million on revenue of $2.48 billion in the same quarter of 2016.