Three years after spinning out a yieldco to operate its green energy assets, NRG Energy Inc. (NYSE: NRG) said Friday morning that it now plans to create another new company, called “Greenco” for current purposes. NRG’s yieldco, NRG Yield Inc. (NYSE: NYLD), would presumably acquire assets from Greenco as it currently does from NRG.
NRG is trying to solve its problems of access to and cost of capital. Forming a new company to focus on its green energy business simplifies the parent company’s management and cost structure to help NRG shrink its balance sheet by reducing operating and capital expenses. At the end of the June quarter, NRG’s long-term debt totaled $19.7 billion
According to the company’s presentation, beginning January 1, 2016, NRG’s financial commitment to Greenco is limited to $125 million. That is expected to save NRG $150 million annually. NRG also stands to post a one-time gain of $210 million in a drop-down transaction of its Edison Mission Wind portfolio to NRG Yield.
NRG expects to cut its cash requirement for 2015 from a prior forecast of $250 million to a new total of $168 million.
The company also expects to spend approximately $1.3 billion by the end of 2016 on reducing debt and an additional $250 million buying back shares this year. Share buybacks in 2015 are expected to total $437 million and the company expects to pay $195 million in dividends. Under its NRG Reset program, the company expects to save about $500 million in cost reductions, fuel conversions and targeted non-recourse financing, and to take in another $500 million in asset dispositions.
Investors are wary. NRG’s stock price traded down about 5% in the noon hour Friday, at $18.21 in a 52-week range of $17.69 to $33.92.