NRG Dumps Stake in Yieldco, Other Assets for Nearly $3 Billion

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Electric power generator NRG Energy Inc. (NYSE: NRG) announced Wednesday morning that it has agreed to sell its integrated U.S. renewable energy platform, including the controlling stake and 46% economic interest in NRG Yield Inc. (NYSE: NYLD), as well as NRG’s renewable energy operations and maintenance and development businesses. The buyer is private equity firm Global Infrastructure Partners (GIP) and the purchase price is $1.375 billion.

At Tuesday’s closing price, NRG Yield had a market cap of $2.44 billion and an enterprise value of $7.54 billion. The company’s trailing 12-month price-to-earnings (P/E) ratio is 52.45 and the forward P/E is 14.66.

Among the yieldco’s assets are operating power plant capacity of 5,100 megawatts (MW) diversified across wind, solar and natural gas technologies. The company also owns thermal infrastructure assets with an aggregate steam and chilled water capacity of 1,319 net MW and electric generation capacity of 123 net MW, servicing commercial businesses, universities, hospitals and government customers. A substantial portion of the NRG Yield’s project portfolio benefits from long-term contracts, with a weighted average remaining contract life of 16 years.

NRG and NRG Yield have also signed purchase and sale agreements for two NRG pipelines that will “drop down” to NRG Yield by the end of the year. NRG Yield will continue to be a publicly traded company.

NRG also announced the sale of its South Central business to Cleco Corporate Holdings for $1 billion in cash. South Central’s assets include a 3,555 MW portfolio of generation assets serving a customer base of cooperatives, municipalities and regional utilities under load contracts. As part of the transaction, NRG signed a sale-and-leaseback agreement for Cottonwood plant that runs through May 2025.

As a result of these sales, NRG has raised some $2.9 billion in cash, including $150 million from a sale in the second half of last year. The company expects to announce more sales this year and is raising its cash sale proceeds target to $3.2 billion.

Global Infrastructure Partners has invested or committed approximately $9 billion of equity in the sector, including 8,000 MW of operating renewable assets and over 14,000 MW of renewable assets under construction or in development.

NRG stock traded up about 5% early Wednesday, at $26.78 in a 52-week range of $14.52 to $29.78. The 12-month consensus price target on the stock is $32.75.