NRG Energy, Inc. (NRG - Free Report) has completed its previously announced sale of interest in NRG Yield, Inc and its Renewables platform to Global Infrastructure Partners (GIP) for $1.348 billion. The transaction will substantially lower the company’s debt by $6.7 billion.
This deal is a part of NRG Energy’s ongoing Transformation Plan and will allow the company to focus on core operations and strengthen balance sheet as well as increase value of shareholders.
Impact of the Transaction
The deal will substantially lower NRG Energy’s long-term debt, which amounted to $14.8 billion as of Jun 30, 2018. The net proceeds will help the company to continue with its share buyback program. It intends to buy back shares worth $500 million in the second half of 2018. The company plans to utilize the proceeds to lower debt by an additional $640 million in the second half of 2018.
Post closure of this deal Global Infrastructure Partners (GIP) has become NRG Yield’s Controlling Stockholder. NRG Yield will change its name to Clearway Energy, Inc and has appointed several new Directors and Officers.
The new controlling stockholder will assist NRG Yield to expand renewables growth opportunities and open new options for access to capital.
Consolidation in Utility Space
Utility companies are generally mature and fundamentally strong. Through acquisition, the companies expand their service area and customer base. Consolidation is a common phenomenon in utility space.
Dominion Energy (D - Free Report) and SCANA Corporation will ink a merger deal, which is expected to be completed by 2018 end, subject to pending consent from SCANA's shareholders; review and approval from the public service commission’s of South and North Carolina; and authorization by the Nuclear Regulatory Commission.
In the past 12 months, shares of NRG Energy have gained 42.6%, against the industry’s decline of 5.9%.
NRG Energy sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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