GenOn Energy Inc, an affiliate of NRG Energy, Inc. NRG, has entered into agreements to sell two of its power plants for a total consideration of $138 million.
As part of its ongoing strategy of portfolio optimization, NRG Energy is selling its 525-megawatt (“MW”), waste coal-fired Seward power plant in Pennsylvania to a Robindale Energy Services unit and the 352-MW, natural gas-fired Shelby County power plant in Illinois to The Woodlands-based Rockland Capital. Under the terms of the contract, NRG Energy will continue to operate and maintain the Seward generation unit on behalf of Robindale Energy.
The company estimates maintenance expenditure of these two plants to amount to $17 million which, by divestment, the company can avoid and funnel those funds for supporting its long-term objectives. Additionally, the company intends to utilize the proceeds to pay down debt and improve its cash flow. The transaction is expected to close in the first quarter of 2016.
NRG Energy has been systematically pursuing asset monetization. In the past one year, NRG Energy has sold a 50% interest in Sabine Cogen, L.P. and Petra Nova Parish Holdings, LLC.
The company is currently assessing the market for selling a majority stake in "GreenCo" Runway and marketing certain assets in Portland and Avon Lake Unit 9 for sale. It has already received a favorable response to these efforts.
However, NRG Energy along with its peers Alliant Energy Corporation LNT, Xcel Energy Inc. XEL and FirstEnergy Corp. FE is vulnerable to the increasing stringency of government regulations on curbing carbon dioxide emissions during power generation. In order to comply with government regulations, NRG Energy has to invest substantially in developing low-emission facilities, which will inevitably raise operating costs and eat into margins.
Zacks Rank
NRG Energy carries a Zacks Rank #3 (Hold).
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