US utility NRG Energy said it will sell up to $4 billion of assets and its renewable energy yieldco in a reorganisation that would shed $13 billion of debt from the company’s balance sheet.
The goal of NRG’s “transformation plan” is to simplify and make its business more efficient, the company said in a statement on Wednesday. The independent power producer, one of the largest in the US, reached an agreement with activist investors Elliot Management and Bluescape Energy Partners to cut costs, cut down on debt and increase flexibility.
NRG plans to divest businesses that represent over 60 percent of its EBITDA to generate a cash infusion. The company said it would sell 6GW of conventional generation and 50-100 percent of its interest in NRG Yield, which is valued at around $3 billion. It has also agreed to divest its ownership interest in GenON Energy and its 15GW of generation after the company filed in June for Chapter 11 bankruptcy.
In December, NRG closed an acquisition for 1.5GW of bankrupt SunEdison’s renewable energy portfolio.
NRG said it expects to announce sale agreements for some of its assets by the end of 2017, mentioning Citi, Goldman Sachs and Morgan Assets as potential buyers.
Profits have constrained for US power producers in recent years as cheap natural gas has sent electricity prices plummeting. NRG chief executive Mauricio Gutierrez said the transformation plan’s goal is to “simplify and strengthen the company to thrive through any market”.
NRG’s board of directors unanimously supported the plan, which has been four months in the making after the company reached an agreement in February with Elliott and Bluescape to reorganise the business. The plan established a five-person review committee that worked with NRG’s management to review and make strategy recommendations.
Elliott and Bluescape held a 9.4 percent interest in the company in February.
NRG is expected to have $6 billion of excess cashflow from 2017 to 2020, with internal returns 12-15 percent or better, according to a statement.