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NRG Energy Issues Sustainability-Linked Bond Worth $900M

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Zacks Equity Research
·3 min read
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NRG Energy Inc. NRG becomes the first North American company to issue Sustainability-Linked Bond (SLB) as it completes issuing senior secured first lien notes worth $900 million. The proceeds will be utilized to complete the Direct Energy acquisition.

Debt Management

NRG Energy has been steadily lowering the proportion of its debt load in the capital mix. As of Sep 30, 2020, the company’s long-term debt amounted to $5,792 million compared with $5,803 million on Dec 31, 2019. Cash and equivalents as of Sep 30, 2020 were $697 million, up from $345 million at the end of the prior year. As of Sep 30, 2020, the company had liquidity worth $3.5 billion, up from $2.1 billion as of Dec 31, 2019.

Efforts to Reduce Emissions

The company is continuously making efforts to make its operations sustainable in nature. It also evaluates the existing resources as well as adopts the forward-looking technologies to meet its long-term carbon goals. These efforts lead to a 37% reduction in greenhouse gas (GHG) emissions during 2019 compared with the carbon footprint recorded in 2014, which is the baseline year for the company’s science-based comparisons.

The company aims to achieve a 50% reduction of absolute GHG emissions by 2025 and reach net-zero GHG emissions by 2050 from the 2014 baseline. Markedly, with the achievement of these goals, the utility will be able to avoid approximately 1 billion tons of CO2 emissions by 2050.

Issuance of SLB will help the company pursue growth, achieve its climate transition strategy and enhance the stakeholders' value. Also, it aligns with NRG Energy’s business and financing commitments. Moreover, it creates a direct link between climate and funding strategies.

Zacks Rank & Price Performance

Currently, the company holds a Zacks Rank #5 (Strong Sell).

Shares of NRG Energy have gained 4.9% against the industry’s fall of 4.7% in the past month.

Key Picks

Some better-ranked stocks in the same industry are Portland General Electric Co. POR, Otter Tail Corp. OTTR and Pinnacle West Capital Corp. PNW, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Portland General Electric delivered an earnings surprise of 98.07% in the last four quarters, on average. It has a long-term (three-five years) earnings growth rate of 5.48%.

Otter Tail delivered an earnings surprise of 9.93% in the trailing four quarters, on average. The Zacks Consensus Estimate for 2020 earnings has moved 1.8% north in the past 60 days.

Pinnacle West Capital delivered an earnings surprise of 27.15% in the preceding four quarters, on average. It has a long-term earnings growth rate of 3.59%.

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