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NRG Energy (NRG) to Acquire Stream Energy's Retail Business

Zacks Equity Research

NRG Energy, Inc. NRG announced thatit has agreed to acquire Stream Energy’s retail electricity and natural gas business. The company will pay $300 million along with working capital in an all-cash transaction. Subject to approval, the transactions are expected to close in the third quarter of 2019.

If approved, the deal will bring $65 million annual EBITDA and Stream Energy’s customer baseto NRG Energy’s account.  Notably, Stream Energy serves 600,000 Residential Customer Equivalents (RCEs) in nine states and the District of Columbia.

Goal of NRG Energy

NRG Energy expects to conduct business at the highest level of operational performance. Additionally, its predictable earnings, benefits from Transformation Plans and growth in retail business will enable the company to generate excess of cash through 2019.

The company plans to utilize the cash by reinvesting in the business, boosting shareholders’ value and undertaking strategic acquisitions. In June 2018, the company closed XOOM Energy acquisition for $208 million, which was expected to boost annual EBITDA by $45 million and annual net income by $11 million.

The company serves nearly 3.1 million residential, industrial and commercial customers. The recent acquisition will not only expand the customer base but also increase the company’s national retail leadership position.

Merger & Acquisition in Utility Space

Merger and acquisition (M&A) activities are common in utility space. Along withorganic ventures, Utility companies are also treading on the inorganic route to expand existing operations.

Dominion Energy D completed the merger with SCANA Corporation on Jan 1, 2019, which added several high-quality businesses to the business.

In April, UGI Corp. UGI announced a merger agreement with AmeriGas Partners, L.P. APU. The deal is expected to be accretive to the company’s earnings from Fiscal 2020.

Price Movement &Zacks Rank

In the past 12 months, shares of NRG Energy have gained 7.4% compared with the industry’s rise of 15.1%.

NRG Energy carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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NRG Energy, Inc. (NRG) : Free Stock Analysis Report
 
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