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NRG Energy Receives Approval to Sale South Central Business

Zacks Equity Research

NRG Energy, Inc. NRG announced that it has received necessary regulatory approval from Louisiana Public Service Commission to sell its South Central Business to Cleco Corporate Holdings LLC (“Cleco”) for $1 billion. The transaction is expected to close on February 2019.

The deal is a part of NRG Energy’s ongoing Transformation Plan. Under the plan, the company has already divested its renewables platform — NRG Yield to Global Infrastructure Partners (GIP) for $1.348 billion.

Sale of South Central Business

The South Central business owns and operates nearly 3.5-gigawatt (GW) portfolio of generation assets. The company’s natural-gas facilities include the 225-megawatt (MW) Bayou Cove plant, the 176 MW Sterlington plant and the 1,263- MW Cottonwood plant.  The company will enter into a sale leaseback agreement for the Cottonwood plant through May 2025.  Cleco will also acquire 1,891 MW in coal-fired capacity from NRG Energy’s Big Cajun-I and Big Cajun-II plants.

On-Track Transformation Plan

NRG Energy’s three-year Transformation Plan, which was initiated in July 2017, is designed to strengthen earnings, increase cost savings and boost shareholder’s value. Continuous execution of the plan is expected to lower the company’s long-term debt that amounted to $6.7 billion as of Sep 30, 2018.

NRG Energy expects to conduct business and reach the peak of operational performance. Benefits from the Transformation Plan and growth in retail business will enable the company to generate in excess of $2.6 billion through 2019.

The net proceeds are expected to enable the company to continue with its share buyback program. The board of directors announced an incremental $500-million share repurchase authorization to be executed in 2019.

Price Movement

In the past 12 months, shares of NRG Energy have surged 51.8% compared with the industry’s rise of 3.6%.


 

Zacks Rank & Key Picks

NRG Energy carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. A few better-ranked stocks from the same industry are Ameren Corporation AEE, IDACORP, Inc IDA and CenterPoint Energy, Inc CNP. All the three stocks sport a Zacks Rank #1.

Long-term earnings growth of Ameren, IDACORP and CenterPoint Energy is pegged at 6.80%, 2.80% and 5.90%, respectively.

The Zacks Consensus Estimate for 2019 earnings of Ameren, IDACORP and CenterPoint Energy inched up 0.6%, 0.9% and 0.6% in the past 90 days, respectively.

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