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S&P upgrades NRG Energy on improved metrics following asset sales

Citing improved metrics, S&P Global Ratings on Sept. 10 raised the issuer credit rating on NRG Energy Inc. to BB from BB-, with a stable outlook.

The upgrade was prompted by NRG Energy's business "transformation plan," which successfully lowered costs and improved the company's operational flexibility, as well as the company's sale of certain assets, resulted to lower debt levels. "We anticipate these cost cuts are likely to be maintained and will permanently and positively affect credit metrics," S&P said in a report.

NRG Energy recently closed the sale of its stake in NRG Yield Inc., now known as Clearway Energy Inc., and a renewable energy business to Global Infrastructure Partners. The company netted more than $1.3 billion in cash and shed $6.7 billion in debt with those asset sales and is moving forward to complete a $1 billion stock buyback program.

The deal, announced in February, was part of a broader plan at NRG that aimed to raise up to $4 billion in cash and cut up to $13 billion in consolidated net debt. The company also is in the process of selling its South Central portfolio, a transaction that is expected to close later this year.

The stable outlook reflects the rating agency's expectation that those developments will drop adjusted Debt to EBITDA to below 3.5x by 2019. The rating agency also upgraded NRG's issue-level secured rating to BBB- from BB+ and its unsecured rating to BB from BB-.

Separately, Clearway Energy said in a filing that it will file further notices of consummation with the Federal Energy Regulatory Commission for the pending purchase by Clearway Energy Operating LLC of the planned 530-MW Carlsbad Energy Center, as well as Clearway Energy's pending acquisition of membership interests in Agua Caliente Borrower 1 LLC. (FERC docket EC18-61)

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.