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NRG to sell Boston Energy unit, cut debt by $640M, pursue $1B share repurchases

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NRG to sell Boston Energy unit, cut debt by $640M, pursue $1B share repurchases

NRG Energy Inc. agreed to sell its Boston Energy Trading and Marketing subsidiary to Diamond Generating Corp. for an undisclosed sum, NRG announced in its fourth-quarter earnings release.

BETM is an energy management services and proprietary energy trading business with trading and energy management activities that span across all U.S. competitive power markets. It was formerly known as Edison Mission Marketing Trading.

Diamond Generating is a subsidiary of Mitsubishi Corp.

The deal is expected to close in the second half. The sale is subject to closing conditions, approvals and consents, including from the Federal Energy Regulatory Commission and the Committee on Foreign Investment in the United States.

To date, the integrated merchant generator and electric retailer has announced or closed about $3 billion in asset sales toward its revised transformation plan target of $3.2 billion as part of its plans to simplify its operations and deleverage its balance sheet.

The company also announced it will pursue a corporate debt reduction of $640 million this year and is temporarily reserving $1.20 billion of additional cash to achieve its 3.0x corporate net debt to adjusted EBITDA ratio.

NRG said it received approval from its board for $1 billion of share repurchase programs, with the first $500 million program to begin immediately. The company expects to execute the remaining $500 million repurchase after completing the initial program and as it moves closer to completing the announced asset sales.

On the earnings front, the company on March 1 reported fourth-quarter 2017 adjusted EBITDA of $497 million, missing the S&P Capital IQ consensus estimate for adjusted EBITDA of $621.7 million. The result is an increase from fourth-quarter 2016 adjusted EBITDA of $471 million.

Fourth-quarter free cash flow before growth investments rose to $497 million in 2017, from $270 million a year earlier, while cash from continuing operations totaled $581 million, an increase from $533 million in the year-ago quarter.

NRG Energy generated $2.46 billion in fourth-quarter operating revenues, compared with $2.48 billion in the comparable quarter of 2016.

The company posted a fourth-quarter loss from continuing operations of $1.67 billion, compared with a net loss of $891 million for the same quarter of 2016.

The result was attributed to a $1.8 billion impairment of fixed assets, goodwill and investments, of which $1.2 billion was related to the South Texas Project nuclear generation facility.

For full year 2017, the company posted adjusted EBITDA of $2.37 billion and free cash flow before growth investments of $1.30 billion. This compares to full-year 2016 adjusted EBITDA of $2.71 billion and free cash flow of $1.26 billion.

The S&P Capital IQ consensus estimate for 2017 adjusted EBITDA was $2.47 billion.

NRG reported a full-year loss from continuing operations of $1.55 billion, compared with a loss of $983 million a year earlier. Cash from continuing operations totaled $1.43 billion, a decrease from $2.21 billion in 2016.

For 2018, the company continues to target full-year adjusted EBITDA of $2.80 billion to $3.00 billion, cash from operations of $2.02 billion to $2.22 billion and free cash flow before growth of $1.55 billion to $1.75 billion.