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S&P revises IPPs Vistra Energy, NRG Energy to positive on strong credit metrics

S&P Global Ratings has revised its outlook on independent power producers NRG Energy Inc. and Vistra Energy Corp. to positive from stable, based on strong credit metrics.

Ratings affirmed the 'BB' issuer rating on NRG Energy and all issue-level ratings on its debt. NRG Energy's business transformation plan is panning out in its favor, Ratings said, and the sale of several assets has helped the company accelerate the reduction of debt, contributing significantly to better financial metrics.

"The positive outlook reflects our expectation that the company's integrated wholesale and retail power strategy, cost-cutting initiatives, and optimization of assets will drop adjusted debt to EBITDA below 3.0x by year-end 2019," Ratings said in a rating action.

The rating agency also affirmed Vistra Energy's 'BB' issuer credit rating and all issue-level ratings on wholly owned subsidiary Vistra Operations Co. LLC.

The positive outlook on Vistra reflects the improvements in its net debt-to-EBITDA ratio of about 3.4x, strong free cash flow generation, and high cash flow conversion, Ratings said in a separate rating action. Both actions were issued Sept. 4.

S&P Global Ratings' adjusted debt to EBITDA ratio is weaker than what the companies project in their financial results because of debt-like imputations. The rating agency imputes debt for asset retirement obligations.

Both companies could see their ratings be raised a notch if certain conditions are met. For NRG, such a decision would be based on the continued execution of its transformation plan and whether it meets Ratings' expectations of summer 2019 performance, the rating agency said. For Vistra, it would be based on the continued execution of its integration strategy.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.