trending Market Intelligence /marketintelligence/en/news-insights/trending/v4sz9pv_lu0vsfd7a9fkog2 content esgSubNav
In This List

NRG announces deal to sell yieldco interest to GIP, Cleco to acquire 3,555 MW

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


NRG announces deal to sell yieldco interest to GIP, Cleco to acquire 3,555 MW

NRG Energy Inc. announced Feb. 7 the sale of its interests in NRG Yield Inc., the NRG Renewables Platform and the associated renewable development pipeline to Global Infrastructure Partners for expected cash proceeds of $1.375 billion. NRG also announced the sale of its 3,555-MW NRG South Central Generating LLC portfolio to Cleco Corporate Holdings LLC.

The deals are the culmination of planned asset sales by one of the remaining, pure-play, publicly owned merchant generators. All the transactions bring NRG's cumulative transformation plan asset sales to $2.9 billion in anticipated cash proceeds. The company has revised its total asset sales cash proceeds target to approximately $3.2 billion and expects to announce additional asset sales over the course of 2018.

"Today's announcement represents a significant milestone in simplifying our value proposition, optimizing our portfolio, and strengthening our balance sheet to create significant shareholder value," said NRG President and CEO Mauricio Gutierrez in a Feb. 7 statement. The transactions will also remove $7 billion of debt as of Sept. 30, 2017.

The Global Infrastructure Partners deal includes NRG's sale of its class B and class D shares of NRG Yield, NRG's renewable energy development and operations platform, NRG's renewable energy non-right-of-first-offer backlog pipeline, and its ROFO updated pipeline for $1.38 billion. Four assets were excluded from this transaction.

The transaction is expected to close in the second half of 2018 and is subject to various closing conditions, approvals and consents, including the Federal Energy Regulatory Commission; California Public Utility Commission; Connecticut Public Utilities Regulatory Authority; Department of Energy; Pennsylvania Public Utilities Authority; and antitrust review under Hart-Scott-Rodino.

The deal is not subject to shareholder approval.

As part of the transaction, NRG Yield entered into a consent and indemnity agreement with NRG and Global Infrastructure Partners. Under the agreement, no more than $10 million in reduced annual cash available for distribution on a recurring basis can result from any changes in NRG Yield's cost structure.

Global Infrastructure Partners also agreed to arrange a $1.5 billion backstop credit facility for NRG Yield to manage any change-of-control costs associated with NRG Yield's corporate debt and committed to provide up to $400 million in financing support for the Carlsbad Energy Center.

NRG is separately selling its interests in the 527-MW, gas-fired Carlsbad facility and the 154-MW Buckthorn solar to NRG Yield for additional cash proceeds of $407 million, subject to certain adjustments. NRG Yield expects annual cash available for distribution from these assets of $44 million beginning 2019.

This dropdown transaction is expected to close before year-end and is subject to both projects achieving commercial operation status and customary closing conditions and approvals.

Both companies also agreed to maintain a ROFO agreement for NRG's remaining 102-MW net ownership in the Agua Caliente solar plant and amended the agreement to remove the Ivanpah solar plant as a ROFO asset.

In connection with this, NRG Yield will also enter into a new ROFO agreement with Global Infrastructure Partners that adds the operational 150-MW Langford wind project and the under-development, 400-MW Mesquite Star Wind project to the current pipeline.

Barclays and J.P. Morgan Securities LLC acted as financial advisers to the independent directors and management of NRG Yield, while Sullivan & Cromwell LLP acted as legal counsel.

Cleco asset sales

NRG will also sell its South Central business to Cleco for a total purchase price and cash proceeds of $1 billion, subject to certain adjustments.

The South Central business owns a 3,555-MW portfolio of generating assets consisting of the 225-MW Bayou Cove, 430-MW Big Cajun 1, 1,461-MW Big Cajun 2, 1,263-MW Cottonwood Energy and the 176-MW Sterlington gas plants.

Under the Cleco deal, NRG also entered a sale leaseback for the Cottonwood plant through May 2025.

Cleco said in its own news release it will also acquire the contracts to provide power to nine Louisiana cooperatives, five municipalities across Arkansas, Louisiana and Texas, and one investor-owned utility. The assets will be acquired through a new, unregulated subsidiary Cleco Energy LLC.

"The acquisition of South Central demonstrates Cleco's commitment to being the leading energy company in Louisiana," said Bill Fontenot, CEO of Cleco Corporate Holdings, regulated utility Cleco Power LLC and Cleco Energy. "Long-term, our strategy will be to merge the companies under one regulated entity."

The Cleco transaction is expected to close in the second half of the year and is subject to various customary closing conditions, approvals and consents, including: FERC, the Louisiana Public Service Commission, Committee on Foreign Investment in the United States and antitrust review under Hart-Scott-Rodino.

Citi is serving as NRG's lead financial adviser on the sale of NRG Yield and renewables, alongside Goldman Sachs and Morgan Stanley as co-financial advisers. Goldman Sachs and Morgan Stanley are serving as co-lead financial advisers on the sale of South Central, alongside Citi as co-financial adviser. Jones Day is serving as legal adviser for both transactions.