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Split Decision: NRG Severs GreenCo from Retail Energy Business

September 23, 2015 By Cheryl Kaften

NRG Energy – the operator of Texas-based retail energy provider Reliant Energy, as well as a roster of renewable and fossil fuel energy firms – announced plans to restructure and “streamline” on September 18, following a disappointing quarter, during which the company ‘s stock dropped nearly 30 percent.

The reorganization will split NRG into two divisions – one, the high-stakes, but low-profit clean energy business; and the other, its conventional generation and electricity retailing subsidiaries.

In a conference call with the media and investment analysts, CEO David Crane said that, under an initiative called NRG Reset, the company would form a new “GreenCo” unit as of January 1, 2016 – which would comprise NRG Home Solar, NRG evGo, and NRG Renew.

NRG’s other business interests would have a separate bottom line – including its wholesale generation division; the Reliant retail business; and the company’s yieldco, NRG Yield.

Concurrently, NRG also announced plans to execute a drop-down, for $210 million, to NRG Yield, of 75 percent of the equity interests in an 814-megawatt (MW) portfolio of wind projects gained through the acquisition in 2014 of Edison Mission Energy.

The restructuring will, according to SNL Financial, allow for a simpler NRG Group, and be coupled with a companywide effort to “unlock capital,” and shrink the balance sheet.

Indeed, Crane said that, although GreenCo initially will be operated completely under the NRG imprimatur, NRG also will pursue strategic partnering alternatives for the new entity. In response to an analyst inquiry regarding a sale or spin-off of GreenCo, Crane said that discussions regarding the future of the new division are “just starting,” but that NRG intends to at least retain a stake in GreenCo.

Crane, who to date had been an unabashed advocate of green energy, now has been forced to take a step back by the economics of the industry. He pledged that NRG’s financial support of GreenCo will not exceed $125 million, and went a step further – noting that, if the division’s renewable businesses cannot find a way to be profitable, NRG may have to shutter one or more of them, or find alternative funding.

This is not the first time that NRG has restructured in hopes of operating more cost-efficiently. Indeed, just a year ago, the company split into three parts – NRG Home, NRG Business,  and NRG Renew – in hopes of creating a better platform for growth.

Among NRG’s professed reasons for not exiting the green energy market entirely is the value that the company may accrue in Texas from the relationship between GreenCo and Reliant Energy. The retail energy provider has 1.6 million customers in the Lone Star State who may be interested in a cross-sell.

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