We like the Big, Bold strokes that NRG is using to repaint its canvas

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Market Price (7/12/2017): $21.09; Target: $22/share; NIV: $40/share


  • We like what we heard on the call, and we’re 100% supportive of this transformative plan
  • We don’t believe that this is the end, but only the opening act; act two may be some 2-years away
    • We feel that act 2 will be contingent on the stock price performance over the next 2 years
    • We believe that the privatization of NRG is NOT off the table
  • The transformative plan calls for the sale of some 50%-100% of NRG’s interest in NYLD and its renewable assets; we expect 100% to be sold for both NYLD and NRG’s directly-owned renewables
    • Our expectations would be that a strategic and not a financial buyer would pay the most for these assets and, therefore, would want 100% of NRG’s interests in both
    • In our opinion, it is unlikely that NYLD goes to one buyer and the rest of NRG’s renewable assets goes to another buyer; we feel that the strategic buyer would want to continue to use the operated assets as a potential source for NYLD growth
  • Debt is expected to be reduced by some $13B to about $6.5B from some $19B at present; net-debt-to-adjusted-EBITDA is expect to be lowered to some 3.0x from some 6.3x at present
  • As expected, what remains is its conventional power assets and its Retail business
  • NRG believes that it would have additional $6.3B in cash proceeds to invest in new assets or new businesses, or available to be returned to shareholders

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