NRG sells renewable energy, Gulf Coast power plant assets

NRG Energy is selling nearly all its renewable energy assets to Global Infrastructure Partners for $1.4 billion and five power plants in Louisiana and Texas totaling 3,555 megawatts to Cleco Corp. for $1 billion in deals announced Wednesday.

The Princeton, New Jersey-based independent power producer also accelerated the drop down of the 527-MW, natural gas-fired Carlsbad Energy Center and the 154-MW Buckthorn solar project to NRG Yield, a yieldco. NRG expects to garner $407 million via the drop down.

NRG expects the deals will reduce its debt by almost $7 billion.

The deals are part of a “transformation plan” NRG unveiled in July that called for selling assets and cutting debt to increase the company’s financial flexibility.

The sale to GIP, expected to close in the second half of this year, includes NRG’s 46 percent interest in NRG Yield as well as the company’s 500 MW in renewable assets and 6,400-MW development pipeline. NRG Yield owns about 5,100 MW of contracted renewable and conventional generation. It also owns about 1,320 MW in steam and chilled water assets.

The transaction also includes NRG’s renewable operations and maintenance business, which operates 2,400 MW in 17 states.

“We view each of the three acquired businesses – the [NRG Yield] stake, the O&M business, and the development business – as highly complementary and well positioned to capitalize on the increasing market demand for low cost, clean energy,” said Adebayo Ogunlesi, GIP chairman and managing partner.

The deal with GIP, an infrastructure investment fund based in New York City, must be approved by the Federal Energy Regulatory Commission, the Energy Department and utility regulators in Connecticut and Pennsylvania. It must also undergo an antitrust review under the Hart-Scott-Rodino Act. Transactions are subject to premerger review by the Federal Trade Commission and Department of Justice under the Hart-Scott-Rodino Act.

The planned power plant sale of NRG’s South-Central subsidiary to Cleco includes the 1,263-MW, natural gas-fired Cottonwood plant in Texas, the 1,461-MW coal- and natural gas-fired Big Cajun II in Louisiana, the 430-MW natural gas-fired Big Cajun I peaking plant in Louisiana, the 225-MW natural gas-fired Bayou Cove peaking plant in Louisiana and the 176-MW natural gas-fired Sterlington peaking plant in Louisiana.

The Cottonwood plant will be leased back to NRG, which will operate it until May 2025.

Power from the plants is under contract to nine cooperative utilities, five municipal utilities in Arkansas, Louisiana and Texas, and one investor-owned utility. The contracts have a weighted average length of 7.6 years, according to NRG.

Cleco, based in Pineville, Louisiana, plans to buy the assets using a new unregulated subsidiary called Cleco Energy.

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

Cleco Power, a regulated utility, owns power plants totaling 3,310 MW. The deal provides Cleco access to key industrial and residential growth areas, according to the holding company.

The deal, expected to close in the second half, must be approved by FERC, the Louisiana Public Service Commission, the Committee on Foreign Investment in the United States while clearing an antitrust review under Hart-Scott-Rodino.

The deals with GIP and Cleco grew out of “rigorous and highly competitive” sales process, Mauricio Gutierrez, NRG president and Chief Executive Officer, said Wednesday during a conference call with analysts.

When combined with transactions announced last year, NRG is set to see close to $2.9 billion in asset proceeds, according to Gutierrez, who noted the company plans to sell an additional $275 million in assets and reduce its debt by another $1 billion.

NRG expects to sell its 102-MW stake early next year in the 290-MW Agua Caliente solar project in Arizona, Gutierrez said.