NRG Energy, Inc., a leading integrated power company in the U.S., headquartered in Princeton, N.J., and Houston, Texas, has entered into a purchase agreement with Global Infrastructure Partners (GIP), an independent infrastructure fund that invests in infrastructure assets and businesses in both OECD and select emerging markets, to purchase NRG’s ownership in NRG Yield and NRG’s Renewables Platform for cash proceeds of USD 1.375 billion, subject to certain adjustments.
GIP, with offices in New York and London, an affiliate in Sydney, Australia, and portfolio company operations in Stamford, Conn., U.S.A., manages more than USD 40 billion for its investors.
The announcement represents a significant milestone in optimizing NRG’s portfolio and strengthening its balance sheet, as well as simplifying its value proposition, according to Mauricio Gutierrez, NRG president and chief executive officer.
The purchase and sale agreement will be through Global Infrastructure Partners’ third equity fund, Global Infrastructure Partners III, and will include the sale of NRG’s ownership in NRG Yield’s Class B and Class D shares, NRG’s renewable energy development and operations platforms, NRG’s renewable energy non-ROFO (Right of First Offer) backlog and pipeline, and the NRG ROFO updated pipeline, with the exception of four assets which are addressed in separate agreements.
The transaction is expected to close in the second half of the year and is subject to various customary closing conditions, approvals and consents. The transaction is not subject to shareholder approval.
The sale of NRG’s Renewables Platform and NRG’s interest in NRG Yield does not impact NRG’s commitment to providing comprehensive energy solutions for corporate and residential customers, the company said.
In addition, GIP has agreed to provide backstop support for NYLD’s agreed purchase of the Carlsbad Energy Center project. The commitment to the Carlsbad project, which remains subject to certain terms and conditions, ensures a timely acquisition in the event that NYLD is unable to raise third-party capital to purchase the project.
NYLD has the largest project portfolio (by installed capacity) among U.S. power “yieldcos” and is the second largest by enterprise value and market capitalization.
The company also owns thermal infrastructure assets with an aggregate steam and chilled water capacity of 1,319 net MWt and electric generation capacity of 123 net MW, servicing commercial businesses, universities, hospitals and government customers. A substantial portion of NYLD’s project portfolio benefits from long-term contracts with a weighted average remaining contract life of 16 years.
NRG Yield owns a diversified portfolio of contracted renewable and conventional generation and thermal infrastructure assets in the United States, including fossil fuel, solar and wind power generation facilities that have the capacity to support more than two million American homes and businesses. NYLD’s operating power plant capacity totals 5.1 gigawatts (GW). NRG Yield’s Class C and Class A common stock are traded on the New York Stock Exchange under the symbols NYLD and NYLD.A, respectively.
In addition to NRG’s interests in NYLD, GIP will acquire NRG’s renewable O&M and development businesses. NRG’s renewable O&M platform operates 2.4 GW of renewable power generation in 17 states. NRG’s renewable development platform includes 630 MW of identified “dropdown” assets, which are subject to a right of first offer from NYLD, and it has a total project pipeline of over 6.4 GW of renewable generation opportunities across the U.S. (as last disclosed publicly by NRG).
GIP has a demonstrated track record of investment and value creation in the renewable energy sector, and this investment fits squarely into GIP’s global renewables investment strategy. GIP has invested or committed approximately USD 9 billion of equity in the sector, including 8 GW of operating renewable assets and over 14 GW of renewable assets under construction or in development.
Adebayo Ogunlesi, chairman and managing partner of GIP, said, “We are excited to announce the acquisition of NRG’s world-class renewables business. We view each of the three acquired businesses – the NYLD 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.”