How NRG Energy Plans to Save $1 Billion in Capital



NRG Energy’s plans

As we discussed earlier in this series, NRG Energy (NRG) is undertaking the NRG Renew initiative in order to restructure its existing operations. Apart from creating a separate GreenCo, which we discussed in Part 1, and transferring renewable energy assets to the GreenCo, NRG is planning to undertake initiatives to save costs and conserve capital to help the company deleverage.

NRG has canceled the coal-to-gas conversion at its 638 MW Avon Lake plant since the plant is already compliant with the EPA’s Mercury and Air Toxics Standards (or MATS). Similarly, oil-to-gas conversion at its Portland plant has been suspended to save capital. The 435 MW Dunkirk capacity addition is pending litigation. If canceled, the company expects to save capital costs on the project.

The company has decided to retire 380 MW of coal-fired capacity by March 2016. In combination with the NRG Reset plan, the company expects to save $1 billion in capital through these initiatives. Starting in 2016, the company expects to save $150 million in annual costs.

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NRG Yield pipeline

NRG Yield (NYLD) has entered into “right of the first offer” (or ROFO) contract with its sponsor, NRG Energy, for certain power generation assets. NRG Energy is mandated to offer these assets first to NYLD before selling it to third parties.

As of June 30, 2015, these assets totaled 2.2 gigawatts, including the wind assets that we discussed in Part 1. Most of these assets are under long-term power purchase agreements with utilities (XLU) such as PG&E (PCG) and San Diego Gas and Electric (SRE).


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