NRG Energy Inc.
) inked an agreement with bankrupt unregulated utility company
Edison Mission Energy (EME), a subsidiary of
) to acquire all of EME's assets for a purchase price of $2.64
billion. The deal also includes purchasing Edison's equity
interest in some of its subsidiaries. The transaction is expected
to be concluded by the first quarter of 2014.
A part of the transaction amount will consist of roughly 12.7
million shares of NRG common stock which comes to a value of $350
million. NRG Energy plans to finance the transaction through a
combination of cash on hand and newly issued corporate debt in an
amount which permits adherence to the company's balance sheet
In addition, the company will take a non-recourse debt of
approximately $1.5 billion, of which $273 million is related to
assets designated as Non-Core Assets pursuant to the asset
The EME buyout will add nearly 8,000 megawatt (MW) of capacity
to NRG Energy's generation portfolio. This comprises 1,700 MW of
wind capacity, 1,600 MW of gas-fired capacity, 4,300 MW of
coal-fired capacity and 400 MW of oil and waste coal-fired
capacity. Edison's marketing and trading business unit will be a
part of NRG Energy's asset basket.
The acquisition will add 2,600 MW of fully-contracted
generation, of which 1,600 MW comprises long-term contracts. The
contracted projects consist of 1,100 MW of wind capacity and 500
MW of gas-fired capacity from the Walnut Creek facility which
attained commercial operation in the 2013 summer.
The deal will also diversify the core generation platform of
NRG Energy by adding 1,200 MW of contracted gas assets in
California and expand opportunities in Pennsylvania, New Jersey
and Maryland (PJM) West for its coal-fired capacity. Furthermore,
NRG Energy by virtue of the deal will become the third largest
renewable operator in the U.S. with more than 2,900 MW of wind
and solar capacities.
NRG Energy expects to utilize its enhanced operational
capabilities achieved from the GenOn integration to establish
cost synergies and benefit from increased economies of scale. Its
customer footprint will also increase, amplifying the revenue
NRG Energy has lately been engaged in a number of acquisition
deals. Its recent buy of Energy Curtailment Specialists, Inc.
will offer energy saving solutions to its clients.
A strong cash balance of $1.36 billion at the end of Jun 30,
2013 has allowed the company to effectively carry out these
acquisitions. We believe NRG Energy's strong liquidity profile
will continue to aid its future diversification and acquisition
goals which will be earnings accretive. Currently, NRG Energy
carries a Zacks Rank #2 (Buy).
Other well-placed utility counterparts include Zacks Ranked #2
AMEREN CORP (AEE): Free Stock Analysis Report
CLECO CORP (CNL): Free Stock Analysis Report
EDISON INTL (EIX): Free Stock Analysis Report
NRG ENERGY INC (NRG): Free Stock Analysis
To read this article on Zacks.com click here.