NRG Energy Inc.
) unit, NRG Yield, Inc. (NYLD), has entered into an agreement to
acquire the assets of privately held Energy Systems Company
(ESC), for $120 million in cash.
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Energy Systems is based in Omaha, Neb. This acquisition will
allow NRG Yield to establish itself in a new market and bolster
the thermal infrastructure platform. Most importantly, it shows
the capability of the company to expand through third-party
NRG Yield is planning to fund the acquisition from its cash on
hand. It exited the third quarter with a cash balance of $272
million. This acquisition will give NRG Yield access to Energy
Systems' existing long-term contracts. The remaining life of
Energy Systems' existing contracts run to nearly 11 years. This
will ensure a steady earnings stream for NRG Yield for the next
NRG Yield expects to close the acquisition by the end of this
year. The acquired assets are expected to be immediately
accretive, with the company expecting its cash available for
distribution to increase by $8 million in 2014.
During the third quarter earnings release, NRG Yield set its
target to increase the annual dividend by 10% to 15% per share
over the next five years, beginning with an increase of 20% by
the third quarter of 2014. We believe the additional funds from
this acquisition will come in handy to meet its dividend growth
NRG Energy holds a Zacks Rank #3 (Hold). Some better-ranked
stocks in the same sector include
Alliant Energy Corporation
Black Hills Corporation
Brookfield Infrastructure Partners L.P.
). All these stocks carry a Zacks Rank #2 (Buy).