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GIP Pays $1.37B for NRG’s Renewables, Yield Units

Citing simplification of its operations and a stronger balance sheet, Princeton, NJ-based NRG Energy Inc. agreed Wednesday to sell its renewables and yield business units to Global Infrastructure Partners (GIP) for  $1.375 billion.

The deal is expected to close in the second half of this year, giving the GIP III affiliate a controlling stake and 46% economic interest in NRG Yield Inc. (NYLD), along with the renewable operations/maintenance and development businesses.

NYLD has the largest project portfolio by installed capacity among U.S. power dividend growth-oriented public companies, i.e. “yieldcos,” and is the second largest by enterprise value and market capitalization.

NYLD’s operating power plant capacity totals 5.1 GW in natural gas, wind and solar technologies. It also owns thermal infrastructure assets with an aggregate steam and chilled water capacity of 1,319 net MW and electric generation capacity of 123 net MW, that service commercial businesses, universities, hospitals and government customers.

In addition to NRG’s interests in NYLD, GIP agreed to acquire NRG’s renewable operations and maintenance (O&M) development businesses, which operates 2.4 GW of renewable power generation in 17 states.

NRG’s renewable development platform includes 630 MW of identified dropdown assets, subject to a right of first offer from NYLD, and it has a total project pipeline of more than 6.4 GW of renewable generation opportunities across the United States.

The investment “fits squarely into GIP’s global renewables investment strategy,” executives said. GIP has invested or committed about $9 billion of equity in the sector, including 8 GW of operating renewable assets and more than 14 GW of renewable assets under construction or in development.

“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,” said GIP Chairman Adebayo Ogunlesi. “We are also excited about the opportunity to grow the value of NYLD, which allows public market investors to access attractive investments in renewable energy.”

NRG also reached an agreement to sell Cleco Corporate Holdings LLC, its south-central business, for $1 billion. The south-central business owns and operates 3,555 MW of generation. As part of the transaction, NRG entered into a sale leaseback agreement for the 1,263 MW Cottonwood plant, a combined-cycle natural gas-fired plant, through May 2025.

The sales overall should result in $2.8 billion in proceeds and remove $7 billion of debt for the independent power provider.

NRG CEO Mauricio Gutierrez said the company has completed nearly 90% of targeted asset sales since last year  and would see debt fall by $9 billion.

NRG expects to announce additional asset sales over the course of 2018, with total proceeds expected to reach about $3.2 billion.  

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