LONDON, UK / ACCESSWIRE / July 14, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for NRG Energy Inc. (NYSE: NRG), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=NRG. The Princeton, New Jersey based Company announced its "Transformation Plan" on July 12, 2017. The Transformation Plan was put forth by the Company's special Business Review Committee (BRC) and has been approved by the Company's Board of Directors and management. The BRC took nearly four months to complete the full review of NRG Energy's business, operations and cost structure before making its recommendations. For immediate access to our complimentary reports, including today's coverage, register for free now at:

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Details of the Transformation Plan

The Transformation Plan is spread over a three-year period and is divided into three major actionable areas - Operations and cost excellence; Portfolio optimization; and Capital structure and allocation enhancements. The Transformation Plan is designed to improve earnings and cost competitiveness, lower risk and volatility, and create value for the Company's shareholders. The actions suggested by the BRC envision achieving the targets and results by the end of FY18. This will provide investors and the Company a clear goal.

The key highlights of the Transformation Plan are:

  • Recurring cost and margin improvements of $1.065 billion, which includes a permanent SG&A (selling, general, and administrative) reduction of $210 million;
  • Funds raised from Targeted Asset Sales in the range of $2.5 billion to $4.0 billion. This includes exploring strategic alternatives for its interest in NRG Yield and the renewables platform. The plan also includes divestment of ownership interest in GenOn Energy, Inc. which has filed for Chapter 11 bankruptcy. NRG Energy has roped in the services of Citi, Goldman Sachs and Morgan Stanley for the assets sale;
  • Reduction $13 billion in total debts;
  • The plan also includes deployment of up to $6.3 billion in excess cash through 2020, including $4 billion by end of 2018, in either projects or investments or shareholder return programs.

To ensure that the targets are achieved and the plan is on track, the Board of Directors of NRG Energy will monitor the implementation of the Transformation Plan and take periodic reports from the Board's Finance and Risk Management Committee. Investors of the Company will also be kept in the loop and provided with updated quarterly earnings reports.

Commenting on the recommended the Transformation Plan, Mauricio Gutierrez, President and CEO, NRG said:

"The transformation plan announced today demonstrates our commitment to simplify and strengthen the Company to thrive through any market cycle."

John Wilder, Chairman of NRG Energy's Business Review Committee added:

"We targeted divesting businesses that represent over 60% of NRG's EBITDA to generate $2.5-4.0 billion of net proceeds and facilitate $13 billion of debt reduction. We targeted rapidly executing annual improvements with 72% of run rate annual benefits of $1.07 billion achieved in 2018, 92% in 2019, and 100% achieved in 2020. Finally, we established a rigorous capital allocation process to ensure NRG is financially flexible for years to come and to ensure NRG wisely allocates its expected 2017-2020 $6 billion of excess cash flow in 12-15% or better unlevered internal rate of return investments, or distributes the excess cash to our shareholders."

Background

The Transformation Plan is the result of the Cooperation Agreement signed in February 2017 with Elliott Management and Bluescape Energy Partners. At that time, Elliott Management and its affiliates owned nearly 6.9% stake and Bluescape and its affiliates owned 2.5% stake in the Company.

Based on terms of the Cooperation Agreement, a special Business Review Committee was formed to review and make recommendations on four key areas - operational and cost excellence initiatives; potential portfolio and/or asset de-consolidations, dispositions and optimization; capital structure; and allocation and Broader strategic initiatives. The Committee will have five members. C. John Wilder, Bluescape Energy Partners, who will be the Chairman of the BRC, and four other members include Barry Smitherman, Mauricio Gutierrez - CEO of NRG Energy, Paul Hobby, and Anne Schaumburg.

The Company had posted a net loss of $891 million, or $2.22 per diluted common share, for the full FY16 ending on December 31, 2016. Following the less than stellar performance and mounting pressure from activist investors Elliott Management and Bluescape Energy Partners led to major changes in the Company's Board of Directors; this led to the signing of the Cooperation Agreement and formation of the special Business Review Committee.

About NRG Energy

NRG Energy is a leading integrated power Company in the US with one of the largest and most diverse competitive electric generation portfolio and leading retail electricity platform. It has power plants with about 45,900 megawatts of generating capacity across 30 US states and Canada. The Company and its subsidiaries provide services to nearly 3 million customers in all 50 states and D.C. The Company has over 149 generation plants in 29 US states and is supported by a team of over 8,500 employees.

Last Close Stock Review

At the closing bell, on Thursday, July 13, 2017, NRG Energy's stock climbed 5.26%, ending the trading session at $22.20. A total volume of 36.12 million shares have exchanged hands, which was higher than the 3-month average volume of 5.82 million shares. The Company's stock price soared 18.53% in the last three months, 57.45% in the past six months, and 39.89% in the previous twelve months. Moreover, the stock skyrocketed 81.08% since the start of the year. The stock has a dividend yield of 0.54% and currently has a market cap of $7.21 billion.

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