NRG Pushes "Reset" Button, Separating Retail Supplier From Home Solar, EV Businesses (Strategic Alternatives Possible)

Describing the process as a "reset," NRG is separating out several of its green-focused businesses currently within NRG Home into a new "GreenCo."

Specifically, the new GreenCo will include NRG Home Solar, NRG evGo, and NRG Renew (excluding utility-scale and NRG ROFO renewable assets), effective January 1, 2016

While GreenCo will initially be within NRG, NRG also said that it is pursuing strategic partnering alternatives to further enhance GreenCo

In response to an analyst inquiry regarding a sale or spin-off of GreenCo, NRG CEO David Crane said that the strategic review of the future of GreenCo is, "just starting," but said that, under current thinking, in any transaction NRG would retain a stake in GreenCo, and is open to selling either a majority or minority of GreenCo

Among the reasons for not completely exiting GreenCo is the value that accrues from a relationship between GreenCo and NRG's traditional retail supply business.

In particular, Crane cited the Texas solar market, which he expects to become attractive in the next two years, noting that the true value of any Texas solar play would be maximized through leveraging NRG's large retail position in the state.

Indeed, despite the separation, NRG said that GreenCo will receive, "[o]ngoing benefit of linkage to NRG’s Retail franchise."

The GreenCo businesses are seen by investors as burning cash, and NRG set a financial limit to GreenCo of $125 million as a limited liquidity facility (the NRG Runway) until GreenCo is self-sufficient either by cash flow neutrality or in conjunction with 3rd party capital.

NRG said that its financial support to GreenCo will not exceed $125 million, and said that, if the cash-burning GreenCo businesses cannot reduce costs, they will have to find other funding or shut down one or more of its businesses

NRG said that among the other rationales for GreenCo is the distinct set of strategic opportunities that make sense for GreenCo, but not necessarily for NRG

NRG said that the separation into GreenCo was further undertaken to reflect:

• Disciplined allocation of capital for growth across all business segments

• Simplified approach to measure value of company

• Reduced cost structure

• Prioritized decision making