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NRG launches transformation of company, intending to strengthen earnings

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Princeton-based power company NRG Energy has launched a “transformation plan” designed to bolster its financial picture, it announced Wednesday.

The plan is a three-part, three-year effort to strengthen earnings and cost competitiveness, lower risk and volatility, and create significant shareholder value, the company said in a news release. The company added that the majority of targets and results could be achievable by the end of 2018.

“The transformation plan announced today demonstrates our commitment to simplify and strengthen the company to thrive through any market cycle,” CEO and President Mauricio Gutierrez said in a prepared statement. “This plan is the result of a comprehensive review of our entire business by the board and management to simplify our business, right-size our portfolio and strengthen our balance sheet to create significant value for all our stakeholders.”

It was developed after a comprehensive evaluation of the company’s businesses conducted by a Business Review Committee, NRG management and independent consultants and advisers.

Under the plan, NRG aims to achieve:

  • Operations and cost excellence, including $1.065 billion in total annual cost and margin enhancement;
  • Portfolio optimization, including divestitures that could lead to $2.5 to $4 billion in asset sale net cash proceeds, as well as strategic alternatives for various interests;
  • Capital structure and allocation enhancements, including a two-thirds reduction in consolidated net-debt.

“By establishing the BRC, the board kick-started an exhaustive four-month review where nothing was sacred,” Chairman Larry Coben said in a statement. “The board and management scrutinized and challenged every available opportunity that could create value for our shareholders — and embraced the plan being announced today.”

NRG said it expects to have signed agreements in the fourth quarter tied to asset sales and strategic alternatives. It has engaged Citi, Goldman Sachs and Morgan Stanley for certain processes, it added.

The company’s board of directors will maintain oversight of the plan and its execution, NRG said. The plan was unanimously recommended by the Business Review Committee and unanimously approved by the board and management.

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