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NRG Energy (NRG) Declares Asset Sale, Boosts Shareholders' Value

NRG Energy, Inc. NRG announced that it entered a definitive agreement to sell its 44% equity interest in South Texas Project Electric Generating Station (“STP”) to Constellation Energy Corporation CEG. STP is a 2,645-MW nuclear facility located about 90 miles southwest of Houston in Bay City, TX.

This deal is valued at a purchase price of $1.75 billion, which represents an implied valuation multiple of 11.7x EV/EBITDA and 17.5x free cash flow. The same will be subject to customary purchase price adjustments.

The agreement is expected to close by the end of 2023, subject to regulatory approvals by the United States Nuclear Regulatory Commission, Hart-Scott-Rodino and the Public Utility Commission of Texas.

Benefits of the Deal

NRG Energy continues to optimize its generation portfolio. Selling its interest in the nuclear power plant is a part of the company’s long-term portfolio optimization.

The net proceeds from the transaction will enable NRG to reduce debts and increase shareholders’ value through repurchase of shares. The lower share outstanding is also likely to have a positive impact on the company’s earnings.

Share Repurchase Program

On May 31, 2023, NRG Energy’s board of directors approved $650 million in share repurchases. This, along with $350 million available under the current share buyback program, brings the total share repurchase amount to $1 billion.

The company reiterates its expectation to achieve its investment grade 2.50x to 2.75x corporate net debt to adjusted EBITDA credit metrics by late 2025 or 2026.

Price Performance

In the past month, shares of NRG Energy have lost 3.1% compared with the industry’s 5.9% decline.


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Zacks Investment Research

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Zacks Rank

NRG Energy currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Picks

Some better-ranked stocks from the same industry are Consolidated Edison ED and NiSource Inc. NI, both carrying a Zacks Rank #2 (Buy) at present.

Consolidated Edison’s long-term (three to five year) earnings growth rate is 2%. The Zacks Consensus Estimate for ED’s 2023 earnings per share (EPS) indicates an increase of 6.81%.

NiSource’s long-term earnings growth rate is 6.9%. The Zacks Consensus Estimate for NI’s 2023 EPS implies an improvement of 6.8%.

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NiSource, Inc (NI) : Free Stock Analysis Report

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Consolidated Edison Inc (ED) : Free Stock Analysis Report

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