Though NRG Energy Inc. offered scant details on asset sale processes that could culminate in up to $4 billion in proceeds, the company reiterated Nov. 2 its intent to announce the bulk of the divestiture deals by year-end.

After posting lower earnings in the third-quarter, the integrated power generator and retailer lowered its full-year 2017 adjusted EBITDA guidance range to $2.4 billion to $2.5 billion, down from a previous range of $2.57 billion to $2.77 billion. NRG management chalked up the guidance revision to mild summer weather and impacts from outages during Hurricane Harvey, in addition to "unfavorable results" at the company's Boston Energy Trading subsidiary.

NRG also introduced 2018 full-year adjusted EBITDA guidance at approximately $1.5 billion, after accounting for earnings lost to the imminent sales of its sponsorship stake in NRG Yield Inc. and other thermal and renewable assets that have been put up for sale following the company's business review earlier this year. The new guidance, combined with a continued push to reduce corporate net debt to corporate EBITDA to 3.0x in 2018, signals that NRG is dead set on slimming costs as it plots out its integrated platform in the years ahead.

"We remain focused on delivering results and executing on the Transformation Plan. We have exceeded our 2017 targeted cost savings and continue to reduce our debt profile in order to achieve our corporate credit metrics," NRG CEO and President Mauricio Gutierrez told analysts Nov. 2. "As we continue to work diligently through the asset sales process, I look forward to providing ... further detail on sale announcements upon reaching agreement."

Sales nearing close

While management was reticent when providing details on the status of its various sale processes, it signaled that a wholesale exit from NRG Yield and its renewables platform was all but certain to be announced in coming weeks, bolstered by strong buyer interest.

"With respect to our Renewables business and our interest in NRG Yield, while this is very much an ongoing process, what I can tell you is that we are currently anticipating a 100% sale of this platform," Gutierrez said. "We are pleased with the level of interest that our high-quality, unique assets and businesses have created from prospective buyers. These have allowed us to move to advanced stages in multiple processes, and we maintain the expectation of announcing significant transactions by the end of the year."

NRG declined to share details on what type of buyers might be bidding for its renewables business, despite previous reports that the sale has drawn interest from major private equity players like Blackstone Group LP, as well as strategic buyers like NextEra Energy Inc., among others. In the lead up to a sale, however, NRG has still engaged its yieldco with drop-downs, selling a 38-MW portfolio of solar assets to NRG Yield for $71 million, while also offering up its 154-MW Buckthorn solar project for a potential sale.

On the thermal front, NRG is still progressing toward the sale of roughly 21,000 MW of conventional generation, including GenOn Energy Inc. Nevertheless, the sale processes for its thermal assets, which analysts have speculated center around select Southeastern assets, including Cottonwood Energy, may have been delayed as a result of outages experienced in the wake of Harvey.

"Hurricane Harvey impacted some of the activities and due diligence events that we were planning," Gutierrez said, referencing the thermal sales. "But I'm still confident that we will be able to announce something by the end of the year in the vast majority of our processes," he added.

Integrated vision

With coal retirements announced in the Electric Reliability Council of Texas market and discussions underway at the federal level to credit resiliency attributes of baseload generation, NRG expressed a bullish outlook overall for merchant markets, with Gutierrez suggesting, "this is certainly a time to be optimistic about competitive power."

Outside of Texas, a dialogue around energy price formation in PJM Interconnection continues to underpin bullish views on that market, particularly as investors have begun exercising capital discipline on new-build projects in the region. Looking to ISO New England and New York ISO, the company is keen to further pair its regional generation resources with similarly located retail operations, despite less constructive regulatory environments.

"We are focused on perfecting the integrated platform," Gutierrez told analysts. "A lot of the generation is going to be driven by our retail needs and how we grow retail, and a lot of our retail is going to be driven by where we have generation, so right now, we are in the process of balancing the portfolio."

"Even without the GenOn assets and some of the conventional asset sales, we're still long generation in PJM," Gutierrez added. "We have a ways to go before we have a balanced portfolio, like we have in Texas, so we have a lot of room to grow in retail."

In the near-term, however, capital allocation may be limited to more corporate-level actions, like share repurchasing or shareholder dividends, rather than any strategic engagements beyond satisfying its business review mandates.

"Right now, I cannot think of any more compelling investment than our own stock given the Transformation Plan that we have laid out," Gutierrez offered. "First and foremost is have the capital, then get to our credit metrics and then we can start talking about allocating capital."