NRG Energy Inc (NYSE:NRG) reported the next phase of its Capital Allocation Plan for the year. The company intends to repurchase $251 million of NRG common stock- $51 million remaining from initial share repurchase plan and an additional repurchase of $200 million of common stock. The authorization will be executed using a 10b5-1 trading plan.
NRG Energy stated that the repurchase would be done deploying cash on hand. It can be done on different time depending on the market conditions and regulatory considerations. This plan does not foreclose the prospect of further or diverse capital allocation measures in the future.
The operations
NRG Energy intends to spin off its renewable energy segment, which the company is terming as “GreenCo.” The decision comes in the wake of focusing all the measures on fossil fuel generation and utilities business. The tent pole of the new unit will be ‘NRG Home Solar’, fundamentally a solar installer like Vivint Solar or SolarCity.
NRG Energy has recorded strong growth in 2015, but at the same time it has been burning adequate cash, and with company’s stock declining, the management wants to put the cash burn in a distinct unit that can expectantly bear its own expenses.
The objective
In theory, this decision will enable NRG Home Solar to extend its reach nationally and get access to lower-cost funds. The move is also estimated to unlock $1 billion in funds and make the operation plan clear to investors. For company’s fossil fuel division, abandoning the solar operations frees up capital that can further be returned to shareholders. As of now, it is just a dream and it has yet to materialize the way NRG planned.
What NRG Energy Inc (NYSE:NRG) was attempting to establish is the next-gen of energy firms. However, turning that concept into a strong business has been tougher than NRG thought.
