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NRG Energy Enters into Agreement to Acquire Edison Mission Energy
-- Significantly Increases Assets Eligible for
Strategic Rationale
- Increases NRG’s generation portfolio by nearly 8,000 net megawatts (MW), providing additional fuel diversity, geographic diversity, and opportunities to achieve economies of scale
-
Significantly expands pipeline of assets available to drive growth at
NRG Yield (NYLD) through future drop-downs with 1,600 MW of long-term, fully-contracted wind and natural gas assets - Builds off the scaled platform and the best practices from the GenOn combination
Financial Highlights
-
Purchase price of
$2,635 million (including$1,063 million of acquired cash) implies transaction enterprise value of approximately$2,844 million after including$1,272 million of adjusted non-recourse debt assumed -
Expected full year 2014 Adjusted EBITDA of
$330 million (or$140 million of pre-tax income) of which $185 million (or$39 million of pre-tax income) is attributable to assets that are suitable for drop-down to NYLD - Transaction anticipated to be credit neutral to NRG
EME and NRG have entered into an asset purchase agreement, dated
The assets to be acquired include:
-
EME’s generation portfolio, which consists of nearly 8,000 net MW of
generation capacity located throughout the US:
- 1,700 MW of wind capacity
- 1,600 MW of gas-fired capacity
- 4,300 MW of coal-fired capacity
- 400 MW of oil and waste coal-fired capacity
-
Edison
Mission Marketing and Trading, a proprietary trading and asset management platform
“Edison Mission Energy is a great fit with NRG, as virtually 100% of
their assets, their particular expertises and the balance of their
technologies deployed complement NRG’s own assets, personnel and
businesses,” said
“We are pleased to have reached this agreement with NRG, which maximizes
the value of our company for all of our stakeholders and paves the road
for our emergence from Chapter 11,” said EME President
Strategic and Financial Benefits
-
Growing NRG’s Clean Energy Platform
With the transaction, NRG and its affiliates will become the 3rd largest US-based renewable energy generator within the US with over 2,900 net MW of wind and solar capacity in operation or under construction. This transaction will substantially increase both the scale and geographic diversity of NRG’s renewable generation portfolio by almost quadrupling NRG’s existing wind generation capacity with the addition of 1,700 net MW of wind capacity, including 1,150 net MW of wind outside of NRG’s existing renewable footprint inTexas and theSouthwest .
-
Significantly Expanding Opportunities for Future NYLD Drop-Downs
The EME portfolio contains 2,600 net MW of fully-contracted generation, of which 1,600 MW are under long-term contracts with credit-worthy counterparties (with a weighted average remaining contract life of 14 years) – consistent with the profile of assets suitable for drop-down to NYLD. This contracted portfolio is composed of 1,100 net MW of wind capacity and the 500 MW gas-firedWalnut Creek facility, which achieved final commercial operations during the summer of 2013.
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Enhancing NRG’s Core Generation Platform
NRG continues to balance the geographic distribution and dispatch-level diversity of its conventional generation fleet by adding 1,200 MW of contracted gas assets inCalifornia and 4,300 MW of coal-fired capacity in PJM West.
-
Leveraging Operational Efficiency Programs to Improve Financial
Performance
NRG expects to leverage key competencies built from its successful GenOn integration to achieve cost synergies and operational improvements that will significantly enhance the financial performance of the portfolio. With EME’s coal fleet, NRG will further capture commercial opportunities in PJM through its operational improvement initiative.
Financial Terms – Purchase Price
The aggregate purchase price for EME’s assets and equity interests in
subsidiaries is
Financial Terms – Powerton/Joliet Lease (PoJo)
In connection with the transaction, NRG has agreed to certain financial
conditions with the PoJo lessor stakeholders subject to which an NRG
subsidiary will assume the PoJo leveraged each lease and NRG will
guarantee the remaining payments under each lease. In connection with
this agreement, NRG has committed to fund up to $350 million in capital
expenditures for plant modifications at Powerton and
Approvals and Time to Close
EME intends to file a motion to seek approval of the plan sponsor
agreement with the
NRG expects to close the transaction in the first quarter of 2014. In
addition to the approval of the
Additional Information
On
NRG has filed a registration statement (including a prospectus) with the
About NRG
NRG is leading a customer-driven change in the U.S. energy industry by
delivering cleaner and smarter energy choices, while building on the
strength of the nation’s largest and most diverse competitive power
portfolio. A Fortune 500 company, we create value through reliable and
efficient conventional generation while driving innovation in solar and
renewable power, electric vehicle ecosystems, carbon capture technology
and customer-centric energy solutions. Our retail electricity providers
– Reliant,
About Edison Mission Energy
With headquarters in
NRG Safe Harbor Disclosure
This news release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward-looking statements are
subject to certain risks, uncertainties and assumptions and include
NRG’s expectations regarding the anticipated benefits of the acquisition
of substantially all of the assets of Edison Mission Energy.
Forward-looking statements typically can be identified by the use of
words such as “will,” “expect,” “believe,” and similar terms. Although
NRG believes that its expectations are reasonable, it can give no
assurance that these expectations will prove to have been correct, and
actual results may vary materially. Factors that could cause actual
results to differ materially from those contemplated above include,
among others, general economic conditions, hazards customary in the
power industry, competition in wholesale and retail power markets, the
volatility of energy and fuel prices, the ability to obtain
Edison Mission Energy Safe Harbor Disclosure
This press release contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect EME’s current expectations and projections about future events based on EME's knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. The words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated.
Some of the risks, uncertainties and other important factors that could
cause results to differ from those currently expected, or that otherwise
could impact EME or its subsidiaries, include but are not limited to,
those described under the heading “Item 1A. Risk Factors” in EME’s most
recent Annual Report on Form 10-K and in subsequent Quarterly Reports on
Form 10-Q. In addition to the risks and uncertainties set forth in EME’s
Appendix Table A-1: 2014 Adjusted EBITDA Reconciliation
The following table summarizes the calculation of incremental Adjusted EBITDA from EME assets for 2014 and provides a reconciliation to pre-tax income:
Total EME |
NYLD-Eligible Assets |
|||||||||
Pre-Tax Income |
$140 | $39 | ||||||||
Depreciation & amortization | 101 | 70 | ||||||||
Interest Expense | 66 | 66 | ||||||||
Adjustment to reflect reported equity earnings | 22 | 10 | ||||||||
Adjusted EBITDA |
$330 |
$185 |
||||||||
EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that NRG’s future results will be unaffected by unusual or non-recurring items.
EBITDA represents net income before interest (including loss on debt extinguishment), taxes, depreciation and amortization. EBITDA is presented because NRG considers it an important supplemental measure of its performance and believes debt-holders frequently use EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:
- EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
- EBITDA does not reflect changes in, or cash requirements for, working capital needs;
- EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
- Other companies in this industry may calculate EBITDA differently than NRG does, limiting its usefulness as a comparative measure.
Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the maintenance and growth of NRG’s business. NRG compensates for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally.
Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for mark-to-market gains or losses; asset write offs and impairments; and factors which we do not consider indicative of future operating performance. The reader is encouraged to evaluate each adjustment and the reasons NRG considers it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this news release.
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Source:
NRG Contacts:
Media:
Karen Cleeve, 609-524-4608
or
Investors:
Chad
Plotkin, 609-524-4526
Daniel Keyes, 609-524-4527
or
EME
Contact for All Inquiries:
Doug McFarlan, 312-583-6024 /
312-343-2561