NRG Energy said it would shuffle several of its clean energy businesses into a subsidiary that could ultimately be sold or otherwise spun off.
The plan was announced on Friday morning by Chief Executive Officer David Crane during a conference call with investors.
Over the past year, NRG Energy, the biggest U.S. independent power producer, has reported the worst financial performance of any member of the S&P 500 Utilities Index. Rather than rebounding, the problems seem to be worsening. In the past four months, as energy prices remained low, the Princeton, New Jersey-based company's stock price has shed almost 30 percent of its value.
At the beginning of next year, NRG Energy will put its distributed solar and electric-vehicle charging businesses in a unit tentatively called GreenCo. NRG will provide the new subsidiary company with $125 million in working capital -- but no more.
"NRG financial support will not be provided beyond the $125 million," Crane said. "In the event that the financial projections for GreenCo are not achieved and GreenCo cannot reduce its burn rate in order to live within the limits of the intercompany revolver, GreenCo will have to find other ways to fund itself or shut down one or more of its businesses."
The GreenCo plan was intended to alleviate concerns expressed by investors about how the company would be able to fund its forays into distributed energy while maintaining a portfolio of about 48,000 megawatts of conventional, mostly coal and gas fired power plants (53 MW total). On Friday, NRG's stock price fell 6.2 percent to $17.98 on the New York Stock Exchange.
The restructuring may result in management changes at NRG Energy. In fact, one highly credible Wall Street analyst, who spoke on the condition of anonymity, claims to have inside information that suggests the ouster of NRG Energy CEO David Crane.
Speculation aside, it seems likely that NRG's senior management team has damaged their credibility with investors.
Crane was an outspoken booster for many of the same energy businesses that NRG is now rolling into GreenCo. For example, in a quarterly earnings conference call in 2014, Crane told investors there was an "inexorable trend toward a distributed generation-centric, disaggregated future featuring individual choice and the empowerment of the American energy consumer."
During the same conference call, Crane added, "That this future is going to occur is, in my opinion, inevitable; that it's going to occur faster than almost every person thinks it's going to occur is highly probable. So at NRG, we are positioning ourselves to succeed during a prolonged period during which the traditional centralized grid-based power system coexists with the fast emerging, high growth distributed sector, much like how fixed line long distance graciously gave way to cellular world dominance only after a couple of decades of relatively peaceful coexistence."