Global Infrastructure Partners (GIP), a, you guessed it, global infrastructure investor, is acquiring NRG Energy Inc.’s integrated U.S. renewable energy platform via its third equity fund, Global Infrastructure Partners III. This move includes a controlling stake and 46% economic interest in NRG Yield, Inc. (NYLD), with a market capitalization of $3.2 billion, as well as NRG’s renewable energy operations and maintenance and development businesses. GIP is acquiring the business for $1.375 billion in cash, subject to certain adjustments. In addition, GIP has agreed to provide backstop support for NYLD’s agreed purchase of the Carlsbad Energy Center project.
NYLD has the largest project portfolio (by installed capacity) among U.S. power “yieldcos” and is the second largest by enterprise value and market capitalization. NYLD’s operating power plant capacity totals 5.1 GW and is diversified across wind, solar, and natural gas technologies. The company also owns thermal infrastructure assets with an aggregate steam and chilled water capacity of 1,319 net MWt and electric generation capacity of 123 net MW, servicing commercial businesses, universities, hospitals and government customers. A substantial portion of NYLD’s project portfolio benefits from long-term contracts with a weighted average remaining contract life of 16 years.
In addition to NRG’s interests in NYLD, GIP will acquire NRG’s renewable O&M and development businesses. NRG’s renewable O&M platform operates 2.4 GW of renewable power generation in 17 states. NRG’s renewable development platform includes 630 MW of identified “dropdown” assets, which are subject to a right of first offer from NYLD, and it has a total project pipeline of over 6.4 GW of renewable generation opportunities across the U.S. (as last disclosed publicly by NRG).
GIP has a demonstrated track record of investment and value creation in the renewable energy sector, and this investment fits squarely into GIP’s global renewables investment strategy. GIP has invested or committed approximately $9 billion of equity in the sector, including 8 GW of operating renewable assets and over 14 GW of renewable assets under construction or in development.
In addition to acquiring the business and assuming sponsorship of NYLD, GIP has made several significant commitments to facilitate the transaction, including arranging a $1.5 billion backstop credit facility to mitigate any change-of-control risk with NYLD’s existing corporate debt and committing up to $400 million to backstop NYLD’s acquisition of the 527 MW Carlsbad natural gas project in California from NRG. The commitment to the Carlsbad project, which remains subject to certain terms and conditions, ensures a timely acquisition in the event that NYLD is unable to raise efficient third-party capital to purchase the project.
The Transaction is subject to customary closing conditions and is expected to close in the second half of 2018.
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