HOUSTON (Reuters) - Power company NRG Energy Inc agreed to buy privately held Green Mountain Energy for $350 million in cash in a bet that a growing percentage of Americans will buy carbon-free electricity and are willing to pay more for it.
The purchase adds more than 300,000 “green” customers to NRG which last year paid less than $300 million to acquire the 1.6 million Texas customers of Reliant Energy which was distressed at the time and losing business.
Green Mountain will be run as a stand-a-lone business, NRG said. It expects to fund the deal with cash on hand upon closing, expected by mid-November.
While the United States has no legislation restricting carbon emissions on a national level, more than half the states have mandates or targets for utilities to use a percentage of renewable power -- like wind and solar -- to supply customers in coming years, ranging as high as 33 percent in California.
That won’t be enough for some consumers, said NRG Chief Executive Officer David Crane and Green Mountain CEO Paul Thomas.
“There is a very distinct group of green consumers (for whom) it is not enough to take power from a utility comforted in the notion that 10 percent of the power is renewable,” said Crane.
“That segment grows every day,” said Thomas. “We are about getting more renewable energy built and we support RPS (renewable power standards.)”
Crane said Green Mountain’s customer base matches NRG’s plan to expand its portfolio of renewable resources.
Princeton, New Jersey-based NRG operates power plants in about a dozen states and is the second largest power generator in Texas where it owns all or part of four wind farms totaling 521 megawatts, enough to serve about 100,000 homes.
NRG also operates a 21-MW solar project in California and has 1,150-MW of solar generation under development.
Overall, renewable generation accounts for nearly 2 percent of NRG’s North American portfolio of 23,470 MW, while nuclear power accounts for 5 percent.
Thomas said Green Mountain has continued to add customers despite the recession although like other companies, it has seen customer payment time lengthen.
Texas is Green Mountain’s largest market, Thomas said. While 100-percent renewable power debuted at prices above other suppliers, Thomas said the current environment of low natural gas prices makes it easier for Green Mountain to compete.
Currently, NRG’s Reliant Energy unit offers a “100-percent Texas wind” product at 9 cents per kilowatt-hour vs 10.9 cents per kwh for Green Mountain’s cheapest product, according to a state-run website.
NRG sees the deal adding about $70 million to its earnings before interest, taxes, depreciation and amortization annually.
On June 30, NRG had about $2.17 billion of cash on its balance sheet.
NRG shares slipped 9 cents on Thursday to close at $21.57 on the New York Stock Exchange.
Reporting by Adveith Nair in Bangalore and Eileen O’Grady in Houston; Editing by Don Sebastian and Sofina Mirza-Reid
Our Standards: The Thomson Reuters Trust Principles.