On Friday, July 24, NRG Energy Inc. (NRG) released news that is would acquire Direct Energy from Centrica PLC in a $3.625 billion transaction.
Direct Energy was acquired by Centrica PLC in 2000 and has grown into one of the largest retail energy providers in North America, with more than three million residential and commercial customers across the U.S. and Canada. Direct Energy has operations in all 50 U.S. states and six Canadian provinces. The provider also has more than 240,000 commercial and business customers across the continent.
This transaction marks a step towards NRG’s goal of diversifying its presence outside of Texas. Approximately 76 percent of Direct Energy’s current customer base exists outside of the Lone Star State, making the acquisition an appealing way to gain a balanced portfolio along the East coast and across the country.
With the addition of more than three million new customers, NRG’s acquisition of Direct Energy will likely improve its status as a growing, customer-centric energy provider. Industry experts predict the transaction will generate about $740 million in annual EBITDA and improve cash flow and earnings diversification.
“This combination improves NRG’s status as one of North America’s premier integrated power companies, bringing the power of energy to people and organizations through our diverse generation platform and leading retail brands,” said Mauricio Gutierrez, president and chief executive officer of NRG.
“The acquisition aligns with our broader strategy of perfecting our integrated business model and drives significant value creation for our customers and stakeholders. Direct Energy ’s complementary assets, talented team and excellent customer service make it a natural fit for our portfolio, and we look forward to welcoming Direct Energy to the NRG team,” Gutierrez continued.
The transaction between NRG and Direct Energy will greatly diversify NRG’s presence because 76 percent of Direct Energy’s customers are outside of the Texas. With this acquisition, NRG’s portfolio will be better balanced along the East coast while also allowing the energy provider to expand its capital-light renewable PPA strategy outside of the Lone Star State. NRG’s current portfolio of providers includes Reliant Energy, Green Mountain Energy, Cirro Energy, and Discount Power.
The acquisition is expected to close by the end of 2020. It is subject to customary closing conditions and regulatory approvals, such as approval from Centrica PLC and the Federal Energy Regulatory Commission.
Caitlin Cosper is a writer within the energy and power industry. Born in Georgia, she attended the University of Georgia before earning her master’s in English at the University of North Carolina at Charlotte.