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NRG Energy to Buy Back More Shares under Capital Program

Zacks Equity Research
Updated

NRG Energy Inc. NRG announced that through its 2015 Capital Allocation Program it will buy back additional shares worth $200 million, taking the current authorization to $251 million. Share buyback is an excellent method to increase the market value of the remaining outstanding shares of the company and boost the earnings per share figure.

NRG Energy’s Capital Allocation Program apportions cash in an amount equal to the drop down proceeds received from NRG Yield, Inc. NYLD to repurchase shares, reduce corporate debt and fund future NRGYield eligible projects.

In Dec 2014, the board of directors authorized the repurchase of $100 million of its common stock under the 2015 Capital Allocation Program. In Mar 2015, the company was authorized to buy back an additional $100 million of its common stock under the Program. Moreover, the company's board of directors authorized the repurchase of an additional $81 million of the company's common stock, for a total authorized share repurchase of $281 million, in the second quarter of 2015.

NRG Energy has year to date repurchased nearly 9.1 million shares worth $230 million leaving a balance of $51 million in its share repurchase coffer. The latest authorization of $200 million will further boost buybacks this year.

In 2015, the company expects to return more than $600 million to its shareholders, which includes $200 million in annual dividend and the rest through share repurchases. The company disbursed dividends worth $102 million in the first half of 2015, 12.1% higher than the prior year.

NRG Energy currently generates nearly 30% of its total electricity from coal-based units. Given the regulatory scare, the company is gradually increasing its renewable portfolio and executing measures to reduce emissions. The company plans to reduce carbon dioxide emission by 50% in 2030 from 2014 levels.

Zacks Rank

NRG Energy currently carries a Zacks Rank #4 (Sell). Better options in the utility space are Brookfield Infrastructure Partners L.P. BIP and Calpine Corp. CPN, both sporting a Zacks Rank #1 (Strong Buy).

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BROOKFIELD INFR (BIP): Free Stock Analysis Report
 
CALPINE CORP (CPN): Free Stock Analysis Report
 
NRG ENERGY INC (NRG): Free Stock Analysis Report
 
NRG YIELD INC-C (NYLD): Free Stock Analysis Report
 
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Zacks Investment Research