New Jersey-based NRG Energy announced Friday it has entered into a definitive agreement to purchase Direct Energy, a North American subsidiary of Centrica PLC for $3.265 billion in an all-cash transaction.
The deal builds on NRG’s strategy as a customer-driven integrated energy company, adding 3 million retail customers across 50 states and six Canadian provinces. NRG is one of the largest independent power suppliers in the country, providing electricity and gas to 3.7 million customers.
Beyond nearly doubling the number of homes its serves, the transaction is viewed as reducing the company’s exposure to volatility in prices in the wholesale energy markets. The deal also expands its footprint in the lucrative market along the Eastern Seaboard, including New Jersey where the company has headquarters near Princeton.
“This is a great transaction for NRG,’’ said Mauricio Gutierrez, president and CEO of NRG in an investors’ call with analysts. “It is the right transaction at the right time.’’
The deal expands NRG’s geographical reach and offerings, enhances the company’s cost competitiveness, and should create significant shareholder value, according to Gutierrez.
With operations in all 50 U.S. states and 6 Canadian provinces, Direct Energy is one of North America’s leading retail providers of electricity, natural gas and business-related products and services. For NRG, it enables the company to better match its power generation with customer demand.
“Some merchant generators are looking to retail as a means of expanding their operations,’’ noted Paul Patterson, an energy analyst at Glenrock Associates in New York. “It is a way of moving further down the food chain.’’
The acquisition comes on the heels of NRG’s deal to buy Stream Energy’s retail and natural gas businesses in 2019 in a $300 million deal.
In acquiring Direct Energy, based in Houston, NRG views the deal as providing substantial regional diversity, broadening its regional platform, including its eastern footprint. The acquisition is also expected to create $300 million in cost savings, according to the company.
The deal may offer opportunities to expand its offerings in the Northeast, including renewable energy options. The transaction is expected to close in 2020.