The Deal: NRG Yield to Price IPO

NEW YORK ( The Deal) -- NRG Yield Inc., the spinoff from Princeton, N.J., power generator NRG Energy Inc. ( NRG), is expected to price its initial public offering at the high end of its $19 to $21 per share range with the 15% shoe option exercised, Tudor Pickering Holt & Co. Securities Inc. wrote in a report Tuesday, July 16. At $21 per share, the implied dividend yield for 2015 is expected to be 7%, or $94 million in distributed cash, the firm said.

The company, whose ticker symbol is expected to be NYLD, is targeted to increase its dividend by 10% to 15% over next five years through NRG Energy asset dropdowns. Compared with the average master limited partnership, NRG Yield has a higher yield, more growth and safer cash flows, with an implied enterprise value-to-Ebitda multiple of 10 versus 8 for NRG.

NRG already is adding to list of assets to capture multiple arbitrage by acquiring a 26-megawatt Guam solar project from Quantum Utility Generation LLC, TPH said. NRG Yield expects to sell up to 19.6 million shares, which could bring in as much as $411 million. NRG announced the IPO in June after filing confidentially with the Securities and Exchange Commission in February. Bank of America Merrill Lynch, Goldman, Sachs & Co. ( GS) and Citigroup Inc. ( C) are the lead underwriters. Kirkland & Ellis LLP is counseling NRG Yield, while Latham & Watkins LLP is representing the underwriters.

Written by Claire Poole

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