Two big shareholders seek a director spot at NRG

Two major shareholders of NRG Energy increased their stakes in the Houston power company in a bid to get a director on the board and boost NRG stock prices, which they described as “deeply undervalued.”

New York hedge fund Elliott Associates and Dallas investment firm Bluescape Energy Partners, which now control 9.4 percent of shares, appear to be taking aim at two subsidiaries that these shareholders view as underperforming and a drag on NRG earnings, analysts said.

The investment firms disclosed their move in a filing with the Securities and Exchange Commission. They said they would seek to place Bluescape’s executive chairman, Charles John Wilder Jr., on NRG’s 13-member board. Wilder, who would need to be elected to the board by shareholders, is a former CEO of TXU, the Dallas power company that was sold to private equity firms in 2007.

In the SEC filing, the two companies said Wilder’s experience would help guide NRG through changes to its operations or finances that would boost the value of NRG.

“The group believes that Wilder and his team have directly relevant experience in effectuating such improvements,” Elliott and Bluescape said in the SEC filing, “and are initiating a dialogue with management and the board of directors to address these opportunities as well as implement appropriate board-

level oversight.”

In a statement, NRG said it welcomes input from all shareholders. Bluescape and Wilder did not respond to a request for comment. Elliott could not be reached.

Wilder was chief executive of TXU when it was sold for $32 billion to two private equity firms, Kohlberg Kravis Roberts & Co. and TPG, formerly Texas Pacific Group, in one of the biggest leveraged buyouts — acquisitions that rely heavily on debt. Wilder, who oversaw the deal, left TXU after it closed. TXU later became part of Energy Transfer Partners, which filed for bankruptcy in 2014 with $42 billion in debt.

The effort to place Wilder on the NRG board spurred speculation that Elliott and Bluescape have similar plans for NRG, but analysts said it’s unlikely that NRG would be taken private. Instead, analysts said, the investment firms more likely want to push NRG to unload its Gen-On Energy and NRG Yield subsidiaries.

Gen-On Energy operates coal-fired power plants in the Middle Atlantic states and carries $2.5 billion in debt. Elliott and Bluescape may want to push Gen-On into bankruptcy as a way to relieve NRG of the burden, analysts said.

“NRG can let go of it, if it can’t support itself on cash flow,” said Neel Mitra, director of power and utilities research at the energy investment banking firm Tudor Pickering & Holt, Co.

Elliott and Bluescape, analysts said, would likely push NRG to sell NRG Yield, which acquires, owns and operates renewable and conventional energy sources available for long-term contracts.

NRG stock closed at $15.56 on Thursday, up 30 cents, or 2 percent, from Wednesday’s close.