LongmontFYI Logo
LongmontFYI Home
 
Business Logo


LongmontFYI
Business Archive

 

 
back to archive

5/15/2003

NRG files for bankruptcy reorganization

The Associated Press

MINNEAPOLIS — NRG Energy Inc. on Wednesday filed for Chapter 11 bankruptcy reorganization, a long-expected action that includes a $752 million commitment by parent Xcel Energy Inc. to help settle debts.

In its filing in U.S. Bankruptcy Court in the Southern District of New York, NRG said it expected operations to continue as normal during restructuring. The filing doesn’t include Xcel or any other Xcel subsidiaries.

NRG is the debt-strapped wholesale power generating unit of Minneapolis-based Xcel, which operates utilities in Colorado, the Dakotas, Michigan, Minnesota, Wisconsin and portions of the Southwestern United States.

Wayne Brunetti — Xcel’s chairman, president and chief executive — said the filing should clear up uncertainty about NRG’s future, which has hampered Xcel’s share price. And he said Xcel believes the settlement reduces Xcel’s exposure to lawsuits over NRG’s performance.

“I believe that this is a very positive step for Xcel Energy and its shareholders,” Brunetti said. Xcel can pay the settlement with cash on hand and proceeds from the tax benefit of writing off its NRG investment, he said.

Xcel shares were up 20 cents, to close at $14.10 Wednesday on the New York Stock Exchange.

Xcel spun off NRG as a separate company in 2000, believing it would help the company raise money from investors to fuel its growth. But electricity prices tumbled in 2001, and investors soured on independent producers, which were hurt by the economic slowdown and concerns about fluctuating supply and demand in the industry.

NRG’s problems became acute in July when credit agencies downgraded the company’s ratings and triggered a $1 billion cash collateral requirement in its lending agreements.

Xcel bought back the public stake in NRG a year ago and said it would scale back NRG operations. In March, it announced a tentative settlement with NRG creditors, and the bankruptcy filing essentially echoes those terms, Xcel said.

“They’re going to be able to put NRG behind them and move back to basics, back to regulated utilities, which they do well,” said Jake Mercer, an analyst with U.S. Bancorp Piper Jaffray who rates Xcel as “outperform.” He said Xcel can afford to make the $752 million payment without jeopardizing its liquidity.