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NRG Ditches the Old and Embraces ... the Old

Back in February, Mauricio Gutierrez, the CEO of NRG Energy Inc., declared his company's old business model obsolete. On Wednesday, those words were put into action.

In fact, the merchant generator's transformation plan -- put together at the no-doubt gentle prodding of Elliott Management -- didn't just consign the old model to history, it also put the final nail in the coffin of the alternative, green-tinged strategy championed by Gutierrez's predecessor David Crane that ultimately led to his ouster.

Listed merchant generators used to lever up, buy assets and ride the cycle of electricity prices (read: natural gas prices). The collapse in gas prices due to the shale boom, along with the flat-lining of U.S. electricity demand and the pressure put on wholesale prices by renewable sources such as wind and solar power, made that untenable. Crane attempted to pivot NRG away from its coal-heavy business toward renewable and distributed power, but Wall Street ultimately lost patience.

Then, in January, Elliott showed up.

One strategic review later, NRG Energy is stripping back big time. Besides cutting operating costs, it also aims to sell off a slew of assets -- including somewhere between a half and all of its remaining stake in NRG Yield Inc., the subsidiary it listed separately four years ago as a source of cheap financing for contracted, mostly renewable power projects. By the time the smoke clears, NRG Energy will have essentially reverted back to being primarily a wholesale and retail electricity business in Texas, with some other assets scattered around the Northeast and maybe California. Renewable energy will be left to those enjoying a more apt (read: lower) cost of capital, such as infrastructure funds.

The overriding objective, as you might expect given Elliott's...