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NRG Energy Case Study
Clearing the Air in Record Time
Background
NRG Energy (“NRG”), a leading competitive energy provider, owns and operates a diverse portfolio of power-generating facilities. Its operations include competitive energy production, cogeneration facilities, thermal energy production and energy resource recovery facilities.
On May 14, 2003, NRG, together with 26 of its subsidiaries and affiliates, filed for Chapter 11 protection in the Southern District of New York to balance its debt incurred primarily during an aggressive five-year growth period of construction and acquisitions. NRG set-out to reduce its debt levels, improve its balance sheet, and align its business strategy and operational structure with the current economic climate and energy market conditions. NRG was able to address most of its debt restructuring out-of-court, but strategically used bankruptcy procedures to ensure long-term financial stability and a rapid restructuring process.
Results
NRG hired KCC to generate cost-efficiencies and accelerate the claims administration process. KCC collaborated closely with a number of professionals assigned to the case, among them Bingham McCutchen, Simpson Thacher & Bartlett, Akin Gump Strauss Hauer & Feld, Jones Day and Kirkland & Ellis. KCC spent several months on-site at NRG conducting a review of thousands of the company’s contracts. This close collaboration enabled NRG to organize its contracts in a systematic manner and determine which contracts would be assumed or rejected quickly and efficiently.
NRG conducted an unconventional approach to traditional solicitation procedures. The company offered its creditors a debt-for-equity swap and the opportunity to sell their equity to maximize value. The KCC team worked with the various professionals to simplify this complex solicitation procedure and facilitate the balloting process. Due to KCC’s hands-on involvement, the team was able to engineer easy-to-understand ballot and solicitation procedures and to ensure all creditors clearly understood their options and were able to make well-informed decisions.
NRG emerged from Chapter 11 on December 5, 2003, exactly 7 months after it commenced its case petition. Industry analysts have stated that NRG’s efficient and rapid restructuring process can serve as a model for one of the most sophisticated and well-run cases. NRG is on its way to profitability and recently acquired Texas Genco for $8.7 billion.
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