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WILMINGTON, Del. (Reuters) - NRG Energy Inc's (NRG.N) GenOn business filed for bankruptcy on Wednesday with an agreement with bondholders to cut $1.75 billion of its debt and restructure the power generator as a standalone business, according to a securities filing.
The filing, which follows a debt restructuring agreement reached in May, comes as wholesale power companies struggle with weak electricity prices.
NRG, the largest independent U.S. power producer, appointed two directors in February and agreed to cut costs and sell assets in a deal with activist investors Elliott Management and Bluescape Energy Partners. The funds acquired a 9.4 percent stake in NRG early in 2017.
Shares of NRG were down 2.9 percent at $16.44 in late morning trade on the New York Stock Exchange.
The bankruptcy will transfer ownership of GenOn, which operates 32 power plants in eight states, to its senior noteholders. GenOn's plants, mostly in the Mid-Atlantic, have a total production capacity of approximately 15,394 megawatts. The company generates nearly two-thirds of its electricity from natural gas.
Holders of notes issued by affiliate GenOn Americas Generation will receive in cash 92 percent of the principal of the $695 million outstanding, plus accrued interest.
As part of the debt-cutting agreement, GenOn and NRG agreed to transition shared services to a third party and NRG will also pay a settlement of $261.3 million in cash to GenOn.
NRG will also provide a $330 million letter of credit to GenOn.
NRG acquired GenOn in 2012 for $1.7 billion.
Mauricio Gutierrez, the president and chief executive of NRG, said in an emailed statement that the bankruptcy will help simplify NRG while maintaining a strong balance sheet.
The senior noteholders will also receive the right to participate in an offering of $700 million of new notes to refinance the company when it emerges from Chapter 11.
Cheap natural gas flowing from shale fields has brought down electricity prices in recent years, squeezing margins for wholesale power generation companies.
Exelon Corp (EXC.N) has hired a debt restructuring adviser and said it plans to close its Three Mile Island nuclear power plant ahead of schedule. FirstEnergy Corp (FE.N) has said it plans to exit its merchant business by mid-2018.
Energy Future Holdings Corp, the largest power generation company in Texas, filed for bankruptcy in 2014 and Panda Temple Power LLC filed earlier this year.
Reporting by Tom Hals in Wilmington, Delaware; Editing by Phil Berlowitz