Background
GenOn is one of the largest independent power producers in the United States, delivering electricity to wholesale customers primarily in the Northeast and Mid-Atlantic. In mid-2017, GenOn entered into bankruptcy proceedings and began the process of reorganization and divestiture from its parent company, NRG Energy. Operating with a lean corporate staff as a result of restructuring, GenOn needed an external partner to provide expertise in assessing its asset retirement obligations.
Based on our experience in mergers and acquisitions (M&A), due diligence, and decommissioning and demolition, GenOn turned to ERM. We regularly help clients identify and mitigate environmental, social and governance (ESG) and sustainability risks to maximize and protect value throughout the investment lifecycle.
Our Approach
Working with directly with the C-suite (including the chief executive officer, chief financial officer and general counsel and senior vice president, strategy), ERM has been advising GenOn in several areas. Our team includes internal resources from across the United States who are providing expertise in M&A, environmental impact assessment, contaminated site management and decontamination/demolition to identify value-creation opportunities for the client.
Our initial focus was helping to update the financial estimates related to the company’s asset retirement allocations. ERM used state-of-the-art technology, including drone surveillance, to evaluate every GenOn location. This led to working with the senior vice president, strategy, to develop a comprehensive aspect management plan that optimized the divestiture of company assets. ERM not only quantified site-level environmental risks and liabilities, we identified and developed several significant approaches for maximizing value.
ERM is working with regulators and electric companies on interconnect agreements. This includes coordinating clean-up obligations from legacy sites and establishing new interconnection agreements and terminations.
We conducted wetland and habitat surveys and then monetizing wetlands, open space and mitigation banking, which can be sold to others who need them for offset credits.
Our decommissioning, decontamination and demolition experts evaluated sites and provided detailed cost estimates for closure plans. These ranged from surgical demolition of stacks and other facilities to turnkey services for closure and capping of coal ash ponds.
Taking a strategic approach, we identified innovative options for best reuse of legacy sites. We recommended subdividing legacy coal sites so small peaker assets can be sold separately from the rest of the property. Our team identified former landfills that could be sold and redeveloped for solar and wind power generation or as battery storage for renewable energy, and we conducted risk evaluations and fatal flaw analyses to prepare these sites for such uses.
We are identifying underutilized assets, finding buyers, and bringing to market tradable assets, such as water rights and emission reduction credits, neither of which were included in the bankruptcy valuation.
Benefits and Value
As a result of our ongoing work, we have identified to date a multi-million dollar increase in property valuations for GenOn. ERM is helping the client achieve its strategic goals in divesting its assets and meeting its commitments to shareholders and other key stakeholders.
