Private equity firm Elliott Investment Management is pushing for change at NRG Energy (NYSE:NRG) after it released a letter recommending the company make leadership changes, improve operations and conduct a strategic review of its home services strategy.
The letter sent NRG's shares to a high of $35.17 on Monday. However, the stock has given up most of those gains, now at $33.18, up 1.2% at the time of writing.
Elliott has an investment of approximately $1 billion, representing a more than 13% economic interest in NRG Energy, the firm said in its letter.
The private equity group said NRG should add new independent directors with strong power and energy industry expertise to refresh the Board and help guide the necessary changes, while it also stated that the company should improve operations and reliability to achieve "at least $500 million of recurring, EBITDA-accretive cost reductions."
Furthermore, Elliott wrote that the review of NRG's home services strategy should also include Vivint, while it should also "establish a new capital allocation framework to return to shareholders at least 80% of free cash flow, with growth investments focused on its generation and retail businesses."
Elliott believes that successful execution of this plan could create over $5B of shareholder value, driving the company's stock price to reach or exceed $55 per share, the letter said.