Ladies and gentlemen, thank you for standing by, and welcome to the NRG Energy, Inc. Business Update Call. At this time, all participants' lines are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr.
Kevin Gold, Head of Investor Relations. Please go ahead, sir.
Good morning, Catherine. Thank you. Good morning, and welcome to NRG's business update call. This morning's call is being broadcast live via the phone and via webcast, which can be located in the Investors section of our website at www.nrg.com under Presentations and Webcasts. Please note that today's discussion may contain forward looking statements, which are based on assumptions that we believe to be reasonable as of this date.
Actual results may differ materially. We urge everyone to review the safe harbor in today's presentation as well as risk factors in our SEC filings. We undertake no obligation to update these statements as a result of future events except as required by law. In addition, we will refer to both GAAP and non GAAP financial measures. For information regarding our non GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's presentation.
And with that, I'll now turn the call to Mauricio Gutierrez, NRG's President and CEO.
Thank you, Kevin. Good morning, everyone, and thank you for your interest in NRG. I'm joined this morning by Kirk Andrews, our Chief Financial Officer. Also on the call and available for questions, We have Elizabeth Killinger, Head of Retail Mass and Chris Moser, Head of Operations. Before we start, I'd like to take a moment and recognize the men and women of NRG who have been reporting to work during this pandemic at our power plants and customer care centers.
On behalf of everyone, thank you for keeping the lights on during this difficult time. Today, I'm pleased to share several important business updates as highlighted on Slide 3. First, we have reached a definitive agreement to acquire Direct Energy, a highly complementary North American home and business retail company that advances our customer focused strategy and strengthens our integrated platform. This is a compelling transaction that will greatly expand our retail footprint across North America and further diversify our product offerings and earnings. 2nd, this transaction will create significant shareholder value.
It exceeds our stated investment hurdle rates and strengthens our path to achieving an investment grade credit rating. And finally, our integrated platform continues to deliver solid results. We are reaffirming our 2020 guidance and initiating 2021 guidance in line with expectations. I'd like to go right into a summary of the Direct Energy acquisition on Slide 5. This is the right transaction at the right time and it represents a considerable opportunity for our business.
Perfecting our integrated model means moving closer to the customer and rebalancing our retail generation portfolio. These transactions does exactly that. It greatly expands and enhances our retail business by adding over 3,000,000 electric, natural gas and service retail customers throughout the United States and Canada. It strengthens our core operating platform by creating a more balanced generation retail portfolio, particularly in the Northeast, where we can expand the capital light renewable PPA strategy we have deployed in ERCOT. It adds a proven and well established retail gas platform with national recognition and reach.
It reduces our earnings mix from coal and keeps us on track to achieve our long term emissions reduction targets. And it creates significant value by leveraging our scalable operational platform. We expect to realize $300,000,000 of cost synergies per year. This transaction is highly attractive and accretive. It exceeds our stated investment criteria, represents a multiple of 4.9 times EV to EBITDA after synergies and a 28% free cash flow yield on our invested capital.
Importantly, we will achieve our targeted credit metrics within 12 months of closing. The purchase price of $3,625,000,000 will be funded through a mix of debt, equity linked securities and cash on hand. Kirk will provide more detail around these and what it means for our capital allocation plan and financials in 2020 2021. The approvals required to close this transaction includes HSR, FERC and the Canada Competition Act. Additionally, Centrica will hold a shareholder vote on the transaction within the next month.
We target closing by the end of 2020. Turning to Slide 6, I want to briefly talk about how this transaction fits within our overall strategic roadmap. Since I became CEO 4.5 years ago, we have transformed our business from a highly levered IPP to a more stable and predictable integrated power company. During this time, we simplified and streamlined our portfolio, strengthened our balance sheet, established a transparent and compelling capital allocation framework and made sustainability an integral part of our foundation. Our overarching commitment was to make sure you knew who we were and where we were heading with no head scratches.
Along these lines, at our 2018 Analyst Day, we presented a strategic roadmap, which you can see on this slide. With 2020 marking the final year of our 3 year 3 part transformation plan, we have now fully turned our attention to our next phase of redefining NRG and moving closer to the customer. Growing our retail businesses positions the company to benefit from current market trends and better integrates complementary and countercyclical parts of the value chain to further stabilize earnings, improve the quality of cash flows and lower our overall business risk profile. Today's announcement is consistent with our plan to rebalance our portfolio, reorganize around the customer and continuously improve our business and cost structure while maintaining financial discipline. It is just another step we're taking that demonstrates our commitment to creating a best in class customer focused integrated energy organization.
The acquisition of Direct Energy is highly complementary to our business as you can see on Slide 7. When complete, NRG will have the strongest collection of competitive power brands offering energy products and services in North America. NRG brands including Reliant and Green Mountain have been focused primarily on electricity customers with the highest concentration in Texas. The direct energy brands, including AirTron, significantly expands our mass and C and I footprint beyond electricity and outside of Texas. This portfolio not only enhances our current offerings, but it also adds complementary business such as natural gas.
Direct Energy operates 1 of the largest natural gas retail platforms in the country, which we see as a logical extension of our current product offerings. We have been impressed with a strong track record of direct retail gas business and expect they will benefit from operating on our platform and under our risk management program. The combined portfolio will continue to be heavily weighted towards the residential customer, allowing us the opportunity to provide an unparalleled level of innovation across products and services. Both residential and business customers will be able to leverage our scope and design energy plants to fit their specific needs, taking consumer choice to a whole new level. And as we have seen time and time again, empowering customers with choice is both good for them and good for our business.
Before we move to the next slide, I want to briefly address the impact of COVID-nineteen on these consumer facing platforms. Regarding energy specifically, I have been impressed by the quick turn to digital selling when face to face marketing was paused due to state restrictions. The adaptability of the team to quickly evolve without missing a beat and deliver is a job well done. For Direct Energy, I will limit my commentary as we have not completed the acquisition. But I will say that we are comfortable with what we have seen and have taken the near term impact of COVID-nineteen into our plans and expectations.
Now turning to Slide 8. This transaction provides a unique opportunity to achieve significant cost synergies, which we expect to total $300,000,000 per year. These significant savings are possible by leveraging our integrated model and disciplined cost management that we have applied since 2016 and throughout our transformation plan. Given the complementary nature of both businesses, we expect to leverage our consolidated platform and processes, preserve the value added talent and capabilities from the acquisition and focus our talent on optimizing the combined model. One time cost to achieve will be $220,000,000 primarily for systems, process and personnel consolidation costs.
Our proven model of integration results in a streamlined operating model that provides cost competitive products and places the customer at the center of everything we do. Now turning to Slide 9, which provides the key pro form a run rate metrics. As you can see, this transaction creates tremendous shareholder value, while maintaining significant financial flexibility with $6,000,000,000 in excess cash generated through 2025 after achieving our target investment grade metrics and growing our dividend at the midpoint of our 7% to 9% annual target. On one final note, before I move to our quarterly business update, I would like to take a moment to say to the Direct Energy team, we look forward to welcoming you to the NRG family. Moving to Slide 11.
I want to provide you with a preview of our year to date results and other businesses updates. As you can see on the left hand side of the slide, during the quarter, we delivered 5.7 $4,000,000 of adjusted EBITDA, 22 percent higher than the same period last year. The performance during the quarter was primarily driven by favorable weather, strong mass retail load as a result of stay at home restrictions and lower sales and marketing costs due to timing. Our year to date adjusted EBITDA results now stand at $922,000,000 a 15% increase from last year. And as a result of our strong performance over the first half of the year, we are reaffirming our 2020 guidance ranges.
We expect to post the full earnings material and 10 Q on August 6 and given today's comprehensive strategy and capital allocation update, do not currently expect to host a call. Now moving to the right side of the slide, while we typically wait until the Q3 to initiate next year's guidance, in light of today's acquisition announcement, we're initiating 2021 NRG stand alone guidance of $1,900,000,000 to $2,100,000,000 adjusted EBITDA and $2,275,000,000 to $1,475,000,000 of free cash flow before growth. These guidance ranges further demonstrate our ability to deliver stable and predictable results through varying market conditions. Moving to the bottom right portion of the slide, we're also announcing 3 strategic portfolio updates today. First, we are opportunistically buying out the Midwest generation leases.
As a reminder, these assets were acquired in 2014 as part of the Edison Mission transaction and the leases have been in place since 2000. Consistent with our efforts to simplify our balance sheet and achieve investment grade credit rating, we have successfully negotiated to buy out the leases. This action creates greater operational and financial flexibility with the assets. We expect the net cash cost to be $112,000,000 Next, we expect to monetize Agua Caliente, which was previously delayed by the PG and E bankruptcy. We state net proceeds from these assets to total $120,000,000 And finally, as we roll forward to 2021 capital allocation, we will be completing the Encina site improvement project, which began this year.
We're allocating $25,000,000 in 2021 and following completion, we expect to monetize the site at a return significantly exceeding our hurdle rates. So with that, I will turn it over to Kirk for the financial update.
Thank you, Mauricio. I'll begin on Slide 13 by expanding just a bit on the summary of our second quarter highlights that Mauricio just provided before providing a financial overview of the Direct acquisition. Mauricio mentioned, based on our year to date results and outlook over the balance of the year, which to be clear, includes lower expected COVID related costs versus our last update, we are reaffirming our 2020 guidance ranges for EBITDA and free cash flow for growth. Mauricio also mentioned, we've executed an agreement with the ownerless source of Powhatan and Joliet to purchase those assets, thereby eliminating the lease obligations we assumed as a part of their acquisition. As a lessor, we have kept those assets in compliance with environmental regulations through back end control investments and in the case of Joliet by converting the units from coal to natural gas.
By purchasing these assets, we're able to eliminate the lease obligations, which are treated as debt for ratings purposes, thereby streamlining our balance sheet. Moreover, as owners rather than lessors, we have a greater operational and strategic flexibility, thus providing us a greater range of alternatives to optimize their benefits to NRG going forward. The purchase of these assets will be funded with approximately $112,000,000 of NRG capital with the balance of the buy in funded with debt replacing the $148,000,000 lease obligation on a credit neutral basis. Turning to Slide 14. To complete the 2020 update, I'll briefly review 2020 capital allocation, which includes 2 notable changes.
First, our investments increased primarily as a result of the Midwest Gen purchase. And second, we're reserving the remaining balance of 2020 capital of $664,000,000 in order to help fund the Direct acquisition, which we expect to close by early 2021. We recognize that this results in a partial decrease of the capital previously earmarked for share repurchases under our fifty-fifty allocation policy. However, as I'll demonstrate shortly, we are confident that this is a superior use of this capital versus repurchasing our own stock. Turning to the Direct acquisition and starting with sources and uses on Slide 15.
The purchase price of direct plus expected transaction costs and expenses leads us to total uses of $3,775,000,000 As shown on the right side of the slide, we expect to fund this with the following sources of capital. First, while we fully backstopped a bridge facility to fund the acquisition, our plan is to issue new secured and unsecured notes likely prior to closing to raise approximately $2,400,000,000 towards the acquisition. However, we view approximately $1,050,000,000 of this acquisition leverage to be temporary as we intend to delever by this amount using 2021 capital in order to rapidly return to our investment grade metrics within the 1st year. We view this as a capital allocation priority. And based on extensive discussions with the rating agencies who understand and appreciate this commitment, we expect favorable reports on NRG and the transaction in the very near future.
With this anticipated support from the agencies and our confidence in returning to our target metrics, we expect this will put us on track to potentially earn investment grade rating by late next year or early 2022, giving the risk reducing impact of the transaction on our overall platform. This was a This was a critical component of our rating strategy and we will be focused on optimizing the structure and magnitude of this portion of the capital sources for the acquisition. We will look to balance equity treatment, ratings impact and overall cost of capital and we'll select the ideal structure based on market conditions as we move closer to closing the transaction. Finally, we will fund the balance of the purchase price with the 2020 excess capital I reviewed earlier. Additionally, as noted on the slide, we'll be increasing our liquidity facilities in connection with the transaction as well, with a total of $3,500,000,000 in additional facilities supplemented by excess capacity on our existing revolver, all of which is primarily intended to fund letters of credit in connection with hedging activities.
Our analysis and long track record of efficient collateral management gives us high confidence in our ability to leverage these strengths to significantly reduce these requirements as we integrate direct. This opportunity will be further enhanced as we move to investment grade, as we expect at least $1,500,000,000 in reduced collateral needs from an investment grade ratings upgrade alone. Finally, in order to ensure nimble access to cash liquidity, we are increasing our minimum cash, which we deduct before calculating capital available for allocation, by $150,000,000 from $500,000,000 currently to $650,000,000 following the transaction. Turning next to Slide 16. I'll begin our review of the financial benefits of the Direct acquisition with an overview of the 2021 NRG standalone guidance Mauricio provided, which will provide a baseline for the acquisition impact.
We're initiating 2021 guidance of $1,900,000,000 to $2,100,000 in adjusted EBITDA and $1,275,000 rather $1,475,000,000 rather $1,475,000,000 in free cash flow before growth. Our standalone guidance is consistent with 2020 expected results despite the backwardated power price curves, further underscoring the resilience of our integrated model. Although we expect to close the Direct acquisition by early 2021, we expect to realize the full run rate impact of the transaction by 2023 due to the ramp up in significant synergy benefits as well as the decreasing incremental interest costs associated with the transaction as we quickly repay a portion of the acquisition debt in 2021 in order to return to our investment grade credit metrics in the 1st year of the transaction. Given our strong confidence in the ongoing resilience of our integrated model, we'll use the midpoint of NRG's 2021 guidance to show the full run rate financial power of the combination, which we'll realize by 2023. Starting with 2021, based on the assumption of a January 1 close, we expect Direct Energy to contribute an incremental $500,000,000 in adjusted EBITDA.
This consists of 3 components. 1st, baseline or run rate EBITDA before synergies of $440,000,000 2nd, we expect nearly half of the full amount of synergies or approximately 135,000,000 dollars in the 1st year of the acquisition. And finally, having assessed and risk adjusted our expectations for Direct's 2021 financial results to allow for the possible impact of various COVID-nineteen outcomes, we've made a downward adjustment to the 2021 expected EBITDA of approximately $75,000,000 We view these assumptions as potentially conservative as should this possible impact abate or moderate, we may see upside to the 2021 contribution from Direct. As we increase to the full impact of synergies over the next 2 years, we expect Direct to contribute a total of $740,000,000 in adjusted EBITDA or just under 5 times adjusted EBITDA based on the purchase price, leading to $2,740,000,000 in total pro form a adjusted run rate EBITDA in 2023. Turning to free cash flow before growth.
In 2021, we expect direct to contribute $240,000,000 in incremental cash flow after deducting incremental acquisition debt interest of approximately 150,000,000 dollars dividends on the new convertible preferred and other cash flow items. As we will be repaying approximately $1,050,000,000 of debt in 2021 in order to return to our target credit metrics in the 1st year, we will realize approximately $50,000,000 in lower interest from the acquisition going forward. We will, however, likely reduce or realize rather this reduction in interest by repaying higher coupon legacy NRG unsecured notes, which will become callable next year, helping us optimize interest savings from delevering. These savings, combined with the full impact of synergies, drive run rate incremental free cash flow before growth from the acquisition to $540,000,000 by 2023. As shown in the lower left of the slide, after giving effect for NRG capital allocated to the transaction, which totals approximately $1,940,000,000 The run rate incremental free cash flow before growth from direct implies a 28% free cash flow yield as compared to an approximate 17 percent yield on NRG shares at the current price, helping to underscore not only the compelling financial impact of the transaction on an absolute basis, but more importantly relative to repurchasing our own stock with this excess capital as well.
Moreover, as we recognize, we must fully consider the financial impact of allocating capital to this transaction on a relative basis. To further illustrate this on the lower right corner of the slide, we've compared the free cash flow per share impact of repurchasing shares at the capital allocated toward direct using share prices ranging from the current level in the mid-30s to $42 a share, which is the 52 week high. As you can see, this implies a run rate impact of the Direct acquisition of approximately 8% to 13% accretion to free cash flow per share, importantly, on this relative basis. Finally, by acquiring Direct, we are also able to use our substantial surplus of net operating losses to shield incremental cash taxes over most of the remaining decade, thereby accelerating their use and driving additional positive after tax NPV of approximately $100,000,000 versus the longer timeframe over which we would have used them on a standalone basis. However, despite this accelerated use of NRGs and NOLs, we do not expect to become a full cash taxpayer on a combined basis until late in this decade, providing ongoing substantial tax run rate even when combined.
Turning to 21 capital allocation on Slide 17. Starting with the midpoint of 2021 free cash flow before growth, which I reviewed earlier, we expect to supplement this excess capital through the planned sale of our remaining interest in Agua Caliente in early 2021, thereby augmenting capital available for allocation by an expected net $120,000,000 and leading to $1,720,000,000 in excess cash before deducting the increase of minimum cash of $150,000,000 This deduction leaves us at $1,570,000,000 in incremental 2021 capital available for allocation, which will be first allocated to reducing debt in order to return balance sheet metrics to our target levels. As I mentioned previously, as opposed to repaying lower cost debt, we'll issue the fund direct, we'll augment the interest savings power by most likely targeting that higher coupon legacy unsecured debt, which is callable in 2021. We then reserved $317,000,000 for dividends based on the midpoint of our targeted dividend growth rate range of 7% to 9%. Finally, we have approximately $200,000,000 in identified investments primarily consisting of cost to achieve in connection with generating synergies from the Direct acquisition, Leaving has been fully allocated for 2021.
Following our return to investment grade metrics in 2021, we plan to resume our policy of returning 50% of excess capital to shareholders with the remaining balance reserved for additional growth opportunities, but remain flexible in increasing capital return to shareholders should superior investment opportunities not materialize. Finally, turning to our credit profile on Slide 17 and our continuing focus on maintaining our credit ratio and remaining on track to achieve investment grade, as shown on the table for 2021 on a standalone basis, we would be at the more favorable end of our targeted range of 2.5 to 2.75x net debt to corporate EBITDA. When we then add the impact of this transaction or approximately $1,500,000,000 of incremental debt, which is net of almost $1,100,000,000 in deleveraging in 2021 and $500,000,000 of incremental EBITDA, which was does not yet reflect the entire expected run rate synergies. Our forecasted net debt to corporate EBITDA at the end of 2021 on a combined basis would be close to the midpoint of our targeted range. Remaining within our targeted credit metrics by the end of 2021 underscores our commitment to continuing on a path to achieving investment grade in the near future, which we now expect would be possible at the end of 2021 or early 2022 based on our continuing dialogue with the rating agencies about the strength of our integrated platform and this business risk reducing transaction.
Mauricio, I'll turn it back to you.
Thank you, Kirk. I mean before moving to closing remarks, I want to review our capital allocation roadmap on Slide 20. Our capital allocation framework remains unchanged. It was built upon our long term commitment of value creation. As you can see in the bar chart on the left, we have been disciplined in deploying every dollar of our excess capital and adhering to our capital allocation principles.
If you recall, my first commitment to you nearly 5 years ago was to first leave no doubt in our balance sheet strength, and we have done that. Next, it was to use our tremendous financial flexibility to deploy our excess cash in good sound investments that meet our financial thresholds and are consistent with our strategy. If this was not an option, we would return capital back to shareholders. And we did, resulting in a nearly 25% reduction in our share count. Today's investment is consistent with our strategy and exceeds all financial hurdle rates.
We're using our financial flexibility to fund the project and expect to complete the deleveraging program in 2021. Then we would return to our target 50% growth and 50% return of capital objective in 2022. Our dividend policy remains unchanged at 7% to 9% annual growth. This is a great transaction for NRG and will be a source of value creation for all our stakeholders in the years to come. In closing, on Slide 21, I believe today's business update is another example of how everyone here at NRG remains focused on creating sustainable long term value.
This transaction is the right transaction. It expands our geographic reach and product offerings. It diversifies our business and reduces financial risks. It provides opportunities for significant synergies, enhancing our cost competitiveness and unlocking further value for our customers. It improves our path to investment grade and resilience once achieved.
It enhances opportunities for organic growth and our ability to thrive through an increasingly cleaner and electrified economy. And it will create significant and sustainable shareholder value. Thank you for your time today. And I also look forward to providing all our stakeholders more information during our Analyst Day in early 2021. Catherine, with that, we're ready to take questions.
Thank you. And our first question comes from Julian Smith with Bank of America. Your line is open.
Hey, good morning. Congratulations team. Well done. Perhaps Thank
you, Julian. Good morning.
Yes. Thank you so much. So a couple of quick questions. First, I suppose at the outset, the generation alignment. I know you talk about changing around some of the collateral facilities here over time, but how do you think about the generation alignment and the strategy on that front as it aligns with collateral benefits?
And then secondarily, can you talk about the synergies? I mean, obviously, the synergy number here is very large relative to the underlying adjusted EBITDA that we're starting with. How do you think about the confidence and line of sight to getting to that? And frankly, even what are the parameters or standard deviation around that as you think about it?
Yes. So let me start with the first one. I mean the Direct Energy transaction has significant customers in the East region, which helps us balance our generation and our retail. I mean, you have heard me said before that we have an imbalance, our generation is bigger in the East. So this transaction really brings that into balance and allows us to do and replicate what we have done in Texas by pointing generation to retail.
So in that respect, this transaction is very, very complementary. With respect to the synergies, I mean, since the deal is not done yet, I want to make sure that I limit my comments on that. But I would be I'm looking forward to share with you in once the transaction closes and in the Analyst Day, I will be I will provide a lot more clarity. Having said that, as you can tell, this transaction is very complementary. It leverages our operating platform, and I think we can achieve significant synergies on processes and systems.
I can tell you, Julien, that I am very, very confident in achieving these synergies. And as you know, we have been integrating some of the retail acquisitions in the past couple of months with Zoom and Stream. So we have a process nailed down to be able to achieve these synergies. And I mean, I can't tell you how confident I feel about this, but I will be able to share a whole lot more in our Analyst Day and when it closes. Kirk, do you?
Yes. And Richard, the only
thing I'd add to that Julien is, as Richard said, we've undertaken the same rigor and diligence that we have not only in previous transactions, but what we undertook in the context of the transformation plan. What also gives me confidence in the cost to achieve relative to the synergy is relatively comparable. And as Mauricio said, it's the same process and most importantly to me as the CFO, we have the same team and leader leading the tracking and we're approaching this from a what gets measured gets done standpoint. So we're going to track this exactly the same way with the same rigor we did in the transformation plan.
And just quick clarification, if you don't mind. With respect to the 2020 and 2021 capital allocation, I mean, you went through some good detail there. It doesn't seem as if there's a lot of latitude for buybacks. Just want to make sure that I'm looking at this correctly.
Yes. Acknowledged on that, Julie. And that's why as I mentioned, when I went through 2020, not lost on me that some portion of that initial capital coming out of the 2020 coffers for which we're now fully allocated was previously earmarked to share buybacks. That's why first focus for me on the financial analysis was ensuring that we had a transaction that measured up relative to our own stock. And given the priority to deleveraging and what we believe is a superior long term sustainable impact on shareholder value and that's getting to that investment grade rating.
We are temporarily, but very dedicated to prioritizing that deleveraging capital I mentioned before. But importantly, I also underscore as I think Mauricio did, once we get through that period of time, we expect a return and remembering that we're continuing to deliver capital back to our shareholders through our more robust and growing dividend. But beyond 2021, once we get back to those ratios and we will, we have an opportunity to go back to our fifty-fifty plan, supplementing the dividend with buybacks.
Yes. And I think that's the important part is, we're maintaining the dividend with the 7% to 9% growth. And after 2021, we will go back to our capital allocation framework of 50% growth, 50% return of capital to shareholders. So we have not changed our capital allocation framework.
Thank you, guys.
Thank you. And our next question comes from Shar Pourreza with Guggenheim Partners. Your line is open.
Hey, good morning, guys.
Good morning, Shar.
Just a couple of questions here. First off, post this deal, what is this like more specifically leave you in the East, more of your generation to load match? And what I'm trying to get at is longer term, as some of the older assets may retire, do you envision this becoming more of a retail platform and asset light strategy in the East? And then do you is there any interest there in trying to monetize the Canadian clients, the services business?
And I have a follow-up.
Well, I mean, this rebalances the position that we have in the East, but also gives us an opportunity to expand our capital light PPA renewable strategy that we have deployed very successfully in Texas, we will expand that to the East. I mean, remember, Shar, we don't have to I believe in the integrated platform today as much as I did yesterday a year ago. But it doesn't mean that we have to own every single asset. We can own the asset, we can rent it and then we can also lean on the bilateral wholesale market. So we have that optionality, and we're going to do what we believe is the most cost efficient and profit maximizing way of doing it.
So I feel very, very comfortable that now that we have this platform, we're going to be able to optimize it like we have optimized ERCOT. Your second question was about the makeup of their businesses. What I can tell you today, Sharice, I'm really, really excited about the platform that we're acquiring today. And this is no different than what we do at NRG. We're constantly evaluating and optimizing our portfolio.
And once the direct energy is part of NRG, we're going to do the same thing with the same rigor. And but at this point, I am really excited about the entire business that we're acquiring.
Got it. And then just from a strategic perspective, the 2021 cash available allocation is kind of obligated now, but you plan on kind of reverting to the current fifty-fifty growth capital return plans. I mean, could we see this kind of dial turn back a little bit to return to capital? Why keep the door even open to so much growth now that you've done this deal? At this juncture, why not just guide to 100% return of capital?
I mean, that's a possibility, but we're talking about 2022 and there is a lot of things that can happen between now and 2022. I mean, we're laser focused right now on closing this transaction, on integrating that transaction, on achieving all the synergies because we believe that, that creates significant shareholder value superior to any to a share buyback. And when we get closer to 2022, we're going to evaluate the opportunities. But Kirk, I mean, do you have anything else on the
Yes.
I mean, certainly, the rearing the fifty-fifty program is important and not to belies our intentions because obviously, we make those decisions when the time comes. But I think it's important to illustrate the order of magnitude here since we're not increasing the common share count that if you extrapolate that run rate free cash flow and take out since we're basically back to 0 bubble on our objectives from a balance sheet standpoint beyond 'twenty one. If you begin the additive effect of that ongoing cash flow as buoyed by our now more resilient and diversified platform on a robust basis, I think it doesn't take very many years because even after you deduct for the dividend, you can add those numbers up on flexibility of cash flow and within a couple of 3 years, you start to get something close to the current market cap of the company. Again, not to say we intend to do that, but I'm just illustrating what that means by the order of magnitude over relatively short period of time after we get past this deleveraging period.
Terrific. Thanks, guys. I'll jump back in the queue. Congrats on the transaction.
You bet. Thanks, Ajar. Appreciate it.
Thank you. Our next question comes from Steve Fleishman with Wolfe Research. Your line is open.
Yes. Hey, good morning.
Good morning, Steve.
Hey, congrats, Mauricio. So a couple of things. Just can you talk a little bit about if we have to be wary at all of market power issues, I guess, particularly in Texas?
Sure. I mean, I'm not worried about that. I mean, this transaction is primarily an East transaction. Keep in mind that in Texas, it's a very highly competitive market. We have hundreds of reps and it has a very low barrier to entry.
So I am not concerned about market power in Texas.
Okay. And then is there like a breakup fee in case somebody else tries to update for this?
Yes, there is and we will providing that, that will be filed and you're going to be able to see that.
Okay. You mentioned upfront how this changes your mix of reduces your mix of GHG and coal in the company. Could you maybe give a little more color on that aspect? Yes.
I mean the one thing is as a percentage of our total EBITDA, it reduces the carbon intensity of the organization. So this is when I talk about the on a relative basis to the size of the organization, I mean, they don't own any generation assets. And so basically, that gives us the opportunity, as I was saying, to expand our capital light renewable PPA strategy, which obviously will be low carbon by definition in the East. So that's how we intend to continue to be on a path on our carbon reduction target that we have to be net 0 by 2,050.
Great. And then just last quickly on the synergies. Could you maybe give a little color of the mix between like, I guess, cost versus revenue or overhead versus like direct, growing their business better essentially?
Yes. I mean, Steve, I hope that you're appreciative. I mean, the deal is not done. So providing a lot more information at this point is perhaps not good. But what I can tell you is that these are complementary businesses, right?
So the underlying operating platform of invoice and billing, customer care, IT systems, I mean this is going to be very focused on systems and processes. We are acquiring a very, very respected and well run business, and we want to maintain the talent that has built this business. So I think you should be thinking about these more as systems on process and less about people.
Great. Thanks so much.
Thank you, Steve.
Our next question comes from Angie Storozynski with Seaport. Your line is open.
Good morning. I have a bigger picture question. So Centrica has already actually disclosed this breakup fee at only $30,000,000 It seems like Direct Energy is a unique or one of a kind retail asset in the U. S. At least.
So I'm a little bit surprised, frankly, that we haven't heard one more chatter around it or 2, more interest from integrated oil and gas companies as this would be an obvious attempt to enter the electric retail market if they were interested? So that's one. And secondly, so is the strategy to become basically like a nationwide retail, electric retail and natural gas retail provider and hence your pursuit of your exposure to the Northeast? Is it I mean, I'm basically trying to understand if there's like a longer term strategy just not to be on the Texas focused retail book, but actually attempt to grow the business across the country? Thank you.
Yes, Angie. So let me start with your first question around the possible suitors for this business. And what I can tell you is that as you can appreciate, this transaction hangs on our ability to achieve the synergies that rely on combining the operating platforms and leveraging the operating platforms. I don't think there is anyone else out there that is going to be able to create this value given our platform. I mean with respect to your question around strategy, I mean this is pretty much in line and consistent with the road map that I provided back in the Analyst Day of 2018.
And that's why I felt that it was necessary to put it on this deck, so you can see that trajectory. I mean, we want to move closer to the customer. We believe that the mega trends that we're seeing support that move on the energy value chain. And if you think about what this transaction does for us, it doubles the size of our retail mass business. It balances our generation and retail portfolio in the East.
It adds a very well respected national gas retail platform. It expands our product offering beyond just electricity and natural gas and other services that allows us to reduce the acquisition cost and increases the stickiness with customers. And it grows our C and I business at a time when you're seeing more on shoring of manufacturing in the United States given the supply chain environment or more hostile environment in the world. And we are achieving all of that at a very attractive multiple of 4.9 times, exceeding our investment hurdle rates, achieving a free cash flow yield on the capital of almost 30% and all of that, we will get back to our targeted credit metrics within 12 months. I mean to me, that is an exciting, exciting value proposition, exciting acquisition.
And obviously, now we will be focusing on getting the approvals that are necessary, closing the transaction and focusing on the integration of this business.
Can I have just one follow-up? So given we've seen some examples, especially in the North, of deterioration in the competitive retail environment for electric retailers, mostly related to just energy. I mean, did you take it into account that there could be some, I don't know, either compression or more difficult regulatory backdrop, some of the retail expansion in the Northeast? And how does Direct Energy's existing portfolio overlap with some of those more troubled retail jurisdictions like, I don't know, New York, Illinois maybe?
I mean, we have I mean, we already have a presence in the East markets, Angie, and we are very well aware of the dynamics. We're very well aware of the economics. I think what this does, it provides us incremental scale, which allows us to lower our costs. And given the expansion on products, we're able to create more stickiness and lower attrition on our customers. So I feel that the platform that we have plus the knowledge that we already have in the East with our retail presence, I mean this is like you said, this is a very unique opportunity.
And yes, we're very, very excited about reaching this agreement.
Thank you.
Thank you. Our next question comes from Jonathan Arnold with Vertical Research. Your line is open.
Hey, good morning, guys.
Hey, good morning, Jonathan.
Just a quick and one of my things were asked and answered, but I'll just pick up that recent theme. I think it's fair to say that direct Mauricio probably hasn't executed as consistently as you have in terms of retention and just holding the size of the book. And I'm just curious why are you confident that you can sort of bring them closer to where you are? Or is it more the ability to cross sell and things like that, which you were just talking about, that makes this sort of a risk reducer rather than is there a concern that your portfolio might be a little lower quality once these things together? I'd just like to hear how you answer that.
Well, I think Direct Energy is a high quality retailer that is very well run. And what we have here is an opportunity to bring 2 complementary businesses to really focus on the operating platform, achieve cost efficiencies. But at the same time, this provides us greater geographic diversity, provides us a wider basket of product offering. And I think that's when it's going to essential as we go to the ease market and other markets is to really broaden the offering that we are providing to our customers. I mean, the more products you offer, the lowest the lower the acquisition cost is and the greater stickiness you can create with these customers.
So I actually think that their brand is a very well respected brand, very well run, but I think we have an opportunity to really combine the 2 and create something that is pretty special and that I don't think we have seen in the electric and now natural gas and services space.
Great. And if I just come back to Steve asked about the nature of the synergies. And on your slide there, I think there are 5 bullets and they all seem to be cost items. So can you I mean, are you assuming in that $300,000,000 very much at all for revenue, what you would have called revenue synergies in kind of prior deals? Or is that more just is it really just a cost number?
No. These are all cost synergies, and there is no revenue.
Thank you. We have now reached the end of the hour. I will turn the call back to Mauricio Gutierrez for closing remarks.
Thank you, Catherine, and thank you all for joining us today in this very exciting moment for NRG, and I look forward to talking to you about this acquisition in the future. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.