QUOTE AND NEWS
newratings.com  Jun 16  Comment 
WASHINGTON (dpa-AFX) - NRG Energy, Inc. (NRG) announced Thursday that it has priced its proposed $1.9 billion term loan B facility. The term loans will be issued at a price equal to 99.50% of their face value, bear interest at a rate equal to...
Motley Fool  Jun 9  Comment 
These stocks fell much further than the overall market. Find out why.
Benzinga  Jun 9  Comment 
UBS’ Julien Dumoulin-Smith believes NRG Energy Inc (NYSE: NRG)'s risk/reward is negatively skewed, given that the share price has nearly doubled from its January lows. Dumoulin-Smith downgraded the rating on the company from Buy to Sell, with...
New York Times  Jun 4  Comment 
The strategy emerging under the current chief de-emphasizes the idea of a power system that would let consumers generate power and feed it back to the grid.
Forbes  May 24  Comment 
Looking at options trading activity among components of the S&P 500 index, there is noteworthy activity today in NRG Energy Inc (NYSE: NRG), where a total volume of 28,001 contracts has been traded thus far today, a contract volume which is...
Reuters  May 9  Comment 
* Has commenced tender offers to purchase certain of its outstanding senior notes for aggregate cash consideration of up to $1.0 billion
New York Times  May 5  Comment 
The company will pare its presence in its electric vehicle charging business, and its home solar division will sell future customer agreements it originates to two partners.




 

NRG Energy (NYSE: NRG) is an independent power producer with generation operations in three countries. The company engages in the ownership, development, construction and operation of power generation facilities; the trading fuel and transportation services; trading of energy related products; and the supply of electricity to retail electricity customers in deregulated markets through its retail subsidiaries Reliant Energy and Green Mountain Energy. A majority of the company's revenues come from North America. As an energy producer, the company's earnings are susceptible to commodity prices and electricity demand.


Business Growth

The company earned $477 million on 2010 revenues of $8.84 billion, compared to $942 million on 2009 revenues of $8.95 billion. Contributing factors to the decline in net income are the sustained drop in natural gas prices and overall electricity demand. Also as a result of low gas prices, some of NRG's hedging positions that have hurt margins. NRG has acquired several companies in the renewable energy industry, which have the potential providing sources of future growth and of diversifying operations away from natural gas dependence.

Trends and Forces

Operations Are Tied Directly to Fuel Prices

NRG Energy's operations benefit from low, stable fuel prices (coal, oil, natural gas, nuclear fuel).[1] Because NRG's power station portfolio possess a fleet of diverse fuel sources,[2] price fluctuations in one of any of the above fuels affects NRG operating costs. Some specific trends to track include rising coal prices,[3] and rising oil prices.

To offset volatile natural gas prices and declines in electricity demand, NRG has several hedge positions on commodity prices.[4] When commodity prices fell rapidly in 2008, NRG reported record earnings partially as a result of their hedges.[5] However, these hedges have the potential of straining cash flows when commodity prices remain stable at historical lows.[6]

Additionally, NRG has acquired several renewable energy companies.[7] By diversify its operations, NRG's revenues become less dependent on commodity prices.[8]

Governmental Regulation Incurs Costs and Affects Revenue

Base rates on long-term electricity sales contracts directly impact NRG Energy's revenue.[9] The company's ability to maximize sale prices on contracts especially in California, Texas, and New England depends on local government demand and negotiation for the company's electricity.[10] NRG's competitiveness in these areas of high population density rests in its ability to sustain efficient, consistent operations relative to other area electric utilities.[11]

Additionally, environmental restrictions affect several aspects of NRG's (and the rest of the industry's) operations.[12] Regulation on coal, oil, and natural gas production and sales raises fuel prices.[13]Carbon emission regulation raises NRG's operating costs by forcing expenditures to clean up fossil fuel emissions from coal and oil-based power stations.[14]

Competition

Since NRG is a utility, the company has little competition. Utilities are typically monopolies that are regulated to ensure they are charging fair prices. Income comes from the utility company's contractual sales agreements with local and state governments. NRG competes with the following companies for contracts:



References

  1. 2007 10K, NRG Energy, Part 1, Item 2
  2. 2007 10K, NRG Energy, Part 1, Item 1A
  3. Coal prices seen rising 3 fold, to hit record; Reuters Business News
  4. Foxbusiness.com: S&P Lowers NRG Energy Outlook On Hedges, Low Prices
  5. Foxbusiness.com: S&P Lowers NRG Energy Outlook On Hedges, Low Prices
  6. Foxbusiness.com: S&P Lowers NRG Energy Outlook On Hedges, Low Prices
  7. renewableenergyworld.com: NRG Energy To Develop 500 MW of Solar Thermal
  8. renewableenergyworld.com: NRG Energy To Develop 500 MW of Solar Thermal
  9. NRG 10K SEC Filings 2010
  10. NRG 10K SEC Filings 2010
  11. NRG 10K SEC Filings 2010
  12. Seekingalpha.com:NRG Energy Testifies Before the Senate Committee on Energy and Natural Resources on Reducing Oil Consumption through Electric Vehicle Adoption
  13. Seekingalpha.com:NRG Energy Testifies Before the Senate Committee on Energy and Natural Resources on Reducing Oil Consumption through Electric Vehicle Adoption
  14. Seekingalpha.com:NRG Energy Testifies Before the Senate Committee on Energy and Natural Resources on Reducing Oil Consumption through Electric Vehicle Adoption
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