As Power Markets Improve, NRG Energy Can Better Leverage Its Assets
Stephen Simpson, CFA
Stephen Simpson, CFA
Nov. 3, 2015, 5:30 PM
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Oct. 12, 2015, 7:04 AM
- NRG Energy (NYSE:NRG) declares $0.145/share quarterly dividend, in line with previous.
- Forward yield 3.75%
- Payable Nov. 16; for shareholders of record Nov. 2; ex-div Oct. 29.
Sep. 21, 2015, 6:10 PM
- NRG Energy (NYSE:NRG) sank to a 52-week low in today’s trade, but Credit Suisse sees a buying opportunity, rating shares at Outperform with a $30 price target an implying an 83% rise from today's close.
- The firm says it has been surprised by the sharply negative investor reaction to NRG's "well-reasoned plan" to cut costs and reduce debt, and that the move felt like capitulation on competitive power broadly and the better known NRG specifically from a market looking to duck commodity exposure in a risk-off backdrop.
- But Credit Suisse sees a clear path to return 17% of NRG's current market cap to shareholders over the next 15 months through buybacks and dividends while also paying down $650M of debt before stepping into a period of even richer free cash generation in 2017 and beyond, with punitive free cash flow definitions still producing $1B/year and growing.
- Separately, NRG says it is adding $200M to its stock buyback program.
Sep. 18, 2015, 5:57 PM
- NRG Yield (NYSE:NYLD) CEO David Crane today attempted to reassure investors that the provider of wind power and other alternative energy can rapidly increase dividends despite unexpected challenges in boosting revenue.
- NYLD "can be put on a growth trajectory of 15% annualized dividend growth through 2018 without... having to rely on the equity capital markets. Our planning is based on the presumption that the market for yieldco equity issuances will effectively be closed for an extended period," says Crane, who is also CEO of NRG Energy (NYSE:NRG), which owns 55% of NYLD.
- NYLD says it could beat its own guidance on dividend growth if winds pick up; for now, it expects its quarterly dividend payment to increase to $0.25/share by Q4 2016.
- Shares of NYLD and other yieldcos have tumbled in recent months amid concerns that the combination of operational problems and rising asset acquisition costs threaten dividends.
- Earlier: NRG Yield to buy NRG wind assets for $210M
Sep. 18, 2015, 11:18 AM
- NRG Energy (NRG -3.6%) unveils several moves to reduce debt, buy back shares and raise cash through an asset sale, as it faces pressure over its expensive clean energy businesses.
- In an investor presentation, NRG says it plans to spend $1.3B on reducing debt and buying back shares through 2016, including $250M in share repurchases this year, and plans to cut $150M in costs starting next year.
- NRG says it will form a “GreenCo” consisting of its money-losing home solar business, its renewable assets and its electric vehicle charging business; it plans to limit its financial commitment to GreenCo to $125M starting Jan. 1, hoping the business will be self-sufficient.
- Separately, NRG will drop down a 75% stake in its portfolio of wind farms to its NRG Yield (NYLD +2.4%) affiliate company for $210M.
- NRG has been the worst performing member of the S&P 500 Utilities Index this year, -31.3% YTD, as its corporate structure has grown complex and its balance sheet bloated while its green businesses have been expensive.
Sep. 18, 2015, 8:42 AM
- NRG Yield (NYSE:NYLD) agrees to acquire 75% of a portfolio of wind assets from NRG Energy (NYSE:NRG), consisting primarily of assets acquired by NRG from Edison Mission Energy in 2014, for $210M in cash plus $145M in assumed project debt and ~$97M in tax equity.
- The wind assets represent 814 MW of total operating capacity, which NYLD expects to deliver ~$41M of adjusted EBITDA and $21M of cash available for distribution on a run-rate basis.
- NYLD also reaffirms Q3 and FY 2015 guidance, and says it continues to have the ability to deliver a target 15% dividend/share growth through 2018.
Sep. 16, 2015, 7:03 PM
- J.P. Morgan analysts warn that companies with large amounts of floating-rate debt - including Chesapeake Energy, Freeport McMoRan, Ford and GE - could be at risk if the Fed decides to raise interest rates.
- Companies with variable/floating-rate debt suffer a more immediate impact by a rate hike than companies with fixed-rate debt, the analysts say; variable-rate coupons typically reset quarterly, meaning that changes in the base rate flow through almost immediately to variable-rate borrowers, while fixed-rate borrowers do not see such an impact until they refinance or issue new debt.
- JPM lists 25 companies - not including financials - that have the “highest variable-rate debt as a percentage of market cap": FMC, NRG, FCX, AES, CVC, LVLT, PVH, CHK, FE, DVA, THC, OI, CNX, F, HCA, FOSL, RCL, JOY, GE, ADS, ALLE, HBI, GT, DNB, AN
Aug. 24, 2015, 2:47 PM
- Utility companies including Exelon (EXC +0.4%) and NRG Energy (NRG -0.8%), Calpine (CPN -2.8%), Dynegy (DYN -1.1%) and Public Service Enterprise Group (PEG -2.1%) show mixed results after analysts said they would be among the biggest beneficiaries of an increase in power prices awarded Friday by PJM Interconnection, the largest U.S. grid operator.
- PJM, which helps supply power to one in five Americans living from Newark and Chicago, announced it would boost capacity prices between 37% and 88%, which could add $2-$3 to the average consumers’ monthly bill across its territory.
- Moody’s had called it “arguably the most important” PJM auction in the operator's eight-year history both for PJM’s plan to improve reliability and as an earnings driver to help companies.
- Earlier: Three Exelon plants do not clear capacity auction
Aug. 4, 2015, 8:05 PM
- The utilities (NYSEARCA:XLU) sector was Wall Street's biggest decliner today as natural gas was the surprise loser from Pres. Obama’s climate plan, with the White House apparently abandoning its previous enthusiasm for gas as a cleaner alternative to coal.
- Gas producers were "confused and disappointed" that the administration eliminated an earlier projection that natural gas would contribute much more electricity, instead increasing the role of renewables; also perplexed were utility companies, who have led a power transformation and spent hundreds of millions of dollars to switch generating plants from coal to shale gas.
- American Electric Power (NYSE:AEP) CEO Nicholas Akins says the U.S. does not have the luxury of being able to ditch nat gas, saying the only way to power big industrial processes is through large-scale, 24-hour generation close to consumers - “solar doesn’t provide that and wind doesn’t provide that."
- The final plan is considered a boon for companies such as SolarCity (NASDAQ:SCTY) and NextEra Energy (NYSE:NEE) that have invested billions in renewable generation, but Sanford Bernstein calls NRG Energy (NYSE:NRG) the biggest potential loser from the plan, saying profits in some scenarios could tumble by half because most of its electricity comes from coal plants that are in EPA’s cross-hairs.
- ETFs: XLE, XLU, VDE, ERX, OIH, KOL, UTG, IDU, VPU, ERY, FCG, DIG, GASL, DUG, BGR, IYE, GUT, BUI, FENY, FIF, PXJ, RYE, FUTY, RYU, UPW, FXN, FXU, DDG, SDP
Aug. 4, 2015, 2:27 PM
- NRG Energy (NRG -10.5%) and NRG Yield (NYLD -13.7%) are sharply lower after reporting disappointing Q2 results (I, II), with earnings and revenues well below expectations; NYLD also lowered forward guidance, citing low wind production and fewer residential solar leases.
- NYLD cut guidance for 2015 adjusted EBITDA to $660M from $690M and 2015 cash available for distribution to $160M from $195M, while also making the "surprising assertion" that it does not expect the change to have any effect on its current dividend or long-term dividend growth.
- NYLD says it is targeting a $0.25/share quarterly dividend by Q4 2016, a 19% increase over the current rate and a 67% increase since its first post-IPO dividend in Q4 2013.
Aug. 4, 2015, 6:43 AM
- NRG Energy (NYSE:NRG): Q2 EPS of -$0.06 misses by $0.05.
- Revenue of $3.4B (-6.1% Y/Y) misses by $120M.
Jul. 30, 2015, 6:48 PM
- New rules for U.S. electricity providers could save two money-losing Exelon (NYSE:EXC) nuclear power plants in Illinois from shutting down and may amount to a $10B bonanza to U.S. power producers, according to a Reuters analysis.
- A system of rewards and penalties approved last month by U.S. energy regulators that applies to a power auction next month may benefit some costly nuclear reactors in the PJM power region, which stretches from New Jersey to Illinois, that have had trouble competing against the growing use of wind turbines and gas-fired power plants.
- Other generators expected to benefit from the new requirements, according to the report, include Dynegy (NYSE:DYN), NRG Energy (NYSE:NRG), Public Service Enterprise (NYSE:PEG) and Talen Energy (NYSE:TLN).
- PJM will hold the auction starting Aug. 10 for power capacity for the June 2018-to-May 2019 time period that will include the new capacity performance standards.
Jul. 15, 2015, 7:05 AM
- NRG Energy (NYSE:NRG) declares $0.145/share quarterly dividend, in line with previous.
- Forward yield 2.63%
- Payable Aug. 17; for shareholders of record Aug. 3; ex-div July 30.
Jun. 29, 2015, 7:37 PM
- For some big U.S. power companies, the Supreme Court's rejection of EPA rules reducing air pollutants from coal-fired plants has arrived too late for them to turn away from a natural gas-fueled future.
- FirstEnergy (NYSE:FE) already has deactivated 5,429 MW of coal-fired generation and says it has no intention of placing any of it back on line, saying "deactivating power plants is an expensive process, and once they are deactivated it is difficult to restart them."
- Dynegy (NYSE:DYN) says it already spent $2B to comply with MATS and other air regulations, and NRG Energy (NYSE:NRG) says it already added the necessary equipment to comply with state and federal laws.
- Officials at other big power companies including American Electric Power (NYSE:AEP) and Duke Energy (NYSE:DUK) also say they will not change their ongoing MATS compliance activities.
- ETFs: XLU, UTG, IDU, VPU, GUT, BUI, FUTY, RYU, UPW, FXU, SDP
Jun. 10, 2015, 9:57 AM
- PJM Interconnection, the largest U.S. electricity grid, wins approval from U.S. regulators for a plan to increase reliability at power plants and avoid a repeat of the shutdowns and price spikes during the unseasonably cold winter of 2014.
- Under the plan, which takes effect in 2018 after a capacity auction this year, generators that promise to be available during peak demand periods will receive higher payouts than other plants and will be penalized for failing to meet the commitments; the auction, planned for May, was delayed after FERC declined PJM’s initial proposal and asked for more information.
- The largest generators in PJM are trading higher at the open: NRG +4.2%, AEP +1.4%, EXC +3.1%, PEG +1.1%, DYN +7.2%.
- Also: TLN +4%, NEE +1.2%, PCG +0.7%, EE +1.5%, SO +0.5%, D +0.2%, DUK +0.9%, XLU +0.9%.
May 26, 2015, 10:55 AM
- NRG Yield (NYLD +2.4%) is added to the Best Ideas List at Morgan Stanley following the recent decline in the share price, maintaining an Overweight rating and $32 price target.
- NYLD has plunged nearly 4% this month vs. an average ~5% gain in peer yieldcos, a divergence that has not been driven by any fundamental business changes but by confusion about the recent recap, the firm says.
- Stanely believes NYLD's fundamentals, which are driven by the growth in U.S. renewables, remain robust and will drive a projected 17% 2015-19 dividend compound annual growth rate.
- NRG -2.1%.
NRG Energy, Inc. is an energy company. The company produces, sells and delivers energy products and services in competitive power markets in the U.S. Its wholesale operations include plant operations, commercial operations, EPC, energy services and other critical related functions. The Company's... More
Industry: Electric Utilities
Country: United States
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