NRG Energy Inc.NRG

Morningstar Rating

Stock Research and Analysis

by Travis Miller

Earnings and shareholder returns for independent power producers like NRG Energy come at the whim of volatile commodity markets. NRG has some advantages because of its well-positioned power plants, but investors should be ready for a bumpy ride.

Prior Read more

Bulls Say

NRG has a number of highly valuable wholesale generation assets, including 1,400 megawatts of in-city generation in New York City as well as a sizable portfolio of coal-fired plants.

We estimate that costs to build new power plants have risen 40% during the last three years, which has benefited brownfield assets by preventing excessive new capacity construction.

Regardless of natural gas price levels, NRG should benefit from an uptick in economic activity and power use. Read more

Bears Say

The acquisition of Reliant's marketing and trading operation in February 2009 adds incremental risk to NRG's operations.

Unfavorable forward hedging conditions could either depress earnings in 2010 and 2011 or heighten risk if NRG goes into future years unhedged.

Given its credit rating and payment schedule, the company can ill afford any cash-flow surprises over the near term.

Greenhouse gas emissions caps out of Washington, D.C., could erode profitability. Read more

Strategy

NRG's strategy is to trim fuel costs by entering into long-term supply agreements and replacing high-cost Appalachian coal with low-cost Western coal as a fuel source for coal-fired plants. It also seeks Read more

Management

David Crane was named CEO and president of the restructured NRG in December 2003. Before joining NRG, Crane was COO and CEO of International Power IPRPY, a U.K.-based wholesale power generator. Before that, he was senior vice president in Lehman Brothers' Read more

Profile

NRG is a wholesale power-generation company that operates a broad portfolio of power plants totaling nearly 24,000 megawatts of generation in five countries. Most of NRG's Read more

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