We have downgraded our recommendation on NRG Energy Inc. to Neutral
from Outperform, primarily due to unfavorable performance in
first-quarter 2014. In addition increasing operating expenses,
stringent utility regulations and disruption in fuel supply are
causes of concern. The company reported a loss in first-quarter,
which was wider than the Zacks Consensus Estimate. Higher operating
expenses, and a rise in the number of shares outstanding and
interest expenses led to weak earnings performance. However, the
company's strategic acquisition program backed by strong financial
position is expected to act as catalysts for its future growth. The
acquisitions are in sync with NRG Energy's strategy to scale up its
operations to meet increasing customer demand.
Princeton, N.J.-headquartered NRG Energy Inc. is a wholesale
power generation company engaged in the ownership, development,
construction, and operation of power generation facilities. The
company is also involved in the trade of fuel and transportation
services the sale of energy, capacity, and related products in the
United States and internationally and the supply of electricity and
energy services to retail electricity customers in the Texas
NRG Energy has a significant presence in major competitive power
markets in the United States, as well as a major retail electricity
franchise in the Electric Reliability Council of Texas (ERCOT)
market. The company's operations include competitive energy
production and cogeneration facilities, power marketing, district
heating and cooling production, thermal energy production and
resource recovery facilities spread across North America and
Australia. NRG Energy operates its retail activities under the
brands like Reliant Energy, Green Mountain Energy and Energy Plus.
NRG Energy's power plants generate electricity using a wide array
of fuel sources including gas, coal, oil, nuclear and renewable
energies (solar and wind).
As of April 1, 2014, NRG Energy's total net generation capacity
stood at over 53,000 megawatt (MW).
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