NRG Energy Inc
) flagship retail outlet Reliant is anticipated to be a major
revenue churner for the company and will lead to net customer
additions in the coming years. The company's solar business also
looks promising with its Agua Caliente officially becoming the
largest operating solar PV plant in the US. We thus upgrade our
recommendations on NRG Energy Inc. from Underperform to Neutral.
The company had nevertheless reported in the red in the first
quarter of 2012. Pro forma loss of 92 cents per share in the
reported quarter narrowed the $1.06 per share loss in the year-ago
period. Despite lackluster earnings, the company's solid growth
strategy and its diverse portfolio of generation assets will offer
a cushion against fuel price volatility and market demand cycles.
NRG's hardened focus on keeping a strong capital source would
enable smooth operation and speedy execution of its high quality
projects. These projects include the Texas gas fleet, El Segundo
Repowering Project and the Encina Plant. The increased capacity
generation from these endeavors would lead to greater
Going forward, the company's robust hedging profile would add to
its cash flow visibility. NRG's commitment of retaining a strong
financial position and flexible liquidity would strengthen its
well-balanced market profile. In addition, the company is
constantly devising means to enhance security measures which will
drive superior operating results and maintain its solid track
Conversely, NRG's overt dependence on coal-fired baseload power
plants makes it susceptible to risks on the environmental front. We
believe the operational costs of coal plants are bound to rise over
the long term in one way or the other.
Failure to properly modernize transmission infrastructures and
restrictive transmission price regulation could also decrease the
company's availability of adequate transmission capacity. This
would lead to inefficiencies in end user services.
Generic downside factors like sudden plant outage, fuel supply
disruption or reduction in the available capacity of a unit could
increase the company's financial burden. Besides, weather
irregularities could affect power demand limiting the company's
NRG maintained its 2012 adjusted EBITDA guidance in the range of
$1,825 million to $2,000 million. The 2012 guidance for free cash
flow was also reaffirmed at $800 million to $1,000 million.
The company also expects to pay a quarterly dividend of 36 cents
per share, with the first payment likely to be made during third
quarter 2012. The Zack Consensus Estimates for the second quarter
and full-year 2012 are currently pegged at 21 cents per share and
86 cents per share, respectively.
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NRG ENERGY INC (NRG): Free Stock Analysis
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NRG Energy holds a Zacks #2 Rank, which translates into a
short-term Buy Rating. The company's closest competitors are
The AES Corporation
GenOn Energy, Inc
Based in Princeton, New Jersey, NRG Energy 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; and the sale of energy, capacity, supply of electricity
and related products in the United States and internationally.