NRG - NRG Energy

[bttmline]

They have wanted to return to shareholders via buybacks for sometime, but their old financing package was based on their Net Income and not EBITDA or cashflow. In general they have large depreciation charges based on basis in power plants and their new solar projects are going to have large accelerated depreciation charges that will further dampen Net Income. The old financing made it impossible to do large scale buybacks under these conditions. I think is it very positive news.

 

http://www.bloomberg.com/news/2011-05-09/nrg-s-7-billion-plan-relies-on-lenders-loosening-grip-corporate-finance.html?cmpid=yhoo

[mevsemt]

Thanks for your input...

 

I own 2013 LEAPS, I was considering selling them given the recent runup, but now given these recent developments I'm thinking about holding them awhile longer and hope my good luck continues...

[sdev]

Anybody still own this guy?

[bttmline]

I'm still hanging in there. They just reaffirmed 2012 guidance "NRG is maintaining its EBITDA guidance range at $1,825-$2,000 with wholesale contributing $1,200-$1,300 million and Retail contributing $625-$700 million. The Company is also maintaining its free cash flow before growth investments guidance of $800- $1,000 million.".

Still generating cash flow and will start paying a dividend next year. When gas prices turn they will be in great shape and in good shape for a while if they don't.

[Arden]

Solar has good returns, way better than their cost of debt and regardless of gas prices.

 

Investing in solar is a good move for them, and unlike some here have said- it makes them less, not more risky, since unlike oil, coal and natural gas, their return on solar is not dependent on the whims of commodity prices.

[twacowfca]

Solar has good returns, way better than their cost of debt and regardless of gas prices.

 

Investing in solar is a good move for them, and unlike some here have said- it makes them less, not more risky, since unlike oil, coal and natural gas, their return on solar is not dependent on the whims of commodity prices.

 

Yes, but solar is not economical on its own.  It's a white elephant without government subsidies and mandated inflated rates for sale of electricity from solar power.  What the government mandates,

it can also rescind.

[bttmline]

The government  gives you the 30% grant upon install so it's not subject to being rescinded. Also they have signed 25 yr agreements with credit rated power producers.

In general I understand what you are saying, but it doesnt apply to their scenario

[twacowfca]

The government  gives you the 30% grant upon install so it's not subject to being rescinded. Also they have signed 25 yr agreements with credit rated power producers.

In general I understand what you are saying, but it doesnt apply to their scenario

 

Notmally, government contracts are subject to renegotiation.  Why would these contracts obligate a different administration that might not want to continue to fund companies that formed a cabal with a different party to get a long term sweetheart deal?

[bttmline]

The policy is all front loaded. The governments only involvement is a upfront 30% rebate of install cost. The contracts for the power supply aren't with the government, but the independent power producers

[Arden]

They are taking no risks with the projects they're already performing, since as has been mentioned, they're paid upfront, the risk is they won't receive new project,

but even that's unlikely because price of solar panels has dropped, and by dropped I mean by A LOT:

http://www.guardian.co.uk/environment/2011/jun/20/solar-panel-price-drop

 

When comparing electricity production, you should remember that all electricity production in plants is subject to huge wastage, as you can see in page 5 in the recent presentation:

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTI3MjM4fENoaWxkSUQ9LTF8VHlwZT0z&t=1

 

So even with no subsidy, solar is not as far as you might think, since it's often produced on sight, and since price is falling and technology improving, it just might be more efficient than other methods not in the distant future.

 

Besides, even if it was more expensive- solar elecricity is not the same commodity as coal electricity. solar gives people who pay a little more to feel better about themselves, and that's worth something by itself, Sorta like fair trade coffee.

[txlaw]

NRG buys GenOn and becomes largest merchant generator in the US.

 

http://www.businessweek.com/news/2012-07-22/nrg-energy-to-acquire-genon-energy-for-about-1-dot-7-billion

[zippy1]

2012 year end results.  Increases dividend by 33% and 200m share buyback authorization.

http://finance.yahoo.com/news/nrg-energy-inc-reports-full-120000456.html

 

 

 

Full-Year 2012 Financial and Business Highlights1

• $1,917 million of Adjusted EBITDA, including $656 million delivered by NRG’s retail businesses;

• $898 million of Free Cash Flow (FCF) before growth investments;

• $0.36 per share annualized dividend initiated in the third quarter of 2012;

• $310 million/year2 in total annual synergies arising out of GenOn merger; • Cost synergies increased to $185 million from $175 million

 

• 142,000 increase in Retail customer count during 2012; 91,000 in the East market and 51,000 in the Texas market; and

• 290 MW of solar generation came online during 2012

 

Reaffirming 2013 and 2014 Guidance

• Reaffirming guidance for Adjusted EBITDA and FCF before growth investments: • Adjusted EBITDA guidance: $2,535-$2,735 million and $2,700 -$2,900 million, for 2013 and 2014 respectively

• FCF before growth investments of $900-$1,100 million for each of 2013 and 2014

 

 

Capital Allocation

• Planning a 33% increase in annual common stock dividend (from $0.36 to $0.48 per share) commencing with the next quarterly payment; and

• $200 million share repurchase program authorized

[Gilp]

The price goes down, let's see if there is a new opportunity here.

According to their recent presentation:

They plan to make around $1.6B FCF before growth/year from 2017-2019. (p.12)

Grow EBITDA from $3.3B now to $6.6B in 2022.

 

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjY2OTM3fENoaWxkSUQ9LTF8VHlwZT0z&t=1

 

They have a big bets on distributed energy, home solar generation(SolarCity style), EV charging stations and other customer propositions.

Looks like they have an entrepreneur-minded CEO that can actually execute.

They say that they are currently undervalued based on current EBITDA.

 

My biggest concern here is their huge debt load ~ $20B vs $9B market cap.

They also show that from 2009 to 2015 the enterprise value went from $12B to $30B and adjusted EBIDTA went from $2.6B to $3.2B, looks like not so good capital allocation for me.

 

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjY2OTM4fENoaWxkSUQ9LTF8VHlwZT0z&t=1

 

So it's a bet on their growth ability, the question is if it's a good bet on the long term?