Exelon Corp., the largest U.S. operator of nuclear reactors, and FirstEnergy Corp. fell the most in more than four years after a surge of proposed new plants in the nation’s largest wholesale power market caused forward prices to drop.
Exelon, based in Chicago, declined 7.5 percent to $32.04 at the close in New York, the biggest drop since December 2008. FirstEnergy, based in Akron, Ohio, dropped 6.5 percent to $39.86, the most since May 15, 2009. NRG Energy Inc., based in Princeton, New Jersey, fell 3.7 percent to $26.17, the most since July 24, 2012.
The companies, which stood to gain from coal plant retirements, are facing more competition from planned natural gas-fueled facilities and imports from neighboring markets. PJM Interconnection LLC, which oversees power markets in 13 states, said on May 24 that capacity market prices fell 56 percent for delivery from June 2016 to May 2017 from last year’s auction. Capacity payments are made to generators to assure a sufficient supply of power.
“It is becoming increasingly clear that significant new low-cost generation and imports are likely to enter the market over the medium term and may be a substantial offset to the positive impact on power prices from coal plant retirements,” Deutsche Bank AG’s Jonathan Arnold and Keith Stanley wrote in a research note today to clients.
“This essentially risks keeping the market oversupplied with future power price improvement more dependent on a rise in natural gas prices,” they wrote.