NRG Falls to the Lowest in Over a Decade on Plant Sales

  • NRG got a `very low' price for two power plants: analyst
  • Dynegy drops to the lowest since emerging from bankruptcy

U.S. independent power producers plunged with NRG Energy Inc. leading the losses after announcing the sale of two power plants. Dynegy Inc. dropped on an unfavorable settlement in Ohio.

NRG fell 13 percent to $10.79 at the close in New York on Wednesday, the lowest since June 3, 2004. Dynegy tumbled 11 percent to $14.46, the lowest since the company emerged from bankruptcy in October 2012.

Power producers that compete in wholesale markets are struggling as cheap natural gas flowing out of shale formations weighs on the price of electricity while costs have risen to meet new environmental rules.

NRG said Tuesday it sold the 525-megawatt Seward coal-fired power plant in New Florence, Pennsylvania, and the 352-megawatt gas-fired Shelby County facility in Neoga, Illinois, for about $138 million in cash and “other consideration.” The transaction is part of the company’s effort to cut costs and pay down debt to appease investors after years of expansion.

"The price they got was very low on a per-megawatt basis," said Stacy Nemeroff, an analyst for Bloomberg Intelligence. "There may be concern about management’s ability to execute on its reset strategy and how much they are going to get from the sale of fossil-fuel plants."

NRG’s restructuring is a "growing focus" of the company as part of its plan to sell power plants to raise about $1 billion by the end of 2016, Julien Dumoulin-Smith, an analyst for UBS Securities LLC, wrote Wednesday in a research note. NRG’s projection that the two plants involved in the sale would produce $10.5 million in adjusted earnings before interest, taxes, depreciation and amortization annually through 2018 was "surprisingly low," Dumoulin-Smith said.

Proposed Settlement

Dynegy shares dropped after FirstEnergy Corp. reached a proposed settlement that would keep open some power plants in Ohio that compete with Dynegy’s assets.

"The decision in Ohio, which indicated that regulators were providing subsidies for FirstEnergy, would decrease the level of competition in the state," Nemeroff said. "There has been uncertainty in the past couple of years about what Ohio was going to do."

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