Yahoo Finance NRG Couldn’t Keep Up Earnings Growth Despite Diverse Business
Is Gas Price Revival the Key to NRG Energy's Sustained Recovery?
EBITDA growth
Earnings from NRG Energy’s (NRG) Home Retail and NRG Yield (NYLD) segments improved in 2015 compared to the prior year. Earnings from its core wholesale business operations fell due to exposure to commodity prices. Wholesale power prices are sensitive to natural gas prices because gas-fired generation sets marginal power prices in the majority of US markets. Dynegy (DYN), Calpine (CPN), and Talen Energy (TLN) are some other US merchant power players that have suffered from low power prices.
Leaders and laggards
Over the last couple of years, NRG’s Home Retail segment has been improving, while its Home Solar business dragged. Company management expects earnings from NRG Yield to grow, as it plans to acquire more assets in 2016. NRG management also plans to increase dividends by 15% annually. NRG Yield and its renewables (PBW) business contributed nearly 35% of the total earnings in 2015.
NRG Energy management said in its fourth quarter results call that it’s reintegrating its solar business for industrial and commercial customers into NRG Energy. However, the company is still thinking of strategic alternatives for its home solar (TAN) and electric vehicle charging segments.
NRG Energy and renewables
NRG Energy repeatedly claims its emphasis is on being a clean power producer. However, renewables contribute only 7% to its total earnings. Renewables account for less than 10% of NRG’s total power generation. However, for power generation, it has shifted from coal to gas and renewables to some extent, led by stringent regulations.
In the next part, we’ll look at NRG Energy’s focus on bringing down massive debt.
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