Dive Brief:
- Uncertain market conditions, environmental regulations and changing fuel mixes have all made for a rough year for independent power producers, EnergyWire reports, highlighting the stock slump of four companies in particular peril.
- Calpine, NRG Energy, Dynegy and Talen Energy have all seen their stock prices drop 40% or more in the last year, with the last three all holding significant coal-fired generation.
- At NRG, where the stock price has dropped about 60% since the end of last year, CEO David Crane announced his departure last week and analysts say the shift likely means a return to more a more traditional strategy.
Dive Insight:
Independent power producers have had a rough time of it lately, battered by a litany of forces that have gone easier on their regulated counterparts. The sector is dealing with the decline of coal, shifting rules in organized markets, and federal environmental regulations, among other undertainties.
The impacts have been particularly hard on four companies, EnergyWire reports. Since the end of last year, Dynegy, Talen and NRG shares are down around 60%; all are producers with strong coal assets. Calpine is less invested in coal, and has seen its shares drop about 40%.
"They're courting irrelevance," according to Evercore ISI's Greg Gordon, as the companies have seen market cap fall significantly.
Over at NRG, the stock slide was likely a factor behind CEO Crane's departure. He will help with the transition and then will be replaced by Mauricio Gutierrez, who analysts expect to move the company away from grid-edge technologies and towards a more traditional generator approach. With Crane at the helm, NRG has tried to reinvent itself to capitalize on the rapidly-evolving power sector with new ventures like NRG Home, which Utility Dive profiled this summer.
"We have made no secret in recent years of our belief that the future of competitive retail energy supply lay in providing a broader range of energy and energy related products and services, both inside the home and on the home," Crane said. But Gutierrez, who has been executive vice president and chief operating officer at NRG since July 2010, is expected to take a more traditional approach.
But UBS analyst Julien Dumoulin-Smith told EnergyWire that "managements need to work through the commodity cycle," referring to the slump in natural gas prices which has helped keep power bills low around the country. "This is ... a particularly steep downward cycle on natural gas expectations."
Henry Hub natural gas prices have been at historic lows lately, but Joe Mastrangelo, CEO of GE Power Generation Products, warned a conference audience in Las Vegas this week that they would not remain there forever. To keep gas competitive with energy storage, he said, generators and gas technology developers must push the efficiency of combined cycle plants up toward 65%.