Amidst falling power demand and a natural gas boom that’s pushed down its share price, NRG Energy, the independent power producer that’s made big investments in green energy, is seeking to buy rival GenOn for $1.7 billion and add more coal to its power mix.
The deal, which still needs approval from federal and state regulators, would create the country’s biggest independent power producer with 47,000 megawatts of power, with Princeton, N.J.-based NRG to own 71 percent of the combined company. The deal is expected to drive $300 million in earnings increases and cost savings by 2014, and expand NRG’s footprint on the East Coast with GenOn’s Mid-Atlantic coal-fired power plants.
For Princeton, N.J.-based NRG, the move will also help it compete in the increasingly challenging independent power producer sector. News of the merger, expected to close in the first quarter of 2013, drove up shares of both NRG and GenOn on Monday.
That’s good news for both companies, which have struggled with falling share prices over the past year, as falling electricity demand and ever-cheaper natural gas have driven down power prices. NRG shares have fallen 27 percent in the last 12 months, while Houston-based GenOn’s have fallen about 55 percent in the same time period, The New York Times reports.
The proposed merger also underscores the fact that NRG will need plenty of old-fashioned coal-fired and nuclear power generation assets to compete, even as it makes a huge push into wind power and solar power.
NRG’s green power purchases include about 450 megawatts of wind power in Texas and more than 1 gigawatt of solar power in California, including its $450 million investment in SunPower’s 250-megawatt California Valley Solar Ranch and its $300 million investment in BrightSource Energy’s 392-megawatt Ivanpah project in California's Mojave Desert.
Not all of NRG’s green power plans have worked out. In December 2011, it halted work on its Bluewater Wind project, which was to build offshore wind turbines to serve Mid-Atlantic states, after failing to find an investment partner for the project. The threat of Congress failing to extend the existing 2.3 cents per kilowatt-hour production tax credits for wind projects played a part in that decision.
On the solar side, NRG Solar CEO Tom Doyle remained upbeat about the industry’s prospects in a May presentation at the GTM Solar Summit, saying the company had a "development pipeline north of one gigawatt" over the next six months to two years.
As for energy retailing, NRG bought Texas-based Reliant Energy in 2009, giving it access to some 1.6 million customers in Texas, and in 2010 bought renewable power retailer Green Mountain for $350 million.
NRG has also taken a lead role in commercial-scale plug-in vehicle charging, launching its eVGo charging station system in 2010 with plans to install fast, 480-volt DC chargers throughout Texas. Last year it opened its first station at a Dallas-area Walgreens store, and said it planned to have 70 stations in the Dallas/Fort Worth area and another 50 in Houston, half of them opened by this summer.
Still, NRG’s plug-in charging plans haven’t been all smooth. In May, its $100 million settlement deal with the state of California that would include a $50.5 million investment in about 200 charging stations across the state was subject to a lawsuit from San Francisco-based ECOtality, which claimed that the deal would hand NRG a “monopoly over the nascent market” in the state.