Princeton, NJ-based NRG Energy Inc.’s strategy for future growth includes natural gas-fired generation regardless of what happens with the continuing low wholesale gas prices, CEO David Crane told a quarterly earnings conference call last Thursday. Crane characterized NRG’s three-pronged focus on gas-fired power, solar and retail energy sales as being able to thrive in a low- or high-priced gas market.
Despite reporting a $55 million loss in net income for the third quarter, compared to profits of $223 million for the same period last year, Crane said his job was to convince Wall Street that NRG is what he called “well positioned” to return to profitable status in the quarters ahead no matter how depressed gas and power commodity prices might become.
His remarks come at the same time that the Energy Information Administration was predicting the average natural gas futures prices for the upcoming heating season will be less than $4/MMBtu, the lowest level entering the winter months since 2001-2002 (see Daily GPI, Nov. 8).
The businesses that NRG is pushing can flourish despite low natural gas prices, including NRG’s retail power/gas sales operations in its Reliant unit in Texas, Crane said. He cited three natural gas-fired power plants or repowering projects that are fully contracted for under long-term deals, and predicted they will “contribute steady streams of profits and revenues for decades to come.”
NRG’s gas plants, expanding large-scale solar projects and retail operations are going to contribute “significantly to the growth of the company in the next couple of years, and do it in a way that is not dependent on a recovery of natural gas prices,” Crane said.
In the Texas market for power, Crane predicted that no new gas-fired generation will get built at the current low electricity commodity prices, making the supply-demand balance even tighter, which he thinks will be an advantage for NRG’s generation fleet.
In underscoring NRG’s aloofness from future gas prices staying low, Crane gave an impassioned pitch on a future in which solar distributed generation was going to grow rapidly. Calling NRG the largest single purchaser of solar panels in the nation, he said the cost of delivered power from solar systems has been “cut in half” in the past two years, and it will be cut in half again by the end of 2013.
“We think the cost of solar is going to continue to drop precipitously — both in absolute terms and relative to other forms of energy for power generation.”
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