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NRG Energy (NRG) Completes Coal-to-Gas Transition Projects

Zacks Equity Research

NRG Energy, Inc. NRG has announced the successful conversion of four of its power plants from coal to natural gas.

Details of the Announcement

The coal-to-natural gas conversion was executed at The Big Cajun II Generating Station in New Roads, Los Angeles; The Joliet Generating Station, southwest of Chicago; The Shawville Generating Station, northwest of Pennsylvania; and The New Castle Generating Station, northwest of Pittsburgh.

The shift from coal to natural gas will not only allow the plants to comply with the environmental standards and support NRG Energy’s decarbonization initiatives, maintaining reliability in the electric system and the company’s competitive edge in the market.

The modified units have a cumulative generation capacity of over 2,780 megawatts (“MW”) and are expected to reduce the combined carbon footprint by over 80%.

Renewable Expansion

NRG Energy is focused on expanding its 4.4-gigawatt (GW) renewable portfolio and is taking measures to reduce emission during operations. The company completed the integration of residential solar into the NRG Energy platform. It is also poised to benefit from the extension of the Investment Tax Credit (ITC) for solar and Production Tax Credit (PTC) for wind generation. NRG Energy presently has nearly 800 MW in near-term renewable assets and backlog, and 2.6 GW of pipeline capacity.

In September, NRG Energy won the bid to acquire SunEdison’s 1.5 GW portfolio of utility-scale wind and solar assets for an initial price of $129 million. The acquisition will expand NRG Energy’s green power generation capacity significantly.

Price Movement

Shares of NRG Energy have gained 16.1% over the past 12 months, outperforming the Zacks categorized Utility – Electric Power industry’s gain of 7.6%.

NRG Energy is on track with its cost saving initiatives, which will have a positive impact on its margins. The FORNRG program is set to achieve cost savings of $400 million through 2017 through reduction in administrative, marketing and development expenses, and operating and maintenance expenditure. Buoyed by management’s margin enhancement strategies, NRG Energy’s estimates for 2016 have moved up 18.8% from 69 cents to 82 cents.

 

An Environment-Friendly Move by a Peer

In the light of stringent regulatory directives on emission control, and increasing usage of cheap natural gas and alternate sources of energy, FirstEnergy Corp.’s FE affiliate – FirstEnergy Solutions – has decided to retire four of seven units, with a cumulative generation capacity of 720 MW, at the coal-fired W.H. Sammis Plant in Ohio by May 2020.The company also intends to sell or shut down the last operating unit at the Bay Shore plant, which generates 136 MW of electricity, by Oct 2020.

Zacks Rank & Key Picks

NRG Energy carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the same space include Ameren Corporation AEE and DTE Energy Company DTE.

Ameren has seen six upward estimate revisions for 2016 over the last 60 days. During this time period, its estimates have increased 6.7% from $2.53 to $2.70. The stock carries a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DTE Energy has seen three upward estimate revisions for 2016 over the last 60 days. DTE Energy carries a Zacks Rank #2 as well. During this time frame, its estimates inched up 1.2% from $5.21 to $5.27.

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