A perfect electrical storm: Forces combine to squeeze power companies
By Ryan Maye Handy, Houston Chronicle
June 10, 2017 Updated: June 12, 2017 8:34am
A surge of renewable energy, persistently low natural gas prices, and the high costs of operating coal and nuclear plants are driving some of the nation's top merchant power companies to rethink their businesses - and consider mergers, sales or spinoffs - in an attempt to stay profitable and relevant in rapidly changing electricity markets.
Three of those companies, NRG Energy, Calpine Corp. and Dynegy, are headquartered in Houston, and all have made moves to reshape their companies as they grapple with thin margins, billions of dollars in debt and electric grids that are buying more and more power from wind and solar farms. Calpine is reportedly exploring putting itself up for sale, while Dynegy, operating under the weight of $33 billion in debt, is said to be in talks with Dallas-based Vistra Energy about a possible merger.
At NRG, major shareholders this year ousted the company's board chairman and secured two open seats in a bid to boost the company's stock and unload underperforming assets, including taking NRG subsidiaries into bankruptcy.
These moves are the result of disappointing performances by the companies and the power sector in general. The three Houston companies have struggled over the past several years - struggles that included bankruptcy filings by Calpine and Dynegy in 2005 and 2011 respectively - and seen their stock prices fall by more than half since 2014. More recently, Calpine's 2016 profit, at $92 million, was down 60 percent from $235 million in 2015. NRG made a slight recovery from its 2015 annual loss of $6.4 billion, but still reported a loss of $891 million in 2016. Dynegy reported a $1.24 billion loss in 2016, as compared with a 2015 profit of $50 million.
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