Ticker
$NRG
Industry
Power Gen
Type
Beaten Up
Rating
Covered
Category
General
Target Price
$53.00
Latest Report
Notes
- This is a comp to Vistra ($VST) which was also impacted by winter storm Uri in Texas. Both stocks look cheap.
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- PJM (east coast generation assets) had low 2021 auction prices... No auction in 2019/2020. Lowest prices in 11 years.. Link to article
- WSJ article on California energy challenges — link
- Power gen retirements in 2022 — Natural gas plants retiring 1.2GW of generation
- Exelon spun-off their generation business to create a new public comp — Constellation Energy
Financials and Valuation
FY21 Valuation — At 8x FCF = $47 price target, at 10x FCF = $59 price target — these would equate to 8.6x EBITDA and 9.8x EBITDA — I’m simply bracketing the 3yr average multiple for NRG in calculating but I think they’ll ultimately deserve a higher multiple given the actions taken on reducing risk and volatility in the business (no longer a merchant power plant).
For simplicity — call it 9x $5.90 in 2022 FCF per share for a $53 price target and 40% upside within the next 12 months.
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Resources
- Great VIC write-up from June 2021
- Link to Quick Value post (June 2021)
- PF figures for Direct Energy + NRG combined (2020)
NRG Energy ($NRG) — FY21 Update
NRG Energy ($NRG) — Initiation (11/18/21)
BofA Note — IPPs
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