Seeking Alpha: As Power Markets Improve, NRG Energy Can Better Leverage Its Assets

There is a chance that independent power producer NRG Energy (NRG) can offer investors the best of both worlds. NRG's management quality has served it well through tough market periods, as the company has executed good deals to improve its market positioning and capital structure. Now, it may be approaching a period where its operating assets can outperform on the back of higher gas prices and tight capacity in key markets like Texas.

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As Power Markets Improve, NRG Energy Can Better Leverage Its Assets

Investopedia: Exelon's Discount May Offer An Opportunity

It feels like investors and analysts have spent the better part of two decades arguing that power prices in regions like the Midwest and Mid-Atlantic should be higher than they are. Along the way, several independent power producers ((including Dynegy (OTC:DYNIQ)) have faltered badly as consumer-friendly regulators and stubbornly lower power prices have made this a perennial "wait 'til next year" market. With power prices recently testing historical lows, Exelon (NYSE:EXC) shares have been quite weak. Is this an undervalued high-quality utility story, or just another utility doomed to struggle with lower-than-expected power prices in its core regions?

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http://www.investopedia.com/stock-analysis/2012/Exelons-Discount-May-Offer-An-Opportunity-EXC-CHK-DUK-AEP0919.aspx

Icahn Bags Dynegy ... Maybe

For a company that has not strung together consecutive years of positive free cash flow in over a decade, Dynegy (NYSE:DYN) is a surprisingly hot commodity. Having rebuffed two bids from Blackstone (NYSE:BX), this independent power producer now has a bid in hand from Carl Icahn's Icahn Enterprises LP (NYSE:IEP).

The Deal In Hand 
Icahn Enterprises is offering $5.50 per share in cash for Dynegy ($660 million), and will take on Dynegy's nearly $4 billion in debt as well. Curiously enough, the buyer agreed to allow Dynegy to seek out yet another better bid, giving the company until late January to find a better offer. Shareholders already seem to be counting on the idea that someone will make a competing bid, as the shares are currently trading a bit higher than that $5.50 deal price.

Ultimately, then, it seems like justification for Dynegy's refusal to close the deal with Blackstone. To be fair, it was not Dynegy's management or board that had the problem; they signed off on the deal. Rather, it was major shareholders of Dynegy, including Seneca Partners and Icahn, that balked at the price. While Blackstone did up its $4.50 bid to $5.00 in November, that still was not enough, and the transaction ultimately fell apart as Blackstone walked away. 

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http://stocks.investopedia.com/stock-analysis/2010/Icahn-Bags-Dynegy--Maybe-DYN-IEG-BX-CPN-NRG1216.aspx

Dynegy Finally Takes A Bid

This was not how the Dynegy (NYSE:DYN) story was supposed to end. One of the veterans of the independent power producer concept, Dynegy was supposed to have been able to leverage cheap coal-burning plants against higher electricity prices and produce streams of cash flow for shareholders. As with Reliant (NYSE:RRI), Mirant (NYSE:MIR), Calpine (NYSE:CPN) and NRG Energy (NYSE:NRG), the Dynegy story just never worked out according to plan.

Hamstrung by low natural gas prices, sluggish power prices and a lot of debt that came from seemingly ill-advised expansion, Dynegy has struggled to make a go of it. Instead of continuing the struggle, Dynegy decided to sell out to private equity giant Blackstone (NYSE:BX) for a total consideration of roughly $4.7 billion. Shareholders will get $4.50 of cash for each share if the deal goes through. 


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http://stocks.investopedia.com/stock-analysis/2010/Dynegy-Finally-Takes-A-Bid-DYN-NRG-RRI-CPN-BX0817.aspx