NRG Energy And Vivint: Paying For Transformation, The Street Prefers Buybacks

It would seem that the Street is far from convinced about the ongoing restructuring and business transformation efforts at NRG Energy, Inc. (NYSE:NRG), and the latest move – the $2.8B deal for Vivint Smart Home, Inc. (NYSE:VVNT) – is doing nothing to ease that anxiety. The shares fell about 15% on the deal announcement, continuing a trend of sharp moves between the mid-$20s and mid-$40s over the last five years as the Street tries to dial in the long-term cash flow consequences of management’s ongoing business transformation efforts.

I can understand why at least some investors would prefer the certain accretion of buybacks over another M&A transaction that brings integration and execution risk. I believe further transformation is necessary, though, and I favor using cash flow to build up (or perhaps shore up) the company’s future prospects and cash flow generation capabilities, so I see this as a short-term versus long-term debate. I do think the selloff makes the shares more interesting, but I do also see ongoing execution risk here.

 

Click the link for the full article: 

NRG Energy And Vivint: Paying For Transformation, The Street Prefers Buybacks

Seeking Alpha: EnerNOC Working, But The Outlook Still Cloudy

I liked demand response and energy management company EnerNOC (ENOC) six months ago and the stock has done well since, rising about 40% as the brutal winter weather brought attention back to the advantages of electricity demand response. I still like this company, particularly as the company shifts its attention to international DR markets and the sizable opportunities in providing enterprises with tools to better analyze and manage their energy needs.

The prime issue with EnerNOC remains the volatile regulatory environment. PJM Interconnection, a major source of EnerNOC's revenue, is serious about altering its rules for demand response and those changes threaten a meaningful portion of today's revenue and cash flow. Over time the company's efforts to diversify and the underlying advantages of DR should smooth this out, but the company's reported performance could be erratic in the meantime. That complicates valuation, though today's price does not seem unreasonable.

Read more here:
EnerNOC Working, But The Outlook Still Cloudy

Seeking Alpha: Calpine Offers Some Upside To More Realistic Power Pricing

The regional markets for electricity in the U.S. are more messed up than many readers probably realize. Although the power stays on, the incentives and pricing structures have led to capacity imbalances and the prospects for more problems down the line. That's a good news / bad news situation for an independent producer like Calpine (CPN) - the good news is that this company's very efficient gas-fired generation fleet can generate attractive cash flows when pricing gets better, but the bad news is that there is little visibility on those price improvements and regulators keep trying to postpone the day of reckoning.

Read the full article here:
Calpine Offers Some Upside To More Realistic Power Pricing

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.

Follow this link to read more:
As Power Markets Improve, NRG Energy Can Better Leverage Its Assets

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. 

Please click the link for the full piece:
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. 


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