NRG Energy Inc (NYSE:NRG) has been amongst the worst performing companies on the S&P Utilities Index. However, that title is going to be changed soon, as the company announced its plans to move its business towards renewable energy. With this decision, NRG is following in the footsteps of its European counterparts, such as EON SE from Germany. Unfortunately, this does not address the investors concerns about the future of NRG’s business.
Following the announcement by NRG to form a new subsidiary for green energy, the investors have voiced concerns that the company does not have sufficient finances to make such a move. Furthermore, the CEO of NRG, David Crane, announced that the new unit would be created on January 1, 2016. However, the decision does highlight the fact that NRG understands that a company cannot hold on to both, green energy and coal and gas based power production. Additionally, the recent decline in energy prices has made the company stock weak and suffers a decline of 40% in terms of pricing.
Despite the worst fears of its investors, NRG does have a plan to begin its transition, while ensuring financial stability. The company announced it would be stepping down a total of 814 MW of energy, after conducting a sale of its wind assets, which is expected to generate $210 million. Furthermore, the company also announced plans to enforce cost effectiveness within the company and sell certain power generation assets, expected to raise $150 million. Additionally, NRG also revealed that it would sell a large stake in the new company to ensure better performance. Analysts believe that the decision to split green energy from old energy is a wise decision on the part of the company, since it offers the investors two different pathways for investments. Conventionally, investors do not like to bid on two opposite aspects of an industry at the same time.
NRG Energy Inc (NYSE:NRG) closed at the end of the September 21 session at a share price of $16.38, after reporting a decline of 8.9% in its share value and experiencing a trade volume of 14.33 million.