Out of bankruptcy, NRG works to reshape itself

17 May2004 – Abandoning the once-popular concept of running a disparate fleet of power plants around the US, NRG Energy Inc. is now reshaping itself into a leaner, regional business after emerging from bankruptcy.

Among the hardest hit in the US power sector by Enron’s collapse and the ensuing turmoil in the industry, the wholesale power generation company is looking to pick up the pieces and rebuild itself after emerging from bankruptcy in December.

One of its top priorities now is to refocus on its operations in the Northeast, South Central (mainly Louisiana) and West Coast (mainly California) regions, Chief Executive David Crane said this week.

NRG filed for bankruptcy in May last year after grappling with a cash crunch triggered by the sharp downturn in the power generation industry and the high prices it paid to acquire turbines and power plants when it went on an aggressive expansion spree during the 1990s.

The company owned stakes in 72 power projects in seven countries with a large portfolio of merchant power plants in the US Northeast as of March 31.

Like many of its peers, the company is also looking to pare back its international investments. NRG, which has assorted projects in countries like Taiwan and Brazil, isn’t interested in holding onto any assets overseas other than its operations in Germany and Australia, Crane said.

The company is not looking to dispose of assets that fall outside its areas of focus in a fire sale but instead plans to manage them until it finds the best price for them, Crane said.

Earlier in the week, NRG posted a quarterly profit, benefiting mainly from an absence of restructuring and impairment charges that pushed it to a loss in the same period a year earlier.

But the company warned that despite its positive performance in the first quarter, it continues to operate in an “overbuilt and challenging” wholesale power generation market. Plus, a much-needed recovery in power prices has yet to occur, it said.

Given some in the industry believe power prices will pick up by 2008 while others maintain that that won’t happen until 2015, Crane said he thinks a recovery will be on the way on the earlier rather than later side of such forecasts.