NRG Energy:
INTERVIEW-NRG Energy seeks global power base
By Vibeke Laroi
MINNEAPOLIS, Minn., Sept 5 (Reuters) - NRG Energy, Inc. (NYSE: NRG), already a leading global independent power producer, is setting its sights even higher, hoping to be one of the top three players in all of its core markets, its CEO said in a recent interview.
"We want to be one of the big guys," NRG Energy Chairman, President, and Chief Executive David Peterson told Reuters.
Minneapolis-based NRG, which went public in May but is still 82 percent owned by energy company Xcel Energy Inc. (NYSE: XEL), is currently the fifth largest independent power producer in the world based on its net ownership in power generation projects.
NRG currently holds the top position as independent power producer in Australia, is fourth or fifth in Central Europe, is about tenth in Britain, the third biggest in the U.S., and number one in Bolivia, although Latin America is quite far down its list of targeted growth areas, Peterson said.
NRG's market share in these core markets would be limited to 20 percent due to regulatory restrictions, Peterson added.
He said NRG's goal is to trim the U.S. share of its installed megawatts to about 70 percent, down from almost 80 percent now. Australia is expected to hold at around 12 percent, while Europe should rise to 10-12 percent over the next 18 months to two years, up from about 9 percent today.
"Over the next four or five years, we'll get up to about 50,000 megawatts (of generating capacity). We think that's what it's going to take to be one of the surviving players," he said.
NRG Energy has ownership interests in 191 facilities either in operation, under construction or subject to signed acquisition with a gross 29,433 megawatts (MW), of which the company has a net share of 16,307 MW.
It also has a strong backlog of some 24,000 MW of additional generating capacity expected to be added over the next couple of years, Peterson said.
EYES GROWTH IN CENTRAL EUROPE
"You can still get long-term (power supply) contracts in Central Europe. You can't get those in the U.S. or Australia - that's anything of length anyway," Peterson said.
In Central Europe, NRG will target countries that were formally socialist but are currently either European Union members or standing in queue for membership. NRG already operates in the Czech Republic, Poland and Estonia.
Upgrading older plants in need of environmental cleanup in Central Europe is a task in which NRG claims expertise. "We can get those plants operating better," he said.
Peterson said NRG would also like to build up Asia, primarily Southern Asia, such as Malaysia and Thailand, where they currently have no operations.
In Australia, Peterson said: "Until they do something in New South Wales, there isn't going to be a whole lot more to buy up and they sure don't need anything new down there."
Although NRG's market share in the United States is likely to diminish, the company will remain U.S.-centered.
"From a return (on investment) standpoint, probably the U.S. is as good (a place) as any. The others are okay too, but there is also higher risk," Peterson said.
"The near-term opportunities are here," he added.
STRONG EARNINGS
"This is about making money, it's not about megawatts," Peterson said.
Asked if Peterson expects NRG to surpass its goal of increasing earnings by at least 25 percent a year, he said: "Of course I do, but we want to over-deliver."
"We get about three or four themes and that's what we do and we deliver on them," he said.
The market consensus is for an earnings per share of 95 cents for the year 2000 and $1.13 for 2001.
NRG has said that it is comfortable that its earnings per share for the year will be in the 87 to 95 cents per share range.
Peterson said return on equity should end up almost in the "low teens", around 12 percent, but added "that needs to go up to the mid- to upper teens over time."
Ray Niles, a power and natural gas analyst with Salomon Smith Barney, noted that only about 20 percent of the 800,0000 MW of generating capacity in the U.S. is currently operated by independent players like NRG, AES Corp. (NYSE: AES) and Calpine Corp. (NYSE: CPN).
"That means that most of the growth that we're going to see in the generation business is ahead of us. I think there's room for a minimum of five to 10 winners in this market.
"NRG is likely to be one of the winners and they'll be a much larger company several years from now than they are today," he said, adding that they are likely to grow at a much higher rate than 25 percent a year. |
