Shares of energy wholesaler and utility owner NRG Energy Inc (NYSE:NRG) fell as much as 10% on Tuesday after winning an auction for SunEdison assets. As of 3:30 p.m. EDT, shares were still down 8.8%.
The big news today is that NRG Energy won an auction for 2.1 GW of SunEdison assets for $144 million. What's strange about the news is that it was the only bidder. No other utility or renewable energy developer got close to the assets and investors are at least a little curious as to why not.
The auction was for a variety of assets held by SunEdison, some of which are complete and some aren't. What's uncertain today is how much the company will have to spend to complete projects or if it will be able to unlock maximum value for projects given that contracts to sell energy to utilities may have to be renegotiated. But for $144 million, the price is right and NRG Energy has an opportunity to make a windfall if it can execute on completing the projects.
There's a massive market sell-off taking place today, which didn't help NRG Energy's stock, either. Oil is down and with it went most of the industry, even though low oil prices could be good for wholesale energy companies like NRG.
When it comes to the SunEdison asset purchase, NRG Energy is taking a fairly small risk that it will be able to complete projects and generate solid returns on the renewable energy projects. And given the long-term cash flows that usually accompany such projects, I think it's a solid bet. Look for more information when management reports earnings next quarter, but for now I would be bullish on NRG Energy's acquisition and not as down on the stock as investors are today.