Why Shares of NRG Energy Inc Plunged Last Month

This energy company is breaking into two and even that couldn't get investors excited.

Travis Hoium
Travis Hoium
Oct 6, 2015 at 8:45AM
Energy, Materials, and Utilities

What: Shares of utility company NRG Energy Inc (NYSE:NRG) fell 25.5% in September as investors continued to reject the company's future plans.

So what: Over the past few years, NRG Energy has been trying to build up its renewable energy assets as an effort to build a more stable long-term company. It bought large utility scale wind and solar assets, launched the yieldco NRG Yield, and bought a rooftop solar developer as well. But returns from these renewable energy projects weren't fast enough to offset declining returns in fossil fuels and couldn't appease investors looking for a quick turnaround.

That's why NRG announced in September that it would split itself into a fossil fuel company and a green company. That way investors can choose which side of the business they want to own and in theory lower costs for both companies.

Now what: Having an old world fossil fuel company married to a new world renewable energy company trying to disrupt the grid was always a long shot. But NRG gave it a decent go and is now realizing it didn't work. I actually think NRG Energy has solid assets on its balance sheet, but I'd like to see how this breakup goes and how operations stabilize before jumping in because both fossil fuels and renewable energy are in highly competitive markets right now, so execution will be key.