NRG Energy looks to a glowing future as power demand heats up

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NRG Energy (NYSE:NRG) stock has received a boost in recent years, buoyed by the prospect of higher demand for energy, thanks to rising consumption by consumers, as well as from the insatiable energy needs of AI data centers. In the last year, the stock has more than doubled in value, going from about $52 on February 15, 2024 to about $107 on February 14. The company was initially started as a subsidary of Northern States Power Company (NSP) to take advantage of power sector deregulation in the late 1980s. NRG was later spun off from NSP through an initial public offering in 2000, with NRG having a 16% stake in the company and NSP maintaining a majority interest in its common shares. At that time, it had a power generation capacity of 15 GW.

Since then, the company has seen its share of ups and downs. Making a bet on the competitive pricing potential for deregulated power, NRG ramped up its capacity to 24 GW, including 5 GW generated internationally. However, it got caught on the wrong foot during a market downturn in 2002, after expanding aggressively and taking on more debt than it could handle to power its capital-intensive projects. While the company was struggling to pay off more than $9 billion in debt, it was forced into involuntary bankruptcy protection in 2002, in a process initiated by some of its executives who were seeking severance benefits. NRG itself filed for Chapter 11 bankruptcy in 2003 and after going through a restructuring, it shed many of its assets and also emerged an independent company without any NSP ownership.

Today, NRG is a Fortune 500 company on the S&P 500 index, describing itself as an energy retailer (selling electricity and natural gas) and home services company (through its Vivint smart home division). It generated about 13 GW of energy as of December 2023, catering to about 8 million residential customers in the U.S. and Canada, as well as commercial, industrial and wholesale customers. However, it remains to be seen whether NRG will be able to continue benefiting from the growing demand for energy, powering growth for investors along the way.