Vistra Energy (VST) Could Be a Winner from the Texas Ice Storm - Seaport Global Securities
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Seaport Global Securities analyst Angie Storozynski reiterated Buy ratings on NRG Energy (NYSE: NRG) and Vistra Energy (NYSE: VST) noting that Texas is experiencing an unprecedented winter storm which should last through Thursday and has knocked ~45% of ERCOT’s power plants (by capacity) offline. The market had to reduce its power demand by more than 35% despite below freezing temperatures. This is reminiscent of the ice storm from February 2011, when Constellation’s retail book counted losses in Super Bowl ads and Calpine used blankets and diesel generators to defrost its gas plants.
The analyst stated "Owners of unhedged peakers turned out to be winners while retail books caught short were losers of that cold snap. It’s too early to name winners and losers of this year’s deep freeze in TX, since we see issues with gas deliverability for gas peakers, forced power plant outages due to voltage issues on the grid, high collateral postings with both ERCOT and contract counterparts, banks guaranteeing output from underperforming wind farms, and aggressive load shedding. For now, we hope that unplanned outages at NRG’s nuclear/coal plants are temporary and can be mitigated by output from unhedged gas peakers and resale of excess power procured to serve the retail load. The winter storm won't be net profitable for NRG, but we'd expect any losses to be capped at ~$100MM. VST’s power plants seem to be running well (excluding some coal plant derates) and the company has been successful at securing gas supplies. That together with resale of excess power which would have been used for retail should deliver some incremental profits which, for now, we estimate at $150MM."
Shares of NRG Energy closed at $43.02 yesterday.
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