West Coast Power Earnings Up but Heading Down

By Published On: November 13, 2004

The postbankruptcy world for NRG Energy was brighter this year, with its California operations expected to bring in $160 million by the end of 2004, said NRG chief executive officer David Crane during a November 10 call with investors. Earnings from NRG?s West Coast Power venture with Dynegy, however, are expected to drop dramatically next year and could range from zero to $30 million. ?It is not a realistic scenario under which West Coast?s earnings in 2005 will be anything like they were under 2004 Department of Water Resources contracts,? Crane said. Next year?s earnings?if any?will be attributed to the recent extension of reliability must-run contracts through 2005 for the 480 MW and 93 MW Cabrillo units. The company continues to seek a contract for output from the El Segundo facility, preferably a reliability must-run pact. NRG would rather not sell the plant, since power will still be needed in California after next year and the hope is that the market will turn around. Since NRG emerged from bankruptcy in May 2003, it has focused on selling off what it calls its ?noncore? assets to revive its bottom line. ?We are not in the process of slowly liquidating our portfolio one by one,? Crane said, adding that it ?would not maximize the value of NRG long-term.? In the recently closed third quarter, NRG managed to alter its debt-to-equity ratio, reducing its debt from 60 percent to 50 percent. For this quarter, NRG liquidity was $1.6 billion, an increase of $260 million since the end of June 2004.

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