Though power companies have traditionally owned entire supply chains from generation to transmission and distribution, recent decades have brought about increased fragmentation and specialization.
But as talk of smart grid and electric vehicles increases, power companies and utilities are recombining along the supply, delivery and service chains, trying to improve efficiency and remove unnecessary kinks from operations.
NRG said this week it plans to acquire Energy Plus, a Philadelphia-based retail electricity and gas company, for $190 million in cash. With most of Energy Plus’ customer base in the northeast, the acquisition will boost NRG’s retail presence in the region and allow it to consolidate its generation portfolio with its residential, commercial and industrial customers.
“As we launch our retail expansion in the Northeast, Energy Plus adds a highly effective, absolutely unique and essentially non-replicable sales chain to our successful business retail energy platform,” said NRG President and CEO David Crane in a company statement.
Back Together Again
Deal activity in the US power and utilities sector nearly doubled in the first six months of 2011 over the preceding year, with many power utilities and generators merging.
“The fragmented, regulated utilities industry is ripe for ongoing consolidation, but deals in the space have their challenges,” John McConomy for accounting firm PwC said in announcing the latest figures from the North American Power Deals report for the second quarter of 2011. “Rising commodity costs, regulatory and compliance concerns, and growing investment requirements are just a fraction of the factors that can detail a power and utility transaction.”
Read the full story: US Energy Sector Buying Rather Than Building.
One of the most significant deals underway is Chicago-based Exelon’s $7.9 billion purchase of Constellation. Exelon is a company with a large generation portfolio but minimal exposure to the customer side of the electricity business, and its all-equity purchase of historically troubled Constellation Energy of Baltimore shows yet another example of a new full-service utility model emerging.
To read more about the reactions from within the industry to the building consolidation of the power sector, read: Power Markets 3.0. Breaking Energy covered the merger when it was finalized. See: Recreating the Full-Service Utility: Exelon Buys Constellation.
With a wide and diverse generation portfolio, NRG is working to add assets against the background of increased integration; that integration will involve not only generation and transmission to customers, but also hybrid generation that combines renewables and thermal plants.
CEO David Crane has been an outspoken supporter of electric vehicles and integration of renewables.
“How important is inclusion of renewables in your portfolio?” he was asked in a recent Breaking Energy Q&A.
“Right now it’s a small part of the overall mix. But over time it’s going to be the most important thing – it’s the engine of growth,” he answered.
Photo Caption: A Nissan Leaf electric car is plugged into a charging station at the Seward Park Co-op apartments on the Lower East Side of Manhattan on May 6, 2011 in New York. Connect by Hertz unveiled its first rental electric car and charging station in New York City where customers can rent this car by the hour. Projects like these are changing the way power companies will operate in the coming decades.
