Counting on coal

NRG Energy's move to buy Texas Genco seems a wise one for a company with strong dark-spread exposure, but it has its risks, despite the target company being backed by an active hedging programme. Joe Marsh reports

New Jersey-based NRG Energy is taking a very bullish bet on natural gas prices with its recently agreed purchase of power producer Texas Genco, says Hugh Welton, senior director in the global power group at Fitch Ratings. NRG may well benefit substantially from the deal, mainly due to the high profit margins for coal- and nuclear-fired generation at present, but the purchase is certainly not without risk, he says.

While much of Texas Genco's forward generating capacity is hedged,