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NRG Energy Inc (NRG), Calpine Corporation (CPN): Independent Power Producers Remain Attractive

The other IPP on which I am bullish is Calpine Corporation (NYSE:CPN). With 92 power plants and approximately 27,000 MW of generation capacity, Calpine Corporation (NYSE:CPN) operates in twenty states in the U.S. and Canada. Calpine Corporation (NYSE:CPN) has a potential to offer attractive total return to the investors as the company has a strong balance sheet with excess and growing free cash flow. Also, Calpine Corporation (NYSE:CPN)’s large exposure to the Texas power market, which is considered to be a market with strong fundamentals, is a positive and an important performance driver for the company.

Moreover, the company is immune to changes in natural gas prices, hence not exposed to changing natural gas prices. Calpine Corporation (NYSE:CPN), as mentioned earlier, has strong free cash flow which can be used by it to repurchase portion of its common shares and repay debt that will further increase financial strength and can result in possible price appreciation.


I am bullish on the aforementioned two IPPs, NRG Energy Inc (NYSE:NRG) and Calpine Corporation (NYSE:CPN). The companies have strong cash flow positions and are expected to maintain the trend in the upcoming years, which can be used to buy back shares and repay debt that will most likely result in potential price appreciation for both of the stocks. Also, in the ongoing environment of rising 10-year treasury yield, IPPs stand a chance to outperform the dividend paying regulated and diversified utilities.

The article Independent Power Producers Remain Attractive originally appeared on and is written by Faizan Chudhry.

Faizan Chudhry has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Faizan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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