This post was originally published on this site
The worst of this week’s power failures in Texas plunged millions in the dark, during a winter snow storm that left many residents in the nation’s energy heartland scrambling to stay warm and without safe drinking water.
The natural disaster also sparked a selloff in power giant NRG Energy Corp.’s NRG, -3.70% corporate bonds, which has notable exposure to Texas and where the company pulls in a significant slug of its profits.
Debt investors reacted to this week’s power failures by selling NRG bonds that mainly mature in 10 years or less, according to BondCliq, a corporate bond trading tracker.
The below chart shows the bulk of the selling in NRG bonds, or roughly 75% when looking at the number of trades, occurred this week in bonds that come due in five to seven years, signaling a more bearish view about the company over the next handful of years.
NRG bonds sell off during power outages
BondCliq
At last check, trading volume of NRG also reached nearly $630 million over the past three days, far exceeding its standard 7-day trading volume average of about $425 million, according to BondCliq.
NRG said Thursday it was working with its customers to help proactively manage their demand during the dire winter conditions by encouraging conservation and pushing alerts to mobile devices, while also outlining steps it took to prepare for the extreme cold, in a press release. The company did not immediately respond to a request for comment to this story.
Power outages have lessened during the week as utilities scrambled to restore service during the winter cold snap which has killed up to 30 people, but roughly half a million Texans were still in the dark on Thursday, a drop from about 4 million on Tuesday. About a quarter of the state’s population still was under boil-water orders Thursday.
Texas accounted for more than 60% of NRG’s near $1.7 billion in earnings in 2020 as of the third quarter, before accounting for interest, taxes, and amortization, according to the company’s most recent earnings results.
NRG in 2019 bought up the retail business of Houston-based Reliant Energy, which at the time, provided electricity service to more than 1.7 million customers in Texas.
NRG shares were about 2.7% lower on Thursday, but down 4.5% on the month.
Not all local power providers in Texas were seeing selling pressure. Irving, Texas-based Vistra Corp. VST, +5.36%, a producer of nuclear, natural gas, coal, solar and battery energy storage, that also has notable exposure to Texas, saw its shares rise 4.4% Thursday and about 7% on the month.
Energy stocks and bonds had been a hot ticket since January, thanks to rising crude oil prices, ramped up vaccination efforts in the U.S. which may allow more business and consumer activity, and hope that the world’s biggest crude producers will refrain from flooding the market with supply.
Oil prices moved higher Thursday, with the U.S. benchmark West Texas Intermediate crude for March delivery CL.1, -1.13% last spotted near $61.38 a barrel on the New York Mercantile Exchange, after a U.S. government report showed a fourth straight weekly decline in domestic inventories and traders weighed the impact of the deep freeze in Texas on energy production and demand.
Around 4 million barrels a day of U.S. output has been knocked offline as a result of the storms that have hit the state, according to Bloomberg.
