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Market Price (5/2/2017): $15.77/share; ST-Target: $22/share; NIV: $40/share
2Q17 is transition quarter until business review and GenOn resolution
We blew our 2Q17 estimate by country mile due to generation optimism and wishful thinking on Retail. Moving-up ST-Target to $22/share from $24/share, and NIV/share lowered to $40 from $44. But, we continue to believe upside coming for commodities and Washington policies’ effects should be more positive than face value. We are concerned about potential for headline risk around GenOn financial distress, but we look for positive outcome, and along with Business Review results, should serve as catalysts. We like NRG’s debt pay-down and refinance of some $5.8B of debt due in 2018 to later maturities. We like NRG keeping hedging levels low for 2018/2019. NRG yet to disavow share buybacks. We’d still like NRG to officially and separately reestablish customer-based marketing and trading business through bankruptcy-remote sub with strong, consistent and vigorously enforced risk-management policies. We believe NRG needs to roll-up NYLD, before NRG runs out of drop-downs.