GenOn At A Crossroads
This Thursday, GenOn Energy will release its third quarter earnings reports. For many companies, this is an opportunity make a clear statement to investors about the company's fiscal strength and key benchmarks of success looking forward. If GenOn’s performance on Thursday is anything like its second quarter earnings report, investors have a serious decision to make about whether to continue to prop up this company.
With little to no warning for investors, GenOn has announced a coal plant retirement in Virginia and has just had bad news in Pennsylvania. After years of community struggle, GenOn’s Alexandria coal plant announced its plan to retire in 2012. Just the other day, EPA granted a petition by New Jersey requiring that the GenOn-owned Portland Generating Station reduce its harmful sulfur dioxide (SO2) emissions by 81% over the next three years. That will require expensive pollution control technology. Or, a commitment to retire the plant.
It all adds up to GenOn being at a very expensive crossroads. The company can keep eking out a small profit while polluting communities across the country, or it can clean up its act and join the green energy economy.
Currently, GenOn lags behind the utility sector in preparing for long overdue federal limitations to air and water pollution caused by burning coal. Most notably, GenOn has developed no plan to meet EPA’s upcoming air and water quality safeguards that will affect their entire fleet of power plants. This runs contrary to the industry standard. To demonstrate they are a competent investment, large utilities have been announcing closures of inefficient coal-fired power plants. In comparison, GenOn has provided no certainty and direction to their investors. When asked about incoming environmental regulations during the GenOn’s second quarter earnings call, CEO Ed Muller made it obvious he just didn’t have a plan to meet the rules. I wonder if he will have one this time around.
Or maybe they have new investor relationship management. Or new media contacts at least.
As of this year, half of GenOn’s 38 coal-fired units produce electricity less than 30% of the time. Notably, GenOn’s facilities in Ohio, Pennsylvania and Maryland are all at risk of running out of business. These include Avon Lake, Elrama, New Castle, Niles, Portland, and Titus. Essentially, these plants are running at a cost that is not competitive with other power plants.
CEO Muller's blasé, non-committal attitude towards reducing GenOn's air and water pollution is not just a poor investment decision, it's evidence that GenOn is unconcerned that its old and dirty coal plants are making communities sick across the country. I think that investors are well within their right to join communities fighting for their survival and call for GenOn to shut these plants down.
I for one am looking forward to the question and answer section of this call. The communities impacted by GenOn’s coal plants care about clean air, clean water, and good, green jobs – and they are hoping for some big changes this quarter.
GenOn is on the hook to show that they care as well.