Unregulated power companies feel the heat

The week ending December 5, 2014, was a particularly bad week for unregulated US power companies. Unregulated power companies are riskier stocks to own compared to regulated power companies due to the volatile nature of their earnings.

The risk off sentiment was evident on Wall Street throughout the week as pure unregulated power companies fell sharply compared to the rest of the industry.

NRG Energy leads the fall for pure unregulated power players

Biggest losers in the power sector for the week

NRG Energy (NRG) fell by 9.6% during the week. The stock was down on each trading day of the week, closing at $28.27 on December 5, 2014. NRG Energy’s share prices have been tumbling for the last six months. Since July, prices have fallen by 24%.

Following NRG Energy’s close, Houston-based Dynegy Inc. (DYN) was down by 8.2% for the week ended December 5, 2014. Like NRG Energy, Dynegy also fell on each of the trading sessions of the week. Last month, Dynegy reported a lower year-over-year third-quarter earnings and has since fallen 10.3%.

Public Service Enterprise Group (PEG) was the third top loser in the week. It fell by 2.0% in the week to close at $40.93 on December 5, 2014. Unlike NRG Energy and Dynegy, Public Service Enterprise Group has been surging in recent months. It has gained more than 16% since July of this year.

The three biggest losers in the week, NRG Energy, Dynegy Inc., and Public Service Enterprise Group, are independent power producers (or IPPs).

These stocks fell at a time when both the utility sector and the S&P 500 were flat. The Utilities Select Sector Standard & Poors depositary receipt (or SPDR) (XLU) was down by -0.3% in the week, while the SPDR S&P 500 exchange-traded fund (or ETF) Trust (SPY) closed the week ending December 5, 2014, with nominal gains of 0.4%.

The SPDR S&P 500 ETF Trust (SPY) is an ETF tracking the S&P 500 (SPX) benchmark index. The Utilities Select Sector SPDR (XLU) is a key ETF in the power utility industry.

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