CEO Power Forum: Wayne Brunetti, Chairman, President, and CEO of Xcel Energy
What was the biggest factor in Xcel deciding to reacquire outstanding shares of NRG?
First of all, I think we built a pretty good company at NRG. The company is now the third-largest independent power producer in the world. A whole host of factors recently have led to erosion in the whole IPP sector. Changes in market perceptions of this kind of company have really raised the cost of capital for NRG as well as the other IPPs. That's been driven certainly by Enron, by lower pool prices, by articles that have been written about excess megawatts being built, excess capacity. Liquidity has become probably the single highest issue. These companies were selling anywhere 20 to 35 times P/E ratios. When all of these liquidity issues came up, they just collapsed. That gave us a chance to refocus whether we should bring them back in. It's a good company. It's got good assets. We're going to refocus their business model. We're going to slow down the growth. We're looking at 25 to 35 percent growth per year. We're going to slow that down. We're going to work on improving their balance sheet and their cost structure. And the main thing is to reduce their need for dependence on external financing.
What is your opinion on the pace of M&A activity in the United States?