Tuesday, January 14, 2014

Electric Utility Gets in Car Charging Game

CarCharging Group (CCGI:  OTC), which was the focus of the last post, is attempting to build a national footprint in electric car charging services by acquiring small, local operations in various stages of development, or disarray as the case might be.  Another electric car charging service provider eVgo, Inc. has similar aspirations.  However, eVgo is attempting to reach critical mass one metropolitan market at a time.

Owned by New Jersey-based electric power generation and supply company NRG Energy, Inc. (NRG:  NYSE), eVgo has a presence in Houston, Dallas-Forth Worth, Washington DC, San Francisco and San Diego.  I estimate the company has 59 public charging sites altogether with another 187 in the planning and permitting stage, most of which are to be in the California market.  eVgo has plans to set up shop in Los Angeles and the San Joaquin Valley. 

eVgo has branded its charging sites as Freedom Stations and targets retail and other high traffic locations.  Electric car owners are offered a monthly subscription plan that allows them to choose 240 volt or fast charging 480 volt options.

The company also offers an in-home solution.  There is a plan for homes as well as apartment and condo situations.  The charging equipment accommodates a variety of electric cars currently on the market.  Besides its ambitious plans for public charging stations under its Freedom Plan, eVgo also plans to outfit a network of 10,000 multi-family parking spaces with charging capability.

The details of eVgo’s assets and its financial performance are carefully hidden away in the parent’s financial results.  So it is difficult to tell if eVgo’s strategy is proving out.  Those big plans in California was not so much the result of overwhelming interest in eVgo’s charging infrastructure as it is a solution for NRG.  The utility offered to underwrite the infrastructure as part of a settlement with California’s regulators, which had found that NRG had overcharged customers in the state.

NRG is an integrated wholesale power generation company with multiple power plants.  Most of the plants use fossil fuel, but NRG has added wind power, solar thermal and solar photovoltaic to its portfolio.  Power generation is by far the greatest share of the company’s revenue and earnings.  NRG reported net income of $433 million on $10.6 billion in total sales over the most recently reported twelve months.

A stake in NRG gives an investor access to the opportunity in electric car charging although the stock price is driven for the present by the electricity market.  NRG trades at 19.7 times trailing earnings and 15.8 times projected earnings.  The 20% discount on future earnings has inspired the dozen or so analysts who follow NRG to give the stock an accumulate rating.  The mean target price is $32.00, representing a potential for 14% price appreciation if the target is reached.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.


1 comment:


I often wonder about using electric instead of gas to fuel cars. It appears you are just increasing the demand for electric power. Not really solving the energy problem.