NRG MAKES ITS CONSUMER PLAY
This past week brought us news of NRG Energy, Inc.’s (NYSE: NRG) continuing diversification efforts as they acquired Vivint Smart Home, Inc. (NYSE: VVNT) in an all-cash deal for nearly 3 billion. Set against the backdrop of the past few years sales of most of its power generation assets in the Northeast, this further solidifies NRG’s pivot towards a consumer services model.
With more than enough free cash flow to support the acquisition, this looks to be a prudent bet from NRG. While there are no shortage of competitors in the smart home market, Vivint stands out for its integrated “Smart Home Tech Stack” services. While Vivint’s current offerings are organized primarily around its security system, we would expect to see greater integration of other household functions (lighting, HVAC, energy consumption, etc.) over time, allowing NRG greater opportunities for leverage. As a forward-thinking utility, this sends a clear signal that renewables will continue to be a core component as smart home technologies develop.
EU TIGHTENS ESG REGULATIONS, ESG FUNDS GET HOISTED BY OWN PETARD
Bloomberg recently reported that more than 100 billion has been downgraded from the EU’s highest ESG status over the past year after the EU issued its updated regulatory guidelines. Asset managers speculate that funds taking the designation, known as Article 9, will be nigh impossible to find in the new year, with Blackrock Inc., Pacific Investment Management Co., and Amundi SA amongst those removing it from the vast majority of their business. Despite investors continued interest in the products, fund managers have complained that the new standards are needlessly difficult to navigate.
After seeing ESG go from fringe concern to mainstream concept over the last decade, we’re starting to see an undercurrent of backlash as fund managers struggle to balance the demands of the stringent new regulatory environment and their fiduciary obligations to their investors. These cutbacks were expected, and while environmentalists will take their shots it’s primarily a question of legality. Asset managers who are downgrading are getting ahead of the upcoming deluge of lawsuits over the mis-selling of ESG funds that in reality accomplish next to nothing. Of course, it was easy to clamor for greater accountability when the regulatory environment was murkier and enforcement mechanisms were nil, but with GFANZ updating their requirements to participate, that good PR comes at the expense of asset managers fiduciary responsibilities. Perhaps what’s most interesting will be to see what happens with Larry Fink—will he survive after his mismanagement of a plan for the largest capital transition ever seen?
WE PUT THE SUN IN A BOX AND NOW IT RUNS YOUR REFRIGERATOR
The U.S. Department of Energy and its National Nuclear Security Administration announced a major breakthrough on Tuesday, with a team at Lawrence Livermore National Laboratory successfully achieving fusion ignition. On December 5th, the LLNL’s National Ignition Facility was able to reach energy breakeven, producing more energy from fusion than the lasers used to create it.
While undeniably a significant achievement (as well as being, in technical terms, very cool) nuclear fusion as a commercial source of power remains decades off. While DOE Secretary Jennifer Granholm optimistically stated it could reach commercial viability by 2035, LLNL Director Kim Budil poured cold water on those hopes, estimating it will be several decades longer than that. That said, when 80% of the cost of electricity is in transmission rather than production, it will require an entire suite of innovations on our path to that sweet sci-fi nuclear future.