Q1 2021 NRG Energy Inc Earnings Call
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It is now my pleasure to turn today's meeting over to Kevin call head of Investor Relations. The floor is yours.
Good morning thinking that day.
You're referring to maybe a different areas call. So investors. Please hit star one when you would ask a question is just a normal framework here and so to get off the call.
Morning to welcome to NRG energy first quarter of 2021 earnings call. This morning's calls you broadcast live over the phone via webcast, which can be located in the investors section of our website at www Dot NRG dot com under presentation Webcasts for.
Please note that today's discussion may contain forward looking statements, which are based on assumptions that we believe be reasonable as of the state actual results may differ materially.
We urge everyone to review to Safe Harbor in today's presentation as well as risk factors and our SEC filings. We undertake no obligation to update these statements as a result of future events, except as required by law. In addition, we will refer to both gap and non-GAAP financial measures for information regarding a non-GAAP financial measures and reconciliation for most directly comparable.
We'll get measures. Please refer to today's presentation and with that I'll turn the call over to Marie's, So gutierrez Nrg's President and CEO.
Thank you, Kevin and good morning, everyone and thank you for your interest in NRG.
I'm joined this morning by Gate Zone.
Our enduring Chief Financial Officer, I'm also on the call them available for questions. We have at least something killinger kind of home rebuilt increase most of our share of operations.
Over the past few months, we have discussed in detail the unprecedented nature of winter storm.
The impact you haven't been fire energy system.
The steps that we took to prepare in Texas platform and the support we provided for our customers when communities.
Today and with the benefit of additional information, we are providing more clarity on the financial impact for our company. The steps were taken to mitigate these one time event and reinstating 2021 financial guidance.
We continue to work closely with legislators regulators and all market participants to introduce comprehensive solutions across the entire energy system to address issues and shortcomings that were apparent during the storm.
NRG remains committed to helping our customers and communities recover from the devastating winter storm and to bring solutions that ensure an event like these never happens again.
For a regulated cops, Brussels and rayburn.
The state legislator, a free nation nature appreciate the impact of the call for the faults in the broader market and is considering securitization as a way to soften the impact the customers and other market participants.
Finally, we are recognizing a 395 million dollar loss due to aircraft from management of degrees.
Particularly during the last 32 hours when Urquhart, Kevin the market clearing price at the cop, despite having more than 10 gigawatts in reserves.
Our platform was balanced during this time, but nonetheless, we were uplifted this extraordinary charges.
To help put this in context for you.
Or no timing historical discharge exceeded $5 million.
The state legislature is considering also securitization for these charges given they are the result of unforeseen among hedgeable actions by Earth tones.
We are focused on supporting the PUC and Earth of in the implementation of policies and procedures to ensure the market function properly in the future.
In total we expect our estimated gross financial losses to be reviews by $275 million to $475 million.
True, but that mitigation recovery of direct energy catch nonperformance, airco default and uplift Securitisations and one time savings, resulting in a net loss of $500 million to $700 million.
We have a high level of confidence confidence in the net range and seem manageable risks around the 180 based settlements and further babette escalations.
Now I want to take some time and discuss the solutions were focused on in Texas.
We believe they will improve greed reliability strengthened.
Your market.
And more importantly, avoid a systemic failure of the energy system in the future.
Since the storm.
We have actively engaging discussions with legislative members and proposed various changes to make textures more resilient.
I want to thank the members of the Texas legislature for their continued leadership from these key issues.
While there are many proposals in the Texas legislator right now, including many of which we are working actively on I want to focus here on three concept that the legislature has made a priority and I believe are critical to insure what happened in February never happens again.
Thinking of the system improving communication on market design changes.
Beginning with system hardening.
With a recession of assets is key to improve the overall reliability of degree.
NRG, such a strong and comprehensive wintry station program that begins with lessons learned from prior winter seasons and ends with our annual declaration of completion of the winter weather recession preparations to EIRCOM and they'd be UCP by November 30th.
The implementation of former wind <unk> rules and force through penalties or not it is something we support.
With that said.
One of the biggest lessons learned from this form is how interactive and interconnected the electric and natural gas sectors are and our focus is not just from hardening the power generation side of the equation.
Instead, we believe the entire system, including natural gas needs to be Harlem as.
As they say from welcome to light bulb.
Next I want to talk about communications.
During the storm the lack of communication between all market participants and stakeholders was unacceptable.
For more coordination between the public utility Commission Earth for the Railroad Commission and key stakeholders will greatly improve the amount of information available as well as informed decision making during future events.
In addition, improving the dialogue between television used during load share events and retailers will greatly improve the amount of information available to customers.
Improved communication copay.
<unk> with a statewide emergency alert system will ensure all Texans can stay inform about the status of the group during times of emergency.
Finally.
Regarding market design changes.
Our focus on improving reliability through competitive solutions in the energy and reserves markets.
<unk> regulated generational solutions with guarantee profits or a one size fits all capacity procurement.
For residential customers banning index wholesale products as we already dose of company is a solution that will protect residential customers from being exposed to the volatile swings in the market.
Addressing these free key areas will significantly enhanced brief stability.
And we look forward to continuing to engage with the Texas legislature in the coming weeks.
Now moving to a regular business highlights on the slide six.
We have excluded the impact of winter storm Uri from all our numbers as we have done previously from.
One time events.
Our intention is to provide transparency to the investment community regarding the recurring earnings power of our business.
Particularly given this was the first quarter of our ownership of direct energy.
And separating what we believe to be non-recurring impacts of the combined business as a result of worry.
Throughout the day presentation, we have made significant effort to be as transparent as possible on both the cost of already related losses and.
And the one time financial impact so that you can evaluate the financial performance in either context.
Jason will provide additional details later in the presentation.
NRG, the levered $567 million of adjusted EBITDA in the first quarter, excluding one time financial impacts from the storm.
This is a 62% increase from the same period last year.
Primarily driven by the acquisition of direct energy.
Notably the addition of direct energy is electric and natural gas businesses helps flatbed, our quarterly earnings and free cash flow seasonality.
As I mentioned before we are restating, our previous financial guidance of $2 for to two $6 billion for 2021, excluding ordered.
Just to remind everyone.
On March 17th with temporary temporarily suspended 2021 guidance to reflect the significant uncertainty of orange.
Once almost certainty remains we believe we have received an update to provide a range of items.
<unk> we.
We continue to advance our direct energy integration plan.
Following the close in early January we immediately began the integration process, achieving $51 million of our 2021 synergy targets.
We remain very confident in our ability to achieve for the 2021 and full plan targets.
As part of the direct energy integration and to further simplify our business operations.
Today, we're announcing the designation of Houston of the soul location for our corporate headquarters.
Texas is already home for our largest customer and employee base.
It's a great place to do business and.
And Houston continues to be at the forefront of energy and technology with one of the most diverse workforces in the country.
We will continue to maintain regional offices in the market that we serve as we expand our business outside of Texas.
We're also making good progress and executing our customer centric a strategy.
In January we close from the direct energy transaction, forming the leading North American integrated energy and home services company, serving a network of 6 million customers and.
In March we announced the agreement to sell a for eight gigawatt portfolio on non core foresail assets, which helps simplify and decarbonize our portfolio.
Since the last earnings call, we increase our airport renewable purchase power agreements by nearly 400 megawatts now totaling approximately 2.2 gigawatts.
Last on our credit metrics.
Despite the impact of winters from Orange, we expect to be a three times leveraged by the end of 2021 after paying down $385 million from that from cash available for allocation.
We are working with the credit agencies to review the impact of winter store for in on the timing of achieving investment grade ratings.
An extension, Inc. Timeline could give us an opportunity to achieve our metrics either through a bed reduction and or EBITDA growth.
I will be providing more details from capital allocation an hour full strategic outlook during our spring Investor day.
Now turning to slide seven for a summer job.
First from a high level, we're expecting neutral for favorable summer weather and continued economic recovery for result in a year on year low growth.
Despite these low growth, we're expecting reserve margin to be robust, resulting in stable to lower power prices.
Just to remind everyone high low low price is good for our business.
As you can see on the upper left hand chart noise predicting a slightly harder than normal summer within the eastern Texas markets.
We expect this outlook the trend towards normal with a positive bias as we neared summer.
Moving through the bottom left hand side of this slide.
COVID-19 related electric demand continues to recover across markets with urkel demonstrating resilience.
As a reminder.
Always stay at home impact on low is most pronounced during the shoulder seasons and less in the summer.
From a market perspective, we see 2021 extra recovery year across all our markets.
In aircraft.
We expect a return to normal 2% annual low growth with residential users in our remaining slightly elevated a stay at home trends remain one C&I usage improves throughout the year.
Returning to pre pandemic levels by the end of the year.
In the east we see similar trends.
Although we believe C&I recovery to be free pandemic levels could take an additional 12 to 18 months given stronger stay at home trends.
Now as it relates to NRG, we continue to see strong residential low or across all markets.
And we expect to be a relative winner given are multi brand in multichannel platform.
In <unk>, we're seeing lower attrition rates and incremental globe opportunities through our multichannel approach and flight to quality following orange.
In the east.
We're also realizing lowered intuition.
But given the less favorable regulatory framework.
We depend more on face to face sales to win customers.
For planning purposes, we are assuming normal customer growth in Arco and a slight contraction in the east as it more closely trucks the economic reopens.
On retail supply cost, we see little risk of sustained high prices. This summer given robust summer reserve margins across all our markets.
Why is it is still early.
We're eager for the <unk> evolution and implementation of the bite on infrastructure plan.
As we believe it will amplify the electrification of the economy through smart technology and cleaner energy choices.
So with these positive backdrop.
We continue to make good progress and execute executing our customer centric a strategy as you can see on the slide eight.
On the direct energy integration.
This transaction presented a step change for us as we move closer to the customer bye significantly expanding our customer network in home services.
During the first quarter, we achieved $51 million or 38% of our 2021 synergy target.
We remain very confident in our ability to achieve both the 2021 and full in full plan targets and we plan to update the scorecard quarterly in order to provide transparency and keep you informed of our progress.
We are on track to close from the for eight gigawatt asset sales in the fourth quarter.
This is a good transaction for us.
As it further streamlines, our business and addresses terminal value and earnings concerns, but otherwise would have masks are retail growth.
Our portfolio repositioning and optimization is a continuous process we.
We are committed to our business model and will continue to provide updates on our progress.
Finally, we are preparing for our Investor day.
We continue to target late spring and given the flexibility afforded by the virtual forma we will announce the event two or three weeks prior to best manage around the Texas resolution.
So with that I will pass it to get them for the financial review.
Thank you Marie So I will now turn to slide 10 for a review of the first quarter results and <unk> financial impact.
On the upper left side of the slide we have shown our quality result, and reinstated guidance after excluding to one time impact of winters from urine, which we're showing separately on the right.
As mentioned by Maurizio we've been in that is better reflects from recurring earnings power of our business. Following the acquisition of direct energy and it is consistent with our established practice of excluding extraordinary events.
For the quarter NRG delivered $567 million in adjusted EBITDA or 219 million higher than the first quarter of last year, excluding 967 million impact from winter storm urine.
Since increase is driven by the acquisition of direct energy, which generate approximately two thirds of its EBITDA during the winter months Gibbons, a season or shape of east electric and natural gas flowed.
Since seasonality will help flatten NRG as future earnings profile for example junior.
Specific to direct energy, we're on track to realize 500 million of adjusted EBITDA in 2021.
We are on track to achieve $135 million of synergies for 2021, as well was 51 million realized in the first quarter and a color of at least 300 million annual run rate by 2023.
Turning now your attention to the table on the right. So total anticipated growth impact from winter storm urine is now $975 million.
The increase since our last communication is primarily driven by the 55 day resettlement information from our cut which affected our fleet cost and load estimates.
And added some incremental reserves for counterparty credit risk.
All of which were partially offset by discounting Dr cut default charges.
We continued to pursue volume of sending solution estimated to me in the range of 275, two $475 million.
This would reduce economic impact to a net amount of $500 million to $700 million.
From a cash standpoint based on $150 million of estimated in credits or two large commercial and industrial customers. In 2022. So total negative cash impacting 2021 is expected to be approximately 150 million.
Dollars lower at 352 $550 million, including the effect of the offsets previously mentioned.
Finally, we all reinstating of 2021 guidance at the original ranges of $2 for 226 billion for adjusted EBITDA and $100 for 264 billion for free cash flow before growth.
I will now turn to slide 11, when we are updating our plan 2021 capital allocation.
Changes on this slide from last quarter are indicated in blue.
Starting from the left on the third column, so net capital requirements for the direct energy acquisition was reduced by $38 million based on the latest estimate of the Pope's closing working capital adjustment.
Moving on to the next column the estimated winter storm Youri capital allocation impact is $825 million.
Net of anticipated customer Bill credit outstanding at the end of the year.
And would be at $450 million after deducting some midpoint of our estimated mitigation efforts all $375 million.
This has reduced our original deleveraging plan in 2021.
However, we remain committed to maintaining a strong balance sheet and improving our credit metrics all the time.
Absent any meaning Asian upset recoveries, which are shown in the far right of the child.
The company will still pay down debt by $385 million in 2021.
And continue to Delever other time to maintenance credit profile goes.
Importantly, this does not include any deleveraging associated with the sale of our Eastern-west assets, which is still slated to close later this year.
Moving on to Slide 12, I will start on the left with our 2021 credit metrics.
After adjusting our corporate that balance for the reduction from 2021, Capitola location and minimum cash of 2021 net debt balance would be approximately seven $8 billion.
This when based on the midpoint of our adjusted EBITDA implies the ratio of just under three time net debt to adjusted EBITDA at the end of the year.
Since notably excludes a one time impact of winter some jewelry, which we also expect to be excluded by the rating agencies.
On the topic of Raining, we continue to work with the agencies to review winter strong numerous impact on the timeline and the requirements to achieve investment grade.
We remain committed to strong credit metrics and continue to operate under the assumption that investment grade ratings will be or Walden shortly after achieving for targeted metrics.
But we're not controlling this process.
And we realize that given the circumstances it could take the agencies much longer than previously anticipated to be comfortable granting us and Iga raining.
I will note that in for timeline as extended it could also give us an opportunity to achieve all metrics either through debt reduction and or EBITDA growth.
Turning to the right side of the slide we also wanted to update you on our latest liquidity position, which which had for $1 million as of a few days ago for remains very strong and sufficient to continue supporting our business even during period of stress.
In conclusion, we all reinstating already done free cash flow be for growth towards the original guidance provided in the last earnings core excluding the impact of winter storm urine.
Why is the storm has impacted our capital allocation plan, we have maintained a strong liquidity position before during and after the event, while our call business continues to perform as otherwise expected.
With this I will hand, it back to moisture.
Thank you Jason.
Provide a few closing thoughts on the slide 14.
Hi, recognize that winter storm already has impacted investor confidence in our cups market design and the door ability of our cash flow.
But I want to be clear.
Given this stuff's been discourse in the Texas legislature.
From the actions by market participants.
I don't believe in event light vs come happen again.
This is statement failure was the result of a lack of winter stress planning.
Which wasn't amplified by for electric and natural gas coordination and protocols too orderly restored the energy system and communicate with customers.
Energy is a keep dealers to Texas outsized growth and all stakeholders are focused on addressing winter reliability swiftly and comprehensively.
Birkhoff winter planning parameters will be in house.
<unk> for the nation will be improved and.
And protocols for a large scale emergency will be established.
Now finally today.
Following are expensive C a for Serge.
I am pleased to announce that I'll bet before narrow will join our team of <unk>, Vice President and Chief Financial Officer effective June 1st.
Albert voice of seasonal finance expert who brings over 30 years of experience and a unique combination of consumer technology manufacturing and risk management experience.
Albert but joins us from coupons, the world's fifth largest e-commerce platform, where he served US group Chief Financial Officer and senior advisors.
Before that he served of CFO for public and private companies Inc.
Including International Gang Technology, Ah, leading gaming company do some contact them heavy construction equipment company and technology, the world's second largest manufacturer of fitness equipment.
I believe old burritos expertise <unk> to enhance our indecisive move closer to the customer.
I also want to take a moment to recognize gate on for open for stepping in interest CFO and leading the finance organization. During these challenging time.
Gay police are very important and valuable member of our leadership team.
On behalf of everyone other NRG.
Thank you gave them for your leadership from dedication.
So we've got Daphne we're open the line for questions.
Okay.
Procedure.
<unk>.
Moving on the line.
Keith.
To join your question.
Key.
Can you stand by while we compiled for Q&A lobster.
Yes first question comes from the line Julian do moving.
Purple America.
Hi, good morning seem thanks for the time and the opportunity.
Thanks for the detailed remarks as well.
Good morning Julia.
Good morning, So if I can just rehash a couple other comments I know you alluded to them in the remarks, a little bit, but the 393, the counterparty with the heat recall option can you expand a little bit on on just what that exposure is a single counterparty in.
What are the prospects for recovery. There is we kind of look forward through a presumably what is from sort of process already ongoing minus.
<unk>.
Julian So yes. This is a single counterparty. This is a bilateral Hebrew a call option.
And I mean VARIG conversations are ongoing so as you can appreciate I can provide a lot of details because of the possible different outcomes that this come take or.
What I can tell you is.
While we're having I think constructive conversations.
We're going to pursue every available means that we have to recover the money that we are our own.
Understood and for a single Powerplant or is it a financial temporary.
Yes, you say is a free.
Single power from.
Got it excellent and then if I can't on the other side of this obviously there is.
Default allocations uplift charges et cetera can you just clarify what is the legislature looking at.
Across the options and I get the session isn't over yet and we've got a few more weeks ago, but I just wanted to clarify against the different ERCOT exposures that you have here what is on the table here potentially for the legislature I know you alluded. This in part from the comments that I want to make sure I'm clear about what what's included you're potentially.
Well I mean, I think the two areas that you should focus is that Eric of default.
And the <unk> charges that I already explain I think in great detail in the presentation.
I think everybody recognizes the impact to the broader market.
Either was an exposure that works from hedgeable or expulsion from Cogs.
The rest of the market these basically being burdened with the I think the legislature recognize that they are prioritizing how they more through these different.
Buckets of let's call in buckets of cost.
There are a number of bills that are addressing securitization, specifically right now for corpse and <unk> falls.
Also including some ancillary services from Napoli so.
We are I think we are.
We have a very positive view on these given the tone on the legislature, obviously this needs to work through it's it's process.
We're going to continue working construct we believe with them and providing them all the information that they need but.
The side that we're seeing is.
They're making progress in addressing these very very important from concerning issues for all market participants.
Right. So basically this is the 95.
And potentially the 395.
Basketball actually being able to ask for.
If I may just one more quickly any preview here's to the metrics that you would be anticipating to disclose here in late spring.
Just kind of a sense as to what the initial blueprint might be.
All for the AD on this day in terms of our customers.
Yeah.
Yeah, whatever you anticipate for.
Metrics, you anticipate disclosing I'm not asking for specific new targets for what metrics would you anticipate updating here, presumably EBITDA EBIT growth, but I don't want to I'm.
I'm just curious.
I think the day down on this day I think on the island is day, we want to do three things number one is harbor conversation around the strength of our core platform.
And the the value that we see in the opportunity that we see closer to the the consumer on the customer so I think cuss.
Customer lifetime volume will be something that we will be discussing and how we can leverage our operating platform in.
Providing additional products and services for our customers.
The second thing is I will be also highlighting.
And reviewing our capital allocation I mean, our framework is very clear, but I think I also need to be mindful doubt.
Storm has had and it will have an impact perhaps on the timeline for our investment grade rating. So I think this is something that we will be discussing.
I also want to introduce metrics.
Showcase the growth.
The company helps card on a per share basis, I mean, that's something that we will be we will be discussing more in detail and then finally, he saw where sustainability framework and ESG metrics, particularly the path that we have on Decarbonising hour.
<unk>. So we already have provided the guidepost through our commitment to the one five degree trajectory, but I also recognize that the investment community would like to see more specificity around it. So this is what I intend to cover on beyond honestly.
Excellent. Thank you guys for the time best of luck and preparing great. Thank you Julian.
Your next question comes from the lineup Michael Lupita.
Goldman Sachs.
Hey, guys. Thank you for taking my questions I actually I have a couple first of all can we do a cash flow work related to Gary.
So if I take the $975 million.
Of.
Headwinds how much of that cash has been paid out as of March 31st vs is cash that's going to be paid out over the next couple of for.
Yes, Michael good morning.
Or perhaps a obligate from.
Yes.
Michael for the way I would characterize it is the grossest packed is 975 cents an impact over time as we've say the impact in the first quarter is 967, many and then other times that would be 8 million of incremental costs.
Associated with it.
So way to think about it is all of the cost of goods sold portion of that 975 I've been settled by now all of the guests settlement and none of those things have been done, but obviously on the working capital side. Some other receivables.
I've been.
An issue to beating has been issue, but the cash hasn't been paid yet.
And you will probably have noticed at the end of the first quarter set we we other launch receivable balance, but then in our liquidity numbers as other than a few days ago on liquidity has gone up significantly, which which shows the connections that we've enjoyed during the months of April. So this is the second moving piece and then for.
Last moving pieces for one we highlighted.
On page 10, which is a deferred credits and we have done.
The maintenance is to be $150 million.
For for 2021.
With an impact basically defund into 2022. So those are the main moving pieces here.
Around for cash.
You shouldn't assume that based on those.
Thanks for the cash impact on for Us for the first quarter is below the 975 basically.
Based on the on the 10-K, you would be able to reconcile.
It's roughly $100 million below that.
Got it so in other words I'm gonna just try and simplify this a little bit in other words for the next couple of quarters, there's about $100 million of headwind related to the 975 net cash.
Worry about earnings here, just cash so 100 million outflow related to that and then.
150 more than offsets that this year, but then you pay kind of pay that back next year and the mitigates.
So the mid against that you outline that's all kind of the 275 to 475, you've got none of that so any dollar you get is incremental cash flow above and beyond.
Right that's right.
Got it okay. Thank you guys much appreciate it.
Thank you Michael.
Your next question comes from the lineup.
Or no.
<unk> research.
Good morning good.
Good morning, Jonathan quick quick one on.
As we think about the mythical.
Range and I think Marie fees for the February covenant in the range could you give us any pointers as to how significant you for.
Feel these different pieces might be whether that for the larger or smaller.
And I guess Louisville, specifically I mean does the.
Hi, and a few.
Recovering most of the.
Right cool option physician or other security you can give us any points us within that range.
Jonathan well I mean, what I would say, we feel confident with this range given the information that we have today and what we tried to do is break it down into its very specific components. So for example, the first above that.
We're working with our customers.
Either through payment plans or extending the the relationship with the customer on MTV basis. So so I would expect a about that number.
So far.
We're seeing really.
Dialogue with them I mean, I already spoke about where he'd recall auction and we're going to explore all avenues on Bob.
I think the securitization is making his way through the process in the Texas legislature.
We're seeing some positive signs there that includes bulb.
Default and the I'll believe charges so.
I hope that these provide for you at least some sense in terms of the more the size of the buckets and.
Where we are in the process, obviously, we will be updating this number.
For all of the year as we get more clarity and we should be in any of these efforts.
The one time cost saving piece significant ora smaller element.
Yeah. So I mean, the one time cost saving a few all I appreciate I mean, we have.
Some.
Cost savings already as part of the direct energy acquisition.
The synergies I mean, we're making good progress there remember those cost synergies tend to be recurring what the cost savings or I'm talking about here are going to be more like one times and the entire organization I mean, we're not pleased with these results for the entire organization is looking at the cost structure and we're evaluating what can we do to.
<unk>.
To review some of the cost in 2021.
Without input.
Impacting negatively the organization, so but I wouldn't say that these numbers are led by cost savings I think you should think about us.
Around the edges and not necessarily be the main number.
Okay and then it just puts you on a low in on the heat right cool option are you the only kind of the policy holder assets.
To one of many.
I cannot answer that I mean, this one's a bilateral financial deal with one counterparty.
We know that they had at.
One plan to to back these these.
These financial bilateral agreements so I cannot tell you what they did on on.
We are judging their position, Okay, and then maybe a slight fall into that I mean, mauricio any sensitive.
Will be opportunities alike for perhaps perhaps adding.
Customer books or something larger.
Would you would you consider.
Picking up any assets that might become distressed here.
The new rule the customer refocus.
I mean, we're always going to be opportunistic about that and we have a I think we have a pretty long improving track record of mine <unk> distress books of value.
Our goal right now is to integrate direct energy I think that was a pretty large acquisition that we made last year and all has on there to achieve the goals that we committed to our investors and I mean, the returns are very compelling so we're going to be focusing on down for hiring for that.
Is there is something that is for.
From a volume standpoint, very very compelling.
I wouldn't characterize more as just buying books as opposed to anything else and.
We'll just going to be.
Very very opportunistic Ababa.
Great. Thank you very much.
Thank you Jonathan.
Our final question comes from the lineup.
Levine.
<unk>.
Hi, Thank you for taking my question.
China reporting right out.
Good morning.
Terms of the Houston headquarters decision can you provide some color as to why you made that decision what the tax implications are.
From a real estate perspective.
If there's any assets that you are looking to monetize and they need.
Digit proceeds for you expect to yield from that position.
Yeah, I mean, if you recall, we've been running a dork headquarters for now for quite some time.
And I think in the spirit.
Simplifying our business operations and also as part of the direct energy integration.
These was already on the works for quite some time, obviously the winter software is impacted the timing of the announcement, but I think from Ah just from a simplification and cost optimizations standpoint. This is really.
This one.
Part of our plan I think one thing that is important to note. These as we're thinking of other returned to the office. We all I. Appreciate the remote work is going to be more prevalent in the future and we've gotten very comfortable with that.
Been running our company in a very efficient way. So I would expect that as we re managing the work space of the future.
Hi, Raven remote work will be more prevalent and.
We actually have inside the organization something that I call workplace 21, which is really a group of our community that is thinking through our real estate needs. What are we going to go in terms of which.
Which which employees need to work remold hybrid.
Impersonal in the office.
How do we think about maintaining the culture of the company through these new way of.
Working.
Do we extend some of the.
Some of our corporate volume like safety and wellbeing beyond the office and into.
Home. So I mean this is very comprehensive we have for company are going to be for.
Flexible with our employee we recognize that.
To attract the best talent, we have to keep up with the we have to keep up with technology and the means by which our employees are more fulfilled and satisfied so I am very pleased with the with the move I think so.
I set on my.
On my remarks, I mean, Houston is an incredible C D in Paris of leading to the energy transformation in terms of technology.
They have.
A very diverse workforce.
Many of our customers for the majority of our customers already recite index of many of our employees are already there. So I think this is just a formalizing something that <unk> has been happening now for quite some time.
I appreciate that in terms of trying to quantify some of the financial impact for the decision is there any color you could provide realizing that some of the details haven't been fully determined around.
Show cost savings or benefits in terms of financial statement impact of that decision.
I mean, I would say that they were part of the plan around simplifying the organization in the direct energy integration. So they are embedded to some extent on the synergy targets that we already provided to.
For them I mean, we're going to maintain regional offices, because with the director energy acquisition, we actually grew significantly outside of Texas.
It's not going to have we don't expect to have any tax implications in the in the current location that we.
That we have I mean, Princeton is going to continue to be a pretty major hobby in our operations and.
So I.
I don't expect any any any negative income.
I appreciate it thank you.
I will now turn the call back offerings summa <unk>.
For closing remarks.
Thank you Daphne well. Thank you for your interest in NRG and look forward to speaking with all of you.
The spring out on this day. Thank you.
Ladies and gentlemen, thank you for your participation on today's conference. This concludes the program.
[music].