Q1 2022 NRG Energy Inc Earnings Call

Ladies and gentlemen, todays conference is scheduled to begin momentarily.

Until that time your lines will be placed on hold until the conference begins.

[music].

Good day, and thank you for standing by.

Come to the NRG Energy Inc.

2022 earnings call.

This time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer recession.

Ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded you require any further assistance. Please press star zero.

I'd now like to hand, the conference over to your Speaker today, Kevin Cole head of Investor Relations. Please go ahead.

Thank you Ken Good morning, and welcome to NRG Energy's first quarter 2022 earnings call. This.

This morning's call will be 45 minutes in length and is being broadcast live over the phone or via webcast, which can be located in the investors section of our website at www Dot NRG dot com under presentations and webcast.

Please note that today's discussion may contain forward looking statements, which are based on assumptions that we believe to be reasonable as of this date actual results may differ materially we urge everyone to review the safe Harbor in today's presentation as well as the risk factors in 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 GAAP and non-GAAP financial measures for information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures. Please refer to today's presentation.

And now I'll turn the call over to Mauricio Gutierrez, Nrg's, President and CEO .

Thank you Kevin Good morning, everyone and thank you for your interest in NRG.

I'm joined this morning by Alberto for narrow Chief Financial Officer, and also on the call and available for questions. We have at least have it Kelly Daryl had a home run.

<unk> had a business and market operations increase most or head of competitive markets and Paul.

I'd like to start on slide four by highlighting the three key messages for today's presentation.

First our business delivered strong results in the first quarter and we are maintaining our 2022 guidance ranges second.

We are well positioned going into the summer with a balanced risk management strategy designed to provide stability through volatile market conditions.

And finally, we continue to advance our strategic growth priorities moving closer to the customer while being excellent stewards of your capital.

Moving to the first quarter results on slide five.

We delivered top decile safety performance and $509 million of adjusted EBITDA.

This result is in line with the first quarter of last year, when adjusted for asset sales and the outage of lifestyle.

When including supply chain constraints on higher ancillary EDC very strong result, driven by our core operations.

The lifestyle power plant in Texas returned to service in April on time on budget and ready for the summer.

I want to thank the operations team for completing this project on schedule, despite a difficult supply chain backdrop.

Now moving to direct energy integration.

We are reaffirming both 2022 and the full plan targets.

As part of our capital light strategy, we have now signed two eight gigawatts of renewable Ppas in ERCOT.

With 45% currently in service and the remaining expected to come online over the next couple of years.

These assets are geographically diverse within Texas.

We have an average tenure of 12 years.

We will continue to execute on this strategy and grow our renewable ppas, but I do expect the development of renewable projects to slowdown in the near term given supply chain constraints and regulatory uncertainty.

Finally, we are executing on our $1 billion share buyback program, which Alberto will provide additional details and we are maintaining our 2022, adjusted EBITDA and free cash flow before growth guidance ranges.

Okay.

Over the past few months, we all have seen the significant increase in energy prices, particularly natural gas.

I want to take a moment to discuss how our business is positioned to navigate through these volatile market conditions on slide six.

Beginning on the left hand side of the slide with our hedge tables for this year and next year.

As you can see we.

We are well hedged against our expected load with a combination of our own generation portfolio and third party hedges.

This is by design.

This also allows us to maintain predictable and stable margins, while mitigating the impact of short term market volatility for our customers.

As a matter of fact these.

This is probably one of the biggest benefits of competitive markets.

Retail companies that can mitigate the impact of short term market disruptions for their customers.

In the medium to long term our platform is uniquely positioned to manage the structural changes in commodity prices.

We have a proven commercial team that manages commodity price risk across our portfolio all the way from our power plants to our retail brands, providing them with significant visibility on the fundamentals of our core markets.

On the retail side.

Our pricing team has significant insights on price elasticity, given the scale and scope of our customer base.

And finally, we have a multi brand multichannel multi product strategy that ensures worked tailoring solutions, which customer segment, while balancing customer retention and margins.

We continue to execute on our five year growth roadmap and are making great progress across many of our initiatives as you can see on slide seven.

On our last earnings call I provided an overview of all of these solutions and capabilities currently available and in development for our customers in two areas.

<unk> services and home services.

I wanted to focus on one area of growth that I'm, especially excited about.

Energy resilience.

<unk> is our home energy resilience and storage company that has been part of NRG since 2014.

When we acquired the company.

Their primary focus was to serve a niche market of outdoor enthusiasts.

And while they were a market leader in that space. The total addressable market was limited.

Recognizing that extreme weather events and power outages were only going to increase given climate change and an aging power grid, we shifted the company's strategy to address energy resilience.

Today.

<unk> energy resiliency products are clean accessible and affordable.

There are power stations on solar generators are modular and affordable meaning.

Meaning they can provide resilience to any part of him and risks eventual home or recreation vehicle of any size.

Something a gas generator for rooftop solar system cannot do.

Theyre also scalable.

Enabling customers to design, a resilient solution that can expand in the future.

Therefore, balancing budgets and need.

Importantly.

These products cost a fraction.

Standby against it or rooftop solar system cost fully installed which allows us to serve an even broader customer base.

And they require minimal installation.

These are just some of the reasons why customers love those hero products, giving them a net promoter score above 70, a rating that is typically reserved for best in class brands.

In the last three years.

<unk> has grown revenue at a 50% CAGR and gross margin of around 40%.

While the overall revenue and gross margin of the business today remains small compared to the core operating platform.

The energy resilience market is expected to grow at 50% CAGR through 2025.

And we expect both to grow along with it.

And this is before considering external factors that could potentially drive growth even higher.

For example, last December , California announced a ban on gas generator sales beginning in 2028.

Such policy decisions by local and state governments will only increase demand for <unk> products.

The team is already working on the next generation of solar power generators that will launch in 2023 with a focus on storage technology upgrades in past call me integration and a better digital customer experience.

I look forward to providing you updates on their progress as we bring new products to market and integrate the solutions closer with our core energy offerings.

So with that I will pass it over to Alberto for the financial review.

Thank you Mauricio.

I will now turn to slide nine for a review of the first quarter results.

For the quarter NRG delivered the $509 million in adjusted EBITDA.

$88 million decrease versus prior year prior year.

Excluding the impact of winter storm in 2021.

Results were reduced by $50 million for the divestiture of four eight gigawatts full size generation assets in the east and west.

And the whole home warranty business.

In addition, the lack of availability of limestone unit, one in Q1, 2022, and other outages impacted negatively this quarter.

Excluding these items adjusted EBITDA would have been higher than Q1 of last year and these are strong results is driven by our diversified portfolio, allowing us to deliver through inflationary pressures and commodity price volatility.

I'm also pleased to report the total impact of KOL constraints have been limited to date.

In Texas lower power prices helped mitigate the overall quarter requirement versus expectations.

In the east we were able to procure more than what we initially estimated.

Looking forward, while we have seen overall improvement in the availability of coal the U S Railroad delivery freight delivery network remains fragile.

And so while we have made progress.

The realized financial impact of the constraints, we continue to tightly manage our coal book.

Moving to Q1 results by Gerald Rafi success results were in line with prior year when factoring in the preview previously discussed plant outages.

Turning to the east West and other segment as in prior quarters, we were able to leverage our portfolio of natural gas assets to deliver stronger results truly volatile market is.

These benefits were offset by the impact of the previously discussed divestiture of generation assets and the whole home warranty business.

We continue to make good progress on our synergy targets delivering $51 million incremental synergies during the quarter.

We are quite pleased with this progress and we are well on our way to deliver on our 2022 and food plan.

Lastly, you will note at the bottom of the slide that we are maintaining our previous guidance ranges for the full year, adjusted EBITDA and free cash flow before growth.

We remain focused on executing our overall 2020 to plan and we look forward, providing you additional updates throughout the year.

I will turn now to slide 10 for a brief update on our 2022 capital allocation move.

Moving left to right at the midpoint of our free cash flow before growth.

Guidance remains unchanged at $1.290 billion.

Next the remainder of winter slowed annuity the total net to 2021 earnings impact of the storm to energy was $380 million, which included an accrual for $696 million of expected beat again.

As we discussed on our fourth quarter call, we expect to receive $689 million by the end of the second quarter and these will be partially offset by $97 million of bill credits that will be issued to C&I customers for a total net cash inflow of 599 million.

To be realized in 2022.

Moving to their eye and focusing on the changes from last quarter shown in blue.

Total expect cash used to fund our $1 40 per share dividend decreased by $5 million as a result, so less share of spend.

Next we have made good progress in executing our 1 billion share repurchase program since the beginning of the year, we have repurchased $262 million to be added to the $39 million in 2021.

The remaining balance of $699 million will be completed over the next several months.

Lastly, we expect it to have $315 million of remaining cash available for our location, which we have earmarked approximately 100 million to fund the initial project in our 2 billion growth plan.

Which also includes the initiatives that will be launched to accelerated the growth of our <unk> business.

Back to <unk>.

Thank you Alberto.

Turning to slide 12 I.

I want to provide a few closing thoughts on today's presentation.

We delivered very strong results for the first quarter, despite volatile market conditions.

And we are well positioned to deliver through all market cycles.

Despite a backdrop of commodity price volatility inflation and difficult economic conditions.

<unk> remains the same.

Customers value, our brands and the products and solutions we offer.

We continue to be relentlessly focus on not just meeting the consumers where they are.

Also looking around the corner to meet them, where they're going.

I have never been more excited about the future of NRG and I look forward to updating you on our progress along the way as we execute on our growth roadmap.

So with that I want to thank you for your time and interest in NRG. Kim we are now ready to open the line for questions.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.

Please standby, while we compile the Q&A roster.

Okay.

Our first question comes from the line of Julien Dumoulin Smith with Bank of America. Your line is now open.

Hey, good morning team. Thanks for the time I Hope you guys are well.

Hey, good morning.

Good morning, Thank you hey, listen so the marketplace has been focused on the volatility in the commodity price uptick of late and obviously.

The pivot that you guys had been towards an asset light model has gotten focuses attention here can you guys address more squarely how youre thinking about mitigating those risks, especially on a longer term basis. As you think about not just the basic blocks, but the the peaks and troughs. If you will of consumption and how you are.

Dressing the risk mitigation there.

To try to address some of these market fears, especially given how quickly. The overall market backdrop has been moving and then maybe in tandem with that can you speak to how your retail pricing is evolving I E. How quickly are you able to reflect this back to your customers right now it seems like power to choose is seeing something of an uplift of late.

Yes, Julian well.

Okay. So this is a really long question.

Sure well, we can take a long time to have this conversation, but let me just say that at the end of the day, we have the sign a platform that is.

Stable and provides visibility and stability on margins right.

So what we provided you on one of the slides is not just how we are positioned on the short term medium term, but also to the long run so for 2022 and 2023.

Pretty well hedged against suspected lobe and I feel very comfortable with that as you think about perhaps a lot.

Have a structural change on the commodity price curve that is longer term.

First of all I think the industry does a really good job in passing through those costs not only increasing calls, but also decreasing cost I mean that is one of the.

Strength of competitive markets.

The second thing and I think this is very important are the competitive advantages that we have as a company.

I'm not going to least again everything that I put on the on the slides, but first I will just tell you. This we have best in class risk management capabilities with our commercial team.

A retail pricing teams that is pricing customers every day and the insights that we get from that and the scale and scope of our customer base allows us to have really good insight in terms of.

Pricing.

Depending on different customer segments, and finally, he's our unique go to market strategy that we've laid out multi brand product and channel that allows us to tailor solutions for each of the customer segment. So now obviously that Skype.

Yes.

Big.

Structure of how we.

Provide more stability of margins now keep in mind that we have also a lot of tools to be able to manage it.

Specific volatility for certain hours in certain months.

Not only we have the flexible.

Our risk management capability on the supply side on the wholesale side and tremendous amount of information on how the power grid works, but also on the retail side remember, we're working very closely with our customers to incentivize demand side management. So we actually help our <unk>.

Customers lower their energy bills by.

Incentivizing them to do demand response, so not only we have capabilities on the wholesale side, but we also have tools on the retail side to ensure that we balance our position.

And.

At the end of the day. The goal is to have stable margins and help our customers.

We are managing their own bills.

Got it.

Excellent.

And if you don't mind more strategically you guys have been on this journey towards <unk>.

Asset light model for a little while here.

How does the latest uptick in commodity prices impact that rate and what I mean by that is is there actually an opportunity to monetize your generation assets at to get a higher value now does that actually tilt you towards monetizing further rather than this perception that owning generation right now is the right way forward.

Well I mean, I think we embrace the asset light strategy a few years ago, we launched a renewable ppas.

Julien then.

I think everybody can see now the benefits of it given the increase in commodity prices. So I am very pleased with the team and how they executed.

Today, we provided one additional disclosure which is.

How many of those megawatts now are in line or on service.

Continue to work with developers on our partners.

To continue growing those megawatts are value for us and also add value for them because we provide them.

Much needed long term contracts, where they can actually finance bill saw renewable plants and bring them to market with respect to how I think about the generation portfolio in context of our retail remember now we have a few a few years ago, we shifted the focus of the generation portal.

Polio now their purpose now is to serve our customers and I think we have done exactly that by right sizing our generation portfolio and making sure that we keep the assets and not just one but also third party contracted assets to better serve our customers in the most cost.

<unk> way, so I think that's going to continue to be our north star as we look at.

Optimizing our portfolio and the rest of our portable generation portfolio going forward.

Got it understood Okay guys. Thank you.

Thank you Julien.

Our next question comes from the line of Sean <unk> with.

With Guggenheim Your line is now open.

Hey, good morning, guys.

Hey, good morning Shar.

I just wanted to just follow up on Julians question, maybe just drill down a little bit on the capital light strategy, especially if these curves aren't transitory right. The moves I mean, maybe looking at sort of a slightly different angle is there any potential interest even on the margin of owning generation.

And especially if the curve moves arent transitory and I couldnt get a sense with your prepared remarks do you believe the curve moves are transitory or sort of sticky and even have more upside given whats been going around us. So what are you assuming with your planning assumptions.

Well, so let's start with the <unk>.

Last part of your question I mean, when I look at the forward curves today, particularly in ERCOT.

From my perspective, a forward curve should actually reflect the fundamentals of a market.

And when I look at the fundamentals of the aircraft market today, what I see is very healthy reserve margins.

This year, we're going to be around in the high 20% over the planning period over the next five years I think it goes to low 30%.

I think this has been the highest reserve margin it seems the market when competitive.

More than a few years ago.

So now there is a fundamental shift here in terms of the composition of that reserve margin and that is the amount of renewable energy that we have in the market.

So when renewables performed well, we have plenty of capacity to mid low.

When renewables done performed that well is a little tighter, but I mean, when you look at a 26, 27% reserve margin for the year.

It's kind of hard to justify some of the scarcity.

Hours that are embedded in the forward prices.

And if you put on top of that how ERCOT is running degrees, which is very conservative.

I would think that perhaps there's a little too much excitement right now in the foreign market.

Okay got it from.

The fundamental reality of the market so.

Thus, that's how I think about it then.

My perspective on the market, obviously market prices for us are.

Being or have been very muted in our business strategy.

Our platform our integrated platform will perform under a number of commodity price cycles, whether it's small or whether it is high and we have proven that now with your first question around what does that mean for our asset light strategy and for that matter for our supply.

Strategy.

Our supply strategy will always be informed by market dynamics always is not like we have a strategy and then we.

We go to bed that wake up three years later, so based on what we're seeing now.

And importantly, what ERCOT and the PUC are doing to provide more regulatory certainty around market design changes that is going to inform how are we going to optimize our generation portfolio going forward.

I don't know if that means.

More asset capital light megawatts I don't know if that means partnering with some developers to bring new generation for market.

At the end of the day, we all recognize that we need more of the dispatch of generation in the system and that's a good thing and we know that we can play a big role of that but the role that we're going to play.

And then what we have done in the pumps.

Got it got it that's helpful. And then Mitchell can you just may be slightly more specific on what youre seeing in the PPA market today, given sort of the commodity moves in the tariff circumvention tail risk I mean have you been able to add contracts as needed. This spring and any issues with your current contracts that may be under <unk>.

Construction now so just maybe elaborate a little bit on potential slowdowns in that market.

Sure well I'm going to ask Rob Gary was asking she has been leading our renewable PPA effort for now quite some time and now you have the you are talking to your lives so Ralph.

So good morning, let me take that in parts.

So as we disclosed today, we got 45% of the portfolio.

Boeing right. So we've got no risks on that side, which is a good thing and it's working out for us.

And a lot of ways. We also have an additional.

Set of contracts you know you can to 55% that's out there we have <unk>.

Minimal life.

Less than 100 Megs of stuff that we're expecting this year and then the stuff. The rest was out into 'twenty three 'twenty four we are in communication with these guys.

On a monthly basis, if they're starting into their construction phase so that depends on when the contract starts were monitoring that just like we would any other power plants and just we've said this before but I'll say it again for history.

We're in the market every call it three to six months with a new RFP looking and assessing every type of products. So that we can build a portfolio for the business as.

As you would expect People's prices are going up over time.

And a lot of that uncertainty is around things like labor or general inflation around steel.

Commerce lawsuit right now that's obviously scared the market to date any of our contracts that we have out front of out in front of us that are not flowing we haven't received any notices or or issues.

We monitor that and we talk to those guys fairly regularly but Mauricio said, it and I concur I would expect given the price environment, meaning the cost environment for developers.

Expect a little bit of a slowdown in renewable development kind of across the country does that answer your question.

It does it was it was actually pretty comprehensive. Thank you guys. Appreciate it thanks Mauricio.

No problem, Sharon just to put a finer point on what Rob said on the in the remaining 55% is basically 2023 and 2020 before we have any exposure right now in 2022 from prices that will come online I mean is de minimus.

We feel very comfortable with our portfolio going forward.

Now this is a very good execution in light of what we're seeing so congrats thanks guys.

Thank you Sean.

The next question comes from the line of Angie <unk> with your.

Your line is now open.

Good morning, guys. So my first question is about good morning about Midwest Gen.

Can you.

Can you tell us anything about these assets.

Do you have.

Additional.

Coal supplies to run these assets more in this current natural gas price environment and how that.

Ties into your.

Earnings outlook for this year, and maybe even 40 years.

Yes, Sanjay So let me just start by saying that.

West generation portfolio.

We announced a few retirements.

At the Investor Day, if you remember LNG and all we're doing right now.

Yes.

Were some of those assets are just moving to retirement I think we extended one of those.

What can we extend it we're keeping one one month, just because we need to burn the coal pile and that is.

You know I mean of course, it will capture additional economics, but the most important thing is.

From an environmental standpoint, but I think it's better that we just go through the pilot as opposed to bringing structured I'm getting the call out so I think that's the.

The main the main goal.

With respect to whether you kind of expand the life of the assets that we announced retirement no. We're not going to I mean, you know.

And the main reason why is because there is a tremendous amount of logistics that go into it.

Personnel to maintenance dollars to fuel supply. So once you make a decision like this is it's very hard to pull back and we are not going to pull back.

Obviously, the other two assets Paragon and Julia will continue to operate and whether you have higher energy prices or higher capacity prices.

Whatever the dynamics are.

They will we will.

We will optimize those assets now I want to remind you LNG that we actually see rolled out the contribution of the <unk> portfolio on our economic outlook that we provided to you on Investor day. So.

I think this is an important part.

So we actually have.

No we haven't reflected any economic contribution from these classes.

Okay and moving on to.

Texas and also your 2022 guidance, So you mentioned that.

Any sort of constraints related to call have subsided, even though rail and rail services is still.

Fragile you had.

Low realized power prices in Texas, while limestone without the I'm stone is back so.

So those were two big drags on your 2022 guidance. So is there any offsets as you said as we stand right now until your expectations for 2022, I'm just wondering why they.

Haven't moved up.

Yes, so I mean, thats, what I mentioned, we have a really strong quarter.

<unk> first quarter the team did an excellent job in managing.

Supply chain issues with coal, particularly product availability and as Alberto mentioned.

Now the issue is around our railroad logistics and the cycle times were working with our railroad partners as we go into the summer.

And so those constraints so those supply chain issues have moved now from product tool tool.

The transportation.

<unk>.

I'm not.

I am very comfortable that the team is going to manage them well, but at the same time, we need to be prudent in the past Angie I have.

<unk> revised our.

Guidance in the third quarter call and I am going to continue to do that I am very optimistic where we are and now just to keep in mind, just like we're managing some of those.

Headwinds that we had.

In the outset of the year, we're also deploying some.

Growth capital dollars and I think were earmarked that for this year around $100 million, which is 5% of our $2 billion. So that is growth that is embedded within the guidance.

Some puts and takes and while we have been able to manage really well our.

Full constraints that has been offset by the capital that we're deploying for growth, which will have a return, but nonetheless, it was not part of the original guidance, so think of that of that plus or minus.

Okay and lastly.

It looks like the summer.

<unk> came early to Texas or is about to come already to Texas. We wish we have the case in the northeast, but anyway. So how.

I mean, everybody talks about the strong load.

And I know that the biggest risk to your retail assets. So I think tell earnings.

You're accurate estimate itself.

Hello, and hedging of that load.

As you go into this next next week next couple of days how concerned are you.

Okay, well I will ask Rob to you know.

These new responsibility to address that and Ralph so.

I'm not going to go into the how scared I am on a Friday before a weekend event, but I will tell you that we saw and I'm sure you've seen the weekend was trading call. It in the 3% to $400 range at the beginning of the week.

That was a concern around heat, which we are getting early heat here in Texas, but it is also a concern about lack of wind.

He has moderated.

Model over model as the market is half of where it was and wind is up.

But as we go into these events, we feel very comfortable where we're at because we are hedging up our load going into it and then when it comes to excursion time inside of a week or two weeks were managing and watching that but we also have our fleet ready to go for events like this so I'm going to sleep okay.

And do you and if I can just take a little bit of a step back and I know Rob you know.

Focus on NRG, specifically, but I mean keep in mind that the aircraft system is designed for summer weather.

And I think we have been very successful in managing through a number of record peak load. So yes.

This is certainly here, but it's not like the system. The electric system wasn't designed to handle these type of low so.

I mean I feel that Ah.

Uh huh.

The.

Supply in the amount of capacity that exists in the market is.

Good to meet the demand and we should have a lot more capability to actually manage demand today than we did before so.

As Rob said, I think our risk management and our supply is going to be okay. As we go into the next couple of.

Next couple of base, and then going into the summer.

Very good congratulations thanks Bye bye.

Thank you Angie.

The next question comes from the line of Keith Stanley with Wolfe.

Research Your line is now open.

Hi, Thank you.

First just wanted to clarify the prior question the $100 million of growth investment. That's earmarked for later this year is that part of Capex or is that an operating cost and could impact to EBITDA for the year.

Good morning, Keith.

Combination if you remember during Investor Day, I said as we start deploying this growth capital is going to be a combination of opex and capex.

The way you need to think about the Opex is when we're doing these organic growth. Some of it is going to be just the incremental selling and marketing and acquiring customers remember the growth is not just adding new capabilities, but also growing our core offerings.

Power gas and dual fuel so it is going to be a combination and thats why I was saying as you think about the guidance that we've provided we've seen some.

Really good management on.

<unk> coal.

Supply issues and Thats offset by some of the capital that we're deploying that will have a return, but remember when youre doing this organic type of grow about return.

There is a lot.

12 to 18 months so.

There is that offset.

In our results and that's why I feel very comfortable maintaining our guidance.

Got it.

Separate question just wanted to ask on direct.

It seems like the business is doing very well with the gas price volatility that we're seeing.

Can you talk a little more to some of the key gas logistics assets and contracts you have that direct I guess, where theyre located and maybe some more examples of how you are able to optimize around the gas price volatility that we're seeing.

So you mean give you the secret sauce for how we optimize all of our gas business saw a kit.

Well, let me just let.

Let me just tell you.

As I have described the business in the past. This is really a logistics business, we don't take price risk on Henry call. Okay. So when we sign customers we buy the supply.

And as we are serving those customers. There is a lot of assets that come with it and those assets can be gas storage pipeline capacity LDS contracts with the LDC distribution assets and so this is really a basis optimization.

Business and you know.

Basis, when Youre optimizing just these the different regional points, it's all about information.

I already have describe our commercial operations team and I have and in the past I have said that the gas commercial operations team that we acquired from direct energy is best in class.

I have been incredibly impressed and I think the results speak for themselves so without going into specific things on what pipeline capacity, we have or what storage. We have all I will tell you. Our EDC very good business is predictable and the theme is best in class in you know him.

Really excited that you know.

Capability that we have and also one important aspect is actually.

Complementary to our power business, so usually when gas prices rise people get concerned about power well now we have an opportunity to monetize some of that volatility in the gas market.

<unk> and complement that with our power business. So really excited about what we're what we've put together between power and gas.

Thank you.

Our final question comes from the line of Jonathan Arnold with vertical research. Your line is now open.

Yes, good morning, guys.

Hey, good morning, Jonathan.

A couple on the new businesses and maybe one.

You exited I think.

The the focus on go zero today.

It.

Is that sort of one of the things you're doing or just the one that sort of you're most focused on or do you just kind of pull out as an example for us.

Yes, well I mean, so two things number one.

EDC incredibly exciting market the energy resilience market hasnt growing leaps and bounds over the past couple of years that is the result of what we are all experiencing in terms of extreme weather events power outages in California is a perfect example.

So we have been working on these and perfecting the energy solutions for a number of years. So they were kind of pulling the veil of these business a little bit more as I committed to all of you to increase disclosures during the year.

The energy solutions that they have meet a customer's needs today. It is a nascent market the growth that we're seeing is a very attractive the margins that we have are very attractive because of this.

Nascent characteristics of them all of these of these new market and importantly, I will tell you that the what I've seen the team work on the next generation of solutions in terms of integrating different storage technologies looking at the power electronics, So it's easier to interface.

<unk>.

The.

Critical circuits in your home.

And these digital customer interface I am just very excited about.

The solutions that we're bringing to the market, but I think.

Right now there is a big big niche that is that is not met by other distributed Gen technologies, whether is the big batteries or whether it is gas generators. So.

All I will tell you is that the.

This is a very.

Exciting and important part of our capability and importantly is complementary to the existing business that we have so we see a lot of potential on cross selling bundling these energy resilience to our.

Current offerings now.

Could you give us any insight into how much of what you've done so far as cross sold and where it sort of multi product customers.

To what extent, it's instead of doing the same thing.

I mean right now it is really the market.

The product on its own has been incredibly exciting because particularly in California, but this is an area that we're focusing on right now on the cross sell right. How do you create these new products and with our existing offerings. So youre going to hear a whole lot more about that in the.

The coming months and quarters. This is the focus right now on that business and like I said I mean.

It always has a you know an evolution and I think that the energy solution that we have right. Now is one that just speaks very well with the current core offering that we give to our customers.

And maybe if I could just squeeze in.

Any comment.

Why you decided to exit the homestead.

The warranty business, which I think was part of the suite that you laid out.

The analyst day in May be might have come with direct if I remember correctly.

Yes, so John if you remember I said to all of you during Investor day that we were evaluating every single one of these new these capabilities to provide.

A new experience on two big categories Energy services and home services, but I also mentioned to all of you that we didn't need to completely vertically integrate every single one of them.

In some cases, we were going to partner in some cases, we were going to own the entire value chain in the case of energy resilience on goal zero, we are going to own it we're going to habits and we're moving this forward indication from warranty of America.

We decided to monetize these.

And keep in mind.

But we're not going to be home services, you need to think about these into two ways you have home protection and <unk> whole home warranties. So what we sold is the whole home warranties and what we're advancing ease their home protection.

Our services. So I mean, my expectation is that in the future we're going to we're going to work with our strategic partners for the home warranty you know whole home warranty business and right now we're testing and learning our home protection great. Thanks, a lot.

We have one more question from Michael Lapides from Goldman Sachs. Your line is now open.

Thank you for taking my question.

It's a two parter, but they're obviously related and it's stuff that we thought about prior to winter storm here, but when you first announced correct.

First of all.

What's your expectation or how are you thinking about.

The growth in mass market customer counts in Texas, meaning what you think your market growth just number of individual accounts do you think your survey kind of what are you embedding in your forecast for that and how youre thinking about customer churn.

Good so good morning, Michael I'm going to ask at least over to address the customer retention and customer count Felicia, Yes, Michael Thanks for the question. So I'll start by saying that we are very pleased with both our customer acquisition and our customer retention performance.

You may recall last year was a record year for retention for us and.

That is all underneath that acquisition and so one of the things that the <unk> acquisition, which was sizable and every time, we do a major acquisition you do see some transition of customers.

Really happy with our performance and as I mentioned.

Slightly better than we expected for first quarter.

And acquisition is also slightly better than first quarter as we look out with the rising customer.

Just because costs are up we do expect to see more market activity and given the strength of our multi brand multi product multi channel platform.

There is no other competitor that has the sweet spot for kind of the innovative pioneer with reliance and NRG that renewable pioneer with Green Mountain.

Frugal or are cost conscious with our serial and discount platforms, and then with our <unk> platform, which is really.

While <unk> customers to direct where they want their energy and to create that on their own.

We're positioned very well to navigate this year, we will have some transitions with the D E attrition and the small book acquisition attrition, but I am very pleased and you asked a question about what do we think the potential is we absolutely expect after this transition to grow.

C Lubbock market opening up next year in fact that they applied.

So the PUC just I think sometime this week and that all of the approvals needed are done and so we are.

Really excited about the platform, we have and the potential concern.

Got it and if I can one quick follow up another big piece.

I think about your communication when you first announced the direct deal.

Converting single fuel customer attainment dual fuel customers, if I'm not mistaken that's much more of an east coast and in ERCOT or Texas items can you talk about how much progress you've made in doing that meaning.

The east coast customers from inherited what percent.

15 months 16 months that you've owned direct have you been able to convert them into appeal.

Yes, so so.

Not going to give you the specific percentage, but what I will tell you is we have initiatives underway both in the east and in Canada focused on doing two things number one selling more gas directly because we doubled with the direct energy acquisition, we doubled our capabilities. There. So we have a lot more of that single fuel.

We'll grow that way will also grow in the dual fuel way, where we're selling not a single product.

But.

Second product and in some cases, a bundled offer a whole home so electricity and gas sold as a single offering so lots of activity underway, we are seeing that that new customer sale.

Significant success again, just a couple of percentage points better on the new sale.

For those customers buying dual fuel, where that's an option and most importantly, really setting up our platform. So that we can sell not only dual fuel, but other products and services as they are.

As it makes sense given the unique markets that we have.

And Michael I mean, this is one of the incremental disclosures that will be giving you know throughout the year. So if you. If you recall last quarter. We provided you additional clarity in disclosure of this quarter, we're starting to provide your disclosures around the new capabilities. So I think what you should expect is more metrics around.

Our efforts on how we're progressing.

These new.

Our focus on selling more than just one product.

Got it thank you guys much appreciated.

Thank you Marni no further questions at this time I would now like to turn the call back to movies obituaries.

Thank you.

I look forward to speaking with all of you. Thank you for your interest in NRG. This is a very exciting time for the company in a very exciting time for our industry. So look forward to.

Continue providing you with updates on our.

Initiatives.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program.

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