Q3 2024 NRG Energy Inc Earnings Call

Good day, Thank you for standing by welcome to NRG Energy's third quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will done here, an automated message advising johanning swings.

Please note that today's conference is being recorded.

Speaker Change: I'll now hand, the conference almost you speak of host Kevin Cole head of Treasury and Investor Relations. Please go ahead.

Thank you good morning, and welcome to NRG Energy's third quarter 2024 earnings call.

Speaker Change: This morning's call will be 45 minutes in length 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 Webcasts.

Speaker Change: 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.

Speaker Change: Actual results may differ materially.

Speaker Change: 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.

Speaker Change: Refer to today's presentation and with that I'll now turn the call over to Larry Coben Nrg's Chair.

Speaker Change: <unk>.

Larry Coben: Thank you Kevin and good morning, everyone I'm joined today by Bruce Chen, our CFO and receive spittle head of NRG consumer who will share an exciting update on our virtual power plant initiative. Other members of our management team are also on the call and available to answer questions.

Larry Coben: Let's start with today's three key messages as shown on slide four.

Larry Coben: First our strong performance this year led us to raise our 2024 financial guidance by $175 million in late September the second consecutive year, we have surpassed our original earnings target today, we are reaffirming this elevated outlook for 2024 and initiating strong guidance for 2025.

Larry Coben: Five.

Larry Coben: Second we're excited to announce a strategic partnership with renew home and Google supported by Google's AI platform to accelerate our virtual power plant efforts. This partnership strengthens our ability to meet evolving customer needs and marks the beginning of our efforts to scale the pp.

Finally, we're enhancing our guidance framework by introducing adjusted EPS were.

Larry Coben: We're also presenting a multiyear outlook supported by our new organic growth program and highlighting additional opportunities to exceed those targets and drive further shareholder value.

Larry Coben: On slide five let's review our 2020 for performance in 2025 guidance.

Larry Coben: Our year to date results and increased guidance are driven by strong plant operations effective supply risk management throughout the summer margin growth across all of our business segments and continued success and smart home.

Larry Coben: These results underscore the strength of our business model and position us exceptionally well for the future.

Larry Coben: I'd also like to note that in response to Investor feedback, we are now, including all amortization costs related to <unk> smart home and retail home energy and the depreciation and amortization line of the income statement.

Louis will provide more details and clear disclosures on this change which is noncash and has no impact on our cash flow metrics or adjusted EPS.

Larry Coben: This update enhances transparency and simplify financial reporting and modeling for our shareholders.

Speaker Change: We're initiating 2025 guidance now, including adjusted EPS, alongside our usual metrics of adjusted EBITDA and free cash flow before growth.

Speaker Change: For 2025, we expect adjusted EPS of $7 25.

Speaker Change: Adjusted EBITDA of $3 85 billion and free cash flow before growth of two 1 billion.

Speaker Change: This reflected a 14% increase in adjusted EPS from our raised 2020 for guidance and a 28% increase from our initial 2020 for guidance.

Our 2025 guidance incorporates the achievement of our key 2023 Investor day commitments.

Speaker Change: Reaching $550 million in run rate synergies, achieving investment grade credit metrics, and delivering 15% free cash flow before growth per share growth.

Speaker Change: This achievement is significant as our June 2023 projection of 15% to 20% free cash flow before growth per share growth was based on a 2025 share price of $46 or less than half today's trading price through.

Speaker Change: Through operational improvement and excellence accelerated growth and synergy achievement, we have stayed on and achieved this target.

Speaker Change: Today, we're also announcing that we are increasing our share repurchase authorization by an additional $1 billion.

Speaker Change: In short 2024 has been an outstanding year in 2025 will be even better.

Market conditions are highly favorable our operations remains superb and our outlook has never been stronger. It is an exciting time to be part of NRG.

Speaker Change: On slide six with the introduction of adjusted EPS, we're presenting our multiyear growth outlook targeting at least a 10% CAGR through 2029 based on our raised 2024 guidance starting from our original 2024 guidance. This race would approach to <unk>.

Speaker Change: 13%, reflecting the extraordinary operations and opportunities in our business.

Speaker Change: To provide a clear view of our EPS drivers we've divided this outlook into two categories.

Speaker Change: Organic business earnings growth and capital allocation.

Speaker Change: The business earnings portion only incorporates the organic growth plans of our core businesses with no value added for such opportunities as the tightening of the Texas power market or data centers.

Speaker Change: I will return to these additional opportunities shortly.

Speaker Change: Our long term outlook includes an annualized $750 million and adjusted EBITDA organic growth through 2029, largely driven by our consumer businesses.

Speaker Change: Key drivers include customer growth in smart home initiatives to increase home energy wallet share and advancements in our virtual power plant.

Speaker Change: We're also strategically expanding our commercial and industrial energy services footprint.

Speaker Change: In terms of capital allocation, we plan to return $8 $8 billion to shareholders with seven $1 billion dedicated to share repurchases.

Speaker Change: Looking at potential opportunities to significantly exceed this outlook, we have not factored in any rise in Texas power prices, which we've held at $47 through 2029, despite expected market tightening from growing demand.

Speaker Change: We have provided growth sensitivities for your additional villas ability into our gearing and to allow our investors to reflect on and sensitize their expectations.

Speaker Change: Our projections also include contributions from our 'twenty, one site development portfolio and to shovel ready, Texas Brownfield projects that were not selected for the Texas Energy Fund.

Speaker Change: Each of these represents additional upside to our baseline growth expectations.

Speaker Change: I will explore these elements in greater depth over the next two slides.

Speaker Change: Our long term outlook emphasizes the strength of our platform and shows that we are well positioned to capture emerging opportunities in our sector.

Speaker Change: Moving to slide seven let's break down our $750 million growth plan, driven by disciplined investments in high value initiatives.

Speaker Change: Our growth is expected in each of our primary businesses around 30% from home energy, 50% from smart home and 20% from commercial and industrial energy.

Speaker Change: In home energy, we're focused on leveraging our strong Texas market share to expand wallet with our customers. We have been testing a home essentials bundle that provides energy customers added value, while increasing margin and retention and the results have been very encouraging.

Speaker Change: This initiative also enhances our ability to scale, our virtual power plant offering.

Speaker Change: We will provide details of these initiatives later on in the presentation.

Speaker Change: For smartphone growth is driven primarily by continued customer base expansion, which we have a strong record of achieving historically, we will also attract a broader segment of customers through new and less expensive bundles.

Speaker Change: In commercial and industrial energy and NRG business, we're enhancing our platform by incorporating AI into both sales and customer care, which will increase speed improve service quality and reduce costs. We're also expanding in our existing markets by offering advanced products such as load management.

Speaker Change: Reduced carbon options. Additionally.

Speaker Change: Additionally, we are broadening our highly successful strategic client services for both electric and natural gas customers, resulting in incrementally higher unit margins.

Speaker Change: To meet our $750 million annualized EBITDA target, we plan to invest up to one $6 billion over the next five years, that's the total investment implying return on investments approaching 50%.

Speaker Change: We expect these initiatives to convert to free cash flow before growth at a rate of approximately 90%.

Speaker Change: These initiatives align with our 80 20 capital allocation framework reinforcing our commitment to you of disciplined high return growth.

Speaker Change: I am very confident that we will meet and likely exceed these base targets I look forward to keeping you updated on our progress.

Speaker Change: Now, let's look at some of our other opportunities on slide eight.

Speaker Change: On the left we show our 2025, Texas generation open gross margin sensitivity to various around the clock power price scenarios.

Speaker Change: This analysis assumes stable natural gas prices and normal weather conditions for.

Speaker Change: For further details on multiple hedging scenarios, please refer to the appendix.

Speaker Change: This highlights the substantial value potential of our Texas generation under different price scenarios as markets tightened due to rising demand previously uneconomic generation can become not only economic but highly profitable. The table also highlights the asymmetrical nature of our gear.

Speaker Change: During to power play race fluctuations.

Texas remains the country's most attractive power market drawing major demand growth.

Speaker Change: For instance, the largest Houston transmission company recently reported an eight gigawatt two of datacenter demand a 700% increase from pre summer levels by comparison, Northern Virginia, the largest U S data center market has a total installed capacity of around half that.

Speaker Change: This demonstrates the kind of structural load growth in Texas that could drive significant value beyond our base case.

On the right we feature our portfolio of 21 development sites at current or former power plants, all located in competitive markets.

Speaker Change: These sites offer desirable attributes in key infrastructure, making them ideal for projects that prioritize speed to market.

Speaker Change: In Texas, We also continue to evaluate the best use for our two shovel ready brownfield projects that total one one gigawatts in capacity.

Speaker Change: Since they were not selected under the Texas energy funds, one asset per developer allocation, we have the flexibility to explore other value enhancing options for these projects such as directing them to hyperscale.

Speaker Change: Together these opportunities represent two of the many high quality tangible path to creating additional value well beyond our baseline expectations.

Speaker Change: On slide nine.

Speaker Change: We outlined what this means for the substantial cash generation, we anticipate in the coming years.

Speaker Change: Our capital allocation plan balances disciplined growth with substantial capital returns to drive sustained value well into the future.

Speaker Change: Our growth initiatives exceed our hurdle rates and we invest only where we see exceptional value.

Importantly, these investments also exceed the implied return of repurchasing our own stock, which currently trades at a low teens free cash flow yield that is an extraordinary value in my view.

With that let me turn it over to <unk> Patel, the head of NRG consumer who will provide an exciting update on our virtual power plant initiatives.

Speaker Change: Thank you Larry turning to slide 10, I am thrilled to announce our strategic partnership with renew home and Google to default of one gigawatt residential virtual power plant <unk> in Texas.

Speaker Change: This partnership brings together leaders across the energy and consumer technology industries to develop an innovative energy management solution for NRG and our customers.

Our intention is to combine nrg's consumer reach and supply management expertise with renew homes residential demand response capabilities and Google's advanced AI technology.

Speaker Change: This will enable us to deploy smart thermostats and other devices that will allow our customers to optimize their energy use and save money, while enhancing the stability and flexibility of our supply strategy and the Texas grid.

Speaker Change: On Slide 11, you will find the key components of our partnership with.

We'll develop a compelling personalized energy management platform that provides near real time dispatch of capacity at a fraction of the cost of a generation plan.

Speaker Change: New home will provide the demand response capabilities and we will fund a significant portion of customer acquisition costs minimizing Nrg's capital Holly.

Speaker Change: This collaboration also positions NRG as the partner for all new Google Nest DPP enrollments in Texas.

Speaker Change: NRG will manage the customer relationship experience and dispatch of DPP events.

Speaker Change: As illustrated in the BCP capital efficiency metrics at the bottom left of the slide this is an economically attractive approach to supplementing our generation portfolio.

Speaker Change: <unk> investment is roughly 110 of our new <unk> plant, while delivering an IRR of greater than 50%, which is significantly higher than traditional alternatives.

Speaker Change: On the right hand side of the page you can see our plan to scale. This program with the goal of reaching 650 megawatts of detachable capacity by 2030, and a gigawatt by 2035.

Speaker Change: Now, let's turn to slide 12, where we outlined our strategy for bringing the virtual power plant program to market with an exciting new offering to.

Speaker Change: To accelerate our VP efforts in Texas, we're introducing the home essentials bundle, which includes a visit smart thermostat doorbell camera and professional installation all provided at no cost to customers enrolled in the PPP plan as long as they remain in NRG energy customer.

Should they choose to leave they can continue to receive the smart home services for a monthly fee of 14 99, allowing customers to continue enjoying the benefits of smart home, while protecting our investment in their experience.

Speaker Change: We have tested this new value proposition with select energy customers in Texas and the results have been very encouraging.

Speaker Change: In our pilot, we're seeing strong adoption of this offer and a step change in customer engagement with the average household using our smart home app more than 160 times per month.

Speaker Change: Moreover, 20% of these customers have opted to purchase additional smart home products and services that generate incremental recurring revenue.

Over time, we see this bundled becoming a powerful entry point that will deliver enhanced value to customers build scale for VP and encourage customers to explore a broader suite of smart home services.

We are leveraging our strong market share in Texas to expand our share of wallet with customers with renew home co funding up to $150 of customer acquisition costs through our <unk> partnership.

Speaker Change: This go to market strategy focuses on making smart energy solutions accessible valuable and deeply engaging we're meeting our customers where they are with solutions that empower them to take control of their own and energy experiences while strengthening their relationship with NRG.

Speaker Change: We will make homebase essentials broadly available in Texas Spring 2025.

Speaker Change: Moving to slide 13, let's take a closer look at how our virtual power plant generates value and deliver strong economics through two distinct value streams consumer and supply.

Speaker Change: On the consumer side, where we retain 100% of the economic benefit we expect margin uplift and increased tenure for customers adopting the homebase essentials bundle as well as incremental recurring revenue from customers opting for additional smart home services.

Speaker Change: The home energy industry relative to other consumer services has elevated customer churn and we expect this initiative to improve customer retention due to the enhanced value engagement and savings from this integrated offering.

Speaker Change: On the supply side, where we retained over half the economic benefit.

Speaker Change: We have provided an illustrative breakdown that shows how VP creates margin opportunity based on the number of events for summer and the implied in the money power price.

Speaker Change: Beyond direct value. This asset also provides critical risk mitigation, allowing us to dispatch the DTP to further stabilize our supply portfolio during periods of volatility.

Speaker Change: At scale for a 650 megawatt DPP, we anticipate approximately $110 million in annual recurring margin for NRG $80 million from consumer value and $30 million from supply value.

Speaker Change: Looking ahead to a one gigawatt DPP, we project the total annual incremental margin to exceed a $160 million, making <unk>, a highly profitable and flexible asset that strengthens both our financial and operational resilience.

Speaker Change: If Texas supply becomes more constrained in the coming years as many expect the value to NRG and our customers will only increase.

Speaker Change: I look forward to keeping you updated on our progress as we execute this plan with that I will turn it over to Bruce to provide the financial review.

Speaker Change: Thank you <unk> before I discuss our third quarter results I'd like to provide a few updates on our key financial performance and valuation metrics as you can see on the slide we are introducing adjusted net income and adjusted earnings per share as part of our reporting framework. These metrics offer additional context for NRG.

Speaker Change: <unk> profitability and growth capturing both underlying business growth driven by investments into our platform as well as the impact of our robust capital allocation program.

Speaker Change: For 2024, we are on track to deliver $1 3 billion of adjusted net income equivalent to $6 35 per share of adjusted EPS.

Speaker Change: The midpoint of our raised adjusted EPS guidance represents a 12% increase over the midpoint of our original guidance, reflecting the strong business performance.

Speaker Change: We are pleased to provide these additional tools for investors to use in their evaluation of the investment merits of NRG.

Speaker Change: We believe these new metrics, coupled with our preexisting metrics such as free cash flow before growth per share will continue to shine a spotlight on nrg's attractive valuation.

Speaker Change: We will continue to provide adjusted EBITDA and free cash flow before growth alongside these two new disclosures for the foreseeable future.

Speaker Change: Going forward and including today's third quarter results. Adjusted EBITDA has been updated to recast all amortization of capitalized customer acquisition costs from SG&A and cost of operations into the depreciation and amortization line item.

Speaker Change: This change addresses a point of common confusion that investors have given us direct feedback on this.

Speaker Change: This is part of our ongoing commitment to provide better visibility into our businesses and simplify the modeling process.

Speaker Change: More details are available in our 10-Q as well as in the Reg G tables appended to the presentation and this morning's press release.

Speaker Change: As you can see on the right hand side of the slide this change results in an upward adjustment to the midpoint of our 2024 guidance by $130 million from $3 $5 6 billion to $3 73 billion.

Speaker Change: We have accordingly, recast adjusted EBITDA for historical periods to conform with this methodology and to allow for direct comparison of our results across reporting periods. This is simply a geography change of noncash items and therefore has no impact on any of our reported free cash flow before growth or adjusted EPS metrics and.

Outlook.

Speaker Change: Turning to slide 16, NRG delivered another strong quarter of financial and operational performance with adjusted EBITDA of 1.055 billion in.

Speaker Change: An increase of $68 million over the third quarter of the prior year.

Speaker Change: Texas delivered $584 million of adjusted EBITDA for the quarter $32 million higher than Q3 of 2023.

Speaker Change: When adjusted for asset sales executed in 2023, our outperformance was approximately $80 million.

Speaker Change: This improvement reflects the strength and resilience of our integrated platform.

Speaker Change: Unlike last year, Texas was marked by a lot by a lack of power price volatility and generally lower pricing. Despite warm temperatures our integrated supply strategy and the ability to turn off units during periods of low pricing enabled us to maximize margins as we served our retail load.

The ability to cycle, our plants on and off as part of our overall supply strategy is what gives us confidence in delivering consistent financial results through a variety of market conditions.

Speaker Change: Our east West and services segments also demonstrated improved year over year outperformance.

Speaker Change: Adjusted EBITDA for the quarter was $214 million, representing an $18 million increase from the prior year. This improvement was primarily driven by lower power and natural gas supply costs, resulting in margin expansion and an increase in average customer counts of 7%.

Speaker Change: Finally, our smart home segment delivered $257 million of adjusted EBITDA for the quarter and $18 million increase from the prior year.

Speaker Change: This was driven by mid single digit growth in our subscriber count and continued net service margin expansion of 6%, reflecting the embedded operating leverage of the business as the subscriber base continues to grow.

Speaker Change: As you can see on the table, we have added disclosures for adjusted net income and adjusted EPS for the third quarter NRG produced $393 million of adjusted net income equivalent to a $1 90.

Speaker Change: Earnings per share.

Speaker Change: This represents a 21% increase over Q3 2023 results, primarily driven by higher gross margin and share repurchases.

Speaker Change: Free cash flow before growth for the quarter was $815 million of $460 million increase over Q3 2023.

Speaker Change: This reflects higher gross margin favorable working capital and lower Capex given the completion of the parish restoration work in 2023.

Lastly, we are reaffirming our revised 2024 financial guidance and have provided our guidance ranges across all the key reporting metrics, including adjusted net income and adjusted EPS.

Speaker Change: Turning to 2024 capital allocation on slide 17, we continue to deliver on our capital allocation priorities. There are only a few minor changes to the capital allocation waterfall from our second quarter earnings call.

Speaker Change: On our last earnings call, we announced an agreement to sell our <unk> HVAC business that transaction closed in late September as a result, we are updating the net cash proceeds from the <unk> sale to approximately $425 million.

Speaker Change: We are also increasing free cash flow before growth by $100 million.

Speaker Change: For liability management preferred dividends, we have reduced our 2020 for allocation to $420 million from $602 million, our aggressive debt reduction over the past few years, coupled with improved financial performance will result in achieving our target credit metrics by the end of 2020 for a full year earlier.

Speaker Change: And then originally intended as a result, we have reduced the amount of liability management, we had intended to pursue in 2024 and have reallocated that cash to our remaining unallocated capital.

Speaker Change: We have increased our share repurchase total from 825 million to $925 million, which reflects the increase in our 2024 Mcf BG guidance through.

Speaker Change: Through October 31, we completed $544 million of repurchases and we expect to complete the remaining repurchases by year end.

Speaker Change: Inclusive of our year to date activity, we have executed over three 8 billion in share repurchases at an average price of around $50 since 2019, representing nearly 30% of our shares outstanding.

Speaker Change: In our other investments, we have allocated $122 million for other growth, including updated spend associated with our ERCOT Newbuild project.

Speaker Change: Finally, we expect to end 2024, with approximately $605 million of unallocated capital, which we have rolled into 2025 for application towards continued share buyback programs.

Speaker Change: Turning to the next slide we are excited to introduce our financial guidance for 2025.

Speaker Change: We are guiding 2025 full year adjusted EBITDA to a range of $3 75 to $3 97, 5 billion, representing a midpoint of $3 85 billion.

Speaker Change: Or an 8% increase from our original 2024 guidance midpoint.

Speaker Change: As you can see from the chart at the bottom. This is driven by the completion of our previously announced growth and cost synergy programs.

Speaker Change: Margin expansion from higher power prices and partly offset by the lost EBITDA from the sale of their trial.

Speaker Change: We are also guiding 2025 full year free cash flow before growth to a range of $1 95, one 975 to two to two 5 billion.

Representing a mid a midpoint of $2 1 billion.

Speaker Change: Also an 8% increase over the midpoint of our original 2024 guidance in.

In addition to adjusted EBITDA and free cash flow before growth, we are initiating guidance for adjusted net income and adjusted earnings per share for full year 2025, we are initiating guidance on adjusted net income to a range of $1 33 to one $5 3 billion representing.

Speaker Change: Representing a midpoint of $1 43 billion and a range of $6 75 to $7 75 for adjusted EPS, representing a midpoint of $7 25 per share.

Speaker Change: Moving to the next slide we are providing a five year road map with the major drivers of our adjusted EPS and free cash flow before growth investment outlook on a per share basis.

Speaker Change: As you can see on the slide we are targeting long term adjusted EPS and FCS EG per share growth of greater than 10%. These.

Speaker Change: These growth rates are pegged against our recently increased 2024 guidance more modeling disclosures can be found in the appendix of today's presentation.

Speaker Change: Our five year outlook is underpinned by visible organic growth, resulting in $750 million of incremental run rate adjusted EBITDA and a robust capital return program of nearly $9 billion over the 2025 to 2029 period.

Speaker Change: I'd also highlight that this five year outlook assumes flat power pricing and does not include any of the additional upside opportunities Larry touched on earlier.

Speaker Change: As you can see on this slide our organic growth plan and share repurchases comprised nearly $4 of EPS growth and nearly $6 50.

Speaker Change: Of FCS Vg per share growth.

Speaker Change: Offsetting this growth is an increase in taxes as available tax credits expire in 2025 and as NRG continues to generate strong earnings that utilize NOL balance.

Speaker Change: In addition to taxes, we are projecting the impact of higher interest costs on earnings and free cash flow growth as maturing low cost debt is refinanced at higher rates.

Speaker Change: Turning to 2025 capital allocation on the next slide and starting on the left side of the chart. We are showing approximately $2 7 billion of cash available for allocation, which includes the carryover amounts from 2024.

Speaker Change: As I have already noted we will achieve our target credit metrics earlier than originally forecasted and as such our liability management program in 2025 will be comprised of settling the convertible note hedge and preferred stock dividends.

Speaker Change: As you can see the primary focus of our 2025 capital allocation activity will continue to be share repurchases with $1 $36 billion planned for 2025 together.

Speaker Change: Together with the planned 8% increase in our common dividend to $1 76 per share. Our total return of capital is currently expected to be about 85% of capa after liability management and integration costs.

Importantly for those keeping a scorecard we are on track to significantly exceed the original return of capital commitments shared as part of our 2023 Investor day with more than $4 5 billion to be returned from 2023 through 2025 gig.

Speaker Change: Given our outstanding performance relative to the 2023 Investor Day plan, our board of Directors approved an increase in total authorization for repurchases from $2 7 billion.

Speaker Change: The $3 7 billion.

Speaker Change: As of October 31.

Approximately $2 billion is remaining under the total authorization inclusive of this increase.

Speaker Change: In 2025, we have allocated $165 million to other investments, which includes continued progress on our ERCOT Newbuild program and investment in near term actionable initiatives related to our long term organic growth plan.

Finally, we are showing $235 million of unallocated capital, which we will allocate over the course of 2025.

Speaker Change: With that I'll turn it back to you Larry.

Larry Coben: Thank you Bruce.

Larry Coben: Turning to slide 22.

Speaker Change: We've provided you today, a detailed view of our compelling five year financial outlook.

Enhanced with additional disclosures for clearer insights into our earnings and growth trajectory.

Speaker Change: Our plan is simple transparent and backed by durable recurring cash flows and a strong balance sheet.

Speaker Change: We're confident in achieving our long term targets of at least 10% growth in adjusted EPS and free cash flow before growth per share.

Speaker Change: With numerous opportunities to significantly exceed these goals.

Speaker Change: In closing on Slide 23, 2024 has been another year of strong execution.

Speaker Change: We have delivered financial operation and capital allocation results, well ahead of guidance and expectations.

Exceptionally proud of the work of our 18000 employees across all of our organization who have driven these results.

Speaker Change: I am deeply committed to driving NRG forward to creating additional significant shareholder value.

We are seeing a long term step change improvement in fundamentals across our platform.

Speaker Change: You can expect a continued and remaining heightened focus on operational excellence prudent growth and being good stewards of our investors' capital.

Speaker Change: I have never been more excited about the potential of NRG than I am today.

Speaker Change: Thank you for your time and continued interest.

Speaker Change: Operator, we're now ready to open the line for questions.

Thank you.

Speaker Change: And gentlemen to ask a question you will need to press star one on your telephone and wait for your name to be announced.

Speaker Change: Your questions.

Speaker Change: One again, please standby, while we compile the Q&A roster.

Speaker Change: And our first question is.

Speaker Change: Your line onshore turbines.

<unk> partners. Your line is now open.

Speaker Change: Hey, guys good morning good.

Speaker Change: Good morning, Shar how are you.

Speaker Change: Alright, quite an update Larry quite an update.

Speaker Change: Let me just start just I wanted to touch on the process around the sites.

Some of your peers. This week mentioned portfolio approaches to Hyperscale or deals you have the ability to provide a degree of additionality with the gas units is it still your plan to sort of update the street in January and how are you seeing.

Speaker Change: Are you seeing more interest in one region versus the other thanks.

Speaker Change: Yes, and yes, no sorry.

Speaker Change: Yeah.

Vince any before by the way.

Speaker Change: It works.

Speaker Change: Yes.

Speaker Change: I got too high for the first clients kind of Guy.

Speaker Change: But we are so we are going to provide an update as we said by the fourth quarter call.

Speaker Change: And we're seeing a lot of interest across our sites both in PJM and in Texas. Both in portfolio approaches ended individual approaches look I think.

Speaker Change: It's a very complex process.

Speaker Change: Rapid lead changing people are still figuring out exactly what it is that we want and I think by stepping back as we did and now diving back in we're really in a position to optimize the value of what we have so still super excited we've done a lot of more site analysis as you can see in the appendix here.

Speaker Change: And we look forward to updating you when that time comes.

Speaker Change: Got it and then as we get more disclosures you plan on layering in.

Speaker Change: The optionality into the numbers.

Speaker Change: Through time or how do we how do we get an update I mean.

Speaker Change: I think as.

Speaker Change: As we know what the numbers are we will layer. The mid now remember how we talked about before some of this may be things that we never ever disclose because someone comes to us.

Speaker Change: They want an extra 1000.

Speaker Change: <unk> of something and then we decide we're going to build the plant and some hyperscale or may or may not want those two events tied together. So one of the ways that you may see that we're doing this is all of a sudden raising our estimates raising our CAGR all of those kind of things rather than one off announcements could go either way.

Speaker Change: But thats, where youll see it.

Speaker Change: Alright, perfect and then just lastly, coming back to sort of identified growth component of the plan. Appreciate obviously the breakdown between the segments through 29. Some of these are obviously familiar to investors like the C&I margin customer accounts, but some aren't.

Speaker Change: Do you see kind of the most room for variability within these three verticals and then any color on cost to achieve I appreciate it.

Speaker Change: Sure look I think we've put out plan that we're really excited to and feeling really good about signing up for and I think we see bias to the upside across all of these things I mean.

Speaker Change: If theres a world recession or something are people going to move less and maybe purchase less energy or fewer smartphone anything is possible same in the industrial sector, but we feel really good sorry about what we've signed up here for and to achieve this $750 million of annualized EBITDA over the next five years, we're going to invest one.

Speaker Change: $6 billion in.

Speaker Change: In total so thats the cost to achieve.

Perfect I appreciate it guys. Congrats on the results and it's good to see that Bruce was busy I appreciate it.

Yeah.

One is once a year, whether it needs through or not.

Chuck: Thank you Chuck.

Thank you and our next question coming from the line of Julien Dumoulin Smith with Jefferies. Your line is open.

Speaker Change: Hey, Larry Good morning, guys. Thanks for the chat.

Growing up a little bit.

Speaker Change: Hey, good good good Plaza guys nicely done maybe just following up a little bit of a sharp pick first year, let me needle a little further on this in terms of just the updated timeline and more specifically what that could look like as you think about.

Speaker Change: To set expectations around shall we say January or otherwise here right is it principally our you're offering geared principally towards this additionality and leveraging those two additional sites or are you still thinking it seems earlier that you were principally focused on the Midwest portfolio. The site value. There we've seen a lot of excitement in the Midwest is that more of where we should be thinking.

Speaker Change: Again I know this.

Speaker Change: 20, plus sites here.

Speaker Change: I think it will be.

Speaker Change: What permutations.

Speaker Change: Think it's both I mean, I think what's happened is we.

Speaker Change: We're obviously still but we're laser focused on the 21 sites and we remain so but when the <unk> decided that they were only going to give one loan per customer as they did that.

Speaker Change: We felt we felt for us that opened up the additionality potential for those to shovel ready projects and so we've kind of just put them into the mix post the TGF announcement, which was around the end of August you'll recall and I think a fair amount of interest because as you know and I think you've written about additionality is going to be Chris.

Nicole going forward to the development of these kinds of sites and to have shovel ready additionality is rare.

Speaker Change: Right, Yes, indeed, and actually just to clarify that even.

Speaker Change: With respect to tariffs would you expect tough part to here to include those sites here.

Speaker Change: Is sort of the idea to double dip if you will between test and additionality next year potentially with your customer.

Speaker Change: We haven't put out any guidance at all about type two we don't know if it's going to occur. So we're going to push forward right. Now is if there is no <unk> II for those projects but.

Speaker Change: That shows up obviously, that's one option that we will consider I don't know that youll be able to double dip will have to wait and see what the rules are but we don't need to double dip to make those very attractive to somebody who is looking for additionality.

Speaker Change: Okay excellent. Thank you and <unk> added that one 6 billion I think how much does it cost you to do the <unk> I think you said $100 kilowatt. So it's like $65 million for the six months.

Speaker Change: One of the unique things about GBP is we don't have to wait to get the benefit as we acquire customers and but the asset to work, we actually start to realize the value in so <unk>.

Speaker Change: Think of it as well.

Speaker Change: We ramp up investment.

Speaker Change: And it stays below $50 million for us because we start to gain gain benefits from the deployed assets.

Speaker Change: Alright excellent guys. Thank you so much <unk> calculator.

Speaker Change: Thank you.

Speaker Change: Our next question coming from the line of Andrew <unk> with Seaport. Your line is now open.

Speaker Change: Thank you, it's kind of honey thats, how all these questions are focused on what else do you have.

Speaker Change: Even though the entire call was filled with announcements.

Speaker Change: Okay.

Well said.

That bar set really high.

Speaker Change: Yes.

Speaker Change: So my question is about.

Speaker Change: The DPP virtual power plants so.

Speaker Change: We're seeing some.

Speaker Change: Cooling off in late <unk>.

Speaker Change: Battery investments in Texas right.

Speaker Change: Yes.

We have a station that existing batteries in fact to cannibalize on peak power prices and that eats into the other pricing arbitrage that these batteries rely on.

Speaker Change: And so why shouldnt the same be true for the VPN.

Speaker Change: That the biggest component of the profitability of this business is basically customer retention so the energy.

Speaker Change: Component is relatively small, but why shouldn't that be true that in a sense.

Speaker Change: That the curve getting flatter and your ability to actually capture this additional energy benefit.

Speaker Change: Malware.

Rob: Hey, Angie it's Rob.

Rob: Great observation.

Speaker Change: I would tell you or remind you is because we serve consumer energy customers. We're always building our portfolio and we're including that component that I called insurance right the options on the backend.

Speaker Change: What <unk> does is it provides that right. So as we think about the customer and as we think about how we ensure against an extreme events.

<unk> DPP is it is the perfect hedge.

Speaker Change: For that kind of exposure so when I look out the curve and as we're building the portfolio over time.

Speaker Change: <unk> does is it helps me.

Speaker Change: Manage the risks of a consumer energy business without having to go to a third party or dropping.

Speaker Change: A lot of money to build massive pickers to meet that same obligations. So I feel really good about the economics that we've got here and as far as the long term perspective. This is absolutely the best tool to manage the risk of a home based energy book does that help.

Speaker Change: Okay. So basically it is that.

Speaker Change: Most cost effective way to hedge against.

And.

Speaker Change: Super peaks right I mean, absolutely not that not that we've seen it and that's my other question is that.

Speaker Change: I mean, we keep hearing those incredible announcements.

Speaker Change: Almost hard to even believes that they can be said with a straight face right.

In Texas from Encore, I mean, and yet the curve has just not reacting at all it's almost the same.

Speaker Change: And again it could it be that that this mode is not going to impact.

Speaker Change: Impact 2008, or even 'twenty nine and that's why we're not seeing any any response or how can you actually reconcile the lack of SaaS.

Speaker Change: In response in forward power curves in Texas, Yes.

Speaker Change: I look at both of those things.

Speaker Change: What I would tell you is that.

Speaker Change: I am with you I don't believe that the curve reflects.

Speaker Change: The load that we expect the supply demand picture that we would expect in the future.

Speaker Change: As far as how we think about it and whether or not it's going to show up.

Speaker Change: I believe that the loads coming I don't know if its 80 gigs and honestly, we don't need any gigs, but part of the curve remember in the reaction incentive pricing is pretty short sighted viewing or.

Just looking a little bit into history. This summer was a little less warm than last year.

Speaker Change: Didn't have any real price formation.

Speaker Change: We did last year and then everybody.

Speaker Change: Kind of lost sight of what could happen. If you look into the future and you think about okay. Well. If you just add a little bit of incremental load into the ERCOT market you have a real opportunity, giving a renewables profile and call. It abnormal weather to really get price formation, and then everybody will be excited again and the curves will go to the moon.

Speaker Change: Arun.

Speaker Change: And we will be managing through it you've seen this before we've all seen it.

Speaker Change: Don't think that these curves in 2008 2009 and beyond reflect reality.

Speaker Change: Okay.

Speaker Change: Last question, so maybe accretive both Bruce and Larry is there.

Speaker Change: Free cash flow yield.

Speaker Change: No.

Speaker Change: Below which you think share buybacks.

Speaker Change: Just on warranted and there is some other way of capital return.

Speaker Change: M&A or some other strategy change.

Speaker Change: Angie there there is one but I don't think we're anywhere close to it.

Speaker Change: I mean, we're still in the double digits. So when we get to the mid single digits. Maybe we can have that kind of a look again, depending on what the opportunities and the world looks like.

Speaker Change: But right now given the undervaluation of the stock.

Speaker Change: It's still a pretty high hurdle rate for us but.

We all look forward to the day and I'm sure you do too that when the stock is trading so high that that becomes a real question for us.

Speaker Change: Yes to infinity and beyond okay.

Speaker Change: Two <unk>.

Speaker Change: Thank you Angie.

Speaker Change: And our next question coming from the line of Michael Sullivan with Wolfe Research. Your line is now open.

Michael Sullivan: Hey, good morning.

Speaker Change: Morning, how are you.

Speaker Change: Good congrats on all.

Speaker Change: All the announcements here.

Speaker Change: Just I know you gave this 10% plus and said it can can vary.

Speaker Change: Year to year, but just to clarify does that mean you can go below it below 10% in some years or it's just going to be 10%.

Speaker Change: Or better in every year and how much better can vary.

Speaker Change: Yes, I mean, Mike I think the reality is there are going to be there may be some years, where it might go below there might be some years, where it's going to go above but generally speaking on a long term basis.

Speaker Change: We see visibility around that plus 10%.

Over the long term.

Speaker Change: Okay and just.

Speaker Change: Specifically on that so if we if we go to slide 19 with the tax impact does that all fall away in 2006, So should we think of like 26% as being a lower year and then you kind of.

Speaker Change: Catch back up again in the areas where.

Speaker Change: There is an incremental increase in the tax rate after 25 because of expiring tax credits I think the way that we think about.

Speaker Change: That.

Speaker Change: That growth is to the extent that there is a drag as a result of an incrementally higher tax rate, we probably see some business performance and business growth.

Speaker Change: Offsetting offsetting that drag.

Speaker Change: Okay, Okay great.

Speaker Change: And then the GTP announcement.

Speaker Change: Good to see there and maybe just.

Speaker Change: Is it fair to kind of bifurcated as you broke out the $80 million component as being.

Speaker Change: Kind of more stable and then locked in and then that $30 million component.

Speaker Change: It looks like.

Speaker Change: Would have been a lot better in 'twenty three if you get to somewhere like that and then if we got this summer maybe.

Speaker Change: <unk> been around that level is that fair.

Speaker Change: Michael This is rajeev, yes.

Speaker Change: A good way to think about it the customer value is going to be stable and very sustainable.

Speaker Change: The supply value, which can add a little more color on.

Speaker Change: That can be significantly higher in in years.

Speaker Change: Tanker markets.

Speaker Change: And so I think that's the right way to think about it Rob yet would you add anything so the thing I would.

Rob: How do you think about from the supply perspective remember that we are using this in some.

Speaker Change: Some form of insurance right. So the values on the page represent.

Speaker Change: What what it would cost me right on the top part of the slide. This is what we would have which is what we save by not having to go and replaces without heat rate call option or something like that.

Speaker Change: The representation down at the bottom, where we talk about the different years. So in 'twenty three the value of that insurance would have been considerably more valuable than saying this year, where we didn't have any real price formation, but when you think about it long term with NRG and how we build it in the portfolio I'm going to buy that ensure.

<unk>, regardless so on building the book 12 months to 18 months out we're putting in the insurance to protect our business and so we're going to capture the values up at the top and then that the representation at the bottom is just the value that that protected me from I bought insurance in 'twenty three that was really valuable.

Speaker Change: I bought insurance this year and I didn't need it.

Thats the examples at the bottom.

Speaker Change: The value that we see around GBP is consistent year every year, regardless of the circumstances, because I'm going to buy that insurance to protect the portfolio anyway does that makes sense.

Speaker Change: It does thanks, Thanks, John that's really helpful.

Speaker Change: Okay, and then last one just to round it out there too.

Speaker Change: That's pretty sizable.

Speaker Change: Can you, maybe just give us a sense of.

Are there any competitors out there or other people looking to do this or how big does that <unk>.

Speaker Change: P market get in Texas overall outside of what you were doing.

Speaker Change: It's a great question and one of the reasons I think NRG is so uniquely positioned is we have a scaled customer base, we have the supply management expertise and now partnering with new home and Google.

Speaker Change: Partnered with the largest demand response platform in North America.

Speaker Change: The partnership also gives us.

Lucidity to all new nest thermostat enrollments into demand response in Texas.

Speaker Change: And to give you context around that there are already million nest thermostat deployed in ERCOT, almost 300000, which are overlapped with the energy customer base and so.

Speaker Change: This is.

Speaker Change: This is a very unique opportunity for NRG.

Into everything that we've outlined today is it's.

Speaker Change: Showing you the thermostat opportunity, but we will be working with our partners to tie in batteries electric vehicles other things onto the platform, where we can leverage already deployed resources.

Speaker Change: Into this into this platform and so Michael I think it would be very hard.

Speaker Change: For anybody else to replicate this at scale.

Speaker Change: Okay awesome. Thank you so much.

Speaker Change: Thank you.

Speaker Change: And our final question comes from the line of.

Speaker Change: David Arcaro with Morgan Stanley. Your line is now open.

David Arcaro: Hey, thanks, so much good morning.

Speaker Change: Hi, David how are you.

David Arcaro: Good good.

I was wondering if there is.

David Arcaro: Organic growth kind of opportunity at the retail energy business that could be potential upside from here how is that incorporated in there.

David Arcaro: It seems like we're seeing pretty good.

David Arcaro: Residential growth in Texas over time, plus all of the C&I growth potential from.

Data center load didn't really see that maybe clearly called out as one of the components of the EBITDA growth opportunities. So I'm wondering.

Speaker Change: How youre thinking about that.

Speaker Change: That's great question the way I would.

Speaker Change: Really think about this is we have very strong market share on the residential energy site in Texas rate nearly 40% share of the market and so the larger opportunity. We see is how do we leverage that.

Speaker Change: That household relationship to actually expand share of wallet with customers.

Speaker Change: And through the launch of homes based essentials, we're giving are.

Our existing skilled customer base, a lot of incremental value and in the trial that we've seen over the summer we provided.

Speaker Change: Customers this new bundle.

Speaker Change: 80% of them have already bought incremental smart home services from us and that's that's very attractive. So I would just characterize that as there will be opportunity, obviously with modest household growth, but a larger opportunity for NRG is to expand the share of wallet leveraging the near 40% market share we have in home energy.

Yes got you absolutely makes sense.

Speaker Change: Maybe on that data center side is there.

Growth coming to your service territory that would boost.

The commercial and industrial side of the business in terms of retail contract opportunities in retail growth.

Speaker Change: Are you seeing data centers show up in that.

Speaker Change: In the retail business.

Speaker Change: Coming come to you with multi year.

Speaker Change: Energy contracting opportunities.

Short answer is yes.

Speaker Change: We are definitely seeing data centers coming with.

Speaker Change: Long term contract requirements and then the way to think about how it affects the rest of the C&I marketplace.

Speaker Change: In a market, where there is growing tightness and there is competition for those megawatts.

Speaker Change: Senate Bill.

Speaker Change: And we've talked about it.

Speaker Change: There is a flight to quality that occurs amongst large industrial and commercial customers, where they want additional services they want.

Skilled operators on the other side of their contracts.

Speaker Change: So we see an uplift into our opportunity set as we see this trend continue in ERCOT.

Speaker Change: Honestly in PJM.

Speaker Change: Got it okay, great. Thanks, so much.

David Arcaro: Thanks, David.

Speaker Change: Thank you and I'm showing no further questions in the queue. At this time I will now turn the call back over to Mr. Larry Cohen for any closing remarks.

Larry Cohen: Want to thank you all for your interest in NRG as you can tell from our releases our slides in our presentation. We are all super excited about our business and we look forward to keeping you up to date on it going forward.

Larry Cohen: Have a great day and have a great weekend.

Speaker Change: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: [music].

Speaker Change: Good day, Thank you for standing by welcome to NRG Energy's third quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will done here, an automated message advising yohanan swings.

Speaker Change: I just know that today's conference is being recorded.

I'll now hand, the conference over to speak of host Kevin Cole head of Treasury and Investor Relations. Please go ahead.

Kevin Cole: Thank you good morning, and welcome to NRG Energy's third quarter 2024 earnings call.

Kevin Cole: This morning's call will be 45 minutes in length 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 Webcasts.

Kevin Cole: 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.

Kevin Cole: 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.

Speaker Change: Refer to today's presentation and with that I'll now turn the call over to Larry Coben, Nrg's Chair and CEO.

Larry Coben: Thank you Kevin and good morning, everyone I'm joined today by Bruce Chen, our CFO and <unk> Patel head of NRG consumer who will share an exciting update on our virtual power plant initiative. Other members of our management team are also on the call and available to answer questions.

Larry Coben: Let's start with today's three key messages as shown on slide four.

Larry Coben: First our strong performance this year led us to raise our 2024 financial guidance by $175 million in late September the second consecutive year, we have surpassed our original earnings target today, we are reaffirming this elevated outlook for 2024 and initiating strong guidance for 2025.

Larry Coben: Five.

Larry Coben: Second we are excited to announce a strategic partnership with renew home and Google supported by Google's AI platform to accelerate our virtual power plant efforts. This partnership strengthens our ability to meet evolving customer needs and marks the beginning of our efforts to scale the pp.

Larry Coben: Finally, we're enhancing our guidance framework by introducing adjusted EPS were.

Larry Coben: We're also presenting a multiyear outlook supported by our new organic growth program and highlighting additional opportunities to exceed those targets and drive further shareholder value.

Larry Coben: On slide five let's review our 2020 for performance in 2025 guidance.

Larry Coben: Our year to date results and increased guidance are driven by strong plant operations effective supply risk management throughout the summer margin growth across all of our business segments and continued success and smart home.

These results underscore the strength of our business model and position us exceptionally well for the future.

Larry Coben: I'd also like to note that in response to Investor feedback, we are now, including all amortization costs related to <unk> smart home and retail home energy and the depreciation and amortization line of the income statement.

Larry Coben: Bruce will provide more details and clear disclosures on this change which is non cash and has no impact on our cash flow metrics or adjusted EPS.

Larry Coben: This update enhances transparency and simplifies financial reporting and modeling for our shareholders.

Larry Coben: We are initiating 2025 guidance now, including adjusted EPS, alongside our usual metrics of adjusted EBITDA and free cash flow before growth.

Larry Coben: For 2025, we expect adjusted EPS of $7 25.

Adjusted EBITDA of $3 85 billion and free cash flow before growth of two 1 billion.

Larry Coben: This reflected a 14% increase in adjusted EPS from our raised 2020 for guidance and a 28% increase from our initial 2020 for guidance.

Larry Coben: Our 2025 guidance incorporates the achievement of our key 2023 Investor day commitments reached.

Larry Coben: Reaching $550 million in run rate synergies, achieving investment grade credit metrics, and delivering 15% free cash flow before growth per share growth.

Larry Coben: This achievement is significant as our June 2023 projection of 15% to 20% free cash flow before growth per share growth was based on a 2025 share price of $46 or less than half today's trading price through.

Through operational improvement and excellence accelerated growth and synergy achievement, we have stayed on and achieved this target.

Larry Coben: Today, we're also announcing that we are increasing our share repurchase authorization by an additional $1 billion.

Larry Coben: In short 2024 has been an outstanding year in 2025 will be even better.

Larry Coben: Market conditions are highly favorable our operations remains superb and our outlook has never been stronger it's an exciting time to be part of NRG.

Larry Coben: On slide six with the introduction of adjusted EPS, we're presenting our multiyear growth outlook targeting at least a 10% CAGR through 2029 based on our raised 2024 guidance starting from our original 2024 guidance. This raised would approach to <unk>.

Larry Coben: 13%, reflecting the extraordinary operations and opportunities in our business.

Larry Coben: To provide a clearer view of our EPS drivers we've divided this outlook into two categories.

Larry Coben: Organic business earnings growth and capital allocation.

Larry Coben: The business earnings portion only incorporates the organic growth plans of our core businesses with no value added for such opportunities as the tightening of the Texas power market or data centers I will return to these additional opportunities shortly.

Larry Coben: Our long term outlook includes an annualized $750 million and adjusted EBITDA organic growth through 2029, largely driven by our consumer businesses.

Key drivers include customer growth in smart home initiatives to increase home energy wallet share and advancements in our virtual power plant.

Larry Coben: We're also strategically expanding our commercial and industrial energy services footprint.

Larry Coben: In terms of capital allocation, we plan to returned $8 $8 billion to shareholders with seven $1 billion dedicated to share repurchases.

Larry Coben: Looking at potential opportunities to significantly exceed this outlook, we have not factored in any rise in Texas power prices, which we've held at $47 through 2029, despite expected market tightening from growing demand.

Larry Coben: We have provided growth sensitivities for your additional villas ability into our gearing and to allow our investors to reflect on and sensitize their expectations.

Our projections also include contributions from our 'twenty, one site development portfolio and to shovel ready, Texas Brownfield projects that were not selected for the Texas Energy Fund.

Larry Coben: Each of these represents additional upside to our baseline growth expectations.

I will explore these elements in greater depth over the next two slides.

Our long term outlook emphasizes the strength of our platform and shows that we are well positioned to capture emerging opportunities in our sector.

Larry Coben: Moving to slide seven lets breakdown, our $750 million growth plan, driven by disciplined investments in high value initiatives.

Our growth is expected in each of our primary businesses around 30% from home energy, 50% from smart home and 20% from commercial and industrial energy.

Larry Coben: In home energy, we're focused on leveraging our strong Texas market share to expand wallet with our customers. We have been testing a home essentials bundle that provides energy customers added value, while increasing margin and retention and the results have been very encouraging.

Larry Coben: This initiative also enhances our ability to scale, our virtual power plant offering.

Larry Coben: We will provide details of these initiatives later on in the presentation.

Larry Coben: For smartphone growth is driven primarily by continued customer base expansion, which we have a strong record of achieving historically, we will also attract a broader segment of customers through new and less expensive bundles.

Larry Coben: In commercial and industrial energy and NRG business, we're enhancing our platform by incorporating AI into both sales and customer care, which will increase speed improve service quality and reduce costs. We're also expanding in our existing markets by offering advanced products such as load management.

Larry Coben: Reduced carbon options. Additionally.

Larry Coben: Additionally, we are broadening our highly successful strategic client services for both electric and natural gas customers, resulting in incrementally higher unit margins.

Larry Coben: To meet our $750 million annualized EBITDA target, we plan to invest up to one $6 billion over the next five years, that's the total investment implying return on investments approaching 50%.

We expect these initiatives to convert to free cash flow before growth at a rate of approximately 90%.

These initiatives align with our 80 20 capital allocation framework reinforcing our commitment to you of disciplined high return growth.

Larry Coben: I am very confident that we will meet and likely exceed these base targets I look forward to keeping you updated on our progress.

Larry Coben: Now, let's look at some of our other opportunities on slide eight.

Larry Coben: On the left we show our 2025, Texas generation open gross margin sensitivity to various around the clock power price scenarios.

Larry Coben: This analysis assumes stable natural gas prices and normal weather conditions for.

Larry Coben: For further details on multiple hedging scenarios, please refer to the appendix.

Larry Coben: This highlights the substantial value potential of our Texas generation under different price scenarios as markets tightened due to rising demand previously uneconomic generation can become not only economic but are highly profitable. The table also highlights the asymmetrical nature of our gear.

Larry Coben: <unk> to power play race fluctuations.

Larry Coben: Texas remains of the country's most attractive power market drawing major demand growth for.

For instance, the largest Houston transmission company recently reported an eight gigawatt two of data center demand a 700% increase from pre summer levels by comparison, Northern Virginia, the largest U S data center market as a total installed capacity of around half that.

Larry Coben: This demonstrates the kind of structural load growth in Texas that could drive significant value beyond our base case.

Larry Coben: On the right we feature our portfolio of 21 development sites at current or former power plants, all located in competitive markets.

Larry Coben: These sites offer desirable attributes in key infrastructure, making them ideal for projects that prioritize speed to market.

Larry Coben: In Texas, We also continue to evaluate the best use for our two shovel ready brownfield projects that total one one gigawatts in capacity since they were not selected under the Texas energy funds, one asset per developer allocation.

Larry Coben: We have the flexibility to explore other value enhancing options for these projects such as directing them to hyperscale.

Larry Coben: Together these opportunities represent two of the many high quality tangible path to creating additional value well beyond our baseline expectations.

Larry Coben: On slide nine we outline what this means for the substantial cash generation, we anticipate in the coming years.

Larry Coben: Our capital allocation plan balances disciplined growth with substantial capital returns to drive sustained value well into the future.

Larry Coben: Our growth initiatives exceed our hurdle rates and we invest only where we see exceptional value in.

Larry Coben: <unk>. These investments also exceed the implied return of repurchasing our own stock, which currently trades at a low teens free cash flow yield.

Speaker Change: That is an extraordinary value in my view.

Speaker Change: With that let me turn it over to <unk> Patel, the head of NRG consumer who will provide an exciting update on our virtual power plant initiatives.

Thank you Larry turning to slide 10, I am thrilled to announce our strategic partnership with renew home and Google to default of one gigawatt residential virtual power plant with ETP in Texas.

Speaker Change: This partnership brings together leaders across the energy and consumer technology industries to develop an innovative energy management solution for NRG and our customers.

Speaker Change: Our intention is to combine nrg's consumer reach and supply management expertise with renew homes residential demand response capabilities and Google's advanced AI technology.

This will enable us to deploy smart thermostats and other devices that will allow our customers to optimize their energy use and save money, while enhancing the stability and flexibility of our supply strategy and the Texas grid.

Speaker Change: On Slide 11, you will find the key components of our partnership we will develop a compelling personalized energy management platform that provides near real time dispatch of capacity at a fraction of the cost of a generation plan.

Speaker Change: New home will provide the demand response capabilities and we will fund a significant portion of customer acquisition costs minimizing Nrg's capital holiday.

Speaker Change: This collaboration also positions NRG as the partner for all new Google Nest Bpd enrollments in Texas.

Speaker Change: NRG will manage the customer relationship experience and dispatch of DPP events.

Speaker Change: As illustrated in the BCP capital efficiency metrics at the bottom left of the slide this is an economically attractive approach to supplementing our generation portfolio.

<unk> investment is roughly 110 of our new <unk> plant, while delivering an IRR greater than 50%, which is significantly higher than traditional alternatives.

Speaker Change: On the right hand side of the page you can see our plan to scale. This program with the goal of reaching 650 megawatts of dispatch low capacity by 2030, and a gigawatt by 2035.

Speaker Change: Now, let's turn to slide 12, where we outlined our strategy for bringing the virtual power plant program to market with an exciting new offering to.

Speaker Change: To accelerate our <unk> efforts in Texas, we're introducing the home essentials bundle, which includes a visit smart thermostat doorbell camera and professional installation all provided at no cost to customers enrolled in the PPP plan as long as they remain in NRG energy customer.

Should they choose to leave they can continue to receive the smart home services for a monthly fee of 14 99, allowing customers to continue enjoying the benefits of smart home, while protecting our investment in their experience.

Speaker Change: We have tested this new value proposition with select energy customers in Texas and the results have been very encouraging.

Speaker Change: In our pilot, we're seeing strong adoption of this offer and a step change in customer engagement with the average household using our smart home app more than 160 times per month.

Speaker Change: Moreover, 20% of these customers have opted to purchase additional smart home products and services that generate incremental recurring revenue.

Speaker Change: Over time, we see this bundled becoming a powerful entry point that will deliver enhanced value to customers build scale for VP and encourage customers to explore a broader suite of smart home services.

Speaker Change: We are leveraging our strong market share in Texas to expand our share of wallet with customers with renew home co funding up to $150 of customer acquisition costs through our <unk> partnership.

Speaker Change: This go to market strategy focuses on making smart energy solutions accessible valuable and deeply engaging we're meeting our customers where they are with solutions that empower them to take control of their own and energy experiences while strengthening their relationship with NRG.

Speaker Change: We will make homebase essentials broadly available in Texas Spring 2025.

Speaker Change: Moving to slide 13, let's take a closer look at how our virtual power plant generates value and deliver strong economics through two distinct value streams consumer and supply.

Speaker Change: On the consumer side, where we retain 100% of the economic benefit we expect margin uplift and increased tenure for customers adopting the homebase essentials bundle as well as incremental recurring revenue from customers opting for additional smart home services.

Speaker Change: The home energy industry relative to other consumer services has elevated customer churn and we expect this initiative to improve customer retention due to the enhanced value engagement and savings from this integrated offering.

Speaker Change: On the supply side, where we retain over half the economic benefit.

Speaker Change: We have provided an illustrative breakdown that shows how BP decrease margin opportunity based on the number of events per summer and the implied in the money power price.

Speaker Change: Beyond direct value. This asset also provides critical risk mitigation, allowing us to dispatch the DTP to further stabilize our supply portfolio during periods of volatility.

At scale for a 650 megawatt DPP, we anticipate approximately $110 million in annual recurring margin for NRG $80 million from consumer value and $30 million from supply value.

Speaker Change: Looking ahead to a one gigawatt DCP, we project the total annual incremental margin to exceed $160 million, making VP of highly profitable and flexible asset that strengthens both our financial and operational resilience.

Speaker Change: If Texas supply becomes more constrained in the coming years as many expect the value to NRG and our customers will only increase.

Speaker Change: I look forward to keeping you updated on our progress as we execute this plan with that I will turn it over to Bruce to provide the financial review.

Bruce Chen: Thank you <unk> before I discuss our third quarter results I'd like to provide a few updates on our key financial performance and valuation metrics as you can see on the slide we are introducing adjusted net income and adjusted earnings per share as part of our reporting framework. These metrics offer additional context for NRG.

Bruce Chen: <unk> profitability and growth capturing both underlying business growth driven by investments into our platform as well as the impact of our robust capital allocation program.

Bruce Chen: For 2024, we are on track to deliver $1 $3 billion of.

Bruce Chen: Adjusted net income equivalent to $6 35 per share of adjusted EPS.

Bruce Chen: The midpoint of our raised adjusted EPS guidance represents a 12% increase over the midpoint of our original guidance, reflecting the strong business performance.

Bruce Chen: We are pleased to provide these additional tools for investors to use in their evaluation of the investment merits of NRG. We believe these new metrics, coupled with our preexisting metrics such as free cash flow before growth per share will continue to shine a spotlight on nrg's attractive valuation.

Bruce Chen: We will continue to provide adjusted EBITDA and free cash flow before growth alongside these two new disclosures for the foreseeable future.

Bruce Chen: Going forward and including today's third quarter results. Adjusted EBITDA has been updated to recast all amortization of capitalized customer acquisition costs from SG&A and cost of operations into the depreciation and amortization line item.

This change addresses a point of common confusion that investors have given us direct feedback on.

Bruce Chen: This is part of our ongoing commitment to provide better visibility into our businesses and simplify the modeling process.

Bruce Chen: More details are available in our 10-Q as well as in the Reg G tables appended to the presentation and this morning's press release.

Bruce Chen: As you can see on the right hand side of the slide this change results in an upward adjustment to the midpoint of our 2024 guidance by $130 million from $3 $5 6 billion to $373 billion.

Bruce Chen: We have accordingly, recast adjusted EBITDA for historical periods to conform with this methodology and to allow for direct comparison of our results across reporting periods. This is simply a geography change of noncash items and therefore has no impact on any of our reported free cash flow before growth or adjusted EPS metrics.

Bruce Chen: Outlook.

Bruce Chen: Turning to slide 16, NRG delivered another strong quarter of financial and operational performance with adjusted EBITDA of 1.055 billion.

Bruce Chen: An increase of $68 million over the third quarter of the prior year.

Bruce Chen: <unk> delivered $584 million of adjusted EBITDA for the quarter $32 million higher than Q3 of 2023.

Bruce Chen: When adjusted for asset sales executed in 2023, our outperformance was approximately $80 million.

Bruce Chen: This improvement reflects the strength and resilience of our integrated platform.

Bruce Chen: Unlike last year, Texas was marked by a lock by a lack of power price volatility and generally lower pricing. Despite warm temperatures our integrated supply strategy and the ability to turn off units during periods of low pricing enabled us to maximize margins as we served our retail load the ability to cycle our plants on.

Bruce Chen: And off as part of our overall supply strategy is what gives us confidence in delivering consistent financial results through a variety of market conditions.

Bruce Chen: Our east West and services segments also demonstrated improved year over year outperformance adjusted.

Bruce Chen: Adjusted EBITDA for the quarter was $214 million, representing an $18 million increase from the prior year. This improvement was primarily driven by lower power and natural gas supply costs, resulting in margin expansion and an increase in average customer counts of 7%.

Bruce Chen: Finally, our smart home segment delivered $257 million of adjusted EBITDA for the quarter and $18 million increase from the prior year.

Bruce Chen: This was driven by mid single digit growth in our subscriber count and continued net service margin expansion of 6%, reflecting the embedded operating leverage of the business as the subscriber base continues to grow.

Bruce Chen: As you can see on the table, we have added disclosures for adjusted net income and adjusted EPS for the third quarter NRG produced $393 million of adjusted net income equivalent to a $1 90.

Bruce Chen: Of earnings per share.

Bruce Chen: This represents a 21% increase over Q3 2023 results, primarily driven by higher gross margin and share repurchases.

Bruce Chen: Free cash flow before growth for the quarter was $815 million of $460 million increase over Q3 2023.

Bruce Chen: This reflects higher gross margin favorable working capital and lower Capex given the completion of the parish restoration work in 2023.

Bruce Chen: Lastly, we are reaffirming our revised 2024 financial guidance and have provided our guidance ranges across all the key reporting metrics, including adjusted net income and adjusted EPS.

Turning to 2024 capital allocation on slide 17, we continue to deliver on our capital allocation priorities. There are only a few minor changes to the capital allocation waterfall from our second quarter earnings call.

Bruce Chen: On our last earnings call, we announced an agreement to sell our <unk> HVAC business that transaction closed in late September as a result, we are updating the net cash proceeds from the <unk> sale to approximately $425 million.

Bruce Chen: We are also increasing free cash flow before growth by $100 million.

For liability management preferred dividends, we have reduced our 2020 for allocation to $420 million from $602 million, our aggressive debt reduction over the past few years, coupled with improved financial performance will result in achieving our target credit metrics by the end of 2020 for a full year earlier.

Bruce Chen: And originally intended as a result, we have reduced the amount of liability management, we had intended to pursue in 2024 and have reallocated that cash to our remaining unallocated capital.

Bruce Chen: We have increased our share repurchase total from 825 million to $925 million, which reflects the increase in our 2024 Mcf BG guidance.

Bruce Chen: Through October 31, we completed $544 million of repurchases and we expect to complete the remaining repurchases by year end inclusive of our year to date activity. We have executed over three 8 billion in share repurchases at an average price of around $50 since 2019 represent.

Bruce Chen: Nearly 30% of our shares outstanding.

Bruce Chen: In our other investments, we have allocated $122 million for other growth, including updated spend associated with our ERCOT Newbuild project.

Bruce Chen: Finally, we expect to end 2024, with approximately $605 million of unallocated capital, which we have rolled into 2025 for application towards continued share buyback programs.

Bruce Chen: Turning to the next slide we are excited to introduce our financial guidance for 2025.

Bruce Chen: We are guiding 2025 full year adjusted EBITDA to a range of $3 75 to $3 975 billion, representing a midpoint of $3 85 billion.

Bruce Chen: Or an 8% increase from our original 2024 guidance midpoint.

Bruce Chen: As you can see from the chart at the bottom. This is driven by the completion of our previously announced growth and cost synergy programs.

Bruce Chen: Margin expansion from higher power prices and partly offset by the lost EBITDA from the sale of air travel.

Bruce Chen: We are also guiding 2025 full year free cash flow before growth to a range of $1 95, one 975 to two to two 5 billion.

Representing a mid a midpoint of $2 1 billion.

Bruce Chen: So an 8% increase over the midpoint of our original 2020 for guidance.

Bruce Chen: In addition to adjusted EBITDA and free cash flow before growth, we are initiating guidance for adjusted net income and adjusted earnings per share for full year 2025, we are initiating guidance on adjusted net income to a range of $1 33 to 153 billion representing.

Representing a midpoint of $1 43 billion and a range of $6 75 to 775 for adjusted EPS, representing a midpoint of $7 25 per share.

Moving to the next slide we are providing a five year road map with the major drivers of our adjusted EPS and free cash flow before growth investment outlook on a per share basis.

Bruce Chen: As you can see on the slide we are targeting long term adjusted EPS and FCS vg per share growth of greater than 10%. These.

Bruce Chen: These growth rates are pegged against our recently increased 2024 guidance more modeling disclosures can be found in the appendix of today's presentation.

Bruce Chen: Our five year outlook is underpinned by visible organic growth, resulting in $750 million of incremental run rate adjusted EBITDA and a robust capital return program of nearly $9 billion over the 2025 to 2029 period.

Speaker Change: I'd also highlight that this five year outlook assumes flat power pricing and does not include any of the additional upside opportunities Larry touched on earlier.

Speaker Change: As you can see on the slide our organic growth plan and share repurchases comprised nearly $4 of EPS growth and nearly $6 50.

Speaker Change: FCS vg per share growth.

Speaker Change: Offsetting this growth is an increase in taxes as available tax credits expire in 2025, and as NRG continues to generate strong earnings that utilize NOL balance and.

Speaker Change: In addition to taxes, we are projecting the impact of higher interest costs on earnings and free cash flow growth as maturing low cost debt is refinanced at higher rates.

Speaker Change: Turning to 2025 capital allocation on the next slide and starting on the left side of the chart. We are showing approximately $2 7 billion of cash available for allocation, which includes the carryover amounts from 2024.

Speaker Change: As I have already noted we will achieve our targeted credit metrics earlier than originally forecasted and as such our liability management program in 2025 will be comprised of settling the convertible note hedge and preferred stock dividends.

Speaker Change: As you can see the primary focus of our 2025 capital allocation activity will continue to be share repurchases with $1 $3 6 billion planned for 2025.

Speaker Change: Together with the planned 8% increase in our common dividend to $1 76 per share. Our total return of capital is currently expected to be about 85% of capa after liability management and integration costs.

Speaker Change: Importantly for those keeping a scorecard we are on track to significantly exceed the original return of capital commitment shared as part of our 2023 Investor day with more than $4 5 billion to be returned from 2023 through 2025 gig.

Speaker Change: Given our outstanding performance relative to the 2023 Investor Day plan, our board of directors improved approved an increase in total authorization for repurchases from $2 7 billion.

Speaker Change: To $3 7 billion.

Speaker Change: As of October 31.

Approximately $2 billion is remaining under the total authorization inclusive of this increase.

Speaker Change: In 2025, we have allocated $165 million to other investments, which includes continued progress on our ERCOT Newbuild program and investment in near term actionable initiatives related to our long term organic growth plan.

Speaker Change: Finally, we are showing $235 million of unallocated capital, which we will allocate over the course of 2025.

Speaker Change: With that I'll turn it back to you Larry.

Larry: Thank you Bruce.

Larry: Turning to slide 22.

Speaker Change: We've provided you today, a detailed view of our compelling five year financial outlook.

Speaker Change: Enhanced with additional disclosures for clearer insights into our earnings and growth trajectory are.

Our plan is simple transparent and backed by durable recurring cash flows and a strong balance sheet.

We're confident in achieving our long term targets of at least 10% growth in adjusted EPS and free cash flow before growth per share.

With numerous opportunities to significantly exceed these goals.

Speaker Change: In closing on Slide 23, 2024 has been another year of strong execution, where we have delivered financial operation and capital allocation results well ahead of guidance and expectations.

Speaker Change: Exceptionally proud of the work of our 18000 employees across all of our organization who have driven these results.

Speaker Change: I am deeply committed to driving NRG forward to creating additional significant shareholder value.

Speaker Change: We are seeing a long term step change improvement in fundamentals across our platform.

Speaker Change: You can expect a continued and remaining heightened focus on operational excellence prudent growth and being good stewards of our investors' capital.

Speaker Change: I have never been more excited about the potential of NRG than I am today.

Speaker Change: Thank you for your time and continued interest.

Speaker Change: Operator, we're now ready to open the line for questions.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen to ask a question you will need to press star one on your telephone and wait for your name to be announced soon.

Speaker Change: <unk> your question.

Speaker Change: One again, please standby, while we compile the Q&A roster.

And our first question.

Speaker Change: Line onshore turbines.

Speaker Change: From Guggenheim Partners. Your line is now open.

Speaker Change: Hey, guys good morning.

Shar: Morning, Shar how are you.

Shar: Alright, quite an update Larry quite an update.

Speaker Change: Let me just start just I wanted to touch on the process around the sites I mean some.

Speaker Change: Some of your peers. This week mention portfolio approaches to Hyperscale or deals you have the ability to provide a degree of additionality with the gas units.

Speaker Change: It still your plan to sort of update the street in January and how are you seeing.

Speaker Change: Are you seeing more interest in one region versus the other thanks.

Yes, and yes, no Sasha.

Speaker Change: Sydney before by the way.

It worked.

Speaker Change: Yes.

Speaker Change: I got tongue tied for the FERC clients okay.

Speaker Change: We are so we are going to provide an update as we said by the fourth quarter call.

Speaker Change: And we're seeing a lot of interest across our sites both in PJM and in Texas. Both in portfolio approaches ended individual approaches look I think.

Speaker Change: It's a very complex process.

Speaker Change: Rapidly changing people are still figuring out exactly what it is that we want and I think by stepping back as we did and now diving back in we're really in a position to optimize the value of what we have so still super excited we've done a lot of more site analysis as you can see in the appendix here.

Speaker Change: And we look forward to updating you when that time comes.

Got it and then as we get more disclosures you plan on layering in the.

Speaker Change: The optionality into the numbers.

Speaker Change: Through time or how do we how do we get an update.

I think as.

Speaker Change: As we know what the numbers are we will layer. The mid now remember how we talked about before some of this may be things that we never ever disclose because someone comes to us.

Speaker Change: They want an extra 1000.

Speaker Change: <unk> of something and then we decide we're going to build the plant and some hyperscale or may or may not want those two events tied together. So one of the ways that you may see that we're doing this is all of a sudden raising our estimates raised.

Speaker Change: Raising our CAGR all of those kind of things rather than one off announcements could go either way.

Speaker Change: But thats, where youll see it.

Alright, perfect and then just lastly, coming back to sort of identified growth component of the plan. Appreciate obviously the breakdown between the segments through 29. Some of these are obviously familiar to investors like the C&I margin customer accounts, but some arm, where do you see kind of the most room for variability.

Speaker Change: <unk> within these three verticals and then any color on cost to achieve I appreciate it.

Speaker Change #100: Sure look I think we've put out plan that we're really excited to and really really good about signing up for and I think we see bias to the upside across all of these things I mean.

Speaker Change #101: If theres a world recession or something are people going to move less and maybe purchase less energy reviewers.

Speaker Change #101: As possible in the industrial sector, but we feel really good sorry about what we've signed up here for and to achieve this $750 million of annualized EBITDA over the next five years, we're going to invest $1 6 billion in.

In total so thats the cost to achieve.

Speaker Change #102: Perfect I appreciate it guys. Congrats on the results and it's good to see that Bruce was busy I appreciate it.

Speaker Change #101: Yeah.

Speaker Change #103: One is once a year, whether it needs through or not et cetera.

Thank you Chuck.

Speaker Change #104: Thank you and our next question coming from the line of Julien Dumoulin Smith with Jefferies. Your line is open.

Speaker Change #105: Hey, Larry Good morning, guys. Thanks for the chat.

Growing up a little bit.

Speaker Change #106: Hey, good good good Plaza guys nicely done maybe just following up a little bit of a sharp pick first year. Let me needle you further on this in terms of just the update timeline and more specifically what that could look like as you think about.

To set expectations around shall we say January or otherwise here right is it principally are you offering geared principally towards this additionality and leveraging those two additional sites or are you still thinking it seemed earlier that you were principally focused on the Midwest portfolio. The site value. There we've seen a lot of excitement in the Midwest is that more of where we should be thinking.

Speaker Change #106: Again I know there's.

Speaker Change #107: 20, plus sites here.

Speaker Change #106: I think it will be.

Speaker Change #106: What permutations.

Speaker Change #106: I think it's both I mean, I think what's happened is we were obviously still but we're laser focused on the 21 sites and we remain so but when the <unk> decided that they were only going to give one loan per customer as they did but we felt we felt for us that opened up the additionality potential for those to shovel ready.

Speaker Change #106: <unk> and so we've kind of just put them into the mix post the <unk> announcement, which was around the end of August you'll recall and I think a fair amount of interest because as you know and I think you've written about additionality is going to be critical going forward to the development of these kinds of sites and to have shovel ready additions.

Speaker Change #106: It is rare.

Speaker Change #108: Right, yes indeed.

Speaker Change #108: Clarify that even.

Speaker Change #108: With respect to tariffs would you expect tough part to here to include those sites here is sort of the idea to double dip if you will between <unk> and additionality next year potential customers.

We haven't put out any guidance at all about <unk> II, we don't know if its going to occur. So we're going to push forward right. Now is if there is no <unk> II for those projects but.

Speaker Change #108: That shows up obviously, that's one option that we will consider.

Speaker Change #108: Don't know that youll be able to double dip will have to wait and see what the rules are but we don't need to double dip to make those very attractive to somebody who is looking for additionality.

Speaker Change #109: Okay excellent. Thank you and <unk> added that $1 6 billion I think how much does it cost you to do the PPP I think you said $100 kilowatt. So it's like $65 million for the six months yes.

One of the unique things about DPP is we don't have to wait to get the benefit as we acquire customers and that the assets to where we actually start to realize the value and so.

Speaker Change #109: Think of it as well.

Speaker Change #109: We ramp up investment.

Speaker Change #109: And it stays below $50 million for us because we start to gain gain benefits from the deployed assets.

Speaker Change #110: Alright excellent guys. Thank you so much <unk>.

Speaker Change #109: Calculator.

Speaker Change #109: Thank you.

Speaker Change #111: Question coming from the line of Andrew Johnson with Seaport. Your line is now open.

Thank you.

Speaker Change #112: All of these questions are focused on what else do you have today and even though the entire call was filled with announcements.

Speaker Change #111: Yeah.

Speaker Change #113: Well said.

Speaker Change #113: That bar set really high.

Speaker Change #113: Yeah.

Speaker Change #113: So my question is about.

Speaker Change #113: About the CPP virtual power plants so.

Speaker Change #113: We're seeing some.

Speaker Change #113: Cooling off and Mike.

Speaker Change #113: Battery investments in Texas markets I mean, there was this.

Speaker Change #113: We have a station that existing batteries in fact to cannibalize on peak power prices and that eats into the pricing arbitrage that these batteries rely on.

Speaker Change #114: So why shouldnt the same be true for the VPN I know I understand that the biggest component of the profitability of this business is basically your customer retention so the energy.

Speaker Change #114: And that component is relatively small, but why shouldn't that be true that in a sense.

Speaker Change #114: That the curve getting flatter and your ability to actually capture this additional energy benefit is lower.

Rob: Hey, Angie it's Rob.

Speaker Change #115: Great observation, what I would tell you.

Mind, you is because we serve consumer energy customers, we're always building our portfolio and we're including that component that I called insurance right the options on the backend.

Speaker Change #115: What <unk> does is it.

Speaker Change #115: Provides that right. So as we think about the customer and as we think about how we ensure against an extreme event. The beauty of DPP is it is the perfect hedge.

Speaker Change #115: For that kind of exposure so when I look out the curve and as we're building the portfolio overtime. What <unk> does is it helps me.

Speaker Change #115: Manage the risks of a consumer energy business without having to go to a third party or dropping.

Speaker Change #115: A lot of money to build massive pickers to meet that same obligations. So I feel really good about the economics that we've got here and as far as the long term perspective. This is absolutely the best tool to manage the risk of a home based energy book does that help.

Speaker Change #116: Okay. So basically it is that in.

Speaker Change #116: Most cost effective way to hedge against.

Speaker Change #116: Thanks.

Speaker Change #117: Super peaks right I mean, not that not that we've seen it and that's my one question is that.

Speaker Change #117: I mean, we keep hearing those incredible announcements.

Speaker Change #117: Almost hard to even believes that they can be said with a straight face right 80 gains because of mode.

Speaker Change #117: In Texas from Encore, I mean, and yet the curve has just not reacting at all it's almost a sense.

Speaker Change #117: And again it could it be that that this mode is not going to impact.

Impact to 2008, or even 'twenty nine and that's why we're not seeing any any response or how can you actually reconcile the lack of SaaS.

Speaker Change #117: In response in forward power curves in Texas, Yes.

Speaker Change #118: I look at both of those things.

Speaker Change #118: What I would tell you is that.

Speaker Change #118: I am with you I don't believe this occur reflects.

The load that we expect the supply demand picture that we would expect in the future.

Speaker Change #118: As far as how we think about it and whether or not it's going to show up.

I believe that the loads coming I don't know if its 80 gigs and honestly, we don't need any gigs, but part of the curve remember in the reaction inside of pricing is pretty short sighted viewing or.

Speaker Change #118: Just looking a little bit into history. This summer was a little less warm than last year.

Speaker Change #118: Didn't have any real price formation like we.

Speaker Change #118: We did last year and then everybody.

Speaker Change #118: Kind of lost sight of what could happen. If you look into the future and you think about okay. Well. If you just add a little bit of incremental load into the ERCOT market you have a real opportunity, giving a renewables profile and call. It abnormal weather to really get price formation, and then everybody will be excited again and the curves will go to the moon.

Speaker Change #118: Arun.

Arun: And we will be managing through it you've seen this before we've all seen it.

Arun: Don't think that these curves in 'twenty eight 'twenty nine and beyond reflect reality.

Arun: Okay.

Last question, So maybe cheetah, both Bruce and Larry is there.

Free cash flow yield.

Arun: No.

Arun: Below which you think that share buybacks.

Arun: Just on warranty then there is some other way of capital return or maybe.

Arun: M&A or some other strategy change.

Speaker Change #120: Angie there is one but I don't think we're anywhere close to it.

Speaker Change #121: I mean, we're still in the double digits. So when we get to the mid single digits. Maybe we can have that kind of a look again, depending on what the opportunities and the world looks like.

Speaker Change #121: But right now given the undervaluation of the stock.

It's still a pretty high hurdle rate for us but.

Speaker Change #121: We all look forward to the day and I am sure you do too that when the stock is trading so high that that becomes a real question for us.

Speaker Change #122: Yes to infinity and beyond okay.

Speaker Change #122: Two <unk>.

Speaker Change #122: Thank you Angie.

Speaker Change #123: And our next question coming from the line of Michael Sullivan with Wolfe Research. Your line is now open.

Hey, good morning.

Speaker Change #124: Morning, how are you.

Speaker Change #124: Good congrats on all.

Speaker Change #124: All the announcements here.

Speaker Change #124: Just I know you gave this 10% plus and said it can can vary.

Speaker Change #125: Year to year, but just to clarify does that mean you can go below it below 10% in some years or it's just going to be 10%.

Speaker Change #125: Or better in every year and how much better can vary.

Speaker Change #126: Yes, I mean, Mike I think the reality is there are going to be there may be some years, where it might go below there might be some years, where it's going to go above but generally speaking on a long term basis.

Speaker Change #126: We see visibility around that plus 10%.

Speaker Change #126: Over the long term.

Speaker Change #127: Okay, and just specifically on that so if we if we go to slide 19 with the tax impact does that all fall away in 2006, So should we think of like 26% as being a lower year and then you kind of.

Speaker Change #127: Catch back up again, and the out I mean, there is or.

There is an incremental increase in the tax rate after 25 because of expiring tax credits I think the way that we think about.

Speaker Change #127: That.

Speaker Change #127: That growth is to the extent that there is a drag as a result of an incrementally higher tax rate, we probably see some business performance and business growth.

Speaker Change #127: Offsetting offsetting that drag.

Speaker Change #128: Okay, Okay great.

Speaker Change #128: And then the PTP announcement.

Speaker Change #128: Good to see there and maybe just.

Speaker Change #128: Is it fair to kind of bifurcated as you broke out the $80 million component as being.

Speaker Change #128: Kind of more stable and then locked in and then that $30 million component.

It looks like.

Speaker Change #128: Would have been a lot better in 'twenty three if you get to somewhere like that and then if we got this summer maybe.

Speaker Change #128: <unk> been around that level is that fair.

Michael This is rajeev, yes.

A good way to think about it the customer value is going to be stable and very sustainable.

Speaker Change #128: On the supply value, which mark can add a little more color on.

Mark: That can be significantly higher in in years.

Speaker Change #128: Tanker markets.

Speaker Change #130: And so I think thats the right way to think about it Rob would you add anything that sort of thing.

Speaker Change #130: How do you think about from the supply perspective remember that we are using this in lieu of some.

Speaker Change #131: Some form of insurance right. So the values on a page represents.

Speaker Change #131: What it would cost me right on the top part of the slide. This is what we would have which is what we save by not having to go and replaces without heat rate call option or something like that.

Speaker Change #131: The representation down at the bottom, where we can talk about the different years. So in 'twenty three the value of that insurance would have been considerably more valuable than say this year, where we didn't have any real price formation, but when you think about it long term with NRG and how we build it in the portfolio I'm going to buy that <unk>.

Speaker Change #131: <unk>, regardless so on building the book 12 months to 18 months out we're putting in the insurance to protect our business and so we're going to capture the values up at the top and then that the representation at the bottom is just the value that that protected me from right.

Speaker Change #131: Insurance in 'twenty, three that was really valuable.

Speaker Change #131: Bought insurance this year and I didn't need it that's the examples at the bottom.

Speaker Change #131: The value that we see around GBP is consistent year every year, regardless of the circumstances, because I'm going to buy that insurance to protect the portfolio anyway does that makes sense.

Speaker Change #132: It does thanks, Thanks, John that's really helpful.

Speaker Change #133: Okay, and then last one just to round it out there too.

That's pretty sizable.

Speaker Change #133: Can you, maybe just give us a sense of.

Speaker Change #133: Are there any competitors out there or other people looking to do this or how big does that <unk>.

Mark: Mark you get in Texas overall outside of what you were doing.

Speaker Change #134: It's a great question and one of the reasons I think NRG is so uniquely positioned is we have a scaled customer base, we have the supply management expertise and now partnering with renew home and Google.

Partnered with the largest demand response platform in North America.

Speaker Change #134: The partnership also gives us.

Speaker Change #134: Lucidity to all new nest thermostat enrollment to demand response in Texas.

Speaker Change #134: And to give you context around that there are already million nest thermostat deployed in ERCOT and almost 300000 of which are overlapped with the NRG customer base and so.

This is.

This is a very unique opportunity for NRG.

Speaker Change #134: Into everything that we've outlined today is is showing.

Speaker Change #134: <unk> you the thermostat opportunity, but we will be working with our partners to tie in batteries electric vehicles other things onto the platform, where we can leverage already deployed resources.

Speaker Change #135: Into this into this platform and so Michael I think it would be very hard.

Speaker Change #135: For anybody else to replicate this at scale.

Speaker Change #136: Okay awesome. Thank you so much.

Thank you.

Speaker Change #137: And our final question comes from the line of David Arcaro with Morgan Stanley. Your line is now open.

David Arcaro: Hey, thanks, so much good morning.

Speaker Change #138: Hi, David how are you.

Speaker Change #139: Good good.

Speaker Change #139: I was wondering if there is.

Speaker Change #140: Organic growth kind of opportunity at the retail energy business that could be potential upside from here how is that incorporated in there.

Speaker Change #140: It seems like we're seeing pretty good.

Speaker Change #140: Residential growth in Texas over time, plus all of the C&I growth potential from.

Speaker Change #140: Data center load.

Speaker Change #141: Didn't really see that maybe clearly called out as one of the components of the EBITDA growth opportunities. So I'm wondering.

Speaker Change #141: How youre thinking about that.

Speaker Change #142: That's great question the way I would.

Speaker Change #143: Really think about this is we have very strong market share on the residential energy site in Texas rate nearly 40% share of the market and so the larger opportunity. We see is how do we leverage that household relationship to actually expand share of wallet with customers and through the launch of homes basis.

Speaker Change #143: Essentially we're giving are.

Speaker Change #143: Our existing skilled customer base, a lot of incremental value and in the trial that we've seen over the summer.

Speaker Change #143: Provided customers this new bundle.

Speaker Change #143: 20% of them have already bought incremental smart home services from us and that's that's very attractive. So I would just characterize that as there will be opportunity, obviously with modest household growth, but a larger opportunity for NRG is to expand the share of wallet leveraging the near 40% market share we have in home energy.

Speaker Change #144: Yes got you absolutely makes sense.

Speaker Change #144: Maybe on that data center side is there.

Speaker Change #146: Growth coming to your service territory that would boost.

Speaker Change #146: The commercial and industrial side of the business in terms of retail contract opportunities in retail growth.

Speaker Change #147: Are you seeing data centers show up in that.

Speaker Change #148: In the retail business.

Speaker Change #148: Coming come to you with multi year.

Speaker Change #148: Energy contracting opportunities.

Speaker Change #148: Short answer is yes.

Speaker Change #148: We are definitely seeing data centers coming with.

Long term contract requirements and then the way to think about how it affects the rest of the C&I marketplace is that in a market, where there is growing tightness and there's competition for those megawatts.

Speaker Change #148: Senate before and we've talked about it.

Speaker Change #148: There is a flight to quality that occurs amongst large industrial and commercial customers, where they want additional services they want.

Skilled operators on the other side of their contracts.

Speaker Change #148: So we see an uplift into our opportunity set as we see this trend continue in <unk>.

Uh huh.

Speaker Change #149: Honestly in PJM.

Speaker Change #149: Got it okay, great. Thanks, so much.

David Arcaro: Thanks, David.

Speaker Change #150: Thank you and I'm showing no further questions in the queue. At this time I will now turn the call back over to Mr. Larry Cohen for any closing remarks.

I want to thank you all for your interest in NRG as you can tell from our releases our slides in our presentation. We are all super excited about our business and we look forward to keeping you up to date on it going forward.

Speaker Change #150: Have a great day and have a great weekend.

Speaker Change #151: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect.