Q1 2025 NRG Energy Inc Earnings Call
[music].
Unknown Executive: Good day and thank you for standing by.
Good day, and thank you for standing by.
Unknown Executive: Welcome to the NRG Energy Inc. first quarter 2025 business update and earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message device in your hand. To withdraw your question, please press star 11 again. Please be advised today's conference.
Welcome to the NRG Energy, Inc. First quarter 'twenty two five.
Speaker Change: This is update and earnings 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 will need to press star one on your telephone you will then hear an automated message a box in your hand is raised to withdraw your question. Please press star. One again. Please be advised today's conference is being recorded I would now like to hand, the conference over to <unk>.
Kevin Cole: I would like to hand the conference over to Kevin Cole, head of treasury and investor relations to read the Safe Harbor introductory and introduce the call. Thank you.
Speaker Change: Kevin Cole head of Treasury, and Investor Relations to read the safe Harbor introductory and introduce the call may begin.
Speaker Change: Thank you good morning, and welcome to NRG Energy's first quarter and business update call. This mornings call is being broadcast live over the phone and via webcast. Today's webcast presentation and press release can be located in the investors section of our website at www Dot NRG dot com under presentations and Webcasts.
Kevin Cole: Good morning, and welcome to NRG Energy's first quarter and business update call. This morning's call is being broadcast live over the phone and via webcast. Today's webcast, presentation, and press release can be located in the investor section of our website at www.nrg.com under presentations and webcasts.
Kevin Cole: Please note that today's discussion may contain forward-looking statements, which are based upon assumptions that we believe be reasonable as of this date. Actual results may differ materially. We urge everyone to review the safe harbor in today's presentation, as well as the risk factors in our SEC filings. We undertake no obligation to update these statements as a result of future events, except as required by law.
Speaker Change: Please note that today's discussion may contain forward looking statements, which are based upon assumptions that we believe to be reasonable as of this date actual results may differ materially.
Speaker Change: Everyone to review the Safe Harbor in today's presentation as well as the risk factors in our SEC filings. We undertake no obligation to update these statements as a result of future events, except as required by law. In addition, we will refer to both GAAP and non-GAAP financial measures for information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures. Please refer.
Kevin Cole: In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's presentation and press release.
Speaker Change: Today's presentation and press release now with that I'll now turn the call over to Larry Coben, Nrg's Chair President and CEO.
Larry Coben: And now with that, I'll now turn the call over to Larry Coben, NRG's Chair, President, and CEO. Thank you, Kevin. Good morning, everyone, and thank you for your interest in NRG. I'm joined today by Bruce Chung, our Chief Financial Officer. Other members of the management team are also on the line and available for questions.
Thank you Kevin Good morning, everyone and thank you for your interest in NRG I'm joined today by Bruce Chung, Our Chief Financial Officer. Other members of the management team are also on the line and available for questions.
Larry Coben: This morning marks a defining step for NRG. Alongside our outstanding first quarter results, we are announcing the acquisition of a portfolio of assets from LS Power, comprised of 13 gigawatts of natural gas generation and a 6 gigawatt commercial and industrial virtual power plant platform located across the Northeast and Texas. This acquisition expands our generation base, improves our ability to serve customers, positions us naturally long versus our retail load in all core markets, and increases our asymmetric exposure to demand growth across U.S. power markets.
Speaker Change: This morning marks a defining step for NRG.
Speaker Change: Alongside our outstanding first quarter results, we are announcing the acquisition of a portfolio of assets from LS power comprised over 13, Gigawatts of natural gas generation and a six gigawatt commercial and industrial virtual power plant platform located across the northeast and Texas.
Speaker Change: This acquisition expands our generation base improves our ability to serve customers positions us naturally long versus our retail load in all core markets and increases our asymmetric exposure to demand growth across U S power markets.
Larry Coben: Let's turn to slide four for the key takeaways of today's call. We delivered the strongest first quarter adjusted EBITDA in company history, surpassing last year's record by 30%. We are reaffirming our 2025 financial guidance range. Second, the acquisition of the LS Power Portfolio reshapes our competitive position. It improves how we serve customers by doubling our own generation and materially strengthening our virtual power plant operation. This significantly expands our earnings potential and positions us to capture meaningful upside as power markets tighten. Third, we are raising our five-year adjusted EPS compound annual growth rate to 14 percent, a 40 percent increase to the base plan we presented in February, reflecting the combined contributions of today's acquisition and the Rockland Portfolio Edition.
Speaker Change: Let's turn to slide four for the key takeaways of today's call.
Speaker Change: We delivered the strongest first quarter adjusted EBITDA in company history, surpassing last year's record by 30%.
Speaker Change: We are reaffirming our 2025 financial guidance ranges.
Speaker Change: Second the acquisition of the <unk> power portfolio reshaped, our competitive position it improves how we serve customers by doubling our own generation and materially strengthening our virtual power plant operations. This significantly expands our earnings potential and positions us to capture meaningful upside.
Speaker Change: As our markets tighten.
Speaker Change: Third we are raising our five year adjusted EPS compound annual growth rate to 14%, a 40% increase to the base plan we presented in February.
Speaker Change: Reflecting the combined contributions of today's acquisition and the Rockland portfolio additions.
Larry Coben: This outlook maintains a flat view of power and capacity prices and does not include potential upsides such as rising prices, data centers, and other large load contracts or success in our full TEF pipeline.
Speaker Change: This outlook maintains a flat view of power and capacity prices and does not include potential upsides, such as rising prices data centers and other large load contracts or success and our full pipeline.
Larry Coben: Finally, we remain disciplined in capital allocation. We are maintaining a strong balance sheet, returning substantial capital to shareholders, investing in growth, and positioning the business for sustained long-term value creation.
Speaker Change: Finally, we remain disciplined in capital allocation, we are maintaining a strong balance sheet, returning substantial capital to shareholders investing in growth and positioning the business for sustained long term value creation.
Larry Coben: Turning to slide five with the quarterly results and key highlights. Adjusted EPS for the first quarter was $2.68, an 84% increase compared to the first quarter of last year. This improvement was driven by strong asset performance, expanded consumer margins, favorable weather, and natural gas optimization in the Northeast.
Speaker Change: Turning to slide five with the quarterly results and key highlights.
Speaker Change: Adjusted EPS for the first quarter was $2 68, and 84% increase compared to the first quarter of last year.
Speaker Change: This improvement was driven by strong asset performance expanded consumer margins favorable weather and natural gas optimization in the northeast.
Larry Coben: We are reaffirming our 2025 financial guidance, reflecting strong year-to-date performance and the expected contribution from the Rockland acquisition. First quarter results were exceptional, and we are already tracking at the upper end of our full year guidance range. This reflects disciplined execution on margins, supply optimization, and strong operating performance across every aspect of our business. We delivered top-decile safety performance and outstanding fleet reliability.
Speaker Change: We are reaffirming our 2025 financial guidance, reflecting strong year to date performance and the expected contribution from the Rockland acquisition first quarter results were exceptional and we are already tracking at the upper end of our full year guidance ranges. This reflects disciplined execution on margins.
Speaker Change: Supply optimization and strong operating performance across every aspect of our business.
Speaker Change: We delivered top decile safety performance and outstanding fleet reliability.
Larry Coben: Our third Texas Energy Fund project, Greens Bayou, was selected for due diligence review in March, bringing all three of our brownfield projects into that program, totaling 1.5 gigawatts of capacity. Separately, we secured an additional 1.2 gigawatts of GE Vernova Turbine Reservations, a direct result of accelerating customer conversations and rising demand signals. We now hold a total of 2.4 gigawatts of total slot reservations for projects that are expected to begin operations in 2029 and 2030. These slot reservations demonstrate confidence in our commercial discussions and ensure we can act quickly where long-term premium power purchase agreements support new development.
Speaker Change: Our third Texas Energy Fund project Greens Bayou with selected for due diligence review in March.
Speaker Change: All three of our brownfield projects into that program totaling one five gigawatts of capacity.
Speaker Change: Separately, we secured an additional one two gigawatts of GE or know that turbine reservations are direct result of accelerating customer conversations and rising demand signals. We now hold a total of two four gigawatts of total slot reservations for projects that are expected to begin operations.
Speaker Change: 2029 and 2030.
Speaker Change: Slot reservations demonstrate confidence in our commercial discussions and ensure we can act quickly where long term premium power purchase agreements support new development.
Larry Coben: Finally, we completed $445 million in share repurchases through April, leaving $855 million remaining to be completed through the end of 2025.
Speaker Change: Finally, we completed $445 million in share repurchases through April, leaving $855 million remaining to be completed through the end of 2025.
Larry Coben: With that, let's turn to the details of the acquisition, starting on slide seven. We are acquiring 13 gigawatts of natural gas capacity and a 6 gigawatt CNI virtual power plant platform from LS Power for an enterprise value of approximately $12 billion. This is a highly strategic acquisition that strengthens our position as one of the nation's leading competitive power generators. We're acquiring these assets at a significant discount to new build costs, at an attractive valuation, and at the strategically opportune time to be adding high-quality, difficult-to-replicate resources into our portfolio as the sector enters into a period of sustained demand.
Speaker Change: With that let's turn to the details of the acquisition starting on slide seven.
Speaker Change: We are acquiring.
Speaker Change: Firing 13, gigawatts of natural gas capacity and a six gigawatt C&I virtual power plant platform from LS power for an enterprise value of approximately $12 billion.
Speaker Change: This is a highly strategic acquisition that strengthens our position as one of the nation's leading competitive power generators. We're acquiring these assets at a significant discount to new build cost at an attractive valuation and thats strategically opportune time to be adding high quality difficult to <unk>.
Speaker Change: Replicate resources into our portfolio as the sector enters into a period of sustained demand.
Larry Coben: We would also note that LS Power will receive a meaningful portion of the transaction consideration in NRG shares. LS Power will receive approximately $2.8 billion of equity as consideration, and own approximately 11% of NRG in closing. This is LS Power's largest single equity investment in firm history, which I think speaks for itself in terms of their confidence in our company's future.
Speaker Change: We would also note that LS power will receive a meaningful portion of the transaction consideration and NRG shares.
Speaker Change: <unk> power will receive approximately $2 8 billion of equity as consideration and own approximately 11% of NRG at closing.
Speaker Change: This is <unk> power's largest single equity investment in firm history, which I think speaks for itself in terms of their confidence in our company's future. We welcome them as a future large shareholder in our company.
Larry Coben: We welcome them as a future large shareholder in our company.
Larry Coben: The acquisition is built on four key pillars. First, it more than doubles the size of our generation fleet, creating a pro forma portfolio of 25 gigawatts of owned capacity. Second, it enhances and magnifies our opportunity to create value in the emerging power market super cycle by expanding our scale in key competitive regions, strengthening our large load strategy, and increasing our asymmetric upside opportunities. Third, it improves our credit risk profile, supporting a long-term net debt-to-adjusted EBITDA target of less than three times and a balanced capital allocation plan, including $1 billion in annual share repurchases through our deleveraging period.
Speaker Change: The acquisition is built on four key pillars first it more than doubles the size of our generation fleet, creating our pro forma portfolio of 25 gigawatts of owned capacity.
Speaker Change: Second it enhances and magnifies, our opportunity to create value in the emerging power market Super cycle by expanding our scale and key competitive regions strengthening our large load strategy and increasing our asymmetric upside opportunities.
Speaker Change: Third it improves our credit risk profile supporting a long term net debt to adjusted EBITDA target of less than three times and a balanced capital allocation plan, including $1 billion in annual share repurchases through our deleveraging period.
Larry Coben: Fourth, it delivers immediate and substantial accretion while establishing an even stronger foundation for sustained long-term growth.
Speaker Change: Forward it delivers immediate and substantial accretion, while establishing an even stronger foundation for sustained long term growth.
Larry Coben: Let me take you through each of these pillars in detail, beginning on slide 8. This transaction transforms our portfolio. We are acquiring the largest privately held natural gas generation fleet and the leading CNI virtual power plant platform. In the east, we are adding approximately 11 gigawatts of natural gas fired capacity, with 75% of that in PJM, and the balance in NISO and ISO NE. These assets include some of the highest capacity factor combined cycle units and most efficient peakers in PJM. Several of the peakers also present opportunities for conversion and up rates to combined cycle plants, improving long-term flexibility and value.
Speaker Change: Let me take you through each of these pillars in detail.
Speaker Change: Beginning on slide eight.
Speaker Change: This transaction transforms our portfolio.
Speaker Change: We are acquiring the largest privately held natural gas generation fleet and the leading C&I virtual power plant platform.
Speaker Change: In the east we are adding approximately 11 gigawatts of natural gas fired capacity was 75% of that in PJM and the balance in ISO and ISO.
Speaker Change: These assets include some of the highest capacity factor combined cycle units and most efficient pickers in PJM.
Speaker Change: Several of the <unk> also present opportunities for conversion in up rates to combined cycle plants, improving long term flexibility and value and.
Larry Coben: In Texas, we are acquiring more than 2 gigawatts of capacity in the North Zone. This strengthens and diversifies our Houston-focused fleet and shifts our residential supply position to naturally law. These assets improve our ability to serve both large and small customers and give us more control over meeting demand in a tightening supply environment, while at the same time lowering our costs to serve. The acquisition also includes CPOWER, the national leader in distributed energy optimization with 6 gigawatts of commercial and industrial virtual power plant capacity. We believe this is the premier CNI BPP platform, valued for its proprietary software and managing more than 2,000 customers across 60 grid programs. The business has 95% retention and a well-diversified customer base spanning commercial, industrial, government, education, and healthcare sectors.
Speaker Change: In Texas, we are acquiring more than two gigawatts of capacity in the North zone.
Speaker Change: This strengthens and Diversifies, our Houston focused fleet and shifts our residential supply position to naturally law.
These assets improve our ability to serve both large and small customers and gives us more control over meeting demand and a tightening supply environment, while at the same time lowering our cost to serve.
Speaker Change: The acquisition also includes sea power the National leader in distributed energy optimization with six gigawatts of commercial and industrial virtual power plant capacity.
Speaker Change: We believe this is the premier C&I VP platform valued for its proprietary software and managing more than 2000 customers across 60 grid programs.
Speaker Change: The business has 95% retention and a well diversified customer base spanning commercial industrial government education and healthcare sectors.
Larry Coben: As customer demand becomes more dynamic and the grid more constrained, we believe this capability will meaningfully grow in value. It gives us the tools and scale to serve customers, support reliability, and compete in a market that increasingly values flexibility. Pro forma, the combined portfolio gives NRG a balanced mix of resources and significant excess supply relative to our residential retail load. In Texas, we expect to generate enough output from our own plants to serve our residential retail load. In PJM, we will produce more than twice the energy required to serve our retail customers. And the acquisition gives us embedded upside as market conditions evolve.
Speaker Change: As customer demand becomes more dynamic and the grid more constrained we believe this capability will meaningfully grow in value.
Speaker Change: It gives us the tools and scale to serve customers support reliability and compete in a market that increasingly values flexibility.
Speaker Change: Pro forma the combined portfolio gives NRG, a balanced mix of resources and significant excess supply relative to our residential retail load in Texas, we expect to generate enough output from our own plants to serve our residential retail load and PJM, we will produce more than twice the <unk>.
Speaker Change: Energy required to serve our retail customers.
Speaker Change: The acquisition gives us embedded upside as market conditions evolve.
Larry Coben: We're also impressed by the regulatory momentum in both markets. In Texas, SB6 is progressing, and we see it as an important step toward improving transparency and clarifying how large loads connect to the system. In PJM, we're seeing constructive progress on key issues. We feel good about where both markets are headed.
Speaker Change: We're also impressed by the regulatory momentum in both markets in Texas, SB fix is progressing and we see it as an important step toward improving transparency and clarifying how large loads connects to the system in PJM, we're seeing constructive progress on key issues, we feel good about where both markets are headed.
Speaker Change: <unk>.
Larry Coben: Moving to slide nine, the transaction significantly strengthens NRG's ability to capture upside as demand grows. With the addition of this portfolio, we will hold the third-largest natural gas generation portfolio in the East and Texas. This puts us at competitive scale alongside other top players in the sector and enhances our position to meet rising load and respond to changing market conditions. We've already identified one gigawatt of potential upgrades through converting peakers to combined cycle plants in the heat.
Speaker Change: Moving to slide.
Speaker Change: Slide nine the transaction significantly strengthens nrg's ability to capture upside as demand grows with the addition of this portfolio. We will hold the third largest natural gas generation portfolio in the east and Texas. This puts us at competitive scale alongside other top player.
Speaker Change: In this sector and enhances our position to meet rising load and respond to changing market conditions.
Speaker Change: We've already identified one gigawatt of potential upgrades through converting figures to combined cycle plants in the east, creating a clear path to expand output using existing sites and meeting large load additionality requests.
Larry Coben: Creating a Clear Path to Expand Output Using Existing Sites and Meeting Large Load Additionality Requests. The acquisition meaningfully increases the number of sites available to support large loads and data sets. positioning us to meet the needs of hyperscalers and other large load customers and the emerging demand across our core markets.
Speaker Change: The acquisition meaningfully increases the number of sites available to support large loads in datacenters positioning us to meet the needs of Hyperscale and other large load customers and the emerging demand across our core markets.
Larry Coben: Importantly, none of these opportunities are incorporated into the accretion and growth metrics. Let me repeat that. None of these opportunities are incorporated into the accretion and growth metrics. Together, these advantages position NRG to capture value well beyond our base forecast, with multiple avenues for upside as markets tighten and customer demand for more customized supply solutions increases.
Speaker Change: Importantly, none of these opportunities are incorporated into the accretion and growth metrics. Let me repeat that none of these opportunities are incorporated into the accretion and growth metrics to.
Speaker Change: Together these advantages position NRG to capture value well beyond our base forecast with multiple avenues for upside as markets tighten and customer demand for more customized supply solutions increases.
Larry Coben: Turning to slide 10. Beyond the strategic and operational drivers, we want to outline how this strengthens NRG's long-term financial foundation. What sets this acquisition apart is not just the quality of the assets. It is the way it accelerates our growth trajectory and reinforces our ability to deliver durable shareholder value. It exceeds our hurdle rates, produces immediate and substantial accretion, lowers risk and positions NRG for sustained financial strength.
Speaker Change: Turning to slide 10.
Speaker Change: Beyond the strategic and operational drivers, we wanted to outline how this strengthens nrg's long term financial Foundation.
Speaker Change: What sets. This acquisition apart is not just the quality of the assets. It is the way it accelerates our growth trajectory and reinforces our ability to deliver durable shareholder value.
Speaker Change: It exceeds our hurdle rates produces immediate and substantial accretion lowers risk and positions NRG for sustained financial strength.
Larry Coben: We are committed to a balanced capital allocation program that prioritizes deleveraging and includes both substantial return of shareholder capital and growth investment. We expect to return at least $1 billion annually to shareholders via share repurchases while maintaining our target 7% to 9% annual dividend per share growth, even through the deleveraging period. We are targeting $3.7 billion of debt reduction related to the acquisition. Once we have achieved our targeted credit metrics, we plan to return to our 80% capital return and 20% growth allocation framework.
Speaker Change: We are committed to a balanced capital allocation program that prioritizes deleveraging and includes both substantial return of shareholder capital and growth investments.
Speaker Change: We expect to return at least $1 billion annually to shareholders via share repurchases, while maintaining our target 7% to 9% annual dividend per share growth even through the deleveraging period, we are targeting $3 $7 billion of debt reduction related to the acquisition.
Speaker Change: Once we have achieved our targeted credit metrics, we plan to return to our 80% capital return and 20% growth allocation framework.
Larry Coben: Turning to slide 11 for a summary of headline metrics. This is an exceptionally accretive acquisition that delivers significant immediate value, including $1.6 billion of incremental adjusted EBITDA, $1 billion of free cash flow before growth, and double-digit percentage accretion in adjusted EPS and free cash flow per share. Over the medium and long term, it lifts our adjusted EPS compound annual growth rate by 40%.
Speaker Change: Turning to slide 11 for a summary of headline metrics.
Speaker Change: This is an exceptionally accretive acquisition that deliver significant immediate value, including $1 $6 billion of incremental adjusted EBITDA.
Speaker Change: $1 billion of free cash flow before growth and double digit percentage accretion in adjusted EPS and free cash flow per share.
Speaker Change: Over the medium and long term it lifts, our adjusted EPS compound annual growth rate by 40%.
Larry Coben: bringing it to 14% through 10, 2029. And to repeat, this 14% growth rate does not, not include any additional upside opportunities, such as rising power prices, or data centers.
Speaker Change: Bringing it to 14%.
Speaker Change: Thousand 29.
Speaker Change: And to repeat this 14% growth rate does not not.
Speaker Change: Not include any additional upside opportunities such as rising power prices or data centers.
Bruce Chung: With that, I'll turn it over to the man who today is the most famous Bruce from New Jersey, Bruce Chung, to walk you through the financial details. Thank you, Larry. Before turning to our exciting announcement today, I'm going to provide a brief overview of our fantastic first quarter financial results. Turning to slide 13, I am pleased to share that NRG delivered record first quarter financial results with $2.68 in adjusted earnings per share and over $1.1 billion in adjusted EBITDA. Adjusted net income was $531 million and free cash flow before growth was $293 million. Compared to the first quarter of last year, we achieved an impressive 84% increase in adjusted EPS and a 30% increase in adjusted EBITDA.
Speaker Change: With that I'll turn it over to the man who today is the most famous as Bruce from New Jersey, Bruce Chung.
Walk you through the financial details.
Speaker Change: Thank you Larry.
Speaker Change: Before turning to our exciting announcement today I am going to provide a brief overview of our fantastic first quarter financial results.
Speaker Change: Turning to slide 13, I am pleased to share that NRG delivered record first quarter financial results with $2 68, and adjusted earnings per share and over $1 1 billion and adjusted EBITDA adjust.
Speaker Change: Adjusted net income was $531 million and free cash flow before growth was $293 million.
Speaker Change: <unk> to the first quarter of last year, we achieved an impressive 84% increase in adjusted EPS at a 30% increase in adjusted EBITDA.
Bruce Chung: Each of our segments executed exceptionally in the first quarter and produced strong financial results over the prior year. Our results were driven by a mix of expanded margins, favorable weather, and excellent commercial optimization in our East, West, and Texas segments, as well as continued customer growth and net service margin expansion in our smart home segment.
Each of our segments executed exceptionally in the first quarter and produced strong financial results over the prior year.
Our results were driven by the mix of expanded margins favorable weather and excellent commercial optimization, and our east West and Texas segments as well as continued customer growth in net service margin expansion and our smart home segments.
Bruce Chung: First quarter 2025 free cash flow before growth exceeded the same period in 2024 by $333 million, largely driven by our strong EBITDA growth and the timing of certain working capital items. With the strong performance delivered in the first quarter, we are reaffirming our 2025 financial guidance across all metrics, while also noting that we are trending at the upper end of our guidance. I look forward to providing you updates on subsequent earnings calls.
Speaker Change: First quarter 2025 free cash flow before growth exceeded the same period in 2024 by $333 million largely driven by our strong EBITDA growth and the timing of certain working capital items.
Speaker Change: With the strong performance delivered in the first quarter, we are reaffirming our 2025 financial guidance across all metrics. While also also noting that we are trending at the upper end of our guidance range I look forward to providing you updates on subsequent earnings calls.
Bruce Chung: Turning to 2025 capital allocation, there are minimal changes to our original capital allocation outlook compared to what I shared in our February call. We began 2025 with $525 million in unallocated excess cash from the prior year, largely driven by the Eritrean divestiture that closed in the fourth quarter. When combined with the midpoint of our free cash flow before growth guidance, that brought the starting 2025 capital allocation, capital available for allocation to over $2.6 billion. Our plan to execute $1.3 billion in share repurchases remained unchanged. Through April 30th, we executed $445 million in share repurchases. We generally manage our share purchases through periodic 10-B-5-1 trading plans, which enables a more programmatic and regular approach to when we are buying in the market.
Speaker Change: Turning to 2025 capital allocation there are minimal changes to our original capital allocation outlook compared to what I shared in our February call. We began 2025 with $525 million on unallocated excess cash from the prior year largely driven by the <unk> divestiture that closed in the fourth quarter.
Speaker Change: When combined with the mid point of our free cash flow before growth guidance that brought the starting 2025 capital allocation capital available for allocation to over $2 6 billion.
Speaker Change: Our plan to execute one 3 billion in share repurchases remains unchanged through April 30, we executed $445 million in share repurchases, we generally manage our share repurchases through periodic can be <unk>, one trading plans, which enables a more programmatic and regular approach to when we are buying in the March.
Bruce Chung: We enter into these plans during open windows when we do not possess material non-public information. These plans will execute over several months or longer and are designed to allow for the continued execution of share purchases if or when we come into possession of material non-public information during such periods.
Speaker Change: <unk>.
Speaker Change: We enter into these plans during open windows, when we do not possess material nonpublic information.
Speaker Change: These plans will execute over several months or longer and are designed to allow for the continued execution of share repurchases, if or when we come into possession of material nonpublic information during such period.
Bruce Chung: Wrapping up the slide, we are showing a slight change from the chart presented during our last earnings call to reflect financing fees related to our liability management program and incremental capital for our new bill program, which includes amounts for turbine reservation slots through the GE-Kiewit partnership we announced last quarter.
Wrapping up the slide we are showing a slight change from the chart presented during our last earnings call to reflect financing fees related to our liability management program and incremental capital for our Newbuild program, which includes amounts for turbine reservation slot through the GE Kiewit partnership we announced last quarter.
Bruce Chung: Finally, we are showing $40 million of unallocated capital, which we will allocate over the course of the year.
Speaker Change: Finally, we are showing $40 million of unallocated capital, which we will allocate over the course of the year.
Bruce Chung: Moving to slide 15 for a look at the key terms of the acquisition we're announcing today. I echo Larry's excitement that NRG will be acquiring a transformative 13-gigawatt portfolio, adding diversity and scale to our generation strategy, while also acquiring the premier CNI VPP platform in the U.S. This is a highly complementary and strategic acquisition and a very compelling transaction from a financial perspective. As you can see on the slide, enterprise value for the portfolio is $12 billion, representing a very attractive multiple of 7.5 times 2026 EV to EBITDA. The enterprise value includes $2.8 billion of stock consideration, which is based on 24.25 million shares that we will issue to LS Power, multiplied by the 10-day trailing volume-weighted average price as of last Friday.
Speaker Change: Moving to slide 15 for a look at the key terms of the acquisition we are announcing today.
Speaker Change: I Echo Larry's excitement that NRG will be acquiring a transformative 13 gigawatt portfolio, adding diversity at scale for our generation strategy. While also acquiring the premier C&I VTC platform in the U S.
Speaker Change: As a highly complementary and strategic acquisition and a very compelling transaction from a financial perspective.
Speaker Change: As you can see on the slide enterprise value for the portfolio is $12 billion, representing a very attractive multiple of seven five times 2026 EV to EBITDA.
The enterprise value includes $2 $8 billion of stock consideration, which is based on 20 425 million shares that we will issue to Alice power multiplied by the 10 day trailing volume weighted average price as of last Friday.
Bruce Chung: In addition to the stock consideration, the enterprise value includes $3.2 billion of existing debt at the acquired companies and $6.4 billion of cash consideration paid to LS Power, less approximately $400 million of the NPV of tax benefits generated directly as a result of the acquisition. The acquisition is highly accretive, with 18% accretion to adjusted EPS in year one and adds $1.85 per share on a run rate basis. On free cash flow before growth per share, the transaction is more than 20% accretive in year one and adds $3.25 per share on a run rate basis. As a result of the highly accretive nature of the acquisition, we are raising our long-term adjusted EPS and free cash flow per share growth rates to greater than 14%, and that's before upside opportunities.
Speaker Change: In addition to the stock consideration the enterprise value includes $3 $2 billion of existing debt at the acquired companies and $6 4 billion of cash considerate consideration paid to LS power less approximately $400 million.
Speaker Change: Of the NPV of tax benefits generated directly as a result of the acquisition.
Speaker Change: The acquisition is highly accretive with 18% accretion to adjusted EPS in year, one and adds a $1 85 per share on a run rate basis on free cash flow before growth per share. The transaction is more than 20% accretive in year, one and at $3 25 per share on a run rate basis.
Speaker Change: As a result of the highly accretive nature of the acquisition, we are raising our long term adjusted EPS and free cash flow per share growth rates to greater than 14% and thats before upside opportunities.
Bruce Chung: The acquisition significantly enhances NRG's credit profile and helps support a long-term leverage target of less than three times net debt to EBITDA.
Speaker Change: The acquisition significantly enhances nrg's credit profile and help support our long term leverage target of less than three times net debt to EBITDA.
Bruce Chung: We expect all three rating agencies to affirm our current credit rating. From a capital allocation perspective, we remain committed to maintaining both a strong balance sheet and a robust return of capital program. As such, we expect to execute $1 billion in annual share purchases while aggressively repaying $3.7 billion of debt over 24 to 36 months post-closing until we achieve our target credit maximum. Upon achieving our target credit metrics, we expect to return to our 80-20 capital allocation framework.
Speaker Change: We expect all three rating agencies to affirm our credit.
Speaker Change: Our current credit ratings.
Speaker Change: From a capital allocation perspective, we remain committed to maintaining both a strong balance sheet and a robust return of capital program as such we expect to execute $1 billion in annual share repurchases, while aggressively repaying $3 7 billion of debt over the 20 over 24 to 36 months.
Speaker Change: Closing until we achieve our target credit metrics.
Speaker Change: Upon achieving our target credit metrics, we expect to return to our 80 20 capital allocation framework.
Bruce Chung: Finally, we anticipate closing the transaction during the first quarter of 2026 after the receipt of various regulatory approvals. Turning to an overview of our acquisition financing plan on slide 16, the acquisition will be funded through the issuance of NRG stock to LS Power, $6.4 billion of new secured and unsecured debt financings, and the assumption of $3.2 billion of existing debt. The stock consideration represents 23% of the total enterprise value and reflects LS Power's strong conviction in NRG's post-acquisition value. The funding plan for the new debt is designed to preserve credit quality and maintain our commitment to a strong balance.
Speaker Change: Finally, we anticipate closing this transaction during the first quarter of 2026 after the receipt of various regulatory approvals.
Speaker Change: Turning to an overview of our acquisition financing plan on slide 16, the acquisition will be funded through the issuance of NRG stock to LS power $6 4 billion of new secured and unsecured debt financings and the assumption of $3 $2 billion of existing debt with <unk>.
Speaker Change: The consideration represents 23% of the total enterprise value and reflects LS power strong conviction and Nrg's post acquisition value.
Speaker Change: The funding plan for the new debt is designed to preserve credit quality and maintain our commitment to a strong balance sheet we.
Bruce Chung: We expect to be opportunistic in the market between now and the anticipated closing date to place permanent financing at compelling rates while also maximizing prepayment flexibility given our aggressive deleveraging plan post-closing. Our investment-grade senior secured rating will allow us to tap the very liquid and cost-effective investment-grade debt market, which greatly enhances our ability to place permanent debt for the transaction.
Speaker Change: We expect to be opportunistic in the market between now and the anticipated closing date to place permanent financing at compelling rates, while also maximizing prepayment flexibility given our aggressive deleveraging plan post closing.
Speaker Change: Our investment grade senior secured rating will allow us to tap that very liquid and cost effective in investment grade debt market, while grape and which greatly enhances our ability to place permanent debt for the transaction.
Bruce Chung: As always, the strength of our balance sheet remains a top priority. Consistent with the views of the rating agencies, we firmly believe this acquisition enhances our credit profile and mitigates key financial risks. We intend to reduce debt by $3.7 billion within 24 to 36 months after closing to ensure we achieve our long-term target investment-grade credit metric. Based on our analysis, this is very achievable and does not rely on any significant power and capacity price increases, nor does the plan rely on achieving any cost or revenue synergies associated with the acquisition. Furthermore, we expect the transaction to provide at least $500 million of potential collateral efficiencies, translating into tens of millions of dollars in carrying cost savings annually.
Speaker Change: As always the strength of our balance sheet remains a top priority consistent with the views of the rating agencies. We firmly believe this acquisition enhances our credit profile and mitigates key financial risks, we intend to reduce debt by $3 7 billion within 24 months to 36 months after closing to ensure we.
Speaker Change: To achieve our long term target investment grade credit metrics.
Speaker Change: Based on our analysis. This is very achievable and does not rely on any significant power and capacity price increases nor does the plan rely on achieving any cost or revenue synergies associated with the acquisition of <unk>.
Speaker Change: The more we expect the transition transaction to provide at least $500 million of potential collateral efficiencies translating into tens of millions of dollars and carrying cost savings annually.
Bruce Chung: We have not included any of this in our pro forma. The combination of the strong free cash flow generation of the combined businesses, our financing plan, and its associated debt reduction creates tremendous flexibility to maintain a robust return of capital program post-closing. As I said earlier, we intend to execute $1 billion of share purchases annually through the deleveraging period while continuing to grow our common dividend per share 7 to 9 percent.
Speaker Change: We have not included any of this and our pro forma the.
Speaker Change: The combination of a strong free cash flow generation of the combined businesses, our financing plan and its associated debt reduction creates tremendous flexibility to maintain a robust return of capital program post closing as I said earlier, we intend to execute $1 billion of share repurchases annually through the deleveraging period.
Speaker Change: While continuing to grow our common dividend per share 7% to 9%.
Bruce Chung: On slide 17, we provide an overview of how the transaction impacts our long-term adjusted EPS growth trajectory. Transaction is immediately accreted by 18% in year one and will add $1.85 per share of incremental run rate earnings by 2029. Combined with the recent acquisition of the Rockland, Texas portfolio, this acquisition will increase our long-term adjusted EPS growth rate from greater than 10 percent to greater than 14 percent.
Speaker Change: On slide 17, we provide an overview of how this transaction impacts our long term adjusted EPS growth trajectory.
Speaker Change: The transaction is immediately accretive by 18% in year, one and we will add $1 85 per share of incremental run rate earnings by 2029.
Speaker Change: Combined with the recent acquisition of the Rosslyn, Texas portfolio. This acquisition will increase our long term adjusted EPS growth rate from greater than 10% to greater than 14%. What is noteworthy is that 80% of our long term growth will come from our previously announced organic growth plan and the accretive earnings from our App.
Bruce Chung: What is noteworthy is that 80% of our long-term growth will come from our previously announced Organic Growth Plan and the accretive earnings from our acquisitions, with the remaining 20% attributed to our Return of Capital Program. Recall that this mix was closer to 50-50 back in our third quarter earnings call, thereby demonstrating how this transaction significantly enhances the source of our long-term earnings growth and substantially reduces the impact that an increasing share price would have on our ability to achieve our adjusted EPS growth target. For example, if today, our stock price were to only partially close its valuation discount and reach $200 per share, our compound annual growth rate would be around 12%.
Acquisitions with the remaining 20% attributed to our return of capital program.
Speaker Change: Recall that this mix was closer to 50 50 back in our third quarter earnings call, thereby demonstrating how this transaction significantly enhances the source of our long term earnings growth and substantially reduces the impact than an increasing share price would have on our ability to achieve our adjusted EPS growth targets for <unk>.
Speaker Change: Example, if today our stock price were to only partially closed its valuation discount and reached $200 per share our compound annual growth rate would be around 12%.
Bruce Chung: Furthermore, this uplift in our growth rate only considers the accretion of the transaction itself based on flat power markets.
Speaker Change: Furthermore, this uplift in our growth rates only considers the accretion of the transaction itself based on flat power markets.
Bruce Chung: Consistent with the 10% CAGR we unpacked in our third quarter 2024 earnings call, our raised adjusted EPS growth rate does not account for any potential upside related to increases in energy and capacity prices, as well as any impacts from our data center and large load strategy.
Speaker Change: <unk> with the 10% CAGR, we unpack in our third quarter 2024 earnings call. Our raised adjusted EPS growth rate does not account for any potential upside related to increases in energy and capacity prices as well as any impacts from our data center and large load strategy.
Bruce Chung: Moving on to pro forma capital allocation on slide 18. As highlighted earlier, the portfolio we are acquiring will add $1 billion of annual free cash flow on a run rate basis. This results in $4 billion of incremental free cash flow before growth for the 2026 to 2029 period, which, when added to our standalone capital available for allocation, results in $13.3 billion of excess cash.
Speaker Change: Moving on to the pro forma capital allocation on slide 18.
Speaker Change: As highlighted earlier as the portfolio, we are acquiring will add $1 billion of annual free cash flow on a run rate basis. This results in $4 billion of incremental free cash flow before growth for the 26 2026 to 2029 period, which when added to our Standalone capital free capital available for allocation.
Speaker Change: <unk> and $13 3 billion of excess cash.
Bruce Chung: As discussed earlier, we will aggressively reduce debt by $3.7 billion over the next 24 to 36 months. Despite the incremental debt reduction, our return of capital program remains largely unchanged from what we discussed on our third quarter earnings call. The pro forma plan provides for $7.4 billion of return of capital, comprised of $5.7 billion in share purchases and $1.7 billion of common dividend. Forecasted expenditures for growth investments remain at $1.3 billion for the period.
Speaker Change: As discussed earlier, we will aggressively reduce debt by $3 7 billion over the next 24 to 36 months, despite the incremental debt reduction or return of capital program remains largely unchanged from what we discussed on our third quarter earnings call. The.
Speaker Change: The pro forma plan provides for $7 $4 billion of return of capital comprised of $5 7 billion in share repurchases and $1 7 billion of common dividends.
The forecasted expenditures for growth investments remain remains at $1 3 billion for the period.
Bruce Chung: The free cash flow from the acquired portfolio will materially enhance NRG's capital return and growth investment flexibility following the deleveraging period in 2029 and beyond, putting NRG on solid footing for sustained earnings per share growth. Finally, we forecast $400 million of remaining TASA, which we will allocate as appropriate in the given period.
Speaker Change: The free cash flow from the acquired portfolio will materially enhance nrg's capital return and growth investment flexibility. Following the deleveraging period in 2029 and beyond putting NRG on solid footing for sustained earnings per share growth.
Speaker Change: Finally, we forecast $400 million of remaining Capa, which we will allocate as appropriate in the given period.
Bruce Chung: Turning to slide 19 for a brief overview on Proforma Credit Profile. The physical attributes of the acquired generation assets, additional earnings diversity from the portfolio, and incremental scale to NRG's platform will translate into a more enhanced credit position for NRG as a whole. The aforementioned credit-enhancing attributes of this acquisition support a long-term investment-grade target credit metric of less than three times net debt to EBITDA, up from our current target range of 2.5 to 2.75 times. As you can see from the table, both our stand-alone and pro forma plans ensure that we achieve our targeted credit metric.
Speaker Change: Turning to slide 19 for a brief overview on pro forma credit profile.
Speaker Change: The physical attributes of the acquired generation assets additional earnings diversity from the portfolio and incremental scale to Nrg's platform will translate into a more enhanced credit position for NRG as a whole the.
Speaker Change: The aforementioned credit enhancing attributes of this acquisition support a long term investment grade target credit metric of less than three times net debt to EBITDA up from our current target range of two 5% to 275 times.
Speaker Change: As you can see from the table, both our Standalone and pro forma plans ensure that we achieve our targeted credit metrics on a pro forma run rate basis, we will add $6 4 billion of incremental debt supported by the additional EBITDA from this acquisition and the Rosslyn portfolio acquisition.
Bruce Chung: On a pro forma run rate basis, we will add $6.4 billion of incremental debt supported by the additional EBITDA from this acquisition and the Rockland Portfolio Act. The $3.7 billion of incremental debt reduction in the pro forma column will be done through internally generated cash flows over a 24 to 36 month period after closing. This debt reduction is an important component of our pro forma capital allocation plan and demonstrates our commitment to a strong balance.
Speaker Change: The $3 $7 billion of incremental debt reduction in the pro forma column will be done through internally generated cash flows over a 24 to 36 month period after closing.
Speaker Change: This debt reduction is an important component of our pro forma capital allocation plan and demonstrates our commitment to a strong balance sheet.
Bruce Chung: We expect all three rating agencies to affirm our credit ratings, which was a critical component to our evaluation of this transaction. Our high double-B unsecured and investment-grade secured credit ratings have historically provided advantageous access and pricing in the debt market. Our Acquisition Financing and Proforma Debt Reduction Plans were carefully crafted to ensure that we will maintain good access to those markets. NRG continues to produce impressive financial results, and the highly complimentary and accretive transaction we announced today further enhances our earnings profile, while enabling NRG to maintain a strong balance sheet and continue to significant return of capital.
Speaker Change: We expect all three rating agencies to affirm our credit ratings, which was a critical component to our evaluation of this transaction our high double be unsecured and investment grade secured credit ratings have historically provided advantageous access and pricing in the debt markets are acquisition financing and pro forma debt.
Speaker Change: Reduction plans were carefully crafted to ensure that we will maintain good access to those markets.
Speaker Change: NRG continues to produce impressive financial results and the highly complementary and accretive transaction. We are we announced today further enhances our earnings profile, while enabling NRG to maintain a strong balance sheet and continued significant return of capital I look forward to updating you throughout the balance of the.
Bruce Chung: I look forward to updating you throughout the balance of the year.
Larry Coben: With that, I'll turn it back to you, Larry. Thank you, Bruce.
Larry Coben: Year with that I'll turn it back to you Larry. Thank you Bruce I think you can see our Bruce is not dancing in the dark.
Larry Coben: I think you can see our Bruce is not dancing in the dark.
Larry Coben: Beginning on slide 21, our long-term outlook. As we have outlined today, this acquisition supercharges our outlook to 14% compound annual growth in adjusted EPS and free cash flow before growth per share through 2029, while reducing our overall risk. These are very achievable targets built on a stronger platform, greater scale, and a more flexible asset. Our increased growth forecast reflects contributions from the acquisition portfolio and Rockland being added to our base plan that we rolled out last November. Again, it does not include upside from rising power prices, premium large load contracts, or execution of our full TEF development pipeline.
Speaker Change: Getting on slide 21, our long term outlook.
Speaker Change: As we have outlined today this acquisition Super charges, our outlook to 14% compound annual growth in adjusted EPS and free cash flow before growth per share through 2029.
Speaker Change: While reducing our overall risk. These are very achievable targets built on a stronger platform greater scale and a more flexible asset base.
Speaker Change: Our increased growth forecast reflects contributions from the acquisition portfolio.
Speaker Change: Rock when being added to our base plan that we rolled out last November.
Speaker Change: Again, it does not include upside from rising power prices premium large load contracts or execution of our full TGF development pipeline, we have the scale reach and balance sheet to meet through the most dynamic period. This sector has ever seen today's announcements significantly strengthens our earnings power.
Larry Coben: We have the scale, reach, and balance sheet to lead through the most dynamic period this sector has ever seen. Today's announcement significantly strengthens our earnings power, improves our risk profile, and expands our ability to return capital to shareholders.
Speaker Change: It improves our risk profile and expands our ability to return capital to shareholders, but more than that it unlock significantly more potential in a market entering a period of sustained structural growth.
Larry Coben: But more than that, it unlocks significantly more potential in a market entering a period of sustained structural growth.
Larry Coben: Before we open the line for questions, I want to recognize Rasesh Patel, who is retiring this week. Rasesh played a central role in the successful integration of Vivint and in building the country's leading smart home and retail energy platform. His strategic clarity, steady hand, and focus on execution have helped define the NRG we are building today. We will miss him for that and for his friendship. On behalf of all of us, thank you, Rasesh.
Speaker Change: Before we open the line for questions I want to recognize Rajiv Patel, who is retiring this week rich.
Speaker Change: <unk> played a central role in the successful integration of <unk> and in building the country's leading smart home and retail energy platform.
Speaker Change: His strategic clarity steady hand, and focus on execution have helped define the NRG. We're building today, we will miss him for that and for his friendship.
Speaker Change: Behalf of all of US. Thank you reduce we wish you and your family the very best and we're proud to have you remain part of the NRG family as a customer and long term shareholder we'd expect to name reduces successor by the end of the second quarter.
Larry Coben: We wish you and your family the very best, and we're proud to have you remain part of the NRG family as a customer and long-term shareholder.
Larry Coben: We expect to name Rasesh a successor by the end of the second quarter.
Unknown Executive: Operator, we're ready for questions.
Speaker Change: Operator, we're ready for questions.
Unknown Executive: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star 1 1 again.
Speaker Change: Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered or you were seeing with yourself from the queue. Please press star one again, we will pause for a moment, while we compile the Q&A roster.
Julien Dumoulin-Smith: We'll pause for a moment while we compile our Q&A Q&A Our first question comes from Julien Dumoulin-Smith with Jeffries, your line is open. Hey team, good morning. Thank you guys very much for the time. Nicely done. Thank you, Julien. Good morning. How are you? Hey, great, Larry. Thank you so much.
Speaker Change: Yes.
Moderator: Our first question comes from Julien Dumoulin Smith with Jefferies. Your line is open.
Speaker Change: Hey, Tim Good morning, and thank you guys. So much of the tie in nicely done.
Speaker Change: Thank you Julien good morning, how are you.
Speaker Change: Hey, great Larry Thank you so much.
Julien Dumoulin-Smith: Hey, so let's dig right in here.
Speaker Change: So, let's let's let's dig right in here so far.
Julien Dumoulin-Smith: So just first off in that EBITDA, real quickly, I just want to make sure I heard a couple things right, but if you can clarify. So you're assuming $50 and $47 for the PJM and ERCOT, respectively. I think that's below market forwards today. I just want to try to understand a little bit on that.
Speaker Change: First off in that EBIT real quick I, just want to make sure I heard a couple of things right, but if you can clarify so youre, assuming 50 box at <unk> 47 for the PJM and ERCOT, respectively, I think thats below market forwards today, just wanted to try to understand a little bit on that and then separately in that EBITDA.
Julien Dumoulin-Smith: And then separately in that EBITDA, what portion is CPOWER and how do you think about growth there, as well as how do you think about the synergies? I think you're not including anything in that one sixth number, but do you want to just break down that EBITDA and the acquisition a little bit and just think about the various meaningful levers, if you don't mind?
Speaker Change: Portion of sea power and how you think about growth there.
Speaker Change: As well as how do you think about the synergies I think youre not including anything in that $1 six number but do you want to just break down that EBITDA in the acquisition a little bit and just think about the various meaningful levers. If you don't mind sure I can start and then I think there's about four questions in there Julien, but let me try to get to them. All we wanted to use the same pricing that we've been.
Larry Coben: Sure, I can start and then go on. I think there's about four questions in there, Julian, but let me try to get to them all. We wanted to use the same pricing that we've been using when we rolled out our plan so that it would be simple for shareholders to compare them apples to apples to really show the power of this acquisition. Obviously, if we raise the pricing to current market, all the numbers would be significantly higher, but we choose not to do that to make the comparative life for everybody far, far simpler.
Speaker Change: Using when we rolled out our plan so that would be simple for shareholders too.
Speaker Change: Compare them apples to apples to really show the power of this acquisition, obviously, if we raised the pricing to current market.
All of the numbers would be significantly higher, but we choose not to do that to make the comparative life for everybody far far simpler.
Larry Coben: Second question was CPOWER, I think. We're really excited about what CPOWER represents. I think we've seen VPP be a very powerful tool for us already, both on the CNI side and beginning to roll it out now on the residential side. I think stay tuned, we'll be rolling out some more thoughts on VPP as the year goes on.
Speaker Change: Second question was seapower I think.
Speaker Change: We're really excited about what see power represents item I think we.
Speaker Change: We've seen <unk> be a very powerful tool for us already bolt on the C&I side and beginning to roll. It out now on the residential side and I think stay tuned we will be rolling out some more thoughts on DPP as the year goes on.
Julien Dumoulin-Smith: There was a third question, Julian. I'm sorry, I can't remember what it was.
Speaker Change: There was a third question Julien I'm, sorry, I can't remember what it was.
Well actually what's the yeah exactly synergies was the third one Julian we expect to find some synergies, but this is not a deal predicated on synergies in any way shape or form and if we were assuming zero and still showing the power of anything else will be additional benefit to our stockholders.
Larry Coben: Synergies was the third one. Julien, we expect to find some synergies, but this is not a deal predicated on synergies in any way, shape, or form. And if we, you know, we're assuming zero and still showing the power, anything else will be, you know, additional benefit to our stockholders.
Julien Dumoulin-Smith: And then separate, more strategic one, I mean, how do you think about doing more? You've done a couple things here in quick succession here. And I mean that both in power, but also specifically retail. How do you think about this enabling you, right, because this kind of flips the equation from earlier, to do more retail conceivably, right, whether that's organically build out more retail presence or, you know, or inorganically. Any thoughts there?
Speaker Change: And then separate more strategic one I mean, how do you think about doing more you've done a couple of things here in success quite succession here and I mean that both in power, but also specifically retail how do you think about this enabling you right because it kind of flips the equation from earlier to do more retail conceivably right, whether that's organically build out more retail presence.
Speaker Change: Or.
Speaker Change: Inorganically.
Speaker Change: That's fair.
Larry Coben: Do you want more, Julien? It's Monday morning. Look, Julien, I think what it does is give us enormous amounts of optionality across all of our customer bases, be it in the home or in the C&I book. It enables us to customize longer-term solutions for people who want those and see power markets. So I think it actually puts us in a position where we can grow across our spectrum of customers.
Speaker Change: You want more Julien.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Under a warning.
Speaker Change: Julian.
Speaker Change: Just give us enormous amounts of optionality across all of our customer base as we did in the home or in the C&I book It enables us to customize longer term solutions for people, who want those in seat power markets. So I think it actually puts us in a position where we can grow across our spectrum of customers.
Larry Coben: Again, we didn't really assume that in this Beyond the Growth plan that we had rolled out a couple months back. But, you know, putting all that together, we're super confident about the opportunity set that this provides to us. I mean, I think it's exponentially higher. I mean, we've doubled the portfolio, but more than doubled the opportunity. Yeah, absolutely.
Speaker Change: Again, we didn't really assume that in this beyond the growth plan that we rolled out a couple of months back.
Speaker Change: But.
Speaker Change: Putting all that together, we're super confident about the opportunity set that this provides to us.
Speaker Change: Its exponentially higher I mean, we've doubled the portfolio, but more than double the opportunity.
Speaker Change: Yes, absolutely.
Julien Dumoulin-Smith: And just clarifying there, the amount of growth reflected in retail or C power, what have you, in your projected assumptions here, can you break that down and clarify that within the organic piece of your longer term target? Yes, if you take zero and then multiply it by zero, that's the answer. It's zero. We have not put any grossing for that. Sorry, Julien. Zero is the correct answer. Yeah, excellent. Thank you guys for that. Appreciate it. Nice to be done again.
Speaker Change: Just clarifying some of the.
Speaker Change: The amount of growth reflected in retailers see power what have you and your projected assumptions here can you break that down and clarify that within the organic piece of your longer term targets.
Speaker Change: Yes, if you take zero and then multiply it by zero that's the answer is zero.
Speaker Change: Okay, we have now.
Speaker Change: Did that clarify we have not put any growth.
Speaker Change: Sorry, Julien zero is the correct answer is correct yes.
Speaker Change: Excellent. Thank you guys for that I appreciate it nice we've done again.
Speaker Change: One moment for our next question.
Shahriar Pourreza: Our next question comes from Shahriar Pourreza with Guggenheim Partners. Your line is open. Hey guys, good morning. Good morning, Shahriar. How are you? Good.
Speaker Change: Our next question comes from Sean <unk> with Guggenheim Partners. Your line is open.
Sean: Hey, guys good morning.
Speaker Change: Good morning, Shar, how are you good I don't think I'll ever question, whether Bruce is working hard enough. After today's announcements so much demonstrates shar.
Shahriar Pourreza: I don't think I'll ever question whether Bruce is working hard enough after today's announcement. Damn straight, Shahriar. He's trying to get that bonus back, Shahriar. There he goes.
Sean: Yeah.
Sean: Just trying to get that bonus bags.
Sean: There you go.
Larry Coben: Larry, this deal seems like it's another huge vote of confidence, I guess, for the industry and the Eastern generation. I guess, what has changed? What was it that changed the company's views on your position in Eastern markets? Is it capacity, energy volatility, the price?
Sean: Larry This deal seems like it's another huge vote of confidence I guess for the industry in the eastern generation I guess what has changed.
Sean: What was it that changed the company's views on your position in eastern market as the capacity energy volatility that price just trying to understand a little bit more on your views on eastern markets, how thats evolved, especially on the heels of some of the PJM states floating opportunities for wireless companies to own generation, which to me.
Larry Coben: Just trying to understand a little bit more on your views on Eastern markets, how that's evolved, especially on the heels of some of the PJM states, floating opportunities for wires companies to own generation, which to me seems like a bit of a tail risk that's a path forward. Yeah. Look, Shahriar, I think we've always, as we've said, liked PJM market. We just weren't really in a position to be a strong, you know, generation player in it. The developments that are going on, be they for data centers, be they for large load, be they for tightening capacity markets, be they for the recent, you know, settlement on capacity, all give us, you know, a great deal of comfort on where this has to go.
Sean: Seems like a bit of a tail risk that surpassed the two yes, yes.
Sean: Yes.
Sean: I think we've always as we've said like PJM market, we just werent really in a position to be a strong generation player in it the developments that are going on <unk> for Datacenters bofa for beef large load BLA for tightening capacity market for the recent.
Sean: Settlement on capacity, all give us a great deal of comfort on where this has to go and so we also.
Larry Coben: And, you know, Shahriar, we also, you know, we run a lot of sensitivities. It won't surprise you. You know, we don't need exorbitant capacity or energy prices for this to be an exceptionally, exceptionally accretive transaction. PJM is probably where we have the most asymmetric gearing to the upside. And so that's why we like it. We don't see any way that market can't tighten, but even if it doesn't, this is an exceptionally accretive transaction. Got it.
Sean: We ran a lot of sensitivities it won't surprise you.
Sean: Don't need exorbitant capacity or energy prices for this to be an exceptionally exceptionally accretive transaction PJM is probably where we have the most a symmetric gearing to the upside and so that's why we like it we don't see any way that market can tighten, but even if it doesn't this is an exceptionally accretive transaction.
Speaker Change: Got it got it and then are there any large.
Shahriar Pourreza: And then are there any large Is there any large customer or co-location deal tied to these assets? Other ones you're inheriting from LS or ones that you've been working on, but just didn't previously have the agenda? Nothing yet, Shahriar. But we believe it will definitely enhance our large load and data center strategy, but nothing we're prepared to talk about at this time. Okay, perfect.
Speaker Change: Is there any large customer or co location deal tied to these assets. Other ones. You are inheriting from Elas are ones that <unk> been working on but just didn't previously have the gen. Four.
Speaker Change: Nothing yet.
Speaker Change: But alright.
Speaker Change: We believe it will definitely enhance our large load in datacenter strategy, but nothing we're prepared to talk about at this time, Okay. Perfect and then just lastly, I guess, how do you go about.
Larry Coben: And then just lastly, I guess, how do you go about unlocking the 500 million in collateral efficiency? Does it require to hit IG first? Any just rough guidance on how to at least think about potential synergies there? Yeah, no, Shahriar Pourreza, I think that's really just a function of having generation now alongside a pretty significant C&I book and being able to sort of match that up appropriately. That is, that's something that we're going to be able to do just by our own. Got it. Perfect.
Speaker Change: Unlocking the $500 million in collateral efficiencies as it required it.
Speaker Change: First any just rough guidance on how to at least think about potential synergies there. Thanks.
Speaker Change: Yes, no shortage, firstly I think that's really just a function of.
Speaker Change: Generation now alongside of pretty significant C&I book, and being able to sort of match set up appropriately that is that's something that we are.
Speaker Change: Going to be able to do just by our own internal meetings.
Speaker Change: Got it perfect Big Congrats guys, Larry everything Bruce I'm very proud of you. This morning, thanks guys.
Shahriar Pourreza: Big congrats, guys. Larry, everything. Bruce, I'm very proud of you this morning. Thanks, guys. Thank you, Shahriar. I feel like such a good son now. Thanks, Shahriar.
Speaker Change: Thank you sure feel like Thats a good.
Speaker Change: Son.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Hey, Ashley.
Yes.
Speaker Change: Thanks Shar.
Speaker Change: Yes.
Speaker Change: One moment for our next question.
Steve Fleishman: Our next question comes from Steve Fleishman with Wolf Research. Your line is open. Yeah, congrats. Congrats, Larry and team.
Speaker Change: Our next question comes from Steve Fleishman with Wolfe Research Your line is open.
Speaker Change: Yes, Hey, Brett Congrats.
Speaker Change: Congrats you Sir.
Speaker Change: Larry and team.
Steve Fleishman: So, I guess my data center question was just asked just a couple other details that uh the shares that you're issuing is there that's just that fixed amount of shares there's no like collars or anything else like that related to it correct uh That is good. And then just could you just go through the path of deleveraging in terms of just like, where are you after year one of closing? And then how do you then get down to the three times? Yeah, I see. So like I said, you know, we're going to be deleveraging through internally generated cash flow, you know, year one after after close will probably be right around three and a half times.
So.
Speaker Change: I guess my data Center question was just asked just a couple of other details.
Speaker Change: The shares that you are issuing is there that's just that fixed amount of shares there's no like collars or anything else like that.
Speaker Change: Correlated to it.
Correct.
Speaker Change: That is good and then just could you just go through the path of deleveraging in terms of just like.
Speaker Change: Where are you after year one of closing and then how do you then get down to the three times.
Speaker Change: I see so like I said, we're going to be deleveraging through internally generated cash flow.
Year, one after after close we will probably be right around three five times.
Steve Fleishman: And then we'll tick down steadily over the following two years until we get to three. Okay, so not Not that far off. Yep. Good.
Speaker Change: And then we will sit down steadily over the following two years until we get to three times.
Speaker Change: Okay. So not.
Speaker Change: Not that far off the three yes.
Larry Coben: And then I guess, uh... You touched on it a little bit, but just on the data center strategy that you have been talking about. Well, I guess the two strategies you've been talking about previously, first, the data centers, it sounds like you're hoping to lock those up in Q2. The Menlo and the Powland. And then also just the new build strategy. So even you're still bullish on. pursuing continued new build generation, even as we've seen prices go up and the like for the cost of new build. We are. We think that, you know, additionality is still going to be a big part of people's data center strategies going forward.
Speaker Change: Okay and then.
Speaker Change: I guess.
Speaker Change: Yes.
Speaker Change: You touched on it a little bit, but just on the data center strategy that you had been talking about.
Speaker Change: Well I guess the two strategy has been talking about previously first.
Speaker Change: The data centers it sounds like you're hoping to lock those up in Q2.
Speaker Change: The menlo and the.
Speaker Change: Palin.
Speaker Change: And then also just the Newbuild strategy so even.
Speaker Change: You are still bullish on.
Speaker Change: Pursuing continued newbuild generation, even as we've seen prices go up and the like for the.
Speaker Change: The cost of new builds.
Speaker Change: Steve We are we think that is.
Speaker Change: This analogy is still going to be a big part of People's data Center strategies going forward and we now have the optionality to be able to do that and we're continuing to all the things. We said about data centers in the last call. Let me just reaffirm and reiterate those I mean, our view on data centers Hasnt changed obviously, we didn't spend much.
Larry Coben: And we now have the optionality to be able to do that, and we're continuing all the things we said about, you know, data centers in the last call. Let me just, you know, reaffirm and reiterate those. I mean, our view on data centers hasn't changed. Obviously, we didn't spend much time on it in this presentation because there were some other things to talk about. Understood. Great. Congrats again. Thank you, Steve.
Speaker Change: Hi monitored in this presentation because there were some other things to talk about.
Speaker Change: Yes.
Speaker Change: Understood Great Congrats again.
Speaker Change: Thank you Steve.
Unknown Executive: One moment for our next question.
Speaker Change: One moment for next question.
Speaker Change: Yes.
David Arcaro: Our final question comes from David Arcaro with Morgan Stanley, your line is open. Oh, hey, thanks so much. Hi David, how are you? Good, good. Congratulations.
Speaker Change: Our final question comes from David Arcaro with Morgan Stanley. Your line is open.
David Arcaro: Okay. Thanks, so much good morning.
Speaker Change: David how are you.
Speaker Change: Good good congratulations.
David Arcaro: You know, hey, I was thinking, or I was wondering at a higher strategic level, you know, how does your, how does the overall NRG portfolio look in your view right now? There's been, you know, it seems like a bunch of transformations now over the last couple of years. Are, is, after this acquisition, is this a good balance? Are there holes or opportunities versus what you think the overall kind of ideal NRG portfolio looks like? Portfolio. Yeah, look, I think Well, we really like where we sit in the portfolio, both in terms of exposure to markets, large loads, data centers, and then, you know, layering in on top of that, you know, the optionality we have with GE and Kiewit to provide additionality.
Speaker Change: I was thinking.
Speaker Change: Wondering at.
Speaker Change: At a higher strategic level.
Speaker Change: How does your how does the overall NRG portfolio look in your view right now there have been it seems like.
Speaker Change: A bunch of transformations now over the last couple of years.
Speaker Change: Our is after this acquisition is this a good balance are there holes or opportunities versus what you think the overall kind of ideal NRG portfolio looks like.
Speaker Change: Look I think.
Speaker Change: We really like where we sit in the portfolio both in terms of exposure to markets large loads data centers.
You're layering in on top of that the Optionality, we have with GE and key with to provide additionality.
Larry Coben: We really like where we sit in every segment of the market, be it generation, be it large load, be it data center, be it retail. We're really quite pleased with the way this portfolio enables us to compete across the board in every competitive market we want to be in. Great, understood.
Speaker Change: Really like where we sit in every segment of the market generation bid large load. These data center be at retail were really quite pleased with the way that this portfolio enables us to compete across the board in every competitive market, we want to be.
Speaker Change: Okay, great understood and then.
Larry Coben: And then... I was wondering, is there, if you were to, are you able to give if you were to mark to market just what the EBITDA and cash flow output would be on the current forward curves and maybe bit of a follow on to that, but you know, a lot of the new assets are peakers. We've got a decent amount of exposure here. Capacity Auction. Wondering if you could talk about just how much exposure there is. Capacity Pricing. and kind of how do you how do you look at the outlook for. Look, I don't, I don't think we're, the assumptions that we've utilized and that you can see in some of the appendices really are particularly aggressive or require high levels of, you know, capacity option.
Speaker Change: I was wondering is there if.
Speaker Change: If you were to are you able to give if you were to mark to market, just what the EBITDA and cash flow uplift would be on the current forward curves and maybe.
Speaker Change: A bit of a follow on to that but a lot of the new assets are <unk>.
Speaker Change: And you've got a decent amount of exposure here to the PJM capacity auction.
Speaker Change: Wondering if you could talk about.
Speaker Change: Just how much exposure there is what's the sensitivity to capacity prices here.
Speaker Change: And kind of how do you how do you look at the outlook for PJM capacity.
Speaker Change: I don't I don't think we are seeing.
Speaker Change: Assumptions that we've utilized and that you can see in some of the appendices really are particularly aggressive or require high levels of capacity auction.
Bruce Chung: You can run this across a series of sensitivities, David, and it's, you're still going to get this incredible double digit accretive outcomes that, you know, we're looking at here. So, you know, I think we'll end up providing some more color over time as to, you know, exactly how those sensitivities work, but we're super confident that across a wide variety of potential outcomes in the market, this is an outstandingly good transaction. Bruce, do you want to add anything to that?
Speaker Change: Run this across the series.
Speaker Change: <unk>, David and its youre still going to get this incredible double digit accretive outcomes that we're looking at here. So.
Speaker Change: And I think we'll end up providing some more color over time as to exactly how those sensitivities work, but we're super confident that across a wide variety of potential outcomes in the market. This is an outstandingly good transaction Bruce you want to add anything that yet David.
Bruce Chung: Yeah, David, you know, in terms of the, your point about this portfolio having a good number of peakers, that's correct. But if you think about the gross margin associated with the portfolio, it's actually probably more, you know, 55% energy, 45% capacity, and that's in large part because of, you know, these are the CCGTs that are in the portfolio are very efficient and have very high run time. So you can think about it that way. got it, got it. That's helpful. Thanks.
Speaker Change: In terms of the.
Speaker Change: Your point about this portfolio, having a good number of <unk> Thats correct, but if you think about the gross margin associated with the portfolio, it's actually probably more.
Speaker Change: 55% energy, 45% capacity and that's in large part because of it.
Speaker Change: These leases the CCT the CCG Ts that are in the portfolio are very efficient and have very high run times. So.
Speaker Change: You can think about it that way.
Speaker Change: Got it got it that's helpful. Thanks and.
Bruce Chung: And maybe it just is thinking one more is thinking about the incremental free cash flow before growth, it seems like a, you know, a good portion of the incremental free cash flow is going toward that pay down. But essentially, as you get out after that 24 to 30, Yeah, that's right. That's what we said. We said, you know, post the deleveraging period, we would expect to go back to that 80-20 framework. Excellent. Thanks so much.
Speaker Change: Maybe just sneak in one more just thinking about the incremental free cash flow before growth it seems like it.
Speaker Change: A good portion of the incremental free cash flow is going towards debt paydown, but essentially as you get out after that 24 to 36 months.
Speaker Change: That's going no further.
Speaker Change: Further commitments at that point at that point, it's incremental kind of be used toward your overall capital allocation framework. The 80 20.
Speaker Change: That's right. That's what we said we said post the deleveraging period, we would expect to go back to that 80 20 framework.
Speaker Change: Excellent. Thanks, so much I appreciate it.
Carly Davenport: And pardon me, we did have someone else queue for a question, so one moment for our next question. Our next question comes from Carly Davenport for Goldman Sachs. Hey, good morning. Good morning. Thanks so much for taking the questions.
Speaker Change: And pardon me, we did have someone else queue for questions. So one moment for our next question.
Speaker Change: Our next question comes from Carly Davenport with Goldman Sachs. Your line is open.
Carly Davenport: Hey, good morning.
Carly Davenport: Morning, Thanks, so much for taking the questions.
Carly Davenport: Maybe just one from me just on the standalone business on the home VPP opportunity. Can you just talk a little bit about that tracking post launch in terms of the uptake and how you feel about the ultimate margin opportunity there relative to what you've laid out on prior calls?
Carly Davenport: Maybe just one from me just on the Standalone business.
Carly Davenport: The home GPP opportunity can you just talk a little bit, but that's tracking close to launching in terms of the uptake.
Carly Davenport: You feel about the ultimate margin opportunity there relative to what you've laid out on prior calls.
Rasesh Patel: Carly, I'm going to let Rasesh answer that, but this is going to be the last question he gets to answer on a call, so thank you for asking. On that note, Carly, I feel, you know, incredibly bullish about where we sit on the home BPP opportunity. If you recall the third quarter earnings call, we had stated that we expect to exit this year with about 20 megawatts of BPP capacity growing to 300 by the end of 2027. We're right now expecting to exit this year with 160 megawatts of residential demand response capacity. So we're tracking really well.
Speaker Change: Currently I'm going to let receipts to answer that because this is going to be the last question here gets to answer on a call. So thank you for asking.
Carly Davenport: Yeah.
Carly Davenport: Carl.
Carly Davenport: I feel incredibly bullish about where we sit on the home DTP opportunity. If you recall the third quarter earnings call.
Carly Davenport: <unk> stated that we expect to exit this year with about 20 megawatts of ETE capacity growing to 300 by the end of 2027 right.
Carly Davenport: Right now I think exiting to exit this year with 150 megawatts.
Carly Davenport: Residential demand response capacity, so we're tracking really well the reception from consumers has been outstanding because essentially this is incremental.
Rasesh Patel: The reception from consumers has been outstanding because essentially this is incremental value-add to the customer. They're getting a, you know, smart thermostat, a doorbell camera, a free installation, all as a part of being an NRG customer. And, in fact, we have been moderating our, you know, demand just so that we can hire enough installers and technicians. And then lastly, in terms of kind of the margin and earnings part of this, the thing that has really surprised us in a positive way is of the customers that have taken this value proposition from us, close to half were already upgraded to other recurring revenue services within the NRG family.
If you ask a customer theyre getting.
Carly Davenport: Smart thermostat and doorbell camera, a free installation all as a part of being in NRG customer and impact.
Carly Davenport: We have been moderating.
Carly Davenport: Sure.
Carly Davenport: The demand.
Carly Davenport: Yes.
Carly Davenport: So that we can hire enough installers in Texas.
Carly Davenport: Bill.
Carly Davenport: Fulfill the customer demand and then lastly at <unk>.
Speaker Change: Turning to margin and earnings part of the thing that has really surprised us in a positive way is of the customers that have taken this value proposition from us.
Carly Davenport: Close to half already upgraded to us.
Carly Davenport: Our recurring revenue services within the NRG family and so this not only helps us moderating supply cost gives us a differentiated value prop with retail customer, but we're now getting incremental recurring revenue and margin for the customers. So all systems are Adobe launched.
Carly Davenport: And so this not only helps us moderate supply costs, gives us a differentiated and a stickier value prop with the retail customer, but we're now getting incremental recurring revenue and margin for the customer. So, you know, all systems are a go. We launched the offering across the state and across all channels at the start of this month, and we're hiring as fast as we can to ensure that we can fulfill that. That's great. Appreciate that.
Carly Davenport: E offering across the fleet and across all channels.
Carly Davenport: At the start of this month and we are hiring as fast as we can to ensure that we can fulfill that demand.
That's great I appreciate that.
Unknown Executive: And I'll leave it there. Thank you.
Speaker Change: I'll leave it there thank you.
Speaker Change: Thank you I'm not showing any further questions. So I'd like to turn the call back over to Larry Cogan.
Unknown Executive: I'm not showing any further questions at this time.
Larry Coben: I'd like to turn the call back over to Larry. Thank you all for your interest in NRG. I think you can hear the palpable excitement that we have in the room for this transaction and the opportunities that it provides us. We look forward to providing you more information in the days and quarters ahead. And really thank you all for being shareholders of NRG.
Larry Cogan: Thank you all for your interest in NRG I think you can hear the palpable excitement that we have in the room for this transaction and the opportunities that it provides us we look forward to providing you more information in the days in quarters ahead and really thank you.
Larry Cogan: All for being shareholders of NRG.
Unknown Executive: Ladies and gentlemen, thank you for your participation in today's conference.
Speaker Change: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program you may now disconnect.
Unknown Executive: This concludes the program. You may now dis-
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