Q2 2025 NRG Energy Inc Earnings Call
With your telephone keypad, you wouldn't hear an automated message advising you had this race to withdraw your question. Please press star one again.
Be advised that this conference is being recorded I wasn't allowed to hand the conference over to your first speaker today, Brad The Mohan head of Investor Relations. Sir. Please go ahead.
Thank you good morning, and welcome to NRG Energy's second quarter 2025 earnings call.
Mornings call is being broadcast live over the phone and via webcast.
<unk> presentation and earnings release can be located in the investors section of our website at Www dot.
Dot com under presentations and webcast.
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.
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.
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 today's presentation and earnings release with that I will now turn it over to Larry Coben and are just prior chair President and Chief Executive Officer.
Thank you Brendan good morning, everyone and thank you for your interest in NRG I'm joined this morning by Bruce Chung, Our Chief Financial Officer. Other members of the management team are also on the line and available for questions.
We can get started.
Also with us and I'd like to welcome Brad Bentley, who joined last week as our new head of consumer Brad is on the call today, but will not be taking questions unless you want to ask them why do so excited to be here in that case, he is more than ready and I encourage you to do so so let's begin with the key message is shown on slide four first.
We delivered strong second quarter results completing an exceptional first half of 2025, we are reaffirming our full year financial guidance across all key metrics are currently trending at the high end of the ranges.
Second we are announcing long term retail power agreements with a data center operator for 295 megawatts with the potential to grow up to one gigawatt overtime. This validates our strategy and provides evidence of the growing interest in gas fired power for data centers.
Third the Th Horton project is closed it's Texas Energy fund loan construction is well underway and we remain on track for a mid 2026 completion.
Finally, our Texas residential virtual power plant is off to a fast start early results have exceeded expectations and we are increasing our 2025 target by more than seven fold.
Turning to slide five.
Adjusted earnings per share for the second quarter were $1 73, reflecting an 8% growth year over year, when normalized for asset sales and retire.
For the first half of 'twenty five adjusted EPS was $4 42.
Representing an increase of 48% on the same basis our.
Our performance was driven by expanded consumer margins strong results in the east gas business record smart home retention and favorable weather early in the year. It reflects broad based strength across our business.
On the right side of the page are some key developments during the quarter, we delivered top decile safety performance and continued executing our capital return plan.
The Rockwood acquisition closed during the quarter and those Texas assets were integrated into our portfolio before the beginning of summer.
We also announced the acquisition of a 13 gigawatt natural gas generation portfolio and a six gigawatt commercial and industrial virtual power plant at form from LS power. This transaction expands our footprint in PJM and ERCOT strengthens our position in two of the most attractive power markets in the <unk>.
<unk> and enhances our ability to serve customers and large loads. It also meaningfully accelerates our long term earnings growth targets.
<unk> strengthens our asset portfolio and increases our exposure to upside from data center demand closing remains on track for the first quarter of next year.
Our key growth initiatives also move forward with Texas residential <unk> launched in the spring and greatly exceeded initial expectations and we closed the Texas Energy fund loan for the Th working project Fi.
Finally, we continue to scale, our large load in datacenter strategy, we signed long term power agreements with data center customers advanced commercial discussions with multiple parties and continued development at key sites.
Let me now turn to slide six.
Today, we are announcing as I said long term retail power agreements with a data center operator.
The agreement includes an initial 295 megawatt commitment served by grid power.
Deal also includes a 10 year initial term with options to extend to 20 years.
<unk> is above the midpoint of our target range and features protected margins operations are expected to reach full capacity in 2030.
We are actively working to expand this agreement 500 megawatts with a long term path to one gigawatt across additional sites.
Our capital requirements are limited in this regard and the returns are compelling.
Future announcements, we'll follow the same structure with details focused on capacity term length and indicative pricing.
On the right side of this slide we highlight the broader progress underway with respect to data centers and in addition to todays announcement, we have over four gigawatts of joint development agreements and letters of intent across multiple sites.
Our long term pipeline extends well beyond that.
Remember also we have two four gigawatts of natural gas turbines reserve for future development, which can be activated when supported by long term data center contracts.
This is a great moment for NRG it brings high quality recurring cash flow and affirms our ability to serve the next generation of large power customers and.
And we are just getting started.
Moving to slide seven.
Our th warden projects has closed its loan under the Texas Energy Fund construction is well underway and the project remains on track to Endo commercial operations in mid 2026.
NRG is proud to lead the way and will likely be the first company to bring new capacity online through this program, which supports reliability and strengthens the Texas grid.
We also have two additional projects totaling one one gigawatts progressing through the due diligence process with expected commercial operation in 2028, we remain confident in their advancement. We have filed for completion bonus grants for all three projects and are on track to qualify for them.
Pricing is above the midpoint of our target range and features protected margins.
Lastly, Texas Senate Bill six was signed into law in June. This legislation provides new tools to support reliability and improve long term planning in the ERCOT market.
We appreciate the continued leadership of the Governor Lieutenant Governor legislature, PUC in ERCOT and advancing policies that support system needs enhanced planning and reinforce the long term health of the Texas market.
Slide eight provides an update on our Texas residential virtual power plant.
We launched this program earlier this year through our partnership with renew home. It combines the reach of our retail brands the vivid smart home platform and a compelling customer offer that delivers comfort and value while supporting our supply strategy. The long term plan targets, one gigawatts of dispensable capacity.
By 2035.
The program is now active across all major brands and channels and early engagement is exceeding expectations adoption of home essentials. The bundle, which leads this program is 15 percentage points ahead of plan.
Uptake of additional smart home services is tracking near 40% and this cohort roughly double our initial target. These are early results and may reflect lost momentum, but they point to strong underlying demand.
We are increasing our <unk> 2025 target from 20 megawatts to 150 megawatts of curtailed capacity. This reflects faster than expected progress against our long term plan. Our focus remains on disciplined execution long term value creation and delivering a best in class.
<unk> customer experience.
This is a 10 year road map and I look forward to keeping you updated on our progress with that I will turn it over to Bruce to provide the financial review.
Thank you Larry turning.
Turning to slide 10, NRG delivered another solid quarter of financial and operational performance with $1 73, and adjusted earnings per share and $909 million and adjusted EBITDA.
Adjusted net income was $339 million and free cash flow before growth with $914 million.
Adjusted EBITDA and adjusted net income for the quarter were down year over year. However, this was primarily driven by the absence of earnings from the <unk> sale in 2020 for exploration of the Cottonwood lease in May of this year, the activation of Indian River unit before and.
Higher Phantom stock expense as a result of Nrg's increased share price when adjusting for these items second quarter 2025, adjusted EBITDA and adjusted net income would have been approximately 90% and $70 million better respectively.
NRG recorded the highest adjusted earnings in the company's history through the first half of 2025 with $4 42.
Adjusted earnings per share and over two $3 5 billion of adjusted EBITDA, a year over year increase of 40% and 11% respectively.
Our exceptional financial performance over the first six months of this year reflects strong execution in each of our segments driven by a mix of expanded margins favorable weather in the first quarter and excellent commercial optimization.
Our Texas segment produced $512 million of adjusted EBITDA in the quarter and $811 million in the first half of 2025, an improvement of over 13% and 20% respectively from the same periods in 2024.
These results were driven by strong performance of the plants.
Increased retail margins and favorable weather in the first quarter.
<unk> contributed adjusted EBITDA of $99 million in the second quarter and $573 million through the first half of 2025.
Performance in the first half of 2025 outpaced the same period for 2024, largely driven by higher margins from our natural gas business due to favorable weather in the first quarter.
Our West services other segment had an adjusted EBITDA of $43 million in the second quarter and $120 million for the first half of 2025 the.
The segment realized higher retail power margins in the west which were offset by the absence of earnings from the sale of our <unk> business in 2024, and the lease expiration at the Cottonwood facility in May 2025, when compared to the same periods of the prior year.
Our smartphone business continued its impressive momentum achieving an adjusted EBITDA of $255 million in the second quarter and $531 million for the first half of 2025. The segment continues to see consistent customer growth expansion to its recurring service margins and record customer retention.
We're 90% free.
Free cash flow before growth was $120 billion to $7 billion in the first half of 2025 and $914 million in the quarter exceeding the same periods in 2024 by 584 and $251 million respectively.
The year over year increase is driven by our adjusted EBITDA growth through the first six months of the year and the timing of certain working capital items. We expect some of the favorability related to working capital to unwind in the second half of the year as receivables and payables settle in their normal course.
As we shared during our first quarter earnings update we are reaffirming our 2025 financial guidance across all metrics and we continue to trending at the upper end of our guidance ranges.
Moving to slide 11 for a look at our updated 2025 capital allocation, we began the year with just over $2 6 billion.
The East contributed adjusted. I dog 99 million in the second quarter and 573 million to the first half of 2025.
Comprised of unallocated excess cash from 2024, and the midpoint of our free cash flow before growth guidance target for 2025, the only change from what I shared in the first quarter call denoted in light Blue reflects an update to our liability management for a marginal increase in amortization payments these incremental payments related.
So a $1 billion upsize in our existing term loan B facility executed in July this increase of the facility will primarily be used for replenishment of capital employed for the acquisition of assets from Roth capital redemption of principle related to our convertible senior notes and the <unk>.
In the first quarter, our West Services other segment, had an adjusted ibida of 43 million in the second quarter and 120 million is the first half of 2025 the segment. Realized higher. Retail power margins in the west which were offset by the absence of earnings from the sale of our airtron business in 2024. And the least expiration at the Cottonwood facility in May 2025, when compared to the same periods of the prior year,
<unk> development of our Texas new builds.
Our plan to execute $1 3 billion in share repurchases remains unchanged through July 31, we executed $768 million in share repurchases, where nearly 60% of the annual total at a weighted average price of $112 74.
Our smart home business continues its impressive. Momentum achieving an adjusted IBA of 2555 million in the second quarter and 531 million to the first half of 2025. The second continues to see consistent customer growth expansion to its recurring service margins and record customer retention at over 90%.
Finally, we are now showing $35 million of unknown.
The allocated capital, which we will allocate over the remainder of the year.
NRG posted impressive first half financial results.
free cash flow before growth was 1.207 billion in the first half of 2025, and 914 million in the quarter exceeding, the same periods in 2024, by 584 and 251 million respectively,
And we are laser focused on delivering strong results for the balance of the year.
Look forward to updating you in subsequent quarters on our strong execution and financial performance with that I'll turn it back to you Larry.
Thank you Bruce.
We've just completed the strongest first half in NRG history, our core business continues to exceed expectations. Our people continue to perform at a high level and our opportunities have never been greater than today. This is an exciting time for our company, we announced the acquisition of Premier natural gas assets in the leading <unk>.
The year-over-year increase is driven by our adjusted ebit, dog growth through the first 6 months of the year and the timing of certain work working capital items. We expect some of the favorability related to working capital to unwind in the second half of the year as receivables and payables settle in their normal course.
As we shared during our first quarter earnings update, we are reaffirming our 2025 Financial guides across all metrics. And we continue to Trend at the upper end of our guidance ranges.
Hi, virtual power plant.
Platform, we launched a new residential VP offering advanced our large load strategy and signed long term power agreements with a data center operator.
We secured a Texas energy fund loan closed on the Rockwood transaction and made meaningful progress across our organic growth initiatives.
My namesake, Larry David would say Keith Keith good.
We are well prepared for the balance of summer and confident in our ability to continue to deliver value to our shareholders. Operator, we are ready to open the line for questions.
Thank you would you have participants as a reminder, if you wish to ask a question. Please press star one on the telephone keypad Lakeland name to be announced should we draw a question. Please press star one again.
Moving to slide 11 for a. Look at our updated 2025 Capital. Allocation we began the year with just over 2.6 billion dollars comprised of unallocated excess cash from 2024 and the midpoint of our free cash flow before growth guidance. Target for 2025, the only change from what I shared in the first quarter. Call denoted in light blue, reflects an update to our liability management for a marginal increase in amortization payments. These incremental payments relate to a 1 billion dollar upside in our existing Term Loan B facility executed in July, this increase to the facility will primarily be. You used for replenishment of capital employed for the acquisition of assets from Rock and capital Redemption of principle related to our convertible senior notes and the continued development of our Texas new builds,
The Q&A, we will take a few moments.
And now we'll go and take our first question.
And it comes from the line of Julien Dumoulin Smith from Jefferies. Your line is open. Please ask your question.
Our plan to execute 1.3 billion dollars in share with purchases remains unchanged through July 31st. We executed 768 million in share repurchases or nearly 60% of the annual total at a weighted average price of $112.74.
Hey, good morning team. Thank you guys very much and again I got to say another quarter nicely done Larry.
Finally, we are now showing 35 million of all allocated Capital, which we will allocate over the remainder of the year.
NRG posted impressive. First half Financial results.
And how are you.
Yes, quite well. Thank you guys, Hey, look I'm speaking of delivering on new and novel topics.
This 295 megawatts can you talk a little bit about the structure here I mean, this is kind of a novel subject for the industry. How do you think about the <unk>.
And we are laser focused on delivering strong results for the balance of the year. I look forward to updating you in subsequent Quarters, on our strong execution, and financial performance with that. I'll turn it back to you Larry.
Thank you, Bruce.
Margin profile again, it's a little bit commercially sensitive to talk about but how do you think about this contributing to the bottom line or EBITDA.
Is it more like a residential contract in terms of margin contribution or.
Some kind of.
Provider of last resort C&I kind of kind of kind of contract how would you frame your economics.
I would.
We've just completed the strongest first half in NRG history, our Core Business continues to exceed expectations. Our people continue to perform at a high level and our opportunities have never been greater than today. This is an exciting time for our company. We announced the acquisition of Premier natural gas assets, and the leading cni virtual power plant.
General and we're not going to get too specific as we said Julian this is commercially sensitive I think we view it closer to our C&I contract with premium margins. That's how I would think about these types of transactions, obviously longer duration than the average C&I contract, but as you know we have numerous C&I customers.
Platform. We launched a new residential, VPP offering Advanced, our large load strategy and signed long-term power agreements with a data center operator.
We secured a Texas, energy fund loan closed on the Rockland transaction and made meaningful progress across our organic growth initiatives.
Of this size and greater so I would think of it as a C&I contract with a premium margin. When we have a very a variety of mechanisms to protect that margin, including things like indexing hedging and a whole slew of other things that we've developed in order to make sure that that margin over time is maintained.
Has let my name say Larry? David would say good.
We are well prepared for the balance of Summer and confident in our ability to continue deliver value to our shareholders.
Operator, we're ready to open the line for questions.
Awesome excellent can you talk a little bit more about this partnership opportunity I mean look it's been a little quieter on that front in recent quarters, you guys have had a lot going on.
Can you talk about where you are are you you guys have been obviously Larry actively marketed.
For a year now I mean is there more to come beyond this gigawatt can you talk even about the specific sites that are contemplated under the gigawatt arrangement and what that scaling up might look like look like.
Thank you. Dear participants. As a reminder, if you wish to ask a question. Please press star 1. 1 on your telephone keypad, and wait for a name to be announced. Do with your question. Please? Press star, 1 1 again, please listen, take a few moments.
And now we're going to take our first question.
We think about like the timing.
And it comes to the line of Julian Doolin Smith from Jeffrey. Your line is open. Please ask a question.
When you when you were talking about a partnership which one are you talking about the data Center agreement, we announced or are you talking about the key with we have a lot of great partnerships.
Appreciate it. How are you?
You're right, you're right I'm not thinking about it up yes.
The data center leveraging your existing sites right. The 295 getting larger and is there more even beyond that as you think about your commercial activity Julian as I've said I think this is just the beginning as you know these transactions are somewhat complicated and complex and were working our way through it but we're super excited about.
Yeah, quite well, thank you guys. Hey look I'm speaking of you know delivering on new and novel topics. Um this 295 megawatts can you talk a little bit about the structure here? I mean, this is kind of a novel subject for the industry. How do you think about the margin profile? I get it's a little bit. Commercially sensitive to talk about, but how do you think about this contributing to the bottom line or IBA? I mean,
This one and Super excited about the potential to expand it as well as the pipeline that we put on the right side of the slide.
Is this more like a residential contract in terms of margin contribution? Or
some kind of, you know,
From our point of view of what we're going to stay about where and what as as you know even with our regular C&I clients. We don't disclose those contracts are who they are if the clients choose to do so we're happy to support them and confirm it but that we feel that part of our client services, it's really up to them to talk about themselves and their plans for the data center.
Provider of Last Resort ski, and I kind of kind of contract. How would, how would you frame the economics?
It would not surprise me if at some point these folks put out a release, but I don't know if theyre going to do so.
Yes, that's great.
And the four Gigawatts in LOI is and all of that as well if any any thoughts there and I'll leave it.
I think it's I think it's great to have them, obviously LOI, they're not all going to come.
I would in general. And we're not going to get, you know, too specific. As we said, Julian this, it is commercially sensitive. I think we view it closer to a cni contract with premium margins. That's how I would think about these types of transactions, obviously, longer duration than the average cni contract. But as, you know, we have numerous cni, customers of this size and greater. So I would think of it as a cni contract with a premium margin, when we have a VAR variety of mechanisms to protect that margin including things like indexing hedging, and a whole slew of other things that we've developed in order to make sure that that margin over time is maintained.
Come to successful conclusion, so I wouldn't model like do you like the new Julian 150% of that for tomorrow, but kidding.
Hitting Julien.
Yes.
Those are things that we're super excited about but due to the complexity not all of them will get to the goal line.
I appreciate it all right guys I'll, let a big thank you so much best of luck.
Thanks Julien.
Awesome, excellent. And can you talk a little bit more about this partnership opportunity? I mean look, it's been a little quieter on that front and recent quarter as you guys have had a lot going on. Um, but can you talk about where you are? You you guys have been obviously Larry actively marketed at for for over a year now. I mean is there more to come Beyond this? Giggle I can you talk even about the specific sites that are contemplated under this gigawatt of arrangement and what that scaling of my liquid like look like you know if you think about like the timing
Thank you.
Now I will go and take our next question.
And the question comes from the line of Nicholas Coppola from Barclays. Your line is open. Please ask your question.
Hey, good morning, good morning.
Thank you Larry David fan.
[laughter].
Okay.
In fact Goldman Sachs Tim So.
Yes.
I guess, just taking a further step on the backlog just.
What is your line of sight to kind of convert some of the four gigawatts to actual Esa is like are you expecting to have more msas by the third quarter or the fourth quarter, how would you kind of frame expectations there.
We're not putting obviously, if we have letters of intent we're spending serious tons.
When you, when you're talking about a partnership with 1, are you talking about this, the data center agreement, we announced today? Are you talking about the keyword? We have a lot of great Partnerships, so I want, you're right, you're right, you're right, I, I'm thinking about it. Ya know, the, the, the, the, the the data center leveraging, your existing sites, right? The 2995, um, getting larger, right? And is there more even beyond that? As you think about the, your commercial activities look Julian? As I said, I think this is just the beginning. As you know, these transactions are somewhat complicated and complex and we're working our way through it. But we're super excited about this 1 and super excited about the potential to expand it as well as the pipeline that we, you know, put on the right side of the slide, you know, from a point of view of what we're going to say about where. And what
Effort and time on this.
Always difficult to put timing on it for some of these things are in our control and some of them are not.
Some of them are them has to do with when an interconnection study gets finished in.
If somebody delays and interconnection study two months Theres not a darn thing we can do about it. So we are pushing the reason we want to have a backlog of this size is to make sure that we have significant transactions to continue to tell you about we're super optimistic, but I don't want to predict quarter by quarter, that's just choose to do.
As you know, as, you know, even with our regular cni clients, we don't disclose those contracts or who they are. If the clients choose to do, so we're happy to support them in confirm it. But that we feel that part of our client services is really up to them to talk about themselves and their plans for the data center. It would not surprise me if at some point these folks put out a release but I don't know if they're going to do so.
<unk> been in the development business too long every time in my career that I've tried to put out a development timeline I've been wrong, and I don't really like being wrong.
Sure.
Fair enough so.
It just seems like on DPP the adoption rates are coming in better than initially thought in Texas and just I'm curious if you can kind of now that you've.
Yeah. Absolutely. But the, and the 4, gigawatts of Lois and all that as well. If any, uh, any thoughts there and I'll leave it, I I think it's, I think it's great to have them obviously, Louis, they're not all going to, you know, come to successful conclusions. So I wouldn't model like you like to do Julian 150% of that for tomorrow, but um, cheating Julian kidding. Um, oh no, no, I get it. I mean those are things that we're, you know, we're super excited about but, you know, due to the complexity, not all of them will get to the goal.
I had a little bit more time after you've announced this transaction on the first quarter.
Appreciate it. All right, guys. I'll let it be. Thank you so much. Best of luck. Thanks Julian.
How do you think the PJM opportunities shaping up.
Thank you. Now we'll go and take our next question.
I think we need to see the Texas opportunity a little more I mean remember its only been about three months that we've been in market.
And the question comes plan of Nicholas Campanella from Barkley. Your line is open, please ask your question.
The results are great, but we want to make sure we have a complete.
Hey, good morning, good morning, big big, big, Larry, David fan. Um,
Take down crews and know everything there is to know and then we will look at.
Certain parts of PJM that we think are particularly right for this type of offering but I wouldn't expect it to be this year.
Fan 2, Coin Fan 2. So, um, uh, I guess just taking a further step on the backlog. Just
Thank you.
Thank you.
Now we will go and take our next question.
And the question comes from the line of understood Skip from Seaport. Your line is open. Please ask your question.
What is your line of sight to kind of convert some of the the 4 gigawatts to actual esas? Like are you expecting to have more esas by the third quarter or the fourth quarter? How would you kind of frame that expectations there and then
Good morning, Thank you.
Hey, Angie how are you.
So let me go ahead, so first about the <unk>.
You know, effort and time on this.
Big Beautiful bill and its impact on.
And the tax shield is basically brings with it that deal in the Brooklyn transaction and how that.
Impacts your free cash flow per share growth trajectory.
Angie it's Bruce so.
Needless to say the Ob three certainly is a good outcome for us as it relates to this particular.
Transactions.
We're still in the process of going through the purchase price allocation.
And we will obviously be done with that until we close but based on early estimates, we would expect potential cash savings to be above and beyond what we had originally assumed in our underwriting to be close to $1 billion, if not a little bit more than that primarily realized over the course of 2027 to 2030.
But I don't want to predict quarter by quarter. That's just too you know too difficult and I've been in the development business too long every time in my career that I've tried to put out a development timeline I've been wrong.
And I don't really like being robbed.
Okay.
Go ahead.
Okay.
Yes.
Again, I was kind of hoping that you could say that there is.
A meaningful uptick in the above 14% <unk> per share growth trajectory that you have.
On the back of the deal.
I didn't say I didn't say, one way or another but.
Look I mean, obviously when it comes time for us to update you guys on that we will do so.
Okay.
And secondly.
To see the Texas opportunity, a little more. I mean, remember, it's only been about 3 months that we've been in market and I, you know, I the results are great. But we want to make sure we have a complete, uh, you know, Shakedown Cruise and know everything there is to know, and then we will look at, you know, certain parts of pjm that we think are particularly right for this type of offering, but I I wouldn't expect it to be this year.
Yes, you have a big transaction pending but.
Thank you.
We do still see some some asset sale.
Thank you.
In.
Now, we're going to take our next question.
Especially in Pennsylvania.
And I'm just wondering if.
In light of the fact that you have a pending transaction does it preclude you from actually potentially bidding for other assets in PJM you still have a relatively small participant in this hallmark.
And the question comes to land of Angie stroinski from C Port. Your line is open, please ask a question.
Good morning, thank you. So, um, how are you?
No. It does not preclude us Angie I mean, I don't think we could take a bite of the same size that we did a couple of months ago, but if there is an attractive asset at the right place and the right price you will find us there.
Very good. So first about the, um, the big beautiful Bill and, and its impact on. Um,
um and the tax shield is basically brings with it um that deal and the and the rock on transaction and how that impacts your free cash flow per share, growth trajectory
And then lastly.
The asset that just got that the tax commitment.
And the other assets that are still waiting for that I mean could.
Hey Angie, it's Bruce so uh needless to say the uh ob3 certainly is a uh a good outcome for us as a related to those particular.
Could we just.
<unk> had a contract for.
These tax assets, either the ones again already awarded the loans or the future ones.
<unk> assets are.
Required to go into the grid.
Existing assets of course that we already have could be directed from a fungibility point of view, but you could not direct test assets two.
To a data center they have to go into the grid.
Steven.
Uh transactions. Um we're still in the process of going through the purchase price allocation um and won't obviously be done with that until we close. But, you know, based on early estimates, we would expect, you know, potential cash savings to be, uh, above and beyond, uh, what we had originally assumed in our underwriting to be close to a billion dollars, if not a little bit more than that primarily realized over the course of 2027 to 2030.
I mean, you could have that sounds of the meter.
Contract right.
The power it does flow through the grid.
Absolutely LNG I mean look I think we can supply a data center from all of our existing plants in Texas without a problem, we simply cannot direct a test plant as if it's a behind the meter deal are being dedicated solely to a data center.
Okay, that's good. Secondly, um, that's, I mean, again, I was clearly hoping that you would say that there's a, you know, a meaningful uptake in the above 14% that's a photo to, uh, per share growth trajectory that you were, you were thinking on the back of the deal. I, I didn't say I didn't say 1 way or another but we'll, uh, you know, look, I mean, obviously, when it comes time for us to update you guys,
Okay, and then just one question.
guys on that, we will do so
Dan.
Maybe I'm confused so what is it exactly.
What is the difference between the contract that you just signed and the other C&I contract I mean, besides the higher margin in obesity.
Leasing the site Tonight.
It is co located with one of your power plants.
Okay.
Why is it different than any other large scale C&I contract.
Andrew We haven't said, whether it's co located or not so we're not going to be doing that going forward just as a rule. So I just wanted to be clear unless one of our customer wants to announced that it is co located that spine I think people are willing to pay premiums at data centers for the assurance that they can have 10 to 20 years.
Okay, then secondly, um, you know, yes, you have a big transaction pending but, you know, we we do still see some, um, some asset sale, um, in, um, especially in Pennsylvania. Um, and I'm just wondering if, you know, in light of the fact that you have a pending transaction. Does it preclude you from actually, um, potentially bidding for other Assets in pjm, you still have a relatively small footprint in this power Market, know it, it just does not preclude us, Angie. I mean I don't think we could take a bite of the same size that we did a couple of months ago, but if there's an attractive asset at the right place in the right price, you will find us there.
Power.
Price because they know what it's going to be so they can plan accordingly.
Thank the premium is.
In large part.
<unk> of being able to sign up for 10 years.
Okay. Thank you alright, thank you Angie.
And then, lastly, the, um, the asset that just got the, the, the, the test commitment, um, and the, and the other assets that are still waiting for that. I mean, could we expect data center, contracts, for these tests assets, either the ones again or the awarded the loans, or the future ones.
The test assets.
Thank you Nova.
I'm going to take our next question.
And the question comes from the line of Michael Sullivan from Wolfe. Your line is open. Please ask your question.
Since it's, you know, are required to go into the grid, uh, existing assets, of course, you know, that we already have could be directed from a fungibility point of view, but you could not direct pep assets.
Hey, good morning, guys.
So how are you hey, you're.
To a data center, they have to go into the grid.
Alright.
One on the data center deal you announced today, just any more color on.
Maybe why the load ramp is a little bit.
Slower than maybe we would think for something in Texas, and then I get the sensitivity but.
Introduce.
Palin and Menlo on the last call like any reason to think.
It wouldn't be the ones associated with this I will let Rob take the first part of that and then I'll grab the second go ahead, Robyn Hey solely on this particular transaction that we announced today.
Even if I mean, it, it's I mean you could have a front of the meter uh contract right where the power does flow through the Grid. It's just that. Yeah, absolutely. I mean, look, I think we can supply a data center from all of our existing plants in Texas without a problem. We simply cannot direct a test plan as if it's a behind the meter dealer being dedicated solely to a data center.
the question and again, um,
Data Center design.
It's more modular and so it comes in in pieces.
It's not to compare that to.
Things you guys are thinking about the 100 megawatt clips.
Come in online kind of Gigawatts site easier design. These are edge data centers. So they come in in smaller sizes, that's why that ramp.
And what you might have expected that makes sense.
It does yes.
Okay.
Hello, Paul.
Palin and Menlo are still in that.
Four gig letter of intent number that we put out there we're still working with both of those entities under letters of intent just things that we're not ready to announce a firm deal with either one of them, but we are still working actively with both of them.
Okay. That's really helpful. And then just in terms of how youre thinking about the cadence of updating your outlook.
It's not like it's co-located with one of your power plants. Um, you know, why is it different than any other large-scale CNI contract? Uh, yeah, Andrew, we haven't said whether it's co-located or not, so I just want to be clear that we're not going to be doing that going forward, just as a rule. So I just want to, you know, be clear unless when our customer wants to announce that it's co-located, that's fine. I think people are willing to pay premiums at data centers for assurance that they can have 10 to 20 years of power at a price that they know what it's going to be, so they can plan accordingly. I mean, I think the premium is, you know, in large part a result of being able to sign up for 10 years.
Okay, thank you. Bye. Thank you, Angie.
Should we be thinking about like Q3 is a.
Thank you.
Standalone update or just 26 are you thinking about.
Now, we're going to take our next question.
The long term plan and then when do you like officially poll.
And the question comes line of Michael Sullivan from Wolf. Your line is open, please ask your question.
Or do you wait for that to close or give any incremental updates along the way I mean, I think youll get NRG alone.
Hey, good morning guys. Hey, Sully how are you? Hey, hey, doing. All right. Uh, had another 1 on the data center deal. You announced today just any more color on.
Third quarter on the third quarter call I think until we own LLS, we can't really put it into our numbers. So I would expect that.
Maybe our first on our year end call assuming the transaction is closed by then if not it'll be on the first quarter call.
you know, maybe why the the load ramp is a little bit slower than than maybe we would think for something in in Texas and then I I get the sensitivity but usually it's not going to introduce
Palin and Menlo on the last call, like any reason to think.
Okay, and the NRG Thats Standalone is that two.
26, only or Youre doing like a long term.
Refresh with Q3.
I mean, I think so it will probably we will certainly do 26, whether we.
Whether we update the outlook or not.
There's going to be a function of what.
What we see at the time, but.
Certainly you'll get it may make more sense to do it after the call if thats, probably the more likely time selling.
They wouldn't be the ones, uh, associated with this. I left Rob takes the first part of that, and then I'll grab the second head around. Hey, so like the on this particular transaction that we announced today, uh, this, uh, data center design. Um, is more modular and so it comes in in pieces, uh, it's not, you know, to compare that to uh the things you guys are thinking about are the hunter Watts, that kind of come in on like a gigawatt site.
Okay fair enough. Thank you.
These are designed. These are Edge type data centers. So they come in in smaller sizes, that's why the ramp looks different than what you might have expected.
Just made my finance people very happy that they don't have to do a double update by the next quarter or two.
Does that make sense?
It does, yep.
Okay.
Okay.
Excuse me, Mike any further questions.
I'm all good thanks, guys.
Thank you so much.
Now we're going to take our next question.
And the question comes from the line of Carly Davenport from Goldman Sachs. Your line is open. Please ask your question.
Pin and Menlo are still in that uh, 4 gig letter of intent. Number that we put out there we're still working with both of those entities under letters of intent. Uh, just things are take, you know, we're not ready to announce the firm deal with either 1 of them, but we are still working actively with both of them.
Hey, good morning, Thanks for taking the questions Hi.
Currently how are you doing.
Doing well thanks, how are you good thank you.
Okay, that's really helpful. And then just in terms of how you're thinking about uh, the Cadence of updating your, your outlook. Um,
We wanted to just ask a couple of follow ups first on the V. P. P opportunity, obviously, raising the 'twenty five target there I guess any more you can expand on on the drivers of that strength and if you see any sort of read throughs to the potential longer term glide path.
should we be thinking about like Q3 as as a standalone update for just 26 are you thinking about
I think it's still early days and so we are still early analyzing the speed of the take up I mean, we were always super optimistic, but it's been faster than we expected and we need to see whether this is just early startup momentum or sustainable before we.
Thinking about changing any kind of numbers or guidance, but what we are seeing is tremendous amount of uptake of the program as well as.
The long-term plan and then when do you like officially pull LS in there? Do you wait for that to to close or give any incremental updates along the way? I mean, I think you'll get NRG alone and the third quarter on the third quarter call. I think, you know, until we own LS, we can't really put it into our numbers. So I would expect that to be maybe, you know, on our first on our year, end call assuming the transaction is closed by then if not, it'll be on the first quarter call.
Equally interesting are people, who are taking additional vivid smart home pieces in products and putting them into their homes. So.
Okay. And the the NRG that's uh, Standalone is that for 26, only or you're you're doing like a long term
It's great cause for optimism and I hope.
And maybe the next call or the one after that will be able to give a little bit more clarity on what the drivers are.
Im a little reluctant to do it after only three months in the market.
Got it Okay fair enough that all makes sense and then.
Refresh with with Q3. And uh, I mean, I think Sully will probably will certainly do 26 whether we, uh, you know, whether we update the Outlook or not, um, is going to be a function of, you know what, uh, what we see at the time, but, um, you know, certainly you'll get 26. They make more sense to do it after LS is closing, if that's probably the more likely time selling
Any updates to share on the partnership with Steve or <unk> on the golf assets to kind of start up in that 29, 2030 timeframe I guess, how does development progressing there and are those plants part of the discussions that you're having with potential data center customers. Yes, I mean, those those that partnership is very closely related to the pipeline.
Okay, fair enough. Thank you. I think I just made my finance people, very happy that they don't have to do a double update by the next quarter, too.
Excuse me, Michael. Any further questions?
No, I'm all good. Thanks, guys.
We put on the right side of the slide there so.
Thank you so much.
Now, we're going to take our next question.
As those some of those letter of intent to joint development agreements advance.
<unk> G and keyword along with us for the ones that where their power would be required to execute.
And the question comes on of Kali Davenport from Goldman Sachs. Your line is open. Please ask your question.
Great. Thank you for the color.
Thank you.
Participants as a reminder, if you wish to ask a question. Please press star one bond Natal from key patch.
And then we'll go and take our next question.
And now we'll go and take the question from David Arcaro from Morgan Stanley. Your line is open. Please ask your question.
Hey, good morning. Thanks for taking the questions. Um, hi. How are you? Hey doing, well, thanks. How are you? Good, thank you. Um, we wanted to just ask a couple follow-ups, first on the VPP opportunity. Um obviously raising the 25 Target there. I guess any more you can expand on on the drivers of that strength and if you see any sort of read through to the potential longer term Glide path,
Hey, Thanks, so much good morning, Hi, David.
Congratulations.
Let's see I was wondering just on the on this data center agreement here.
Could you clarify if the margin sixth over the cost of supply for this agreement such that it's indexed to the market or is this a is this a long term fixed price agreement for the customer maybe with escalators just any clarity there would be helpful.
I mean, we've done a bunch of things to lock in the margin David to keep it at the levels. So that we will maintain a level as if we were pricing it at the numbers that we said today.
Been faster than we expected. And we need to see whether this is just early startup momentum or sustainable before. We think about changing any kind of numbers or guidance, but what we are seeing is tremendous amount of uptake of the program as well as the, you know, equally interesting of people who are taking additional movement smart home pieces and products and putting them into their homes. So,
Not going to tell people, how we do that because it's part of our secret sauce. The margin. If you look at what we put out as a pricing number and you can you know pricing in Texas as well as anybody you can see what the margin is in that margin as well protected over the course of the agreement.
It's a great cause for optimism, and I hope you know that, in, you know, maybe the next call or the one after that, we'll be able to give a little bit more clarity on what the drivers are. I'm a little reluctant to do it after only three months in the market.
Got it understood. Okay. That's helpful.
And then let's.
Let's see a little bit related to the to the prior question, but just what are you seeing in terms of interest in additionality in the market.
The portfolio of solutions here for data centers, you've seen them go a bunch of different directions, but what's the current appetite and push for bringing additionality here.
I think there is still tremendous appetite for this analogy.
Got it. Okay. Fair enough. Um, that, that all makes sense and then, um, any updates to share on the partnership with G, vernova and cue it on, on the gas assets to kind of start up in that. 29 2030 time frame, I guess House Development progressing, there and are those plants part of, you know, the discussions that you're having with potential data center customers. Yeah, I mean those the you know, those that partnership is very closely related to the pipeline that we put on the right side of the slide there. So you know as as those some of those letter of intent, The Joint development agreements Advanced, we bring G and uh keyword along with us for the ones where their power would be required to execute.
Partly for assurance from people that they can have power and partly because grids are tight.
Great, thank you for the color.
And both of those are factors, that's going to lead to a stronger and stronger push for additionality going forward, we feel very good about the fact that we have the agreement.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press *1 1 on your telephone keypad.
J E T with in order to <unk> in order to bring that additionality to bear we think it will be well received both by regulators and by end users.
And now we're going to take our next question.
And now we're going to take the question from David araro from Morgan Stanley. Your line is open. Please ask a question.
Yeah, absolutely and you're in a unique position there.
Hey, thanks so much. Good morning.
Hi David.
If you don't mind.
Rob can I buggy for just your current outlook for power prices in Texas I mean, we're seeing continued acceleration in data center activity load growth from different angles, but how are you expecting power prices to trend.
As you see it today.
So I'm going to sound like a broken record data.
Power prices, we have seen an upward.
Movement in the optics, which would be.
Driven by Canada disappoint on large industrial load C&I and AI all of those things.
<unk> are still don't reflect what should be reflected in them.
And the reason for that or at least one potential reason for that is.
We are waiting on data points, we're waiting on load to get announced any show up.
So the back of the curve is going to see that and then move or because of the work that got done with SPX ERCOT.
Congratulations. Um, uh, let's see. I was wondering just on the, uh, on the data center agreement here. Um, could you clarify is the margin 6, uh, over the cost of supply for this agreement? Um, such that it's indexed to the market or is this, uh, is this a long-term fixed price agreement for the customer maybe with escalators just any Clarity? There would be helpful. No, I mean, we've done a bunch of things to lock in the margins David to keep it, you know, at the level, you know, so that it will maintain a level as if we were pricing it at the numbers that we said today, you know, we're not going to tell people how we do that because it's part of our secret sauce. But the margin if you look at, you know what, we put out as a pricing number and you can you know, pricing in Texas as well as anybody you can see what the margin is. And that margin is is well protected over the course of the agreement.
ERCOT forecast.
Chart to reflect reality again.
And if the ERCOT report says 200 gigs a load.
The market doesn't move in a real report 30, Meg Meg our gigs of load this market with jumped 10 blocks. So we still see plenty of upside in the curves in Texas.
Great.
I appreciate it thanks, so much.
Thank you.
Dear speakers there are no further questions for today I would now like to hand, the conference over to that recall Ben for any closing remarks.
I want to thank you all for your interest in NRG and for being a part of this call again, we are super excited about where we stand and even more excited about where we're going so thank you for your interest and look forward to seeing you all soon.
Got it understood. Okay, that's helpful. Um, and then, uh, let's see, a little bit related to the, uh, to the prior question. But just what are you seeing in terms of interest in additionality in the market you know in terms of the portfolio of solutions here for data centers. We've seen them go a bunch of different directions. Um but you know what's the current appetite and push for bringing additionality here? Look I think there's still a tremendous appetite for additionality partly. You know, for Assurance for people that they can have power and partly because grizzler type and both of those are factors that's going to lead to a stronger and stronger, push for additionality going forward. We feel very good about the fact that we have the agreement with GE and key with in order to, you know, and key with in order to bring that additionality to Bear, we think it will be, you know, well received both by regulators and by end users
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program.
Yeah, absolutely. And you're in a unique position there. And if, uh, if you don't mind, um, Rob, could I bug you for just your current outlook for power prices in Texas? I mean, we're seeing continued acceleration in data center activity, load growth from different angles. But, um, how are you expecting power price to Trend? Um, as you see it today,
Plenty of upside in the Curves in Texas.
Great. Appreciate it. Thanks so much.
Thank you.
Dear for the questions for today. I would now like to hand the conference over to Larry Cobin for any closing remarks.
I want to thank you all for your interest in NRG and for being a part of this call.
Again, we are super excited about where we stand and even more excited about where we're going. So, thank you for your interest, and we look forward to seeing you all soon.
Ladies and gentlemen, thank you for your participation. In today's conference, this concludes the program