Q3 2025 NRG Energy Inc Earnings Call

Speaker #2: We undertake no obligation to update these statements as a result of future events , except as required by law . In addition , we will refer to both GAAP and non-GAAP financial measures for information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures , please refer to today's presentation and earnings release .

Speaker #2: With that , I'll now turn it over to Larry Tobin and our chair , President and Chief Executive Officer .

Speaker #3: Thank you , Brendan . Good morning , everyone , and thank you for your continued interest in NRG . I'm joined today by Bruce Cheung , our chief Financial Officer , and other members of our management team are also on the line and available to answer questions .

Speaker #3: Let's start with the key messages on slide four . Strong performance across all areas of the business led us to raise 2025 financial guidance by $100 million in late September .

Speaker #3: This is the third consecutive year we have increased our full year outlook , and today we are reaffirming that higher range . We are also introducing 2026 guidance that aligns with our long term growth targets .

Speaker #3: This represents Nsgs stand , outlook and excludes any contribution from the less power acquisition . We will provide updated guidance that includes less power around the time of closing .

Speaker #3: We expanded our data center power agreements this quarter , bringing total contracted capacity to 445MW . We also rapidly grew our pipeline of potential projects under joint development and letters of intent to 5.4GW .

Speaker #3: Together , these actions build on the agreement announced in August and reflect rapidly growing momentum and validation of our data center strategy . The LRS power acquisition remains on track .

Speaker #3: Financings were executed in September on favorable terms . All regulatory filings have been submitted and we expect to close in the first quarter of 2026 .

Speaker #3: Turning to slide five . Adjusted EPs for the third quarter was 32% higher than the same period last year , and adjusted EBITDA reached the highest quarterly level in company history .

Speaker #3: I'd like to pause to congratulate all 18,000 of our employees for that achievement . Our results reflect strong performance across both energy and smart home .

Speaker #3: In energy supply optimization and disciplined commercial execution drove margin improvement across both our home and CNI businesses . In smart home growth was supported by expanding our customer base record retention and continued momentum in our home virtual power plant initiative .

Speaker #3: We also delivered top decile safety performance and completed the loan agreement for our second Texas Energy Fund project . Year to date , adjusted EPs is 36% higher than last year , reflecting strong performance across all parts of the business , as well as continued cost discipline .

Speaker #3: These results keep us firmly on track to achieve our raised full year 2025 guidance ranges . On the right side of the slide , we are introducing 2026 guidance on a standalone basis .

Speaker #3: This serves as an interim view ahead of a full update after the power acquisition closes . When we will provide guidance for the combined company .

Speaker #3: Moving to slide six for an update on market conditions . Ercot experienced a mild summer with . Moderate pricing and strong growth in overall power use .

Speaker #3: Total consumption across Texas has increased nearly 30% over the past five years , driven by residential , commercial , and industrial demand . As electrification and onshoring of manufacturing accelerate .

Speaker #3: Data center development , usage remains . Early , with ramp schedules expected to add meaningful capacity over the next several years . Looking ahead , power , demand is projected to outpace new supply , keeping the market structurally tight and reinforcing the need for reliable , dispatchable generation .

Speaker #3: Policymakers are responding through initiatives such as Senate Bill six in Texas and similar efforts in other regions focused on affordability , additionality and reliability .

Speaker #3: We are encouraged by the focus and progress being made to strengthen Ercot and other competitive markets across the country . In this environment .

Speaker #3: NRG is expanding its portfolio of reliable and flexible capacity through the less Power and Rockland acquisitions . The Texas Energy Fund projects and our home virtual power plant .

Speaker #3: We are adding 15GW of natural gas and seven gigawatts of virtual power plant capacity . We also see about six gigawatts of additional opportunities through the GE partnership .

Speaker #3: And our final TEF project . That is still under review . Together , these actions strengthen our platform and position NRG to meet rising customer demand and support large load growth , including data centers across Ercot , PJM , and other key markets .

Speaker #3: Turning to slide seven . We expanded our data center customer portfolio through 150MW of new premium long term power agreements , bringing total contracted capacity to 445MW across Ercot and PJM .

Speaker #3: This builds on the framework announced last quarter with the same customer . These sites , located in Maryland and Illinois , support edge data Center development with access to high capacity fiber and proximity to major U.S.

Speaker #3: cities . These projects will be built in PJM with operations beginning in 2028 and ramping through 2032 . This agreement was signed above the midpoint of our prior $70 to $90 per megawatt hour target range .

Speaker #3: Given continued strength in customer demand and higher forward power curves , we are raising our target for new long term data center agreements to above $80 per megawatt hour .

Speaker #3: This reflects sustained pricing improvement and energy's leadership in providing reliable , long term power solutions for large load customers . We are advancing numerous additional opportunities , including up to 5.4GW of new capacity for data centers through 2032 under our GE and Kiewit Partnership , supporting the principle of additionality .

Speaker #3: Since last quarter , signed letters of intent have increased 35% , underscoring customer engagement from multiple hyperscalers and data center developers . As well as growing demand for new development .

Speaker #3: We also see several additional gigawatts of potential projects across our broader pipeline as markets evolve toward . Bring your own generation models . NRG is leading the next phase of data center growth .

Speaker #3: Turning to slide eight . The power acquisition remains firmly on track for a first quarter 2026 . Close . It strengthens our platform , broadens our earnings base and extends our reach across key competitive markets .

Speaker #3: It reinforces our position as one of the largest competitive generators in the country , and increases our leverage to long term demand growth at announcement , the acquisition was immediately accretive across all key metrics , reflecting portfolio quantity , quality and an attractive purchase .

Speaker #3: Multiple . We also unveiled a 14% EPs stagger through 2029 , which does not . I repeat , does not include any contribution from data centers and reflects pricing assumptions that are below current market levels .

Speaker #3: These factors , along with other upside opportunities , underscore the significant potential ahead . Since announcement , incremental benefits , including 100% bonus depreciation , have further enhanced the economics .

Speaker #3: All required filings have been submitted and financing was completed on terms better than originally projected . The transaction positions NRG for stronger long term growth , greater scale and enhanced value creation .

Speaker #3: As we bring the two platforms together . With that , I'll turn it over to Bruce for the Financial Review . Thank you Larry .

Speaker #3: Beginning with slide ten , NRG delivered strong financial and operational performance in .

Speaker #4: In the third quarter, we reported $2.78 in adjusted earnings per share and $1.25 billion in adjusted EBITDA, representing a 32% and 14% increase from the same quarter of 2020.

Speaker #4: For , respectively . Adjusted net income was $537 million and free cash flow before growth was $828 million . Through the first three quarters of 2025 , NRG delivered $7.17 of adjusted earnings per share and over $3.2 billion of adjusted EBITDA , a year over year increase of 36% and 12% , respectively .

Speaker #4: Our exceptional quarterly and year to date financial performance reflects continued execution in all of our businesses , driven primarily by a mix of expanded margins , favorable weather , and excellent commercial and operational execution .

Speaker #4: Our Texas segment delivered third quarter and year to date adjusted EBITDA of $807 million and $1.618 billion , respectively , representing an improvement of 38% and 29% from the same period in 2020 .

Speaker #4: For these results were driven by margin expansion across our operations in the region , with lower realized supply costs and excellent optimization . Despite low summer volatility .

Speaker #4: The East segment contributed adjusted EBITDA of $107 million in the third quarter and $680 million for the first three quarters of 2025.

Speaker #4: These results reflect a modest decline from the same period of 2024 , primarily driven by the net impact of higher supply costs throughout the region , partially offset by increased capacity revenues .

Speaker #4: At our plants and favorable weather in the first quarter , which benefited our natural gas business . Our West services , other segment had adjusted EBITDA of $19 million in the third quarter and $139 million for the first three quarters of 2025 .

Speaker #4: The segment realized higher retail power margins , which were offset by the absence of earnings from the sale of our AirTran business in 2024 and the leaks expiration at the Cottonwood facility in May 2025 , when compared to the same periods of the prior year .

Speaker #4: Our smart home , our smart home business posted another impressive quarter and executed brilliantly through the key summer selling season , achieving adjusted EBITDA of $272 million in the third quarter and $803 million through the first three quarters of 2025 .

Speaker #4: The segment continues to see record new customer adds and retention rates , as well as expanded net service margins . Our consolidated free cash flow before growth was $828 million for the quarter and $2.035 billion for the first three quarters of 2025 .

Speaker #4: Year to date free cash flow before growth exceeded the same period in 2024 by $597 million , or 42% . The year over year increase is primarily driven by the higher year to date adjusted EBITDA , favorable working capital timing , and receipt of the remaining insurance proceeds from our parish unit .

Speaker #4: Eight claims . We expect some of the year over year favorability to moderate as working capital timing normalizes in the first . In the fourth quarter and as we continue to invest in our plants through our scheduled maintenance program .

Speaker #4: Looking to the remainder of 2025 , we are reaffirming the increased financial guidance we announced last month with ranges of $7.55 to $8.15 for adjusted EPs , 3.875 billion to $4.025 billion for adjusted EBITDA , and 2.1 to $2.25 billion for free cash flow before growth .

Speaker #4: Moving to slide 11 for updates to our capital allocation . For the remainder of 2025 . This has been updated to reflect the new midpoint of our raised free cash flow before growth guidance target setting .

Speaker #4: The total capital available for allocation in 2025 at $2.7 billion . Note that this slide excludes proceeds received from the $4.9 billion of new debt raised in October .

Speaker #4: Most of which will be allocated to fund the cash portion of the pending power transaction . A few other updates from what I shared in our second quarter call are denoted in light blue .

Speaker #4: Starting with an update to liability management , the $52 million increase primarily reflects transaction costs and financing fees associated with the power transaction integration costs increased by $20 million due to a shift in spend from 2024 to 2025 .

Speaker #4: The net total remained largely consistent with our communicated expectation between the two years . We remain on track to execute the full $1.3 billion in share repurchases slated in 2025 through October 31st .

Speaker #4: We have executed $1.084 billion in share repurchases , or nearly 85% of our planned annual total at a weighted average price of $125.35 , and expect to complete the full amount of share repurchases by the end of the year .

Speaker #4: Other related activities increased due to higher tax withholdings related to equity compensation , compensation resulting from the increase in our share price . The increase in the revenue synergy Growth Plan reflects the strong customer growth our smart home segment has delivered through the year .

Speaker #4: Customer growth for the business was 9% year over year . Well surpassing the target of 5 to 6% net customer growth embedded in our growth plan .

Speaker #4: On other investments , we are showing a net $30 million inflow of capital related to our Texas new build program . As you may recall , the stipulated capital structure for projects under the Texas Energy Fund program is 6040 .

Speaker #4: Debt to equity . In order to get our TDF projects to that target , capital structure . The initial disbursement under the loan took into account previously spent development costs .

Speaker #4: Given that catch up mechanism under the loan , the disbursements we received in 2025 exceeded the amount of capital we expect to spend on the projects .

Speaker #4: Therefore resulting in a net inflow of capital for the year . Finally , we are on track to finish the year with $158 million of unallocated capital , which we currently plan to roll over into 2026 and deploy as part of our 2026 capital allocation plan .

Speaker #4: Turning to the next slide . We are initiating our 2026 standalone financial guidance at ranges of 3.925 to $4.175 billion for adjusted EBITDA , representing a midpoint of $4.05 billion and free cash flow before growth of 1.975 to $2.225 billion , representing a midpoint of $2.1 billion .

Speaker #4: We are not providing standalone EPs guidance as we acknowledge that EPs will change materially with the closing of the power transaction due to associated accounting adjustments , pro forma capital allocation and other matters impacting any per share .

Speaker #4: Financial metrics . As you can see on the slide , we have included the adjusted EBITDA and free cash flow before growth for the acquisition , which we provided when we originally announced the transaction in May .

Speaker #4: This , combined with the 2026 standalone guidance that we are initiating today , should remind people of the pro forma company's earnings profile .

Speaker #4: We will provide an updated pro forma view once the transaction is closed , which we which will include updates to items like energy , energy and capacity prices , accelerated depreciation benefits and pro forma capital allocation , among others .

Speaker #4: On the bottom of the page , we have provided walks from same the midpoint of our original 2025 guidance to the midpoint of our new 2026 guidance on a standalone basis for adjusted EBITDA .

Speaker #4: The net $200 million increase year over year is primarily driven by the addition of the Rockland assets acquired earlier in the year . The impact of higher power pricing in our Texas segment , and the continued execution of our existing $750 million growth plan .

Speaker #4: The impact of higher power pricing in Texas that we are showing is consistent with the sensitivities we have provided in our previous earnings , materials and reflects an increase in around the clock pricing from the $47 we previously used to $53 per megawatt hour , which reflects Texas pricing .

Speaker #4: At the end of July . The sum total of these year over year increases is slightly offset by other minor drivers , such as regulatory developments , negatively impacting the Maryland and New York competitive retail markets and tariff impacts on our businesses .

Speaker #4: On free cash flow before growth , we are we expect strong year over year growth from core operations amounting to to $145 million , comprised of the previously discussed EBITDA growth partially offset by the continued investment in our generation fleet .

Speaker #4: After taking into account higher cash interest and taxes , we forecast free cash flow before growth to be flat year over year . The higher cash interest is largely driven by refinancings of very low cost debt that was issued when the fed funds rate hovered near 0% .

Speaker #4: The increase in cash taxes primarily relates to fewer federal tax credits available to offset income than in prior years . Just to reiterate , we will provide a more detailed update on pro forma financial metrics once we close the acquisition .

Speaker #4: I look forward to sharing that update with you soon . Moving to slide 13 for a brief discussion on 2026 standalone capital allocation .

Speaker #4: The key takeaway here is that we remain committed to our return of capital programme through share repurchases of $1 billion and our planned 7 to 9% , percent , percent annualized growth of the common dividend per share .

Speaker #4: This is the case both on a standalone and pro basis . I am also pleased to share that our board has approved a new $3 billion share repurchase authorization to be executed through 2028 .

Speaker #4: As you can imagine , certain elements of this chart , such as the starting point for excess cash and liability management , will look very different after we close the acquisition .

Speaker #4: As such , I do not intend to go further into detail on this slide . We will provide a fulsome update on capital allocation alongside our key financial metrics .

Speaker #4: Once we close on the assets acquisition . In closing , NRG has delivered outstanding financial and operational results through the first three quarters of this year , and we are poised to finish the year on a high note .

Speaker #4: The standalone 2020 financial guidance and capital allocation outlook I have shared today further demonstrates the solid growth and continued performance of our standalone base business .

Speaker #4: I look forward to providing you updated and detailed guidance for 2026 . That includes the assets we are acquiring from RLS power following the closing of the transaction .

Speaker #4: With that , I'll turn it back to you . Larry .

Speaker #3: Thank you . Bruce . Turning to slide 15 , 2025 has been an outstanding year across every part of our business . And our outlook continues to improve .

Speaker #3: Our near-term focus is on completing the RLS power acquisition and providing you with an updated long term outlook . Following the close , we also continue expanding our data center portfolio , advancing our Texas energy projects , including completing the construction of the Wharton Project and returning at least $1.3 billion to shareholders .

Speaker #3: These priorities reflect a disciplined approach to growth and capital allocation as we position NRG for 2026 and beyond . Continuing to build a company defined by consistent execution and accelerating value creation .

Speaker #3: With that , we'll now open the line for questions .

Speaker #1: Thank you . At this time , we will conduct the question and answer session . As a reminder to ask a question , you will need to press star one one on your telephone and wait for your name to be announced .

Speaker #1: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster . Our first question comes from Shar Pourreza with Wells Fargo .

Speaker #1: Please go ahead .

Speaker #4: Hey guys . Good morning .

Speaker #3: Sure . Welcome back to the workforce .

Speaker #4: I'm ready to go back to Garden Leaf .

Speaker #5: To be honest .

Speaker #3: So I want to see the flower show . I want to see the flowers .

Speaker #6: There you go . Good morning . Bruce . Good morning Rob . To .

Speaker #4: Morning .

Speaker #6: So , Larry , just do you think 26 is kind of that year you're going to be able to announce a data center agreement that includes new development as part of your , you know , give Kiewit Partnership .

Speaker #3: Yes .

Speaker #6: You tongue tied me again .

Speaker #3: Well , sorry . You'll remember the last time I gave you a one word . Answer . It showed up . So I'm giving you a one word answer .

Speaker #6: Any sense around timing ? Next year ? Are we thinking back half or earlier ? Part of the year ?

Speaker #3: It's hard to tell . Shar , as my good friend Max said yesterday , these are complex , but super excited by by the process and you know , I've never been more sure .

Speaker #6: Got it . Okay . That's helpful . And then just lastly , just maybe share a little bit more about sort of the announced data center deals , how they kind of compare to those announced by your peers a little bit more color around the margins .

Speaker #6: Given other peer deals , deals have come with generation linkages . Thanks .

Speaker #2: Yeah .

Speaker #3: You know , we put a little slide in the appendix , which kind of talks about margin and pricing . You know , you know , this is very similar to the one that we announced last quarter .

Speaker #3: Just locationally different , you know , premium margin as a result . You know , different things go into getting our premium margin on any deal , including land , including our commercial acumen .

Speaker #3: I mean , I really need to say we have the best commercial team in the business at both gas and electricity . Being able to really meet customer needs in a flexible way .

Speaker #3: All of those lead to the margin that you see in that appendix . Chart .

Speaker #6: Got it . Okay . That is super helpful . Appreciate that . Larry . Bruce . Keep working hard . I like what I'm seeing here .

Speaker #6: Thanks , guys .

Speaker #3: Thanks .

Speaker #1: Our next question comes from Julien Dumoulin-smith with Jefferies . Please go ahead .

Speaker #7: Hey . Good morning , team . How are you guys all doing ? There we go . Good .

Speaker #3: Julien , how are you ?

Speaker #7: Quite well , quite well . We're slaving away here , as they say . Let's look . Look , let me let me jump back to the .

Speaker #7: Let me let me ask the same question that our buddy just asked a second ago in a different way . Look , as far as GV goes , and this key word partnership , do you have a certain time frame that you need to move some of this equipment , use it or lose it if you will ?

Speaker #7: Can you speak to that a little bit ? Because I think that's that's probably an important nuance to speak to . When you talk about your confidence and the timelines under which you're operating to execute on this .

Speaker #3: Look , Julien , we haven't disclosed any timelines , but you know , we're I'm very confident that we're going to meet all of the timelines that are required under that agreement .

Speaker #3: But what you're really trying to do , Julien , I know , is pin me to a month and I'm not going to let you do that .

Speaker #7: Yeah . Absolutely . I mean , look , you know , we're all trying . I mean , Sean did his best at it to .

Speaker #7: I appreciate the effort .

Speaker #3: It was well done . But .

Speaker #7: Not quite there . I got it . Well , look , let me let me ask you this way . As far as it goes with the build your own power bi op , as we're calling it .

Speaker #7: Right . Like there's clearly been an evolution in the marketplace when you think about the scope of what's possible here . Again , I know folks have been looking at co-located opportunities the last couple of years , but now we've we've we've firmly shifted .

Speaker #7: You know , how meaningful , right . We've seen a few announcements here . You know , with a couple of hundred megawatts here , a couple hundred megawatts this quarter .

Speaker #7: I mean , when you say you're going to deliver updates next year , can you speak to biopsy and the scale of what's what's at hand here in terms of , you know , really building out contracted gen .

Speaker #3: Sure . Look to starting with the GeV Kiewit deal . Julien . That's 5.4 gigs . So that's a good place to start from .

Speaker #3: I mean , there are some things that could be added to that in a variety of ways that we're looking at . But , you know , I think if we brought even 5.4 gigs to the table , you would be in .

Speaker #3: Everyone would be super happy from us . So , I mean , the scale , I mean , that's kind of the scale that we're focused on right now , but we are looking at opportunities to see how we can make that even greater .

Speaker #7: Got it . And then let me just shift this slightly . When you think about the focus here , I mean , you know , a lot of a lot of conversations been around your portfolio in Texas and Ercot specifically .

Speaker #7: Can you speak a little bit more broadly? Obviously, you guys have Illinois sites, and PJM is talking increasingly about bringing new assets to Illinois. They just passed legislation in recent weeks, for instance.

Speaker #7: Is there an opportunity in the PJM portfolio to both again and add gas and storage specifically , and perhaps tap into some of these developments that have been recently afoot to kind of quell the state's needs for new capacity ?

Speaker #3: Absolutely , Julien . And we are , you know , working hard on that . And we'll really accelerate those efforts . Of course , once les closes , because no , until we own , you know , the generation assets there that will really vault us into being a significant player .

Speaker #3: But , you know , there's no grass growing under our feet there . In the meantime .

Speaker #7: Got it . All right . In Illinois , legislation . Is there something for you guys to do there specifically to ask that more pointedly ?

Speaker #3: I don't think the legislation is really going to be the driver of this . Julien . So but , you you know , as you know , we do have sites in Illinois .

Speaker #3: So .

Speaker #7: Absolutely . All right . I'll leave it there . Thank you guys very much . All the best . See you soon .

Speaker #3: Julien .

Speaker #1: Thank you . Our next question comes from Angie Storozynski with seaport . Please go ahead .

Speaker #8: Thank you . So , first of all .

Speaker #3: Good morning .

Speaker #8: Angie . Good morning . No longer see the slide showing the sensitivity of your gross margin to changes in forward power curves . You know , I mean , we've had finally the move in curves .

Speaker #8: We had waited for . And so I'm just wondering if anything has changed . There . Are you waiting to update it for your enlarged portfolio ?

Speaker #8: Any comments ?

Speaker #4: Angie , you just hit the nail on the head . We are waiting to update it for our enlarged portfolio .

Speaker #8: Okay . And and you're not going to give me any sense how especially the PJM prices moving how they are impacting the pro forma EBITDA of the company for now .

Speaker #3: Not at this stage .

Speaker #4: We'll certainly we we will provide obviously a very fulsome update soon after we close on the transaction .

Speaker #8: Okay . And then and then the second thing is so we've had some companies , you know , new power companies or pretending to be new power companies .

Speaker #8: That have aspirations to build a gas plants without any prior expertise in power . So I mean , it is surprising that they could be ahead of you in the pecking order .

Speaker #8: You know , if not for the fact that you guys actually have sites , have equipment , know how to hedge gas , etc.

Speaker #8: . So is it that , you know , they just talk more about the their opportunities versus you guys or , or do you still feel like you have , you know , a head start over those companies ?

Speaker #3: Angie , I'm convinced that we're in great position to do what I was describing . You know , about this a long time .

Speaker #3: So you have. There's a lot of announcements when I actually see, to use Sam Altman's new term, electrons flowing. Then I will actually believe that they're real.

Speaker #3: Or you will see steel in the ground . But , you know , we're not one . You know , we tell you what we've done .

Speaker #3: We don't tell you what we're going to do . And that's kind of my philosophy on all this . So there's going to be a lot of announcements because a lot of people think they're data center and power developers .

Speaker #3: Some of those probably real , but I'm very , very comfortable with where we sit in the pecking order , both with respect to building power plants and with respect to hyperscalers .

Speaker #8: Okay . And then one more . I mean , we are still seeing a lot of assets , private assets being offered to , you know , companies like you , hopefully , you know , you do have a large pending acquisition .

Speaker #8: And I'm just wondering if , if you would still have interest in single asset transactions before the transaction closes .

Speaker #3: We look at everything and , if there's something that's economically attractive , that's a great fit for our portfolio , we would be interested .

Speaker #3: We don't feel we need to add any additional capacity given the LHS acquisition . The Rockford acquisition and the TEF projects . But , you know , we are always opportunistic when these things are out there .

Speaker #3: .

Speaker #8: And then lastly , Bruce , you mentioned the the free cash flow guidance for 26 and the fact that you're , you know , you're sort of running out of the tax shield .

Speaker #8: I mean , the power transaction brings the tax shield , right ? So there would be presumably an improvement for free cash flow generation of the current business on the back of that transaction .

Speaker #8: Is that fair ?

Speaker #4: Yeah , I think that's generally a fair statement . Angie . You know , the one thing that I'll just clarify for you is that uptick in cash tax that we talked about on a standalone basis isn't necessarily related to our NOLs disappearing .

Speaker #4: It's really more about certain tax credits that we had from our days when we owned renewable assets that eventually expired . And so , you know , regardless of the of the of the transaction , we're still going to have a very sizable Nol position .

Speaker #4: But clearly , the transaction is going to give us even more , which should adhere to , to , to to a cash flow benefit .

Speaker #8: Okay . Very good . Thank you .

Speaker #9: Thank you .

Speaker #1: Next question comes from James West with Melius Research. Please go ahead.

Speaker #10: Hey good morning guys .

Speaker #3: Good morning . How are you .

Speaker #10: Doing . All right . Thanks . Thanks , Larry . Larry , in your prepared comments , both at the beginning and the end , I think you made it very clear that you guys are not just standing still waiting to to close less , but you've got a lot of , a lot of other things going on .

Speaker #10: If you were to kind of rank order what your most excited about , you know , outside of that transaction , you know , what would you say are the top kind of one , two , three other things , other items that you're you're waiting to hopefully announce to us in the near term ?

Speaker #3: Well , I'm going to do them in no particular order because otherwise that's like picking favorites among your kids .

Speaker #10: Understood . Okay ,

Speaker #3: I mean , you know , we have , you know , both on the CNI and on the retail side and energy . And in Smarthome , we have a lot of , you know , people kind of lost sight of we have a very exciting growth plan where we're killing it .

Speaker #3: Second , you know , our residential vrp excites me tremendously . And after LLS close , I'm also even more excited about our demand response potential .

Speaker #3: So I look at all of those things as I guess the fourth thing I would say is , you know , bringing our first test project online and making progress on the other two .

Speaker #3: So there's a lot going on here that we don't we haven't even begun to put into our numbers . And so , you know , even if there were no , I just , you know , as a reminder , even if there were no data centers at all and no changes in power prices , we're still showing a 14% Tiger , and we still have a double digit free cash flow discount rate .

Speaker #3: So I'm sorry , I'm super excited about that . I don't know where I could get in the market , such as , you know , with not much downside .

Speaker #3: Those kind of numbers leaving out all the other great things that we're doing . So I am , you know , as bullish as I've ever been .

Speaker #10: Okay . Good to hear I'll leave it there .

Speaker #3: Great .

Speaker #9: Thank you .

Speaker #1: Our next question comes from Nick Campanella with Barclays . Please go ahead .

Speaker #11: Hey . Morning . Thanks for taking my questions .

Speaker #3: Good morning . Nick , how are you ?

Speaker #11: Maybe I'm doing well . I'm doing well . Hope you're well too . Maybe I could just follow up on the bio convo .

Speaker #11: Just your conversation with policymakers at the States . You operate in . How does that look in terms of bio ? How have the customer conversations evolved over the last six months and is it is it a fair assumption that all deals going forward just need some type of additionality in this space now ?

Speaker #11: Or how would you kind of frame that ?

Speaker #3: I mean , I don't , you know , speaking to all deals is hard , but , you know , it starts with the Secretary of Energy , who's been very , very explicit on this .

Speaker #3: And I think as regulators more and more look at the affordability question and how to distribute the cost of this new power , you know , the simplest way to do it and the fairest way to do it , I think , is probably bring your own gen .

Speaker #3: Now , whether that's , you know , megawatt hour per megawatt hour or 75% or 50 or some other measure , I think remains to be seen .

Speaker #3: But I think every policymaker is looking at this for two reasons . One is the affordability factor , and two is everyone knows they need new power .

Speaker #3: Everyone knows they need new infrastructure to . So to the extent if you're the governor of , say , new Jersey or Pennsylvania or somewhere like that , you would rather spread that cost across Amazon or Metas or Google's or Microsoft's .

Speaker #3: Billions of customers around the world , rather than your own ratepayers . So this is a trend that we started talking about a year ago .

Speaker #3: And prepared for it with our GeV and Kiewit joint venture , and it's now really coming home to roost . And accelerating in the last few months .

Speaker #11: Definitely recognize that . Thanks for those thoughts . So maybe just with PJM being a more important jurisdiction , pro forma , this LLS power deal , can you talk about the capacity auction and just the prospects and timing for the caller to potentially be extended , or just what you're advocating for with stakeholders , where you think the industry is heading and ultimately what outcome you think would be good for the industry ?

Speaker #11: Thanks .

Speaker #12: Hey , it's Rob . Look , nothing's changed since the last auction as far as you know , supply and demand . So I would expect that that means that we're going to price at the top of that cap and collar .

Speaker #12: The as far as long term goes , you know , they're they're looking at lots of different ways to solve the equation . You know ultimately , you know we everybody is generally concerned about reliability .

Speaker #12: And they're concerned about things like affordability . But in order to get reliability you have to have price signals . And so , you know , the market has to reflect something for something to get built .

Speaker #12: As far as the caller being extended , you know , we were supportive of the caller last time . I could see it being extended again because it provides certainty for everyone in the market , whether or not the top end of that collar is at the right place .

Speaker #12: That's yet to be determined .

Speaker #11: Thanks for the thoughts .

Speaker #9: Thank you .

Speaker #1: Our next question comes from Carly Davenport with Goldman Sachs . Please go ahead .

Speaker #13: Hey , good morning . Thank you for taking the questions .

Speaker #3: Good morning Carly , how are you .

Speaker #13: Doing ? Well , thanks . Hope you are too . Larry , you mentioned before your excitement about the the BPP program and the pilot there .

Speaker #13: I guess . Any updates on how that's tracking in terms of uptake ? And if that's something that we should expect to see sort of regular updates on in subsequent calls .

Speaker #3: Yeah , I'm going to kick that over to Brad . Hi .

Speaker #12: Thank you . Yeah . No , we've been .

Speaker #3: Very pleased .

Speaker #12: With the .

Speaker #14: Progress on BPP . So as you're aware we did raise guidance earlier this year for the balance of 25 . So we went from 20MW to to to 150 .

Speaker #14: And we remain on track for our one gig by year end . We've received a lot of 35 . Sorry .

Speaker #3: I would say things .

Speaker #14: A .

Speaker #3: Lot .

Speaker #14: By 2035 , we a lot of great feedback from customers about the value and the experience of our offering . So we're really excited about that .

Speaker #14: And we're actually installing more customers than anticipated. And I think we had shared in our last earnings, we are actually seeing the upgrade of additional equipment to our expectations.

Speaker #14: But apart from that , we're also piloting some additional new home automation offerings , which not only deliver the demand response , but will also help reduce home energy consumption , which will enable us to to offer customers home energy savings .

Speaker #14: So as affordability and grid capacity become more critical , energy will really have the only solution to meet those needs to be able to reduce energy consumption and save customers money .

Speaker #14: So we're really excited about piloting that , not just in Texas , but we will also be taking that out to the east early next year .

Speaker #13: Great . Okay . That's super helpful . Thanks for that . And then maybe just on the data center pipeline , you know , you have one agreement with first delivery in 26 , another in 28 I guess .

Speaker #13: Is there any trend that you're seeing in terms of when customers are looking to be energized on these deals ?

Speaker #3: I mean , I think they're looking to be energized as quickly as possible , but , you know , there are some bottlenecks of , as you know , with interconnection and things of that nature as well as if you do really need to bring your own power plant .

Speaker #3: Obviously , that doesn't occur in a day . So I think customers are would love to start ramping yesterday and they're doing what they can to do that .

Speaker #3: But I think , you know , if I look at the graph from now through 2031 , there's more and more power coming on ramping each of those years .

Speaker #3: So I don't think anybody comes to the table thinking , well , we really want to start in 2033 . But I think there also realistic about building their own businesses and the constraints that exist .

Speaker #13: Got it . Great . Thank you so much .

Speaker #9: Thank you .

Speaker #1: Our next question comes from David Arcaro with Morgan Stanley . Please go ahead .

Speaker #15: Oh , hey . Thanks . Good morning .

Speaker #3: Morning , David .

Speaker #15: When you say that you're let's see on the data center , power agreements increasing your kind of expectations for pricing to now be above $80 , a megawatt hour .

Speaker #15: What's that reflecting ? You know , is that a reflection of where market prices have gone ? And just thinking about , you know , the upper end of your prior 70 to 90 range , like , does that upper end go up as well ?

Speaker #15: Kind of curious . Just like would you be repricing like bring your own power type deals ? Also upward ?

Speaker #3: Well , I think everything is pricing upward as a result of increasing demand . If you look at the capital expenditure announcements by the hyperscalers , they continue to rapidly increase across the board .

Speaker #3: I think it's a recognition from people of the commercial of our rather unique ability commercially to supply them in ways that they want to be supplied and to bring new power to the table .

Speaker #3: And just really heightened interest from multiple hyperscalers and developers in a very accelerating fashion . Just kind of using the basic laws of supply and demand .

Speaker #3: So all of those are factors that led us to , you know , raise this really to kind of take the top off the range and raise raise the bottom of the range .

Speaker #15: Got it . Okay , great . That's helpful . Then separately , was just wondering if you could comment on the retail competitive backdrop retail , your outlook for retail margins from here .

Speaker #15: Can they remain strong looking out into your forecast?

Speaker #14: Yeah , we have this is Brad . We continue to see strong margins in Texas . And we have had primarily because it's a competitive marketplace .

Speaker #14: And so those prices have gone up . We've been able to to maintain those margins . As I mentioned earlier , we are looking at solutions to help give some customers relief in terms of helping reduce energy consumption .

Speaker #14: As we know , affordability will be a challenge as everyone does raise prices and the East a little bit different . Dynamic when we're up against the price to compare and and so that one , we have seen a little bit of margin erosion that we are managing very closely .

Speaker #14: But as I mentioned earlier , being able to bring an integrated value proposition to consumer that gets beyond competing for price per kilowatt hour and gives them a solution that actually brings their energy consumption down and give them home protection and home automation in the home .

Speaker #14: We believe that's a solution that we will be able to scale and slightly change the conversation . So a little bit . Different dynamic , as you know , between the East and what we see in Texas .

Speaker #15: Yeah . Okay . Great . Thank you .

Speaker #9: Thank you .

Speaker #1: Our next question comes from Ryan Levine with city . Please go ahead .

Speaker #16: Good morning . I'm going to follow up on this . Hey , hoping to follow up on the smart home business as good to see the 9% annual year over year growth there .

Speaker #16: What are you assuming for 26 standalone business contribution for smart home growth ? And how do you see that trend evolving into your longer term outlook ?

Speaker #14: Yeah , in terms of customer counts , we're assuming something very similar to what we saw this year . We've seen really strong growth across really all of our channels of distribution .

Speaker #14: We're also launching , you know , more of a good , better , best , historically , vivid has been pushing , you know , the higher end systems .

Speaker #14: But we're able to , as I mentioned earlier , offer a much more affordable entry level offering that not only gives customers some security protection , but also that energy management savings that I touched on .

Speaker #14: So with the additional kind of good , better , best that opens up new channels of distribution . And so we expect , you know , really strong growth in 26 as well .

Speaker #4: Yeah . Hey Ryan I just want to remind , you know , when we when we announced that $750 million growth plan , we had indicated smart home net customer growth to be in that 5 to 6% range .

Speaker #4: And so I think when , when Brad alludes to the customer growth that we're assuming for 26 , it's still going to be pretty consistent with that original growth plan , probably .

Speaker #16: A higher end . Thank you . Thank you . And then in terms of the the Hyperscaler data center conversations , appreciate the additional guidance around pricing and momentum .

Speaker #16: But in terms of duration of the contracts , are you seeing any change there around the tenor of contracts that the customers are looking for ?

Speaker #16: As as demand has continued to accelerate ?

Speaker #3: You know , we've still continued to see people wanting at least ten years , some even more than that . So if anything , tenure will be increased .

Speaker #3: Is increasing , particularly if you're going to bring your own generation . You really need a longer tenured contract in order to , you know , drive your own cost down .

Speaker #3: So, we're seeing longer contracts, not shorter ones. Ryan.

Speaker #16: Okay . And anything around inflation provisions , are they becoming the more more standardized around some of the other commercial terms embedded in these contracts ?

Speaker #3: I mean , you know , we're we are most of the contracts are going to be allowing us to , you know , pass through and allow us to keep our margins relatively fixed .

Speaker #3: You're kind of across the board for a variety of factors .

Speaker #16: Okay . Great . Thanks for the time .

Speaker #1: Our final question comes from Andrew Weisel with Scotiabank . Please go ahead .

Speaker #17: Hey good morning everyone . Thanks for including me .

Speaker #3: Good morning . Welcome . .

Speaker #17: First question on buybacks . I see that you're guiding to a moderation in next year to 1 billion . I think you've previously alluded to that .

Speaker #17: Forgive me , I'm still a bit new to the story . Is that a function of less power and CapEx , which is sort of one time in nature , or should we think of the billion as a good run rate going forward ?

Speaker #17: I can do the math . 3 billion through 2028 kind of implies that . But how are you thinking about this longer term ?

Speaker #4: Yeah , it's really just staying consistent with what we had indicated when we announced the power transaction . Andrew . We had indicated buybacks of $1 billion per year until we get through our deleveraging .

Speaker #4: And so that's all we just wanted to keep it consistent , recognizing that we were going to be updating capital allocation once we close .

Speaker #17: Okay . That makes sense . And similarly on that last point there , you said that you'll update all the financials when Ellis Power closes .

Speaker #17: Does that mean an 8-K or press release as soon as it closes? Or are you talking about the Q4 update in February?

Speaker #4: I think it's really just going to be dependent on when we actually close and how that timing lines up with when we might otherwise regularly report earnings .

Speaker #4: Fourth quarter earnings . And so we'll we'll assess based on where things are lining up with respect to close to figure out what the best way to communicate with the investment community will be .

Speaker #17: Okay , that makes sense . And one last one you covered a lot of good detail . So this is kind of a nuanced one , but I'm seeing some headlines that potential potential sale of the Gladstone asset in Australia .

Speaker #17: A lot of people might not even remember that you have that . But how are you thinking about that asset ? And could there be value there ?

Speaker #4: Look, I mean, we don't, we don't to the extent that there is value, it's really more, it's going to be nominal at best.

Speaker #4: I wouldn't necessarily think of that as being a particularly significant driver . And if anything , it's really to more to just continue to simplify our portfolio and streamline our operations .

Speaker #17: Okay . Very good . Thank you so much .

Speaker #4: Thank you .

Speaker #3: Thank you .

Speaker #9: Thank you .

Speaker #1: I'm showing no further questions at this time. I'd now like to turn it back to Lawrence Coben for closing remarks.

Speaker #3: I want to thank you all for taking the time to listen and for your interest in NRG . I have never been more excited about our prospects as we are today , and I look forward to seeing you all on roadshows and wherever so that we can discuss them in more detail .

Speaker #3: Thank you . Operator . And thank you everyone .