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NRG Reports Retail Financial Impacts From Hurricane Harvey, Raises Retail Guidance

NRG Says 100% Sale Of Renewables Business On Track (No Longer Expects To Retain Ownership Stake)

November 2, 2017

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Copyright 2010-17
Reporting by Paul Ring •

In reporting earnings this morning, NRG Energy reported financial impacts on its Retail unit from Hurricane Harvey

For its Retail business, NRG reported a one-time financial impact of $20 million in 2017 from Harvey.

Of this impact, mild weather and outages were responsible for $9 million, customer relief was responsible for $7 million, and bad debt was responsible for $4 million.

Separate from the hurricane impacts, mild weather in Q3 negatively impacted retail Adjusted EBITDA by $11 million.

NRG's Retail segment reported Adjusted EBITDA of $276 million for the three months ending September 30, 2017, versus $304 million in the year-ago quarter, due to mild weather, impacts from Hurricane Harvey, and higher supply costs, partially offset by customer growth and reduced operating costs.

Operationally, NRG said that Retail customer outages from Harvey peaked at 4% of customers; current outages are 0.02% customers

Regarding Retail customer count, NRG stated in a customer presentation, "Continued customer momentum with 84k (3%) net mass customer growth versus 3Q16 (over the past year)." NRG in a presentation did not list its current Retail customer total or growth (if any) versus June 30, 2017. For reference, NRG in its third quarter 2016 presentation had listed its recurring Retail customer count, excluding C&I, as of Q3 2016 as 2.797 million. In its second quarter 2017 presentation, NRG had listed its mass market recurring Retail customer count as of 2Q 2017 as 2.887 million (excluding C&I).

NRG Retail delivered volumes for the three months ended September 30, 2017 were 18.7 TWh, versus 19.1 TWh a year ago

NRG increased its Retail financial guidance to $780-820 million Adjusted EBITDA, from $700-800 million Adjusted EBITDA

Regarding impacts to its Generation business from Hurricane Harvey, NRG said that about 80% of NRG’s baseload generation in the Gulf Coast was available during the worst part of the storm, and 95% of all 13 GW of generation is restored today.

Cottonwood (1,263 MW), which had been evacuated after the storm and impacted by floods, is back online

Greens Bayou (330 MW) and Gregory (388 MW) remain offline; NRG said that, "impacts [are] still being assessed."

For its Generation segment, NRG reported a one-time financial impact of $20 million in 2017 from Hurricane Harvey

NRG told analysts during an earnings call that Harvey's impacts did impact the timing of anticipated divestitures of conventional generation (see story here), and the industry was focused on operations and recovery. As NRG considers the future of Greens Bayou and Gregory, NRG executives did state that the future of Greens Bayou and Gregory are being re-evaluated given recent retirement announcements in ERCOT and expected recovery in power prices.

In presenting earnings, NRG updated investors that it is now, "currently anticipating," a 100% sale of its interest in NRG Yield and its Renewables platform. Previously, NRG had said that it would consider retaining up to a 50% ownership stake in these businesses, but said that as the transaction has progressed, the most likely outcome is a complete 100% sale.

"With respect to the targeted asset sales under the Transformation Plan, NRG continues to expect up to $4 billion of net cash proceeds, with transactions leading to a majority of those proceeds announced by year end 2017, and the balance in 2018. NRG anticipates these sales to include 100% of its interest in NRG Yield and its Renewables platform," NRG said

Overall, NRG lowered its guidance for its 2017 Adjusted EBITDA to $2.4-2.5 billion, from a prior guidance of $2.565-$2.765 billion, due to a negative $65 million impact from mild summer weather and Hurricane Harvey, and a negative $50 million impact due to unfavorable results at Boston Energy Trading and Marketing (BETM)

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