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NRG CEO Sees "Opportunities" For Retail Growth From Forecast Volatility

After Share Buybacks, Capital Allocation Focus Will Be On Attractive Acquisitions In Retail

NRG Reports Retail Customer Growth

NRG To Sell Boston Energy Trading and Marketing LLC

Records $1.2 Billion Impairment Related To South Texas Project Nuclear Plant, On Outlook For Future Commodity Prices

March 1, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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In discussing 2017 earnings this morning, Mauricio Gutierrez, NRG President and Chief Executive Officer said that forecast volatility in the Texas electric market creates opportunities for well-positioned retail energy companies, such as NRG's, and also stated that, after prioritizing share repurchases, any attractive acquisitions that the company may consider would be focused on the retail segment.

The NRG Board of Directors has authorized $1 billion for share repurchases, with the first $500 million program to begin immediately. Following the completion of the initial program, and as NRG progresses towards the closing of the announced asset sales, NRG expects to execute the remaining $500 million of the $1 billion share repurchase program.

"Without a doubt, right now, the most compelling return for our capital is our own stock, and that's where we're focusing," Gutierrez said during an earnings call

However, Gutierrez added that, "We are always evaluating the market in terms of attractive opportunities. What I will say is, given where the market conditions are, those attractive opportunities are perhaps more likely in the retail business than the generation business. And that's where we're going to be focusing."

Gutierrez noted, in particular, that NRG is long on generation in the East, and as such, the company will work to grow retail in the East organically, "and perhaps if there is an attractive opportunity in the retail sector we will evaluate it."

Concerning the retail business in Texas, Gutierrez also said, "volatility creates opportunities," for well-positioned retail companies.

"We actually are ready to capitalize on these opportunities, as perhaps customers want to move to retail companies that are better capitalized, that have generation behind them," Gutierrez said

NRG reported that it was serving 2.94 million retail customers as of December 31, 2017. That compares to 2.89 million as of 2016

NRG reported its recurring mass market retail customer count as 2.88 million as of the end of 2017, versus 2.887 million as of 2Q2017 and 2.82 million as of 2016. NRG reported that it expanded its portfolio by ~58,000 recurring mass market customers over the year.

NRG's retail segment reported fourth quarter Adjusted EBITDA of $214 million, $80 million higher than the fourth quarter 2016 due to improved performance, customer growth and lower operating costs.

Full year 2017 Adjusted EBITDA for Retail was $825 million, $14 million higher than 2016 due to lower operating costs, partially offset by lower unit margins due to customer mix, milder weather and the impact of Hurricane Harvey. NRG said that this was the fourth year in a row of earnings growth for the Retail segment

Retail delivered volumes for 2017 were 60.5 TWh, with 42.4 TWh in the mass market, and 18.1 TWh in the C&I market

NRG announced today that a subsidiary of NRG has entered into a purchase and sale agreement with a subsidiary of Diamond Generating Corporation, a subsidiary of Mitsubishi Corporation, to sell Boston Energy Trading and Marketing LLC (BETM) for $70 million.

The BETM transaction is expected to close in the second half of 2018

In announcing corporate earnings, NRG also reported that it recorded a $1.8 billion impairment of fixed assets, goodwill, and investments, of which $1.2 billion was related to the South Texas Project (STP) nuclear generation facility, primarily due to the revised outlook of future commodity prices

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