Updated: NRG Reports Lower Retail Mass Market Customer Count, Excluding Stream

NRG Reports Lower Retail Earnings, "Capacity Obligations" Among Drivers

NRG Cites "Expanded Demand Management Programs" For Texas Retail Business As Summer Volatility Management Strategy

Executed Approximately 1.3 GWs Of Solar Power Purchase Agreements In ERCOT

August 7, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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NRG Energy reported that its Retail segment recorded Adjusted EBITDA of $240 million for the second quarter of 2019, $58 million lower than the $298 million recorded in the second quarter of 2018, driven by higher supply costs, milder weather, and capacity obligations, partially offset by the acquisition of XOOM, partially offset by transformation plan cost savings and margin enhancement benefits (noted further below)

As of Q2 2019, NRG was serving 3.277 million mass market recurring customers, compared to 3.325 million as of Q1 2019, and 3.149 million a year ago. The Q2 2019 total does not include 450,000 customers acquired from Stream Energy, which were added after the close of the quarter (discussed further below)

NRG's Retail delivered volumes for Q2 2019 were 16.1 TWh, versus 16.8 TWh a year ago

In terms of the income/(loss) from continuing operations, NRG's Retail segment reported a loss of $280 million for the second quarter of 2019, versus a loss of $84 million a year ago, reflecting losses on mark-to-market hedge positions, driven by large movements in gas prices and ERCOT heat rates.

NRG's Retail segment reported economic gross margin of $458 million for the second quarter of 2019, versus $496 million in the year-ago quarter

NRG's Retail segment reported operating revenues of $1.746 billion for the second quarter of 2019, versus $1.814 billion in the year-ago quarter

As first reported by RetailEnergyX.com, NRG closed its acquisition of Stream Energy's retail electricity and natural gas business on August 1. NRG acquired Stream Energy's retail electricity and natural gas business for $300 million and estimated transaction costs and working capital adjustments of approximately $25 million. Stream's retail energy business operates in 9 states and Washington, D.C., and the acquisition increased NRG's retail portfolio by approximately 600,000 Retail Customer Equivalents or 450,000 customers.

NRG highlighted that during the quarter its Retail business, "launched innovative and compelling electricity offers and tools like Reliant/NRG energy management solutions leveraging Google/Nest, the Green Mountain app and Rent Ready by Reliant."

NRG reported that in preparing for ERCOT summer volatility, its Retail business has developed, "expanded Demand Management programs," in addition to engaging in enhanced customer outreach and being fully hedged on priced load

During the first half of 2019, NRG began execution of its capital-light strategy to provide competitively priced renewable offerings to retail customers. NRG entered into power purchase agreements with third-party project developers and other counterparties, totaling approximately 1.3 GWs, with an average tenor of approximately ten years. NRG expects to continue evaluating and executing agreements such as these that support the needs of its platform, the company said

Through the second quarter of 2019, NRG realized $261 million of its cost savings target as part of the previously announced Transformation Plan, and is on track to realize $590 million in savings in 2019. Margin Enhancement provided $30 million in uplift through the second quarter toward the $135 million 2019 target.

NRG announced an incremental $250 million share repurchase program to be executed by year-end

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