NRG Says Retail Growth, Acquisitions A Focus For Investment

NRG Says Retail Business Positioned To Acquire Customers, "At-Value With Increased Volatility Pressuring Pure Retailers"

NRG Reports Flat Retail Adjusted EBITDA

NRG Reports Customer Count, Retail Volumes

November 6, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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In reporting third quarter earnings today, NRG Energy said that, for its Retail segment, Adjusted EBITDA was $269 million for the quarter ending September 30, 2019, which was flat versus the year-ago quarter

NRG said that the third quarter 2019 Retail results were, driven by, "margin enhancement and acquisitions offset by higher supply costs and weather overcoming unfavorable weather and higher supply costs."

NRG said that its Retail segment is, "positioned to acquire customers at-value with increased volatility pressuring pure retailers."

Mauricio Gutierrez, NRG President and Chief Executive Officer, said that retail would be a focus for growth and investment, including the potential for further acquisitions. Gutierrez said current opportunities are likely small to medium-sized retail companies. While retail acquisition targets may be "limited", NRG still sees some opportunities in the market, Gutierrez said

Gutierrez said that NRG will evaluate retail acquisition opportunities for complementary products, regions, and sales channels. While Gutierrez would like to better balance NRG's generation in the East, Gutierrez said that the company remains interested in Texas retail acquisitions as well.

NRG said that its Retail segment performed through summer volatility in Texas, with enhanced customer outreach to optimize customer attrition. NRG also, "partnered with customers to mitigate high demand and high cost periods."

As of Q3 2019, NRG was serving 3.697 million mass market recurring customers, compared to 3.277 million as of Q2 2019. NRG's acquisition of Stream's retail energy business closed after the close of Q2 2019. In a Q2 2019 presentation, NRG had listed mass market recurring customers to be added due to the Stream acquisition as 450,000

NRG's year-ago mass market recurring customer count had been 3.167 million as of Q3 2018

As exclusively first reported by EnergyChoiceMatters.com (story here), NRG has executed several additional retail energy book purchases in recent months, including acquiring books from LifeEnergy, Pro Power Providers, LLC d/b/a Circular Energy, and American Light & Power

NRG reported delivered volumes for its Retail segment as 21.8 TWh for Q3 2019, versus 20.3 TWh a year ago.

NRG said that, across its businesses, Margin Enhancement provided $53 million in uplift through the third quarter toward the $135 million 2019 target.

NRG has narrowed the range of its Adjusted EBITDA guidance for 2019.

For Retail, Adjusted EBITDA guidance for 2019 is now $900 million to $950 million, versus the earlier guidance of $1,000 million to $1,100 million

NRG also initiated guidance for fiscal year 2020. For the Retail segment, NRG provided 2020 guidance of $925 million to $1,025 million in Adjusted EBITDA. Across all of its businesses, NRG listed drivers of 2020 guidance as including $80 million in incremental margin enhancement, $60 million from the Stream acquisition, offset in part by higher retail costs in the amount of $90 million

On a GAAP basis, which reflects mark-to-market impacts, the Retail segment reported net income of $422 million, versus a loss of $128 million a year ago

NRG announced that it has adopted a long-term capital allocation policy that will target allocating fifty percent (50%) of FCFbG to growth investments and fifty percent (50%) to be returned to shareholders. The return of capital to shareholders is expected to be completed through the newly announced increased dividend supplemented by share repurchases, NRG said

NRG said that, beginning in the first quarter of 2020, NRG will increase the annual dividend to $1.20 per share and expects to target an annual dividend growth rate of 7-9 % per share. On October 17, 2019, NRG had declared a quarterly dividend on the Company's common stock of $0.03 per share, payable November 15, 2019, to stockholders of record as of November 1, 2019, representing $0.12 on an annualized basis.

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