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NRG CEO: "Still Some Opportunities" For Retail Acquisitions

NRG CEO Discusses Potential For Evaluation Of Taking Company Private

Retail Segment Reports Stable Margins, Customer Growth

February 27, 2020

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Reporting by Paul Ring •

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During an earnings call today, NRG CEO Mauricio Gutierrez, in discussing capital allocation, said that, despite consolidation in the retail market, there are "still some opportunities" in potential retail acquisitions that would meet NRG's financial hurdles, as well as being superior to share buybacks in terms of allocating capital

Gutierrez said that such retail acquisition opportunities reflect small to medium size companies, for which NRG could achieve significant synergies given the scale of its current retail operations

Gutierrez was also asked about the potential to take NRG private.

Gutierrez said that NRG's stock price is "not lost on me" and said that it does not reflect the value of the company, and that his mandate is to maximize shareholder value

Gutierrez said that right now NRG is focused on executing on its strategy, but noted that NRG is nearing the end of a three-year transformation plan, is on a path to an investment-grade credit rating, and has provided more visibility to investors

Once such efforts are final and the results are visible to shareholders, if a significant gap between NRG's share price and value of the company persists, that will be the time to evaluate "all other options," Gutierrez said

In terms of financial results, NRG reported that its mass market customer count (recurring customers) was 3.7 million as of the end of 2019. NRG had previously reported its mass market recurring customers as 3.697 million as of the quarter ending September 30, 2019. As of the end of 2018, NRG's mass market customer count (recurring customers) had been 3.3 million.

NRG reported that its Retail business was seeing "stable" mass market unit margins (Economic GM $/MWh), with such margins essentially flat, versus 2017, in 2018 and 2019.

For the year 2019, NRG's delivered Retail volumes were 69.1 TWh, versus 67.0 TWh in 2018

For 2019, delivered mass market Retail volumes were 48.9 TWh, versus 45.8 TWh in 2018

For 2019, delivered C&I Retail volumes were 20.2 TWh, versus 21.2 TWh in 2018

NRG said, "In 2019, NRG continued efforts to perfect its integrated platform through the acquisition of Stream Energy's retail electricity and natural gas business operating in 9 states and Washington, D.C., as well as other small electricity retailers."

As exclusively first reported by (story here), in addition to acquiring Stream's energy business, NRG executed several retail energy book purchases during 2019, including acquiring books from LifeEnergy, Pro Power Providers, LLC d/b/a Circular Energy, and American Light & Power

NRG's brands now serve more than 1 million customers outside of the state of Texas

For the fourth quarter of 2019, NRG's Retail segment recorded Adjusted EBITDA of $258 million, $61 million higher than the $197 million recorded in the fourth quarter of 2018, driven by margin enhancement initiatives and the acquisition of Stream Energy

For the fourth quarter of 2019, the Retail segment reported Economic Gross Margin of $495 million, versus $430 million in the year-ago quarter

For the fourth quarter of 2019, the Retail segment reported Operating Revenues of $1.782 billion, versus $1.608 billion in the year-ago quarter

For the fourth quarter of 2019, the Retail segment reported Income from Continuing Operations, which reflects the impact of mark to market (MtM) gains and losses on economic hedges, of $233 million, versus $331 million a year ago.

For the full year 2019, NRG's retail segment recorded Adjusted EBITDA of $920 million, $32 million lower than the $952 million recorded in 2018, driven by higher supply costs, capacity obligations and weather, partially offset by margin enhancement initiatives and growth related to M&A activity.

During 2019, NRG continued execution of its capital-light strategy to provide renewable offerings to customers. NRG entered into power purchase agreements with third-party project developers and other counterparties, totaling approximately 1.6 GWs for the year, "with an average tenor of approximately ten years."

NRG said that it, "Signed 1.6 GW of solar PPAs in ERCOT" in 2019

"NRG expects to continue evaluating and executing agreements such as these that support the needs of its customers," NRG said

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