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NRG To Undertake "Test & Learn" Retail Investments In 2022

November 4, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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During a quarterly earnings call today, NRG executives discussed its retail strategy for 2022.

For retail, NRG expects "small-scale growth and 'test & learn' investments in 2022."

This year and next year, NRG in retail will be engaged in the following activities designed to set the stage for future growth:

• Trialing and executing strategic partnerships

• Small-batch testing in key markets

• Apply learned market and competitive intelligence to enhance go-to-market strategy

In discussing 2021 capital allocation, NRG listed, in a new allocation in the third quarter disclosure (change from prior disclosure) $35 million for "Small Books". As previously reported, a bankruptcy court approved the acquisition of a significant portion of Liberty Power's customers by NRG, with an initial purchase price initially estimated as $36 million at the time of a stalking horse bid

NRG Energy, Inc. reported a third quarter 2021 Adjusted EBITDA of $767 million, versus $752 million a year ago

In NRG's Texas segment, third quarter Adjusted EBITDA was $446 million, $68 million lower than third quarter of 2020. This decrease was driven by increased costs to service retail load resulting from increased power and fuel costs as well as replacement power due to the extended forced outage at Limestone. These were partially offset by an increase due to the acquisition of Direct Energy.

In NRG's East segment, third quarter Adjusted EBITDA was $229 million, $89 million higher than third quarter of 2020. This increase was driven by the acquisition of Direct Energy partially offset by lower retail volumes and higher supply costs.

NRG narrowed its Adjusted EBITDA guidance for 2021 to $2,400 - $2,500 million, the bottom end of its prior guidance, which excludes the full year impact of Winter Storm Uri.

The narrowed guidance reflects negative impacts by continued outage at Limestone unit 1 and coal and chemical supply chain constraints across NRG's generation fleet, partially offset by increased Direct Energy synergies of $40 MM and other cost measures

NRG also initiated guidance for fiscal year 2022, with Adjusted EBITDA of $1,950 – $2,250 million. Among the negative drivers for the 2022 guidance Adjusted EBITDA versus 2021 is a $70 million negative impact from Texas ancillary service charges

NRG reported 3Q21 retail volumes as follows:

46 TWh Electricity

       18 TWh Home / Residential 
       28 TWh Business / C&I

367 MMDth Natural Gas
       12 MMDth Home / Residential 
      355 MMDth Business / C&I

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