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NRG Says It Recorded "Strong Retail Operational Performance" In Q2; Grew Customers Q/Q

NRG Pursuing Development Of Gas Peakers In ERCOT

August 4, 2022

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Copyright 2010-21
Reporting by Paul Ring •

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In reporting second quarter earnings, NRG Energy said that it recorded, "strong retail operational performance," with the following highlights:

• "Retention exceeded target by 5%"

• "Grew Texas and East customers 1.2% Q/Q"

• "Increased customer offer term length while improving margin predictability"

• "Disciplined approach to pricing in volatile market"

NRG ended the second quarter of 2022 with 5.6 million Home customers, versus 5.55 million as of the first quarter of 2022

Mauricio Gutierrez, NRG President and Chief Executive Officer, said that in the current environment, retail customers are engaged in a "flight to safety" to brands such as those owned by NRG, and NRG's retail business is seeing "strong numbers".

NRG reported second quarter 2022 retail volumes as follows:

40 TWh Electricity

     15 TWh Home / Residential 
         (77% of volumes are in Texas)

     25 TWh Business / C&I  
         (41% of volumes are in Texas)

388 MMDth Natural Gas
     27 MMDth Home / Residential 
    361 MMDth Business / C&I

NRG reported Adjusted EBITDA $358 million for the second quarter of 2022, versus $656 million a year ago when excluding the impact of Winter Storm Uri

In NRG's Texas segment, second quarter Adjusted EBITDA was $251 million, $61 million lower than the second quarter of 2021. This decrease was driven primarily by the extended outage at W.A. Parish Unit 8 that began in the second quarter of 2022. Favorable weather-driven retail load was offset by higher supply costs, NRG said

NRG said that, in May 2022, the W.A. Parish Unit 8 came offline as a result of damage to certain components of the steam turbine/generator. Based on management's current assessment of necessary restoration efforts, the Company is targeting to return the unit to service by the end of the second quarter of 2023, NRG said

In NRG's East segment, second quarter Adjusted EBITDA was $61 million, $220 million lower than the second quarter of 2021. This decrease was driven primarily by the December 2021 sale of the 4.8 GW fossil generation assets, higher supply costs, and lower demand response revenues associated with an early settlement in 2021, NRG said

On June 1, 2022, the Company closed on the sale of its 49% ownership in the Watson natural gas generating facility to Tesoro Refining & Marketing Company LLC for $59 million. NRG recognized a gain on the sale of $46 million.

Concerning ERCOT securitization proceeds, NRG said that the Company accounted for the expected proceeds as a reduction to cost of operations during December 2021 and received the proceeds of $689 million from ERCOT in June 2022.

As of June 30, 2022, NRG's cash was at $580 million, and $2.5 billion was available under the Company’s credit facilities. Total liquidity was $3.1 billion, which was approximately $398 million higher than at the end of 2021.

In discussing NRG's asset-light strategy, which to date has focused on renewable PPAs, Gutierrez said that the company is expanding this strategy to include storage and quick-start natural gas supply in ERCOT through a capital-light (PPA) strategy

Specifically, Gutierrez said that NRG has a shovel-ready peaking project that is fully permitted. NRG is considering partnerships and other strategies under which NRG would be the offtaker and, potentially, the developer (including at brownfield sites), but NRG would not take operational risk of the asset or contribute development capital

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