NRG Reports Record Customer Retention, Provides More Details On Cross-Sell Opportunities Under Vivint Smart Home Acquisition, In Reporting Earnings

Sees Retail Growth Opportunities In East From Rising SOS Rates

February 16, 2023

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In reporting fourth quarter and full year earnings for 2022, NRG Energy said that it experienced, "record customer retention."

NRG ended the fourth quarter of 2022 with 5.4 million Home customers, versus 5.5 million as of the third quarter of 2022

NRG provided further details on cross-sell opportunities under its pending acquisition of Vivint Smart Home, Inc., providing insight into what part of the Vivint customer base are in retail choice markets. NRG noted that 55% of Vivint's approximately 2 million customer base is in non-competitive energy markets

Specifically, NRG reported the potential "Tier 1" cross sell of energy to Vivint customers as approximately 1 million customers. NRG reported the potential "Tier 1" cross sell of Vivint smart home to its existing customers as approximately 2.7 million customers. "Tier 1 customers are defined with the following attributes which include single-family homeowner with high credit score in core urban markets," according to an NRG presentation

In its presentation, NRG again reported, "strong retail performance."

NRG reported 2022 retail volumes as follows:

155 TWh Electricity

     59 TWh Home / Residential 
         (74% of volumes are in Texas)

     96 TWh Business / C&I  
         (40% of volumes are in Texas)


1,918 MMDth Natural Gas
    145 MMDth Home / Residential 
  1,773 MMDth Business / C&I

In providing an outlook, NRG reported the following:

• "Stable to falling commodity prices ease customer bill pressure and stabilize margins"

• "Continued healthy consumer trends, supportive of home essential services"

• "Customer Bad Debt remains near historical avg"

In discussing NRG's outlook, Mauricio Gutierrez, NRG President and Chief Executive Officer, highlighted an opportunity for retail customer growth in the East from an increase in default service rates

In NRG's Texas segment, fourth quarter Adjusted EBITDA was $200 million, $39 million higher than the fourth quarter of 2021. This increase was primarily driven by partial settlements of insurance claims related to the W.A. Parish and Limestone extended outages and increased margin rates. This was partially offset by higher supply costs as a result of Winter Storm Elliott in December 2022, and higher ancillary charges.

In NRG's East segment, fourth quarter Adjusted EBITDA was $180 million, $47 million lower than the fourth quarter of 2021. This decrease was driven by the December 2021 4.8 GW asset sales, PJM asset retirements, and "estimated capacity performance net impact resulting from Winter Storm Elliott."

On a consolidated basis for the fourth quarter, NRG reported a negative impact of ($80 MM) from the December Winter Storm, further stating, "Capacity performance bonus risk-adjusted, pending clarity from PJM." This reflects payment under the capacity performance construct

On a consolidated basis, NRG Adjusted EBITDA for the full year of 2022 was $1,754 million, versus $2,423 million a year ago

Concerning capital allocation, NRG said, "As part of NRG’s long-term capital allocation plan, the return of capital to shareholders during the twelve months ending December 31, 2022 was comprised of the annual dividend of $1.40 per share, or $332 million, and share repurchases of $606 million at an average price of $40.50 per share, for a total amount of capital returned to shareholders of $938 million in 2022. The Company’s $1 billion share repurchase program began with $39 million of shares repurchased in December of 2021, resulting in $645 million of shares repurchased under that program to date. The program is expected to be completed in 2023, subject to availability of cash and full visibility of the achievement of the Company’s 2023 targeted credit metrics."

"In 2023, the Company expects to use its excess free cash flow to fund the Vivint acquisition, reduce acquisition-related debt, and maintain its common stock dividend. In addition, NRG is targeting additional asset sales with projected proceeds, net of any required deleveraging, of $500 million during 2023. Following the completion of the Vivint acquisition, the Company plans to update 2023 capital allocation," NRG said

"NRG is committed to maintaining a strong balance sheet and credit ratings, and remains focused on achieving investment grade credit metrics. The Company expects to achieve 2.50x to 2.75x corporate net debt to adjusted EBITDA by late 2025 or 2026, which will be primarily achieved through debt reduction and the realization of growth initiatives," NRG said

"On January 20, 2023, NRG declared a quarterly dividend on the Company's common stock of $0.3775 per share, or $1.51 per share on an annualized basis. This dividend represents an 8% increase from the prior year, which is in line with the Company’s previously announced dividend growth rate target of 7% to 9% per year," NRG said

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