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NRG Reports 1.5 GW In Potential Brownfield Opportunities In ERCOT, Specifically Targeted To Meet Retail Supply Needs

NRG Cuts Amount Of Excess Cash Devoted To Energy & Home Services Growth, Will Instead Return To Shareholders

NRG Discusses New Customer Services, Metrics During Investor Day

June 22, 2023

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Copyright 2010-23
Reporting by Paul Ring •

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During an investor day, NRG Energy reported that it has identified 1.5 GW in potential brownfield opportunities in ERCOT, with the proposed projects, "specifically targeted to meet the supply needs of our ERCOT retail business."

These include:

TH Wharton (413 MW gas peaking)

Greens Bayou (436 MW gas peaking)

Cedar Bayou (689 MW gas CCGT)

During the investor day, NRG also offered various insights into its retail energy and home services customer base and strategy

As previously reported, NRG had been conducting a "test & learn" phase of new services, including the channels and providers (third-party or self-provided) used to fill these services

In discussing insights from this testing phase, NRG cited the importance of the customer relationship ownership, observing that, "fully outsourced/partner models limit access to customer and data; need direct relationships to build interactions and reputation."

NRG also said that the testing phase "validated [its] rooftop solar partnership model."

"NRG customers want rooftop solar offering; marketing & sales model offers best risk/return model for NRG," NRG said

NRG also cited new value opportunities emerging behind the meter, observing that, "increasing adoption of controllable devices inside the home [is] creating new grid services opportunities."

NRG reported an estimate of its Home customers who take various services, as follows:

Retail Electricity: 4.5 million meters

Retail Gas: 1.1 million meters

Energy Protection Plans: 300,000

Renewables: 720,000

Demand Response: 120,000

EV [Note 1]: 140,000

Solar [Note 1]: 130,000

Battery Storage & Back-up [Note 2]: 70,000

Note 1: Estimated Home customers with rooftop solar and/or EVs

Note 2: Sum of 2020-2022 customers purchasing YETI batteries from Goal Zero; Not included in Home recurring customer count;

NRG also reported annual sales under various channels, reflecting new customer acquisitions, new product adds to existing customers, and new term contracts for existing customers, as follows:

Channel                   Annual Sales

Voice                       ~1,000,000
  (driven by marketing, movers)

Digital                       ~500,000
  (driven by Search & Display,
   Mobile, Shoppers)

Retail stores / On-site       ~500,000
  (Meet People Where They Are)

Direct (targeted prospects)   ~500,000
  (use of own & paid data,
   behavioral insights)

NRG said, on any given day, it may be selling in close to 1,000 retail storefronts, event kiosks, and similar physical locations

During the investor day, NRG said that it has updated its capital allocation framework and plans to, after deleveraging, return 80% of excess cash to shareholders and invest 20% in growth initiatives. This compares to the Company’s prior 50% / 50% allocation.

Specifically the 20% invested in growth would include, "disciplined growth behind the meter," to grow energy and home services, NRG said. Growth would, "build on core retail energy and expand further into the home," NRG said

"As a result of the expected cash flow generation, the Company expects $6.9 billion of cumulative capital returns to shareholders through share repurchases and dividends through 2027. The Company’s Board of Directors has increased the share repurchase authorization from $1.0 billion to $2.7 billion through 2025. NRG expects 7% to 9% long-term annual dividend per share growth," NRG said

NRG said that it expects to complete up to $2.55 billion of debt reduction to enable NRG to achieve its target investment grade credit metrics of 2.5x to 2.75x net debt / adjusted corporate EBITDA by 2025


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