NRG Lowers Retail Segment Guidance, Cites Rising Wholesale Costs, Margin Compression

Citing weather and wholesale price impacts, NRG has lowered its Adjusted EBITDA guidance for its retail segment by $75 million in each of 2013 and 2014.

Specifically, 2013 Retail Adjusted EBITDA guidance is now $575 million to $650 million, and 2014 Retail Adjusted EBITDA guidance is $600 million to $675 million.

In 2013, the Retail reduction is primarily due to unseasonably milder weather year-to-date, particularly in Texas, as well as higher supply costs.

Looking ahead to the remainder of this year and next year, NRG continues to see rising wholesale prices. While this benefits NRG overall, executives said that Retail is entering the phase of the market cycle where retail price changes lag that of the wholesale market, resulting in margin contraction as retail prices take more time to catch up.

NRG also cited the impact of continued competitive intensity, particularly in the C&I space.

Executives said that NRG will continue to invest in its mass market retail business to profitably grow customer count while focusing on operational improvements and efficiencies to continue to deliver on bottom line objectives. NRG will also continue to focus on developing new retail products.

During a conference call with analysts, NRG CEO David Crane, in response to a question about marrying the GenOn generating assets with NRG's Northeast retail book, said that it was a little to early to discuss specifics.