NRG Reports Higher Retail Margins, But Challenging C&I Space Prompts "Repositioning"

NRG Energy saw higher margins in its retail business which led to improved adjusted EBITDA, but margins for non-residential customers remain challenging.

During an earning call, executives reported achieving higher retail margins despite the introduction of the Dominion Retail electric portfolio, which generally came in with lower-margin customers.

Retail unit gross margin for the third quarter of 2014 was $21.0/MWh, versus $20.3/MWh a year ago. Retail unit gross margin excludes O&M and SG&A

CFO Kirkland Andrews, however, said that C&I margins remain challenging, stating, "I think we've consistently said we don't see compelling margins in that particular business, which is why we're repositioning our approach to C&I more comprehensively as a bundled product offering," and not strictly grid power.

NRG retail customer count as of the third quarter of 2014 was 2.917 million, including 582,000 customers transitioned from Dominion Retail. This compares to 2.524 million as of the second quarter of 2014, which included 217,000 customers transitioned from Dominion Retail at that time.

Regarding the Dominion Retail electric integration, NRG said that it has retained higher-than-planned customer count and realized favorable EBITDA contributions, with customer retention and expense management being the key drivers of much better-than-planned results on EBITDA and customer count. The Northeast drove the customer count over-performance with Texas driving the cost efficiencies.

NRG's Retail segment reported adjusted EBITDA of $196 million for the third quarter of 2014, $16 million higher than in third quarter 2013 primarily driven by increased margin from the Dominion Retail electric acquisition, continued advancement in customer and product growth, and a focus on maintaining unit margins, partially offset by lower C&I volumes.