NRG Energy Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Shahriar Pourreza - Guggenheim - Analyst : Larry, I know since we last spoke, we've seen something like 40 to 60 gigs get in line for the energy fund. Do you think the state could do a second fund of this one helps meet the demand? Do you think this means the curves could revert to backwardation? And could you get involved with more generation assuming an expanded program next year? So do you have more bandwidth?

Question: Shahriar Pourreza - Guggenheim - Analyst : Just assuming like you see an expanded program, do you guys have like kind of bandwidth to do additional generation?

Question: Shahriar Pourreza - Guggenheim - Analyst : Got it. Perfect. And then just lastly, Larry, just on transitioning to EPS, I know I asked you this on the last call, but has your thoughts evolved around just maybe changing disclosures and guidance a little bit?

Question: Shahriar Pourreza - Guggenheim - Analyst : Okay. That's perfect color. Larry, big congrats. I know a couple of quarters ago, I highlighted that we didn't want you to leave and just stay as the CEO. So we're glad the Board listened.

Question: Agnieszka Storozynski - Seaport Global Holdings LLC - Analyst : I We're all trying to be as excited as you are, Larry, about the prospect of power markets. I mean, clearly, the curves disagree. And I'm just wondering if you can explain to us why do you think we've had this short pullback in Texas power curves given the load outlook you see and we see.

Question: Agnieszka Storozynski - Seaport Global Holdings LLC - Analyst : Speaking about retail business, if you could talk to us about what's happening in New England. Any potential reviews to the retail electric market and how that could impact your business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 1:00PM, NRG.N - Q2 2024 NRG Energy Inc Earnings Call

Question: Agnieszka Storozynski - Seaport Global Holdings LLC - Analyst : Okay. And then back to the generation assets. I mean, this whole discussion about new build and the need to actually supply additional generation capacity. I'm just wondering, I mean, those are assets with four-year lives and you guys are making decisions based on two to three-year visibility into the profitability of these assets. So one is, how you approach the new build, given that previous cycles were very painful for IPPs. And two, is there a way to basically maybe pursue new build through long-term contracts as opposed to a truly merchant's new build? If the demand is truly there, one could argue that the demand should be comfortable with signing PPAs to support new build as opposed to just truly merchant assets, both actually in ERCOT and PJM.

Question: Agnieszka Storozynski - Seaport Global Holdings LLC - Analyst : And nothing about potential long-term contracts? I'm clearly fishing for some comments about those brownfield sites as the monetization of those could come through newbuilds backed by PPAs.

Question: Antoine Oraman - Jefferies - Analyst : Congrats on the results. Larry, congrats on the permanent appointment. I guess on that note, just more broadly taking a step back, how do you think about just the strategic trajectory of the company under your new leadership? So over the past years, NRG [deemphasized] physical generation, asset-light strategy. Do you think that's still the best positioning in the current market conditions? And any other strategic shifts we should be considering?

Question: Antoine Oraman - Jefferies - Analyst : Yes. That makes sense. And then I guess on the data center opportunity, could you maybe comment on status of any discussions you may have with data center providers, type of contracts that you may be contemplating, how advanced you are in negotiation process? And how should we think about timeline potential announcements?

Question: Antoine Oraman - Jefferies - Analyst : Fair enough. And then lastly, on the $400 million of net proceeds [from] HVAC divestiture, I guess, somewhat unexpected. Where do you expect to allocate that for cash?

Question: Steven Fleishman - Wolfe Research, LLC - Analyst : Congrats, Larry. So just a couple of kind of near-term questions first. How should we think about if we do end up having a milder lower-priced summer in Texas, you've done a lot to kind of make sure you are ready for a high-priced hot summer, just protection from the opposite. And I assume that's kind of embedded in saying to the upper end, but just, Larry, how should we think about that?

Question: Steven Fleishman - Wolfe Research, LLC - Analyst : Okay. And then also just kind of more -- we had this PJM auction outcome. Just how should we think about that capacity price flow through the retail business? I don't know how much you've already contracted or it's just not enough of a scale to matter much.

Question: Steven Fleishman - Wolfe Research, LLC - Analyst : Okay. And then just to go back to Texas new build, so obviously, the TEF has the low-cost loans and performance bonuses and the like. But then you do have to kind of have a market price for return on equity. I mean, is your messaging that basically, hey, this works for us at any forward curve? And just how should we think about kind of projecting equity?

Question: Steven Fleishman - Wolfe Research, LLC - Analyst : I don't, but I'm just trying to understand the thought process on. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 1:00PM, NRG.N - Q2 2024 NRG Energy Inc Earnings Call

Question: Steven Fleishman - Wolfe Research, LLC - Analyst : Got it. That's helpful. And then one last quick one just on the Q3 disclosures. You've talked about the earnings and VPPs. Just the site, the 21 sites, do you think we'll get some update on the kind of the Q3 call? Or is that more late year or next year? Like, what timeline on that?

Question: Neil Kalton - Wells Fargo Securities - Analyst : Just a quick question on economic outlook. So we've seen a softening in the consumer side. Like how do you think about the impacts to your business, thinking both the home security business, retail energy as well. Are you seeing any evidence that the consumer is stepping back, weakness, et cetera?

Question: Durgesh Chopra - Evercore ISI - Analyst : Larry, congrats. I've got two questions. First, just for housekeeping, August 29, will we guess a list of projects? Will that be formally announced? Or how will we know which ones kind of made it to the second round of due diligence by the PUCT?

Question: Durgesh Chopra - Evercore ISI - Analyst : Okay. Perfect. And then just, Larry, back to you. As you take the permanent role, obviously, there was this transaction announced here, are there other noncore assets that we could potentially see being liquidated for cash proceeds back into the core portion of the company? How are you thinking through that?

Question: David Arcaro - Morgan Stanley - Analyst : I was just curious on the PJM market, just reflecting on the capacity print that we just saw, is there an opportunity for you to look at new build there? Like, this newbuild economics work at this point? And do you have any opportunities to look at that market in terms of power plant expansion?

Question: David Arcaro - Morgan Stanley - Analyst : That's helpful. And just maybe expanding on that a little bit, do you have a sense as to when new gas plants could realistically get built in the PJM market, given the supply chain challenges that you mentioned in your outlook for energy prices, too, in the context of that?