NRG Energy Inc Q3 2024 Earnings Call Transcript

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

Question: Shahriar Pourreza - Guggenheim Securities - Analyst : Hey guys. Good morning.

Question: Shahriar Pourreza - Guggenheim Securities - Analyst : All right. Quite an update, Larry, quite an update. Let me just start just I want to touch on the process around the sites. I mean, some of your peers this week mentioned portfolio approaches to hyperscaler deals. You have the ability to provide a degree of additionality with the gas units. Is it still your plan to sort of update the Street in January? And how are you seeing -- are you seeing more interest in one region versus the other? Thanks.

Question: Shahriar Pourreza - Guggenheim Securities - Analyst : Worked to me before, by the way.

Question: Shahriar Pourreza - Guggenheim Securities - Analyst : I got to hide for the first time.

Question: Shahriar Pourreza - Guggenheim Securities - Analyst : Got it. And then as we get more disclosures, you plan on layering in the optionality into the numbers through time? Or how do we get an update?

Question: Shahriar Pourreza - Guggenheim Securities - Analyst : All right. Perfect. And then just lastly, coming back to sort of the identified growth component of the plan. I appreciate, obviously, the breakdowns between the segments through '29. Some of these are obviously familiar to investors like the C&I margin, customer counts, but some aren't. Where do you see kind of the most room for variability within these three verticals? And then any color on cost to achieve? Appreciate it.

Question: Shahriar Pourreza - Guggenheim Securities - Analyst : Perfect. I appreciate it. Congrats on the results, and it's good to see that Bruce was busy. -- appreciate it.

Question: Shahriar Pourreza - Guggenheim Securities - Analyst : Thank you, Sahar.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : Hey, Larry team, good morning guys. Nice to chat. Pleasure, guys. Nicely done. Maybe just following up a little bit on what Shar picked you on first here. Let me move the needle a little further on this in terms of just the update timeline and more specifically, what that could look like as you think about what to set expectations around should we say, January or otherwise here, right? Is it principally are your efforts geared principally towards this additionality in leveraging those two additional sites? Or are you still thinking, it seems earlier that you were principally focused on the Midwest portfolio, the site value there. We've seen a lot of excitement in the Midwest. Is that more where we should be thinking about it? Again, I know there's a 20-plus sites here. Tell me what permutation.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : Right. Yeah, indeed. And actually, just to clarify that even with respect to TEF, would you expect TEF part two here to include those sites here? I mean, is sort of the idea to double dip, if you will, between TEF and additionality next year potentially, with the customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 2:00PM, NRG.N - Q3 2024 NRG Energy Inc Earnings Call

Question: Julien Dumoulin-Smith - Jefferies - Analyst : Yeah. Okay. Excellent. And VPP, out of that $1.6 billion, I think, how much has it cost you to do the VPP? I think you said $100 a kilowatt, so it's like $65 million for the [6 years].

Question: Julien Dumoulin-Smith - Jefferies - Analyst : All right, excellent guys. Thank you so much. All the best.

Question: Agnieszka Storozynski - Seaport Research Partners - Analyst : Thank you. It's kind of funny that does all these questions are focused on what else do you have even though the entire call was still good enough.

Question: Agnieszka Storozynski - Seaport Research Partners - Analyst : The bars set really high. So my question is about the VPP, virtual power plant. So we're seeing some cooling off in like battery investments in Texas, right? I mean there's this realization that existing batteries are starting to cannibalize on peak power prices and that eats into the pricing arbitrage that these batteries rely on. And so why shouldn't the same be true for the VPP? And I understand that the biggest component of the profitability of this business is basically customer retention for the energy component is relatively small. But why shouldn't that be true that, in a sense, the curve gets sort of flatter and your ability to actually capture this additional energy benefit is lower? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 2:00PM, NRG.N - Q3 2024 NRG Energy Inc Earnings Call

Question: Agnieszka Storozynski - Seaport Research Partners - Analyst : Okay. So basically, it's the most cost-effective way to hedge the gains spikes in super peaks, right?

Question: Agnieszka Storozynski - Seaport Research Partners - Analyst : I mean, not that we've seen it. And that's my other question is that we -- I mean, we keep hearing those incredible announcements almost hard to even believe that they can be set with a straight face, right, 80 gigs of load in Texas from Oncor. I mean -- and yet, the curve is just not reacting at all. It's almost as if -- and again, could it be that this load is not going to impact '28 or even '29, and that's why we're not seeing any response? Or how can you actually reconcile the lack of response in forward power curves in Texas?

Question: Agnieszka Storozynski - Seaport Research Partners - Analyst : Okay. And the last question. So maybe actually to both Bruce and Larry. So is there a free cash flow yield that below which you think that the share buyback just unwarranted and there is some other way of capital return or maybe M&A or some other strategy change?

Question: Agnieszka Storozynski - Seaport Research Partners - Analyst : Yeah, to infinity and beyond. Okay.

Question: Michael Sullivan - Wolfe Research - Analyst : Hey, good morning.

Question: Michael Sullivan - Wolfe Research - Analyst : Congrats on all the announcements here. Just -- I know -- so you gave this 10%-plus and said it can vary year-to-year. But just to clarify, does that mean you can go below it, below 10% in some years? Or it's just going to be 10% or better in every year? And how much better can vary?

Question: Michael Sullivan - Wolfe Research - Analyst : Okay. And just specifically on that, so if we go to slide 19 with the tax impact, does that all fall away in '26? So should we think of like '26 as being a lower year and then you kind of catch back up again in the outcome?

Question: Michael Sullivan - Wolfe Research - Analyst : Okay. Great. And then, yes, the VPP announcement, good to see there. And maybe just -- is it fair to kind of bifurcate it as you broke out the $80 million component as being kind of more stable and then locked in? And then that $30 million component, it looks like would have been a lot better in '23 if you get a summer like that. And then if we got this summer, maybe wouldn't have been around that level? Is that fair?

Question: Michael Sullivan - Wolfe Research - Analyst : It does. That's really helpful. Okay. And then last one, just to round it out there, too. It's pretty sizable. Can you maybe just give us a sense of are there any competitors out there or other people looking to do this? Or how big does that VPP market get in Texas overall outside of what you were doing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 08, 2024 / 2:00PM, NRG.N - Q3 2024 NRG Energy Inc Earnings Call

Question: Michael Sullivan - Wolfe Research - Analyst : Okay, awesome. Thank you so much.

Question: David Arcaro - Morgan Stanley - Analyst : Hey, thanks so much. Good morning. Hi David, how are you? Good, good. Hey, I was wondering if there's an organic growth kind of opportunity at the retail energy business that could be potential upside from here. How is that incorporated in there? It seems like we're seeing pretty good residential growth in Texas over time, plus all of the C&I growth potential from new data center load. I didn't really see that maybe clearly called out as one of the components of the EBITDA growth opportunity. So wondering how you're thinking about that.

Question: David Arcaro - Morgan Stanley - Analyst : Yes. Got you. Absolutely. Makes sense. And maybe on that data center side, is there growth coming to your service territory that would boost the commercial and industrial side of the business in terms of retail contract opportunities and retail growth? Are you seeing data centers show up in that -- in the retail business coming to you with a multiyear energy contracting opportunities?

Question: David Arcaro - Morgan Stanley - Analyst : Got it. Okay, great. Thanks so much. Yes, sir.