NRG Ups Capital Allocation For Small Book Acquisitions -- EnergyChoiceMatters.com

NRG Ups Capital Allocation For Small Book Acquisitions

NRG's Customer Acquisition In Lubbock Over-performing Its ERCOT Home Market Share

NRG Reports, "Strong Customer Count And Product Margins"

February 27, 2024

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Reporting by Paul Ring • ring@energychoicematters.com

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In reporting fourth quarter and full year earnings, NRG Energy reported an increase in its capital allocation for "small books".

In a November 2023 presentation on Q3 2023 results, NRG had indicated in its 2024 capital allocation plan $32 million for small books

In its new Q4 2023 presentation, NRG now indicates in its 2024 capital allocation plan $40 million for small books

NRG also said that its customer acquisition in the newly opened Lubbock service area has over-performed relative to its ERCOT Home segment market share of 39%

NRG reported full year 2023 Adjusted EBITDA of $3,282 million, up from $1,865 million a year ago

"The energy platform performed above plan, delivering strong customer count and product margins," NRG said

NRG reported, "Significant increase in Texas margins and earnings through higher revenue combined with lower supply costs".

NRG also reported that it is, "Sustaining Home Energy customer retention of 80% while maintaining average customer tenure of 6 years".

NRG said that it is seeing, "Durable margins with customer life of 6 years for Home and 7-9 years for Business".

In the Texas segment, NRG reported full year 2023 Adjusted EBITDA of $1,692 million, $806 million higher than prior year, primarily driven by lower retail supply costs as, "a result of solid execution of NRG's diversified supply strategy and improved plant performance, coupled with higher revenue rates," NRG said

In the East segment, full year 2023 Adjusted EBITDA was $780 million, $7 million higher than the prior year, primarily driven by higher retail power margins, partially offset by the impact of asset retirements and lower natural gas gross margin.

NRG reported volumes as follows:

4Q 2023
                                Texas   EWO
Home Power Load (TWh)              8      4
Business Power Load (TWh)         10     14
Total Power Load (TWh)            18     18

Total Natural Gas Sales (MDths)    -    498

EWO = East/West/Other; includes Services


2023A
                                Texas   EWO
Home Power Load (TWh)             40     15
Business Power Load (TWh)         40     57
Total Power Load (TWh)            80     72

Total Natural Gas Sales (MDths)    -  1,892

EWO = East/West/Other; includes Services

NRG said that smart home subscribers were 2.04 million as of 4Q23, versus a reported 2.1 million as of 3Q23, and 1.92 million a year ago

NRG continues to emphasize the opportunity in VPPs

NRG said, "NRG is uniquely positioned to leverage its customer portfolio, product ecosystem, and market expertise in expanding access to Virtual Power Plant (VPP) opportunities. Demand response and management will continue to be a strategic priority in 2024."

NRG said, "NRG continues to evaluate brownfield development opportunities at three of its existing generation sites in Texas, totaling up to 1.5 GW of dispatchable, natural gas fired capacity. The Texas Energy Fund, a low-cost Texas loan program to facilitate dispatchable new build generation, was formally approved in November 2023. NRG is awaiting the issuance of the Texas Energy Fund's rules and regulations."

NRG said, "The Company’s long-term capital allocation policy is to target approximately 80% of recurring cash available for allocation (CAFA), after debt reduction consistent with achieving targeted credit metrics by 2025, to return of capital, and approximately 20% to strategic growth investments. As part of this plan, the Company expects to increase its dividend per share by 7-9% annually, complete its $2.7 billion share repurchase authorization, and reduce debt by up to $2.55 billion by year-end 2025."

NRG said, "In 2023, the Company returned approximately $1.5 billion to shareholders and paid down debt by $1.52 billion. NRG exceeded its original share repurchase target by $150 million and debt reduction target by $120 million. The Company returned $1.15 billion through share repurchases and returned $347 million in common dividends representing $1.51 per share. The Company's $950 million accelerated share repurchase program executed in the fourth quarter of 2023 is planned to conclude by the end of the first quarter of 2024, at which time the Company expects to enter into a new share repurchase program."

"For 2024, the Company reiterates its previously announced capital allocation plan that includes $500 million in debt paydown, $825 million in share repurchases, and an 8% increase of the annual common dividend," NRG said

"On January 19, 2024, NRG declared a quarterly dividend on the Company's common stock of $0.4075 per share, or $1.63 per share on an annualized basis. This represents an increase of 8% to the annual common dividend for the fifth consecutive year," NRG said

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