Nrg Energy, Inc. · NYSE:NRG
Nrg Energy — Q3 2024 Earnings Presentation
55 slides from Nrg Energy's earnings presentation, Nov 8, 2024
Slide 1: Third Quarter 2024 Earnings Presentation
Confidential_v2a NRG Energy, Inc. NRG Energy, Inc. Third Quarter 2024 Third Quarter 2024 Earnings Presentation Earnings NRG Energy, Inc. Presentation November 8, 2024 Third Quarter 2024 November 8, 2024 Earnings Presentation November 8, 2024 1 | NRG 3Q24 Earnings
Slide 2: Safe Harbor
Safe Harbor Forward-Looking Statements In addition to historical information, the information presented in this presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These statements involve estimates, ex
Slide 3: Agenda
Agenda Business Review Dr. Larry Coben Chair, President and CEO Virtual Power Plant Update Rasesh Patel President, NRG Consumer Financial Review Bruce Chung CFO Closing Remarks Dr. Larry Coben Chair, President and CEO Q&A Management 3 | NRG 3Q24 Earnings
Slide 4: Key Messages
3 Key Messages Strong YTD Performance; Reaffirming Increased 2024 & Initiating 2025 Guidance Announced Virtual Power Plant Strategic Partnership with Renew Home & Google Introducing Adjusted EPS Metric; Targeting Long-Term CAGR of >10% for Adjusted EPS and FCFbG per Share 4 | NRG 3Q24 Earnings Busin
Slide 5: Business and Financial Highlights
Business and Financial Highlights ($ millions, except per share amounts) Reaffirming Initiating 2025 2024 Financial Guidance1 Financial Guidance (Guidance Increased September 25, 2024) Adjusted EBITDA FCFbG Adjusted EPS2 $6.75-$7.75 $3,725-$3,975 +5% +5% +12% $3,555 $3,730 $6.35 $1,975-$2,225 $1303
Slide 6: Long-Term Earnings Growth Outlook
Long-Term Earnings Growth Outlook ($ per share) Targeting >10% Long-Term Adj EPS CAGR1 (Growth rate will vary from year to year) $10.25 >10% Delivering >10% Organic Growth Share Repurchases: ~5% CAGR 1 Through Visible Drivers: Adj Net Income: (slide 7) $7.25 • $750 MM Run-Rate Adjusted EBITDA Mid-si
Slide 7: >10% Organic 5-Year Growth Plan
1 >10% Organic 5-Year Growth Plan ($ millions) Visible & Achievable Organic Growth Identified Initiatives through 2029 Run-Rate Adjusted EBITDA Growth1 Home Energy ~$225 MM • Launch Home Essentials bundle in Texas to expand wallet Targeting ~85-90% Adjusted EBITDA to FCFbG Conversion for Growth Init
Slide 8: Significant Upside to 5-Year Growth Plan
2 Significant Upside to 5-Year Growth Plan ($ millions) Leverage to Higher Power Prices Maximize Sites’ Value and (Illustrative Texas Generation Sensitivities) Texas New Build Projects Open Energy Scenario Location* Sites Acreage 2025 Texas Base Gross Margin $1,710 Texas 6 ~17,000 ATC Power Price in
Slide 9: Clear Capital Allocation Framework
Clear Capital Allocation Framework ($ billions) 2022A-2029E Capital Allocation Capital Allocation Principles $4.6 $2.1 $2.7 $9.3 $0.4 Maintain top decile safety $0.5 and operational excellence $0.5 $0.5 20% $1.5 $1.3 Growth Investment Grade Credit metrics of $0.2 2.50-2.75x Net Debt / Adjusted EBITD
Slide 10: Virtual Power Plant Update
Virtual Power Plant Update Partnering with Renew Home & Google Cloud to Develop 1GW AI-enabled Residential Virtual Power Plant in Texas 10 | NRG 3Q24 Earnings
Slide 11: Renew Home / Google Partnership Accelerates Virtual Power Plant Strategy in Texas
Renew Home / Google Partnership Accelerates Virtual Power Plant Strategy in Texas Texas Partnership Overview Timing and Scale • Developing VPP and personalized energy management Targeting 650 MW by 2030 & platform 1,000 MW by 2035 • Delivers capacity at 10% cost of physical plant (Total MW from Texa
Slide 12: VPP Go-To-Market Strategy
VPP Go-To-Market Strategy Introducing Home Base Essentials: Smart Thermostat & Doorbell Camera Bundle with Professional Setup Included as Part of an Energy Subscription Value to the Customer: Pilot Success Rates: • Smart Home Essential Bundle at no cost • ~17% customer take rate • Smart thermostat •
Slide 13: VPP Value
VPP Value Consumer & Supply Margin Uplift Opportunities Consumer Businesses Value Uplift Annual Margin Uplift $ Per Customer, Illustrative Unit Economics Home Energy Margin Uplift $100 Home Energy Customer Life Extension $90 650 MW VPP % Upgrade to Additional Smart Home Services 20% A Retail & Smart
Slide 14: Financial Review
Financial Review 14 | NRG 3Q24 Earnings
Slide 15: Introducing Adjusted Net Income & Adjusted EPS
Introducing Adjusted Net Income & Adjusted EPS ($ millions, except per share amounts) Enhanced Reporting: Adjusted Updating Adjusted EBITDA Net Income and Adjusted EPS $6.35 $3,730 $5.65 $3,555 $130 $3,319 $130 $37 $1,310 $4.73 $1,165 $1,079 $3,425 $3,600 $3,282 2023 Actual 2024 Original 2024 Raised
Slide 16: 3Q24 Financial Update
3Q24 Financial Update ($ millions, except per share amounts) Three Months Ended 2024 Raised Guidance 9/30/2024 9/30/2023 $1,665–$1,735 Texas $584 $552 (Original $1,665-$1,785) 1,015–1,065 East/West/Services/Other1 214 196 (Original 810-890) 975–1,005 Vivint Smart Home 257 239 (Original 955-1,005) $3
Slide 17: 2024 Capital Allocation
2024 Capital Allocation ($ millions) No change from Previously Disclosed Indicates change from Previously Disclosed $2,708 420 Airtron Sale, net $425 100 980 115 ($182) 865 $2,050 FCFbG (Raised 336 midpoint of $100 MM increase) 145 122 $605 $164 2023 $441 Remaining $233 CAFA 2024 Liability Integrati
Slide 18: Introducing 2025 Guidance
Introducing 2025 Guidance ($ millions, except per share amounts) 2025 Guidance 1 Adjusted EBITDA $3,725 - $3,975 Adjusted Net Income $1,330 - $1,530 Adjusted EPS $6.75 - $7.75 Free Cash Flow before $1,975 - $2,225 Growth Investments (“FCFbG”) $110 $3,850 $145 Adjusted $100 $3,555 ($60) EBITDA ($ mil
Slide 19: Roadmap to Adjusted EPS & FCFbG/Share Growth
Roadmap to Adjusted EPS & FCFbG/Share Growth >10% CAGR $1.80 $10.25 $2.25 $7.25 Adjusted $6.35 EPS $5.65 ($0.65) ($/share) ($0.40) 2024 Original 2024 Raised 2025 Tax Impact3 Higher Interest Business Share 2029 Guidance Guidance Guidance Expense Growth Repurchases Pro Forma (midpoint)1 (midpoint)1 (m
Slide 20: 2025 Capital Allocation
2025 Capital Allocation ($ millions) $2,705 365 110 1,355 $2,100 FCFbG (midpoint) 345 130 2024 165 Remaining CAFA $605 $235 2024 Liability Integration Share Common Revenue Synergy Other 2025 Excess Cash1 Management Costs Repurchases Dividends Growth Plan Investments Remaining & Pref. Divs. CAFA Liab
Slide 21: Closing Remarks
Closing Remarks 21 | NRG 3Q24 Earnings
Slide 22: Compelling 5-Year Financial Outlook
Compelling 5-Year Financial Outlook >10% >10% >10% Adjusted EPS Growth FCFbG / Share Growth ~$8.8 Bn 2.50-2.75x Return of Capital Net Debt to Adj EBITDA Plus: Significant and Highly Probable Upside Opportunities 22 | NRG 3Q24 Earnings Business Review | VPP Update l Financial Review | Closing Remarks
Slide 23: 2024 Priorities
2024 Priorities ❑ Deliver Financial, Operational, Safety, and ESG Objectives – Increased Financial Guidance Deliver on Cost Initiatives – On Track $250 MM 2023-2025 program: $68 MM incremental in 2024 ($105 MM ’23-24) Optimize and Grow from Core – On Track $300 MM 2023-2025 growth plan: incr
Slide 24: Appendix: Operations
Appendix: Operations 24 | NRG 3Q24 Earnings
Slide 25: Integrated Energy Performance: Summer Review
Integrated Energy Performance Summer Review Texas Continues to Realize Load Growth Business Highlights & Results Hit New Record Peaks in 5 of the 3Q Highlights First 10 Months of 2024 • Top decile safety performance 90,000 • Home Energy subscribers +4% YoY Peak Demand MWs 80,000 • Smart Home subscri
Slide 26: Committed to Sustainability
Committed to Sustainability US CO2e Emissions (MMtCO2e)2 Progress Highlights1 NRG Targets3 Carbon Reduction Target: 50% by 20251 58% Net-Zero by 2050 58 Reduction in CO2e emissions 24 29 (2023) Net-Zero 2014 2023 2025 2050 71% Reduction in SO2 2023 Sustainability Report Published August 2, 2024 emis
Slide 27: Texas Development Portfolio
Texas Development Portfolio Evaluating Viability of Projects Power Market Review – Texas Potential Benefits from Texas Legislation • Texas has approved legislation to incentivize new • Low-interest rate (3%) loans from the Texas Energy dispatchable generation resources Fund – SB2627 • Completion Bon
Slide 28: Advancing Sites' Value Opportunities
Advancing Sites’ Value Opportunities Sites Available for Development Value Creation Opportunities Location* Sites Acreage Texas 6 ~17,000 Joint Venture – Generation with Co-location East/West 15 ~4,000 Total 21 ~21,000 Land Lease – Generation *Portfolio comprised of current and retired power plant s
Slide 29: Mature Risk Strategy
Mature Risk Strategy Managing Through-Cycle Stability 1 Forecast & Price 2 Retail Sale & Hedge 3 Optimize • Proprietary forecasting • Fully hedge priced load to firm • Enhance hedge profile to program models expected gross margin incorporate additional data load and variability (i.e. weather) • Part
Slide 30: Home Integrated Retail Supply Procurement
Home Integrated Retail Supply Procurement Net Home Position1 Supply Position Highlights (Avg. On-Peak MWh) ERCOT East/Other ✓ Balance net generation and market purchases against priced load Total Expected Load2 (normal weather) ✓ Manage current financial exposure while 82% 73% planning for physical
Slide 31: Texas Generation Sensitivity
Texas Generation Sensitivity Significant Upside Opportunity in Rising Price Environment Illustrative Mark-to-Market for Texas Generation-Only Portfolio Gas Sensitivity Year 1 Year 2 Year 3 Open +$0.25 -$0.25 2025 Texas Base Gross Margin $1,710 MM $1,710 Base Earnings % Hedge (as of Sept. 2024) 95-10
Slide 32: Appendix: Finance
Appendix: Finance 32 | NRG 3Q24 Earnings
Slide 33: Historical Consolidated Metrics
Historical Consolidated Metrics 2023 1Q24 2Q24 3Q24 Adjusted EBITDA1 $3,319 $870 $962 $1,055 Adjusted Net Income $1,079 $315 $358 $393 Adjusted EPS $4.73 $1.51 $1.72 $1.90 Basic Share Count – Average 228 209 208 207 Basic Share Count – Ending 208 208 207 205 1 Reflects recast of all amortization of
Slide 34: Consolidated Modeling Data
Consolidated Modeling Data 2024 2025 2026-2029 Raised Guidance Pro Forma Outlook Guidance Power Price, ERCOT ATC $46 $47 flat ($47), see sensitivity table Adjusted EBITDA (midpoint) $3,730 $3,850 see growth plan Depreciation & Amortization ~$1.4 Bn ~$1.4 Bn flat Interest Expense, net $640 MM $635 MM
Slide 35: 2024 Corporate Credit Profile
2024 Corporate Credit Profile ($ millions) 2024 2025 Guidance Guidance 2024 Liability Management Sources & Uses 1 Corporate Debt $10,940 $10,895 Sources Debt Reduction (45) 2024 Liability Management 335 Texas Energy Fund Debt 200 Uses Minimum Cash Balance (750) (750) Debt Reduction (45) Corporate Ne
Slide 36: Debt Maturity Schedule
Debt Maturity Schedule Balance as of 10/31/24 ($ millions) Debt as of 10/31/24 Principal 5.75% Senior Notes, due 2028 $821 5.25% Senior Notes, due 2029 733 NRG Energy, Inc. Credit Rating 3.375% Senior Notes, due 2029 500 S&P Moody’s Fitch 5.75% Senior Notes, due 2029 798 BB Ba1 BB+ 3.625% Senior Not
Slide 37: Energy Modeling Aid
Energy Modeling Aid Initiating 2025 Metrics 2025E East/West/ Texas Other (EWO2) Operational Statistics Additional Commentary-Power 1 Retail Energy Sales : Home Load served primarily by owned Home Power Expected Load (TWh) ~40 ~17 generation and supplemented with ~40 ~65 third-party hedges Business P
Slide 38: Energy KPIs and Modeling Data
Energy KPIs and Modeling Data Quarterly KPIs Home & Business Operational KPIs1 3Q24 3Q23 Texas EWO2 Texas EWO2 Home Power Load (TWh) 13 5 15 4 Business Power Load (TWh) 11 15 12 16 Total Power Load (TWh) 24 20 27 20 Total Natural Gas Sales (MDths) -- 358 -- 400 Total Owned Generation (TWh) 9 3 12 3
Slide 39: Smart Home KPIs and Modeling Data
Smart Home KPIs and Modeling Data Quarterly KPIs Key Metrics1 3Q24 3Q23 Change Portfolio Subscribers (MM)2 2.15 2.05 +5% Customer Lifetime (years)2 ~9 ~9 -- Optimized Pricing in Key Sales Channel Retention (%)3 89.5% 89.1% +40 bps Drives ~$400 Improvement in Customer Lifetime Value Bad Debt as % of
Slide 40: Growth & Cost Initiative Scorecard
Growth & Cost Initiative Scorecard ($ millions) Scorecard 2023 2023 2024 2025 As of 9/30/2024 Realized Target Target Run-Rate Growth Plan: FCFbG Growth $101 $75 $200 $300 (recurring) Orig. $30 Cost-to-Achieve $129 $105 $145 $404 (one-time) Cumulative Cost Initiatives1: FCFbG Growth $37 $35 $105 $250
Slide 41: Impact of Capitalized Customer Acquisition Costs
Impact of Capitalized Customer Acquisition Costs Presentation Adjustments ($ millions) Twelve Months Ended 12/31/23 2024 Raised Guidance Reported Actual Reported Actual Presentation Raised Guidance Presentation Raised Guidance Results as Results Adjustments (Issued 9/25/24) Adjustments as Adjusted A
Slide 42: Appendix: Reg. G Schedules
Appendix: Reg. G Schedules 42 | NRG 3Q24 Earnings
Slide 43: Reg. G
Reg. G ($ millions except per share amounts) Appendix Table A-1: 2024 and 2025 Guidance The following table summarizes the 2024 and 2025 Guidance calculations of Adjusted Net Income and Adjusted EPS and provides a reconciliation from Net Income1 2024 2024 2025 Original Earnings Per Raised Earnings P
Slide 44: Reg. G
Reg. G ($ millions except per share amounts) Appendix Table A-2: 2024 and 2025 Guidance The following table summarizes the 2024 and 2025 Guidance calculations of Adjusted EBITDA, Adjusted Net Income and Adjusted EPS and provides a reconciliation from Net Income1 2024 2024 2025 Original Guidance Rais
Slide 45: Reg. G
Reg. G ($ millions) Appendix Table A-3: 2024 and 2025 Guidance The following table summarizes the calculation of FCFbG providing a reconciliation from Cash provided by operating activities and Adjusted Net Income 2024 2024 2025 Original Guidance Raised Guidance Guidance Adjusted Net Income $1,040 -
Slide 46: Reg. G
Reg. G ($ millions except per share amounts) Appendix Table A-4: Three months ended 9/30/24 and 9/30/23 Adjusted EBITDA Reconciliation by Operating Segment and Consolidated Adjusted EPS reconciliation The following table summarizes the calculation of Adjusted EBITDA, Adjusted Net Income and Adjusted
Slide 47: Reg. G
Reg. G ($ millions except per share amounts) Appendix Table A-5: Three months ended 9/30/24 and 9/30/23 Adjusted Net Income and Adjusted EPS Reconciliation The following table summarizes the calculation of Adjusted Net Income and Adjusted EPS and provides a reconciliation from Net Income1 Three Mont
Slide 48: Reg. G
Reg. G ($ millions except per share amounts) Appendix Table A-6: Nine months ended 9/30/24 and 9/30/23 Adjusted EBITDA Reconciliation by Operating Segment and Consolidated Adjusted EPS reconciliation The following table summarizes the calculation of Adjusted EBITDA, Adjusted Net Income and Adjusted
Slide 49: Reg. G
Reg. G ($ millions except per share amounts) Appendix Table A-7: Nine months ended 9/30/24 and 9/30/23 Adjusted Net Income and Adjusted EPS Reconciliation The following table summarizes the calculation of Adjusted Net Income and Adjusted EPS and provides a reconciliation from Net Income1 Nine Months
Slide 50: Reg. G
Reg. G ($ millions) Appendix Table A-8: Three months ended 9/30/24 and 9/30/23 Free Cash Flow before Growth The following table summarizes the calculation of FCFbG and provides a reconciliation Cash provided by operating activities and Adjusted Net Income Three Months Ended Three Months Ended 9/30/2
Slide 51: Reg. G
Reg. G ($ millions) Appendix Table A-9: Nine months ended 9/30/24 and 9/30/23 Free Cash Flow before Growth The following table summarizes the calculation of FCFbG and provides a reconciliation Cash provided by operating activities and Adjusted Net Income Nine Months Ended Nine Months Ended 9/30/24 9
Slide 52: Reg. G
Reg. G ($ millions except per share amounts) Appendix Table A-10: Three months ended 3/31/24 and 6/30/24 Adjusted EBITDA Reconciliation by Operating Segment and Consolidated Adjusted EPS reconciliation The following table summarizes the calculation of Adjusted EBITDA, Adjusted Net Income and Adjuste
Slide 53: Reg. G
Reg. G ($ millions except per share amounts) Appendix Table A-11: Twelve months ended 12/31/23 Adjusted EBITDA Reconciliation by Operating Segment and Consolidated Adjusted EPS reconciliation The following table summarizes the calculation of Adjusted EBITDA, Adjusted Net Income and Adjusted EPS and
Slide 54: Reg. G
Reg. G Non-GAAP Financial Measures NRG reports its financial results in accordance with the accounting principles generally accepted in the United States (GAAP) and supplements with certain non-GAAP financial measures. These measures are not recognized in accordance with GAAP and should not be viewe
Slide 55: Smart Home Performance Metrics
Smart Home Performance Metrics Definitions • New Subscribers is the aggregate number of new smart home and security subscribers originated during a given period. This metric excludes new subscribers acquired by the transfer of a service contract from one subscriber to another. • Average Monthly Subs