NRG Energy, Inc. (NRG) Q4 2022 Earnings Call Transcript

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NRG Energy, Inc. (NYSE:NRG) Q4 2022 Earnings Conference Call February 16, 2023 9:00 AM ET

Company Participants

Kevin Cole - SVP, IR

Mauricio Gutierrez - President, CEO & Director

Alberto Fornaro - EVP & CFO

Conference Call Participants

Julien Dumoulin-Smith - Bank of America Merrill Lynch

Angie Storozynski - Seaport

David Arcaro - Morgan Stanley

Steve Fleishman - Wolfe Research


Good day, and convey you for opinionated by. Welcome to nan NRG Energy Inc. Fourth Quarter 2022 Earnings Call. [Operator Instructions]. Please beryllium advised that today's convention is being recorded. I would now for illustration to manus nan convention complete to your speaker today, Kevin Cole, Head of Investor Relations.

Kevin Cole

Thank you, Josh. Good morning, and invited to NRG Energy's Fourth Quarter 2022 Earnings Call. This morning's telephone will beryllium 45 minutes successful magnitude and is being broadcast unrecorded complete nan telephone and via webcast, which tin beryllium located successful nan Investors conception of our website astatine nether Presentations and Webcasts.

Please statement that today's chat whitethorn incorporate forward-looking statements which are based upon assumptions that we judge to beryllium reasonable arsenic of this date. Actual results whitethorn disagree materially. We impulse everyone to reappraisal nan safe harbor successful today's position arsenic good arsenic nan consequence factors successful our SEC filings. We undertake nary responsibility to update these statements arsenic a consequence of early events, isolated from arsenic required by law.

In addition, we will mention to some GAAP and non-GAAP financial measures. For accusation regarding our non-GAAP financial measures and reconciliations to nan astir straight comparable GAAP measures, please mention to today's presentation. And pinch that, I'll now move nan telephone complete to Mauricio Gutierrez, NRG's President and CEO.

Mauricio Gutierrez

Thank you, Kevin. Good morning, everyone, and convey you for your liking successful NRG. I'm joined this greeting by Alberto Fornaro, Chief Financial Officer. And besides connected nan telephone and disposable for questions, we person Elizabeth Killinger, Head of Home, Rob Gaudette, Head of Business and Market Officer; and Chris Moser, our Head of Competitive Markets and Policy.

Starting connected Slide 4 pinch our cardinal messages for today's presentation. We person made important advancement successful advancing our strategical priorities successful 2022. And while our financial results were little than expected, our business is good positioned successful 2023.

Today, we are reaffirming our 2023 financial guidance ranges. The Vivint Smart Home acquisition is connected way to adjacent by nan extremity of nan first quarter. Today, we are providing further disclosures astir gross synergies to guarantee you person further devices to decently worth nan transaction.

Finally, nan halfway of NRG is strong, supported by favorable fundamentals. The acquisition of Vivint enhances our expertise to execute our free rate travel earlier maturation per stock targets.

Now turning to Slide 5 for nan financial and operational results of 2022. Beginning pinch our scorecard for nan year, we executed good crossed our strategical priorities. We delivered our 2nd consecutive twelvemonth of grounds information performance. For me, it ever starts and ends pinch nan wellbeing of our people. I want to convey everyone astatine NRG for staying focused during a challenging year.

Our unit group took deliberate actions to negociate value volatility and delivered grounds customer retention and extended nan mean word of a caller customer to 2 years. Also, our bad indebtedness remained beneath humanities levels contempt higher ostentation and tightening financial conditions. Our works operations capacity was beneath expectations, chiefly impacted by nan outage astatine [indiscernible] Paris correct earlier nan summer.

We are taking further steps to fortify our proviso and mitigate operational consequence during circumstantial conditions.

The nonstop power integration is nearing completion and connected way to present our tally complaint synergy targets successful 2023. We executed connected our trial and study programme during nan year, which culminated successful nan announcement of nan Vivint Smart Home acquisition. We besides proceed our portfolio optimization pinch 2 gigawatts of ember retirements and plus sales.

Finally, connected superior allocation, we executed $645 cardinal of stock repurchases retired of nan $1 cardinal program. We will execute nan remaining magnitude erstwhile rate is disposable and erstwhile we person afloat visibility to execute our targeted in installments metrics.

We besides accrued our dividend by 8%. Since it was reestablished successful 2020, we person raised our dividend much than 25% and returned almost $1 cardinal to shareholders this way. I position our dividend arsenic an integral portion of our return connected superior policy.

Moving to financial results. We delivered $435 cardinal of adjusted EBITDA successful nan 4th fourth bringing our 2022 afloat twelvemonth consequence to $1.754 billion, beneath expectations. For nan 4th quarter, we highlighted successful our past net telephone that reaching nan bottommost extremity of nan financial guidance included a small complete $100 cardinal of optimization opportunities. Specifically, making our earthy state units disposable to seizure worth during periods of precocious powerfulness prices.

This opportunity did not materialize arsenic mild upwind during nan quarter, nan powerfulness value is overmuch little than expected. We were besides impacted by wintertime large wind Elliott successful precocious December chiefly from PJM capacity capability payments, wherever we consequence adjusted downward our prize payments pending further accusation from PJM. Alberto will supply much accusation connected our financial results.

Turning to Slide 6, our 2023 outlook. We are reaffirming our 2023 financial guidance. We spot improving fundamentals successful our business, including much unchangeable proviso costs driven by little earthy state prices, little proviso concatenation issues for ember and chemicals, much favorable unit marketplace conditions successful nan East and economical resilience successful our customer base.

In nan East, we spot opportunity for customer maturation fixed rising rates from nationalist utilities, enabling competitory retailers to show nan worth of our services to customers connected an adjacent playing field.

In Texas, nan Public Utility Commission projected marketplace creation improvements that will consequence successful much dispatchable procreation and greater reliability of nan craft grid. I want to commend nan Texas Governor's office, legislature, and for taking swift action to heighten grid resilience while ensuring nan integrity of nan competitory market.

Also, unit title will unfastened successful , Texas successful nan fall, a metropolis pinch much than 100,000 electrical customers. We look guardant to having nan opportunity to gain and service customers successful that area later this year.

In 2023, we will proceed executing connected our strategical priorities focusing connected strengthening our halfway business while increasing ideation products and services, arsenic you tin spot connected nan right-hand broadside of nan slide. We proceed our attraction connected optimizing our portfolio to amended service our customers. To that effect, we are targeting $500 cardinal successful nett rate proceeds from plus income by nan extremity of nan year.

Having completed our trial and study shape successful 2022, we are now focused connected nan adjacent shape of our strategical roadworthy map, increasing nan business. This includes completing nan nonstop power integration and expanding nan number of customers that acquisition aggregate products from us.

Today, we person sold much than 1 merchandise to 15% of our customers. We are making bully advancement connected cross-selling and will supply further disclosures arsenic we merge Vivint. To support this growth, we will proceed to fortify our powerfulness proviso by expanding our capital-light PPA programme for renewables to dispatchable procreation astatine immoderate of our existing sites.

Finally, we are connected way to adjacent dividend successful nan first 4th pinch each regulatory approvals received and nary shareholder required. We expect to adjacent financing soon and person begun time 1 integration efforts.

I want to supply further insights connected really Vivint enhances our halfway power level and brings further capabilities astatine standard connected Slide 7. Vivint is simply a leader successful smart location solutions pinch astir 2 cardinal highly engaged customers pinch an mean life of 9 years. Their strategy brings together automation, information and residential star nether a azygous proprietary exertion and information platform. This business is highly complementary to our halfway power offering. We will usage their smart location ecosystem to link each our presently isolated products and services, including greenish power, batteries, EVs and different products into a seamless acquisition that is highly engaging and personalized.

This engagement will supply tremendous insights into pricing, customer experience, a caller solutions that create greater marque loyalty and longer mean customer lifetime. As we leverage nan smart location ecosystem, we expect to optimize power request wrong nan home, providing valuable services to nan wholesale markets.

In different words, NRG will beryllium nan span betwixt nan location and power markets pinch a unsocial expertise to optimize and monetize worth betwixt nan two. Vivint will besides complement our existing power merchandise offerings and income channels by adding location automation, information and residential star astatine standard including a proven acquisition motor pinch a coagulated way grounds of maturation and astir 2 cardinal customers.

On nan right-hand broadside of nan descent is nan virtuous rhythm that we person discussed successful nan past. By leveraging our existing platform, we tin entree meaningful costs synergies. This economical advantage, coupled pinch amended insights and much personalization, resulting successful a amended acquisition for our customers. All of this translates into a deeper knowing of really consumers interact pinch their homes, further separator and amended retention connected our halfway products and past nan rhythm repeats arsenic we grow, creating a much valuable business.

Now I want to disclose nan worth of opportunities that this operation represents connected Slide 8. We person identified 3 main areas of value, increasing and optimizing our web of customers, leveraging nan level to execute costs synergies and improving nan worth of our halfway power customers.

With respect to nan maturation opportunity, we are targeting $300 cardinal of incremental free rate travel earlier maturation by 2025. We are encouraged by nan preliminary activity we person done connected some sets of customers and look guardant to afloat optimize erstwhile nan transaction closes.

As you tin spot connected nan left-hand broadside of nan slide, location is immoderate overlap successful our halfway power markets, but it's comparatively small. This is important because Vivint already has teams fresh to beryllium deployed successful our halfway power markets and because nan addressable marketplace opportunity for caller customers will beryllium moreover greater.

We expect to execute this maturation target successful respective ways arsenic we target Tier 1 customers which we specify arsenic single-family homeowners pinch precocious in installments scores wrong prime municipality areas. We will attraction connected 2 contiguous and actionable opportunities. One, cross-selling existing products into our mixed customer web of 7.5 cardinal customers; two, trading bundle offers to caller customers extracurricular of our web representing 15 cardinal imaginable households.

In addition, we will turn dividends organically successful statement pinch humanities levels. These opportunities will beryllium enhanced by optimizing our mixed income channels and champion practices, leveraging nan spot of some NRG and Vivint.

The superior required to execute this maturation is expected to scope $500 cardinal to $600 cardinal complete nan adjacent 3 years.

For gross synergies, we person identified $100 cardinal to beryllium achieved by 2025, chiefly from combining 2 nationalist companies. For these, we expect $160 cardinal of onetime costs to achieve.

Finally, connected our existing halfway power customers, cross-selling intends we tin person nonstop entree to our customers successful nan East and nan opportunity to grow separator and widen customer life value. In total, we spot a $400 cardinal opportunity by '25 and a larger opportunity beyond fixed nan size of nan smart location addressable market.

I americium assured successful our expertise to present these targets arsenic we person a beardown history of integration and synergy achievement. Just to punctual you, since 2016, we person achieved important worth connected integration synergies, costs reductions and enhancement programs. This effort will beryllium led by nan aforesaid squad arsenic nan translator scheme and nonstop power integration. I look guardant to providing you a much broad update later this twelvemonth during our Investor Day.

Now turning to Slide 9. We want to springiness you an update connected our pro forma outlook and really nan dividend transaction supports our maturation targets. On nan left-hand broadside of nan descent is simply a free rate travel earlier maturation pro forma locomotion from 2023 to 2025, including nan expected maturation publication from Vivint that we conscionable discussed connected nan erstwhile slide.

This illustrates nan net powerfulness of nan institution and will beryllium further unpacked erstwhile nan transaction is closed. On nan right-hand broadside of nan descent is nan expected superior allocation done 2025. As you tin see, nan mixed level provides nan financial elasticity to person a balanced attack betwixt maturation and return of superior while maintaining a beardown equilibrium sheet.

The acquisition of Vivint and much specifically, nan maturation opportunity that it represents will amended support our per stock maturation targets while materially high-grading our net value and customer life value. So pinch that, I will walk it complete to Alberto for nan financial review.

Alberto Fornaro

Thank you, Mauricio. I will now move to Slide 11 for a reappraisal of 2022 results. During our 3rd 4th call, we stated that higher profitability successful nan 4th fourth would alteration america to present an adjusted EBITDA astatine nan bottommost of our 2022 afloat twelvemonth guidance range. To recognize this, we mentioned that nan higher profitability was partially related to security proceeds for Limestone Unit 1 and Paris [indiscernible], further synergies and different costs reductions and nan remaining from nan opportunity to make further gross separator from nan planned utilization of our state fleet.

Our forecasting process is based connected guardant marketplace curves and astatine nan time, nan guardant curves included higher powerfulness prices for nan 4th fourth which would make nan planned utilization of nan state fleet economical. Unfortunately, prices successful nan 4th fourth fell importantly beneath short of expectation.

On highest prices successful Texas were 45% beneath expectation, resulting successful little profitability from our procreation fleet. Near nan extremity of December, wintertime large wind Elliott brought crisp simplification successful somesthesia for a short time, December 20-24. During nan storm, flood surge was faster and importantly higher astatine nan precocious level of nan expected scope successful some ERCOT and PJM for respective hours. This drove spikes successful powerfulness prices.

Our state procreation fleet successful Texas, which was mostly unutilized successful nan 4th fourth was called successful to action. Given nan important spread betwixt existent and expected load, nan fleet was incapable to wholly lucifer nan further demand. As a result, we portrayed further powerfulness successful nan marketplace astatine higher prices.

In nan East, higher load led to a PJM reliability halfway for our units without immoderate notice. Several of our larger units were reserved started nan arena and person longer startup times, which led to capacity performance, a antagonistic effect fixed nan deficiency of notice.

The lower-than-expected prices astatine nan opening of nan 4th coupled pinch nan effect of nan wintertime large wind drove unfavorable variances to our EBITDA expectation. The 4th fourth adjusted EBITDA of $435 cardinal was beneath our implied guidance by $196 million. We estimated that nan little prices knowledgeable for astir of Q4 reduced nan expected publication of our state procreation by astir $115 million. We besides estimated a wintertime large wind Elliott caused astir $80 cardinal successful antagonistic impact. This was chiefly a consequence of nan nett effect of capacity capability successful PJM arsenic good arsenic accrued powerfulness purchases successful ERCOT that were partially offset by an expected capacity capability bonds for nan [indiscernible] plant.

When we look astatine nan afloat twelvemonth adjusted EBITDA of $1.754 billion, fell short of nan midpoint of guidance astatine nan opening of 2022 by $346 million. There were 2 main drivers that impacted this result. First, nan extended outage astatine Parish [indiscernible] pinch $220 cardinal of mislaid separator that was partially offset by business interruption proceeds of $52 million; and second, nan estimated $80 cardinal effect of wintertime large wind Elliott.

There was besides an incremental $44 cardinal of pension expenses resulting from reduced prices of financial assets successful nan 2nd half of nan twelvemonth and immoderate accrued O&M expenses. Additional drivers see $15 cardinal of reduced net for nan divestiture of Watson and $16 cardinal of maturation expenses.

In 2022, free rate travel earlier maturation came successful astatine $568 million, pinch nan shortage to our 3rd 4th guidance driven chiefly by nan shortfall successful EBITDA and 2 moving superior drivers. First, that nan security proceeds for Parish and Limestone that were forecasted for 2022 were accrued successful nan 4th fourth but received successful January 2023, resulting astatine nan extremity of nan twelvemonth successful a $100 cardinal summation successful receivables.

Second moving superior arsenic an further antagonistic effect owed to falling state prices successful nan 4th which much quickly impacted nan relationship payables than nan relationship received. Turning our attraction to 2023, we are reaffirming our afloat twelvemonth guidance for some adjusted EBITDA and free rate travel earlier growth. Before we reappraisal nan 2023 rate disposable for allocation, I would for illustration to supply updates pinch wintertime large wind Yuri and nonstop power synergies.

The 2021 nett effect of wintertime large wind Yuri was $380 million. During 2022, we were capable to summation mitigant proceeds and reduced nan full nett costs to astir $259 million. For early years, location will still beryllium immoderate costs recoveries associated pinch Yuri, but wrong nan magnitude to beryllium immaterial, and we will nary longer update to these fees.

For nonstop power synergies, we achieved a full of $84 cardinal of further synergies successful 2022 pinch nan related integration costs of $74 cardinal bringing nan full synergy achieved from nan acquisition to $259 million. We are assured that we tin execute nan remaining synergies, which are related to circumstantial projects that will beryllium completed successful 2023. Therefore, we will nary longer supply quarterly updates connected our nonstop power synergy process -- progress, but we will supply a last summary astatine year-end.

Now turning to Slide 12 for a little update connected our 2023 superior allocation. Moving near to right, pinch bluish shading indicating updates. Excess rate from 2022 is adjacent to $40 cardinal astatine year-end, positive $209 cardinal successful proceeds from nan income of Astoria which totals $249 cardinal successful nan bottommost left.

Next, for Vivint, we proceed to utilize its 2022 pro forma afloat twelvemonth figures provided successful our December call. Full twelvemonth free rate travel beneath maturation of $1.73 cardinal includes power stand-alone guidance of $1.62 cardinal positive pro forma $110 cardinal for EBIT. This includes nan expected effect from indebtedness financing. In addition, we included a $300 cardinal of rate disposable from Vivint.

Next [indiscernible], we are targeting $500 cardinal of leverage neutral nett inflow from plus sales. The adjacent investments are higher by $29 cardinal pursuing early realization of antecedently included wintertime large wind Yuri [indiscernible] successful 2022. Now moving to nan acold correct bar, we expect a full of $434 cardinal disposable for early allocation. This will money nan remaining stock repurchase programme upon afloat visibility of nan achieving of our 2023 target in installments metrics, which are elaborate connected nan adjacent slide.

Now quickly turning to Slide 13. We stay committed to a beardown equilibrium sheet. This descent has not changed since our past update. We are focused connected achieving 2023 target in installments metrics and finance people in installments metrics by precocious 2025 to 2026 done some indebtedness simplification and growth. With that, I'll move nan telephone backmost complete to Mauricio.

Mauricio Gutierrez

Thank you, Alberto. On Slide 15, I want to concisely outline our 2023 priorities and expectations. First and foremost is delivering connected our halfway power business goals. We will proceed to fortify our integrated level and further optimize our portfolio. Second, we are focused connected closing nan dividend acquisition, integrating nan business and delivering connected our synergy commitments. Finally, we will enactment disciplined connected our superior allocation scheme arsenic we execute connected our strategical priorities.

I americium excited astir this adjacent shape of our improvement and look guardant to providing you a broad update astatine our Investor Day later this year. So pinch that, I want to convey you for your clip and liking successful NRG. Josh, we're fresh to unfastened nan statement for questions.

Question-and-Answer Session


[Operator Instructions]. Our first mobility comes from Julien Dumoulin-Smith pinch Bank of America.

Julien Dumoulin-Smith

Listen, I wanted to talk to you guys astir nan '25 outlook and conscionable explain this. As it pertains to nan original speech around, telephone it, $12.50 a stock of , is this an implicit summation successful expectations aliases astir successful nan aforesaid ballpark? As I look astatine benignant of what's implied connected nan numerator and denominator, seems for illustration location could beryllium a flimsy summation there. I conscionable want to travel backmost and explain that arsenic champion you guys spot it. And I person a speedy follow-up.

Mauricio Gutierrez

Yes. I mean fto maine spot if I understand nan question. The pro forma that we show present could root successful statement pinch nan free rate travel earlier maturation targets that we provided you astatine Investor Day of 15% to 20%. So arsenic you mentioned, what Vivint does is complements our stock buyback and superior allocation programme pinch a very charismatic maturation motor that we articulated successful nan telephone today.

Now, nan Vivint transaction, I'm expecting that it's going to nutrient $400 cardinal of free rate travel earlier growth, connected apical of nan 2023 pro forma aliases guidance for NRG. So erstwhile I deliberation astir nan 2025 pro forma, I will opportunity that I'm very comfortable pinch nan power pro forma now that we person communicated nan publication of dividend, I will show you that we person beautiful bully statement of show to present connected that committedness of 15% to 20% growth.

Julien Dumoulin-Smith

Excellent. And conscionable clarifying this. I cognize you discussed an Analyst Day here, would you expect to rotation that 25 guardant astatine nan clip of nan Analyst Day? Or could we get thing sooner pinch nan adjacent and past considering that closed -- conscionable ace quick, if I can, we've seen immoderate litigation retired location astir and what is possible, if you will, successful caller days. Can you explain really that whitethorn beryllium impacting nan process itself astatine this point? Just if you don't mind for a moment?

Mauricio Gutierrez

Yes. So I deliberation what you should expect is astatine Investor Day, we'll supply you nan 5-year scheme that will spell beyond 2025. I deliberation that's nan correct clip to articulate it obviously, nan adjacent and successful consequent weeks aft nan adjacent and astir apt connected nan net call, we will supply further clarity successful 2023 pinch respect to event, right? So pinch respect to nan litigation that you're mentioning connected nan , we really person looked astatine that, evaluated it, and we spot very small consequence successful position of closing nan transaction. So support successful mind that this is not only for our industry, this is for each SPAC crossed each industry. And I spot this much arsenic conscionable a cleanable of process than thing else. So nan consequence of impacting nan closing of nan transaction, I would say, is minimal.


Our adjacent mobility comes from Angie Storozynski pinch Seaport.

Angie Storozynski

So possibly first connected nan '23 guidance. I mean it seems for illustration it's a beautiful bully setup for nan year. I mean powerfulness prices person fallen, you should person an advantage pinch gaining marketplace stock connected nan unit side, particularly successful nan East, fixed nan illness successful powerfulness prices and earthy state prices, there's been an betterment successful moving capital, location is nan costs to switch nan powerfulness for nan WA Parish outage should person travel down, and yet you kept nan guidance range. So what's nan offset to these affirmative drivers?

Mauricio Gutierrez

Yes. No, Angie, I mean I'm gladsome that you went down nan database because erstwhile I deliberation astir 2023, I would opportunity that it's much blimpish than we person did successful 2022. Not only from what we control. So if you deliberation astir nan characteristics of our plans, nan assumptions that we usage successful our forecast are much blimpish we person besides -- retrieve now this is nan 2nd twelvemonth that we person accrued attraction CapEx astir our plans. So we expect greater reliability connected them. And location is simply a batch of tailwinds connected our guidance.

You already mentioned nan dynamics successful nan East wherever prices for nan default work inferior providers are overmuch higher, and I deliberation we're going to person a awesome opportunity to summation marketplace share. With nan falling state prices, that creates really bully situation for america for managing our unit margin. So each of this is positive.

Now, let's conscionable -- it's only February, right? So I want to make judge that we spot astatine slightest a mates of months, and we person greater visibility connected nan remainder of nan twelvemonth earlier we tin supply you further adjustments. But I deliberation it's adjacent to opportunity that I consciousness very assured that we tin execute our guidance and possibly we are proceeding connected nan blimpish broadside pinch nan number. But I deliberation it is -- I deliberation it's prudent fixed nan type of volatility and utmost upwind that we person seen successful nan past mates of years.

Angie Storozynski

That's good, particularly aft this full year. Okay. And past connected nan PJM capacity penalties. So it's my knowing that nan disclosures that nan procreation companies were provided by PJM connected Slide 8 only talked astir penalties. So immoderate benignant of prize capacity payments haven't been disclosed aliases calculated. So I cognize that, that's a '22 issue. But conscionable talk to america astir really you accounted for those offsets to nan penalties connected nan capacity side.

Mauricio Gutierrez

Sure. I'll fto Alberto cover.

Alberto Fornaro

Yes. No, I mean it is -- from nan punishment side, it is comparatively elemental because we person considered based connected our record, what is nan imaginable penalties that they tin [indiscernible] successful to account. On nan prize side, location is simply a batch of variables, including imaginable bankruptcy that tin alteration nan magnitude that will beryllium distributed. And therefore, what we person done pinch nan constricted accusation available, we person estimated what is nan champion lawsuit scenario, nan worst-case script and we person chosen a level we are comfortable. And therefore, we have, astatine nan extremity of nan day, consequence adjusted nan prize for -- that we could get astatine nan extremity of this process.

We will cognize much successful nan successful nan adjacent months, but we are comfortable pinch what we person done.

Mauricio Gutierrez

Yes. So I deliberation it's adjacent to opportunity that penalties -- we person taken each of that into information and bonuses, we request much accusation from PJM. So we person consequence adjusted down for that.

Angie Storozynski

Okay. And past lastly, truthful erstwhile you announced nan event, location was a scheme to execute connected stock buybacks a beautiful meaningful $360 million. I mean, looking astatine nan stock count, you haven't done it. I understand that location is simply a scheme for '23 to decorativeness that $1 cardinal of nan stock buyback allocation. So conscionable talk to maine astir nan timing, why it hasn't happened yet. Were you waiting for nan proceeds from Astoria? Is it somewhat of a reflection of nan anemic free rate travel procreation for '22? And again, conscionable astir about erstwhile we should expect those buybacks to happen.

Mauricio Gutierrez

Yes. No, I mean that's correct. So my anticipation is that it will hap this twelvemonth and evidently being very accordant pinch our superior allocation principles, we want to attraction first connected achieving our in installments metrics and past we will -- erstwhile we person nan visibility successful position of achieving that and obviously, arsenic we get rate proceeds successful nan doorway passim nan year, we will beryllium executing connected nan stock repurchases. So my committedness to everybody is that we will execute them, but we request to person first assurance is that we person -- that we meet our committedness connected in installments metrics and that we person nan rate available. So that's really we're reasoning astir it.

Angie Storozynski

So it's not for illustration nan truth that you deferred nan buyback -- it's successful nary measurement does that trim nan magnitude of financing that you will request to raise for nan Vivint transaction.

Mauricio Gutierrez



Our adjacent mobility comes from David Arcaro pinch Morgan Stanley.

David Arcaro

I was wondering if you could elaborate connected what assets mightiness beryllium considered for waste and what nan imaginable timing mightiness look for illustration successful position of executing immoderate processes related to that?

Mauricio Gutierrez

Yes, David. So arsenic you know, we really person been optimizing our portfolio for a number of years. I deliberation we person a beautiful bully way grounds connected doing that. And nan measurement I deliberation astir it is you person halfway assets and non-core assets, right? So halfway assets are immoderate helps america champion service our customers. And if location is an plus that doesn't do that function, past it becomes a non-core asset, and we'll look astatine monetizing that.

There is simply a 2nd group of things that -- if location is an plus that is much valuable successful personification else's business, we will decidedly return a look astatine that and measure each nan options. So what I tin show you is, this is an ongoing process. We sold and monetized immoderate assets past year. We're going to do that. What I wanted coming was to supply you much specificity astir nan magnitude that we are targeting and that this will beryllium executed passim 2023. In position of timing, obviously, these will require 2 group coming to an statement and -- but we will beryllium updating you arsenic soon arsenic we person disposable information.

David Arcaro

Okay. That's helpful. And past I was wondering if you could speak a spot to conscionable fleet reliability and resilience here. Wondering -- conscionable if you could talk to nan strategy to amended nan consequence floor plan of nan business during utmost power and acold events. Are location further investments that you could make successful your fleet to amended their resilience aliases much you could do to beef up nan proviso broadside of nan equation?

Mauricio Gutierrez

Yes, David. So erstwhile you deliberation astir nan reliability and resiliency, I really -- if you return a measurement back, and you deliberation astir our proviso strategy to service our unit loan, I deliberation astir it successful 3 large buckets. The first 1 is nan procreation that we own, nan 2nd 1 is medium-term PPAs and past nan 3rd 1 is obviously, you complement that pinch marketplace purchases.

Today, we are astir 50% of nan megawatts that we serve, we proviso pinch our ain generation, 50% pinch third-party either devices aliases purchases. So what we person done connected nan -- connected our ain procreation is twofold. Number one, we person been a small spot much blimpish erstwhile we tally our forecast and what we usage to hedge our node successful position of scheme characteristics and that gives america a small spot much push connected truthful we're self-insuring.

The 2nd point is we person really invested further attraction CapEx to summation nan reliability connected nan units, specifically successful areas wherever we person seen issues during scarcity conditions. So those 2 things really mitigate what I described arsenic nan operational consequence connected our units.

The different tool, we really waste and acquisition these operational consequence aliases counterparty risk, in installments risk. So while it's possibly much firmer successful position of nan megawatts, it besides -- we person to show nan wellness of nan entities that we're transacting with. So what I for illustration astir this attack is that we're diversifying our consequence that is not a all-generation, all-operational risk. So we really diversify nan risk. And this 1 was 1 of nan large lessons during wintertime large wind Yuri. So I consciousness very comfortable nan consequence accommodation that we person made.

And past lastly, successful position of hedging our loans, we are being a small spot much conservative. So we're leaning possibly longer than we person done successful nan past and to make judge that we negociate immoderate of nan scarcity periods wherever we spot higher load. But obviously, you cannot derisk wholly nan business because it would beryllium costs prohibitive. So we've been very, very intentional and very thoughtful about.


Our last mobility comes from Steve Fleishman pinch Wolfe Research.

Steven Fleishman

I admit nan time. Just a mobility connected nan 2023 benignant of guidelines pre-Vivint, what are you assuming successful there, I guess, obviously, you're expecting a large betterment from '22 and immoderate of nan issues, conscionable but what are you assuming successful location for outages, immoderate lingering outages and past nan related security money? And past besides are you including immoderate plus waste gains aliases losses successful nan guidance for '23? I deliberation you've sold Astoria already astatine a decent price. Can you talk astir that?

Mauricio Gutierrez

Yes. So we already sold Astoria. And fto maine conscionable springiness you my position connected nan 2023 guidance, which I started talking to and astir it, and past I'll walk it connected to Alberto to show you precisely what's nan amount. But nan measurement to deliberation astir nan 2023 velocity is much blimpish forecast that we person done successful nan past, some from an operational productivities of nan powerfulness plants, really we're managing our unit load but besides because of nan dynamics that existed successful 2022 that don't beryllium today, for illustration if you remember, we person nan proviso concatenation issues connected ember and chemicals. That has abated for nan astir part.

We are falling to unchangeable earthy state prices now that allows america to amended negociate our unit margins. We person an situation successful nan East wherever we consciousness very comfortable that we tin summation marketplace stock connected our unit business. So I deliberation successful general, I would opportunity that 2023 is simply a batch much conservative. The guidance is correct connected apical of what we provided to you backmost astatine nan Investor Day erstwhile you set for plus income which we provided you nan span backmost then. So actually, successful nan Investor Day deck, you person nan ins and outs, fixed nan portfolio optimization that we person done. And we're virtually connected apical of wherever we should person been truthful -- 2 things. One, I consciousness very assured that this is successful statement pinch what we provided you. And two, that is taking -- we're taking a small spot much of our blimpish attack successful truthful nan number.

Obviously, we will update you passim nan year. But conscionable support successful mind that we're conscionable astatine nan opening of nan year. But I don't cognize if location is thing other that we request to add.

Steven Fleishman

I mean Parish, part, for illustration outage costs security and plus sales. Could you place what's successful nan guidance for those?

Mauricio Gutierrez

Yes. So successful nan guidance, obviously, we person nan Parish that is not successful nan first half of nan twelvemonth because it's connected average. What I will show you successful Parish and I deliberation that's astir apt nan largest risk. The advancement that we person made is beautiful significant. As a matter of fact, I deliberation conscionable past week, we've had nan generator now connected tract and has been listed and put successful nan deck. So we're making really, really bully advancement connected what I'm seeing today, I'm assured that we will travel backmost connected time.

Obviously, nan commercialized squad is monitoring very intimately that pinch nan plan. If location is immoderate delays aliases location is immoderate acceleration that we either mitigate nan consequence successful nan marketplace aliases that we return advantage if it comes successful earlier. But successful fact, that it's already embedded successful guidance but Alberto?

Alberto Fornaro

Yes. And conscionable to beryllium a small spot much specific, Steve, regarding Parish outage, we said that location is nary effect successful 2023. And nan logic is because of nan effect of nan readiness of nan works was matched by business insurance. We person received a small spot much than nan business security successful 2022. However, we are recalculating nan margin. And net-net, it's still wholly hedged by -- nan nonaccomplishment separator is hedged by what we're going to person arsenic insurance, and therefore, nary alteration compared to nan anterior scenario, which was successful nan 3rd 4th erstwhile we provided nan guidance.

Steven Fleishman

And past plus sales?

Alberto Fornaro

The upsell, we person factored Astoria fundamentally which happened successful January. And we are -- for nan moment, until location are news, obviously, we are not adjusting.

Mauricio Gutierrez

But it's already -- Astoria, it has already been taken into consideration.

Alberto Fornaro

Astoria has been considered because it was a -- should person happened astatine nan extremity of 2022. It happened conscionable a fewer days aft '23 and we took it into information successful our guidance.

Steven Fleishman

Okay. And really overmuch is that?

Alberto Fornaro

It's reasonably mini astatine nan afloat impact. Consider that we person a instrumentality for nan remaining short period. So it's very, very small.

Steven Fleishman

Okay. Great. Appreciate it. So it's really nan halfway business, yes.


Thank you. This concludes nan Q&A session. I'd now for illustration to move nan telephone backmost complete to Mauricio Gutierrez for immoderate closing remarks.

Mauricio Gutierrez

Thank you. Thank you for your liking successful NRG, and I look guardant to updating you erstwhile we adjacent nan transaction connected Vivint. Thank you.


Thank you. Ladies and gentlemen, convey you for your information successful today's conference. This concludes nan program.

Editor: Naga

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