Monday, July 23, 2018

NRG CEO Hopeful About ZEC Suits, Company Future

By Peter Key

NRG Energy CEO Mauricio Gutierrez said Thursday that his company is optimistic that FERC and U.S. courts will find that the zero-emission credits (ZECs) being issued to nuclear generators by two states are harmful to the market and consumers.

Mauricio Gutierrez NRG zero-emission credits ZECs

NRG Energy CEO Mauricio Gutierrez | NRG

Speaking during NRG’s second-quarter earnings conference call, Gutierrez was also bullish on the company’s future as a power generator and retailer, in part because of the location of its generation assets.

Additionally, he said that although the asset sales included in a transformation plan launched last month may not be completed by the end of the year, he expects the company will be able to announce them all by then.

NRG earned $99 million ($0.36/share) from continuing operations during the quarter, after losing $163 million ($0.25/share) a year earlier. That beat the Zacks consensus analysts’ estimate of a 5-cent/share loss. Both sets of figures excluded the results of GenOn Energy, which filed for bankruptcy in June and will become the property of its senior noteholders.

NRG’s revenue was $2.7 billion in the most recent quarter, up from $2.25 billion a year ago, but short of the consensus estimate of $3.03 billion.

The company is a plaintiff in lawsuits against ZEC programs in Illinois and New York, both of which were dismissed last month. (See Illinois Zero-Emission Credit Suit Dismissed and New York ZEC Suit Dismissed.) The subsidies also prompted requests for FERC to extend the minimum offer price rule (MOPR) to existing units.

Initial briefs are due Aug. 28 in the plaintiffs’ appeal of the ruling on the Illinois ZECs case, which is pending before the 7th U.S. Circuit Court of Appeals. The plaintiffs plan to ask the 2nd Circuit to review the New York ruling.

Mauricio Gutierrez NRG zero-emission credits ZECs

NRG Energy’s Princeton, N.J. headquarters | NRG

When asked why he was so confident that the cases will be ultimately decided in NRG’s favor, Gutierrez said, “We think that we have a strong case, and with new FERC commissioners coming in, I think there will be a fresh look, a fresh perspective on the validity of our case and the potential impact that these out-of-market subsidies can have in the competitive markets.”

Another analyst on the call pointed to continued renewable subsidies while, outside Texas, load growth in NRG’s markets is flat. He asked if those developments concerned Gutierrez, as NRG will be left with a generation portfolio without renewables once the company finishes its planned asset sales.

Gutierrez said NRG would have a chance to rebalance its portfolio once its transformation process is completed and that its “generation is within the load pocket of the Chicago area, New York City or southwest Connecticut, and that these assets benefit significantly from capacity prices that have been very robust and continue to be robust as far as 2020 [or] 2021.”

As for NRG’s retail business, Guiterrez said the company has looked at best practices in other retail industries for ideas and concluded that it should build up its information technology infrastructure and analytics.

“So the way I characterize this effort is, in the last three years, we grew our business roughly by $200 million,” he said. “What we’re saying is that in the next three years, we are going to grow it by $200 million.”

[Editor’s note: Quotes from conference call courtesy of Seeking Alpha.]