NRG discloses nearly $1B hit from Texas grid collapse – Utility Dive

Dive Brief:

  • NRG Energy took a $967 million hit from Winter Storm Uri, which wreaked havoc on the electric grid in Texas in February, company officials revealed Thursday in their quarterly earnings report. The storm resulted in “all-time peak demand” of 77 GW.
  • NRG is working closely with Texas legislators on proposals that could help mitigate the cost of the disaster for the power company and other key market players, Mauricio Gutierrez, NRG’s president and CEO, told analysts.
  • Houston will now be the company’s sole corporate headquarters, company executives said, with the decision stemming from the completion of NRG’s $3.6 billion acquisition of Direct Energy.

Dive Insight:

NRG’s efforts to mitigate and recoup some of its losses in the wake of Uri was a major focus of the company’s quarterly earnings call.

NRG said its $975 million loss estimate comes before income tax, with a significantly lower actual loss after several mitigation efforts are taken into account.

The company is pursuing “$275-475 million of estimated mitigants,” some of which are tied to proposals now being debated in the Texas Legislature, the company said in its first quarter earnings release.

One of the proposals the power producer is working on with state legislators would allow for the securitization of the large amounts of debt owed in the wake of the storm by large electric cooperatives, Gutierrez said.

The proposals would enable big electric cooperatives to pay down their costs incurred by the storm by charging customers, but spreading the charges — and the repayment — over decades.

That, in turn, would provide a boost to NRG, whose plants are major producers for the Texas grid and for the electric cooperatives, who buy power from the company.  

“We continue to work closely with legislators, and regulators and all market participants to introduce comprehensive solutions across the entire energy system to address issues and shortcomings that were apparent during the storm,” Gutierrez said.

The net cash flow impact from the disaster could wind up dropping to the $350-550 million range. This includes $150 million of bill credits to big commercial and industry customers that don’t have to be paid until 2022, NRG said.

NRG is also looking closely at proposals and efforts to improve communication between the major players in the Texas energy market, with electric generation companies and natural gas firms having blamed each other for supply failures that contributed to the collapse of the grid.

“One of the biggest lessons learned from this storm is how interactive and interconnected the electric and gas systems are,” Gutierrez said.

“Our entire system, including natural gas and electricity, needs to be hardened,” he told stock analysts. “The lack of communication between all market participants and stakeholders was unacceptable.”

NRG is also backing efforts being eyed by Texas legislators to harden the grid and build in more resilience in order to deal with future storms.

Gutierrez said he is supportive new rules to ensure utilities and other players prepare their systems to withstand the onslaught of severe winter storms.

“The implementation of formal winterization rules enforced through audits is something we support,” he said.

The first quarter also saw NRG complete the sale of some major power generating assets. The company has agreed to sell “4,850 MWs of fossil generating assets from its East and West regions” to Generation Bridge, an affiliate of ArcLight Capital Partners. The $760 million deal is expected to close in the fourth quarter.

And on Feb. 3, NRG wrapped a $202 million sale to Clearway Energy of its remaining 35% ownership in the Agua Caliente solar project.

NRG Energy reported a first quarter loss of $82 million, or $0.33/diluted share, with an adjusted EBITDA of $567 million.


May 9, 2021 susan ward