NRG CEO Says Political Turnover Favors Its 1.2-Gigawatt Texas Data-Center Project
Management targets a year-end customer agreement while a $4 billion asset-sale deal supports an extra $1 billion in planned buybacks.
NRG Energy, which generates and sells energy and provides smart-home services, expects a customer agreement for its 1.2-gigawatt Texas data-center power project by year-end, President and Chief Executive Officer Robert Gaudette said on Monday's earnings call, arguing that political turnover has strengthened the project's prospects. NRG also agreed to a $4 billion sale of generation assets to LS Power and increased planned buybacks by $1 billion.
New Demand Gets New Generation
Gaudette's argument rests on the project's design: build generating capacity alongside the electricity demand from a data center, backed by a long-term customer commitment. NRG discussed the initial Texas project in August and is pursuing further opportunities with the same customer.
Asked whether political turnover threatened the schedule, Gaudette said he had spoken with the customer since the elections. “This project is going to happen,” he said. Management has agreed on terms and is working through the processes needed to approve the agreement, he said.
The assurance answers a concern already circulating among investors. Analysts at BNP Paribas and Morgan Stanley had cited opposition to data centers and regulatory directives in Pennsylvania and Texas as possible obstacles to timing. Other firms had lowered price targets while pointing to policy risk and uncertainty about contracts.
Gaudette argued that incoming elected officials want communities to have a say, want to protect water supplies and want to avoid higher electricity bills. He said NRG would pursue projects in communities that welcome the investment, working with customers that understand those requirements.
Permits, Partners And Fixed Payments
An analyst from Morgan Stanley asked whether Texas's process for reviewing new electricity demand, or other permitting delays, could affect the project. Gaudette said NRG and its customer had built permitting requirements and the possible outcomes of that review into their work. Asked by an analyst from Citi whether regulatory milestones stood in the way of signing a commercial agreement, he answered, “No.”
Chief Financial Officer Bruce said NRG's 2026 capital plan allocates $721 million to the initial project. He is negotiating with potential financing partners for that development and the broader project pipeline; he ruled out issuing equity as the funding approach.
Bruce ideally wants a financing partner lined up alongside the year-end customer agreement. Negotiations could extend into the first quarter of 2027, he said, although he would not expect them to run far into that quarter.
Customer interest now exceeds the turbine reservations and construction capacity in NRG's development agreement with GE Vernova and Kiewit, Gaudette said. Rather than sell those reservations, NRG wants to use them for generating projects under contracts lasting 15 to 20 years and exceeding its investment-return target.
“We're looking to put them to work for long-term contracts,” Gaudette said. He expects future agreements to follow the initial project's core structure: substantial fixed payments for available generating capacity, with location-specific details but unchanged required returns.
Selling Plants, Expanding Buybacks
The LS Power agreement covers six facilities with just under 4.9 gigawatts of capacity in New York, Texas and New England. NRG bought those assets as part of the LS Power acquisition completed earlier this year; it will retain the entire PJM generation portfolio and Sea Power.
“We were not pursuing a sale,” Gaudette said. He described LS Power's approach as unsolicited, with a price equivalent to eight times the assets' expected 2027 adjusted earnings before interest, taxes, depreciation and amortization.
NRG plans $3 billion of share repurchases across 2026 and 2027, including the extra $1 billion it intends to begin buying back in 2026, before the asset sale closes. Management expects the sale to close in the second quarter of 2027.
Of the expected proceeds, NRG plans to use $2 billion to reduce debt and $1 billion to support the additional repurchases. The remaining $1 billion would provide cash for contracted growth opportunities or further debt reduction.
Gaudette put Jack County's implied sale value at approximately $1,400 per kilowatt, compared with just above $1,000 per kilowatt for the 1.5 gigawatts of new natural-gas generation NRG is developing in Texas. Management's plan is to sell selected existing assets while continuing to build new capacity.
The Financial Plan Stands Apart
The data-center projects are additions to NRG's existing financial ambitions, rather than requirements for meeting them. Bruce said the long-term plan needs no contribution from the initial Texas project, 2 gigawatts of potential PJM upgrades or other development opportunities.
NRG's underlying business spans electricity and natural-gas sales, generation and Vivint Smart Home's security and automation services. It serves residential, commercial and industrial customers as well as data centers and wholesale buyers; across energy and smart home, management said it serves 8 million customers.
For the third quarter, Bruce reported $2 billion in adjusted earnings before interest, taxes, depreciation and amortization, $1.2 billion in free cash flow before growth and adjusted earnings of $4.68 per share. All four key financial metrics increased at least 50% from a year earlier. Smart-home adjusted earnings before interest, taxes, depreciation and amortization rose 14%.
NRG reaffirmed its 2026 financial guidance, although Bruce expects adjusted earnings before interest, taxes, depreciation and amortization to finish slightly below the midpoint. Texas wholesale power prices averaged nearly 40% below the original planning assumption year to date.
For 2027, management introduced midpoints of $5.75 billion in adjusted earnings before interest, taxes, depreciation and amortization, $3.15 billion in free cash flow before growth and $9.05 in adjusted earnings per share. Those forecasts exclude the pending asset sale. It also reaffirmed expected compound annual growth of more than 14% in adjusted earnings per share and free cash flow before growth per share through 2030, applying across the full planning period rather than as a minimum for each year.
The next project milestone is the definitive customer agreement management targets by year-end. Bruce's financing negotiations could run into the first quarter of 2027.
Sources
- NRG Energy to sell six gas generation assets to LS Power in $4B deal (NRG:NYSE) | Seeking Alpha — seekingalpha.com
- NRG Energy (NRG) Beats Q3 Earnings and Revenue Estimates — Yahoo Finance
- NRG Energy Reports Third Quarter 2026 Results, Reaffirms 2026 Financial Guidance, and Initiates 2027 Guidance – Company Announcement - FT.com — Financial Times
- NRG Energy Non-GAAP EPS of $4.68 beats by $1.65, revenue of $9.47B beats by $180M (NRG:NYSE) | Seeking Alpha — seekingalpha.com
- NRG Energy (NRG) Stock Sees Modest Fair Value Cut As Analyst Targets Reset — Yahoo Finance
