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DATE

Nov. 6, 2025 at 9 a.m. ET

CALL PARTICIPANTS

  • Chairman — Larry Coben
  • Chief Financial Officer — Bruce Chung
  • President and Chief Executive Officer — Brendan Mulhern

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TAKEAWAYS

  • Adjusted EPS Growth -- Adjusted EPS increased 32% year-over-year in Q3 2025, and year-to-date adjusted EPS rose 36% from the prior year.
  • Adjusted EBITDA -- EBITDA reached $1.205 billion in Q3 2025, a 14% increase from the same period in 2024 and the highest in company history.
  • Free Cash Flow Before Growth -- Reported $828 million for the quarter and $2.035 billion in free cash flow before growth year-to-date, year-to-date free cash flow before growth exceeded the prior year by $597 million, or 42%.
  • Texas Segment EBITDA -- The Texas segment delivered $807 million in adjusted EBITDA in Q3 2025 and $1.618 billion in adjusted EBITDA year-to-date, up 38% and 29%, respectively.
  • East Segment Performance -- The East segment delivered $107 million in adjusted EBITDA in Q3 2025 and $680 million in adjusted EBITDA year-to-date, but showed a modest year-over-year decline in adjusted EBITDA in Q3 2025 due to higher supply costs, partially offset by improved capacity revenues and favorable early-year weather.
  • Smart Home Segment -- Adjusted EBITDA was $272 million in Q3 2025 and $803 million in adjusted EBITDA year-to-date; customer growth reached 9% year-over-year, surpassing the targeted 5%-6% range.
  • Share Repurchase Plan -- $1.084 billion in share repurchases completed through October 31, representing nearly 85% of the $1.3 billion share repurchase target, at an average price of $125.35 per share.
  • Increased Financial Guidance -- Current guidance reaffirmed: Adjusted EPS of $7.55-$8.15, adjusted EBITDA of $3.875 billion-$4.025 billion, and free cash flow before growth of $2.1 billion-$2.25 billion.
  • Data Center Agreements -- Expanded power agreements to 445 megawatts as of Q3 2025 and pipeline under development and letters of intent to 5.4 gigawatts as of Q3 2025.
  • Data Center Pricing Update -- Management raised the target price for new long-term data center deals to above $80 per megawatt hour, citing sustained pricing improvement and customer demand.
  • 2026 Guidance Initiated -- Standalone adjusted EBITDA forecast of $3.925 billion-$4.175 billion for 2026 and free cash flow before growth of $1.975 billion-$2.225 billion for 2026; no new standalone EPS outlook due to pending LS Power transaction.
  • LS Power Acquisition Progress -- Acquisition remains on track for first quarter 2026 closing, with all regulatory filings submitted and financing completed on favorable terms.
  • Dividend and Buyback Commitments -- Continued commitment to $1 billion in 2026 share repurchases and annualized 7%-9% dividend growth, along with a newly approved $3 billion buyback authorization through 2028.
  • Additional Capacity Growth -- Plans to add 15 gigawatts of natural gas and 7 gigawatts of virtual power plant capacity through ongoing projects and acquisitions.

SUMMARY

NRG Energy (NRG 3.22%) delivered quarterly and year-to-date adjusted (non-GAAP) financial results that exceeded prior-year levels in adjusted EPS and adjusted EBITDA, driven by strong operational execution, margin improvement, and robust demand in the Texas and smart home segments. The company introduced standalone guidance for 2026 adjusted EBITDA and free cash flow before growth, laying groundwork for an updated outlook to be provided post-LS Power transaction. Management signaled continued acceleration in data center customer agreements and pricing, underscored by new contracts signed above previous targets. NRG also communicated a disciplined capital allocation strategy, executing significant share repurchases and increasing dividend payouts in alignment with previously stated growth objectives.

  • Chairman Coben stated, "The acquisition was immediately accretive across all metrics," though guidance excludes this pending impact until closing.
  • Management confirmed that signed letters of intent for data center capacity grew 35% sequentially since the previous quarter, indicating ongoing customer engagement from hyperscalers and developers.
  • The upward revision of the target price for data center power agreements to above $80 per megawatt hour for new long-term agreements reflects heightened demand and rising power price curves.
  • Free cash flow before growth guidance for 2026 is projected to remain flat compared to the prior year.
  • NRG maintained guidance for $1.3 billion in planned 2025 share buybacks, with capital available for allocation marked at $2.7 billion.
  • Capital inflows related to the Texas Energy Fund program exceeded development costs, driven by the loan's catch-up disbursement structure.
  • No updates were provided on portfolio gross margin sensitivity to power curves, with management stating such disclosure will be revisited after the LS Power acquisition closes.
  • The East segment experienced margin erosion due to higher supply costs, partly offset by improved capacity revenues and favorable early-year weather, as reflected in adjusted EBITDA performance.

INDUSTRY GLOSSARY

  • ERCOT: Electric Reliability Council of Texas, the grid operator managing Texas' wholesale electricity market.
  • PJM: Regional Transmission Organization coordinating wholesale electricity in parts of the U.S. Midwest and Northeast.
  • Virtual Power Plant (VPP): Aggregated network of decentralized energy resources operating as a unified power plant via software control.
  • Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for certain non-recurring items, used to assess operating performance.
  • Free Cash Flow Before Growth: Cash flow available from operations before investments in major growth projects.
  • GE Vernova Partnership: Joint development agreement with GE Vernova to pursue new power generation projects, cited as contributing 5.4 GW to the pipeline.
  • BYOP (Build Your Own Power): Customer-driven model in which large energy users contract new dedicated generation assets for their specific needs.
  • Cap and Collar: Mechanism in PJM capacity auctions setting upper and lower bounds for price outcomes to manage volatility.

Full Conference Call Transcript

Larry Coben: Thank you, Brendan. Good morning, everyone, and thank you for your continued interest in NRG. I'm joined today by Bruce Chung, our Chief Financial Officer, and other members of our management team are also on the line and available to answer questions. Let's start with the key messages on slide four. Strong performance across all areas of the business led us to raise 2025 financial guidance by $100 million in late September. This is the third consecutive year we have increased our full-year outlook. And today, we are reaffirming that higher range. We are also introducing 2026 guidance that aligns with our long-term growth targets. This represents NRG's standalone outlook and excludes any contribution from the LS Power acquisition.

We will provide updated guidance that includes LS Power around the time of closing. We expanded our data center power agreements this quarter, bringing total contracted capacity to 445 megawatts. We also rapidly grew our pipeline of potential projects under joint development and letters of intent to 5.4 gigawatts. Together, these actions build on the agreement announced in August and reflect rapidly growing momentum and validation of our data center strategy. The LS Power acquisition remains on track. Financings were executed in September on favorable terms. All regulatory filings have been submitted, and we expect to close in 2026. Turning to Slide five. Adjusted EPS for the third quarter was 32% higher than the same period last year.

And adjusted EBITDA reached the highest quarterly level in company history. For that achievement, I'd like to pause to congratulate all 18,000 of our employees. Our results reflect strong performance across both energy and smart home. In energy, supply optimization, and disciplined commercial execution drove margin improvement across both our home and C&I businesses. In smart home, growth was supported by expanding our customer base, record retention, and continued momentum in our home virtual power plant initiative. We also delivered top decile safety performance and completed the loan agreement for our second Texas Energy Fund project.

Year to date, adjusted EPS is 36% higher than last year, reflecting strong performance across all parts of the business as well as continued cost discipline. These results keep us firmly on track to achieve our raised full-year 2025 guidance ranges. On the right side of the slide, we are introducing 2026 guidance on a standalone basis. This serves as an interim view ahead of a full update after the LS Power acquisition closes when we will provide guidance for the combined company. Moving to Slide six for an update on market conditions. ERCOT experienced a mild summer with moderate pricing and strong growth in overall power use.

Total consumption across Texas has increased nearly 30% over the past five years, driven by residential, commercial, and industrial demand as electrification and onshoring of manufacturing accelerate. Data sector development usage remains early with ramp schedules expected to add meaningful capacity over the next several years. Looking ahead, power demand is projected to outpace new supply, keeping the market structurally tight and reinforcing the need for reliable, dispatchable generation. Policymakers are responding through initiatives such as Senate Bill 6 in Texas, and similar efforts in other regions focused on affordability, additionality, and reliability. We are encouraged by the focus and progress being made to strengthen and other competitive markets across the country.

In this environment, NRG is expanding its portfolio of reliable and flexible capacity. Through the LS Power and Rockland acquisitions, the Texas Energy Fund projects, and our home virtual power plant, we are adding 15 gigawatts of natural gas and seven gigawatts of virtual power plant capacity. We also see about six gigawatts of additional opportunities through the GE Vernova partnership and our final test project that is still under review. Together, these actions strengthen our platform and position NRG to meet rising customer demand and support large load growth, including data centers, across ERCOT, PJM, and other key markets.

Turning to Slide seven, we expanded our data center customer portfolio through 150 megawatts of new premium long-term power agreements, bringing total contracted capacity to 445 megawatts across ERCOT and PJM. This builds on the framework announced last quarter with the same customer. These sites located in Maryland and Illinois support edge data center development with access to high-capacity fiber and proximity to major US cities. These projects will be built in PJM with operations beginning in 2028 and ramping through 2032. This agreement was signed above the midpoint of our prior $70 to $90 per megawatt hour target range.

Given continued strength in customer demand and higher forward power curves, we are raising our target for new long-term data center agreements to above $80 per megawatt hour. This reflects sustained pricing improvement and NRG's leadership in providing reliable long-term power solutions for large load customers. We are advancing numerous additional opportunities, including up to 5.4 gigawatts of new capacity for data through 2032 under our GE Vernova and KeyWit partnership. Supporting the principle of additionality. Since last quarter, signed letters of intent have increased 35% from multiple hyperscalers and data center developers as well as growing demand for new development. Underscoring customer engagement, we also see several additional gigawatts of potential projects across a broader pipeline.

As markets evolve, NRG is leading the next phase of data center growth. Turning to slide eight. The LS Power acquisition remains firmly on track for a first-quarter 2026 close. It strengthens our platform, broadens our earnings base, and extends our reach across key competitive markets. It reinforces our position as one of the largest competitive generators in the country and increases our leverage to long-term demand growth.

Brendan Mulhern: An announcement.

Larry Coben: The acquisition was immediately accretive across all metrics, reflecting portfolio quantity and quality and an attractive purchase multiple. We also unveiled a 14% EPS CAGR through 2029, which does not, I repeat, does not include any contribution from data centers and reflects pricing assumptions that are below current market levels. These factors, along with other upside opportunities, underscore the significant potential ahead. Since the announcement, incremental benefits, including 100% bonus depreciation, have further enhanced the economics. All required filings have been submitted, and financing was completed on terms better than originally projected. The transaction positions NRG for stronger long-term growth, greater scale, and enhanced value creation as we bring the two platforms together.

With that, I'll turn it over to Bruce for the financial review.

Bruce Chung: Thank you, Larry. Beginning with slide 10. NRG delivered strong financial and operational performance in the third quarter with $2.78 in adjusted earnings per share and $1.205 billion in EBITDA, representing a 32% and 14% increase from the same quarter of 2024, respectively. Adjusted net income was $537 million, and free cash flow before growth was $828 million. Through 2025, NRG delivered $7.17 of adjusted earnings per share and over $3.2 billion of adjusted EBITDA, a year-over-year increase of 36% and 12%, respectively. Our exceptional quarterly and year-to-date financial performance reflects continued execution in all of our businesses, driven primarily by a mix of expanded margins, favorable weather, and excellent commercial and operational execution.

Our tech segment delivered third-quarter and year-to-date adjusted EBITDA of $807 million and $1.618 billion, respectively, representing an improvement of 38% and 29% from the same period in 2024. These results were driven by margin expansion across our operations in the region with lower realized supply costs and excellent optimization despite low summer volatility. The East segment contributed adjusted EBITDA of $107 million in the third quarter and $680 million through 2025. These results reflect a modest decline from the same period of 2024, primarily driven by the net impact of higher supply costs throughout the region, partially offset by increased capacity revenues at our plants and favorable weather in the first quarter benefited our natural gas business.

Our web services other segment had an adjusted EBITDA of $19 million in the third quarter and $139 million for 2025. The segment realized higher retail power margins, which were offset by the absence of earnings from the sale of our Airtron business in 2024, and the lease expiration at the Cottonwood facility in May 2025. When compared to the same periods of the prior year, our smart home business posted another impressive quarter and executed brilliantly through the key summer sell season, achieving adjusted EBITDA of $272 million in the third quarter and $803 million through 2025. The segment continues to see record new customer ads and retention rates as well as expanded net service margin.

Our consolidated free cash flow before growth was $828 million for the quarter and $2.035 billion for 2025. Year-to-date free cash flow before growth exceeded the same period in 2024 by $597 million, or 42%. The year-over-year increase is primarily driven by the higher year-to-date adjusted EBITDA, favorable working capital timing, and receipt of the remaining insurance proceeds from our Parish unit eight claim. We expect some of the year-over-year favorability to moderate as working capital timing normalizes in the fourth quarter and as we continue to invest in our plants through our scheduled maintenance program.

Looking to the remainder of 2025, we are reaffirming the increased financial guidance we announced last month, with ranges of $7.55 to $8.15 per adjusted EPS, $3.875 billion to $4.025 billion for adjusted EBITDA, and $2.1 billion to $2.25 billion for free cash flow before growth. Moving to Slide 11 for updates to our capital allocation for the remainder of 2025. This has been updated to reflect the new midpoint of our raised free cash flow before growth guidance target, setting the total capital available for allocation in 2025 at $2.7 billion.

Note that this slide excludes proceeds received from the $4.9 billion of new debt raised in October, most of which will be allocated to fund the cash portion of the pending LS Power transaction. A few other updates from what I shared in our second-quarter call are denoted in light blue. Starting with an update to liability management. The $52 million increase primarily reflects transaction costs and financing fees associated with the LS Power transaction. Integration costs increased by $20 million due to a shift in spend from 2024 to 2025. The net total remained largely consistent with our communicated expectation between the two years.

We remain on track to execute the full $1.3 billion in share repurchases slated in 2025. Through October 31, we have executed $1.084 billion in share repurchases, or nearly 85% of our planned annual total at a weighted average price of $125.35, and expect to complete the full amount of share repurchases by the end of the year. Other related activities increased due to higher tax withholdings related to equity compensation resulting from the increase in our share price. The increase in the revenue synergy growth plan reflects strong customer growth our smart home segment has delivered through the year.

Customer growth for the business was 9% year-over-year, well surpassing the targeted 5% to 6% net customer growth embedded in our growth plan. On other investments, we are showing a net $30 million inflow of capital related to our Texas newbuild program. As you may recall, the stipulated capital structure for projects under the Texas Energy Fund program is 60/40 debt to equity. In order to get our TDF projects to that target capital structure, the initial disbursement under the loan took into account previously spent development costs.

Given that catch-up mechanism under the loan, the disbursements we received in 2025 exceeded the amount of capital we expect to spend on the project, therefore resulting in a net inflow of capital for the year. Finally, we are on track to finish the year with $158 million of unallocated capital, which we currently plan to roll over into 2026 and deploy as part of our 2026 capital allocation plan. Turning to the next slide, we are initiating our 2026 NRG standalone financial guidance at ranges of $3.925 billion to $4.175 billion for adjusted EBITDA, representing a midpoint of $4.05 billion, and free cash flow before growth of $1.975 billion to $2.225 billion, representing a midpoint of $2.1 billion.

We are not providing standalone EPS guidance as we acknowledge that EPS will change materially with the closing of the LS Power transaction, due to associated accounting adjustments, pro forma capital allocation, and other matters impacting any per-share metrics. As you can see on the slide, we have included the same adjusted EBITDA and free cash flow before growth for the acquisition, which we provided when we originally announced the transaction in May. This combined with the 2026 NRG standalone guidance that we are initiating today should remind people of the pro forma company's earnings profile.

We will provide an updated pro forma view once the transaction is closed, which will include updates to items like energy and capacity prices, accelerated depreciation benefits, and pro forma capital allocation, among others. On the bottom of the page, we have provided walks from the midpoint of our original 2025 guidance to the midpoint of our new 2026 guidance on a standalone NRG basis. For adjusted EBITDA, the net $200 million increase year-over-year is primarily driven by the addition of the Rockland assets acquired earlier in the year, the impact of higher power pricing in our Texas segment, and the continued execution of our existing $750 million growth plan.

The impact of higher power pricing in Texas that we are showing is consistent with the sensitivities we have provided in our previous earnings materials and reflect an increase in around-the-clock pricing from the $47 we previously used to $53 per megawatt hour, which reflects Texas pricing at the July. The sum total of these year-over-year increases is slightly offset by other minor drivers such as regulatory developments negatively impacting the Maryland and New York competitive retail markets. On free cash flow before growth, we expect partially offset by the continued investment in our generation fleet. After taking into account higher cash interest and taxes, we forecast free cash flow before growth to be flat year-over-year.

The higher cash interest is largely driven by refinancings of very low-cost debt that was issued when the Fed funds rate hovered near 0%. The increase in cash taxes primarily relates to fewer federal tax credits available to offset income than in prior years. Just to reiterate, we will provide a more detailed update on pro forma financial metrics once we close the acquisition. I look forward to sharing that update with you soon. Moving to Slide 13 for a brief discussion on 2026 NRG standalone capital allocation.

The key takeaway here is that we remain committed to our return of capital program through share repurchases of $1 billion and our planned 7% to 9% annualized growth of the common dividend per share. This is the case both on a standalone and pro forma basis. I'm also pleased to share that our board has approved a new $3 billion share repurchase authorization to be executed through 2028. As you can imagine, certain elements of this chart, such as the starting point for excess cash and liability management, will look very different after we close the acquisition. As such, I do not intend to go further into detail on this slide.

We will provide a fulsome update on capital allocation, alongside our key financial metrics once we close on the LS assets acquisition.

In closing, NRG has delivered outstanding financial and operational results through the first three quarters of this year, and we are poised to finish the year on a high note. The standalone 2026 financial guidance and capital allocation outlook I have shared today further demonstrate the solid growth and continued performance of our standalone-based business. I look forward to providing you updated and detailed guidance for 2026 that includes the assets we are acquiring from LS Power following the closing of the transaction. With that, I'll turn it back to you, Larry.

Larry Coben: Turning to Slide 15. 2025 has been an outstanding year across every part of our business, and our outlook continues to improve. Our near-term focus is on completing the LS Power acquisition and providing you with an updated long-term outlook following the close. We also continue expanding our data center portfolio, advancing our Texas energy projects, including completing the construction of the T.H. Wharton project, and returning at least $1.3 billion to shareholders. These priorities reflect a disciplined approach to growth and capital allocation as we position NRG for 2026 and beyond. Continuing to build a company defined by consistent execution and accelerating value creation. With that, we'll now open the line for questions.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone. And wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Shahriar Pourreza with Wells Fargo. Please go ahead.

Shahriar Pourreza: Hey guys, good morning. Sure. Welcome back to the workforce. I'm ready to go back to garden leave, to be honest. Yeah. I wanna see the flowers, Shar. I wanna see the flowers. There you go. Good morning, Bruce. Good morning, Rob too. Good morning. Good morning. So, Larry, just do you think '26 is kind of that year you're gonna be able to announce a data center agreement that includes new development as part of your, you know, GEV KeyWit partnership?

Larry Coben: Yes. You tongue-tied me again. Well, you remember the last time I gave you a one-word answer, it showed up. So I'm giving you a one-word answer.

Shahriar Pourreza: Any sense around on timing next year? Are you are we thinking back half or earlier part of the year?

Larry Coben: It's hard to tell, Shar, as my good friend Max said yesterday, these are complex, but super excited by the process and, you know, never been more sure.

Shahriar Pourreza: Got it. Okay. That's helpful. And then just lastly, just maybe share a little bit more about sort of the announced data center deals, how they kinda compare. To those announced by your peers. So a little bit more color around the margins given other peer deals have come with generation linkages. Thanks. Yeah. You know, we put it a little slide in the appendix which kinda talks about margin and pricing. You know, we're you know, this is very similar to the one that we announced last quarter. Just locationally different. You know, premium margin as a result, you know, different things going to getting our premium margin on any deal including land, including our commercial acumen.

I mean, I really need to say we have the best commercial team in the business at both gas and electricity, being able to really meet customer needs in a flexible way. All of those lead to the margin that you see on that appendix chart.

Shahriar Pourreza: Got it. Okay. That is super helpful. Appreciate that, Larry. Bruce, keep working hard. I like what I'm seeing here. Thanks, guys.

Operator: Our next question comes from Julien Dumoulin-Smith with Jefferies. Please go ahead.

Julien Dumoulin-Smith: Hey, good morning team. How you guys all doing?

Larry Coben: Here we go. Good, Julian. How are you?

Julien Dumoulin-Smith: Quite well. Quite well. We're slaving away here, as they say. Let's look. I look. Let me let me jump back to the let me let me ask the same question that our buddy just asked a second ago in a different way. Look, as far as GV goes in this keyword partnership, do you have a certain time frame that you need to move some of this equipment, use it or lose it if you will, Can you speak to that a little bit? Because I think that's that's probably an important nuance to speak to when you talk about your confidence. And the timelines under which you're operating to execute on this.

Larry Coben: Look, Julian, we haven't disclosed any timelines, but, you know, we're I'm very confident that we're going to meet all of the timelines that are required under that agreement. But I what you're really trying to do, Julian, I know is pin me to a month I'm not gonna let you do that.

Julien Dumoulin-Smith: Absolutely. You know we're all trying. I mean, Shar did his best ever too. I appreciate the effort. It was well done, but Not quite there. Alright. I got it. Well, look, let me let me ask you this way. As far as it goes with the Build Your Own Power, BYOP as we're calling it. Right? scope of what's possible here, again, I know folks have been looking at co-located opportunities the last couple years, but now we say we've firmly shifted You know, how meaningful. Right? We've seen a few announcements here, you know, with the 100 megawatts here, a couple 100 megawatts this quarter.

I mean, when you say you're gonna deliver updates next year, can you speak to BYOP and the scale of what's at what's at hand here in terms of know, really building out contracted gen?

Larry Coben: Sure. Look. Just starting with the GEV, KeyWiz deal, Julian, that's five point you know, four disks. So that's a good place to start from. I mean, there are some things that could be added to that in a variety of ways that we're looking at. But you know, I think if we brought even 5.4 gigs to the table, you would be and everyone would be super happy from us. So I mean, the scale I mean, that's kind of the scale that we're focused on right now. But we are looking at opportunities to see how we can make that even greater.

Julien Dumoulin-Smith: Got it. Alright. And then let me just shift this slightly. When you think about the focus here, I mean, you know, a lot of a lot of conversation has been around your portfolio in Texas and ERCOT specifically. You speak a little bit more broadly? Obviously, you guys have Illinois sites, PJM's talking increasingly about bill bringing new assets before. Illinois just passed legislation in recent weeks. For instance, is there an opportunity in the PJM portfolio to both add gen and add gas and storage specifically and perhaps tap into some of these developments that have been recently afoot to kinda quell the state's needs for new capacity?

Larry Coben: Absolutely, Julian. And we are, you know, working hard on that, and we'll really accelerate those efforts, of course, once LS closes. Because, you know, until we own the, you know, the generation assets there, that won't really vault us into being a significant player. But we're you know, there's no grasp growing under our feet there in the meantime. Got it.

Julien Dumoulin-Smith: Alright. And in the Illinois legislation, is there something for you guys to do there specifically? Ask that more pointedly?

Larry Coben: I don't think the legislation is really gonna be the driver of this, Julian. So but, you know, he'll you know, as you know, we do have sites in Illinois. So

Julien Dumoulin-Smith: Absolutely. Alright. I'll leave it there. Thank you guys very much. All the best. You soon. Thanks, Julian.

Operator: Thank you. Our next question comes from Angie Storozynski with Seaport. Please go ahead.

Angie Storozynski: Thank you. So first of all, no Good morning, Angie. Good morning. No longer see the slide showing the sensitivity of your gross margin to changes in forward power curves. You know, I mean, we've had finally the move in and curves we had waited for. And so I'm just wondering if anything's changed there. Are you waiting to update it for your enlarged portfolio? Any comments?

Larry Coben: Andy, you just hit the nail on the head. We are waiting to update it for our enlarged portfolio.

Angie Storozynski: Okay. And you're not gonna give me any sense, you know, how especially, the PJM prices moving, how they are impacting the pro forma EBITDA of the company. For now? Not at this stage. We'll certainly we will provide, obviously, a very fulsome update. After we close on the transaction.

Angie Storozynski: Okay. And then the second thing is so we've had some companies you know, new power companies or pretending to be new power companies. That have aspirations to build gas plants. Without any prior expertise and power. So I mean, it is surprising that they could be ahead of you in the pecking order. You know, it's not for the fact that you guys actually have sides, have a equipment, know how to hedge gas, etcetera. So, is it that you know, they just talk more about their opportunities versus you guys? Or do you still feel like you have, you know, a head start over those companies?

Larry Coben: Angie, I'm convinced that we're in great position to do, you know, what I was describing. You know? It has this a long time, so have you. There's a lot of announcements But I actually see, to use Sam Alton's new term, electrons flowing, then I will actually believe that they're real or will see steel in the ground. But you know, we're not one you know, we tell you what we've done. We don't tell you what we're gonna do. And that's kind of my philosophy in all this. So there's gonna be a lot of announcements because a lot of people think their data center and power developers.

Some of those are probably real but I'm very, very comfortable with where we sit in the pecking order both with respect to building power plants and with respect to hyperscalers.

Angie Storozynski: Okay. And then one more. I mean, we are still seeing a lot of assets, private assets being offered to you know, companies like you, hopefully. You know, you do have a large pending acquisition, and I'm just wondering if you would still have interest in single asset transactions before the Avastara transaction closes.

Larry Coben: We look at everything. And, you know, if there's something that's economically attractive that's a great fit for our core we would be interested. We don't feel we need to add any additional capacity given the LS acquisition, the Rockford acquisition, and the test projects. But you know, we are always opportunistic when these things are out there.

Angie Storozynski: And then lastly, Bruce, you mentioned the, the free cash flow guidance for '26. And the fact that you're, you know, sort of running out of the tax Shield. I mean, the Ellis Power transaction brings the Tax Shield. Right? So there would be presumably an improvement to the free cash flow generation of the current business on the back of that transaction. Is that fair?

Bruce Chung: There yeah. I think that's generally a fair statement, Angie. You know, the one thing that I'll just clarify for you is that uptick in cash tax that we talked about on a stand alone basis isn't necessarily related to our NOLs disappearing It's really more about certain tax credits that we had from our days when we owned renewable assets that, you know, eventually expired. And so you know, regardless of the of the of LS transaction, we're still gonna have a very sizable NOL position. But clearly, the LS transaction is gonna give us even more which should in your to a to a cash flow benefit.

Angie Storozynski: Okay.

Operator: Thank you.

Larry Coben: Doing alright. Thanks, Larry.

Larry Coben: Larry, in your prepared comments, both at the beginning and the I think you made it very clear, that you're you guys are not just standing still waiting to close LS, but you've got a lot of lot of other things going on. If you were to kind of rank order what you're most excited about it, you know, outside of that transaction, You know, what would you say the top kind of one, two, three, other things or the items that you're you're waiting to hopefully announce to us in the near term? I'm gonna do them in no particular order because otherwise, that's like, you know, picking favorites among your kids. Understood. Okay.

I mean, you know, we have you know, both on the C and I and on the retail side, and energy and in Spark. And we have a lot of you know, people kind of lost sight of we have a very exciting growth plan where we're killing it. Second, you know, our residential VPP excites me tremendously. And after LS close, I'm also even more excited about our demand response potential. So I look at all of those things as and I guess the fourth thing I would say is, you know, bringing our first test project online and making progress on the other two.

So there's a lot going on here that we don't need we haven't even begun to put into our numbers. And so, you know, even if there were no I just, know, to as a reminder, even if there were no data centers at all, and no changes in power prices, we're still showing a 14% CAGR. We still have a double digit free cash flow discount rate. So I'm you know, I'm sorry. I'm super excited about that. I don't know where I could get in the market such a you know, with not much downside, those kind of numbers. Leaving out all the other great things that we're doing.

So I am you know, as bullish as I've ever been.

Larry Coben: Okay. To hear. I'll leave it there.

Operator: Great. Thank you. Our next question comes from Nick Campanella with Barclays. Please go ahead.

Nick Campanella: Good morning. Thanks for taking my question. Good morning, Nick. How are you? Oh, maybe I'm doing well. I'm doing well. Hope you're well too. Maybe I could just follow-up on the BYOP combo just your conversation with policymakers at the states you operate in, how does that look in terms of BYOP? How have the customer conversations evolved over the last six months? And is it is it a fair assumption that all deals going forward just need some type of additionality? In this space now, or how would you kinda frame that?

Larry Coben: I mean, I don't you know, speaking to all deals is hard, but, you know, it starts with the secretary of energy who's been very, very explicit on this. And I think as regulators more and more look at the affordability question and how to distribute the cost of this new power, you know, the simplest way to do it and the fairest way to do it, I think, is probably bring your own gen. Now whether that's you know, megawatt hour per megawatt hour or 75% or 50 or some other measure, think remains to be seen. But I think every policymaker is looking at this for two reason.

One is the affordability factor, and two is everyone knows they need new power. Everyone knows they need new infrastructure to the so to the extent if you're the governor of, say, New Jersey or Pennsylvania or somewhere like that, you would rather spread that cost across know, Amazon or Metas or Google's or Microsoft's billions of customers around the world. So, you know, this is a trend that we started talking about a year ago and prepared for it with our GEV and KeyWit joint venture, and it's now really coming home to roost and accelerating in the last few months.

Nick Campanella: Definitely recognize that. Thanks for those So maybe just with PJM, being a more important jurisdiction pro forma this LS Power deal, Can you talk about the capacity auction and just the prospects and timing for the collar to potentially be extended? Or just what you're advocating for with stakeholders. You think the industry is heading, and ultimately, what outcome you think would be good for the industry? Thanks. Hey. It's Rob. Look. Nothing's changed since the last auction as far as you know, supply and demand. So you I would expect that means that we're going to price at the top of that cap and collar.

The as far as long term goes, you know, they're they're looking at lots of different ways to solve the equation. You know, ultimately, you know, we everybody is generally concerned about reliability and they're concerned about things like affordability. But in order to get reliability, you have to have price signals. And so, you know, the market has to reflect something for something to get built. As far as the collar being extended, you know, we were supportive of the collar last time. I could see it being extended again because it provides certainty for everyone. In the markets. Whether or not the top end of that collar is at the right place, that's yet to be determined.

Thanks for the thought.

Operator: Thank you. Our next question comes from Carly Davenport with Goldman Sachs. Please go ahead.

Carly Davenport: Hey, good morning. Thank you for taking the questions. Good morning, Carly. How are you? Doing well. Thanks. Hope you are too. Larry, you mentioned before your excitement about the resi v p program and the pilot there. I guess, updates on how that's tracking in terms of uptake and if that's something that we should expect to see sort of regular updates on in subsequent calls?

Larry Coben: Gonna kick that over to Brad. Hi. Thank you.

Bruce Chung: No. We've been very pleased with the progress on DPP. So as you're aware, we did raise guidance earlier this year. For the balance of 25. So we went from 20 megawatts to six 150. And we remain on track for our, you know, one gig by year end. We received a lot of great 35. Go. Sorry. I would say things a lot. By 2035. We received a lot of good feedback from customers about the value and the experience of our offering. So we're really excited about that. We're actually installing more customers than anticipated.

And I think as we had shared in our last earnings, we're actually seeing the upgrade of additional equipment kinda two x our expectations. But apart from that, we're also piloting some additional new home automation offering which not only deliver the demand response, but will also help reduce home energy consumption. Which will enable us to offer customers home energy savings. So as affordability and great capacity become more critical, energy will really have the only solution to meet those needs. Be able to reduce energy consumption and save customers money. So we're really excited about piloting that, not just in Texas, but we will also be taking that out to the East early next year.

Carly Davenport: Great. Okay. That's super helpful. Thanks for that. And then maybe just on the data center pipeline, you have one agreement with first delivery in '26, another in '28. I guess, is there any trends that you're seeing in terms of when customers are looking to be energized on these deals?

Larry Coben: I mean, I think they're looking to be energized as quickly as possible, but you know, there are some bottlenecks of as you know, probably with interconnection and things of that nature as well as if you do really need to bring your own power plant, obviously, that doesn't occur in a day. So I think customers are look would love to start ramping yesterday, and they're doing what they can to do that. But I think you know, if I look at the a graph from now through 2031, there's more and more power coming on ramping each of those years.

So I don't think anybody comes to the table thinking, well, we really wanna start in 2033, but I think they're also realistic about building their own businesses and the constraints that exist.

Carly Davenport: Got it. Great. You so much.

Larry Coben: Thank you.

Operator: Our next question comes from David Arcaro with Morgan Stanley. Please go ahead.

David Arcaro: Hey, thanks. Good morning.

Larry Coben: Morning, David.

David Arcaro: When you say that you're let's see. On the data center power agreement, increasing your kind of expectations for pricing to now be above $80 a megawatt hour. What's that reflecting? You know, is that a reflection of where market prices have gone and just thinking about you know, the upper end of your prior 70 to 90 range. Like, does that upper end go up as well? Kinda curious just, like, would you be repricing, like, bring your own power type deals also upward.

Larry Coben: I think everything is pricing upward as a result of increasing demand. If you look at the capital expenditure announcements by the hyperscalers, they continue to rapidly increase across the board. I think it's a recognition from people of the commercial of our rather unique ability commercially to supply them in ways that they wanna be supplied and to bring new power to the table. And just really heightened interest from multiple hyperscalers and developers in a very accelerating fashion. Just kind of using the basic laws of, you know, supply and demand.

So all of those are factors that led us to you know, raise this to kinda take the top off the range and raise the bottom off the range.

David Arcaro: Got it. Okay. Great. That's helpful. Then separately, was just wondering if you could comment on the retail competitive backdrop retail your outlook for retail margins from here? Can they remain strong? Looking on into your forecast?

Bruce Chung: Yeah. We have this is Brad. We continue to see strong margins in Texas. And we have had primarily it's a competitive marketplace, and so as prices have gone up, we've been able to maintain those margins. As I mentioned earlier, we are looking at solutions to help give cons some customers relief in terms of helping reduce energy consumption. As we know, affordability will be a challenge as everyone does raise prices. In the East, a little bit different dynamic. When we're up against the price to compare. And so that one, we have seen a little bit of margin erosion that we are managing. Very closely.

But as I mentioned earlier, being able to bring an integrated value proposition to the consumer that gets beyond competing for you know, price per kilowatt. Hour and gives them a solution that actually brings their energy consumption down and give them home protection and home automation in the home We believe that's a solution that we will, you know, be able to scale and probably change the conversation. So a little bit different dynamic that, as you know, between the East and what we see in Texas. Yeah.

David Arcaro: Okay. Great. Thank you.

Operator: Thank you. Next question comes from Ryan Levine with Citi. Please go ahead. Good morning.

Ryan Levine: Hi, Ryan. I'm to follow-up on this Hi. Hoping to follow-up on the smart home business. Good to see the 9% annual year over year growth there. What are you assuming for '26 stand alone business contribution for smart home growth? And how do you see that trend evolving? Into your longer term outlook?

Bruce Chung: Yeah. In terms of customer accounts, we're assuming something very similar to what we saw this year. We've seen really strong growth across really all of our channels of distribution. We're also launching, you know, more of a good, better, best know, historically, that has been pushing you know, the higher end systems, but we're able to, as I mentioned earlier, offer a much more affordable entry level offering that not only gives customers some security protection, but also that energy management savings that I touched on. So with the additional kind of good, better, best, it opens up new channels of distribution. And so we expect really strong growth in '26 as well. Yeah. Hey, Ryan.

I just wanna remind you know, when we, when we announced that $750 million growth plan, we had indicated smart home cost net customer growth to be in that five to 6% range. And so I think when Brad alludes to the customer growth that we're assuming for '26, it's still gonna be pretty consistent with that original growth plan. Probably the higher end. Thank you.

Ryan Levine: Thank you. And then in terms of the hyperscaler data center conversations, appreciate the additional guidance around pricing and momentum. But in terms of duration of the contract, are you seeing any change there around the tenor of contracts? That the customers are looking for? As demand has continued to accelerate? No. We still continue to see people wanting at least ten years some even more than that. So if anything, ten year will be increased is increasing. Particularly if you're going to bring your own generation. If you really need a longer tenured contract in order to you know, drive your own cost down. So we're seeing longer contracts, not shorter ones, Ryan.

Ryan Levine: Okay. And anything around inflation provisions that they becoming the more standardized or around some of the other commercial terms embedded in these contracts.

Larry Coben: I mean, you know, we are do we are do most of the contracts are, you know, gonna be allowing us to you know, pass through and allow us to keep our margins relatively fixed. It kind of across the board for a variety of factors.

Ryan Levine: Okay. Thanks for the time.

Operator: Final question comes from Andrew Wisele with Scotiabank. Please go ahead.

Andrew Wisele: Hey. Good morning, everyone. Thanks for including me. Good morning. Welcome. First question on buybacks. I see that you're guiding to a moderation in next year to 1,000,000,000. I think you previously alluded to that. Forgive me. I'm still a bit new to the story. Is that a function of LS Power and t e f CapEx, which is sort of onetime in nature? Or should we think of the $1,000,000,000 as a good run rate going forward? I can do the math. 3,000,000,000 through 2028 kind of implies that. But how are you thinking about this? Longer term? Yeah. It's really just staying consistent with what we had indicated when we announced the LS Power transaction, Andrew.

We had indicated buybacks Does that mean, like, an eight k or press release as soon as it closes, or are you talking about the four q update in February? I think it's really just gonna be dependent on when we and what how that timing lines up with when we might otherwise regularly report earnings, fourth quarter earnings. And so we'll we'll assess based on where things are lining up with respect to close to figure out what the best way to communicate with the investment community will be.

Andrew Wisele: Okay. That makes sense. And one last one, you covered a lot of good details, so this is kind of a nuanced one. But I'm seeing some headlines that potential sale of the Gladstone asset in Australia. A lot of people might not even remember that you have that, but how are you thinking about that asset, and could there be value there?

Bruce Chung: Look. I mean, we don't we don't to the extent that there is value, it's really more it's gonna be nominal at best. I wouldn't necessarily think of that as being a particularly significant driver. And if anything, it's it's really the more to just continue to simplify our portfolio and streamline our offers. Okay. Very good. Thank you so much. Thank you. Thank you.

Operator: Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Larry Coben for closing remarks.

Larry Coben: I wanna thank you all for taking the time to listen and for your interest in NRG. I have never been more excited about our prospects as we are today. And I look forward to seeing you all on road shows and wherever so that we can discuss them in more detail. Thank you, operator, and thank you, everyone.

Operator: Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program.