Good day, and thank you for standing by. Welcome to NRG Energy, Inc. Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the call over to your first speaker today, Brendan Mulhern, Head of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to NRG Energy's Fourth Quarter and Full Year 2025 Earnings Call. This morning's call is being broadcast live over the phone and via webcast. The webcast presentation and earnings release can be located in the Investors section of our website at www.nrg.com under Presentations and Webcasts. Please note that today's discussion may contain forward-looking statements, which are based upon assumptions that we believe to be reasonable as of this date. Actual results may differ materially. We urge everyone to review the safe harbor in today's presentation as well as the risk factors in our SEC filings. We undertake no obligation to update these statements as a result of future events, except as required by law. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's presentation and earnings release. With that, I will now turn the call over to Larry Coben, NRG's Chair and Chief Executive Officer.

Thank you, Brendan, and good morning, everyone. I'm joined today by Bruce Chung, our CFO; and Rob Gaudette, our President. Other members of our management team are also on the line and available to answer questions. Let's begin with the key messages on Slide 4. We exceeded the midpoint of our raised 2025 guidance, marking the third consecutive year we increased our outlook and delivered above it. We introduced stand-alone 2026 guidance in November, updated it in February to reflect 11 months of LS Power ownership. And today, we are reaffirming those ranges. We successfully closed LS Power at the end of January. Integration is well underway and performance is already exceeding our underwriting assumptions. With LS Power now closed, we are rolling forward our long-term outlook. We continue to target at least 14% annual growth in adjusted earnings per share and free cash flow before growth per share, now measured from 2026 through 2030 rather than the previous through 2029. We are maintaining this more than 14% trajectory despite a much higher share price than assumed at the original announcement. This is achieved through higher earnings from both the LS Power portfolio and our legacy businesses. Finally, as demand accelerates across our markets, affordability and reliability will define long-term success. New large loads must bring their own power and contract for the generation that supports them. Flexible demand response must scale alongside that. Otherwise, prices will rise and volatility will increase. NRG is well positioned to do both and thus meet rising demand across our markets. Let's turn to Slide 5, our 2025 financial and business results. 2025 was a record year of performance at NRG. Full year adjusted EPS was $8.24 per share and adjusted EBITDA was $4.087 billion, both above the high end of our raised guidance.…

Thank you, Larry. Starting with Slide 10, I am pleased to share that NRG delivered exceptional full year financial results in 2025. We achieved earnings at or above the high end of our raised financial guidance ranges, including record level performance across several key metrics. Our 2025 adjusted EPS was $8.24 and adjusted EBITDA was $4.087 billion, representing an increase of 21% and 8%, respectively, over the prior year. We delivered $1.606 billion of adjusted net income and $2.21 billion of free cash flow before growth. Our robust financial performance in 2025 marks the third year in a row where excellent execution across our businesses continues to demonstrate the durability of our integrated platform. Moving on for a brief discussion of segment results. Our Texas segment delivered full year adjusted EBITDA of $1.877 billion, driven by margin expansion and excellent commercial optimization throughout the year as well as favorable weather that benefited our home energy volumes. The East segment contributed full year adjusted EBITDA of $981 million, reflecting a slight decline from the prior year, primarily driven by higher regional retail power supply and planned maintenance costs and the retirement of the Indian River facility. These impacts were partially offset by strong capacity revenues at our plants, winter weather driving natural gas margin expansion and continued commercial optimization in both power and gas. Our West and Other segment provided full year adjusted EBITDA of $137 million, a modest decline from the prior year, driven by the absence of earnings from the sale of our Airtron business in September 2024 and the lease expiration at the Cottonwood facility in May 2025. These were partially offset by higher retail power margins in the West. The Smart Home business generated full year adjusted EBITDA of $1.092 billion, driven by record new customer adds…

Thank you, Bruce. Let me close with our priorities for 2026. Demand is accelerating, led by data centers. Our priority is to serve that growth under a Bring Your Own Power framework, securing long-term power agreements that support the new generation required to meet it. We will complete T.H. Wharton. We will integrate LS Power. We will continue building our Virtual Power Plant platform. Execution and capital discipline remain our lodestar. We will deliver the financial results embedded in our guidance, return at least $1.4 billion to shareholders, grow the dividend consistent with our framework and maintain balance sheet strength. As I approach the conclusion of my time as CEO, I want to thank all of our 18,000 employees for their incredible work and commitment, our customers for their trust and our shareholders for their support. Over the past 27 months, the NRG team has reshaped the portfolio, strengthened the balance sheet and positioned NRG to compete and keep winning in a changing power market. We entered 2026 strong, disciplined and well prepared for this next phase of growth. I look forward to continuing as an adviser and long-term shareholder and to watching this incredible team build on the foundation in the years ahead. This is only the beginning and the best is yet to come. Thank you all for everything you have done. Operator, we're now ready to open the line for questions.

[Operator Instructions] First question comes from the line of Shar Pourreza with Wells Fargo Securities.

All right. Larry, big congrats to you and Rob. So terrific transition and best of luck to both of you on your Phase 2. Maybe just starting off on the expectation -- I totally forgot Bruce. Is Bruce still there? The CEOs are doing such a good job. We forget the CFO sometimes. But Bruce, we still love you, I apologize. And congrats on that Phase 1. Maybe just starting off on the expectations now that the LS deal is closed. Larry, can you just expand on commercially contracting the combined portfolio comments you made? I mean, $2.5 billion in EBITDA is sizable. I just want to get a sense on timing and structure, including how we should think about which party would be taking on the gas risk in these deals or risk shared passed on to the counterparties? Just a little bit of a sense on the structures.

Yes. Look, so I think a little bit -- obviously, depending on the hyperscalers, but I think we're looking at blocks in excess of 1 gig. I think we're looking at contracts of minimum 10 and frequently 20 years with investment-rated entities that can actually support the kind of credit required to make this happen. We're looking at a significant fixed price component in that. And so I think you can start seeing these things come on. You can do the math. We've given you the margin. We've given you the capacity numbers, so you can kind of figure out when it comes. I think the first tower, assuming we get to the place we need to get, could be on by the end of late '29 and then ratably probably 1 gig a year, maybe more for each year after that.

Got it. Okay. And then just the fuel risk, Larry, this is a question we get from a lot of investors is who actually takes on the gas risk?

So it's Rob. The contract that we're working with and the structure that we're -- the hyperscalers seem to be okay with is a very heavy capacity payment like Larry talked about and then a variable component where it turns into basically a heat rate for the hyperscaler. They take the gas risk. If they want to offload the gas risk, I have a gas platform where I can help them do that.

Got it. Okay. Perfect. And then just in terms of PJM and the regulatory process, do you guys see FERC PJM directive opening opportunities for energy to bring new generation to that market? Would you focus on the 1 gigawatt of uprates that you noted in the slides? Or is there opportunity beyond that similar to what you're doing in Texas under the TEF? I guess how attractive is that reserve auction?

I mean, look, I think it's attractive, Shar, but I think our focus in PJM, at least initially will be the 1 gig of uprates. It's just faster and quicker to market and the demand is there for Texas. If somebody were to come to us and say that they wanted it in PJM, obviously, we have the flexibility to do that. But I think that we would focus in PJM on the 1 gig of uprates and probably the other 5.4 outside of PJM.

Got it. This is perfect. I appreciate it, guys. And Larry, big congrats. And Rob, just do me a favor as you take the spot, just make sure you continue to work Bruce really hard like Larry did.

The next question comes from the line of Julien Dumoulin-Smith with Jefferies LLC.

Larry, Rob, congratulations. And Bruce, I swear we will never forget you. But with that said, let me come back to a couple of things, right? So first off, on the capital allocation, the 14% here. Just to break that down a little bit further here, how much latitude do you have in that in as much as you're not reflecting, I don't believe, the CapEx for the data center. I mean, presumably, you could be forgoing buybacks in the near and medium-term sense to invest in a longer-term sense in presumably 2030 and beyond if you start to pivot into the data center. So maybe just talk about the latitude that exists within that commitment through 2030 against the buyback numbers and how you could see that shift as you allocate capital? Again, if I understand it right, the first data center here under your targets with GEV and Kiewit, it would be a 2029 in service anyway. So conceivably, you'd get some of those cash flows on a run rate basis in 2030. But again, obviously, as you continue to scale the strategy, you need to roll forward that target. So Rob, when are you doing an Analyst Day pro forma with all these data centers is really the other way to ask that. But I'll pass it to you guys.

Julien, just on the buyback question. I mean, I think -- as we think about the variability in that buyback number, it's probably more on the back end as opposed to the front end. The $1 billion that we're sort of thinking about over the next couple of years is probably pretty set in stone, frankly, from our perspective. And we see ample opportunity to be able to fund these projects while still keeping at least $1 billion buyback program in place. So I don't think there's really any risk on that. And then it's really more about how do we think about the cash flows in the out years, particularly after we've delevered and how that can be redeployed in some of these very potentially lucrative projects.

Any sense on returns, though? Maybe that's the other back-ended way to ask this is like how are you thinking about what the operate and/or new data center counterparty in Texas would look like here?

Yes. Look, I mean, we've always been very consistent about and transparent about what our hurdle rate is. It's 12% to 15% pretax unlevered. And every project and every dollar devoted to a project is going to be held against that standard.

Got it. Excellent. I appreciate it. And then just if I can keep going slightly further here. As you think about this rollout of VPP, I mean, just any -- when would you expand that? I mean it seems like you're doing very well against it. I mean I'm curious on how you would think about the economics contributing to the story here. Just in brief, I saw the targets in the longer term.

Yes. This is Brad speaking. I've been really pleased with our results in Texas. So we continue to scale in Texas. And then we are looking to launch a VPP-like program in the East here early second quarter. That, coupled with our relationships with GoodLeap and Sunrun, we continue to scale batteries up. So we feel really good about what we've learned so far and well ahead of our targets, as Larry had mentioned, and pacing well against the 300-megawatt number we gave you for 2027.

All right. Fair enough. Still, I'm asking when do we get a robust Analyst Day, but you don't necessarily need to commit today. All right.

More to come. Every day with us, Julien, is a robust day.

The next question comes from the line of Nicholas Campanella with Barclays.

Congrats to Larry and Rob here.

Before you ask your question, would you also congratulate Bruce, please?

I'm feeling really hurt these days.

And congrats to Bruce. Look, good questions so far. I just wanted to follow up on Shar's comments and just what's kind of underpinning the $2.5 billion. I think in prior decks, you had this target price for signings above 180 -- above $80 per megawatt hour. Just what are your updated thoughts on where that figure is now and what's really kind of underpinning the $2.5 billion here?

It's Rob. So the $80 -- we adjusted our targets from -- to an $80-plus kind of range. And as we've talked about and we've mentioned that if you're going to build 1.2 gigawatts of GEV turbines, that number is going to be on the high end. So as you're thinking about how you get in there, think north of the $90 to $95 range where we were back in our original guidance. It's on the top end. It's got to pay for the equipment. It's got to pay for our return, and we're not going to do a deal unless it does.

That's helpful. And then maybe just understand the share repurchases, if they are going to be affected at all from new build. It sounds like it's more in the back end of the plan. But I guess you have a strategic advantage on cost and securing these turbines early. I assume they're going to be project financed. So just what would your kind of targeted equity contribution be? Would it be in the 20% to 30% range? And maybe that's just one way to understand how that could pressure the buybacks.

Yes. Nick, from our perspective, project financing comes -- sometimes it can be great. Other times, it can be not so great. And I think in this particular instance, we really see value in simplicity. We see value in transparency. And so I don't think you should assume that project financing is the way that we would go. I think we would probably err on the side of corporate style balance sheet financing. And on that basis, that means you should be thinking about the capitalization for these projects consistent with what our corporate capitalization would be, which is like that 3x leverage level.

The next question comes from the line of Michael Sullivan with Wolfe.

I was just hoping maybe we could refresh a little on what the key components of the organic growth beyond 2026. I know you've kind of laid that out in bits and pieces over the last year or so. But can you maybe just frame that up between like the test, the VPP, some of the other things? What are kind of the core drivers? And then how much of it is the buyback? I know that's become smaller as your stock has done well.

So in terms of the components that are driving the underlying earnings growth for the business, Mike, it's -- first, it's the $750 million growth program that we had announced back in 2023. We are well on the path towards achieving that. We feel very confident that we're going to be able to get there. And if you recall, about half of that was from just regular way organic growth in the Smart Home business, underpinned by like 6% net subscriber growth. And as you saw, we delivered 9% this past year. So the team is executing very well in that regard. And the other half is really from related growth investments in both the C&I business and the retail energy business. So again, we feel very confident about that $750 million. The other levers that are embedded in the plan right now are all 3 test plants. Remember, in the past, we did not have all 3 test plants in the plan, but we now have those, the last of which comes online in 2028. And then finally, we have the 400 change of megawatts of the smaller data center deals that we had previously announced also embedded in the plan. If you think about what that means in terms of how that shapes our growth in that 14% plus, we talked about when we announced the LS transaction that it was about an 80-20 split of organic growth versus share repurchases driving that growth rate, and it's pretty much the same as we sit here today.

Okay. That's very helpful. I appreciate you laying that out, Bruce. And then just in terms of the upgrade opportunities at the LS assets in PJM, any sense of timing there just in terms of what you're going to do, particularly with the RBA going on in the background, but also the value of kind of speed and what you could do there? Just a sense of timing would be great.

Thanks, Sully, it's Rob. So we already have engineers at every plant running around and assessing not just the 1,000 megawatts of uprates that we mentioned when we did the transaction. We're obviously looking at that, but we're also running around, given the RBA and the need for additionality or bringing more power to the markets, we're running around to see if there's 25 or 50-megawatt clips that we can add on to the back of other assets. So we're out there looking. I expect to hear from us later when we actually have some math. But given the timing of the RBA and kind of how that plays out, we're working very hard to know what we can bring to serve that market and serve our customers. And data centers want to get built up there, too. So we'll be looking for opportunities to monetize that through hyperscalers.

Next question comes from the line of Nick Amicucci with Evercore ISI.

Larry, Rob, you guys [indiscernible]. So I'll just keep it with Bruce. Bruce, congratulations on...

Thanks, Nick. You're now his new favorite.

Absolutely. I got all the time in the world for you. All right. Perfect. That's what I was going for. I got 3 quarters worth of questions I got to asked. So just kind of considering -- I mean, it's another kind of strong French strong guidance. You've now kind of beaten and raised 3 straight times. Just anything that we could kind of pinpoint like really what's gone well? What kind of exceeded the expectations just over the past -- the recent past?

I mean with a slight amount of humility, Nick, I'll say it's just we have a great team, and we have great employees, and we just execute really well. I mean that's really what it boils down to is just execution, execution, execution. We took our lumps in years past. We learned a lot from those. We made a lot of significant operational changes. And that is really what's bearing fruit for us. I mean bear in mind, too, that when we budget and we put out guidance, we plan for weather normalized. And depending on what happens with weather, that can also influence the results. And for us, we've had situations where the weather has been favorable for us, and we've been able to take advantage of that.

Nick, I would only add to that, we've created a culture where our employees are always looking to improve, bringing improvements to the table and sharing them in ways probably we've never done before. We are really 1 NRG across all of our businesses and that kind of collaboration, just we keep finding new ways to do everything we do better and more profitably.

Great. That makes a ton of sense. And then I just wanted to kind of triangulate a little bit, too. So just with the VPP opportunity and now having kind of the RTC+B initiative in ERCOT in Texas kind of up and running now for about 2 to 3 months. I mean, is there incremental kind of upside for you guys in particularly just given the amount of data points, whether it be through Vivint or just incremental kind of touch points and able to arbitrage that. Is there kind of -- should we be viewing that as kind of an incremental type of opportunity for you guys?

Yes. I mean it's early days, but we look at this as an enormous opportunity and one that nobody is as well positioned to capture as we are. And when I said at the end of my remarks that the best is yet to come. That's one of the things I think is yet to come. But I think it's an extraordinary opportunity that we're just really beginning to quantify and understand.

The next question comes from Bill Appicelli with UBS.

Congrats to everybody in the room. Just a question around how you guys are evaluating the creditworthiness of the counterparties on some of these data center deals. Are you guys exclusively targeting Tier 1 hyperscalers? Or how are you thinking about evaluating that risk?

Yes. We are -- in fact, I would say that we're targeting even inside of the universe of hyperscalers. We watch all the same credit reports you do.

Okay. And then I guess on the retail channel, you guys -- you've rolled in the 400 change of megawatts. I think you talked about maybe potentially an incremental 500 megawatts within that channel. Is that still an opportunity for you?

Yes. Look, I think we will still see some of those -- I hate to think of 445 megawatts as smaller transactions, but they're smaller than the other ones we've been discussing. And those are ones that won't be targeted to the folks we were just discussing. So yes, we still think that's a great channel that we'll continue to pursue, and you'll hear more about those going forward. But that's -- those are -- we're trying to distinguish for these purposes between the large gig plus hyperscaler deals and the smaller ones of the type that we've already -- we announced during the year.

Okay. And then just one last one. On the $2.2 billion of growth in unallocated through 2030, can you maybe just unpack a little bit of how much of that is actually unallocated? And so we could just maybe understand a little bit of -- on the back end of this plan, when you start to announce some of these contracts, how much of that is available to be allocated towards servicing the data center projects versus maybe having to pull in from some of the share repurchase bucket?

I wouldn't necessarily -- I'd say if you think about the $2.2 billion, a good chunk of that is devoted to the growth plans that we have, the organic growth plans over the years. I wouldn't necessarily look at that bucket as a significant lever towards being able to contribute to the funding of these data center projects. At the end of the day, it's not like massive dollars that would be able to be redeployed anyway. So I don't think you should be thinking about it that way.

The question comes from the line of Angie Storozynski with Seaport.

So my main question is about your upcoming gas-fired new build. I think I'm still recovering from the PTSD associated with gas-fired new build from the early 2000s and the assumptions that were made back then. I mean, I understand that your contracts will be mainly driven by capacity payments, but I still have only about a 10- to 15-year contract for an asset that has a 40-year useful life. And I'm sure you run the same math that I did. It's not actually so obvious to see that double-digit return over the life of the assets, again, given the short duration of the contract. So how do you address this risk as you embark on the gas-fired new build?

I think there's a few things, Angie. One is length of contract. I think we're looking probably past 10. But if you're looking at the pricing that we're getting and the costs that we're paying, we are not going to do anything that doesn't meet our unlevered hurdle rate that we've announced full stop. I promise you that. And Rob promises to you that and Bruce promises you that. I'm going to promise for everybody else in the room. But I mean, Angie, I live through that same period that you did. We have 0 interest in being in the speculative new capacity build business, 0 interest. And so the math -- we work on the math all the time and people who want power at cost less than that, maybe they'll get it from somebody else, but they won't be getting it from us.

Okay. And those prices that you guys quote for those future contracts, do they incorporate payments for the site? So for example, that $90 -- whatever, $95-plus number that Rob is referring to, does it incorporate a site lease? Or is there an incremental payment, for example, for the land itself on top of that? So is $95 just energy or capacity -- energy and capacity?

$95 is -- so Angie, it's Rob. $95 is a representation of the bottom end of what the total value looks like from a capacity and variable component. Remember, this is going to be very, very, very heavy capacity. So it doesn't really translate into a dollar per megawatt hour basis. For each of these transactions that we've looked at, the ones that are on our sites also involve a land transaction, which is not incorporated in the number, right? So the way to think about these is that we are going to get our return and our capital back inside of that 20-year contract as we -- that's how we structure it. That's how we think about it, and that's what we're requiring because we're one of the few people who've got 9 turbines that people can go put on the ground and put next their data center, provide affordability and stay out of regulatory hot water.

Okay. Understood. And then just the last one, the $2.5 billion of an EBITDA upside that you're showing me, does that directly correspond with that 5.4 gigs in gas-fired new build plus the 1 gigawatt of uprates? Or is there something else included in that $2.5 billion of EBITDA?

No, it's exactly what you said, Angie. It's roughly 6 gigs.

The next question comes from the line of Carly Davenport with Goldman Sachs.

You highlighted in the slides several hundred megawatts of bridge power available beginning in 2028. Can you just talk a little bit about that opportunity in terms of maybe key suppliers, what technologies you're looking at and just how you view the duration of that opportunity?

Sure. So you know as well as I do that Bridge Power that works is a limited resource out there today. I'm not going to go through names, but I can tell you the technology that we look at as most successful is overengineered reciprocating engines. There's a lot of need for spinning steel on systems. And what Bridge Power does is gives an opportunity for a hyperscaler to scale up their capacity as the CCGT is being built so that they could get on the ground earlier. And I've mentioned before, but when you think of the hyperscalers that we speak to, their desire for Bridge Power ranges. Some people want it, some people don't. And it's all a matter of where they fit kind of in their data center build plan and how fast they need generation on the ground. So we have agreements with Bridge Power providers. So we have that limited resource that we can offer as part of a package to hyperscalers. And like I said, Carly, some of them -- some of our hyperscaler clients want it. Some of them are going down a path where their portfolio will just absorb the CCGTs when they come on. So it ranges, but it's a good piece of equipment to have to solve the solution for our customers.

Got it. Okay. That's really helpful. And then I think you also noted a new battery storage contract in ERCOT. Just 1 gigawatt, I think, expected to be online at the end of this year. Can you maybe just talk a bit about that opportunity and how you could see the battery portion sort of scaling over time?

Sure. So it's a series of contracts that make up over 1 gig batteries in Texas, they're PPAs, right? So it's -- or tolls, sorry, so that we have them in our portfolio, we can use them in the portfolio and use it as part of how we serve our retail customers here in Texas. As we use those and as we operate them, that will help define what our strategy is over the long haul. Batteries provide short-term burst of power if you need it. It also provides ways for us to shift renewable power between hours. And so as the customer demand changes or it goes up, we'll look to scale that portfolio if it makes sense.

The next question comes from the line of Andrew Weisel with Scotiabank.

I think I'll take a different approach. I'm going to say congrats to Brendan and the IR team. Congrats to everybody. Just a couple of follow-ups. You covered a lot of ground today, but one is you talked pretty positively about the outlook for ERCOT and opportunities for your gigawatts finding homes there. How are you thinking about the batching proposal? Do you worry that might slow things down? Or I think you've had some pretty positive comments there, but how do you see that impacting the pace of signing contracts in ERCOT?

I think the batching work that ERCOT is doing is perfect for the market. It is a great step forward to accelerate the process for people to get data centers and large loads interconnected to the grid. It's actually a very thoughtful approach, and we're very happy that the PUC and ERCOT are making it happen in that way. It makes a lot more sense than a serial process that just stacks up forever. This is a very good thing for us and all of our customers as well as those who want to serve them.

Accelerate, did you say?

I'm sorry?

Did you say...

Versus serial processes of do loops and like reevaluating every time somebody puts something in, yes, this will accelerate it versus that.

Okay. Great. And then one more. Just to be really explicit, the guidance, you talked about you're targeting 1 gigawatt of an announcement for 2026. Is your goal to announce the gigawatt, but the financial impact would be upside? Or does the guidance include that gigawatt but not incremental projects? I just want to specify that.

First of all, it's at least or a minimum of 1 gigawatt. I want to make that really clear. And that gigawatt or more than gigawatt is not included in the guidance or in the roll-forward outlook.

The final question will come from the line of David Arcaro with Morgan Stanley.

Congratulations, Larry, Rob and Bruce. Let me see. Just one question for me. I was just wondering, in the PJM market, how has activity in PJM been impacted by the whole backstop auction process and the general policy uncertainty that we've had over the last several months. Has that changed the pace of conversations with data centers and contracting opportunities just given the policy that's in flux there?

There's a lot of conversations. I mean we've -- it's always -- as we've been talking about for a while, was going to be slower than Texas. It's still going to be slower than Texas. They're making progress going forward. But when you're looking at a 20-year investment, there's a lot to put in place anyway. So I think while we'd all like it to be somewhat faster, it's still progress is being made. It's just faster outside of PJM at this moment.

This concludes the question-and-answer session. I would now like to turn it back to Larry Coben for closing remarks.

I want to thank you all again for all of your support. When I arrived, you came on these calls with an open mind and we're willing to kind of look at NRG freshly. We made you a lot of promises that we kept, and we really appreciate the challenges that you gave us, the feedback that you gave us and the support that you've given us over this last time. And I do mean it when I say the best is yet to come. So thank you all very, very much.

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