NRG Energy Sees $750 Million Loss Following Texas Cold Snap

NRG Energy Inc. withdrew an earlier full-year profit forecast and said it expects a $750 million loss due to the brutal cold snap that froze Texas and led to sweeping blackouts.

“Based on the new information available to us today, we are unable to provide financial guidance due to the unprecedented and unpredictable market outcomes resulting from winter storm Uri,” Chief Executive Officer Mauricio Gutierrez said Wednesday in a statement.

NRG is the latest power company to report taking a hit from the bitter cold after electricity prices surged to $9,000 a megawatt-hour during the blackouts and providers had to turn to the spot market to meet contractual obligations. State lawmakers are considering a plan to claw back some of those payments, though it’s faced significant barriers.

NRG, which operates power plants and provides retail services to homes and businesses in the state, previously projected full-year earnings as high as $2.6 billion. The shares dropped as much as 15% in New York, the biggest intraday decline in a year.

The company revised its estimate of the financial impact as defaults on the Texas grid surged to $3.1 billion from a previous assumption of $1.3 billion, Gutierrez said during a conference call with analysts. The grid operator passes on those defaults as charges to market participants. NRG’s share is “shy of $200 million,” he said.

Gutierrez said the estimates could be revised again as NRG has received resettlement data for 80% of its commercial and industrial load compared with 99% for residential consumers. There remains “significant uncertainty” as Texas lawmakers and regulators consider repricing or other measures to mitigate the impact of the crisis, he said.

“Details matter here,” Gutierrez said.

What Bloomberg Intelligence says:

“The steeper loss could increase the risk that NRG’s credit outlook may be downgraded to negative and its investment grade ambitions could be significantly delayed. S&P recently lowered its outlook to negative for Vistra but confirmed NRG’s BB+ credit rating with a stable outlook.”
-- Jaimin Patel, BI credit analyst
Click here to read the research

The historic outage killed 57 and caused as much as $129 billion in economic losses. The impact on individual companies is only starting to emerge. More than 4 million homes and businesses were left without power, heat or water for days.

Vistra Corp. last month said the blackouts would cost it $900 million to $1.3 billion, days after Exelon Corp. said it expects its first-quarter net income will be reduced by $560 million to $710 million because of the outages.

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