NRG Energy is making it a priority to meet the demand driven by data centers, and aiming to serve that growth with a bring-your-own-power framework, but is committed to avoiding the mistakes of the early-aughts gas bubble, said CEO, President and Chairman Larry Coben in a Tuesday earnings call.
“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,” said Angie Storozynski, managing director and senior equity research analyst at Seaport Research Partners on the call, referring to NRG’s planned buildout of gas generation to meet large load demand.
“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,” said Coben. “I promise you that … I'm going to promise for everybody else in the room. Angie, I lived through that same period that you did. We have zero interest in being in the speculative new capacity build business, zero interest.”
NRG is examining data center opportunities with contracts of up to 20 years, said CFO Bruce Chung, and “will evaluate those opportunities with discipline. Rest assured that any and all of those situations will be measured against our stated hurdle rates of 12%-15% pretax unlevered [internal rate of return] and the implied return of buying back our stock.”
NRG has a 5.4 GW pipeline of combined-cycle gas turbines with equipment and engineering, procurement and construction secured through its GE Vernova and Kiewit ventures, along with 1 GW of uprate potential within its recently acquired LS Power portfolio, according to its earnings presentation.
NRG’s residential virtual power plant in Texas began enrolling customers last spring and finished the year at 10 times its original scale objective, Coben said.
“We’ve been really pleased with the results in Texas,” said Brad Bentley, president of NRG Consumer, during the earnings call. “We continue to scale in Texas. 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.”
The company has a goal to sign at least 1 GW of long-term data center contracts using bring-your-own-power this year, Coben said.
“New large loads must bring their own power and contract for the generation that supports them,” he said. “Flexible demand response must scale alongside that, otherwise prices will rise and volatility will increase … Data centers must pay for their required capacity additions. Cost and volatility should not be shifted to existing customers.”
NRG has set a 1 GW target for 2035 for its Texas VPP and is “preparing to extend that model into PJM,” Coben said. The company has combined its legacy demand response platform with CPower’s commercial and industrial VPP platform after acquiring a portfolio of CPower assets, in a deal with LS Power, which closed in January.
The portfolio also included 18 gas-fired generation facilities totaling approximately 13 GW, NRG said in a release.
NRG’s overall integration of LS Power’s assets “is well underway and performance is already exceeding our underwriting assumptions,” Coben said.
“With LS Power now closed, we are rolling forward our long-term outlook,” he said. “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.”
That 14% growth target follows the company’s EPS outperformance in 2025 of $8.24, after setting an original guidance of $7.25.
This target “extends the prior five-year framework, which ended in 2029, and reflects our expanded earnings base,” Coben said. “Consistent with our prior methodology, the outlook assumes flat power and capacity prices across the planning horizon. I must emphasize that the outlook does not assume any additional data center contracts or higher power or capacity prices.”
