Power August 2023 - 24

UTILITY SPOTLIGHT
NRG Energy's Pivot Amid
Power Sector Change
Once a giant pure-play independent power producer, NRG Energy has cultivated a
legacy of pioneering business models to withstand waves of change in the power
sector. Its latest strategic shift pivots from megawatts generated to customers
served.
Sonal Patel
A
mere decade ago, NRG Energy,
which described itself as a " competitive
power and energy company, "
held a massive 48-GW generating
fleet with assets dispersed throughout
the U.S. By the end of 2022, the company
had accomplished a remarkable
corporate overhaul, ridding itself of nearly
two-thirds of that capacity and regenerating
itself as a " consumer services
company built on dynamic retail brands. "
However, that transformation has represented
only one stage of the company's
elaborate metamorphosis.
As a horizon for deregulation began
to emerge in the late 1980s, Northern
States Power Co. (NSP), a Minnesotabased
utility founded in 1909, tasked David
Peterson to start a new business that
could acquire, build, own, and operate
non-regulated power and energy segments.
Peterson-a 25-year company
veteran who had climbed the ranks starting
in power plants and rising to running
corporate fuel supply-in 1989 began
leading NRG Energy as a wholly owned
NSP subsidiary.
Powered initially by a series of cogeneration
power plants in California,
NRG Energy formally incorporated as a
Delaware corporation in 1992. By 1993,
the company had branched out internationally,
acquiring interests in plants in
Latin America, Germany, the Czech Republic,
and Australia. And by 1999, the
company's power capacity surged to
11 GW, padded by major fossil power
acquisitions like Dunkirk and Huntley in
upstate New York and combustion turbines
in California.
However, as restructuring gained
steam, NSP merged with New Century
Energies, a Colorado-based mid-sized
public utility holding company, in an effort
to gain more business clout. While
the merged companies rebranded to
create Xcel Energy, NRG, then already a
hefty generator with a 15-GW fleet, was
24
1. NRG Energy has owned a 44% share of the 2.6-GW South Texas Project Electric Generating
Station (STP) nuclear power plant located in Bay City, Texas, since 2006, along with municipal
utilities CPS Energy (40%) and Austin Energy (16%). Under a definitive agreement announced
in June 2023, NRG will sell its stake in STP to Constellation Energy. Courtesy: NRG
spun off as an independent entity. While
Xcel still owned a 74% interest in the
nascent NRG after it completed a public
offering, NRG largely functioned as an
Xcel subsidiary.
At the time, NRG, still headquartered
in Minneapolis, was bent on an aggressive
expansion, highly optimistic that
the U.S. power generation sector would
evolve away from regulation based on
cost-of-service pricing to an independent
power generation market based on competitive
market pricing. Within a year, the
company had extended its full or partial
ownership to 76 generation projects-a
combined 24 GW, including 5 GW located
outside the U.S.
But much of the expansion, including
construction of new projects, required
intensive capital, and the majority was
fulfilled with third-party debt. In 2002,
as an economic downturn froze the
market, NRG's financial burden became
significantly heavier. Struggling
to pay off a $9.4 billion debt it had accumulated
on its balance sheet through
" aggressive purchases, " the company
and 25 subsidiaries in May 2003 voluntarily
filed for Chapter 11 bankruptcy
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protection and began a comprehensive
restructuring. While the bankruptcy
forced NRG to sell off assets-including
its foreign fleet-and halt construction
of nearly 4 GW of new projects, it
eliminated Xcel's equity ownership and
allowed the company to relaunch as an
independent public company.
By 2006, buoyed by market forces,
NRG had resumed its expansion spree.
Its most significant acquisition during
that period was of Texas Genco, whose
generating assets in the Electric Reliability
Council of Texas (ERCOT) comprised
10.4 GW, many of which NRG retains
today as its core generating base in
Texas. They include major baseload coal
and nuclear plants, and intermediate, cyclic,
and natural gas assets, such as the
mammoth 2.5-GW coal-fired W.A. Parish
plant, the 1.6-GW coal-fired Limestone
plant, the 1.4-GW Cedar Bayou natural
gas plant, and an undivided 44% interest
in two nuclear generation units at
the 2.6-GW South Texas Project Electric
Generating Station (STP, Figure 1).
In 2009, while still chiefly a competitive
power generator with a 24-GW
fleet, the company acquired Reliant
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