Aug 4, 2026 earnings call — Texas BYOP data-center power deal
NRG is aligned on principal commercial terms for a 1.2 gigawatt BYOP power project in Texas with a leading global cloud and AI hyperscaler.
Revenue $7.5B (est $7.3B) · EPS $1.49 (est $1.69)
Key quotes
"We are aligned on the principal commercial terms with the leading global cloud and AI hyperscaler, including their capital commitment to support 1.2 gigawatts of new generation in Texas with the potential to expand to 2.4 gigawatts."
"The commercial structure provides for 95% of the project's free cash flow to be supported by capacity payments over the term, independent of data center utilization."
"Our commitment to return at least $1 billion to shareholders through share repurchases each year is unchanged."
Analyst Q&A 8
site expansion timing and returns
Q (Julien Dumoulin-Smith · Jefferies): Asked about timing to expand a site from 1.2 gigawatt to 2.4 gigawatt, cadence between CODs, and whether returns on follow-up projects will match this first one.
A: Management said the returns shown for this project are their expectation and commitment to shareholders. Timing depends on CODs and turbine deliveries; Bruce said after the first COD in late 2029 you can assume another 1.2 gigawatt block each year. They also said the 15-year contract structure applies here and the project should address Texas policy concerns given its 2029 COD.
"So the returns that we showed today on this particular project that we're moving forward, that's our expectation." — Robert Gaudette (CEO)
progress, approvals, and counterparty quality
Q (Shahriar Pourreza · Wells Fargo): Why announce principal terms now and what final approvals remain? Also asked about the credit quality of the counterparty (BBB, single A, etc.).
A: Management said they announced because they are in a material place and commercially aligned with customers who have seen and agreed to the structure. They remain subject to negotiation, internal approvals, and ongoing conversations, and will report back when there is another material update. On the credit-quality question, management declined to state a rating.
"As far as things that are what we've stated today, right, we are commercially aligned, meaning that we have a -- they've seen the structure, they agree to the structure." — Robert Gaudette (CEO)
pricing per MWh and PJM plans
Q (Nicholas Campanella · Barclays): Asked if the PPA equivalent is now north of $90 or $100 per megawatt hour given CapEx, and asked for an update on the PJM 2 gigawatt upgrade procurement and bilateral process.
A: They said dollar per megawatt hour isn’t the right lens because of the contract structure, and estimated expected usage is in the "probably $85 to $90 plus range." The structure gives certainty and flexibility for hedging. On the PJM upgrades, they are pursuing a multipronged approach: bidding long-term auctions and continuing bilateral conversations for like-term durable cash flows.
"I think if you were to do the math and expect a capacity -- or sorry, an expected usage off the data center, it's in the probably $85 to $90 plus range." — Robert Gaudette (CEO)
PJM auction share and buyback plans
Q (Carly Davenport · Goldman Sachs): How much of the 2 gigawatts would be economic at the $555 per megawatt day cap, and whether capital allocation (buybacks) could be increased given valuation.
A: They said probably less than half of the 2,000 megawatts would clear through that central auction at that cap, and bilateral conversations continue on all 2,000 megawatts. On buybacks, Bruce said upsizing the program depends on cash flow and executing the project; if they can generate incremental cash, they would consider increasing the buyback.
"The way I think about it, Carly, is it's probably about less than half of that 2,000 would go through that auction that way." — Robert Gaudette (CEO)
funding structure and ERCOT market outlook
Q (Michael Sullivan · Wolfe): Asked about funding the project (on balance sheet vs. capital partners) and impacts on leverage and buybacks, and asked Rob for views on ERCOT pricing dynamics.
A: Bruce said the base case is to fund on balance sheet, which would push the timing to hit their 3x leverage ratio from 2028 to 2029 but still allow deleveraging over time; partnering could create capacity to increase the annual buyback. Rob said ERCOT prices are low now and markets don’t react until projects are real; he expects a medium-term need for generation and that changes in subsidies around '27 will reduce battery/solar build and tighten the market over time.
"I mean right now, the base case is that we just fund all of this on balance sheet and all that really results in is, we've previously spoken about being able to hit our 3x leverage ratio in 2028." — Bruce Chung
interest capitalization and cost breakdown
Q (Agnieszka Storozynski · Seaport): Asked whether interest on project financing is capitalized and how that affects free cash flow, whether debt is Holdco unamortizing, maintenance CapEx size, why EPC costs look large, and whether below-market hedges drag beyond 2026.
A: They said interest expense is IDC and will be capitalized, so it won't affect free cash flow before growth. Assume a permanent capital structure of 3x for the project; they won't yet provide a maintenance CapEx number. Matthew explained EPC includes labor and balance-of-plant equipment while turbines are OEM-supplied. Bruce said the portfolio did include some hedges into 2027 and they will provide detail with 2027 guidance.
"Angie, the interest expense will be -- it's IDC, so it will be capitalized." — Bruce Chung
contract returns and when payments start
Q (Moses Sutton · BNP Paribas): Clarified whether the return structure equates to $1,150 per megawatt day with pass-through P&L costs, whether later projects will have higher cost of entry, and whether capacity payments start at COD or ramp with data center use.
A: They declined to comment on specific contract terms but said the project is within their 12% to 15% return hurdle. Rob added that if build costs rise, their return expectations do not change and they will sign deals within their 12% to 15% hurdle. Bruce said the annualized capacity payment switches on immediately upon COD.
"Moses, we are not going to comment specifically on any of the specific terms of the contract." — Bruce Chung
2026 guidance confidence and upgrade costs
Q (Nicholas Amicucci · Evercore): Asked how confident they are in 2026 guidance given subdued ERCOT prices and potential PJM benefits, and asked a rule-of-thumb on build cost for CT-to-CCGT conversion relative to $2,700 for greenfield.
A: They said results are likely below the midpoint but they still expect to be within the guidance range because the fleet is substantially hedged for the year and most committed load has been acquired, giving visibility on earnings. On the CT-to-CCGT conversion cost vs greenfield, management said the conversion is lower and faster.
"But we still feel confident that we'll be within guidance range." — Bruce Chung