NRG Energy Discloses Long-Term Outlook & Increased Share Buyback Authorization

NRG Energy Inc NRG provided an update on its consumer services strategy and capital allocation framework, and operating efficiency initiatives at an investor day today.

Free cash flow (FCF): Factoring in the acquisition of Vivint Smart Home Inc, the company expects incremental FCF before growth of $300 million by 2025.

Related: NRG Energy Bolsters Retail Platform Via $5.2B Vivint Smart Home Deal - What's On The Cards?

The company expects FCF before growth per share to increase around 15% to 20% on a compounded annual basis from 2023-2027, equating to cumulative excess cash (after deleveraging) of $8.3 billion, which exceeded the current market cap.

Capital Allocation Framework: NRG revised the capital allocation framework (after deleveraging) from 50% / 50% earlier. It now expects to return 80% of excess cash to shareholders and spend 20% on growth initiatives. 

Repurchase & Dividend: The company expects cumulative capital returns of $6.9 billion to stockholders via share repurchases and dividends through 2027. 

NRG raised the share repurchase authorization to $2.7 billion from $1.0 billion through 2025. The company expects long-term annual dividend per share growth of 7% to 9%.

Balance Sheet: The company expects to achieve up to $2.55 billion of debt reduction, targeting net debt / adjusted corporate EBITDA of 2.5x to 2.75x by 2025.

Cost Savings Initiative: NRG launches a new cost reduction initiative of $150 million to be completed by 2025. 

Also, the company announced Direct Energy cost synergies of $300 million, to be completed by 2023, and $100 million in cost synergies related to the Vivint acquisition, to be achieved by 2025.

"We have strengthened our core energy business with a leading smart home technology platform, positioning NRG to capitalize on the convergence of electricity and smart technologies inside the home. In the next five years, our plan will generate excess cash that will exceed our current market capitalization and deliver tremendous value for our shareholders," said Mauricio Gutierrez, NRG President and CEO.

Related: Activist Investor Pressures NRG Energy To Change CEO: Report

Price Action: NRG shares are trading higher by 3.57% to $35.09 premarket on the last check Thursday.