NRG Energy Bets on Future of Gas With $12 Billion LS Deal
(Bloomberg) -- NRG Energy Inc. agreed to acquire a fleet of natural gas-fired power plants from LS Power Equity Advisors LLC for about $12 billion including debt, betting the fuel will be crucial to meet electricity demand from data centers.
The cash-and-stock deal calls for NRG to buy 18 gas-fired facilities from LS with a combined capacity of about 13 gigawatts, the companies said Monday in a statement. That’s enough to power about 10.4 million homes.
NRG, a Houston-based independent power producer, has already been a key beneficiary of the AI-driven boom that’s upended the US power system, and now it’s vying to take a bigger share of that growth. Electric demand had been mostly flat for a generation before OpenAI unveiled ChatGPT in late 2022, signaling the arrival of artificial intelligence. Now, a surge in data centers to power AI has reignited investor interest in electric providers.
“It’s kind of like finding the Holy Grail,” Chief Executive Officer Larry Coben, an archaeologist, said in an interview. “This portfolio seems to be the perfect fit for us.”
The facilities NRG is buying are spread across nine states, expanding its footprint in the Northeast and Texas. The move gives NRG a larger presence on the grid run by PJM Interconnection LLC, the operator powering the data center capital of the world in northern Virginia.
NRG is also acquiring LS’s CPower business, a 6-gigawatt portfolio of commercial consumers that has agreed to curtail usage to free up supply when the grid is stressed. Having a large stable of big power users willing to throttle back usage could give NRG a critical tool for the future.
Grids are designed to withstand the very hottest and coldest days of the year, when power demand peaks. That means on most days, there’s spare supply. If power producers can coordinate users to conserve energy when the grid needs it, they can connect more homes and businesses without bringing the system to the brink of blackouts during heat waves and deep freezes.
Investors rallied behind the deal, sending NRG shares up as much as 25% on Monday, the most intraday since July 2017. It was a far cry from the reaction to the company’s last big acquisition of Vivint Smart Home Inc. for nearly $3 billion, which caused shares to plunge and drew ire from activist investor Elliott Investment Management LP.
With the LS purchase, NRG said adjusted earnings per share will now expand at 14% on a compound annual growth rate over five years, up from previous guidance of 10%. The company reiterated its previously announced plan to spend $1.3 billion on share repurchases and dividends of about $345 million.
“That 14% includes zero from data centers,” but these big power users will be a significant part of NRG’s future, Coben said. “We are still vigorously, vigorously pushing that.”
NRG increased its order for big gas turbines with GE Vernova Inc. by 1.2 gigawatts to 2.4 gigawatts. These new power plant would most likely support demand from data centers, though other customers may want to lock in new supply too given tightening in power markets, he said. Coben, who declined to discuss details at this time, said that gas and renewables are both needed to feed the super cycle of demand growth.
The deal is expected to close in the first quarter of 2026.
LS Power will keep about 10 gigawatts of natural gas, renewable and energy storage capacity. It will also hold onto its transmission business, LS Power Grid platform, which has more than 780 miles of high-voltage lines in operation and another 350 miles under construction or development.
Citigroup Inc., Goldman Sachs Group Inc. and Scotiabank served as NRG’s advisers on the deal. Citi and Goldman are providing financing. White & Case LLP was NRG’s legal counsel.
Evercore was LS Power’s lead financial adviser.
(Updates with CEO interview starting in fourth paragraph, share prices in seventh paragraph.)
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