Elliott Seeks Shakeup at NRG After ‘Worst Deal’ of Decade

(Bloomberg) -- Elliott Investment Management LP is calling for a boardroom shakeup at NRG Energy Inc., the second time in six years the activist investor has pushed for changes at the independent US power producer.

Elliott said in a letter sent to NRG’s board Monday that the company “has meaningfully underperformed due to a number of operational and strategic missteps.” The investor said it now manages funds that have an economic interest of more than 13% in NRG and is calling on the board to add new, independent directors.

NRG shares surged as much as 7.3% on Monday and were up 1.9% at 1:51 p.m. in New York. “NRG is committed to creating shareholder value and appreciates Elliott’s interest,” the company said in a statement, adding that it “welcomes all shareholders’ input and looks forward to an open dialogue with Elliott.”

Elliott criticized NRG for agreeing to buy home technology company Vivint Smart Home Inc. for $2.8 billion in December, calling the purchase a bad bet on a strategy that other companies have already failed to execute. 

“As measured by the share price reaction following its announcement, the Vivint transaction ranks as the single worst deal in the power and utilities sector during the past decade,” Elliott said in Monday’s letter. The firm also said NRG missed two years of financial guidance after struggling with repeated power plant outages and showed an inability to deal with extreme weather.

Elliott called NRG “unfocused” and laid out additional demands in its letter: a strategic review of its home services strategy, including Vivint, and return to shareholders at least 80% of free cash flow. Elliott said its plan could create more than $5 billion of shareholder value and drive the company’s shares to $55.

Elliott disclosed an earlier investment in NRG back in 2017, when it was critical of the company’s strategy. The firm sold the stake in 2018 after the power producer agreed to offload assets worth 2.8 billion, including renewable energy operations. 

The firm has taken stakes and pushed for changes at multiple energy companies. Elliott gave input on Canadian oil producer Suncor Energy Inc.’s new chief executive officer last week, disclosed a stake in gas and electric utility NiSource Inc. last year and struck a deal with Duke Energy Corp. in 2021 to add two independent directors to the US utility giant’s board.

(Update with company comment and share price in third paragraph. Previous versions corrected Elliott’s spelling and ownership history.)

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