NRG 1Q2016 Earnings Note

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Market Price (5/5/2016): $14.86/share; ST-Target: $30/share; NIV: $66/share

Regressing in some ways, remaining stubborn & progressing in others

Moving ST-Target to $30 and NIV goes to $67 from $21 and $50, respectively. Emotional ups and downs are rare when listening to earnings calls but NRG brought about some extreme emotions. When talking about future fundamentals, NRG remained stubborn, but also sounded weirdly like sell-side analysts who seem to want to have everything both ways all the time. However, NRG’s innovative financing of capacity payments is a brilliant financial initiative. But then its Home Solar and eVgo restructuring fell short of expectations. In our last note we stated that “Mauricio Gutierrez and new management team didn’t disappoint[;]” however, in this call we were less than impressed. We like that NRG continues to focus on debt repayment and cost savings, but NRG has yet to disavow share buybacks, and we’d still like NRG to officially and separately reestablish a customer-based marketing and trading business through a bankruptcy-remote sub with strong, consistent and vigorously enforced risk-management policies. NRG needs to roll-up NYLD, in our minds.

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