Will NRG's Acquisition and Capital Expenditure Set New Growth Path?

NRG Energy’s NRG recent $12 billion acquisition of LS Power’s 12.9 gigawatts (GW) natural gas portfolio marks a transformative step in its evolution from a primarily retail-focused utility to a major player in U.S. power generation. This deal effectively doubles NRG’s generation capacity to more than 25 GW, significantly strengthening its presence in high-demand regions like Texas and the Northeast. Courtesy of this acquisition, NRG Energy is now better equipped to meet the surging electricity needs driven by AI data centers, electrification and rising domestic commercial and industrial demand.

NRG plans to deploy annual capex of $1.3 billion through 2029 in generation optimization, virtual power plant technology and grid reliability solutions. These efforts will focus on modernizing its newly acquired gas fleet, expanding distributed energy platform and supporting long-duration dispatchable capacity, which is essential for reliability in a decarbonizing grid. The new clean generation fleet will reduce emissions as NRG targets net-zero emissions by 2050 from the 2014 baseline.

NRG Energy has made notable strides in its transformation into an integrated power company by prioritizing customer-centric strategies. The company has been trying to slowly lower the proportion of debt in the capital mix for a while and is targeting $3.7 billion debt reduction over 24-36 months.

Looking ahead, as the United States enters a prolonged power demand supercycle, NRG Energy is uniquely positioned with the scale, asset base and capital discipline to benefit. With strong free cash flow and investor-aligned capital returns, the company offers an attractive opportunity for long-term growth and income.

Utilities Are Gearing Up to Meet Rising Clean Energy Demand

NextEra Energy NEE expands its operations through organic projects and acquisitions. NEE will add more renewable projects to its portfolio and has nearly 28 GW of renewable projects in backlog. NextEra plans to deploy more than 7.6 GW of battery storage to support the clean energy transition.

The Southern Company’s SO Vogtle Unit 4, in service from April 2025, has been marking the completion of America’s first newly constructed nuclear units in more than three decades. SO’s large load pipeline now exceeds 50 GW across its electric subsidiaries. Southern is ready to meet clean energy demand from data centers and industrial customers.

NRG’s Return on Equity Better Than Industry

Return on equity (ROE) is an essential financial indicator that evaluates a company’s efficiency in generating profits from the equity invested by its shareholders. It demonstrates how well management is utilizing the capital provided to increase earnings and deliver value. The current ROE of NRG Energy indicates that it is using shareholders’ funds more efficiently than peers in its industry..

NRG Energy’s Shares Trading at a Premium

The company is currently valued at a premium compared with its industry on a forward 12-month P/E basis. NRG Energy is currently trading at 18.73X compared with the industry average of 15.17X.

NRG Energy’s Earnings Estimates Moving North

The Zacks Consensus Estimate for NRG’s earnings per share indicates year-over-year increase of 9.64% and 20.33% in 2025 and 2026, respectively.

NRG’s Zacks Rank

NRG Energy currently has a Zacks Rank#3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

 

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This article originally published on Zacks Investment Research (zacks.com).

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