NRG Power has appointed the chair of its board of administrators, Dr. Lawrence Coben, as its interim president and CEO and appointed 4 new impartial administrators to its board, signaling a serious management reshuffle partly influenced by activist investor agency Elliott Funding Administration.
The Houston-headquartered power large on Nov. 20 mentioned Mauricio Gutierrez, NRG’s long-time and influential president and CEO, “has departed the Firm and resigned from the Board.” The corporate’s board “has initiated a search to establish a everlasting CEO and retained a number one search agency to help with this course of,” it mentioned.
NRG additionally introduced that, pursuant to a “cooperation settlement” with Elliott, it will add 4 new impartial administrators to its board. These embrace Marwan Fawaz, a former government at Google, Alphabet, Nest, and Motorola House; Kevin Howell, who served as COO of Dynegy Inc. and Regional President of NRG Texas; Alex Pourbaix, the manager chair and former CEO of Cenovus Power; and Marcie Zlotnik, who co-founded and led StarTex Energy as COO and Chair.
The brand new administrators “have been recognized as a part of NRG’s beforehand introduced Board refreshment course of and in collaboration with Elliott,” NRG mentioned. With the appointments, NRG’s board now contains 13 administrators, 12 of whom are impartial.
Lastly, NRG mentioned it will additionally “conduct a complete assessment of its operations and value construction to establish further alternatives to develop into extra environment friendly and additional improve capital return to shareholders,” it mentioned. “The assessment can be undertaken with a continued dedication to reliability within the markets NRG serves and with the help of exterior advisors.”
Strain from an Activist Investor
The adjustments observe repeated calls by utility investor and hedge fund Elliott for a brand new CEO and “enhancements” to the board of administrators. Elliott in Could notified NRG it had spent $1 billion and claimed to carry a 13% “financial curiosity” (by means of inventory and derivatives) in NRG. In a letter despatched to NRG’s board, the agency prompt the corporate had “meaningfully underperformed resulting from quite a lot of operational and strategic missteps.” Among the many missteps the agency outlined is NRG’s $2.8 billion buy earlier this 12 months of Vivint House, a “smart-home” platform.
Vivint’s acquisition, as POWER has reported in-depth, marked a step change for the traditionally generation-focused aggressive power supplier—which was as soon as the nation’s largest impartial energy producer. But it surely was designed as a strategic effort to form the corporate’s future market standing as electrification beneficial properties tempo and the residential sector adopts sensible and related units. In keeping with Elliott, nevertheless, the acquisition, “measured by the one-week market response following its announcement, was the one worst deal within the energy and utilities sector previously decade.”
Elliott has notably mentioned its latest intervention echoes activism in 2017 when it beneficial NRG rein in its deal with its core service provider energy and retail electrical energy enterprise. The trouble culminated within the firm’s “Transformation Plan,” reinvigorating the corporate’s monetary initiatives, together with $1.065 billion of complete value and margin enchancment, $2.5 billion to $4.0 billion of asset divestitures, and $13 billion of debt discount, the agency has claimed. Throughout that point, NRG relinquished GenOn’s 15.4-GW fleet—almost a 3rd of its fleet—to its collectors and unloaded a 3.4-GW renewable asset portfolio in NRG Yield.
In June, Elliott as soon as once more known as for a brand new chief, shifting blame straight on CEO Gutierrez, who it claimed had “misplaced the arrogance of the core investor base.” The board “lacks the need to make the suitable choice for the corporate,” it mentioned. In response, NRG Board of Administrators Chair Coben in a assertion mentioned the board totally supported Gutierrez, the corporate’s administration crew, and the corporate’s technique “to drive substantial, sustainable shareholder worth.”
However in July, Elliott requested the Federal Power Regulatory Fee (FERC) for permission to purchase as much as 20% of NRG’s inventory. The agency’s energy play raised considerations from client advocacy group Public Citizen, which in August known as on FERC to analyze Elliott’s proposed acquisition, suggesting that Elliott’s relationship with coal provider Peabody Power raised anti-competitive considerations. Public Citizen has urged FERC to require extra particulars of all spinoff contracts it used to accumulate NRG’s “financial curiosity” in addition to make clear what position its executives will play on NRG’s board.
NRG Reaches Cooperation Settlement with Elliott
Underneath Elliott’s cooperation settlement with NRG reached on Monday, NRG’s board may have a most of 13 administrators till NRG’s 2024 annual assembly, after which cut back it to 11 administrators afterward. This measurement adjustment is conditioned on a brand new CEO’s appointment or by Dec. 31, 2024. If any new director appointed below the settlement can’t serve or leaves earlier than the top of the Cooperation Interval—which is slated with circumstances to finish in November 2024—NRG and Elliott will collectively choose a substitute, supplied Elliott nonetheless owns not less than 1% of NRG’s excellent frequent inventory.
On Monday, Elliott appeared to laud NRG’s abrupt reshuffle. “We invested in NRG as a result of we believed {that a} renewed deal with best-in-class operations and returns-driven capital allocation would strengthen NRG and allow it to ship important upside for shareholders,” mentioned Elliott Companion John Pike and Portfolio Supervisor Bobby Xu in a press release. “The adjustments introduced right this moment, together with the addition of 4 new Board members with robust operational backgrounds, characterize a key milestone towards this finish. We stay up for persevering with our dialogue with the Firm as it really works to execute on this chance.”
Coben, who has served as NRG’s board of administrators chair since 2017 and has been a member of the corporate’s board since 2003, thanked Guitierrez “for his contributions in serving to to construct NRG’s strong basis as we put together for the following technology of management.”
The brand new administrators, Coben prompt, will deliver “complementary expertise as confirmed operators within the power trade and in main rising revolutionary house know-how firms with iconic manufacturers. Their experience will assist guarantee we seize the worth we create by providing a wiser, cleaner and extra digitally enhanced power ecosystem. We welcome them to the Board,” he mentioned.
—Sonal Patel is a POWER senior affiliate editor (@sonalcpatel, @POWERmagazine).
