Elliott Demands NRG Seek New CEO as Boardroom Battle Rages

The activist investor is demanding that NRG immediately initiate a search for an external CEO and add new directors to its board, according to a public letter Tuesday.

Shares of NRG rose 1.8% at 3:28 p.m. in New York.

Elliott has criticized the company’s leadership and strategy, especially its $2.8 billion acquisition in March of home technology provider Vivint Smart Home Inc. The investor says it manages funds with an economic interest of more than 13% in NRG, and is pushing the power company to prioritize returning capital to shareholders.

“NRG’s CEO has lost the confidence of the core investor base, and the board lacks the will to make the right decision for the company,” Elliott said in the letter. While NRG announced plans to boost share buybacks at an investor day meeting last week, Elliott said the moves were “wholly insufficient to remedy a deeply flawed strategy overseen by a leadership team unfit to execute.”

NRG said at the June 22 meeting that it was boosting share buybacks and had plans to refresh its board. The company said it will spend $2.7 billion on share repurchases through 2025, up from its earlier $1 billion plan.

“The board fully supports NRG’s CEO Mauricio Gutierrez and management team and the strategy they are executing to drive substantial, sustainable shareholder value,” an NRG spokesperson said in an emailed statement Tuesday.

The letter comes about six weeks after Elliott began calling for a boardroom shakeup at NRG, the second time in six years that it had put NRG in its sights.

Vivint Deal

Elliott has called the Vivint acquisition the “worst deal of the decade.” The investor said in the letter that the strategy it is pushing could “create more than $5 billion of value at NRG.”

The unwinding of the deal is unlikely and not in investors’ interest though the deal is “value-neutral”, wrote Morningstar analyst Travis Miller in a Tuesday note.

“We continue to believe the retail energy, home services, and power generation businesses do not have sustainable competitive advantages,” Miller said.

However, analysts at Bank of America Corp. argued in a note dated June 22 that Vivint is funding itself. While half of the growth capital is allocated toward new gas plants in Texas worth $700 million, the check could flip into a power purchase agreement with any prospective buyer of the sites, increasing shareholder return, the analysts said.

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.

Elliott has a long history of taking stakes and pushing for changes at energy companies. It gave input on Canadian oil producer Suncor Energy Inc.’s new chief executive officer last month, 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.