NRG Energy near close of 1.2 GW power supply deal with hyperscaler using customer-backed model amid Texas grid approval restrictions
NRG Energy has reached preliminary agreement with an unnamed "global cloud and AI hyperscaler" to develop a 1.2-GW combined-cycle natural gas power plant in Texas, the Houston-based independent power producer announced Tuesday alongside its second-quarter earnings report.
The deal aligns on principal commercial terms but is not yet final. It would deliver the facility by late 2029, with potential to double capacity to 2.4 GW in a future phase. NRG's investor presentation indicates sufficient turbine capacity could be available by 2030, supported by procurement and construction partnerships with GE Vernova and Kiewit that give the company 5.4 GW of CCGT new-build capacity through 2032.
The announcement arrives as Texas Gov. Greg Abbott ordered an audit of data center projects seeking grid interconnections, pausing new approvals pending a project-by-project review of power needs, water consumption, and financial impacts on ratepayers. CEO Robert Gaudette offered limited commentary on whether the pause would affect NRG's pending deal, stating simply, "I think we're OK."
The hyperscaler project advances NRG's "bring your own power" strategy, where large-load customers back incremental generation through capacity and operating payments. The deal carries a minimum 15-year term, backed by a parent-company guarantee, with more than 95% of cash flow derived from capacity payments rather than merchant power revenue.
"We're paid for the megawatts we build and make available, not for how much the data center runs," Gaudette said. "Our return is established upfront and is not dependent on merchant power prices or natural gas prices."
The project's implied build cost of roughly $2,670/kW aligns with recent industry benchmarks suggesting modern baseload gas plants range from $2,000/kW to $3,000/kW.
Gaudette framed Abbott's move as vindicating NRG's strategy. "The environment has changed. Our strategy has not. In fact, the direction of policy is moving toward the model we've been building from the beginning," he said, noting that growing policy pressure on data centers to fund their own capacity supports NRG's approach.
NRG's second-quarter East segment earnings rose $370 million from the prior year, largely due to the 13-GW generation portfolio acquired from LS Power in January. However, Virginia's return to the Regional Greenhouse Gas Initiative will cost NRG approximately $70 million annually and affects 1.2 GW of the LS Power assets—a factor Chung said "was not included in our underwriting."
Texas operations faced headwinds: earnings in the state declined $131 million year-over-year as average round-the-clock power prices in ERCOT's Houston zone fell to $33/MWh, below NRG's $52/MWh planning assumption. "With prices low and volatility limited, our fleet had fewer opportunities to run and our commercial team had fewer opportunities to optimize the portfolio," CFO Bruce Chung said.
The company continues expanding dispatchable capacity under the Texas Energy Fund. NRG brought its 415-MW T.H. Wharton combustion-turbine facility online near Houston in late May—its first new-build generation asset in a decade and the first of several gas-fired generators planned through the TEF program. The project came in on time and on budget. NRG expects to bring more than 1 GW of additional TEF-supported capacity online in Texas over the next two years, with T.H. Wharton eligible for up to $54.72 million in state bonus grants over 10 years, which can mitigate wholesale power price volatility exposure.