Elliott campaign results in chief’s exit from US power company NRG

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NRG Energy has parted ways with its chief executive and agreed to overhaul its board following a months-long campaign by activist investor Elliott Management over the strategic direction of the $11bn US power company. 

The utility group said on Monday that Mauricio Gutierrez had left his role, while it had appointed four new directors as part of a “co-operation agreement” with Elliott, the aggressive hedge fund led by Paul Singer.

The reboot comes after a tense stand-off sparked by NRG’s pivot into security cameras and other home services through its $5.2bn acquisition of Vivint Smart Home in March, which Elliott branded “the single worst deal in the power and utilities sector in the past decade”.

Elliott in June branded Gutierrez a “deficient leader” and demanded he step down as part of a management overhaul.

In a statement on Monday, Elliott executives John Pike and Bobby Xu said the changes represented “a key milestone” that would “strengthen NRG and enable it to deliver significant upside for shareholders”.

The deal marks the second time Elliott has forced changes at NRG, a Texas-based utility and power producer with 7.3mn customers. In 2017, an earlier campaign drove the company to cut the size of its electric-generating fleet and refine its focus on selling retail electricity in competitive power markets.

Elliott launched its latest campaign in mid-May following the Vivint deal, arguing that the foray into home services had pushed the utility beyond its core competency. It disclosed a 13 per cent stake and demanded NRG rethink its strategy. Elliott later made wholesale management change the focus of its demands. 

Since mid-May, NRG’s shares have risen 47 per cent, compared with a 10 per cent loss for the S&P 500 utilities index. Shares of NRG fell 1 per cent in early trading on Monday.

NRG’s leadership initially stood its ground, unveiling plans to almost triple the size of its share repurchase programme to $2.7bn and said it would cut costs, pay down debt and refresh the board.

As part of the deal announced with Elliott, NRG said on Monday it would carry out a “comprehensive review of its operations and cost structure to identify additional opportunities to become more efficient”. But it gave no indication that the Vivint deal would be reversed.

“The integration of Vivint is well under way, and as a differentiated company at the intersection of energy and smart home technology, NRG has clear upside value creation opportunities,” said Lawrence Coben, NRG’s chair, who has been appointed interim chief executive.

He added: “The board is confident in NRG’s strategic direction as a consumer energy and services company.”

Among the new directors appointed is Marwan Fawaz, former chief executive of Google smart home subsidiary Nest and Motorola Home.

Also joining the board are Kevin Howell, former head of NRG’s Texas business, Alex Pourbaix, former chief executive of Canadian oil group Cenovus Energy, and Marcie Zlotnik, co-founder of Texas retail electricity provider StarTex Power.

NRG said it had hired a recruitment company to search for a new permanent chief executive.