Businessmodel of NRG Energy

Customer Segments

NRG serves a broad range of customers, across multiple segments and sectors. NRG’s retail business provides home energy and related services as well as personal power to consumers to approximately 2.77 million recurring customers, and around 624,000 discrete customers of products and services, including:

• Residential customers, including family households, and individual apartments and apartment buildings;
• Commercial customers, including a range of businesses of varying sizes;
• Industrial customers, including various industrial companies, such as manufacturers and engineering companies. NRG also provides a full range of renewable solar energy solutions to utilities providers, schools, municipalities, and businesses, and operates thermal infrastructure assets that provide steam, hot water, and in some instances electricity, to commercial businesses, universities, hospitals and government bodies. Among NRG’s customers are high-profile companies such as Kaiser Permanente, Unilever, and Cisco.

NRG does not have a broad international customer base. It is based in the US, and serves customers across its domestic market.

Value Propositions

NRG provides value to its customers in the following ways:

• The quality and reliability of its products and services, with the Company established as a reliable provider of energy solutions, utilising an efficient generation and distribution infrastructure system;
• Its commitment to delivering innovative and sustainable solutions, with the Company involved in ongoing research and development with a view to providing state-of-the-art sustainable services to customers;
• Its broad range of customers, with the Company providing services to suit general consumers, commercial entities, public and government bodies, and industrial businesses; and
• The technical expertise of its personnel, with the Company employing a team of highly-trained, specialist staff across its operating segments, led by experienced industry executives. ### Channels

NRG operates a website at www.nrg.com, through which the Company provides information on its products, services, and energy assets. While the Company details its various services, it does not operate an online sales channel.

NRG operates an in-house direct sales force, through which it makes its energy sales under various brand names, including NRG Reliant. Customers are served through a variety of sales channels, including direct sales representatives, call centres, brokers and brick-and-mortar stores, as well as the Company’s domestic network of offices. Business-to-business sales are conducted by specialist teams, organised by operating segment and unit.

NRG delivers power and utilities through its own generation, distribution, and transmission infrastructure. It owns and operates approximately 50,000 MW of generation, including one of the largest and most diversified power generation portfolios in the US, with assets are diversified by fuel-type, dispatch level and region. The Company has generation assets in or near Houston, New York, Chicago, Washington DC, New Jersey, southwestern Connecticut, Pittsburgh, Cleveland, Los Angeles, San Diego, and San Francisco.

Customer Relationships

NRG does not provide any products or services to its customers on a self-service basis. The Company, instead, consults directly with its customers – both businesses and consumers – with a view to establishing each client’s individual needs. The Company provides the majority of its services to through long-term sales contracts, which are often pursuant to rates regulated by state utility commissions, with a view to establishing longstanding relationships and recurring business.

NRG provides ongoing support to and works closely with its customers throughout the provision of its products and services. The Company operates customer service teams across its various business units, which can be contacted by customers over the phone for a personalised response to queries and concerns.

The NRG website includes a news page, where the Company publishes press releases and provides market reports, keeping its customers updated on the Company’s operations. The Company also operates Facebook, Twitter, LinkedIn, and Google+ accounts, through which it is able to interact directly with its customers.

Key Activities

NRG is a US-based integrated power company. It is engaged in the production, sale, and delivery of energy, and energy products and services across domestic power markets.

The Company’s activities are divided into several business segments: NRG Business, which includes the Company’s power generation, carbon capture and energy services offerings; NRG Home, which includes the Company’s residential retail services and products, and the installation and leasing of residential solar solutions; NRG Renew, which is concerned with the operation of solar and wind assets; and NRG Yield, which includes certain of the Company’s contracted generation assets.

NRG is also involved in certain corporate activities, largely through its subsidiary Boston Energy Trading and Marketing. NRG owns and operates one of the largest energy networks in the US, with around 50,000 megawatts of generation capacity.

Key Partners

NRG collaborates with a range of companies and organisations, throughout the generation, sale, and distribution of its energy products and services. The Company’s solar business, in particular, targets strategic partnerships with local, regional, national and multi-national companies and institutions to provide on-site and off-site renewable power generation. NRG’s other partners include:

• Power Generation and Joint Venture Partners, comprising a range of energy and energy service companies and municipal and local government bodies, with which it collaborates on joint-venture projects through mutually-owned vehicles;
• Sales and Marketing Partners, comprising a range of channel partners that help to extend the Company’s own sales and marketing reach;
• Supplier and Vendor Partners, comprising vendors and suppliers of services, equipment, and resources that support and supplement the Company’s operations, as well as various companies to which non-core functions are outsourced; and
• Strategic and Alliance Partners, comprising a range of companies and organisations, with which the Company shares resources and collaborates on joint projects. In 2014 NRG became the exclusive electric energy partner of Comcast in Pennsylvania. The Company has also recently agreed a deal with the NBA’s Miami Heat franchise as part of a clean energy partnership, and has collaborated with the University of Louisiana at Lafayette to develop solar energy solutions.

Key Resources

NRG’s key resources are its various permits and licences, its physical energy generation and distribution assets, its technologies, its partnerships, its sales and marketing channels – including its physical network of outlets, and its personnel.

The Company’s physical infrastructure and assets are key to its activities. The Company owns and operates power production and cogeneration facilities across the US, organised into three regions: Gulf Coast Region, East Region, and West Region.

Cost Structure

NRG incurs costs in relation to its research and development activities, the operation and maintenance of its energy generation and distribution assets, the management of its partnerships, the operation of its sales and marketing channels – including physical outlets, and the retention of its personnel.

In 2015, NRG accrued sales costs in the amount of $7.84 billion, its largest expense. The Company also recorded annual operation and maintenance costs totalling $2.31 billion, and selling, general and administrative expenses amounting to $1.22 billion. Included within these expenses are the payment of salaries and benefits to the Company’s 10,468 employees.

Revenue Streams

NRG generates revenue through the provision of energy and energy services to a range of customers, including consumers, commercial entities, industrial operators, and government bodies. This principally includes:

• Energy Revenue, derived from the sale to third-parties of electricity in the day-ahead and real-time markets, as well as bilateral sales;
• Capacity Revenue, derived through rom market clearing resource adequacy contracts, tolling arrangements, power purchase agreements, and other long-term contractual arrangements;
• Retail Revenue, derived from retail sales to residential, small business, commercial, industrial and governmental/institutional customers; and
• Market-to-Market Revenue, derived from the Company’s economic hedging activities. In 2014 NRG generated $14.67 billion in annual operating revenue, down on the $15.87 billion recorded by the Company in 2014. More than 90% of the Company’s revenue was attributed to the Company’s energy revenue and retail revenue, which generated $6.59 billion and $6.92 billion in 2015 respectively.