NRG Outlines BYOP Commercial Structure for Durable Returns in 2026 Q2

What management said about BYOP commercial structure details

Core commercial mechanics (how BYOP is structured financially)

Management described BYOP (“Bring Your Own Power”) as a commercial structure intended to make returns durable and visible by shifting most project economics away from merchant-style variability and toward availability-based capacity plus separate recovery of fuel and operating costs. Specifically, management said the “commercial structure” is supported by: (i) an availability-based capacity payment, (ii) separate recovery of fuel and operating costs, and (iii) limited commodity exposure. ¹

They further elaborated the logic as follows:

• The capacity payment is “designed to recover the capital we invest and deliver the return we require.” ²
• A separate operating payment covers “natural gas and plant operating costs.” ²
• Management emphasized a key distinction: NRG is “paid for the megawatts we build and make available, not for how much the data center runs.” ²
• They stated the structure provides that “95% of the project's free cash flow” is supported by capacity payments over the term, independent of data center utilization. ²
• They added that the customer commitment is supported by an investment-grade parent guarantee, producing “durable, visible cash flow.” ²
• They stated the return is established upfront and is “not dependent on merchant power prices or natural gas prices.” ²

Management also stressed that the model is intended to be reusable: “this structure is not unique to one project,” and while customer/location/project size can change, the “fundamentals remain the same.” ²

Why this matters for risk allocation and customer incentives

Management framed the BYOP structure as reducing the customer’s exposure to certain power-market variables while preserving flexibility to manage remaining risks. They said:

• The structure is intended to provide “certainty and the returns that we need for our investors,” while also providing the customer flexibility “depending on what their views look like.” ³
• Management noted that the structure can support hedging of variable components: the customer “could hedge up that variable piece if they wanted,” with the customer providing collateral if applicable. ³
• They reiterated they are building from the start around shareholder needs, serving the customer, and serving communities around the projects. ³

Asset/contract structure features (what NRG does vs. what the customer provides)

Management described how the BYOP commercial framework assigns responsibilities and aligns incentives:

• “NRG develops, owns and operates the generation,” and “the economics are established before construction begins.” ²
• Management said NRG’s role includes “develop, engineer, interconnect, commission and operate the assets across their full life cycle,” so the customer gets “one experienced partner accountable from initial design through decades of operation.” ²

On the customer side, management said there is alignment on principal commercial terms with a “leading global cloud and AI hyperscaler,” including the customer’s “capital commitment to support 1.2 gigawatts of new generation in Texas with the potential to expand to 2.4 gigawatts,” and that the deal commitment is “long term.” ⁴

How management answered “contract details” questions (pricing and “PPA equivalent”)

When asked about targeted pricing (including whether the PPA equivalent is north of $90 / $100), management did not provide specific contract pricing/terms. Instead, they explained why unit pricing is not the right way to evaluate this structure:

• They said the “dollar per megawatt hour thing doesn't really matter because of the way we've structured it.” ³
• They gave a rough implied range for expected data center usage economics (“probably $85 to $90 plus range” for expected usage), but emphasized that they “really don't focus on that.” ³
• They repeated that the structure is designed to provide certainty/returns and flexibility for customer risk management rather than focusing on usage-linked per-MWh pricing. ³
  Separately, another question explicitly asking for “specific terms of the contract” received the response: management would not comment “specifically on any of the specific terms of the contract.” ⁵

Financial targets management tied to the BYOP commercial structure

Management linked the commercial structure to specific projected project-level financial outcomes and return thresholds:

• They stated that at full operation, the initial 1.2 GW project is expected to generate at least $500 million of annual adjusted EBITDA and approximately $375 million of annual free cash flow before growth. ¹
• On $3.2 billion of total investment, management said they expect a pretax unlevered IRR within a 12% to 15% target range and that at the expected run rate EBITDA this implies a build multiple of approximately 6x. ¹
• They also stated that the commercial structure “protects the return we underwrite through” availability-based capacity and separate recovery of fuel/operating costs with limited commodity exposure, and that the customer’s investment-grade credit and credit support are part of the structure. ¹

On whether returns are sensitive to cost increases, management said expectations don’t change if build cost rises: “If the cost of the build goes up over time, our expectations of return on your cash flow or on your investment don't change… We will always sign deals inside of our 12% to 15% hurdles.” ⁶

How management described sequencing/expansion within BYOP

Management addressed the staging concept:

• They discussed COD timing, stating one project is “late 2029” and that “you can assume there's another block, so 1.2 to come on serially year — each year after the 2029 COD for the first one.” ⁷
• They also said the 1.2 GW on a site “doesn't rule out taking 2.4 somewhere” (or larger), emphasizing that the key point is not the location/timing logic but the aligned approach and turbine-customer discussions. ⁸

Funding context management offered (capital structure implications)

Although not “BYOP commercial terms” in the pricing sense, management did connect funding approach to leverage/risk/returns:

• They stated a “base case” of funding on balance sheet would enable achieving a 3x leverage ratio in 2028, but moving the project to balance-sheet funding “extends out to 2029,” while still implying deleveraging over the period. ⁹
• They suggested that using a partner “Williams type structure” or other structures could “create some incremental capacity” and provide “more opportunity to increase the annual buyback program.” ⁹
• In response to questions about financing/funding, management referenced potential capital partners as a way to create balance sheet flexibility, while preserving disciplined return thresholds. ⁹

Overall, the financial “shape” of BYOP management described is: availability-driven capacity economics (capacity largely independent of utilization), separate recovery of fuel/operating costs, upfront return setting, and investment-grade credit support—with unit pricing/deal specifics largely framed as secondary to how the risk and cash flow mechanics are engineered. ²¹³