NRG Energy beats fourth-quarter profit estimates on higher demand for power

Updates share movement in paragraph 2, adds analyst comment in paragraph 6

Feb 26 (Reuters) - NRG Energy NRG.N beat Wall Street estimates for fourth-quarter adjusted profit on Wednesday, helped by growing demand for power and lower fuel costs, and unveiled its plans to cater to more data centers in the coming years.

Shares of the company rose over 11% in morning trade.

Utility companies are benefiting from rising electricity usage, mainly from energy-guzzling data centers needed to scale Big Tech's artificial intelligence (AI) technologies, which has led many of NRG's peers to add tens of billions of dollars to their spending plans.

"Growing demand for electricity due to GenAI and the buildup of data centers means we need to form new, innovative partnerships to quickly increase America’s dispatchable generation," said Robert Gaudette, president of NRG's business and wholesale operations.

The company has signed Letters of Intent (LOIs) with two data center developers, PowLan and Menlo Equities, for power targets of 500 megawatts (MW) and 300 MW respectively in the initial phase. Work is expected to start in 2026.

The deals can potentially scale up to 6.5 gigawatts (GW), which analysts said bodes well for the company.

NRG also signed a project development agreement on Wednesday with power equipment maker GE Vernova GEV.N and construction company Kiewit's subsidiary, TIC, to develop up to 5.4 GW of new natural gas projects.

For the quarter, NRG's fuel costs fell marginally from a year ago to $4.89 billion.

But quarterly adjusted core earnings at its Texas business unit, the largest contributor to profit, fell 14.4% to $327 million from a year ago, due to warmer winter weather.

This was offset by gains in the East and West segments.

The Houston, Texas-based utility posted an adjusted profit of $1.56 per share in the fourth-quarter, beating analysts' estimates of $1.29 per share.