The Federal Energy Regulatory Commission on Monday, Jan. 8, approved Elliott Management Corp.’s application to increase its common share stake in NRG Energy Inc. (NRG) up to 20%, a major blow to a consumer advocacy group that had been urging the agency to prohibit the activist from adding directors in cooperation agreements with public utilities.
FERC in a statement said Elliott’s request seeking permission to buy up to 20% of NRG shares “will not have an adverse effect on rates,” and it added that the request to prohibit Elliott from entering into cooperation agreements, sought by Public Citizen Inc., was “outside the scope” of the agency’s analysis.
Elliott had filed a FERC application in July seeking to gain authorization to increase its common share stake in NRG up to 20% from 2.36% it reported owning in July. The investor said it already has an NRG “economic interest” of about 13%, mostly in derivatives. The approval lets it surpass the previous 9.9% cap on common shares.
The agency’s determination emerged after Public Citizen launched a campaign seeking to block any Elliott executives from serving “simultaneously” on the board of both NRG, which owns a number of power plants, and Peabody Energy Corp. (BTU), where two of the Paul Singer-led activist’s portfolio managers hold seats.
On Nov. 20, however, NRG announced it ousted CEO Mauricio Gutierrez and agreed to add four mutually identified directors to the utility’s 13-person board in a settlement with Elliott. It also added that it would conduct a review of its operations and cost structure. None of the four new NRG directors are Elliott employees.
The Paul Singer-led fund had launched a campaign at NRG in late 2022, arguing that its $2.8 billion Vivint Smart Home Inc. acquisition was the single “worst deal” in the power and utility sectors during the past decade.
Elliott’s move to continue to pursue its share purchase authorization suggests the activist fund wants to continue to put pressure on NRG in the months to come, and possibly launch a director contest in 2025. (Elliott declined to comment for this story.) If Elliott obtains a larger common share position, it would have more leverage in a director contest in 2025 given that common shares come with voting rights. The November settlement prohibits Elliott from making disparaging comments or launching a director contest until 30 days before NRG’s 2025 annual meeting director nomination deadline, or until Nov. 30, 2024.
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