Activist investor Elliott Investment issued a public letter on Tuesday calling for a new chief executive at utility firm NRG Energy (NRG.N), increasing pressure on incumbent Mauricio Gutierrez.
Elliott said NRG’s recent measures were “wholly insufficient to remedy a deeply flawed strategy overseen by a leadership team unfit to execute”.
The investor, which disclosed a more than 13% stake in NRG last month, stuck with its call for a boardroom overhaul and strategic changes to refocus the energy firm on its core business of supplying power.
Elliott was particularly critical of NRG’s $2.8 billion acquisition of Vivint Smart Home which it termed as “the single worst deal in the power and utilities sector in the past decade”.
NRG has so far backed its acquisition of Vivint and said it expects $100 million in cost synergies by 2025.
It sold its stake in a nuclear power plant in Texas earlier in June in a deal valued at $1.75 billion.
NRG’s investor day commitments of generating significant excess cash flow and promises of returning nearly its entire market value to shareholders were not new, Elliott said in the letter.
It added NRG’s management was not a “disciplined allocator of capital” and had always prioritized growth, and mergers and acquisitions over capital return.
“The Board fully supports NRG’s CEO Mauricio Gutierrez and management team and the strategy they are executing to drive substantial, sustainable shareholder value,” an NRG spokesperson said to Reuters.
Shares of the company rose 1.4% in afternoon trading.
CFRA analyst Daniel Rich said the stock trades at a significant valuation discount to peers and Elliott’s call for a change in CEO would likely get the attention of a large contingent of the investment community, including those outside of the utilities space, who may not have been aware of NRG’s recent history.
