Texas awards NRG $562M low-interest loan for new 721-MW gas unit

The state of Texas has awarded NRG Energy Inc. a $562 million loan to add a 721-MW natural gas-fired unit at the company's 1,494-MW Cedar Bayou plant.

With a 20-year term and 3% interest rate, it is the third loan finalized under the Texas Energy Fund (TEF) In-ERCOT Generation Loan Program, and the second loan to NRG. The program is for projects that add new dispatchable power to the Electric Reliability Council of Texas Inc. region.

The loan finances 60% of the new Cedar Bayou 5 unit's total estimated project cost of $936 million. The project completion date is 2028, and the loan term runs through Sept. 25, 2045.

"Development of the new unit at our Cedar Bayou power plant will generate significant construction jobs, and once online in 2028 will provide additional permanent jobs, enhanced grid stability and regional economic growth," Robert Gaudette, executive vice president and president of NRG Business and Wholesale Operations, said in a Sept. 26 statement issued by Gov. Greg Abbott's office.

In August, NRG was awarded a TEF loan for up to $216 million to construct two new gas units at the company's 406-MW T.H. Wharton CT plant in Houston.

One remaining NRG loan request is progressing through the TEF due diligence process, for an addition at the company's 394-MW Greens Bayou CT plant.

When the Public Utility Commission selected a slate of projects to advance to the due diligence phase of the loan program, it selected one application per applicant to maintain portfolio diversity. Initially, only NRG's Wharton project was selected.

But since the initial slate of 17 projects was announced, six companies have voluntarily withdrawn their proposals, citing factors such as increasing costs, equipment procurement constraints and lower-than-anticipated returns, highlighting some of the challenges to build new merchant gas-fired generation in Texas.

As projects were withdrawn, the PUCT backfilled those spots with others, including the two additional NRG projects, Cedar Bayou and Greens Bayou. NRG has an advantage in the program because it already had all of the needed gas turbines on site.

During the 2025 legislative session, the Texas legislature voted to fully fund the $10 billion program.