NRG Energy received a $562 million low-interest loan to build a 721-megawatt natural gas unit at its Cedar Bayou Generating Station near Baytown, marking the third and largest loan approved through the Texas Energy Fund since its creation in 2023.
The loan, announced by Governor Greg Abbott in September 2025, more than doubles the amount of money distributed through the $7 billion fund established to strengthen Texas’ power grid following Winter Storm Uri in 2021.
Project Details
The new combined-cycle gas turbine unit at the existing Cedar Bayou facility in Chambers County is expected to begin generating power by summer 2028, according to NRG Energy’s third quarter 2025 earnings report. The company closed the loan agreement and received initial disbursement by November 2025.
The 20-year loan carries a 3 percent interest rate and covers approximately 60 percent of the project’s estimated $936 million construction cost.
“We see the state’s electricity demand going up and our customers’ demand going up,” said Matthew Pistner, NRG’s senior vice president of generation. “The ability to step in and provide that dispatchable generation is critical not just for the company but for the state and its needs.”
The Cedar Bayou Generating Station already operates two natural gas units constructed in the 1970s that can generate more than 1,500 megawatts.
Texas Energy Fund Status
The fund has now distributed $883 million to three projects expected to create 1,299 megawatts of potential generation. Seven loan applications have been withdrawn since the fund’s inception, with companies citing adverse market conditions.
Fourteen applications have advanced to the final review stage. The Legislature in spring 2025 gave the Public Utility Commission authority to extend the distribution deadline past the end of 2025.
NRG Energy submitted three loan applications to the Texas Energy Fund as part of a “shovel ready” projects initiative launched five years before the fund’s creation. The company aims to bring 1.5 gigawatts of new generation online through the program.
Market Context
Texas electricity demand forecasts have increased as the state’s population grows and new data centers come online. However, global demand for gas turbines is straining supply chains and driving up costs and wait times for natural gas power plants.
The state is meeting much of its electricity demand growth through solar technology and battery storage, which are significantly cheaper to install than natural gas plants.
The low-interest loan helps NRG mitigate financial risk in current market conditions. “The markets are going to do what they’re going to do, so there’s always risk when you make billion dollar decisions to put steel in the ground,” Pistner said.
As of November 2025, the Texas Energy Fund has secured over 3,500 megawatts of capacity across multiple projects, according to subsequent Governor Abbott announcements about additional fund awards.
