NRG Energy, Inc. Reports Third Quarter 2019 Results, Announces Dividend Increase and Initiates 2020 Guidance

  • Enhancing Long-Term Return of Capital Policy
  • Increasing 2020 annual dividend from $0.12/share to $1.20/share and targeting 7-9% annual growth
  • Executing current $250 million share repurchase authorization, announced Q2 2019
  • Narrowing 2019 guidance and initiating 2020 financial guidance

PRINCETON, N.J.--()--NRG Energy, Inc. (NYSE: NRG) today reported third quarter 2019 income from continuing operations of $374 million, or $1.45 per diluted common share and Adjusted EBITDA for the third quarter of $792 million.

"In the third quarter, our integrated platform continued to deliver stable results amid a volatile summer," said Mauricio Gutierrez, NRG President and Chief Executive Officer. "We continue to execute on our disciplined capital allocation principles, including increasing the dividend and enhancing our long-term return of capital policy.”

Consolidated Financial Results a

 

Three Months Ended

 

Nine Months Ended

($ in millions)

 

9/30/19

 

9/30/18

 

9/30/19

 

9/30/18

Income from Continuing Operations

 

$

374

 

$

287

 

$

657

 

$

553

Cash provided by Continuing Operations

 

$

472

 

$

407

 

$

853

 

$

671

Adjusted EBITDA

 

$

792

 

$

651

 

$

1,593

 

$

1,503

Free Cash Flow Before Growth Investments (FCFbG)

 

$

433

 

$

553

 

$

637

 

$

769

a. In accordance with GAAP, 2018 results have been recast to reflect the discontinued operations of the South Central Portfolio, Clearway Energy, the Renewables Platform and Carlsbad Energy Center.

Segments Results

Table 1: Income/(Loss) from Continuing Operations

($ in millions)

 

Three Months Ended

 

Nine Months Ended

Segment

 

9/30/19

 

9/30/18

 

9/30/19

 

9/30/18

Retail

 

$

422

 

$

(128)

 

$

252

 

$

732

Generation a

 

63

 

574

 

794

 

255

Corporate

 

(111)

 

(159)

 

(389)

 

(434)

Income from Continuing Operations a

 

$

374

 

$

287

 

$

657

 

$

553

a. In accordance with GAAP, 2018 results have been recast to reflect the discontinued operations of the South Central Portfolio, Clearway Energy, the Renewables Platform and Carlsbad Energy Center.

 

Table 2: Adjusted EBITDA

($ in millions)

 

Three Months Ended

 

Nine Months Ended

Segment

 

9/30/19

 

9/30/18

 

9/30/19

 

9/30/18

Retail

 

$

269

 

$

269

 

$

662

 

$

755

Generation a

 

524

 

395

 

938

 

780

Corporate

 

(1)

 

(13)

 

(7)

 

(32)

Adjusted EBITDA b

 

$

792

 

$

651

 

$

1,593

 

$

1,503

a. In accordance with GAAP, 2018 results have been recast to reflect the discontinued operations of the South Central Portfolio, Clearway Energy, the Renewables Platform and Carlsbad Energy Center.
b. See Appendices A-1 through A-4 for Operating Segment Reg G reconciliations.

Retail: Third quarter Adjusted EBITDA was $269 million, consistent with third quarter in 2018, driven by margin enhancement and the acquisition of Stream Energy, offset by higher supply costs and weather.

Generation: Third quarter Adjusted EBITDA was $524 million, $129 million higher than third quarter 2018, driven by:

  • Texas Region: $213 million increase due to higher realized power prices; and
  • East/West1: $84 million decrease due to lower capacity revenues and lower generation volumes, driven by lower power pricing in PJM combined with 2018 asset sales and the deconsolidation of projects.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

($ in millions)

 

09/30/19

 

12/31/18

Cash and Cash Equivalents

 

$

243

 

$

563

Restricted Cash

 

4

 

17

Total

 

$

247

 

$

580

Total credit facility availability

 

1,297

 

1,397

Total Liquidity, excluding collateral received

 

$

1,544

 

$

1,977

As of September 30, 2019, NRG cash was at $0.2 billion, and $1.3 billion was available under the Company’s credit facilities. Total liquidity was $1.5 billion, including restricted cash. Overall liquidity as of the end of the third quarter 2019 was $433 million lower than at the end of 2018 driven by share repurchases, the acquisition of Stream Energy and debt reductions executed during the period.

NRG Strategic Developments

Transformation Plan

Through the third quarter of 2019, NRG realized $401 million of its cost savings target as part of the previously announced Transformation Plan, and is on track to realize $590 million in savings in 2019. Margin Enhancement provided $53 million in uplift through the third quarter toward the $135 million 2019 target.

Petra Nova Debt Repayment

On September 27, 2019, NRG contributed $95 million to Petra Nova to prepay a significant portion of the project debt and fund operations. NRG also posted a $12 million letter of credit to cover certain project debt reserve requirements. As a result, the $124 million of financial guarantees previously provided by NRG to the project lenders have been canceled and the remaining project debt is now non-recourse to NRG.

2019 and 2020 Guidance

NRG has narrowed the range of its Adjusted EBITDA, Adjusted Cash From Operations and Free Cash Flow before Growth Investments (FCFbG) guidance for 2019 and is initiating guidance for fiscal year 2020.

Table 4: 2019 and 2020 Adjusted EBITDA, Cash from Operations, and FCFbG Guidanc

 

2019

2020

($ in millions)

Revised Guidance

Guidance

Adjusted EBITDAa

$1,900-$2,000

$1,900-$2,100

Adjusted Cash From Operations

$1,425-$1,525

$1,450-$1,650

FCFbG

$1,250-$1,350

$1,275-$1,475

a. Non-GAAP financial measure; see Appendix Tables A-8 for GAAP Reconciliation to Net Income that excludes fair value adjustments related to derivatives. The Company is unable to provide guidance for Net Income due to the impact of such fair value adjustments related to derivatives in a given year

Capital Allocation Update

Through November 7, 2019, NRG completed $1.305 billion in share repurchases at an average price of $38.75 per share and has approximately $195 million remaining under the latest $250 million share repurchase program announced on the second quarter 2019 earnings call. In total, NRG has allocated $1.5 billion of capital available for allocation to share repurchases in 2019.

On October 17, 2019, NRG declared a quarterly dividend on the Company's common stock of $0.03 per share, payable November 15, 2019, to stockholders of record as of November 1, 2019, representing $0.12 on an annualized basis. Beginning in the first quarter of 2020, NRG will increase the annual dividend to $1.20 per share and expects to target an annual dividend growth rate of 7-9 % per share.

In addition, NRG has adopted a long-term capital allocation policy that will target allocating fifty percent (50%) of FCFbG to growth investments and fifty percent (50%) to be returned to shareholders. The return of capital to shareholders is expected to be completed through the newly announced increased dividend supplemented by share repurchases.

The Company’s common stock dividend, debt reduction and share repurchases are subject to available capital, market conditions and compliance with associated laws and regulations.

1 Includes International and Renewables
2 As of October 31, 2019, 251,594,290 shares outstanding

Earnings Conference Call

On November 7, 2019, NRG will host a conference call at 9:00 a.m. Eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG’s website at http://www.nrg.com and clicking on “Investors” then "Presentations & Webcasts." The webcast will be archived on the site for those unable to listen in real time.

About NRG

At NRG, we’re bringing the power of energy to people and organizations, putting customers at the center of everything we do. We generate electricity and provide energy solutions and natural gas to more than 3.5 million residential, small business, and commercial and industrial customers through our diverse portfolio of retail brands. A Fortune 500 company, operating in the United States and Canada, NRG delivers innovative solutions while advocating for competitive energy markets and customer choice, and by working towards a sustainable energy future. More information is available at www.nrg.com. Connect with NRG on Facebook, LinkedIn and follow us on Twitter @nrgenergy, @nrginsight.

Forward-Looking Statements

In addition to historical information, the information presented in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These statements involve estimates, expectations, projections, goals, assumptions, known and unknown risks and uncertainties and can typically be identified by terminology such as “may,” “should,” “could,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “expect,” “intend,” “seek,” “plan,” “think,” “anticipate,” “estimate,” “predict,” “target,” “potential” or “continue” or the negative of these terms or other comparable terminology. Such forward-looking statements include, but are not limited to, statements about the Company’s future revenues, income, indebtedness, capital structure, plans, expectations, objectives, projected financial performance and/or business results and other future events, and views of economic and market conditions.

Although NRG believes that its expectations are reasonable, it can give no assurance that these expectations will prove to be correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated herein include, among others, general economic conditions, hazards customary in the power industry, weather conditions, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets, changes in government regulations, the condition of capital markets generally, our ability to access capital markets, cyberterrorism and inadequate cybersecurity, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify, execute or successfully implement acquisitions, repowerings or asset sales, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to implement and execute on our publicly announced transformation plan, including any cost savings and margin enhancement, our ability to achieve our net debt targets, our ability to achieve investment grade credit metrics, our ability to proceed with projects under development or the inability to complete the construction of such projects on schedule or within budget, the inability to maintain or create successful partnering relationships, our ability to operate our businesses efficiently, our ability to retain retail customers, our ability to realize value through our commercial operations strategy, the ability to successfully integrate businesses of acquired companies, our ability to realize anticipated benefits of transactions (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, and our ability to execute our Capital Allocation Plan. Achieving investment grade credit metrics is not an indication of or guarantee that the Company will receive investment grade credit ratings. Debt and share repurchases may be made from time to time subject to market conditions and other factors, including as permitted by United States securities laws. Furthermore, any common stock dividend is subject to available capital and market conditions.

NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The adjusted EBITDA, free cash flow and excess cash guidance are estimates as of November 7, 2019. These estimates are based on assumptions the company believed to be reasonable as of that date. NRG disclaims any current intention to update such guidance, except as required by law. The foregoing review of factors that could cause NRG’s actual results to differ materially from those contemplated in the forward-looking statements included in this press release should be considered in connection with information regarding risks and uncertainties that may affect NRG's future results included in NRG's filings with the Securities and Exchange Commission at www.sec.gov.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

Three months ended
September 30,

 

Nine months ended
September 30,

(In millions, except for per share amounts)

2019

 

2018

 

2019

 

2018

Operating Revenues

 

 

 

 

 

 

 

Total operating revenues

$

2,996

 

$

2,960

 

$

7,626

 

$

7,486

Operating Costs and Expenses

 

 

 

 

 

 

 

Cost of operations

2,153

 

2,238

 

5,649

 

5,512

Depreciation and amortization

91

 

99

 

261

 

331

Impairment losses

 

 

1

 

74

Selling, general and administrative

210

 

211

 

615

 

587

Reorganization costs

1

 

27

 

16

 

70

Development costs

1

 

1

 

5

 

9

Total operating costs and expenses

2,456

 

2,576

 

6,547

 

6,583

Gain on sale of assets

 

14

 

2

 

30

Operating Income

540

 

398

 

1,081

 

933

Other Income/(Expense)

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

29

 

20

 

8

 

26

Impairment losses on investments

(107)

 

(1)

 

(107)

 

(16)

Other income, net

17

 

19

 

49

 

12

Loss on debt extinguishment, net

 

(19)

 

(47)

 

(22)

Interest expense

(99)

 

(122)

 

(318)

 

(361)

Total other expense

(160)

 

(103)

 

(415)

 

(361)

Income from Continuing Operations Before Income Taxes

380

 

295

 

666

 

572

Income tax expense

6

 

8

 

9

 

19

Income from Continuing Operations

374

 

287

 

657

 

553

(Loss)/income from discontinued operations, net of income tax

(2)

 

(336)

 

399

 

(272)

Net Income/(Loss)

372

 

(49)

 

1,056

 

281

Less: Net income attributable to noncontrolling interest and redeemable interests

 

23

 

1

 

1

Net Income/(Loss) Attributable to NRG Energy, Inc.

$

372

 

$

(72)

 

1,055

 

280

Earnings per Share Attributable to NRG Energy, Inc.

 

 

 

 

 

 

 

Weighted average number of common shares outstanding — basic

254

 

299

 

266

 

309

Income from continuing operations per weighted average common share — basic

$

1.47

 

$

0.88

 

$

2.47

 

$

1.79

(Loss)/income from discontinued operations per weighted average common share — basic

$

(0.01)

 

$

(1.12)

 

$

1.50

 

$

(0.88)

Earnings/(Loss) per Weighted Average Common Share — Basic

$

1.46

 

$

(0.24)

 

$

3.97

 

$

0.91

Weighted average number of common shares outstanding — diluted

256

 

299

 

268

 

313

Income from continuing operations per weighted average common share — diluted

$

1.46

 

$

0.88

 

$

2.45

 

$

1.76

(Loss)/income from discontinued operations per weighted average common share — diluted

$

(0.01)

 

$

(1.12)

 

$

1.49

 

$

(0.87)

Earnings/(Loss) per Weighted Average Common Share — Diluted

$

1.45

 

$

(0.24)

 

$

3.94

 

$

0.89

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

Three months ended September 30,

 

Nine months ended September
30,

 

2019

 

2018

 

2019

 

2018

 

(In millions)

Net Income/(Loss)

$

372

 

$

(49)

 

$

1,056

 

$

281

Other Comprehensive (Loss)/Income

 

 

 

 

 

 

 

Unrealized gain on derivatives

 

5

 

 

$

24

Foreign currency translation adjustments

(4)

 

(2)

 

(4)

 

$

(8)

Available-for-sale securities

(14)

 

 

(13)

 

$

1

Defined benefit plans

(41)

 

(1)

 

(47)

 

$

(3)

Other comprehensive (loss)/income

(59)

 

2

 

(64)

 

14

Comprehensive Income/(Loss)

313

 

(47)

 

992

 

295

Less: Comprehensive income attributable to noncontrolling interest and redeemable noncontrolling interest

 

26

 

1

 

15

Comprehensive Income/(Loss) Attributable to NRG Energy, Inc.

$

313

 

$

(73)

 

$

991

 

$

280

 

 

 

 

 

 

 

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

September 30, 2019

 

December 31, 2018

(In millions, except share data)

(Unaudited)

 

 

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

243

 

$

563

Funds deposited by counterparties

30

 

33

Restricted cash

4

 

17

Accounts receivable, net

1,376

 

1,024

Inventory

364

 

412

Derivative instruments

735

 

764

Cash collateral paid in support of energy risk management activities

164

 

287

Prepayments and other current assets

271

 

302

Current assets - held-for-sale

 

1

Current assets - discontinued operations

 

197

Total current assets

3,187

 

3,600

Property, plant and equipment, net

2,615

 

3,048

Other Assets

 

 

 

Equity investments in affiliates

405

 

412

Operating lease right-of-use assets, net

482

 

Goodwill

591

 

573

Intangible assets, net

828

 

591

Nuclear decommissioning trust fund

756

 

663

Derivative instruments

358

 

317

Deferred income taxes

53

 

46

Other non-current assets

252

 

289

Non-current assets - held-for-sale

 

77

Non-current assets - discontinued operations

 

1,012

Total other assets

3,725

 

3,980

Total Assets

$

9,527

 

$

10,628

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current Liabilities

 

 

 

Current portion of long-term debt and finance leases

$

302

 

$

72

Current portion of operating lease liabilities

73

 

Accounts payable

866

 

863

Derivative instruments

668

 

673

Cash collateral received in support of energy risk management activities

30

 

33

Accrued expenses and other current liabilities

625

 

680

Current liabilities - held-for-sale

 

5

Current liabilities - discontinued operations

 

72

Total current liabilities

2,564

 

2,398

Other Liabilities

 

 

 

Long-term debt and finance leases

5,798

 

6,449

Non-current operating lease liabilities

500

 

Nuclear decommissioning reserve

294

 

282

Nuclear decommissioning trust liability

453

 

371

Derivative instruments

364

 

304

Deferred income taxes

70

 

65

Other non-current liabilities

1,036

 

1,274

Non-current liabilities - held-for-sale

 

65

Non-current liabilities - discontinued operations

 

635

Total other liabilities

8,515

 

9,445

Total Liabilities

11,079

 

11,843

Redeemable noncontrolling interest in subsidiaries

19

 

19

Commitments and Contingencies

 

 

 

Stockholders' Equity

 

 

 

Common stock; $0.01 par value; 500,000,000 shares authorized; 421,859,844 and 420,288,886 shares issued and 251,985,517 and 283,650,039 shares outstanding at September 30, 2019 and December 31, 2018, respectively

4

 

4

Additional paid-in-capital

8,494

 

8,510

Accumulated deficit

(4,991)

 

(6,022)

Less treasury stock, at cost - 169,874,327 and 136,638,847 shares at September 30, 2019 and December 31, 2018, respectively

(4,920)

 

(3,632)

Accumulated other comprehensive loss

(158)

 

(94)

Total Stockholders' Equity

(1,571)

 

(1,234)

Total Liabilities and Stockholders' Equity

$

9,527

 

$

10,628

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Nine months ended September 30,

(In millions)

2019

 

2018

Cash Flows from Operating Activities

 

 

 

Net Income

$

1,056

 

$

281

Income/(loss) from discontinued operations, net of income tax

399

 

(272)

Income from continuing operations

657

 

553

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

Distributions and equity earnings of unconsolidated affiliates

(5)

 

10

Depreciation, amortization and accretion

289

 

364

Provision for bad debts

87

 

57

Amortization of nuclear fuel

40

 

38

Amortization of financing costs and debt discount/premiums

20

 

21

Loss on debt extinguishment, net

47

 

22

Amortization of emissions allowances and out-of-market contracts

28

 

21

Amortization of unearned equity compensation

15

 

21

Gain on sale and disposal of assets

(20)

 

(50)

Impairment losses

108

 

90

Changes in derivative instruments

36

 

(17)

Changes in deferred income taxes and liability for uncertain tax benefits

(3)

 

(6)

Changes in collateral deposits in support of energy risk management activities

129

 

(30)

Changes in nuclear decommissioning trust liability

27

 

50

GenOn settlement

 

(125)

Loss on deconsolidation of Agua Caliente and Ivanpah projects

 

13

Changes in other working capital

(602)

 

(361)

Cash provided by continuing operations

853

 

671

Cash provided by discontinued operations

8

 

396

Net Cash Provided by Operating Activities

861

 

1,067

Cash Flows from Investing Activities

 

 

 

Payments for acquisitions of businesses

(348)

 

(209)

Capital expenditures

(183)

 

(343)

Net proceeds from notes receivable

2

 

Net proceeds from sale of emission allowances

14

 

24

Investments in nuclear decommissioning trust fund securities

(295)

 

(449)

Proceeds from the sale of nuclear decommissioning trust fund securities

271

 

398

Proceeds from sale of assets, net of cash disposed and sale of discontinued operations, net of fees

1,293

 

1,555

Deconsolidation of Agua Caliente and Ivanpah projects

 

(268)

Net contributions to investments in unconsolidated affiliates

(94)

 

(39)

Contributions to discontinued operations

(44)

 

(23)

Cash provided by continuing operations

616

 

646

Cash used by discontinued operations

(2)

 

(705)

Net Cash Provided/(Used) by Investing Activities

614

 

(59)

Cash Flows from Financing Activities

 

 

 

Payments of dividends to common stockholders

(24)

 

(28)

Payments for treasury stock

(1,286)

 

(1,000)

Payments for debt extinguishment costs

(24)

 

Distributions to noncontrolling interests from subsidiaries

(1)

 

(17)

Proceeds from issuance of common stock

3

 

15

Proceeds from issuance of short and long-term debt

2,048

 

995

Payment of debt issuance costs

(34)

 

(19)

Payments for short and long-term debt

(2,487)

 

(970)

Receivable from affiliate

 

(26)

Other

 

(4)

Cash used by continuing operations

(1,805)

 

(1,054)

Cash provided by discontinued operations

43

 

403

Net Cash Used by Financing Activities

(1,762)

 

(651)

Effect of exchange rate changes on cash and cash equivalents

 

1

Change in Cash from discontinued operations

49

 

94

Net (Decrease)/increase in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash

(336)

 

264

Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period

613

 

1,086

Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period

$

277

 

$

1,350

 

Appendix Table A-1: Third Quarter 2019 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to income/(loss) from continuing operations:

($ in millions)

Texas

East/West1

Generation

Retail

Corp/Elim

Total

Income/(Loss) from Continuing Operations

8

55

63

422

(111)

374

Plus:

 

 

 

 

 

 

Interest expense, net

6

6

1

88

95

Income tax

1

1

5

6

Depreciation and amortization

22

25

47

37

7

91

ARO Expense

3

14

17

17

Contract amortization

5

5

5

EBITDA

38

101

139

460

(11)

588

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

3

23

26

26

Acquisition-related transaction & integration costs

1

1

Reorganization costs

1

1

Deactivation costs

3

3

2

5

Other non recurring charges

1

(1)

(2)

2

Impairments

101

101

6

107

Mark to market (MtM) (gains)/losses on economic hedges

238

17

255

(191)

64

Adjusted EBITDA

381

143

524

269

(1)

792

1 Includes International, remaining renewables and Generation eliminations

 

Third Quarter 2019 condensed financial information by Operating Segment:

($ in millions)

Texas

East/West1

Generation

Retail

Corp/Elim

Total

Operating revenues

805

425

1,230

2,545

(569)

3,206

Cost of sales

302

204

506

2,011

(569)

1,948

Economic gross margin2

503

221

724

534

1,258

Operations & maintenance and other cost of operations3

118

121

239

103

(1)

341

Selling, marketing, general and administrative

32

11

43

161

6

210

Other expense/(income)4

(28)

(54)

(82)

1

(4)

(85)

Adjusted EBITDA

381

143

524

269

(1)

792

1 Includes International, remaining renewables and Generation eliminations
2 Excludes MtM loss of $64 million and contract amortization of $5 million
3 Excludes deactivation costs of $5 million
4 Excludes acquisition-related transaction & integration costs of $1 million and reorganization costs of $1 million

 

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)

Condensed
financial
information

Interest, tax,
depr., amort.

MtM

Deactivation

Other adj.

Adjusted
EBITDA

Operating revenues

2,996

210

3,206

Cost of operations

1,807

(5)

146

1,948

Gross margin

1,189

5

64

1,258

Operations & maintenance and other cost of operations

346

(5)

341

Selling, marketing, general & administrative

210

210

Other expense/(income)1

259

(209)

(135)

(85)

Income/(Loss) from Continuing Operations

374

214

64

5

135

792

1 Other adj. includes impairments of $107 million, acquisition-related transaction & integration costs of $1 million and reorganization costs of $1 million

 

Appendix Table A-2: Third Quarter 2018 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to income/(loss) from continuing operations:

($ in millions)

Texas

East/West1

Generation

Retail

Corp/Elim

Total

Income/(Loss) from Continuing Operations

387

187

574

(128)

(159)

287

Plus:

 

 

 

 

 

 

Interest expense, net

10

10

1

105

116

Income tax

8

8

Loss on debt extinguishment

19

19

Depreciation and amortization

21

39

60

30

9

99

ARO Expense

9

4

13

13

Contract amortization

7

7

7

Lease amortization

(2)

(2)

(2)

EBITDA

424

238

662

(97)

(18)

547

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

2

25

27

27

Acquisition-related transaction & integration costs

1

(1)

Reorganization costs

1

2

3

6

18

27

Deactivation costs

3

3

Gain on sale of business

1

1

(15)

(14)

Other non recurring charges

1

1

1

Impairments

(8)

(8)

(8)

Mark to market (MtM) (gains)/losses on economic hedges

(259)

(32)

(291)

359

68

Adjusted EBITDA

168

227

395

269

(13)

651

1 Includes International, remaining renewables and Generation eliminations

 

Third Quarter 2018 condensed financial information by Operating Segment:

($ in millions)

Texas

East/West1

Generation

Retail

Corp/Elim

Total

Operating revenues

594

589

1,183

2,202

(480)

2,905

Cost of sales

296

262

558

1,702

(475)

1,785

Economic gross margin2

298

327

625

500

(5)

1,120

Operations & maintenance and other cost of operations3

117

117

234

89

(3)

320

Selling, marketing, general & administrative

25

30

55

144

12

211

Other expense/(income)4

(12)

(47)

(59)

(2)

(1)

(62)

Adjusted EBITDA

168

227

395

269

(13)

651

1 Includes International, remaining renewables and Generation eliminations
2 Excludes MtM loss of $68 million and contract amortization of $7 million
3 Excludes deactivation costs of $3 million
4 Excludes gain on sale of business of $14 million, reorganization costs of $27 million and loss on debt extinguishment of $19 million

 

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)

Condensed
financial
information

Interest, tax,
depr., amort.

MtM

Deactivation

Other adj.

Adjusted
EBITDA

Operating revenues

2,960

(55)

2,905

Cost of operations

1,915

(7)

(123)

 

1,785

Gross margin

1,045

7

68

1,120

Operations & maintenance and other cost of operations

323

(3)

320

Selling, marketing, general & administrative1

211

211

Other expense/(income)2

224

(234)

(52)

(62)

Income/(Loss) from Continuing Operations

287

241

68

3

52

651

1 Other adj. includes impairments of $8 million, gain on sale of business of $14 million, reorganization costs of $27 million and loss on debt extinguishment of $19 million

 

Appendix Table A-3: YTD Third Quarter 2019 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to income/(loss) from continuing operations:

($ in millions)

Texas

East/West1

Generation

Retail

Corp/Elim

Total

Income/(Loss) from Continuing Operations

590

204

794

252

(389)

657

Plus:

 

 

 

 

 

 

Interest expense, net

19

19

2

281

302

Income tax

1

1

1

7

9

Loss on debt extinguishment

47

47

Depreciation and amortization

66

72

138

100

23

261

ARO Expense

10

20

30

1

31

Contract Amortization

16

16

16

EBITDA

682

316

998

355

(30)

1,323

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

11

80

91

91

Acquisition-related transaction & integration costs

1

1

2

Reorganization costs

1

1

4

11

16

Legal Settlement

3

8

11

11

Deactivation costs

11

11

6

17

Other non recurring charges

(1)

4

3

(1)

2

Impairments

101

101

1

6

108

Market to market (MtM) (gains)/losses on economic hedges

(237)

(41)

(278)

301

23

Adjusted EBITDA

559

379

938

662

(7)

1,593

1 Includes International, remaining renewables and Generation eliminations

 

YTD Third Quarter 2019 condensed financial information by Operating Segment:

($ in millions)

Texas

East/West1

Generation

Retail

Corp/Elim

Total

Operating revenues

1,705

1,186

2,891

5,898

(1,214)

7,575

Cost of sales

723

517

1,240

4,534

(1,212)

4,562

Economic gross margin2

982

669

1,651

1,364

(2)

3,013

Operations & maintenance and other cost of operations3

378

340

718

264

(2)

980

Selling, marketing, general & administrative4

52

97

149

438

17

604

Other expense/(income)5

(7)

(147)

(154)

(10)

(164)

Adjusted EBITDA

559

379

938

662

(7)

1,593

1 Includes International, remaining renewables and Generation eliminations
2 Excludes MtM loss of $23 million and contract amortization of $16 million
3 Excludes deactivation costs of $17 million
4 Excludes legal settlement of $11 million
5 Excludes acquisition-related transaction & integration costs of $2 million, reorganization costs of $16 million and loss on debt extinguishment of $47 million

 

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)

Condensed
financial
information

Interest, tax,
depr., amort.

MtM

Deactivation

Other adj.

Adjusted
EBITDA

Operating revenues

7,626

(51)

7,575

Cost of operations

4,652

(16)

(74)

4,562

Gross margin

2,974

16

23

3,013

Operations & maintenance and other cost of operations

997

(17)

980

Selling, marketing, general & administrative1

615

(11)

604

Other expense/(income)2

705

(603)

(266)

(164)

Income/(Loss) from Continuing Operations

657

619

23

17

277

1,593

1 Other adj. includes legal settlement of $11 million
2 Other adj. includes impairments of $108 million, acquisition-related transaction & integration costs of $2 million, reorganization costs of $16 million and loss on debt extinguishment of $47 million

 

Appendix Table A-4: YTD Third Quarter 2018 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to income/(loss) from continuing operations:

($ in millions)

Texas

East/West1

Generation

Retail

Corp/Elim

Total

Income/(Loss) from Continuing Operations

73

182

255

732

(434)

553

Plus:

 

 

 

 

 

 

Interest expense, net

46

46

2

301

349

Income tax

1

1

18

19

Loss on debt extinguishment

22

22

Depreciation and amortization

64

156

220

86

25

331

ARO Expense

20

12

32

1

33

Contract Amortization

19

1

20

20

Lease amortization

(6)

(6)

(6)

EBITDA

176

392

568

820

(67)

1,321

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

5

47

52

1

53

Acquisition-related transaction & integration costs

2

3

5

Reorganization costs

3

7

10

10

50

70

Legal Settlement

13

13

6

19

Deactivation costs

10

10

8

18

Gain on sale of business

2

2

(29)

(27)

Other non recurring charges

(2)

6

4

4

(4)

4

Impairments

15

87

102

102

MtM (gains)/losses on economic hedges

19

19

(81)

(62)

Adjusted EBITDA

229

551

780

755

(32)

1,503

1 Includes International, remaining renewables and Generation eliminations

 

YTD Third Quarter 2018 condensed financial information by Operating Segment:

($ in millions)

Texas

East/West1

Generation

Retail

Corp/Elim

Total

Operating revenues

1,324

1,597

2,921

5,502

(906)

7,517

Cost of sales

669

655

1,324

4,130

(895)

4,559

Economic gross margin2

655

942

1,597

1,372

(11)

2,958

Operations & maintenance and other cost of operations3

397

385

782

236

(10)

1,008

Selling, marketing, general & administrative4

35

116

151

385

32

568

Other expense/(income)5

(6)

(110)

(116)

(4)

(1)

(121)

Adjusted EBITDA

229

551

780

755

(32)

1,503

1 Includes International, remaining renewables and Generation eliminations
2 Excludes MtM gain of $62 million and contract amortization of $20 million
3 Excludes deactivation costs of $18 million
4 Excludes legal settlement of $19 million
5 Excludes gain on sale of business of $27 million, acquisition-related transaction & integration costs of $5 million, reorganization costs of $70 million and loss on debt extinguishment of $22 million

 

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)

Condensed
financial
information

Interest, tax,
depr., amort.

MtM

Deactivation

Other adj.

Adjusted
EBITDA

Operating revenues

7,486

31

7,517

Cost of operations

4,486

(20)

93

4,559

Gross margin

3,000

20

(62)

2,958

Operations & maintenance and other cost of operations

1,026

(18)

1,008

Selling, marketing, general & administrative 1

587

(19)

568

Other expense/(income) 2

834

(726)

(229)

(121)

Income/(Loss) from Continuing Operations

553

746

(62)

18

248

1,503

1 Other adj. includes legal settlement of $19 million
2 Other adj. includes impairments of $102 million, gain on sale of business of $27 million, acquisition-related transaction & integration costs of $5 million, reorganization costs of $70 million and loss on debt extinguishment of $22 million

 

Appendix Table A-5: 2019 and 2018 Three Months and Nine Months Ended September 30 Adjusted Cash Flow from Operations Reconciliations

The following table summarizes the calculation of adjusted cash flow operating activities providing a reconciliation to net cash provided by operating activities:

 

 

Three Months Ended

($ in millions)

 

September 30, 2019

September 30, 2018

Net Cash Provided by Operating Activities

 

472

 

407

Merger, integration and cost-to-achieve expenses1

 

1

 

27

GenOn Settlement2

 

13

 

132

Adjustment for change in collateral

 

3

 

27

Adjusted Cash Flow from Operating Activities

 

488

 

593

Maintenance CapEx, net

 

(55)

 

(36)

Environmental CapEx, net

 

 

(1)

Distributions to non-controlling interests

 

 

(3)

Free Cash Flow Before Growth Investments (FCFbG)

 

433

 

553

1 2019 and 2018 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call
2 2019 includes pension contribution of $13 million; 2018 includes settlement consideration of $261 million, transition services credit of $28 million, and pension contribution of $12 million, less $151 million repayment of intercompany revolver loan, accrued interest and fees of $12 million, certain other balances due to NRG of $6 million

 

 

 

Nine Months Ended

($ in millions)

 

September 30, 2019

September 30, 2018

Net Cash Provided by Operating Activities

 

853

 

671

Merger, integration and cost-to-achieve expenses1

 

19

 

71

Sale of Land

 

 

3

GenOn Settlement2

 

18

 

132

Adjustment for change in collateral

 

(120)

 

45

Adjusted Cash Flow from Operating Activities

 

770

 

922

Maintenance CapEx, net

 

(131)

 

(136)

Environmental CapEx, net

 

(2)

 

(1)

Distributions to non-controlling interests

 

 

(16)

Free Cash Flow Before Growth Investments (FCFbG)

 

637

 

769

1 2019 and 2018 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call
2 2019 includes final restructuring fee of $5 million and pension contribution of $13 million; 2018 includes settlement consideration of $261 million, transition services credit of $28 million, and pension contribution of $12 million, less $151 million repayment of intercompany revolver loan, accrued interest and fees of $12 million, certain other balances due to NRG of $6 million

 

Appendix Table A-6: Third Quarter YTD 2019 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity through second quarter of 2019:

($ in millions)

Nine Months Ended
September 30, 2019

Sources:

 

Adjusted cash flow from operations

770

Increase in credit facility/revolver

115

Collateral1

124

Asset sales

1,293

Uses:

 

Share repurchases

(1,286)

Debt Repayment, net of proceeds2

(650)

Financing Fees - Debt issuance and Debt extinguishment costs

(58)

Growth investments and acquisitions, net

(499)

GenOn Settlement

(18)

Maintenance and Environmental CapEx, net

(133)

Cost-to-achieve expenses3

(58)

Common Stock Dividends

(24)

Other Investing and Financing

(9)

 

 

Change in Total Liquidity

(433)

1 Excludes impact of Funds deposited by counterparties
2 Includes discounts and non-recourse debt
3 Includes capital expenditures associated with the Transformation Plan

 

Appendix Table A-7: 2019 and 2020 Adjusted EBITDA Guidance Reconciliation

The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to Income from Continuing Operations:

 

 

2019 Revised Guidance

($ in millions)

 

Low

 

High

Income from Continuing Operations 1

 

888

 

 

988

 

Income Tax

 

10

 

 

10

 

Interest Expense

 

335

 

 

335

 

Loss on Debt Extinguishment

 

47

 

 

47

 

Depreciation, Amortization, Contract Amortization and ARO Expense

 

430

 

 

430

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

110

 

 

110

 

Other Costs 2

 

80

 

 

80

 

Adjusted EBITDA

 

1,900

 

 

2,000

 

 

 

2020 Guidance

($ in millions)

 

Low

 

High

Income from Continuing Operations 1

 

980

 

 

1,180

 

Income Tax

 

20

 

 

20

 

Interest Expense

 

335

 

 

335

 

Depreciation, Amortization, Contract Amortization and ARO Expense

 

480

 

 

480

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

65

 

 

65

 

Other Costs 2

 

20

 

 

20

 

Adjusted EBITDA

 

1,900

 

 

2,100

 

1 For purposes of guidance, discontinued operations are excluded and fair value adjustments related to derivatives are assumed to be zero
2 Includes deactivation costs and cost-to-achieve expenses

 

Appendix Table A-8: 2019 and 2020 FCFbG Guidance Reconciliation

The following table summarizes the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:

 

 

2019

2020

($ in millions)

 

Revised Guidance

Guidance

Adjusted EBITDA

 

$1,900 - $2,000

$1,900 - $2,100

Interest payments

 

(335)

(335)

Income tax

 

(10)

(20)

Working capital / other assets and liabilities

 

(180)

(105)

Cash From Operations

 

$1,375 - $1,475

$1,440 - $1,640

Adjustments: Acquired Derivatives, Cost-to-Achieve, Return of Capital Dividends, Collateral, GenOn Pension and Other

 

50

10

Adjusted Cash flow from Operations

 

$1,425 - $1,525

$1,450 - $1,650

Maintenance capital expenditures, net

 

(170) - (180)

(165) - (185)

Environmental capital expenditures, net

 

(0) - (5)

(0) - (5)

Free Cash Flow before Growth

 

$1,250 - $1,350

$1,275 - $1,475

EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that NRG’s future results will be unaffected by unusual or non-recurring items.

EBITDA represents net income before interest (including loss on debt extinguishment), taxes, depreciation and amortization. EBITDA is presented because NRG considers it an important supplemental measure of its performance and believes debt-holders frequently use EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:

  • EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
  • EBITDA does not reflect changes in, or cash requirements for, working capital needs;
  • EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
  • Other companies in this industry may calculate EBITDA differently than NRG does, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the growth of NRG’s business. NRG compensates for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally. See the statements of cash flow included in the financial statements that are a part of this news release.

Adjusted EBITDA is presented as a further supplemental measure of operating performance. As NRG defines it, Adjusted EBITDA represents EBITDA excluding impairment losses, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from accounting for derivatives, adjustments to exclude the Adjusted EBITDA related to the non-controlling interest, gains or losses on the repurchase, modification or extinguishment of debt, the impact of restructuring and any extraordinary, unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA from our unconsolidated investments. The reader is encouraged to evaluate each adjustment and the reasons NRG considers it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this news release.

Management believes Adjusted EBITDA is useful to investors and other users of NRG's financial statements in evaluating its operating performance because it provides an additional tool to compare business performance across companies and across periods and adjusts for items that we do not consider indicative of NRG’s future operating performance. This measure is widely used by debt-holders to analyze operating performance and debt service capacity and by equity investors to measure our operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations, and for evaluating actual results against such expectations, and in communications with NRG's Board of Directors, shareholders, creditors, analysts and investors concerning its financial performance.

Adjusted cash flow from operating activities is a non-GAAP measure NRG provides to show cash from operations with the reclassification of net payments of derivative contracts acquired in business combinations from financing to operating cash flow, as well as the add back of merger, integration and related restructuring costs. The Company provides the reader with this alternative view of operating cash flow because the cash settlement of these derivative contracts materially impact operating revenues and cost of sales, while GAAP requires NRG to treat them as if there was a financing activity associated with the contracts as of the acquisition dates. The Company adds back merger, integration related restructuring costs as they are one time and unique in nature and do not reflect ongoing cash from operations and they are fully disclosed to investors.

Free cash flow (before Growth) is adjusted cash flow from operations less maintenance and environmental capital expenditures, net of funding, preferred stock dividends and distributions to non-controlling interests and is used by NRG predominantly as a forecasting tool to estimate cash available for debt reduction and other capital allocation alternatives. The reader is encouraged to evaluate each of these adjustments and the reasons NRG considers them appropriate for supplemental analysis. Because we have mandatory debt service requirements (and other non-discretionary expenditures) investors should not rely on free cash flow before Growth as a measure of cash available for discretionary expenditures.

Free Cash Flow before Growth is utilized by Management in making decisions regarding the allocation of capital. Free Cash Flow before Growth is presented because the Company believes it is a useful tool for assessing the financial performance in the current period. In addition, NRG’s peers evaluate cash available for allocation in a similar manner and accordingly, it is a meaningful indicator for investors to benchmark NRG's performance against its peers. Free Cash Flow before Growth is a performance measure and is not intended to represent net income (loss), cash from operations (the most directly comparable U.S. GAAP measure), or liquidity and is not necessarily comparable to similarly titled measures reported by other companies.

Contacts

Media:
Candice Adams
609.524.5428

Investors:
Kevin L. Cole, CFA
609.524.4526

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Contacts

Media:
Candice Adams
609.524.5428

Investors:
Kevin L. Cole, CFA
609.524.4526