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NRG Energy, Inc. Reports Full Year Results and Maintains 2022 Guidance

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·17 min read
In this article:
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  • 2021 financial results in line with guidance

  • Reduced Winter Storm Uri financial impact to $380 million

  • Closed 4.8 GW asset sale and corresponding $500 million debt reduction

  • Executing $1 billion 2022 share repurchase program

  • Maintaining 2022 Adjusted EBITDA and FCFbG guidance

HOUSTON, February 24, 2022--(BUSINESS WIRE)--NRG Energy, Inc. (NYSE: NRG) today reported a full year 2021 Net Income of $2.2 billion, or $8.93 per diluted common share. Adjusted EBITDA for the full year 2021 was $2.4 billion, Net Cash Provided by Operating Activities was $0.5 billion, and Free Cash Flow Before Growth (FCFbG) was $1.5 billion.

"We have made significant progress across all of our strategic priorities, including advancing our customer-focused strategy, the integration of Direct Energy, and optimizing our generation portfolio," said Mauricio Gutierrez, NRG President and Chief Executive Officer. "Our leading consumer services platform positions NRG to deliver on our compelling growth plan and create significant value for our stakeholders."

Consolidated Financial Results

Three Months Ended

Twelve Months Ended

(In millions)

12/31/21

12/31/20

12/31/21

12/31/20

Net Income/(Loss)

$

(427

)

$

(173

)

$

2,187

$

510

Net Cash Provided by Operating Activities

$

(1,362

)

$

451

$

493

$

1,837

Adjusted EBITDAa

$

433

$

330

$

2,423

$

2,004

Free Cash Flow Before Growth Investments (FCFbG)

$

349

$

387

$

1,512

$

1,547

a Three and twelve months ended 12/31/2021 excludes Winter Storm Uri income/(loss) of $690 million and ($380) million, respectively

Segment Results

Table 1: Net Income/(Loss)

(In millions)

Three Months Ended

Twelve Months Ended

Segment

12/31/21

12/31/20

12/31/21

12/31/20

Texas

$

695

$

$

1,293

$

800

East

(1,214

)

44

1,909

352

West/Services/Othera

92

(217

)

(1,015

)

(642

)

Net Income/(Loss)

$

(427

)

$

(173

)

2,187

$

510

a. Includes Corporate segment

Fourth quarter Net Loss was $427 million, compared to a Net Loss of $173 million in 2020, driven by $1.2 billion of mark-to-market losses on economic hedges in 2021 versus 2020, which were primarily driven by large movements in natural gas and power prices, coupled with a $213 million impairment on the Joliet generation facility in PJM, partially offset by realization of Winter Storm Uri mitigants and the acquisition of Direct Energy.

Table 2: Adjusted EBITDA

(In millions)

Three Months Ended

Twelve Months Ended

Segment

12/31/21

12/31/20

12/31/21

12/31/20

Texas

$

162

$

231

$

1,166

$

1,319

East

228

77

988

437

West/Services/Othera

43

22

269

248

Adjusted EBITDAb

$

433

$

330

2,423

$

2,004

a. Includes Corporate Segment
b. Three and twelve months ended 12/31/2021 excludes Winter Storm Uri income/(loss) of $690 million and ($380) million, respectively

Texas: Fourth quarter Adjusted EBITDA was $162 million, $69 million lower than fourth quarter of 2020. This decrease is primarily driven by milder weather and increased supply costs including replacement power costs associated with the outage at Limestone Unit 1 power plant, partially offset by the acquisition of Direct Energy.

East: Fourth quarter Adjusted EBITDA was $228 million, $151 million higher than fourth quarter of 2020. This increase is driven by the acquisition of Direct Energy, partially offset by the 4.8 GW asset sale in early December 2021.

West/Services/Other: Fourth quarter Adjusted EBITDA was $43 million, $21 million higher than fourth quarter of 2020. This increase was due to the acquisition of Direct Energy, partially offset by the sale of Agua Caliente in February 2021.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

(In millions)

12/31/21

12/31/20

Cash and Cash Equivalents

$

250

$

3,905

Restricted Cash

15

6

Total

$

265

$

3,911

Total credit facility availability

2,421

3,129

Total Liquidity, excluding collateral received

$

2,686

$

7,040

As of December 31, 2021, NRG cash was $0.3 billion, and $2.4 billion was available under the Company’s credit facilities. Total liquidity was $2.7 billion, including restricted cash. Overall liquidity as of December 31, 2021, was approximately $4.4 billion less than December 31, 2020, which included the liquidity procured to close the $3.6 billion Direct Energy acquisition on January 5, 2021. The remaining impact is primarily due to the impact of Winter Storm Uri.

NRG Strategic Developments

Texas Legislation and Winter Storm Uri Updates

The Texas Legislature passed measures to ensure the physical and financial stability of the state’s energy markets, including Senate Bill (SB3) and House Bill (HB) 4492. Consistent with SB 3, the PUCT implemented mandatory weatherization standards for the power sector in 2021, which the Company certified its compliance on December 1, 2021. Natural gas weatherization standards remain outstanding, pending mapping of critical infrastructure and further regulatory action by that industry’s regulator, the Texas Railroad Commission. At the same time, the PUCT announced its intention to introduce a product for reserves to ensure fuel availability in the instance of supply failures in the natural gas system. More comprehensive reforms to introduce a meaningful resource adequacy policy also remain under active consideration. In addition to the physical reliability of the system, the PUCT, consistent with HB 4492, authorized ERCOT to obtain $2.1 billion of financing to offset the costs of certain online reserves and exceptionally highly priced ancillary services borne by load serving entities (LSEs) and their customers during Winter Storm Uri (Uplift Securitization).

The Company is reducing its expected Winter Storm Uri financial loss to $380 million, from a previously expected range of $500-$700 million. This reduction reflects successful mitigations of $708 million, including: customer bad debt mitigation, uplift and default securitizations. The Company expects to receive uplift securitization proceeds in the second quarter of 2022 and continues to pursue additional mitigants including, but not limited to, customer bad debt mitigation, counterparty default recovery, and additional ERCOT default recovery.

Sale of 4.8 GW of Fossil Generating Assets

On December 1, 2021, the Company closed the previously announced sale of approximately 4,850 MW of fossil generating assets from its East and West regions to Generation Bridge, an affiliate of ArcLight Capital Partners, resulting in net proceeds of $623 million. The Company recorded a gain of $210 million from the sale. As part of the transaction, NRG entered into a tolling agreement for the 866 MW Arthur Kill plant in New York City through April 2025.

PJM Retirements

On June 17, 2021, NRG announced the retirement of 55% (or 1,600 MW) of its PJM coal fleet by June 2022 due to the decline in forward PJM capacity prices. PJM has previously identified reliability impacts resulting from the proposed deactivation of Indian River 4. The Company has responded to PJM indicating its willingness to operate the facility in support of the reliability need and is entering into discussions with PJM and the independent market monitor to propose a suitable reliability-must-run arrangement.

Sustainability Update

In 2021, NRG became the first North American power company to receive validation from the Science Based Targets initiative (SBTi) that the company’s climate goals are 1.5 degree Celsius-aligned. In recognition of its commitments, the Company was awarded the Climate Leadership Award for Excellence in Greenhouse Gas Management. NRG also established a new sustainability goal in 2021: 100% electrification of our light-duty fleet by 2030. Rounding out the year, the Company published its inaugural Task Force on Climate-related Financial Disclosures (TCFD) report, reinforcing our commitment to transparent disclosure of our climate-related opportunities and risks.

Maintaining 2022 Guidance

NRG is maintaining its Adjusted EBITDA, Adjusted Cash from Operations, and Free Cash Flow Before Growth Investments (FCFbG) guidance for 2022 as set forth below.

Table 4: 2022 Adjusted EBITDA, Adjusted Cash from Operations, and FCFbG Guidance

2022

(In millions)

Guidance

Adjusted EBITDAa

$1,950 - $2,250

Adjusted Cash From Operations

$1,380 - $1,680

FCFbG

$1,140 - $1,440

a. Non-GAAP financial measure; see Appendix Table 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

As announced on December 6, 2021, the NRG Board of Directors authorized $1 billion for share repurchases. The program began in 2021 with $39 million in share repurchases and the balance will be executed throughout 2022.

On January 21, 2022, NRG declared a quarterly dividend on the Company's common stock of $0.35 per share, or $1.40 per share on an annualized basis. This dividend represents an 8% increase from the prior year, in line with the Company’s previously announced annual dividend growth rate target of 7-9% per share.

As previously disclosed, with closing on the sale of 4.8 GW of fossil generating assets, the Company redeemed $500 million of 6.625% Senior Notes due in 2027. In connection with the redemptions, a $20 million loss on debt extinguishment was recorded, which included the write-off of previously deferred financing costs of $3 million.

The Company remains committed to maintaining a strong balance sheet and continues to work to achieve investment grade credit metrics. The Company expects to grow into its target investment grade metrics of 2.50x-2.75x corporate net debt to adjusted EBITDA primarily through the realization of Direct Energy run-rate earnings and other growth initiatives.

The Company's share repurchase program and common stock dividend are subject to maintaining satisfactory credit metrics, available capital, market conditions, and compliance with associated laws and regulations. The timing and amount of any shares of NRG’s common stock that are repurchased under the share repurchase authorization will be determined by NRG’s management based on market conditions and other factors. NRG will only repurchase shares when management believes it would not jeopardize the company’s ability to maintain satisfactory credit ratings.

Earnings Conference Call

On February 24, 2022, NRG will host a conference call at 9:00 a.m. Eastern (8:00 a.m. Central) 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 by putting customers at the center of everything we do. We generate electricity and provide energy solutions and natural gas to millions of 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, 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.

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 and extreme weather events, competition in wholesale power and gas markets, the volatility of energy and fuel prices, failure of customers or counterparties to perform under contracts, changes in the wholesale power and gas markets, changes in government or market regulations, the condition of capital markets generally, our ability to access capital markets, the potential impact of COVID-19 or any other pandemic on the Company’s operations, financial position, risk exposure and liquidity, data privacy, 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 or asset sales, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to achieve our net debt targets, our ability to achieve or maintain 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 business efficiently, our ability to retain retail customers, our ability to realize value through our market operations strategy, the ability to successfully integrate businesses of acquired companies, including Direct Energy, 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 and free cash flow guidance are estimates as of February 24, 2022. 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

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended December 31,

(In millions, except per share amounts)

2021

2020

2019

Operating Revenues

Total operating revenues

$

26,989

$

9,093

$

9,821

Operating Costs and Expenses

Cost of operations (excluding depreciation and amortization shown below)

20,482

6,540

7,303

Depreciation and amortization

785

435

373

Impairment losses

544

75

5

Selling, general and administrative costs

1,293

810

760

Provision for credit losses

698

108

95

Acquisition-related transaction and integration costs

93

23

2

Total operating costs and expenses

23,895

7,991

8,538

Gain on sale of assets

247

3

7

Operating Income

3,341

1,105

1,290

Other Income/(Expense)

Equity in earnings of unconsolidated affiliates

17

17

2

Impairment losses on investments

(18

)

(108

)

Other income, net

63

67

66

Loss on debt extinguishment

(77

)

(9

)

(51

)

Interest expense

(485

)

(401

)

(413

)

Total other expense

(482

)

(344

)

(504

)

Income from Continuing Operations Before Income Taxes

2,859

761

786

Income tax expense/(benefit)

672

251

(3,334

)

Income from Continuing Operations

2,187

510

4,120

Income from discontinued operations, net of income tax

321

Net Income

2,187

510

4,441

Less: Net income attributable to redeemable noncontrolling interest

3

Net Income Attributable to NRG Energy, Inc.

$

2,187

$

510

$

4,438

Income Per Share Attributable to NRG Energy, Inc. Common Stockholders

Weighted average number of common shares outstanding — basic

245

245

262

Income from continuing operations per weighted average common share — basic

$

8.93

$

2.08

$

15.71

Income from discontinued operations per weighted average common share — basic

$

$

$

1.23

Net Income per Weighted Average Common Share — Basic

$

8.93

$

2.08

$

16.94

Weighted average number of common shares outstanding — diluted

245

246

264

Income from continuing operations per weighted average common share — diluted

$

8.93

$

2.07

$

15.59

Income from discontinued operations per weighted average common share — diluted

$

$

$

1.22

Net Income per Weighted Average Common Share — Diluted

$

8.93

$

2.07

$

16.81

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Year Ended December 31,

(In millions)

2021

2020

2019

Net Income

$

2,187

$

510

$

4,441

Other Comprehensive Income/(Loss), net of tax

Foreign currency translation adjustments, net of income tax

(5

)

8

(1

)

Available-for-sale securities, net of income tax

(19

)

Defined benefit plans, net of income tax

85

(22

)

(78

)

Other comprehensive income/(loss)

80

(14

)

(98

)

Comprehensive Income

2,267

496

4,343

Less: Net income attributable to redeemable noncontrolling interest

3

Comprehensive Income Attributable to NRG Energy, Inc.

$

2,267

$

496

$

4,340

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31,

(In millions)

2021

2020

ASSETS

Current Assets

Cash and cash equivalents

$

250

$

3,905

Funds deposited by counterparties

845

19

Restricted cash

15

6

Accounts receivable, net

3,245

904

Uplift securitization proceeds receivable from ERCOT

689

Inventory

498

327

Derivative instruments

4,613

560

Cash collateral paid in support of energy risk management activities

291

50

Prepayments and other current assets

395

257

Total current assets

10,841

6,028

Property, plant and equipment, net

1,688

2,547

Other Assets

Equity investments in affiliates

157

346

Operating lease right-of-use assets, net

271

301

Goodwill

1,795

579

Intangible assets, net

2,511

668

Nuclear decommissioning trust fund

1,008

890

Derivative instruments

2,527

261

Deferred income taxes

2,155

3,066

Other non-current assets

229

216

Total other assets

10,653

6,327

Total Assets

$

23,182

$

14,902

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

As of December 31,

(In millions, except share data)

2021

2020

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Current portion of long-term debt and finance leases

$

4

$

1

Current portion of operating lease liabilities

81

69

Accounts payable

2,274

649

Derivative instruments

3,387

499

Cash collateral received in support of energy risk management activities

845

19

Accrued expenses and other current liabilities

1,324

678

Total current liabilities

7,915

1,915

Other Liabilities

Long-term debt and finance leases

7,966

8,691

Non-current operating lease liabilities

236

278

Nuclear decommissioning reserve

321

303

Nuclear decommissioning trust liability

666

565

Derivative instruments

1,412

385

Deferred income taxes

73

19

Other non-current liabilities

993

1,066

Total other liabilities

11,667

11,307

Total Liabilities

19,582

13,222

Commitments and Contingencies

Stockholders' Equity

Common stock; $0.01 par value; 500,000,000 shares authorized; 423,547,174 and
423,057,848 shares issued; and 243,753,899 and 244,231,933 shares outstanding at
December 31, 2021 and 2020, respectively

4

4

Additional paid-in capital

8,531

8,517

Retained earnings/(accumulated deficit)

464

(1,403

)

Treasury stock, at cost; 179,793,275 and 178,825,915 shares at December 31, 2021
and 2020, respectively

(5,273

)

(5,232

)

Accumulated other comprehensive loss

(126

)

(206

)

Total Stockholders' Equity

3,600

1,680

Total Liabilities and Stockholders' Equity

$

23,182

...

14,902

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended December 31,

(In millions)

2021

2020

2019

Cash Flows from Operating Activities

Net income

$

2,187

$

510

$

4,441

Income from discontinued operations, net...