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NRG Energy, Inc. Reports Full Year Results and Reaffirms Guidance

·13 mins read
  • Completed $250 million share repurchase authorization, announced on the Q2 2019 call; $1.6 billion completed since January 1, 2019

  • Achieved 2019 Transformation Plan cost savings target of $590 million and working capital target of $370 million, and delivered margin enhancement of $135 million

  • Initiated and paid increased quarterly dividend of $0.30 per share, representing $1.20 on an annualized basis

NRG Energy, Inc. (NYSE: NRG) today reported full year 2019 income from continuing operations of $4.1 billion, or $16.81 per diluted common share. This increase in income from continuing operations is driven by the release of a $3.5 billion tax valuation allowance due to continuing evidence of historical and forecasted positive earnings. Adjusted EBITDA for the full year 2019 was $2.0 billion, cash from continuing operations was $1.4 billion and FCFbG was $1.2 billion. Cash from continuing operations and FCFbG were impacted by certain cash receipts previously expected in 2019, which are now expected to be received in 2020.

"Our integrated platform delivered another year of stable financial and operational results," said Mauricio Gutierrez, NRG President and Chief Executive Officer. "The strength of our business model provides the financial flexibility to continue perfecting our platform while consistently returning significant capital to our shareholders."

Consolidated Financial Results a

Three Months Ended

Twelve Months Ended

($ in millions)

12/31/19

12/31/18

12/31/19

12/31/18

Income/(Loss) from Continuing Operations

$

3,463

$

(92

)

$

4,120

$

460

Cash From Continuing Operations

$

552

$

332

$

1,405

$

1,003

Adjusted EBITDA

$

384

$

273

$

1,977

$

1,777

Free Cash Flow Before Growth Investments (FCFbG)

$

575

$

351

$

1,212

$

1,120

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

Segment Results

Table 1: Income/(Loss) from Continuing Operations

($ in millions)

Three Months Ended

Twelve Months Ended

Segment

12/31/19

12/31/18

12/31/19

12/31/18

Retail

$

233

$

331

$

487

$

1,062

Generation a

(15

)

(256

)

780

2

Corporate

3,245

(167

)

2,853

(604

)

Income/(Loss) from Continuing Operations

$

3,463

$

(92

)

4,120

$

460

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

Twelve Months Ended

Segment

12/31/19

12/31/18

12/31/19

12/31/18

Retail

$

258

$

197

$

920

$

952

Generation a

130

84

1,069

864

Corporate

(4

)

(8

)

(12

)

(39

)

Adjusted EBITDA b

$

384

$

273

1,977

$

1,777

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

Full year 2019 Adjusted EBITDA was $920 million, $32 million lower than 2018, driven by higher supply costs, capacity obligations and weather, partially offset by margin enhancement initiatives and growth related to M&A activity.

Fourth quarter Adjusted EBITDA was $258 million, $61 million higher than the fourth quarter of 2018, driven by margin enhancement initiatives and the acquisition of Stream Energy.

Generation

Full year 2019 Adjusted EBITDA was $1,069 million, $205 million higher than 2018, driven by:

  • Texas: $364 million increase due to higher realized power prices, partially offset by higher operating expenses driven by forced outage at WA Parish and Gregory return-to-service costs; and

  • East/West1: $159 million decrease primarily due to $178 million decrease in EBITDA from 2018 asset sales and the deconsolidation of projects, partially offset by lower operating expenses.

Fourth quarter Adjusted EBITDA was $130 million, $46 million higher than the fourth quarter 2018, driven by:

  • Texas: $34 million increase due to higher realized power prices, partially offset by higher operating expenses; and

  • East/West1: $12 million increase due to higher realized power prices and lower operating expenses, partially offset by lower capacity revenues and deactivation of the Encina generation facility.

1 Includes International and Renewables

Liquidity and Capital Resources

Table 3: Corporate Liquidity

($ in millions)

12/31/19

12/31/18

Cash and Cash Equivalents

$

345

$

563

Restricted Cash

8

17

Total

$

353

$

580

Total credit facility availability

1,794

1,397

Total Liquidity, excluding collateral received

$

2,147

$

1,977

As of December 31, 2019, NRG cash was $0.4 billion, and $1.8 billion was available under the Company’s credit facilities. Total liquidity was $2.1 billion, including restricted cash. Overall liquidity as of the end of the fourth quarter 2019 was $170 million higher than at the end of 2018.

NRG Strategic Developments

Transformation Plan

NRG realized the targeted $590 million operating expense cost savings and $135 million margin enhancement, as part of the previously announced Transformation Plan. Working capital three year target of $370 million was also achieved.

Renewable Power Purchase Agreements

During 2019, NRG continued execution of its capital-light strategy to provide competitively priced renewable offerings to customers. NRG entered into power purchase agreements with third-party project developers and other counterparties, totaling approximately 1.6 GWs for the year, with an average tenor of approximately ten years. NRG expects to continue evaluating and executing agreements such as these that support the needs of its customers.

Retail Growth

In 2019, NRG continued efforts to perfect its integrated platform through the acquisition of Stream Energy's retail electricity and natural gas business operating in 9 states and Washington, D.C., as well as other small electricity retailers. NRG's brands now serve more than 1 million customers outside of the state of Texas.

2020 Guidance

NRG is reaffirming its guidance range for 2020 with respect to Adjusted EBITDA, Adjusted Cash From Operations and Free Cash Flow before Growth Investments (FCFbG) as set forth below.

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

2020

($ in millions)

Guidance

Adjusted EBITDA a

$1,900-$2,100

Adjusted Cash From Operations

$1,450-$1,650

FCFbG

$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 February 27, 2020, NRG completed $1.6 billion in share repurchases at an average price of $38.72 per share2.

On January 21, 2020, NRG declared a quarterly dividend on the Company's common stock of $0.30 per share, which was paid on February 18, 2020, to stockholders of record as of February 3, 2020, representing $1.20 on an annualized basis.

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

2 As of February 27, 2020, 247,656,747 shares outstanding

Earnings Conference Call

On February 27, 2020, 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 by putting customers at the center of everything we do. We generate electricity and provide energy solutions and natural gas to more than 3.7 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.

Forward-Looking Statements

In addition to historical information, the information presented in this presentation 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 achieve margin enhancement under our publicly announced transformation plan, our ability to achieve our net debt targets, our ability to 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 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 a 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 guidance and excess cash guidance are estimates as of February 27, 2020. 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 presentation 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)

2019

2018

2017

Operating Revenues

Total operating revenues

$

9,821

$

9,478

$

9,074

Operating Costs and Expenses

Cost of operations

7,303

7,108

6,886

Depreciation and amortization

373

421

596

Impairment losses

5

99

1,534

Selling, general and administrative

827

799

836

Reorganization costs

23

90

44

Development costs

7

11

22

Total operating costs and expenses

8,538

8,528

9,918

Other income - affiliate

87

Gain on sale of assets

7

32

16

Operating Income/(Loss)

1,290

982

(741

)

Other Income/(Expense)

Equity in earnings/(losses) of unconsolidated affiliates

2

9

(14

)

Impairment losses on investments

(108

)

(15

)

(79

)

Other income, net

66

18

51

Loss on debt extinguishment, net

(51

)

(44

)

(49

)

Interest expense

(413

)

(483

)

(557

)

Total other expense

(504

)

(515

)

(648

)

Income/(Loss) from Continuing Operations Before Income Taxes

786

467

(1,389

)

Income tax (benefit)/expense

(3,334

)

7

(44

)

Income/(Loss) from Continuing Operations

4,120

460

(1,345

)

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

321

(192

)

(992

)

Net Income/(Loss)

4,441

268

(2,337

)

Less: Net income/(loss) attributable to noncontrolling interest and redeemable interests

3

(184

)

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

$

4,438

$

268

$

(2,153

)

Earnings/(Loss) Per Share Attributable to NRG Energy, Inc. Common Stockholders

Weighted average number of common shares outstanding — basic

262

304

317

Income/(loss) from continuing operations per weighted average common share — basic

$

15.71

$

1.51

$

(3.66

)

Income/(loss) from discontinued operations per weighted average common share — basic

$

1.23

$

(0.63

)

$

(3.13

)

Net Income/(Loss) per Weighted Average Common Share — Basic

$

16.94

$

0.88

$

(6.79

)

Weighted average number of common shares outstanding — diluted

264

308

317

Income/(loss) from continuing operations per weighted average common share — diluted

$

15.59

$

1.49

$

(3.66

)

Income/(loss) from discontinued operations per weighted average common share — diluted

$

1.22

$

(0.62

)

$

(3.13

)

Net Income/(Loss) per Weighted Average Common Share — Diluted

$

16.81

$

0.87

$

(6.79

)

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

For the Year Ended December 31,

(In millions)

2019

2018

2017

Net Income/(Loss)

$

4,441

$

268

$

(2,337

)

Other Comprehensive (Loss)/Income, net of tax

Unrealized gain on derivatives, net of income tax

23

13

Foreign currency translation adjustments, net of income tax

(1

)

(11

)

12

`

Available-for-sale securities, net of income tax

(19

)

1

(8

)

Defined benefit plans, net of income tax

(78

)

(35

)

46

Other comprehensive (loss)/income

(98

)

(22

)

63

Comprehensive Income/(Loss)

4,343

246

(2,274

)

Less: Comprehensive income/(loss) attributable to noncontrolling interests and redeemable noncontrolling interests

3

14

(179

)

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

$

4,340

$

232

$

(2,095

)

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31,

(In millions)

2019

2018

ASSETS

Current Assets

Cash and cash equivalents

$

345

$

563

Funds deposited by counterparties

32

33

Restricted cash

8

17

Accounts receivable, net

1,025

1,024

Inventory

383

412

Derivative instruments

860

764

Cash collateral posted in support of energy risk management activities

190

287

Prepayments and other current assets

245

302

Current assets - held-for-sale

1

Current assets - discontinued operations

197

Total current assets

3,088

3,600

Property, plant and equipment, net

2,593

3,048

Other Assets

Equity investments in affiliates

388

412

Operating lease right-of-use assets, net

464

Goodwill

579

573

Intangible assets, net

789

591

Nuclear decommissioning trust fund

794

663

Derivative instruments

310

317

Deferred income taxes

3,286

46

Other non-current assets

240

289

Non-current assets - held-for-sale

77

Non-current assets - discontinued operations

1,012

Total other assets

6,850

3,980

Total Assets

$

12,531

$

10,628

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

As of December 31,

(In millions, except share data)

2019

2018

LIABILITIES AND STOCKHOLDERS' EQUITY

...

Current Liabilities

Current portion of long-term debt and finance leases

$

88

$

72

Current portion of operating lease liabilities

73

Accounts payable

722

863

Derivative instruments

781

673

Cash collateral received in support of energy risk management activities

32

33

Accrued expenses and other current liabilities

663

680

Current liabilities - held for sale

5

Current liabilities - discontinued operations

72

Total current liabilities

2,359

2,398

Other Liabilities

Long-term debt and finance leases

$

5,803

$

6,449

Non-current operating lease liabilities

483

Nuclear decommissioning reserve

298

282

Nuclear decommissioning trust liability

487

371

Derivative instruments

322

304

Deferred income taxes

17

65

Other non-current liabilities

1,084

1,274

Non-current liabilities - held-for-sale

65

Non-current liabilities - discontinued operations

635

Total other liabilities

8,494

9,445

Total Liabilities

10,853

11,843

Redeemable noncontrolling interest in subsidiaries

20

19

Commitments and Contingencies

Stockholders' Equity

Common stock; $0.01 par value; 500,000,000 shares authorized; 421,890,790 and 420,288,886 shares issued; and 248,996,189 and 283,650,039 shares outstanding at December 31, 2019 and 2018

4

4

Additional paid-in capital

8,501

8,510

Accumulated deficit

(1,616

)

(6,022

)

Treasury stock, at cost; 172,894,601 and 136,638,847 shares at December 31, 2019 and 2018

(5,039

)

(3,632

)

Accumulated other comprehensive loss

(192

)

(94

)

Total Stockholders' Equity

1,658

(1,234

)

Total Liabilities and Stockholders' Equity

$

12,531

$

10,628

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended December 31,

(In millions)

2019

2018

2017

Cash Flows from Operating Activities

Net income/(loss)

$

4,441

$

268

$

(2,337

)

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

321

(192

)

(992

)

Income/(loss) from continuing operations

4,120

460

(1,345

)

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

Distributions and equity in earnings of unconsolidated affiliates

14

46

102

Depreciation and amortization

373

421

596

Accretion of asset retirement obligations

51

38

44

Provision for bad debts

95

85

68

Amortization of nuclear fuel

52

48

51

Amortization of financing costs and debt discount/premiums

26

29

29

Loss on debt extinguishment, net

51

44

49

Amortization of emission allowances and out-of-market contracts

38

45

54

Amortization of unearned equity compensation

20

25

35

Net gain on sale of assets and disposal of assets

(23

)

(49

)

(9

)

Impairment losses

113

114

1,614

Changes in derivative instruments

34

37

(170

)

Changes in deferred income taxes and liability for uncertain tax benefits

(3,353

)

5

13

Changes in collateral deposits in support of risk management activities

105

(105

)

(80

)

Changes in nuclear decommissioning trust liability

37

60

11

GenOn settlement, net of insurance proceeds

(63

)

Net loss on deconsolidation of Agua Caliente and Ivanpah projects

13

Cash provided/(used) by changes in other working capital, net of acquisition and disposition effects:

Accounts receivable - trade

5

(83

)

(83

)

Inventory

22

31

143

Prepayments and other current assets

29

(41

)

(187

)

Accounts payable

(177

)

113

44

Accrued expenses and other current liabilities

(41

)

(166

)

(88

)

Other assets and liabilities

(186

)

(104

)

(35

)

Cash provided by continuing operations

1,405

1,003

856

Cash provided by discontinued operations

8

374

754

Net Cash Provided by Operating Activities

1,413

1,377

1,610

Cash Flows from Investing Activities

Payments for acquisitions of businesses

(355

)

(243

)

(14

)

Capital expenditures

(228

)

(388

)

(254

)

Net proceeds from sale of emission allowances

11

19

66

Investments in nuclear decommissioning trust fund securities

(416

)

(572

)

(512

)

Proceeds from sales of nuclear decommissioning trust fund securities

381

513

501

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

1,294

1,564

430

Deconsolidations of Agua Caliente and Ivanpah projects

(268

)

Net contributions to investments in unconsolidated affiliates

(91

)

(39

)

(57

)

Net (contributions to)/distributions from discontinued operations

(44

)

(60

)

150

Other

6

(6

)

30

Cash provided by continuing operations

558

520

340

Cash used by discontinued operations

(2

)

(725

)

(979

)

Net Cash Provided/(Used) by Investing Activities

556

(205

)

(639

)

For the Year Ended December 31,

(In millions)

2019

2018

2017

Cash Flows from Financing Activities

Payments of dividends to common stockholders

(32

)

(37

)

(38

)

Payments for share repurchase activity

(1,440

)

(1,250

)

Payments for debt extinguishment costs

(26

)

(32

)

(42

)

Net distributions to noncontrolling interest from subsidiaries

(2

)

(16

)

(30

)

Proceeds/(payments) from issuance of common stock

3

21

(2

)

Proceeds from issuance of short and long-term debt

1,916

1,100

1,178

Payments of debt issuance costs

(35

)

(19

)

(18

)

Payments for short and long-term debt

(2,571

)

(1,734

)

(1,884

)

Receivable from affiliate

(26

)

(125

)

Other

(4

)

(4

)

(8

)

Cash used by continuing operations

(2,191

)

(1,997

)

(969

)

Cash provided/(used) by discontinued operations

43

471

(169

)

Net Cash Used by Financing Activities.

(2,148

)

(1,526

)

(1,138

)

Effect of exchange rate changes on cash and cash equivalents

1

(1

)

Change in Cash from discontinued operations

49

120

(394

)

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

(228

)

(473

)

226

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

613

1,086

860

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

$

385

$

613

$

1,086

Appendix Table A-1: Fourth 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/
West 1

Generation

Retail

Corp/Elim

Total

Income/(Loss) from Continuing Operations

(19

)

4

(15

)

233

3,245

3,463

Plus:

Interest expense, net

4

4

88

92

Income tax

1

1

1

(3,344

)

(3,342

)

Loss on debt extinguishment

3

3

3

Depreciation and amortization

22

24

46

57

8

111

ARO expense

17

4

21

21

Contract amortization

3

3

3

EBITDA

23

40

63

291

(3

)

351

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

25

25

25

Acquisition-related transaction & integration costs

1

1

Reorganization costs

1

6

7

Deactivation costs

(1

)

8

7

3

10

Gain on sale of assets

(5

)

(5

)

Other non recurring charges

(1

)

(1

)

(1

)

(5

)

(7

)

Impairments

4

4

4

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

29

3

32

(33

)

(1

)

(2

)

Adjusted EBITDA

51

79

130

258

(4

)

384

1 Includes International, remaining renewables and Generation eliminations

Fourth Quarter 2019 condensed financial information by Operating Segment:

($ in millions)

Texas

East/
West 1

Generation

Retail

Corp/Elim

Total

Operating revenues

372

350

722

1,782

(290

)

2,214

Cost of sales

168

150

318

1,287

(288

)

1,317

Economic gross margin2

204

200

404

495

(2

)

897

Operations & maintenance and other cost of operations3

123

105

228

100

(1

)

327

Selling, marketing, general & administrative4

33

34

67

137

6

210

Other expense/(income)5

(3

)

(18

)

(21

)

0

(3

)

(24

)

Adjusted EBITDA

51

79

130

258

(4

)

384

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gains of $2 million and contract amortization of $3 million

3 Excludes $31 million of deactivation costs, ARO expense and other non recurring charges

4 Excludes $3 million of other non recurring charges

5 Includes development costs. Excludes $3,114 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition-related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

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

2,195

19

2,214

Cost of operations

1,299

(3

)

21

1,317

Gross margin

896

3

(2

)

897

Operations & maintenance and other cost of operations1

358

(10

)

(21

)

327

Selling, marketing, general & administrative2

213

(3

)

210

Other expense/(income)3

(3,138

)

3,118

(4

)

(24

)

Income/(Loss) from Continuing Operations

3,463

(3,115

)

(2

)

10

28

384

1 Other adj. includes ARO expense

2 Other adj. includes other non recurring charges

3 Other adj. includes gain on sale of assets, acquisition-related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

Appendix Table A-2: Fourth 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/
West 1

Generation

Retail

Corp/Elim

Total

Income/(Loss) from Continuing Operations

(174

)

(82

)

(256

)

331

(167

)

(92

)

Plus:

Interest expense, net

9

9

1

107

117

Income tax

(12

)

(12

)

Loss on debt extinguishment

21

21

Depreciation and amortization

21

31

52

30

9

91

ARO Expense

1

3

4

4

Contract amortization

7

7

7

Lease amortization

(2

)

(2

)

(2

)

EBITDA

(145

)

(41

)

(186

)

362

(42

)

134

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

4

26

30

30

Acquisition-related transaction & integration costs

1

1

2

Reorganization costs2

1

1

5

31

37

Legal Settlement

10

10

10

Deactivation costs

4

4

Gain on sale of assets

(1

)

(1

)

Other non recurring charges

(1

)

(1

)

1

(1

)

(1

)

Impairments

5

4

9

1

10

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

153

68

221

(173

)

48

Adjusted EBITDA

17

67

84

197

(8

)

273

1 Includes International, remaining renewables and Generation eliminations

2 Includes $17 million of non-recurring pension expense

Fourth Quarter 2018 condensed financial information by Operating Segment:

($ in millions)

Texas

East/
West 1

Generation

Retail

Corp/Elim

Total

Operating revenues

345

377

722

1,608

(239

)

2,091

Cost of sales2

198

178

376

1,178

(239

)

1,315

Economic gross margin3

147

199

346

430

776

Operations & maintenance and other cost of operations4

114

123

237

81

(1

)

317

Selling, marketing, general & administrative5

20

20

40

153

8

201

Other expense/(income)6

(4

)

(11

)

(15

)

(1

)

1

(15

)

Adjusted EBITDA

17

67

84

197

(8

)

273

1 Includes International, remaining renewables and Generation eliminations

2 Excludes deactivation costs of $4 million

3 Excludes MtM gains of $48 million and contract amortization of $7 million

4 Excludes $2 million of ARO expense and lease amortization

5 Excludes $11 million of legal settlements and other non recurring charges

6 Includes development costs. Excludes $293 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition-related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

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

1,992

99

2,091

Cost of operations

1,275

(7)

51

(4)

1,315

Gross margin

717

7

48

4

776

Operations & maintenance and other cost of operations1

319

(2)

317

Selling, marketing, general & administrative2

212

(11)

201

Other expense/(income)3

278

(198)

(95)

(15)

Income/(Loss) from Continuing Operations

(92)

205

48

4

108

273

1 Other adj. includes ARO expense and lease amortization

2 Other adj. includes legal settlement and other non recurring charges

3 Other adj. includes gain on sale of assets, acquisition-related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

Appendix Table A-3: Full Year 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/
West 1

Generation

Retail

Corp/Elim

Total

Income/(Loss) from Continuing Operations

570

210

780

487

2,853

4,120

Plus:

Interest expense, net

23

23

3

368

394

Income tax

2

2

2

(3,338

)

(3,334

)

Loss on debt extinguishment

3

3

48

51

Depreciation and amortization

88

97

185

157

31

373

ARO expense

27

24

51

1

(1

)

51

Contract amortization

19

19

19

EBITDA

704

359

1,063

650

(39

)

1,674

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

12

103

115

115

Acquisition-related transaction & integration costs

2

1

3

Reorganization costs

1

1

5

17

23

Legal Settlement

3

8

11

2

13

Deactivation costs

(1

)

19

18

9

27

Gain on sale of assets

(6

)

(6

)

Other non recurring charges

(1

)

4

3

(5

)

(3

)

(5

)

Impairments

101

4

105

1

7

113

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

(208

)

(39

)

(247

)

267

20

Adjusted EBITDA

610

459

1,069

920

(12

)

1,977

1 Includes International, remaining renewables and Generation eliminations

Full Year 2019 condensed financial information by Operating Segment:

($ in millions)

Texas

East/
West 1

Generation

Retail

Corp/Elim

Total

Operating revenues

2,077

1,536

3,613

7,680

(1,505

)

9,788

Cost of sales

891

667

1,558

5,821

(1,501

)

5,878

Economic gross margin2

1,186

869

2,055

1,859

(4

)

3,910

Operations & maintenance and other cost of operations3

488

421

909

364

(3

)

1,270

Selling, marketing, general & administrative4

110

110

220

574

21

815

Other expense/(income)5

(22

)

(121

)

(143

)

1

(10

)

(152

)

Adjusted EBITDA

610

459

1,069

920

(12

)

1,977

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM loss of $20 million and contract amortization of $19 million

3 Excludes $83 million of deactivation costs, ARO expense and other non recurring charges

4 Excludes $12 million of legal settlement and other non recurring charges

5 Includes development costs. Excludes $2,277 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition-related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

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

9,821

(33

)

9,788

Cost of operations

5,950

(19

)

(53

)

5,878

Gross margin

3,871

19

20

3,910

Operations & maintenance and other cost of operations1

1,353

(27

)

(56

)

1,270

Selling, marketing, general & administrative2

827

(12

)

815

Other expense/(income)3

(2,429

)

2,516

(239

)

(152

)

Income/(Loss) from Continuing Operations

4,120

(2,497

)

20

27

307

1,977

1 Other adj. includes ARO expense and other non recurring charges

2 Other adj. includes legal settlement and other non recurring charges

3 Other adj. includes gain on sale of assets, acquisition-related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

Appendix Table A-4: Full Year 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/
West 1

Generation

Retail

Corp/Elim

Total

Income/(Loss) from Continuing Operations

(102

)

104

2

1,062

(604

)

460

Plus:

Interest expense, net

55

55

3

408

466

Income tax

1

6

7

Loss on debt extinguishment

44

44

Depreciation and amortization

85

187

272

116

33

421

ARO Expense

21

15

36

1

37

Contract amortization

26

1

27

27

Lease amortization

(8

)

(8

)

(8

)

EBITDA

30

354

384

1,183

(113

)

1,454

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

9

73

82

1

83

Acquisition-related transaction & integration costs

5

4

9

Reorganization costs2

3

8

11

15

81

107

Legal Settlement

13

10

23

6

29

Deactivation costs

10

10

12

22

Gain on sale of assets

2

2

(30

)

(28

)

Other non recurring charges

(1

)

1

1

1

Impairments

20

93

113

1

114

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

172

67

239

(253

)

(14

)

Adjusted EBITDA

246

618

864

952

(39

)

1,777

1 Includes International, remaining renewables and Generation eliminations

2 Includes $17 million of non-recurring pension expense

Full Year 2018 condensed financial information by Operating Segment:

($ in millions)

Texas

East/
West 1

Generation

Retail

Corp/Elim

Total

Operating revenues

1,670

1,975

3,645

7,110

(1,147

)

9,608

Cost of sales2

867

832

1,699

5,308

(1,140

)

5,867

Economic gross margin3

803

1,143

1,946

1,802

(7

)

3,741

Operations & maintenance and other cost of operations4

479

497

976

314

(1

)

1,289

Selling, marketing, general & administrative5

95

110

205

535

37

777

Other expense/(income)6

(17

)

(82

)

(99

)

1

(4

)

(102

)

Adjusted EBITDA

246

618

864

952

(39

)

1,777

1 Includes International, remaining renewables and Generation eliminations

2 Excludes deactivation costs of $11 million

3 Excludes MtM gain of $14 million and contract amortization of $27 million

4 Excludes $58 million of deactivation costs, ARO expense and other non recurring charges

5 Excludes $22 million of legal settlements, acquisition-related transaction & integration costs and other non recurring charges

6 Includes development costs. Excludes $1,213 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition-related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

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

9,478

130

9,608

Cost of operations

5,761

(27

)

144

(11

)

5,867

Gross margin

3,717

27

(14

)

11

3,741

Operations & maintenance and other cost of operations1

1,347

(11

)

(47

)

1,289

Selling, marketing, general & administrative2

799

(22

)

777

Other expense/(income)3

1,111

(923

)

(290

)

(102

)

Income/(Loss) from Continuing Operations

460

950

(14

)

22

359

1,777

1 Other adj. includes ARO expense and lease amortization

2 Other adj. includes legal settlement, acquisition-related transaction & integration costs and other non recurring charges

3 Other adj. includes gain on sale of assets, acquisition-related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

Appendix Table A-5: 2019 and 2018 Three Months Ended December 31 and Full Year 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)

December 31, 2019

December 31, 2018

Net Cash Provided by Operating Activities

552

332

Merger, integration and cost-to-achieve expenses1

20

26

GenOn Settlement2

(57

)

Note Repayment

5

Gain on Sale of Land

2

1

Encina Site Improvement

1

Adjustment for change in collateral

23

72

Adjusted Cash Flow from Operating Activities

603

374

Maintenance CapEx, net

(27

)

(23

)

Environmental CapEx, net

(1

)

Distributions to non-controlling interests

Free Cash Flow before Growth

575

351

1 2019 and 2018 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call

2 2018 includes insurance proceeds and legal fees

Twelve Months Ended

($ in millions)

December 31, 2019

December 31, 2018

Net Cash Provided by Operating Activities

1,405

1,003

Merger, integration and cost-to-achieve expenses1

39

97

GenOn Settlement2

18

75

Note Repayment

5

Gain on Sale of Land

2

4

Encina Site Improvement

1

Adjustment for change in collateral

(97

)

117

Adjusted Cash Flow from Operating Activities

1,373

1,296

Maintenance CapEx, net

(156

)

(159

)

Environmental CapEx, net

(3

)

(1

)

Distributions to non-controlling interests

(2

)

(16

)

Free Cash Flow before Growth

1,212

1,120

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 $13 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, and insurance proceeds, net of legal fees, of $58 million

Appendix Table A-6: Full Year 2019 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity for the full year 2019:

($ in millions)

Twelve Months Ended
December 31, 2019

Sources:

Adjusted cash flow from operations

1,373

Asset Sales

1,283

Collateral

97

Increase in credit facility/revolver

397

Uses:

Share repurchases

(1,440

)

Corporate Debt payments and Financing fees

(655

)

Midwest Gen Debt amortization

(48

)

Growth investments and acquisitions, net

(551

)

Maintenance and Environmental CapEx, net

(159

)

GenOn Settlement

(18

)

Cost-to-achieve expenses1

(84

)

Common Stock Dividends

(32

)

Distributions to non-controlling interests

(2

)

Other Investing and Financing

9

Change in Total Liquidity

170

1 Includes capital expenditures associated with the Transformation Plan

Appendix Table A-7: 2020 Adjusted EBITDA Guidance Reconciliation

The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income:

2020 Adjusted EBITDA

($ 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: 2020 FCFbG Guidance Reconciliation

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

2020

($ in millions)

Guidance

Adjusted EBITDA

$1,900 - $2,100

Interest payments

(335)

Income tax

(20)

Working capital / other assets and liabilities

(105)

Cash From Operations

$1,440 - $1,640

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

10

Adjusted Cash flow from Operations

$1,450 - $1,650

Maintenance capital expenditures, net

(165) - (185)

Environmental capital expenditures, net

(0) - (5)

Free Cash Flow before Growth

$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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200227005541/en/

Contacts

Media:
Candice Adams
609.524.5428

Investors:
Kevin L. Cole, CFA
609.524.4526