Key Highlights
- Significant progress in
corporate-level debt reduction and maturity extensions; increasing
both cash from operations and free cash flow before growth
- Reached definitive agreement with
NRG Yield for California Valley Solar Ranch (CVSR) Drop Down;
together with project financing, total $180 million in cash
consideration to NRG
- Exceeded $500 million asset sales
target with $563 million1 completed
NRG Energy, Inc. (NYSE:NRG):
Financial Results
Three Months Ended Six Months Ended ($
in millions)
6/30/16 6/30/15 6/30/16
6/30/15 Net Loss (276 ) (9 ) (229 ) (145 ) Cash From
Operations 319 198 873 458 Adjusted EBITDA2 779 681 1,592 1,482
Free Cash Flow (FCF) Before Growth Investments (29 )
(90 ) 220 274
- Net loss of $276 million for the second
quarter of 2016, compared with a net loss of $9 million in the
second quarter of 2015, driven by $198 million in impairments and
the loss on sale of assets and $80 million loss on debt
extinguishment
- Adjusted EBITDA of $779 million for the
second quarter of 2016 represents a $98 million increase compared
to the second quarter of 2015
NRG Energy, Inc. (NYSE:NRG) today reported a second quarter net
loss of $276 million. The net loss for the first six months of 2016
was $229 million, or $0.37 per diluted common share compared to a
net loss of $145 million, or $0.43 per diluted common share for the
first six months of 2015. Adjusted EBITDA for the three and six
months ended June 30, 2016, was $779 million and $1,592 million,
respectively. Year-to-date cash from operations totaled $873
million.
"During the second quarter, our integrated competitive power
platform, unique in our sector, performed exceptionally well,”
said Mauricio Gutierrez, NRG's President and Chief Executive
Officer. “Our consistent performance continues to validate the
strategic direction of our integrated approach, positioning us for
market recovery while providing stability during periods of low
commodity prices. While we execute our plan and simplify our value
proposition, we remain focused on strengthening the balance
sheet and increasing financial flexibility.”
1 Subject to working capital changes.2 For comparability, 2015
results have been restated to include the negative contribution
from residential solar of $47 million and $87 million for the three
and six months ended June 30, 2015.
Segment Results
Table 1: Net Loss
($ in millions)
Three Months Ended Six Months
Ended Segment
6/30/16 6/30/15
6/30/16 6/30/15 Generation (371 ) 3 (212 ) 32
Retail Mass 496 217 642 321 Renewables (1) (58 ) (6 ) (103 ) (57 )
NRG Yield (1) 58 38 60 18 Corporate (2) (401 ) (261 ) (616 ) (459 )
Net Loss (3) (276 ) (9 ) (229 ) (145 )
(1) In accordance with GAAP, 2015 results have been restated to
include full impact of the assets in the NYLD Drop Down transaction
which closed on November 3, 2015.(2) Includes residential solar.(3)
Includes mark-to-market gains and losses of economic hedges.
Table 2: Adjusted EBITDA
($ in millions)
Three Months Ended Six Months
Ended Segment
6/30/16 6/30/15
6/30/16 6/30/15 Generation (1) 302 293 735 834
Retail Mass 213 209 363 375 Renewables (2) 57 66 95 88 NRG Yield
(2) 240 199 428 331 Corporate (3) (33 ) (86 ) (29 ) (146 ) Adjusted
EBITDA (4) 779 681 1,592 1,482
(1) See Appendices A-6 through A-9 for Generation regional Reg G
reconciliations.(2) In accordance with GAAP, 2015 results have been
restated to include full impact of the assets in the NYLD Drop Down
transaction which closed on November 3, 2015.(3) 2016 includes
residential solar, 2015 results have been restated to include
negative contribution of $47 million and $87 million for the three
and six months ended June 30, 2015, respectively.(4) See Appendices
A-1 through A-4 for Operating Segment Reg G reconciliations.
Generation: Second quarter Adjusted EBITDA was $302
million, $9 million higher than second quarter 2015 primarily
driven by:
- Gulf Coast Region: $26 million increase
primarily due to higher South Central capacity revenues and
favorable operating costs from reduced outages across the region,
partially offset by lower energy margins in Texas from the decline
in power prices on mild weather;
- East Region: $19 million lower due to
lower energy margins on milder weather and lower dispatch, and
lower capacity revenues due to lower pricing and plant
deactivations.
Retail Mass: Second quarter Adjusted EBITDA was $213
million, $4 million higher than second quarter 2015 driven by
operating cost efficiencies and lower supply costs offset by lower
rates to customers and the impact from milder weather.
Renewables: Second quarter Adjusted EBITDA was $57
million, $9 million lower than second quarter 2015 due primarily to
unplanned outages at Ivanpah.
NRG Yield: Second quarter Adjusted EBITDA was $240
million, $41 million higher than second quarter 2015 due to
increased wind production and the acquisitions of Desert Sunlight
and Spring Canyon.
Corporate: Second quarter Adjusted EBITDA was $(33)
million, $53 million better than second quarter 2015 due to reduced
spend at residential solar, lower headcount and favorable trading
results at BETM.
Liquidity and Capital Resources
Table 3: Corporate Liquidity
($ in millions)
6/30/16 12/31/15 Cash at NRG-Level (1) $600 $693
Revolver 1,329 1,373
NRG-Level Liquidity $1,929
$2,066 Restricted cash 413 414 Cash at Non-Guarantor
Subsidiaries 789 825
Total Liquidity
$3,131 $3,305
(1)Includes $250 million of unrestricted cash held at Midwest
Gen (a non-guarantor subsidiary) which can be distributed to NRG
without limitation
NRG-Level cash as of June 30, 2016, was $600 million, a decrease
of $93 million from the end of 2015, and $1.3 billion was available
under the Company’s credit facilities at the end of the second
quarter of 2016. Total liquidity was $3.1 billion, including
restricted cash and cash at non-guarantor subsidiaries (primarily
GenOn and NRG Yield).
NRG Strategic Developments
NRG entered into two transactions to realize the value of its
remaining stake in CVSR for a total cash consideration of $180
million:
- On July 15, 2016, CVSR Holdco, the
indirect owner of the CVSR project, which is 51.05% owned by NRG,
issued $200 million of senior secured notes, before fees, of which
NRG's pro-rata share of cash proceeds from the borrowings was
$101.5 million.
- On August 8, 2016, NRG agreed to sell
its 51.05% interest in the CVSR facility to NRG Yield for total
cash consideration of approximately $78.5 million3 plus assumed
project level debt. The sale is subject to customary closing
conditions and is expected to close in the third quarter of
2016.
On July 12, 2016, GenOn completed the sale of Aurora for cash
proceeds of $369 million, including $4 million in adjustments for
the PJM base residual auction results and estimated working
capital, which is subject to further adjustment, and NRG completed
the sale of Rockford for cash proceeds of $56 million, including $1
million in adjustments for the PJM base residual auction
results.
On May 26, 2016, the California Public Utilities Commission
approved the resource adequacy purchase agreement between Southern
California Edison and NRG for the construction of the 262 MW
natural gas peaking Puente Power Project; the project has a
targeted completion for the second quarter 2020.
3 Subject to working capital changes
2016 Guidance
NRG is reaffirming its guidance range for fiscal year 2016 with
respect to Adjusted EBITDA and FCF before growth investments.
Table 4: 2016 Adjusted EBITDA and FCF
before Growth Investments Guidance
($ in millions)
2016 Adjusted EBITDA $3,000 - 3,200
Cash Interest payments (1,090) Debt Extinguishment Cash Cost (100)
Cash Income tax (40) Collateral / working capital / other 285 Cash
From Operations $2,055 - 2,255 Adjustments: Acquired Derivatives,
Cost-to-Achieve, Return of Capital Dividends, and Collateral (210)
Adjusted Cash flow from operations $1,845 - 2,045 Maintenance
capital expenditures, net (435) - (465) Environmental capital
expenditures, net (285) - (315) Preferred dividends (2)
Distributions to non-controlling interests (170) - (180)
Free Cash Flow – before Growth Investments $1,000 – 1,200
Capital Allocation Update
On June 13, 2016, NRG retired 100% of the outstanding shares of
its $345 million 2.822% preferred stock for $226 million cash
resulting in an annual dividend savings of $10 million.
Year to date, NRG has reduced its 2018 corporate debt maturities
by 84% through a combination of debt reduction and maturity
extensions. The company issued new Senior Notes due 2026 and 2027
totaling approximately $2.25 billion at an average coupon rate of
6.9% permitting it to seek to redeem all of its Senior Notes due
2020, and a portion of the notes due 2021 and to significantly
reduce the outstanding balances of its remaining Senior Notes due
2018, 2022 and 2023. The company also extended the maturity of the
$1.9 billion 2018 secured term loan facility to 2023 and extended
the maturity of $2.2 billion of its secured revolving credit
facility from 2018 to 2021.
Through June 30, 2016, NRG allocated $320 million of the $1.3
billion of 2016 NRG-level capital to debt repurchases, thereby
reducing corporate debt by $337 million. Combined with the debt
repurchases in 2015 and the planned redemption of a portion of 2020
and 2021 Senior Notes in September 2016, NRG will have retired $642
million4 of corporate debt resulting in an annual interest savings
of $50 million. NRG expects to allocate approximately $439 million
of 2016 capital toward further corporate debt reduction during the
year and continues to maintain a reserve totaling $430 million
which is expected to be used to retire a portion of its 2018 Senior
Notes (currently $587 million outstanding).
On July 13, 2016, NRG declared a quarterly dividend on the
company's common stock of $0.03 per share, payable August 15, 2016,
to stockholders of record as of August 1, 2016, representing $0.12
on an annualized basis.
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.
4 Includes $246 million in 2015 at cash cost of $226 million,
$337 million through June YTD 2016 at a cash cost of $375 million,
and proforma for $59 million to be completed in September 2016 as
part of the 2020/21 Senior Notes extension at a cash cost of $100
million following the issuance of the 2026/27 Senior Notes,
extended revolver and 2023 term loan.
Earnings Conference Call
On August 9, 2016, 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.” The webcast will be archived on the site for those
unable to listen in real time.
About NRG
NRG is the leading integrated power company in the U.S., built
on the strength of the nation’s largest and most diverse
competitive electric generation portfolio and leading retail
electricity platform. A Fortune 200 company, NRG creates value
through best in class operations, reliable and efficient electric
generation, and a retail platform serving residential and
commercial customers. Working with electricity customers, large and
small, we continually innovate, embrace and implement sustainable
solutions for producing and managing energy. We aim to be pioneers
in developing smarter energy choices and delivering exceptional
service as our retail electricity providers serve almost 3 million
residential and commercial customers throughout the country. More
information is available at www.nrg.com. Connect with NRG Energy on
Facebook and follow us on Twitter @nrgenergy.
Safe Harbor Disclosure
In addition to historical information, the information presented
in this communication 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
above include, among others, general economic conditions, hazards
customary in the power industry, weather conditions, including wind
and solar performance, 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 regulation of markets and of environmental
emissions, the condition of capital markets generally, our ability
to access capital markets, unanticipated outages at our generation
facilities, adverse results in current and future litigation,
failure to identify or successfully implement acquisitions and
repowerings, our ability to implement value enhancing improvements
to plant operations and companywide processes, the ability for
GenOn to continue as a going concern, our ability to obtain federal
loan guarantees, the inability to maintain or create successful
partnering relationships with NRG Yield and other third parties,
our ability to operate our businesses efficiently including NRG
Yield, our ability to retain retail customers, our ability to
realize value through our commercial operations strategy and the
creation of NRG Yield, the ability to successfully integrate the
businesses of acquired companies, the ability to realize
anticipated benefits of acquisitions (including expected cost
savings and other synergies) and the ability to sell assets to NRG
Yield, Inc. or the risk that anticipated benefits may take
longer to realize than expected and our ability to pay dividends
and initiate share or debt repurchases under our capital allocation
plan, which 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 or
debt repurchases are 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
August 9, 2016. 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 Earnings 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 June 30,
Six months ended June 30,
(In millions,
except for per share amounts)
2016 2015 2016 2015
Operating Revenues Total operating revenues $ 2,638 $
3,400 $ 5,867 $ 7,229
Operating Costs and
Expenses Cost of operations 1,756 2,436 3,945 5,509
Depreciation and amortization 309 396 622 791 Impairment losses 115
— 115 — Selling, general and administrative 265 296 520 551
Acquisition-related transaction and integration costs 5 3 7 13
Development activity expenses 18 37 44 71
Total operating costs and expenses 2,468 3,168 5,253 6,935
Gain on postretirement benefits curtailment — — — 14 Loss on sale
of assets, net of gains (83 ) — (51 ) —
Operating
Income 87 232 563 308
Other
Income/(Expense) Equity in earnings/(losses) of unconsolidated
affiliates 4 8 (3 ) 5 Gain/(impairment loss) on investment 7 — (139
) — Other income, net 8 4 26 23 Loss on debt extinguishment (80 )
(7 ) (69 ) (7 ) Interest expense (277 ) (263 ) (561 ) (564 ) Total
other expense (338 ) (258 ) (746 ) (543 )
Loss Before Income
Taxes (251 ) (26 ) (183 ) (235 ) Income tax expense/(benefit)
25 (17 ) 46 (90 )
Net Loss (276 ) (9 ) (229 )
(145 )
Less: Net (loss)/income attributable to
noncontrollinginterest and redeemable noncontrolling interests
(5 ) 5 (40 ) (11 )
Net Loss Attributable to NRG Energy,
Inc. (271 ) (14 ) (189 ) (134 )
Gain on redemption, net of dividends for
preferredshares
(78 ) 5 (73 ) 10
Loss Available for Common
Stockholders $ (193 ) $ (19 ) $ (116 ) $ (144 )
Loss per
Share Attributable to NRG Energy, Inc. Common Stockholders
Weighted average number of common
sharesoutstanding — basic and diluted
315 333 315 335
Loss per Weighted Average Common Share — Basic
and Diluted $ (0.61 ) $ (0.06 ) $ (0.37 ) $ (0.43 )
Dividends Per Common Share $ 0.03 $ 0.14 $
0.18 $ 0.29
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
Three months ended June 30, Six months ended June
30, 2016 2015 2016
2015 (In millions) Net Loss $ (276 ) $ (9 ) $
(229 ) $ (145 )
Other Comprehensive (Loss)/Income, net of
tax Unrealized (loss)/gains on derivatives, net of income tax
expense of $1, $12, $2 and $6 (3 ) 16 (35 ) 4 Foreign currency
translation adjustments, net of income tax expense/(benefit) of $0
, $6, $0 and $(1) (3 ) 9 3 (2 ) Available-for-sale securities, net
of income tax benefit of $0, $3, $0 and $7 (2 ) (3 ) 1 (4 ) Defined
benefit plans, net of tax expense of $0, $0, $0 and $4 — (1
) 1 6 Other comprehensive (loss)/income (8 ) 21
(30 ) 4
Comprehensive (Loss)/Income (284 ) 12
(259 ) (141 )
Less: Comprehensive (loss)/income
attributable tononcontrolling interest and redeemable
noncontrollinginterests
(16 ) 12 (68 ) (17 )
Comprehensive Loss Attributable to
NRG Energy, Inc. (268 ) — (191 ) (124 ) Gain on redemption, net
of dividends for preferred shares (78 ) 5 (73 ) 10
Comprehensive Loss Available for Common Stockholders $ (190
) $ (5 ) $ (118 ) $ (134 )
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
June 30, 2016 December 31,
2015
(In millions,
except shares)
(unaudited) ASSETS Current Assets Cash
and cash equivalents $ 1,389 $ 1,518 Funds deposited by
counterparties 44 106 Restricted cash 413 414 Accounts receivable —
trade, less allowance for doubtful accounts of $20 and $21 1,251
1,157 Inventory 1,124 1,252 Derivative instruments 1,470 1,915 Cash
collateral paid in support of energy risk management activities 218
568 Renewable energy grant receivable, net 36 13 Current assets
held-for-sale 13 6 Prepayments and other current assets 406
442 Total current assets 6,364 7,391
Property, plant and equipment, net of accumulated depreciation
of $6,107 and $5,761 18,382 18,732
Other
Assets Equity investments in affiliates 882 1,045 Notes
receivable, less current portion 25 53 Goodwill 999 999 Intangible
assets, net of accumulated amortization of $1,650 and $1,525 2,180
2,310 Nuclear decommissioning trust fund 599 561 Derivative
instruments 348 305 Deferred income taxes 175 167 Non-current
assets held-for-sale 229 105 Other non-current assets 1,239
1,214 Total other assets 6,676 6,759
Total
Assets $ 31,422 $ 32,882
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current Liabilities Current portion
of long-term debt and capital leases $ 1,215 $ 481 Accounts payable
898 869 Derivative instruments 1,373 1,721 Cash collateral received
in support of energy risk management activities 44 106 Current
liabilities held-for-sale 2 2 Accrued expenses and other current
liabilities 982 1,196 Total current liabilities 4,514
4,375
Other Liabilities Long-term debt and
capital leases 17,893 18,983 Nuclear decommissioning reserve 334
326 Nuclear decommissioning trust liability 309 283 Deferred income
taxes 42 19 Derivative instruments 539 493 Out-of-market contracts,
net of accumulated amortization of $712 and $664 1,093 1,146
Non-current liabilities held-for-sale — 4 Other non-current
liabilities 1,554 1,488 Total non-current liabilities
21,764 22,742
Total Liabilities 26,278
27,117
2.822% convertible perpetual preferred stock —
302
Redeemable noncontrolling interest in
subsidiaries
23 29
Commitments and Contingencies Stockholders’
Equity Common stock 4 4 Additional paid-in capital 8,306 8,296
Retained deficit (3,179 ) (3,007 ) Less treasury stock, at cost —
102,450,781 and 102,749,908 shares, respectively (2,406 ) (2,413 )
Accumulated other comprehensive loss (203 ) (173 ) Noncontrolling
interest 2,599 2,727
Total Stockholders’
Equity 5,121 5,434
Total Liabilities and
Stockholders’ Equity $ 31,422 $ 32,882
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Six months ended June 30, 2016
2015 (In millions) Cash Flows from
Operating Activities Net Loss $ (229 ) $ (145 ) Adjustments to
reconcile net loss to net cash provided by operating activities:
Distributions and equity in earnings of unconsolidated affiliates
32 40 Depreciation and amortization 622 791 Provision for bad debts
20 29 Amortization of nuclear fuel 26 23 Amortization of financing
costs and debt discount/premiums 3 (7 ) Adjustment to loss on debt
extinguishment 14 7 Amortization of intangibles and out-of-market
contracts 41 32 Amortization of unearned equity compensation 16 24
Impairment losses 254 — Changes in deferred income taxes and
liability for uncertain tax benefits 1 (98 ) Changes in nuclear
decommissioning trust liability 13 (4 ) Changes in derivative
instruments (25 ) 186 Changes in collateral deposits supporting
energy risk management activities 350 (112 ) Proceeds from sale of
emission allowances 47 — Loss/(gain) on sale of assets and
postretirement benefits curtailment 43 (14 ) Cash used by changes
in other working capital (355 ) (294 )
Net Cash Provided by
Operating Activities 873 458
Cash Flows from
Investing Activities Acquisitions of businesses, net of cash
acquired (17 ) (30 ) Capital expenditures (622 ) (583 )
Decrease/(increase) in restricted cash, net 29 (3 )
(Increase)/decrease in restricted cash to support equity
requirements for U.S. DOE funded projects (28 ) 27
(Increase)/decrease in notes receivable (3 ) 7 Purchases of
emission allowances (27 ) — Proceeds from sale of emission
allowances 25 — Investments in nuclear decommissioning trust fund
securities (280 ) (354 ) Proceeds from the sale of nuclear
decommissioning trust fund securities 267 358 Proceeds from
renewable energy grants and state rebates 10 61 Proceeds from sale
of assets, net of cash disposed of 145 1 Investments in
unconsolidated affiliates — (353 ) Other 32 9
Net
Cash Used by Investing Activities (469 ) (860 )
Cash Flows
from Financing Activities Payment of dividends to common and
preferred stockholders (57 ) (102 ) Payment for treasury stock —
(186 ) Payment for preferred shares (226 ) — Net receipts from
settlement of acquired derivatives that include financing elements
103 91 Proceeds from issuance of long-term debt 3,223 629
Distributions from, net of contributions to, noncontrolling
interest in subsidiaries (21 ) 670 Proceeds from issuance of common
stock — 1 Payment of debt issuance costs (35 ) (12 ) Payments for
short and long-term debt (3,507 ) (662 ) Other - contingent
consideration (10 ) —
Net Cash (Used)/Provided by
Financing Activities (530 ) 429 Effect of exchange rate
changes on cash and cash equivalents (3 ) 3
Net
(Decrease)/Increase in Cash and Cash Equivalents (129 ) 30
Cash and Cash Equivalents at Beginning of Period 1,518
2,116
Cash and Cash Equivalents at End of
Period $ 1,389 $ 2,146
Appendix Table A-1: Second Quarter 2016
Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adj. EBITDA and
provides a reconciliation to net income/(loss): ($ in
millions)
RetailMass
Generation Renewables
Yield Corp/Elim Total
Net
income/(loss) 496
(371 ) (58 )
58 (401 )
(276 ) Plus:
Interest
expense, net — 32 30 62 152 276 Income tax — — (5 ) 12 18 25 Loss
on debt extinguishment — — — — 80 80 Depreciation, amortization and
ARO expense 27 153 55 67 17 319 Amortization of contracts
2 (20 ) —
17 (2 ) (3 )
EBITDA 525 (206 ) 22 216
(136 ) 421 Adjustment to reflect NRG share of
adjusted EBITDA in unconsolidated affiliates — 8 (1 ) 21 4 32
Acquisition-related transaction & integration costs — — — — 5 5
Reorganization costs — — 1 — 9 10 Deactivation costs — 6 — — — 6
Loss on sale of business — — — — 83 83 Other non recurring charges
— 8 6 3 (8 ) 9 Impairments — 78 27 — 10 115 Mark to market (MtM)
(gains)/losses on economic hedges (312 )
408 2 —
— 98
Adjusted
EBITDA 213 302
57 240
(33 ) 779
Second Quarter 2016 Condensed Financial
Information by Operating Segment:
($ in millions) Retail Mass
Generation Renewables
Yield Corp/Elim Total Operating
revenues 1,202 1,912 127 275 (325 ) 3,191 Cost of sales
821 1,019 1
14 (338 ) 1,517
Economic gross margin 381 893 126
261 13 1,674 Operations & maintenance 60
434 49 47 (19 ) 571 Selling & marketing 56 11 2 — 17 86 General
& administrative (a) 32 103 13 3 18 169 Other expense/(income)
(b) 20 43 5
(29 ) 30 69
Adjusted EBITDA 213
302 57
240 (33 )
779
(a) Excludes reorganization costs of $10 million.(b) Excludes
acquisition-related transaction & integration costs of $5
million.
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions)
Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other
adj.
AdjustedEBITDA (a)
Operating revenues 2,638 14 539 — — 3,191 Cost of operations
1,073 3 441
— — 1,517
Gross Margin 1,565 11 98 — —
1,674 Operations & maintenance 577 — — (6 ) — 571
Selling & marketing 86 — — — — 86 General & administrative
(b) 179 — — — (10 ) 169 Other expense/(income) (c)
999 (673 ) —
— (257 ) 69
Net
loss (276 )
684 98
6 267
779
(a) See Appendices A-10 through A-13 for condensed financial
information by Operating Segment.(b) Other adj. includes
reorganization costs of $10 million.(c) Other adj. includes
impairments, loss on sale of business, and acquisition-related
transaction & integration costs.
Appendix Table A-2: Second Quarter 2015
Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA
and provides a reconciliation to net income/(loss): ($ in
millions)
RetailMass
Generation Renewables
Yield Corp/Elim
Total
Net income/(loss) $
217 $ 3
$ (6 ) $ 38
$ (261 )
$ (9 ) Plus:
Interest expense, net — 17 22 45 176 260 Income tax — 1 (3 ) 4 (19
) (17 ) Loss on debt extinguishment — — — 7 — 7 Depreciation
amortization and ARO expense 33 236 53 70 13 405 Amortization of
contracts 1 (18 )
(1 ) 15 2
(1 )
EBITDA 251 239 65 179
(89 ) 645
Adjustment to reflect NRG share ofadjusted
EBITDA in unconsolidatedaffiliates
— 4 (1 ) 15 1 19
Acquisition-related transaction
&integration costs
— — — 1 2 3 Deactivation costs — 3 — — — 3 Other non recurring
charges — 8 — — — 8 MtM (gains)/losses on economic hedges
(42 ) 39 2
4 — 3
Adjusted EBITDA 209
293 66
199 (86 )
681
Second Quarter 2015 Condensed Financial Information by Operating
Segment:
($ in millions) Retail Mass
Generation Renewables
Yield Corp/Elim Total Operating
revenues 1,298 2,151 131 254 (309 ) 3,525 Cost of sales
910 1,168 2
16 (305 ) 1,791
Economic gross margin 388 983 129
238 (4 ) 1,734 Operations &
maintenance 56 513 27 42 3 641 Selling & marketing 64 15 3 — 41
123 General & administrative 42 118 9 3 1 173 Other
expense/(income) (a) 17 44
24 (6 ) 37
116
Adjusted EBITDA
209 293
66 199
(86 ) 681
(a) Excludes acquisition-related transaction & integration
costs of $3 million.
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions)
Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other
adj.
AdjustedEBITDA (a)
Operating revenues 3,400 12 113 — — 3,525 Cost of operations
1,681 — 110
— — 1,791
Gross Margin 1,719 12 3 —
— 1,734 Operations & maintenance 644 — — (3 ) —
641 Selling & marketing 123 — — — — 123 General &
administrative 173 — — — — 173 Other expense/(income) (b)
788 (663 ) —
— (9 ) 116
Net
loss (9 ) 675
3 3
9 681
(a) See Appendices A-10 through A-13 for condensed financial
information by Operating Segment.(b) Other adj. includes
impairments and acquisition-related transaction & integration
costs.
Appendix Table A-3: YTD Second Quarter
2016 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adj. EBITDA and
provides a reconciliation to net income/(loss): ($ in
millions)
RetailMass
Generation Renewables
Yield Corp/Elim Total
Net
income/(loss) 642
(212 ) (103 )
60 (616 )
(229 ) Plus:
Interest
expense, net — 42 62 130 322 556 Income tax — 1 (11 ) 12 44 46 Loss
on debt extinguishment — — — — 69 69 Depreciation, amortization and
ARO expense 56 308 111 134 34 643 Amortization of contracts
1 (32 ) 1
40 (4 ) 6
EBITDA 699 107 60 376
(151 ) 1,091 Adjustment to reflect NRG share
of adjusted EBITDA in unconsolidated affiliates — 16 (5 ) 49 5 65
Acquisition-related transaction & integration costs — — — — 7 7
Reorganization costs 5 1 3 — 11 20 Deactivation costs — 13 — — — 13
Gain/(loss) on sale of business — (29 ) — — 83 54 Other non
recurring charges — 11 10 3 1 25 Impairments — 213 26 — 15 254
Market to market (MtM) (gains)/losses on economic hedges
(341 ) 403 1
— — 63
Adjusted EBITDA 363
735 95
428 (29 )
1,592
YTD Second Quarter 2016 Condensed Financial Information by
Operating Segment:
($ in millions) Retail Mass
Generation Renewables
Yield Corp/Elim Total Operating
revenues 2,251 4,026 235 512 (615 ) 6,409 Cost of sales
1,555 2,106 3
30 (672 )
3,022
Economic gross margin 696 1,920
232 482 57 3,387 Operations &
maintenance 110 881 82 90 (16 ) 1,147 Selling & marketing 123
21 3 — 39 186 General & administrative (a) 60 187 25 6 36 314
Other expense/(income) (b) 40 96
27 (42 ) 27
148
Adjusted EBITDA
363 735
95 428
(29 ) 1,592
(a) Excludes reorganization costs of $20 million.(b) Excludes
acquisition-related transaction & integration costs of $7
million.
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions)
Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other
adj.
AdjustedEBITDA (a)
Operating revenues 5,867 29 513 — — 6,409 Cost of operations
2,575 (3 ) 450
— — 3,022
Gross margin 3,292 32 63 — —
3,387 Operations & maintenance 1,160 — — (13 ) — 1,147
Selling & marketing 186 — — — — 186 General &
administrative (b) 334 — — — (20 ) 314 Other expense/(income) (c)
1,841 (1,246 ) —
— (447 )
148
Net loss (229 )
1,278 63
13 467
1,592
(a) See Appendices A-10 through A-13 for condensed financial
information by Operating Segment.(b) Other adj. includes
reorganization costs of $20 million.(c) Other adj. includes
impairments, gain/(loss) on sale of business and
acquisition-related transaction & integration costs.
Appendix Table A-4: YTD Second Quarter
2015 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA
and provides a reconciliation to net income/(loss): ($ in
millions) Retail Mass Generation
Renewables Yield Corp/Elim
Total
Net income/(loss)
321 32
(57 ) 18
(459 ) (145 ) Plus:
Interest expense, net — 35 51 118 354 558
Income tax — 1 (9 ) — (82 ) (90 ) Loss on debt extinguishment — — —
7 — 7
Depreciation amortization and
AROexpense
63 475 105 137 25 805 Amortization of contracts 1
(30 ) — 26
— (3 )
EBITDA
385 513 90 306 (162 )
1,132
Adjustment to reflect NRG share ofadjusted
EBITDA in unconsolidatedaffiliates
— 14 (4 ) 27 3 40 Acquisition-related transaction & integration
costs — — — 1 12 13 Deactivation costs — 6 — — — 6 Other non
recurring charges — 9 1 10
MtM (gains)/losses on economichedges
(10 ) 292 2
(3 ) — 281
Adjusted EBITDA 375
834 88
331 (146 )
1,482
YTD Second Quarter 2015 Condensed Financial Information by
Operating Segment:
($ in millions) Retail Mass
Generation Renewables
Yield Corp/Elim Total Operating
revenues 2,610 4,739 222 458 (580 ) 7,449 Cost of sales
1,881 2,563 3
38 (563 )
3,922
Economic gross margin 729 2,176
219 420 (17 ) 3,527 Operations
& maintenance 113 1,009 63 87 (6 ) 1,266 Selling &
marketing 123 23 3 — 79 228 General & administrative 72 210 20
6 15 323 Other expense/(income) (a) 46
100 45 (4 )
41 228
Adjusted EBITDA
375 834
88 331
(146 ) 1,482
(a) Excludes acquisition-related transaction & integration
costs of $13 million.
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions)
Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other
adj.
AdjustedEBITDA (a)
Operating revenues 7,229 20 200 — — 7,449 Cost of operations
4,007 (4 ) (81 )
— — 3,922
Gross
margin 3,222 24 281 — —
3,527
Operations & maintenance 1,272 — — (6 ) — 1,266 Selling &
marketing 228 — — — — 228 General & administrative 323 — — — —
323 Other expense/(income) (b) 1,544
(1,370 ) — —
54 228
Net loss
(145 ) 1,394
281 6
(54 ) 1,482
(a) See Appendices A-10 through A-13 for condensed financial
information by Operating Segment.(b) Other adj. includes
impairments and acquisition-related transaction & integration
costs.
Appendix Table A-5: 2016 and 2015 QTD
and YTD Second Quarter 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: ($ in millions)
Three months ended
June 30, 2016
Three months ended
June 30, 2015
Net Cash Provided by Operating Activities
319 198
Reclassifying of net receipts for
settlement of acquired derivativesthat include financing
elements
64 51 Merger, integration and cost-to-achieve expenses [1] 6 5
Return of capital from equity investments 6 - Adjustment for change
in collateral (194) (101)
Adjusted Cash Flow from Operating Activities
201 153
Maintenance CapEx, net [2] (78 ) (104 ) Environmental CapEx, net
(112 ) (78 ) Preferred dividends — (3 ) Distributions to
non-controlling interests (40 )
(58 )
Free Cash Flow - before Growth Investments
(29) (90 )
(1) Cost-to-achieve expenses associated with the $150 million
savings announced on September 2015 call.(2) Includes insurance
proceeds of $30 million in 2016; excludes merger and integration
capex of $6 million in 2015.
($ in millions)
Six months ended
June 30, 2016
Six months ended
June 30, 2015
Net Cash Provided by Operating Activities 873
458
Reclassifying of net receipts for
settlement of acquired derivativesthat include financing
elements
103 91 Merger, integration and cost-to-achieve expenses [1] 25 17
Return of capital from equity investments 11 - Adjustment for
change in collateral (350 ) 112
Adjusted Cash Flow from Operating Activities
662 678
Maintenance CapEx, net [2] (169 ) (189 ) Environmental CapEx, net
(189 ) (127 ) Preferred dividends (2 ) (5 ) Distributions to
non-controlling interests (82 )
(83 )
Free Cash Flow - before Growth Investments
220 274
(1) Cost-to-achieve expenses associated with the $150 million
savings announced on September 2015 call.(2) Includes insurance
proceeds of $30 million in 2016; excludes merger and integration
capex of $9 million in 2015.
Appendix Table A-6: Second Quarter 2016
Regional Adjusted EBITDA Reconciliation for Generation
The following table summarizes the calculation of Adjusted EBITDA
and provides a reconciliation to net (loss)/income:
($
in millions) East Gulf Coast
West Business Solutions Total
Net (loss)/income (139 )
(336 ) (71 )
175 (371 )
Plus: Interest expense, net 32 — — — 32 Depreciation, amortization
and ARO expense 56 76 18 3 153 Amortization of contracts
(18 ) 1 (4 )
1 (20 )
EBITDA (69
) (259 ) (57 ) 179
(206 )
Adjustment to reflect NRG share ofadjusted
EBITDA in unconsolidatedaffiliates
— 1 2 5 8 Deactivation costs 6 — — — 6 Other non recurring charges
2 6 — — 8 Impairments 17 2 59 — 78
Market to market (MtM)losses/(gains) on
economic hedges
167 389 15
(163 ) 408
Adjusted
EBITDA 123 139
19 21
302
Appendix Table A-7: Second Quarter 2015
Regional Adjusted EBITDA Reconciliation for Generation
The following table summarizes the calculation of Adjusted EBITDA
and provides a reconciliation to net income/(loss): ($ in
millions) East Gulf Coast
West Business Solutions Total
Net
income/(loss) 97
(114 ) (12 )
32 3 Plus:
Interest expense, net 17 — — — 17 Income tax — — — 1 1
Depreciation amortization andARO
expense
75 143 16 2 236 Amortization of contracts (18 )
2 (3 ) 1
(18 )
EBITDA 171 31 1
36 239
Adjustment to reflect NRG share ofadjusted
EBITDA in unconsolidatedaffiliates
— (2 ) 2 4 4 Deactivation costs 2 — 1 — 3 Other non recurring
charges — 8 — — 8
MtM (gains)/losses on economichedges
(31 ) 76 14
(20 ) 39
Adjusted EBITDA
142 113
18 20
293
Appendix Table A-8: YTD Second Quarter
2016 Regional Adjusted EBITDA Reconciliation for Generation
The following table summarizes the calculation of Adjusted EBITDA
and provides a reconciliation to net income/ (loss): ($ in
millions) East Gulf Coast
West Business Solutions Total
Net
income/(loss) 106
(462 ) (39 )
183 (212 ) Plus:
Interest expense, net 42 — — — 42 Income tax — — — 1 1
Depreciation, amortization andARO
expense
113 155 35 5 308 Amortization of contracts (34 )
2 (3 ) 3
(32 )
EBITDA 227 (305 )
(7 ) 192 107
Adjustment to reflect NRG share ofadjusted
EBITDA in unconsolidatedaffiliates
— 5 5 6 16 Reorganization costs — 1 — — 1 Deactivation costs 13 — —
— 13 Gain on sale of assets (29 ) — — — (29 ) Other non recurring
charges 3 7 1 — 11 Impairments 17 139 57 — 213
Market to market (MtM)losses/(gains) on
economic hedges
137 415 18
(167 ) 403
Adjusted
EBITDA 368 262
74 31
735
Appendix Table A-9: YTD Second Quarter
2015 Regional Adjusted EBITDA Reconciliation for Generation
The following table summarizes the calculation of Adjusted EBITDA
and provides a reconciliation to net income/(loss): ($ in
millions) East Gulf Coast
West Business Solutions Total
Net
income/(loss) 186
(81 ) (35 )
(38 ) 32 Plus:
Interest expense, net 35 — — — 35 Income tax — — — 1 1
Depreciation amortization and
AROexpense
152 287 31 5 475 Amortization of contracts (32 )
3 (4 ) 3
(30 )
EBITDA 341 209 (8
) (29 ) 513
Adjustment to reflect NRG share ofadjusted
EBITDA in unconsolidatedaffiliates
— 1 4 9 14 Deactivation costs 4 — 2 — 6 Other non recurring charges
— 9 — — 9 MtM losses on economic hedges 222
11 13 46
292
Adjusted EBITDA
567 230
11 26
834
Appendix Table A-10: YTD Second Quarter
2016 Sources and Uses of Liquidity
The following table summarizes the sources and uses of liquidity in
the first six months of 2016: ($ in millions)
Six months ended
June 30, 2016
Sources: Adjusted cash flow from operations
662 Collateral 350 Asset sales 145 Tax equity proceeds 11
Monetization of capacity revenues at Midwest Gen 253 Proceeds from
NRG Yield revolver, net of payments 12
Uses: Debt repayments, discretionary, net of proceeds
(corporate) (320 ) Debt repayments, non-discretionary (234 )
Decrease in credit facility (44 ) Debt Issuance Costs (35 )
Redemption of convertible preferred stock (226 ) Maintenance and
environmental capex, net (1) (358 ) Growth investments and
acquisitions, net (194 ) Common and preferred stock dividends (57 )
Distributions to non-controlling entities (82 ) Other investing and
financing (32 ) Merger, integration and cost-to-achieve expenses
(2) (25 )
Change in Total Liquidity
(174 )
(1) Includes insurance proceeds of $30
million.(2)Cost-to-achieve expenses associated with the $150
million savings announced on September 2015 call.
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 andamortization. EBITDA is presented because NRG
considers it an important supplemental measure of itsperformance
and believes debt-holders frequently use EBITDA to analyze
operating performance and debt servicecapacity. EBITDA has
limitations as an analytical tool, and you should not consider it
in isolation, or as a substitutefor 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
contractualcommitments;
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
serviceinterest or principal payments, on debt or cash income tax
payments;
Although depreciation and amortization are
non-cash charges, the assets being depreciated and amortizedwill
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
usefulnessas 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 investments) 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 investments as a measure of cash available
for discretionary expenditures.
Free Cash Flow before Growth Investment is utilized by
Management in making decisions regarding the allocation of capital.
Free Cash Flow before Growth Investment 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 Investment 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: http://www.businesswire.com/news/home/20160809005684/en/
NRG Energy, Inc.Media:Karen Cleeve,
609-524-4608orCandice Adams, 609-524-5428orInvestors:Kevin
L. Cole, 609-524-4526CFAorLindsey Puchyr, 609-524-4527
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