- Closed on sale of NRG’s interest in
NRG Yield and the Renewables Platform for $1.348
billion1
- Executing on second $500 million
share repurchase commitment, totaling $1 billion in 2018
- Announcing an additional $500
million share repurchase authorization
- Redeemed $485 million balance of
2022 senior notes and prepaid $155 million of Term Loans, achieving
corporate debt reduction target of $640 million; on track to
achieve 3.0x net debt / EBITDA for 2018
- Narrowing 20182
guidance to the upper-half of range and initiating 2019 Adjusted
EBITDA and FCFbG guidance
- C. John Wilder announces retirement
from the Board of Directors
NRG Energy, Inc. (NYSE: NRG) today reported third quarter 2018
income from continuing operations of $306 million. Income from
continuing operations for the first nine months of 2018 of $601
million, or $1.91 per diluted common share, compares to income from
continuing operations of $116 million, or $0.56 per diluted common
share for the first nine months of 2017. Adjusted EBITDA for the
three and nine months ending September 30, 2018, was $677 million
and $1,580 million, respectively. Year-to-date cash from continuing
operations totaled $758 million.
“Our quarterly and year to date results demonstrate the benefits
of the integrated retail and generation platform,” said Mauricio
Gutierrez, President and Chief Executive Officer, NRG. “We are
making significant progress on achieving our Transformation Plan
targets and capital allocation priorities.”
Consolidated Financial Results
On August 31, 2018, NRG completed the sale of its interest in
NRG Yield and the Renewables Platform. As a result, the financial
information for NRG Yield, the Renewables Platform and Carlsbad
Energy Center has been deconsolidated from the current period and
all historical periods have been recast to reflect the presentation
of these entities as discontinued operations.
Three Months Ended Nine Months Ended ($
in millions)
9/30/18 9/30/17 9/30/18
9/30/17 Income from Continuing Operations $ 306 $ 185
$ 601 $ 116 Cash From Continuing Operations $ 401 $ 640 $ 758 $ 558
Adjusted EBITDA $ 677 $ 552 $ 1,580 $ 1,183 Free Cash Flow Before
Growth Investments (FCFbG) $ 556 $ 462
$ 856 $ 630
1 Sale price was reduced by $27 MM to account for the
agreed-upon adjustment for Patriot Wind, which is expected to be
sold to a third party2 Adjusted for the deconsolidation of NRG
Yield, the Renewables Platform, and Carlsbad Energy Center, and the
expected sale of South Central
Segment Results
Table 1: Income/(Loss) from Continuing Operations
($ in millions)
Three Months Ended
Nine Months Ended Segment
9/30/18
9/30/17 9/30/18 9/30/17 Retail $
(127 ) $ 72 $ 733 $ 380 Generation a 595 272 302 183 Corporate (162
) (159 ) (434 ) (447 ) Income from Continuing Operations $ 306
$ 185 $ 601 $ 116
a. In accordance with GAAP, 2018 and 2017 results have been
restated to include full impact of the deconsolidation of GenOn,
NRG Yield, the Renewables Platform and Carlsbad Energy Center
Table 2: Adjusted EBITDA
($ in millions)
Three Months Ended
Nine Months Ended Segment
9/30/18
9/30/17 9/30/18 9/30/17 Retail $
269 $ 279 $ 755 $ 615 Generation a 421 297 850 607 Corporate (13 )
(24 ) (25 ) (39 ) Adjusted EBITDA b $ 677 $ 552 $
1,580 $ 1,183
a. In accordance with GAAP, 2018 and 2017 results have been
restated to include full impact of the deconsolidation of GenOn,
NRG Yield, the Renewables Platform and Carlsbad Energy Center
b. See Appendices A-1 through A-4 for Operating Segment Reg G
reconciliations
Retail: Third quarter Adjusted EBITDA was $269 million,
$10 million lower than third quarter 2017, driven by higher margin
enhancement costs. Gross margin was $25 million higher as a result
of our margin enhancement initiatives (including both value
expansion and customer growth), coupled with increased usage,
partially offset by higher supply costs.
Generation: Third quarter Adjusted EBITDA was $421
million, $124 million higher than third quarter 2017, driven
by:
- Gulf Coast Region: $115 million
increase due to higher generation and higher realized energy
prices; and
- East/West3: $9 million increase due to
higher capacity revenues, partially offset by increased operating
costs and the deconsolidation impact of the non-controlling
interest in Ivanpah and Agua Caliente.
Corporate: Third quarter Adjusted EBITDA was $(13)
million, $11 million better than the third quarter 2017, driven by
lower G&A expenses associated with the Transformation Plan.
3 Includes International and Renewables
Liquidity and Capital Resources
Table 3: Corporate Liquidity
($ in millions)
9/30/18
12/31/17 Cash and Cash Equivalents $ 1,359 $ 767 Restricted
Cash 28 279
Total $ 1,387 $
1,046 Total credit facility availability 1,454
1,711
Total Liquidity, excluding collateral received
$ 2,841 $ 2,757
As of September 30, 2018, NRG-level cash was at $1.4 billion,
and $1.5 billion was available under the Company’s credit
facilities. Total liquidity was $2.8 billion, including restricted
cash. Overall liquidity as of the end of the third quarter 2018 was
$84 million higher than at the end of 2017.
NRG Strategic Developments
Transformation Plan
Through the third quarter of 2018, NRG realized $375 million of
its 2018 cost savings target as part of the previously announced
Transformation Plan, and is on track to realize $500 million in
savings in 2018. With respect to the asset sales under the
Transformation Plan, on August 31, 2018, the Company completed the
sale of its interest in NRG Yield, Inc. and the Renewables Platform
to GIP, for approximately $1.348 billion in cash proceeds. NRG is
narrowing asset sale proceeds to $3.1 billion from $3.2 billion.
The $1 billion sale of South Central is targeted to close by year
end 2018 and the balance, Carlsbad and Agua Caliente, in 2019.
Agua Caliente Deconsolidation
As a result of the sale of NRG Yield and the Renewables
Platform, the Company no longer controls the Agua Caliente project.
Due to this change in control, the Company has deconsolidated the
Agua Caliente project from its financial results and is accounting
for the project as an equity method investment going forward. This
is unrelated to the Company’s planned sale of its remaining
interest in Agua Caliente as described in the preceding
paragraph.
2018 and 2019 Guidance
NRG has narrowed the range of its Adjusted EBITDA and FCF before
Growth Investments guidance for 2018 to reflect the completed sale
of NRG Yield and the Renewables Platform, as well as the previously
announced sale of the South Central business unit. Additionally,
NRG is initiating guidance for fiscal year 2019, which also
reflects the aforementioned sales.
Table 4: 2018 and 2019 Adjusted EBITDA, Cash from Operations,
and FCF before Growth Investments Guidance
2018 2019 ($ in millions)
Revised Guidance4
Guidance Adjusted EBITDA5 $1,700-$1,800
$1,850-$2,050 Cash From Operations $1,240-$1,340 $1,405-$1,605 Free
Cash Flow Before Growth Investments (FCFbG) $1,050-$1,150
$1,250-$1,450
4 Adjusted for the deconsolidation of NRG Yield, the Renewables
Platform, and Carlsbad Energy Center, and the expected sale of
South Central5 Non-GAAP financial measure; see Appendix Tables A-1
through A-5 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
During the third quarter of 2018, NRG executed on its second
$500 million share repurchase commitment through an Accelerated
Share Repurchase program. This brings the total amount of shares to
be repurchased in 2018 to $1 billion. In addition, the Board of
Directors of the Company has authorized an additional $500 million
share repurchase program to be executed into 2019.
To remain leverage-neutral in connection with the $575 million
convertible senior notes issued in second quarter of 2018, NRG
completed the repurchase of $575 million of its 2022, 2027 and 2028
senior unsecured notes during the third quarter of 2018, generating
approximately $20 million of annual interest expense savings7.
Additionally, the Company has completed its targeted $640
million of debt reduction through the redemption of $485 million of
its outstanding 6.250% senior notes due 2022 and the prepayment of
$155 million of Term Loans, and is on track to achieve a target net
debt to Adjusted EBITDA ratio of 3.0x for 2018.
On October 17, 2018, NRG declared a quarterly dividend on the
Company's common stock of $0.03 per share, payable November 15,
2018, to stockholders of record as of November 1, 2018,
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.
Board of Directors
C. John Wilder informed the Board of Directors that he will
retire from the Board, effective November 8, 2018. Mr. Wilder
joined the Board in February 2017 and served on the Company’s
Business Review Committee (dissolved in July 2017) and Finance and
Risk Management Committee. In connection with Mr. Wilder’s
resignation, the size of the Board will be reduced from eleven (11)
to ten (10) members.
According to C. John Wilder, Independent Director of the Board,
“Today, I am announcing my retirement from the NRG Board of
Directors.” Mr. Wilder continues, “I applaud the advancements made
by the company in the culture and strategy since Mauricio Gutierrez
took over as CEO, and most recently with the adoption and execution
of the Transformation Plan. This has been a critical year in the
Company’s transformation and I am proud of the course charted by my
fellow directors and management in rightsizing the business,
strengthening the balance sheet, achieving cost excellence and
adopting capital allocation principles. I believe NRG has the right
team in place to continue its relentless execution that will create
significant long-term value and I am excited to remain a long-term
shareholder.”
Larry Coben, Chairman of the Board, continued, "On behalf of the
Board of Directors, I want to thank John for his outstanding
service on the Board and valued direction on all Board matters,
particularly the Company's Transformation Plan. Going forward, the
Board will continue to assess our size and composition to ensure
the proper level of expertise and oversight on behalf of our
shareholders."
Mr. Gutierrez added, “John has provided valuable insights and
thoughtful counsel as a member of the Board. I want to thank him
for his service, and look forward to having him as a valued
long-term shareholder."
7 Interest savings assumes average 6.2% interest rate on $575
million debt retired in 2018
Earnings Conference Call
On November 8, 2018, 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 redefining power by putting customers at the
center of everything we do. We create value by generating
electricity and serving nearly 3 million residential and commercial
customers through our portfolio of retail electricity brands. A
Fortune 500 company, NRG delivers customer-focused solutions for
managing electricity, while enhancing energy choice and working
towards a sustainable energy future. More information is available
at www.nrg.com. Connect with NRG on Facebook, LinkedIn and follow
us on Twitter @nrgenergy, @nrginsight.
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
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, cyber terrorism and inadequate cyber security,
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 company-wide processes, our ability to implement and
execute on our publicly announced transformation plan, including
any cost savings, margin enhancement, asset sale, and net debt
targets, our ability to proceed with projects under development or
the inability to complete the construction of such projects on
schedule or within budget, the timing or completion of GenOn's
emergence from bankruptcy, the inability to maintain or create
successful partnering relationships, our ability to operate our
businesses efficiently, our ability to retain retail customers, our
ability to realize value through our commercial operations
strategy, the ability to successfully integrate businesses of
acquired companies, our ability to realize anticipated benefits of
transactions (including expected cost savings and other synergies)
or the risk that anticipated benefits may take longer to realize
than expected, and our ability to execute our Capital Allocation
Plan. Debt and share repurchases may be made from time to time
subject to market conditions and other factors, including as
permitted by United States securities laws. Furthermore, any common
stock dividend is subject to available capital and market
conditions.
NRG undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law. The adjusted
EBITDA and free cash flow guidance are estimates as of November 8,
2018. 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 September 30,
Nine months ended September 30, (In millions,
except for per share amounts) 2018
2017 2018 2017 Operating
Revenues Total operating revenues $ 3,061 $ 2,740
$ 7,795 $ 7,246
Operating Costs and Expenses
Cost of operations 2,307 2,072 5,730 5,589 Depreciation and
amortization 112 163 370 490 Impairment losses — — 74 60 Selling,
general and administrative 212 190 591 634 Reorganization costs 27
12 70 18 Development costs 1 6 9 18
Total operating costs and expenses 2,659 2,443 6,844 6,809 Other
income - affiliate — — — 87 Gain on sale of assets 14 —
30 4
Operating Income 416 297
981 528
Other Income/(Expense) Equity
in earnings/(losses) of unconsolidated affiliates 20 9 26 (20 )
Other income/(expense), net 17 19 (4 ) 43 Loss on debt
extinguishment, net (19 ) — (22 ) — Interest expense (121 ) (139 )
(361 ) (432 ) Total other expense (103 ) (111 ) (361 ) (409 )
Income from Continuing Operations Before Income Taxes 313
186 620 119 Income tax expense 7 1 19 3
Income from Continuing Operations 306 185 601 116 Loss from
discontinued operations, net of income tax (354 ) (22 ) (320 ) (798
)
Net (Loss)/Income (48 ) 163 281 (682 ) Less: Net
income/(loss) attributable to noncontrolling interest and
redeemable noncontrolling interests 24 (8 ) 1 (63 )
Net (Loss)/Income Attributable to NRG Energy, Inc. common
stockholders $ (72 ) $ 171 $ 280 $ (619 )
(Loss)/Earnings per Share Attributable to NRG Energy, Inc.
Common Stockholders Weighted average number of common shares
outstanding — basic 299 317 309 317 Income from continuing
operations per weighted average common share — basic $ 0.94 $ 0.61
$ 1.94 $ 0.56 Loss from discontinued operations per weighted
average common share — basic $ (1.18 ) $ (0.07 ) $ (1.03 ) $ (2.51
)
(Loss)/Earnings per Weighted Average Common Share — Basic
$ (0.24 ) $ 0.54 $ 0.91 $ (1.95 ) Weighted average
number of common shares outstanding — diluted 299 322 313 317
Income from continuing operations per weighted average common share
— diluted $ 0.94 $ 0.60 $ 1.91 $ 0.56 Loss from discontinued
operations per weighted average common share — diluted $ (1.18 ) $
(0.07 ) $ (1.02 ) $ (2.51 )
(Loss)/Earnings per Weighted Average
Common Share — Diluted $ (0.24 ) $ 0.53 $ 0.89 $
(1.95 )
Dividends Per Common Share $ 0.03 $ 0.03
$ 0.09 $ 0.09
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE (LOSS)/INCOME
(Unaudited)
Three months ended September 30,
Nine months ended September 30, 2018
2017 2018 2017 (In millions)
Net (loss)/income $ (48 ) $ 163 $ 281 $ (682 )
Other
comprehensive income/(loss), net of tax Unrealized gain on
derivatives, net of income tax expense of $0, $0, $1, and $0 4 7 24
7 Foreign currency translation adjustments, net of income tax
expense of $0, $0, $0, and $0 (2 ) 2 (8 ) 9 Available-for-sale
securities, net of income tax expense of $0, $0, $0, and $0 — 1 1 2
Defined benefit plans, net of income tax expense of $0, $0, $0, and
$0 (1 ) (1 ) (3 ) 25 Other comprehensive income 1 9
14 43
Comprehensive (loss)/income (47 )
172 295 (639 ) Less: Comprehensive income/(loss) attributable to
noncontrolling interest and redeemable noncontrolling interest 26
(5 ) 15 (61 )
Comprehensive (loss)/income
attributable to NRG Energy, Inc. common stockholders $ (73 ) $
177 $ 280 $ (578 )
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
September 30, 2018 December
31, 2017 (In millions, except shares)
(Unaudited) ASSETS Current Assets Cash
and cash equivalents $ 1,359 $ 767 Funds deposited by
counterparties 30 37 Restricted cash 28 279 Accounts receivable,
net 1,297 960 Inventory 408 486 Derivative instruments 683 624 Cash
collateral paid in support of energy risk management activities 209
171 Accounts receivable - affiliate 19 186 Prepayments and other
current assets 248 179 Current assets - held for sale — 116 Current
assets - discontinued operations 4 705 Total current
assets 4,285 4,510
Property, plant and equipment,
net 3,599 6,435
Other Assets Equity
investments in affiliates 452 182 Notes receivable, less current
portion 10 2 Goodwill 539 539 Intangible assets, net 602 507
Nuclear decommissioning trust fund 719 692 Derivative instruments
392 159 Deferred income taxes 11 6 Other non-current assets 281 294
Non-current assets held-for-sale — 43 Non-current assets -
discontinued operations 560 10,181 Total other assets
3,566 12,605
Total Assets $ 11,450 $
23,550
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities Current portion of long-term debt and
capital leases $ 593 $ 204 Accounts payable 824 711 Accounts
payable - affiliate 14 57 Derivative instruments 550 537 Cash
collateral received in support of energy risk management activities
30 37 Accrued expenses and other current liabilities 659 769
Accrued expenses and other current liabilities - affiliate 1 161
Current liabilities - held-for-sale — 72 Current liabilities -
discontinued operations 52 864 Total current
liabilities 2,723 3,412
Non-Current
Liabilities Long-term debt and capital leases 6,658 9,180
Nuclear decommissioning reserve 278 269 Nuclear decommissioning
trust liability 432 415 Deferred income taxes 18 21 Derivative
instruments 357 143 Out-of-market contracts, net 177 195 Other
non-current liabilities 1,177 1,002 Non-current liabilities -
held-for-sale — 8 Non-current liabilities - discontinued operations
547 6,859 Total non-current liabilities 9,644
18,092
Total Liabilities 12,367 21,504
Redeemable noncontrolling interest in subsidiaries 19 78
Commitments and Contingencies Stockholders’ Equity
Common stock 4 4 Additional paid-in capital 8,453 8,377 Accumulated
deficit (6,001 ) (6,269 ) Less treasury stock, at cost -
129,948,876 and 101,580,045 shares, at September 30, 2018 and
December 31, 2017, respectively (3,334 ) (2,386 ) Accumulated other
comprehensive loss (58 ) (72 ) Noncontrolling interest —
2,314
Total Stockholders’ Equity (936 ) 1,968
Total Liabilities and Stockholders’ Equity $ 11,450 $
23,550
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Nine months ended September 30, (In millions)
2018 2017 Cash Flows from
Operating Activities Net income/(loss) $ 281 $ (682 ) Loss from
discontinued operations, net of income tax (320 ) (798 ) Income
from continuing operations 601 116 Adjustments to reconcile net
income to net cash provided by operating activities: Distributions
and equity in earnings of unconsolidated affiliates 10 —
Depreciation, amortization and accretion 403 490 Provision for bad
debts 57 57 Amortization of nuclear fuel 38 37 Amortization of
financing costs and debt discount/premiums 21 15 Adjustment for
debt extinguishment 22 3 Amortization of intangibles and
out-of-market contracts 21 79 Amortization of unearned equity
compensation 36 27 Impairment losses 89 60 Changes in deferred
income taxes and liability for uncertain tax benefits (6 ) (1 )
Changes in nuclear decommissioning trust liability 50 20 Changes in
derivative instruments (17 ) 36 Changes in collateral deposits in
support of energy risk management activities (30 ) (103 ) Gain on
sale of emission allowances (20 ) 21 Gain on sale of assets (30 )
(4 ) GenOn settlement in July 2018 (125 ) — Loss on deconsolidation
of business 13 — Changes in other working capital (375 ) (295 )
Cash provided by continuing operations 758 558
Cash
provided by discontinued operations 324 178
Net Cash Provided by Operating Activities 1,082 736
Cash Flows from Investing Activities Acquisitions of
businesses, net of cash acquired (209 ) (12 ) Capital expenditures
(345 ) (172 ) Purchases of emission allowances (30 ) (47 ) Proceeds
from sale of emission allowances 54 104 Investments in nuclear
decommissioning trust fund securities (449 ) (402 ) Proceeds from
the sale of nuclear decommissioning trust fund securities 398 382
Proceeds from sale of assets, net of cash disposed and sale of
discontinued operations, net of fees 1,555 309 Deconsolidation of
business (268 ) — Changes in investments in unconsolidated
affiliates (62 ) 24 Other — 30
Cash provided by
continuing operations 644 216
Cash used by discontinued
operations (703 ) (638 )
Net Cash (Used) by Investing
Activities (59 ) (422 )
Cash Flows from Financing
Activities Payment of dividends to common stockholders (28 )
(28 ) Payment for treasury stock (1,000 ) — Proceeds from issuance
of long-term debt 995 308 Payments for short and long-term debt
(970 ) (343 ) Receivable from affiliate (26 ) (125 ) Net
distributions to noncontrolling interests from subsidiaries (17 )
(18 ) Payment of debt issuance costs (19 ) (39 ) Other (4 ) (8 )
Cash used by continuing operations (1,069 ) (253 )
Cash
provided by discontinued operations 403 39
Net
Cash Used by Financing Activities (666 ) (214 ) Effect of
exchange rate changes on cash and cash equivalents 1 (10 )
Change in Cash from discontinued operations 24 (421 )
Net Increase in Cash and Cash Equivalents, Funds Deposited by
Counterparties and Restricted Cash 334 511
Cash and Cash
Equivalents, Funds Deposited by Counterparties and Restricted Cash
at Beginning of Period 1,083 860
Cash and Cash
Equivalents, Funds Deposited by Counterparties and Restricted Cash
at End of Period $ 1,417 $ 1,371
Appendix Table A-1: Third Quarter 2018 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) Gulf Coast East/
West1
Generation Retail Corp/
Elim
Total
Income/(Loss) from Continuing Operations
417 178 595
(127 ) (162 )
306 Plus:
Interest expense, net — 10 10 1 105 116 Income tax —
— — — 7 7 Loss on debt extinguishment — — — — 19 19 Depreciation
and amortization 43 30 73 30 9 112 ARO Expense 9 4 13 — — 13
Contract amortization 2 — 2 — — 2 Lease amortization —
(2 ) (2 ) — —
(2 )
EBITDA 471 220 691
(96 ) (22 ) 573 Adjustment to
reflect NRG share of adjusted EBITDA in unconsolidated affiliates 2
25 27 — — 27 Reorganization costs 1 2 3 6 18 27 Deactivation costs
— — — — 3 3 Gain on sale of business — 1 1 — (14 ) (13 ) Other non
recurring charges 1 (12 ) (11 ) — 2 (9 ) Mark to market (MtM)
(gains)/losses on economic hedges (268 ) (22 )
(290 ) 359 — 69
Adjusted EBITDA 207 214
421 269
(13 ) 677
1 Includes International, remaining renewables and Generation
eliminations
Third Quarter 2018 condensed financial information by Operating
Segment:
($ in millions) Gulf Coast East/
West1
Generation Retail Corp/
Elim
Total Operating revenues 782 497
1,279 2,202 (480 ) 3,001 Cost of sales
413 192 605 1,702
(477 ) 1,830
Economic gross
margin2 369 305 674 500
(3 ) 1,171 Operations & maintenance and
other cost of operations 3 146 111 257 89 (3 ) 343 Selling,
marketing, general and administrative 29 25 54 144 14 212 Other
expense/(income) 4 (13 ) (45 ) (58 )
(2 ) (1 ) (61 )
Adjusted EBITDA
207 214 421
269 (13 )
677
1 Includes International, remaining renewables and Generation
eliminations2 Excludes MtM loss of $69 million and contract
amortization of $2 million3 Excludes deactivation costs of $3
million4 Excludes gain on sale of business of $13 million,
reorganization costs of $27 million and loss on debt extinguishment
of $19 million
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions) Condensed financial information
Interest, tax, depr., amort. MtM Deactivation
Other adj. Adjusted EBITDA Operating revenues 3,061
(5 )
(55
) — — 3,001 Cost of operations 1,961
(7 ) (124 ) — —
1,830
Gross margin 1,100 2
69 — —
1,171 Operations & maintenance and other
cost of operations 346 — — (3 ) — 343 Selling, marketing, general
& administrative 212 — — — — 212 Other expense/(income) 1
236 (246 ) — —
(51 )
(61
)
Income/(Loss) from Continuing Operations 306
248 69
3 51 677
1 Other adj. includes gain on sale of assets of $13 million,
reorganization costs of $27 million and loss on debt extinguishment
of $19 million
Appendix Table A-2: Third Quarter 2017 Adjusted EBITDA
Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted
EBITDA and provides a reconciliation to income/(loss) from
continuing operations:
($ in millions) Gulf Coast East/
West1
Generation Retail Corp/
Elim
Total
Income/(Loss) from Continuing Operations
155 117 272
72 (159 )
185 Plus:
Interest expense, net — 24 24 1 111 136 Income tax — — — — 1
1 Depreciation and amortization 69 59 128 28 7 163 ARO Expense 4 3
7 — — 7 Contract amortization 3 1 4 (1 ) — 3 Lease amortization
— (2 ) (2 ) —
— (2 )
EBITDA 231 202
433 100 (40 ) 493 Adjustment to
reflect NRG share of adjusted EBITDA in unconsolidated affiliates
(6 ) 14 8 — (1 ) 7 Acquisition-related transaction &
integration costs — — — — 3 3 Reorganization costs 3 — 3 5 4 12
Deactivation costs — 2 2 — 3 5 Other non recurring charges (1 ) (3
) (4 ) 1 7 4 Mark to market (MtM) (gains)/losses on economic hedges
(135 ) (10 ) (145 ) 173
— 28
Adjusted EBITDA
92 205 297
279 (24 )
552
1 Includes International, remaining renewables and Generation
eliminations
Third Quarter 2017 condensed financial information by Operating
Segment:
($ in millions) Gulf Coast East/
West1
Generation Retail Corp/
Elim
Total Operating revenues 655 520
1,175 1,935 (397 ) 2,713 Cost of sales
395 204 599 1,460
(394 ) 1,665
Economic gross
margin2 260 316 576 475
(3 ) 1,048 Operations & maintenance and
other cost of operations3 143 111 254 87 3 344 Selling, marketing,
general & administrative 35 16 51 109 30 190 Other
expense/(income)4 (10 ) (16 ) (26 )
— (12 ) (38 )
Adjusted EBITDA
92 205
297 279 (24
) 552
1 Includes International, remaining renewables and Generation
eliminations2 Excludes MtM loss of $28 million and contract
amortization of $3 million3 Excludes deactivation costs of $5
million4 Excludes acquisition-related transaction & integration
costs of $3 million and reorganization costs of $12 million
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions) Condensed financial information
Interest, tax, depr., amort. MtM Deactivation
Other adj. Adjusted EBITDA Operating revenues 2,740
(5 ) (22 ) — — 2,713 Cost of
operations 1,723 (8 ) (50 ) —
— 1,665
Gross margin
1,017 3 28 — — 1,048
Operations & maintenance and other cost of operations 349 — —
(5 ) — 344 Selling, marketing, general & administrative 190 — —
— — 190 Other expense/(income) 1 293 (305 )
— — (26 ) (38 )
Income/(Loss) from Continuing Operations 185
308 28
5 26 552
1 Other adj. includes acquisition-related transaction &
integration costs of $3 million and reorganization costs of $12
million
Appendix Table A-3: YTD Third Quarter 2018 Adjusted EBITDA
Reconciliation by Operating Segment
The following table summarizes the calculation of Adj. EBITDA
and provides a reconciliation to income/(loss) from continuing
operations:
($ in millions) Gulf Coast East/
West1
Generation Retail Corp/
Elim
Total
Income/(Loss) from Continuing Operations
156 146 302
733 (434 )
601 Plus:
Interest expense, net — 46 46 2 301 349 Income tax — 1 1 —
18 19 Loss on debt extinguishment — — — — 22 22 Depreciation and
amortization 128 131 259 86 25 370 ARO Expense 21 12 33 — — 33
Contract Amortization 7 1 8 — — 8 Lease amortization —
(6 ) (6 ) — —
(6 )
EBITDA 312 331 643
821 (68 ) 1,396 Adjustment to reflect
NRG share of adjusted EBITDA in unconsolidated affiliates 5 47 52 —
1 53 Acquisition-related transaction & integration costs — — —
2 3 5 Reorganization costs 5 5 10 10 50 70 Deactivation costs — 10
10 — 8 18 Gain on sale of business — 2 2 — (29 ) (27 ) Other non
recurring charges 27 13 40 3 10 53 Impairments — 74 74 — — 74
Market to market (MtM) (gains)/losses on economic hedges 14
5 19 (81 )
— (62 )
Adjusted EBITDA 363
487 850
755 (25 )
1,580
1 Includes International, remaining renewables and Generation
eliminations
YTD Third Quarter 2018 condensed financial information by
Operating Segment:
($ in millions) Gulf Coast East/
West1
Generation Retail Corp/
Elim
Total Operating revenues 1,923 1,286
3,209 5,502 (897 ) 7,814 Cost of sales
1,028 439 1,467
4,130 (895 ) 4,702
Economic
gross margin2 895 847 1,742
1,372 (2 ) 3,112 Operations &
maintenance and other cost of operations3 494 363 857 236 (10 )
1,083 Selling, marketing, general & administrative 83 82 165
385 41 591 Other expense/(income)4 (45 ) (85 )
(130 ) (4 ) (8 ) (142 )
Adjusted
EBITDA 363 487
850 755 (25
) 1,580
1 Includes International, remaining renewables and Generation
eliminations2 Excludes MtM gain of $62 million and contract
amortization of $8 million3 Excludes deactivation costs of $18
million4 Excludes gain on sale of business of $27 million,
acquisition-related transaction & integration costs of $5
million, reorganization costs of $70 million and loss on debt
extinguishment of $22 million
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions) Condensed financial information
Interest, tax, depr., amort. MtM Deactivation
Other adj. Adjusted EBITDA Operating revenues 7,795
(12 ) 31 — — 7,814 Cost of
operations 4,629 (20 ) 93
— — 4,702
Gross margin
3,166 8 (62 ) — —
3,112
Operations & maintenance and other cost of operations 1,101 — —
(18 ) — 1,083 Selling, marketing, general & administrative 591
— — — — 591 Other expense/(income) 1 873 (765
) — — (250 ) (142 )
Income/(Loss) from Continuing Operations 601
773 (62 )
18 250 1,580
1 Other adj. includes gain on sale of assets of $27 million,
acquisition-related transaction & integration costs of $5
million, reorganization costs of $70 million and loss on debt
extinguishment of $22 million
Appendix Table A-4: YTD Third Quarter 2017 Adjusted EBITDA
Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted
EBITDA and provides a reconciliation to income/(loss) from
continuing operations:
($ in millions) Gulf Coast East/
West1
Generation Retail Corp/
Elim
Total
Income/(Loss) from Continuing Operations
50 133 183
380 (447 )
116 Plus:
Interest expense, net — 74 74 3 349 426 Income tax — 2 2 (9
) 10 3 Depreciation and amortization 207 178 385 81 24 490 ARO
Expense 11 9 20 — — 20 Contract Amortization 10 3 13 — — 13 Lease
amortization — (6 ) (6 )
— — (6 )
EBITDA 278
393 671 455 (64 ) 1,062
Adjustment to reflect NRG share of adjusted EBITDA in
unconsolidated affiliates 15 43 58 — (11 ) 47 Acquisition-related
transaction & integration costs — — — — 3 3 Reorganization
costs 3 — 3 5 10 18 Deactivation costs — 3 3 — 7 10 Other non
recurring charges (25 ) — (25 ) 1 16 (8 ) Impairments 42 18 60 — —
60 MtM (gains)/losses on economic hedges (152 ) (11 )
(163 ) 154 — (9 )
Adjusted EBITDA 161 446
607 615
(39 ) 1,183
1 Includes International, remaining renewables and Generation
eliminations
YTD Third Quarter 2017 condensed financial information by
Operating Segment:
($ in millions) Gulf Coast East/
West1
Generation Retail Corp/
Elim
Total Operating revenues 1,752 1,348
3,100 4,868 (910 ) 7,058 Cost of sales
1,049 500 1,549
3,671 (904 ) 4,316
Economic
gross margin2 703 848 1,551
1,197 (6 ) 2,742 Operations &
maintenance and other cost of operations3 442 370 812 246 13 1,071
Selling, marketing, general & administrative 97 73 170 334 130
634 Other expense/(income)4 3 (41 )
(38 ) 2 (110 ) (146 )
Adjusted EBITDA 161 446
607 615
(39 ) 1,183
1 Includes International, remaining renewables and Generation
eliminations2 Excludes MtM gain of $9 million and contract
amortization of $13 million2 Excludes deactivation costs of $10
million3 Excludes acquisition-related transaction & integration
costs of $3 million and reorganization costs of $18 million
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions) Condensed financial information
Interest, tax, depr., amort. MtM Deactivation
Other adj. Adjusted EBITDA Operating revenues 7,246
(11 ) (177 ) — — 7,058 Cost of
operations 4,508 (24 ) (168 ) —
— 4,316
Gross margin
2,738 13 (9 ) — —
2,742 Operations & maintenance and other cost of
operations 1,081 — — (10 ) — 1,071 Selling, marketing, general
& administrative 634 — — — — 634 Other expense/(income) 1
907 (933 ) — —
(120 ) (146 )
Income/(Loss) from Continuing
Operations 116 946
(9 ) 10 120
1,183
1 Other adj. includes acquisition-related transaction &
integration costs of $3 million and reorganization costs of $18
million
Appendix Table A-5: 2018 and 2017 Three and Nine Months Ended
September 30 Adjusted Cash Flow from Operations
Reconciliations
The following table summarizes the calculation of adjusted cash
flow operating activities providing a reconciliation to net cash
provided by operating activities:
Three Months Ended ($ in millions)
September 30, 2018 September 30, 2017 Net
Cash Provided by Operating Activities 402
555 Reclassifying of net receipts for settlement of acquired
derivatives that include financing elements — (2 ) Merger,
integration and cost-to-achieve expenses (1) 27 14 GenOn Settlement
(2) 132 13 Adjustment for change in collateral 27
(86 )
Adjusted Cash Flow from Operating Activities
588 494 Maintenance
CapEx, net (3) (30 ) (32 ) Environmental CapEx, net (1 ) —
Distributions to non-controlling interests (1 ) —
Free Cash Flow Before Growth Investments (FCFbG)
556 462
(1) 2018 includes cost-to-achieve expenses associated with the
Transformation Plan announced on July 2017 call.(2) 2018 includes
settlement consideration of $261 million, transition services
credit of $28 million, and pension contribution of $12 million,
less $151 million repayment of intercompany revolver loan, accrued
interest and fees of $12 million, certain other balances due to NRG
of $6 million; 2017 includes pension contribution of $13
million.(3) Includes insurance proceeds of $4 million in 2017.
Nine Months Ended ($ in millions)
September
30, 2018 September 30, 2017 Net Cash Provided
by Operating Activities 758 558 Merger,
integration and cost-to-achieve expenses (1) 71 14 Sale of Land 3 8
GenOn Settlement (2) 132 13 Adjustment for change in collateral (3)
45 182
Adjusted Cash Flow from
Operating Activities 1,009
775 Maintenance CapEx, net (4) (135 ) (102 )
Environmental CapEx, net (1 ) (25 ) Distributions to
non-controlling interests (17 ) (18 )
Free Cash
Flow Before Growth Investments (FCFbG) 856
630
(1) 2018 includes cost-to-achieve expenses associated with the
Transformation Plan announced on July 2017 call.(2) 2018 includes
settlement consideration of $261 million, transition services
credit of $28 million, and pension contribution of $12 million,
less $151 million repayment of intercompany revolver loan, accrued
interest and fees of $12 million, certain other balances due to NRG
of $6 million; 2017 includes pension contribution of $13
million.(3) 2018 includes $15MM return of collateral to GenOn, and
2017 reflects change in NRG’s cash collateral balance as of 3Q2017
including $79MM of collateral postings from deconsolidated
affiliate (GenOn).(4) Includes insurance proceeds of $22 million in
2017.
Appendix Table A-6: Third Quarter YTD 2018 Sources and Uses
of Liquidity
The following table summarizes the sources and uses of liquidity
through third quarter of 2018:
($ in millions)
Nine Months Ended
September 30, 2018
Sources: Adjusted cash flow from operations 1,009
Convertible Note Issuance 575 Asset sales 1,468
Uses:
Share repurchases (1,000 ) Debt Repayment, net of proceeds (683 )
Deconsolidation of Ivanpah and Agua Caliente (268 ) Decrease in
credit facility (257 ) Growth investments and acquisitions, net
(151 ) GenOn Settlement (157 ) Maintenance and environmental capex,
net (136 ) Cost-to-achieve expenses(1) (114 ) Nuclear
Decommissioning Trust (51 ) Collateral (2) (38 ) Common Stock
Dividends (28 ) Distributions to non-controlling interests (17 )
Other Investing and Financing (68 )
Change in Total
Liquidity 84
(1) Includes capital expenditures associated with the
Transformation Plan(2) Excludes impact of Funds deposited by
Counterparties
Appendix Table A-7: 2018 and 2019 Adjusted EBITDA Guidance
Reconciliation
The following table summarizes the calculation of Adjusted
EBITDA providing reconciliation to net income:
2018 Adjusted EBITDA
Revised Guidance
($ in millions)
Low High Income from
Continuing Operations 1 405 505 Income Tax
15 15 Interest Expense 445 445 Depreciation, Amortization, Contract
Amortization and ARO Expense 490 490 Adjustment to reflect NRG
share of adjusted EBITDA in unconsolidated affiliates 65 65 Other
Costs 2 280 280
Adjusted EBITDA
1,700 1,800 2019
Guidance ($ in millions)
Low High
Income from Continuing Operations 1 965
1,165 Income Tax 15 15 Interest Expense 350 350 Depreciation,
Amortization, Contract Amortization and ARO Expense 430 430
Adjustment to reflect NRG share of adjusted EBITDA in
unconsolidated affiliates 40 40 Other Costs 2 50 50
Adjusted EBITDA 1,850
2,050
1. For purposes of guidance, discontinued operations are
excluded and fair value adjustments related to derivatives are
assumed to be zero.2. 2018 includes impairments, loss on debt
extinguishment, deactivation costs, and cost-to-achieve expenses;
2019 includes deactivation costs and cost-to-achieve expenses
Appendix Table A-8: 2018 and 2019 FCFbG Guidance
Reconciliation
The following table summarizes the calculation of Free Cash Flow
before Growth providing reconciliation to Cash from Operations:
2018 2019 ($ in millions)
Revised Guidance Guidance
Adjusted EBITDA $1,700 - $1,800 $1,850
- $2,050 Cash Interest payments (445 ) (350 ) Cash Income tax (15 )
(15 ) Collateral / working capital / other —
(80 ) Cash From Operations $1,240 - $1,340 $1,405 -
$1,605 Adjusted Cash flow from
operations $1,240 - $1,340 $1,405 - $1,605 Maintenance capital
expenditures, net (170) - (180) (145) - (165) Environmental capital
expenditures, net
(0) - (5)
(0) - (5) Distributions to non-controlling interests
(10) - (20) - Free Cash Flow - before Growth
$1,050 - $1,150 $1,250 - $1,450
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.
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For NRG Energy, Inc.Media:Candice
Adams609.524.5428orInvestors:Kevin L. Cole, CFA609.524.4526
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