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Investor News Release

NRG Energy, Inc. Reports First Quarter Results, Concludes GreenCo Process, and Reaffirms 2016 Guidance

First Quarter 2016 Results and Financial Highlights

  • $812 million of Adjusted EBITDA
  • $249 million of Free Cash Flow (FCF) before growth investments

Operational and Strategic Update

  • Announcing the conclusion of the GreenCo process:
    • Restructuring and streamlining of residential solar business; and
    • Agreed to sell majority interest in EVgo to Vision Ridge Partners
  • NRG intends to offer the remaining 51.05% of CVSR it owns to NRG Yield in the second quarter

2016 Financial Guidance and Capital Allocation Update

  • 2016 Guidance reaffirmed and now includes the residential solar business and EVgo:
    • Adjusted EBITDA of $3,000-$3,200 million
    • Consolidated FCF before growth investments of $1,000-$1,200 million
    • NRG-Level FCF before growth investments of $750-$950 million
  • $229 million of NRG-Level corporate debt retired year-to-date
  • $253 million raised to supplement NRG-Level capital through the non-recourse monetization of certain capacity revenues at the Midwest Generation facilities

PRINCETON, N.J.--(BUSINESS WIRE)--May 5, 2016-- NRG Energy, Inc. (NYSE:NRG) today reported Adjusted EBITDA of $812 million in its first quarter 2016 financial results. First quarter cash flow from operations totaled $554 million. Net income for first quarter 2016 was $47 million, or $0.24 per diluted common share compared to net loss of $136 million, or $0.37 per diluted common share for first quarter 2015.

“NRG’s strong financial and operational performance continued despite a weak weather and commodity market environment, validating our integrated competitive power platform,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “Combining renewable and fossil generation with an industry-leading retail platform, along with our robust partnership with NRG Yield, provides strength and stability while allowing us to maintain upside to a market recovery. Today, we are also pleased to announce the conclusion of the GreenCo process with the agreement to sell a majority share of EVgo and the restructuring and simplification of the residential solar business.”

Segment Results

Table 1: Adjusted EBITDA

($ in millions)   Three Months Ended
Segment     3/31/16   3/31/15
Generation/Business (1)   $429   $535
Retail Mass 151 166
Renewables (2) 42 22
NRG Yield (2) 188 132
Corporate (3)     2   (15)
Adjusted EBITDA (4)     $812   $840

(1) See Appendices A-6 and A-7 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, which was excluded from Adjusted EBITDA throughout 2015 (first quarter 2015 negative contribution of $40 million).
(4) See Appendices A-1 through A-4 for NRG Energy, Inc. and Operating Segment Reg G reconciliations.

Table 2: Net Income/(Loss)

($ in millions)   Three Months Ended
Segment     3/31/16   3/31/15
Generation/Business   $159   $29
Retail Mass 146 104
Renewables (1) (45) (51)
NRG Yield (1) 2 (20)
Corporate (2)     (215)   (198)
Net Income/(Loss) (3)     $47   $(136)

(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.

Generation/Business (formerly NRG Business): First Quarter Adjusted EBITDA was $429 million; $106 million lower than first quarter 2015 primarily driven by:

  • East Region: $179 million lower due to declining energy margins from milder weather, declines in gas prices and dark spreads, and lower capacity revenues due to deactivations, partially offset by increased contract margins attributable to new load contracts and lower supply costs;
  • West Region: $63 million increase due primarily to sale of $47 million in emission credits and lower operating costs on timing of outages; and
  • Gulf Coast Region: $7 million increase due primarily to higher South Central capacity revenues and lower supply costs to serve load contracts, and favorable operating costs driven by reduced outages across the region, partially offset by lower energy margins in Texas from the decline in power prices and milder weather.

Retail Mass (formerly NRG Home Retail): First quarter Adjusted EBITDA was $151 million, $15 million lower than first quarter 2015 from milder weather, partially offset by lower supply costs and operating cost efficiencies.

Renewables (formerly NRG Renew): First quarter Adjusted EBITDA was $42 million, $20 million higher than first quarter 2015 due primarily to increased production at Ivanpah, higher generation from wind assets and new solar projects achieving commercial operations in late 2015.

NRG Yield: First quarter Adjusted EBITDA was $188 million, $56 million higher than first quarter 2015 due to increased wind production and the acquisition of Desert Sunlight.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

($ in millions)     3/31/16   12/31/15
Cash at NRG-Level     $589   $693
Revolver     1,337   1,373
NRG-Level Liquidity $1,926 $2,066
Restricted cash 387 414
Cash at Non-Guarantor Subsidiaries     1,070   825
Total Liquidity $3,383 $3,305
 

NRG-Level cash as of March 31, 2016 was $589 million, a decrease of $104 million from the end of 2015, and $1,337 million was available under the Company’s credit facilities at the end of the current quarter. Total liquidity was $3,383 million, including restricted cash and cash at non-guarantor subsidiaries (primarily GenOn and NRG Yield)1.

1 See Appendix A-6 for First Quarter 2016 Sources and Uses of Liquidity detail.

NRG Strategic Developments

Residential Solar

NRG today announces the conclusion of the strategic review process for residential solar, integrating it into NRG and streamlining both its model and market. The operation will transition to an originate-and-monetize to third party model. As part of this change, NRG has entered into agreements with both Sunrun Inc. (Nasdaq: RUN) and Spruce Finance Inc., whereby both parties will be able to purchase NRG originated residential solar contracts and provide support over the life of the customer contract. Additionally, as NRG streamlines its go-to-market approach, residential solar will focus on three markets where it already has a well-established foothold – New Jersey, New York and Massachusetts – while maintaining a longer-term option to participate in NRG Retail’s core Texas market as economics for residential solar improve. NRG will incur one-time costs to achieve of approximately $20 million in 2016.

EVgo

NRG has agreed to sell a majority stake in its EVgo business to Vision Ridge Partners for total consideration of approximately $50 million, consisting of $19.5 million (subject to working capital adjustments) payable to NRG and the remainder contributed as capital to the business. NRG also has future earnout potential of up to $70 million based on future adjusted EBITDA targets. NRG will retain its obligations under the 2012 California Public Utilities Commission settlement. The sale of a majority interest will result in NRG reporting EVgo on an equity earnings basis.

Next Drop Down to NRG Yield

During the second quarter of 2016, NRG intends to offer the remaining 51.05% of the California Valley Solar Ranch (CVSR) facility, a 250 MW solar facility located in San Luis Obispo, CA, to NRG Yield. NRG Yield currently owns 48.95% of the CVSR facility.

2016 Guidance

NRG is reaffirming its guidance range for fiscal year 2016 with respect to both Adjusted EBITDA and FCF before growth investments, including the results of the residential solar business and EVgo.

Table 4: 2016 Adjusted EBITDA and FCF before Growth Investments Guidance

    5/5/16
($ in millions)   2016
Adjusted EBITDA   $3,000 –3,200
Interest payments (1,090)
Income tax (40)
Working capital/other changes   75
Adjusted Cash flow from operations $1,945 – 2,145
Maintenance capital expenditures, net (435)-(465)
Environmental capital expenditures, net (285)-(315)
Preferred dividends (10)
Distributions to non-controlling interests   (195)-(205)
Free Cash Flow – before Growth Investments   $1,000 – 1,200
 

Capital Allocation Update

On April 7, 2016, Midwest Generation, LLC (MWG) entered into an agreement to sell certain quantities of unforced capacity revenues through the 2018/19 delivery year to a trading counterparty for net proceeds of $253 million. MWG will continue to operate the generation facilities and remains responsible for performance penalties and eligible for performance bonus payments, if any. NRG intends to allocate proceeds from this transaction toward additional NRG level delevering or redemption of the Company’s Convertible Preferred stock.

Year to date, through May 5, 2016 the Company utilized $214 million ($229 million par) of the $1.3 billion of 2016 NRG level capital allocated to debt repurchases.

On April 18, 2016, NRG declared a quarterly dividend on the Company's common stock of $0.03 per share, payable May 16, 2016 to stockholders of record as of May 2, 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.

Earnings Conference Call

On May 5, 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 businesses. 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, 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 May 5, 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 Presentation should be considered in connection with information regarding risks and uncertainties that may affect NRG’s future results included in NRG’s filings with the Securities and Exchange Commission at www.sec.gov.

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

 
  Three months ended March 31,

(In millions, except for per share amounts)

2016   2015
Operating Revenues
Total operating revenues $ 3,229   $ 3,829  
Operating Costs and Expenses
Cost of operations 2,189 3,063
Depreciation and amortization 313 395
Selling, general and administrative 255 265
Acquisition-related transaction and integration costs 2 10
Development activity expenses 26   34  
Total operating costs and expenses 2,785 3,767
Gain on sale of assets and postretirement benefits curtailment 32   14  
Operating Income 476   76  
Other Income/(Expense)
Equity in losses of unconsolidated affiliates (7 ) (3 )
Impairment loss on investment (146 )
Other income, net 18 19
Gain on debt extinguishment 11
Interest expense (284 ) (301 )
Total other expense (408 ) (285 )
Income/(Loss) Before Income Taxes 68 (209 )
Income tax expense/(benefit) 21   (73 )
Net Income/(Loss) 47 (136 )
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interests (35 ) (16 )
Net Income/(Loss) Attributable to NRG Energy, Inc. 82 (120 )
Dividends for preferred shares 5   5  
Income/(Loss) Available for Common Stockholders $ 77   $ (125 )
Earnings/(Loss) per Share Attributable to NRG Energy, Inc. Common Stockholders
Weighted average number of common shares outstanding — basic 315 336
Earnings/(Loss) per Weighted Average Common Share — Basic $ 0.24   $ (0.37 )
Weighted average number of common shares outstanding — diluted 315 336
Earnings/(Loss) per Weighted Average Common Share — Diluted $ 0.24   $ (0.37 )
Dividends Per Common Share $ 0.15   $ 0.15  
 
 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

 
  Three months ended March 31,
2016   2015
(In millions)
Net Income/(Loss) $ 47 $ (136 )
Other Comprehensive Income/(Loss), net of tax
Unrealized loss on derivatives, net of income tax expense/(benefit) of $1 and ($6) (32 ) (12 )
Foreign currency translation adjustments, net of income tax benefit of $0 and $(7) 6 (11 )
Available-for-sale securities, net of income tax benefit of $0 and $(4) 3 (1 )
Defined benefit plans, net of tax expense of $0 and $4 1   7  
Other comprehensive loss (22 ) (17 )
Comprehensive Income/(Loss) 25 (153 )
Less: Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interests (52 ) (29 )
Comprehensive Income/(Loss) Attributable to NRG Energy, Inc. 77 (124 )
Dividends for preferred shares 5   5  
Comprehensive Income/(Loss) Available for Common Stockholders $ 72   $ (129 )
 
 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 
  March 31, 2016   December 31, 2015

(In millions, except shares)

(unaudited)  
ASSETS
Current Assets
Cash and cash equivalents $ 1,659 $ 1,518
Funds deposited by counterparties 101 106
Restricted cash 387 414
Accounts receivable — trade, less allowance for doubtful accounts of $19 and $21 1,018 1,157
Inventory 1,161 1,252
Derivative instruments 2,113 1,915
Cash collateral paid in support of energy risk management activities 411 568
Renewable energy grant receivable, net 35 13
Current assets held-for-sale 6
Prepayments and other current assets 461   442  
Total current assets 7,346   7,391  
Property, plant and equipment, net of accumulated depreciation of $7,093 and $6,804 18,763   18,732  
Other Assets
Equity investments in affiliates 898 1,045
Notes receivable, less current portion 40 53
Goodwill 999 999
Intangible assets, net of accumulated amortization of $1,592 and $1,525 2,256 2,310
Nuclear decommissioning trust fund 577 561
Derivative instruments 465 305
Deferred income taxes 185 167
Non-current assets held-for-sale 105
Other non-current assets 1,151   1,214  
Total other assets 6,571   6,759  
Total Assets $ 32,680   $ 32,882  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and capital leases $ 465 $ 481
Accounts payable 845 869
Derivative instruments 1,947 1,721
Cash collateral received in support of energy risk management activities 100 106
Current liabilities held-for-sale 2
Accrued expenses and other current liabilities 981   1,196  
Total current liabilities 4,338   4,375  
Other Liabilities
Long-term debt and capital leases 18,677 18,983
Nuclear decommissioning reserve 330 326
Nuclear decommissioning trust liability 294 283
Deferred income taxes 37 19
Derivative instruments 627 493
Out-of-market contracts, net of accumulated amortization of $687 and $664 1,122 1,146
Non-current liabilities held-for-sale 4
Other non-current liabilities 1,547   1,488  
Total non-current liabilities 22,634   22,742  
Total Liabilities 26,972   27,117  
2.822% convertible perpetual preferred stock 304 302
Redeemable noncontrolling interest in subsidiaries 23 29
Commitments and Contingencies
Stockholders’ Equity
Common stock 4 4
Additional paid-in capital 8,299 8,296
Retained deficit (2,977 ) (3,007 )
Less treasury stock, at cost — 102,450,781 and 102,749,908 shares, respectively (2,406 ) (2,413 )
Accumulated other comprehensive loss (195 ) (173 )
Noncontrolling interest 2,656   2,727  
Total Stockholders’ Equity 5,381   5,434  
Total Liabilities and Stockholders’ Equity $ 32,680   $ 32,882  
 
 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
  Three months ended March 31,
2016   2015
(In millions)
Cash Flows from Operating Activities
Net Income/(loss) $ 47 $ (136 )
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Distributions and equity in earnings of unconsolidated affiliates 17 32
Depreciation and amortization 313 395
Provision for bad debts 10 15
Amortization of nuclear fuel 13 13
Amortization of financing costs and debt discount/premiums 1 (4 )
Adjustment for debt extinguishment (11 )
Amortization of intangibles and out-of-market contracts 26 19
Amortization of unearned equity compensation 8 11
Impairment losses 146
Changes in deferred income taxes and liability for uncertain tax benefits (25 ) (83 )
Changes in nuclear decommissioning trust liability 9 (3 )
Changes in derivative instruments (50 ) 261
Proceeds from sale of emission allowances 47
Changes in collateral deposits supporting energy risk management activities 156 (213 )
Gain on sale of assets and postretirement benefits curtailment (32 ) (14 )
Cash used by changes in other working capital (121 ) (33 )
Net Cash Provided by Operating Activities 554   260  
Cash Flows from Investing Activities
Acquisitions of businesses, net of cash acquired (6 ) (1 )
Capital expenditures (279 ) (252 )
Increase in restricted cash, net (12 ) (11 )
Decrease in restricted cash to support equity requirements for U.S. DOE funded projects 39 25
Decrease in notes receivable 1 5
Purchases of emission allowances (12 )
Proceeds from sale of emission allowances 7
Investments in nuclear decommissioning trust fund securities (200 ) (193 )
Proceeds from the sale of nuclear decommissioning trust fund securities 191 196
Proceeds from renewable energy grants and state rebates 8 2
Proceeds from sale of assets, net of cash disposed of 120
Investments in unconsolidated affiliates (4 ) (44)
Other 4   3  
Net Cash Used by Investing Activities (143 ) (270 )
Cash Flows from Financing Activities
Payment of dividends to common and preferred stockholders (48 ) (51 )
Payment for treasury stock (79 )
Net receipts from settlement of acquired derivatives that include financing elements 39 40
Proceeds from issuance of long-term debt 61 248
Distributions from, net of contributions to, noncontrolling interest in subsidiaries 10 (25 )
Proceeds from issuance of common stock 1
Payments for short and long-term debt (316 ) (94 )
Other - contingent consideration (10 )  
Net Cash (Used)/Provided by Financing Activities (264 ) 40  
Effect of exchange rate changes on cash and cash equivalents (6 ) 18  
Net Increase in Cash and Cash Equivalents 141 48
Cash and Cash Equivalents at Beginning of Period 1,518   2,116  
Cash and Cash Equivalents at End of Period $ 1,659   $ 2,164  
 
 

Appendix Table A-1: First Quarter 2016 Adjusted EBITDA Reconciliation for NRG Energy, Inc.

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income

 
      Adjustments  
($ in millions) GAAP

Interest, tax,
depreciation &
amortization

Mark-to-
market
(gains)/losses

 

Deactivation
Costs

 

Other
adjustments
to EBITDA

Adjusted
EBITDA

Operating Revenues
Energy revenue 1,151 - - - - 1,151
Capacity revenue 521 - - - - 521
Retail revenue 1,370 - - - - 1,370
Mark-to-market for economic hedging activities 26 - (26) - - -
Contract amortization (15) 15 - - - -
Other revenues 176 - - - - 176
Total operating revenues 3,229 15 (26) - - 3,218
Operating Costs and Expenses
Cost of sales 1,505 - - 1 - 1,506
Mark-to-market for economic hedging activities (9) - 9 - - -
Contract and emissions credit amortization 6 (6) - - -
Operations and maintenance 583 - - (8) (6) 569
Other cost of operations 104 - - - (10) 94
Total cost of operations 2,189 (6) 9 (7) (16) 2,169
Depreciation and amortization 313 (313) - - - -
Selling & marketing 100 - - - - 100
General & administrative 155 - - - 155
Acquisition related transaction & integration costs 2 - - - (2) -
Development activity expenses 26 - - - - 26
Total operating costs and expenses 2,785 (319) 9 (7) (18) 2,450
Gain on sale of assets 32 - - - (29) 3
Operating Income 476 334 (35) 7 (11) 771
Other Income/(Expenses)
Equity in losses of unconsolidated affiliates (7) - - - 33 26
Impairment loss on investment (146) - - - 146 -
Other income, net 18 (3) - - - 15
Gain on debt extinguishment 11 (11) - - - -
Interest expense (284) 284 - - - -
Total other expenses (408) 270 - - 179 41
Net income before income taxes 68 604 (35) 7 168 812
Income tax expense 21 (21) - - - -
Net income 47 625 (35) 7 168 812
 
 

Appendix Table A-2: First Quarter 2015 Adjusted EBITDA Reconciliation for NRG Energy, Inc.

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net loss

 
      Adjustments  
($ in millions) GAAP

Interest, tax,
depreciation &
amortization

Mark-to-
market
(gains)/losses

 

Deactivation
Costs

 

Residential
Solar

 

Other
adjustments to
EBITDA

Adjusted
EBITDA

Operating Revenues
Energy revenue 1,676 - - - - - 1,676
Capacity revenue 488 - - - - - 488
Retail revenue 1,663 - - - (3) - 1,660
Mark-to-market for economic hedging activities (87) - 87 - - -
Contract amortization (8) 8 - - - -
Other revenues 97 - - - (2) - 95
Total operating revenues 3,829 8 87 - (5) - 3,919
Operating Costs and Expenses
Cost of sales 2,134 - - - (4) - 2,130
Mark-to-market for economic hedging activities 191 - (191) - - - -
Contract and emissions credit amortization 4 (4) - - - - -
Operations and maintenance 615 - - (3) (2) 12 622
Other cost of operations 119 - - - - (6) 113
Total cost of operations 3,063 (4) (191) (3) (6) 6 2,865
Depreciation and amortization 395 (395) - - - - -
Selling & marketing 108 - - - (20) - 88
General & administrative 157 - - - (19) 138
Acquisition related transaction & integration costs 10 - - - - (10) -
Development activity expenses 34 - - - - - 34
Total operating costs and expenses 3,767 (399) (191) (3) (45) (4) 3,125
Gain on postretirement benefits curtailment 14 - - -   - 14
Operating Income 76 407 278 3 40 4 808
Other Income/(Expenses)
Equity in losses of unconsolidated affiliates (3) - - - - 19 16
Other income, net 19 (3) - - - - 16
Interest expense (301) 301 - - - - -
Total other expenses (285) 298 - - - 19 32
Net loss before income taxes (209) 705 278 3 40 23 840
Income tax benefit (73) 73 - - - - -
Net loss (136) 632 278 3 40 23 840
 
 

Appendix Table A-3: First Quarter 2016 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/Business   Renewables   Yield   Corp   Total
Net income/(loss)   146   159   (45)   2   (215)   47
Plus:            
Interest expense, net - 10 33 68 170 281
Income tax - 1 (6) - 26 21
Gain on debt extinguishment - - - - (11) (11)
Depreciation, amortization and ARO expense 28 155 57 67 16 323
Amortization of contracts   1   (15)   -   23   (1)   8
EBITDA 175 310 39 160 (15) 669
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates - 7 (3) 28 1 33
Integration & transaction costs - - - - 2 2
Reorganization costs 5 1 2 - 2 10
Deactivation costs - 7 - - - 7
Gain on sale of business - (29) - - - (29)
Impairments - 138 5 - 12 155
Market to market (MtM) gains on economic hedges (29) (5) (1) - - (35)
                         
Adjusted EBITDA   151   429   42   188   2   812
 
 

Appendix Table A-4: First 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/Business   Renewables   Yield   Corp   Total
Net income/(loss)   104   29   (51)   (20)   (198)   (136)
Plus:            
Interest expense, net - 18 28 73 179 298
Income tax - - (6) (4) (63) (73)
Depreciation amortization and ARO expense 30 240 52 67 12 401
Amortization of contracts   -   (12)   (1)   11   2   -
EBITDA 134 275 22 127 (68) 490
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates - 4 - 12 3 19
Integration & transaction costs - - - - 10 10
Deactivation costs - 3 - - - 3
Residential Solar EBITDA - - - - 40 40
MtM losses/(gains) on economic hedges 32 253 - (7) - 278
                         
Adjusted EBITDA   166   535   22   132   (15)   840
 
 

Appendix Table A-5: 2016 and 2015 First 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

March 31, 2016

  Three months ended

March 31, 2015

Net Cash Provided by Operating Activities $554 $260
Reclassifying of net receipts (payments) for settlement of acquired derivatives that include financing elements 39 40
Merger, integration and cost-to-achieve expenses [1] 19 12
Return of capital from equity investments 5 -
Adjustment for change in collateral   (156)   213
Adjusted Cash Flow from Operating Activities   $461   $525
Maintenance CapEx, net [2] (91) (85)
Environmental CapEx, net (77) (49)
Preferred dividends (2) (2)
Distributions to non-controlling interests   (42)   (25)
Free Cash Flow – before Growth Investments   $249   $364

(1) Cost-to-achieve expenses associated with the $150MM savings announced on September 2015 call

(2) Excludes merger and integration CapEx of $0 million in Q1 2016 and $3 million in Q1 2015

 
 

Appendix Table A-6: First Quarter 2016 Regional Adjusted EBITDA Reconciliation for Generation/Business

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
($ in millions)   East   Gulf Coast   West   B2B   Carbon 360   Total
Net income/(loss)   246   18   32   5   (142)   159
Plus:          
Interest expense, net 10 - - - -   10
Income tax - - - 1 - 1
Depreciation, amortization and ARO expense 57 78 16 4 - 155
Amortization of contracts   (17)   -   1   1   -   (15)
EBITDA 296 96 49 11 (142) 310
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates - - 3 - 4 7
Reorganization costs - 1 - - - 1
Deactivation costs 7 - - - - 7
Gain on sale of assets (29) - - - - (29)
Impairments 1 - - - 137 138
Market to market (MtM) (gains)/losses on economic hedges (30) 26 3 (4) - (5)
                     
Adjusted EBITDA   245   123   55   7   (1)   429
 
 

Appendix Table A-7: First Quarter 2015 Regional Adjusted EBITDA Reconciliation for Generation/Business

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss)

 
($ in millions)   East   Gulf Coast   West   B2B   Carbon 360   Total
Net income/(loss)   88   35   (24)   (64)   (6)   29
Plus:          
Interest expense, net 18 - - - -   18
Depreciation amortization and ARO expense 77 145 16 2 - 240
Amortization of contracts   (14)   2   (1)   1   -   (12)
EBITDA 169 182 (9) (61) (6) 275
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates - (1) 1 1 3 4
Deactivation costs 2 - 1 - - 3
MtM losses/(gains) on economic hedges 253 (65) (1) 66 - 253
                     
Adjusted EBITDA   424   116   (8)   6   (3)   535
 
 

Appendix Table A-8: First Quarter 2016 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity in the first quarter of 2016.

 
($ in millions)   Three months ended

March 31, 2016

Sources:  
Adjusted cash flow from operations $ 461
Collateral 156
Asset sales 120
Tax equity proceeds 11
Proceeds from NRG Yield revolver, net of payments   10
Uses:
Debt repayments, discretionary (NRG-level) 190
Maintenance and environmental capex, net 168
Debt repayments, non-discretionary 87
Growth investments and acquisitions, net 62
Common and preferred stock dividends 48
Distributions to non-controlling entities 42
Decrease in credit facility 36
Other investing and financing 28
Merger, integration and cost-to-achieve expenses [1] 19
     
Change in Total Liquidity   $ 78
(1) Cost-to-achieve expenses associated with the $150MM 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 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. Adjusted EBITDA represents EBITDA adjusted for mark-to-market gains or losses, asset write offs and impairments; and factors which we do not consider indicative of future operating performance. 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.

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 and integration related 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 and integration related 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, and preferred stock dividends 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.

Source: NRG Energy, Inc.

NRG Energy, Inc.
Media:
Karen Cleeve, 609-524-4608
or
Marijke Shugrue, 609-524-5262
or
Investors:
Kevin Cole, CFA, 609-524-4526
or
Lindsey Puchyr, 609-524-4527