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8-K - 8-K - NRG ENERGY, INC.a16-5468_18k.htm

Exhibit 99.1

 

 

NRG Energy, Inc. Reports Record 2015 Adjusted EBITDA Results,

Reaffirms 2016 Financial Guidance, Announces

Retirement of $691 Million of Debt, and Realigns Dividend

 

2015 Results and Financial Highlights

 

·                  Record Adjusted EBITDA(1) of $3,340 million, including best ever results from NRG Home Retail since 2009 acquisition — a validation of NRG’s leading integrated competitive power platform

·                  $1,127 million of Free Cash Flow (FCF) before growth investments

·                  Over $1.3 billion of capital returned to stakeholders

·            $691 million of debt retired(2); approximately $54 million in annual interest savings

·            $628 million returned to shareholders in 2015

·                  $786 million of NRG Yield dropdown proceeds in 2015

·                  $5.1 billion and $3.0 billion non-cash one-time charges for impairments and income tax valuation allowance expense, respectively, primarily driven by the extended low commodity price cycle for the Texas wholesale generation

 

Operational and Strategic Update

 

·                  Allocating $925 million of additional 2016 capital to incremental NRG-level debt reduction

·                  GreenCo strategic process: Reintegrating NRG Renew into the NRG platform; expect resolution for NRG Home Solar and EVgo in the second quarter 2016

·                  Asset sales completed or pending represent 877 MWs and $138 million of $500 million 2016 asset sales target

·                  Reducing annual dividend to $0.12 per share to enhance flexibility on capital allocation, reallocating approximately $145 million annually

 

2016 Financial Guidance

 

·                  2016 Guidance is reaffirmed, and now includes GreenCo’s NRG Renew

·                  Adjusted EBITDA of $3,000-$3,200 million

·                  FCF before growth investments of $1,000-$1,200 million

 

PRINCETON, NJ February 29, 2016 — NRG Energy, Inc. (NYSE: NRG) today reported record full-year Adjusted EBITDA of $3,340 million. Adjusted cash flow from operations totaled $1,945 million for 2015. Net loss for the twelve months of 2015 was $6,436 million, including non-cash charges of $3,306 million(3) and $3,039 million for asset impairments net of taxes and income tax valuation allowance expense, respectively.  These non-cash charges were primarily driven by the low commodity cycle and its impact on the Texas wholesale business. This resulted in a $19.46 loss per diluted common share in 2015 compared to net income of $132 million, or $0.23 per diluted common share in 2014.  Excluding the impact of the impairments and tax valuation allowance, the Company’s net loss would have been $91 million or $0.34 loss per diluted common share for the twelve months of 2015.

 

“Amid a continued weak commodity price environment, NRG’s integrated competitive power platform once again delivered strong financial results, demonstrating that we have the right portfolio and the right platform to succeed,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “Today we are reintegrating our successful business renewables solutions back into NRG as an important part of our diversified platform. With the further

 


(1)  Excludes negative contribution from NRG Home Solar of $173 million.

(2)  Represents total discretionary debt retirements from November 2015 through February 2016 (excludes $405 million of non-discretionary debt amortization in 2015)

(3)  Total impairments of $5,086 million net of taxes of $1,780 million.

 



 

strengthening of our balance sheet and increased flexibility from recalibrating our dividend, we will be in a stronger position to benefit from market opportunities.”

 

NRG continued its strong track record of safety performance with a top quartile recordable rate of 0.71 for the full year 2015(4).  Overall generation was down 3% from 2014, with coal and nuclear availability at 83.8% improving 2.4% over 2014.

 

Today, NRG also announces the reintegration of business renewables (formerly GreenCo’s NRG Renew) back into NRG. This move supports NRG’s advantaged position to participate in the changing landscape of the power industry and serve customers, especially with on- and offsite solar and distributed generation in the commercial and industrial space.

 

Segment Results

 

Table 1: Adjusted EBITDA

 

($ in millions)

 

Three Months Ended

 

Twelve Months Ended

 

Segment

 

12/31/15

 

12/31/14

 

12/31/15

 

12/31/14

 

Business (a)(b)

 

$

308

 

$

302

 

$

1,798

 

$

1,836

 

Home Retail

 

144

 

165

 

739

 

604

 

Renew (a)

 

22

 

31

 

171

 

172

 

NRG Yield (a)

 

183

 

159

 

720

 

582

 

Corporate

 

(32

)

4

 

(88

)

(1

)

Adjusted EBITDA(c)

 

$

625

 

$

661

 

$

3,340

 

$

3,193

 

 


(a)   In accordance with GAAP, 2015 and 2014 results have been restated to include the full impact of the NRG Yield drop down transactions which closed on November 3, 2015, January 2, 2015 and June 30, 2014.

(b)   See Appendices A-6 through A-9 for NRG Business regional details.

(c)    See Appendices A-1 through A-4 for Operating Segment Reg G reconciliations; excludes negative Adjusted EBITDA from NRG Home Solar

 

Table 2: Net (Loss)/Income

 

($ in millions)

 

Three Months Ended

 

Twelve Months Ended

 

Segment

 

12/31/15

 

12/31/14

 

12/31/15

 

12/31/14

 

Business (a)(b)

 

$

(4,664

)

$

577

 

$

(4,472

)

$

1,062

 

Home Retail

 

140

 

(119

)

652

 

137

 

Home Solar

 

(175

)

(37

)

(324

)

(73

)

Renew (a)

 

(58

)

(73

)

(124

)

(147

)

NRG Yield (a)

 

13

 

4

 

55

 

99

 

Corporate(c) 

 

(1,614

)

(255

)

(2,223

)

(946

)

Net (Loss)/Income(b)(c)(d)

 

$

(6,358

)

$

97

 

$

(6,436

)

$

132

 

 


(a)         In accordance with GAAP, 2014 results have been restated to include full impact of the assets in the NRG Yield drop down transactions which closed on November 3, 2015, January 2, 2015 and June 30, 2014

(b)         Includes non-cash impairment charges of $4,823 million and $5,086 million for the three and twelve months ended December 31, 2015, respectively

(c)          Includes non-cash income tax expense of $1,385 million and $1,342 million for the three and twelve months ended December 31, 2015, respectively

(d)         Includes mark-to-market gains and losses of economic hedges

 

NRG Business: Full year 2015 Adjusted EBITDA was $1,798 million; $38 million lower than 2014 primarily driven by:

 

·                  Gulf Coast Region: $201 million increase due to higher average realized prices in Texas reflecting ERCOT hedge gains plus higher realized energy margins and capacity revenues in South Central offsetting lower coal generation across the region

·                  East Region: $187 million lower due to declining energy margins from the absence of extreme weather which benefited first quarter 2014, lower capacity volumes following plant deactivations in PJM, partially offset by lower operating costs from reduced outages and decreased run times across the fleet, and the benefit of the full year impact of the coal assets acquired on April 1, 2014 from Edison Mission Energy

 


(4)  Excludes Goal Zero, NRG Home Services and NRG Home Solar

 

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Fourth quarter Adjusted EBITDA was $308 million, $6 million higher than the fourth quarter 2014 primarily driven by:

 

·                  Gulf Coast Region: $54 million increase due to higher average realized prices in Texas reflecting ERCOT hedge gains plus higher realized energy margins and capacity revenues in South Central, all offsetting lower coal and nuclear generation in Texas driven by outages and lower market prices

·                  East Region: $45 million lower due to lower energy margins from milder weather, declines in gas prices and dark spreads, partially offset by increased contract margins attributable to new load contracts and lower supply costs, and lower operating costs from reduced outages, plant deactivations, and decreased run times across the fleet

 

NRG Home Retail: Full year 2015 Adjusted EBITDA was $739 million, $135 million higher than 2014 driven primarily by favorable supply costs and weather as well as continued effective customer operations and margin management across the portfolio.

 

Fourth quarter Adjusted EBITDA was $144 million, $21 million lower than the fourth quarter 2014 primarily due to lower volume driven by milder weather.

 

NRG Renew: Full year 2015 Adjusted EBITDA was $171 million, $1 million lower than 2014 primarily due to higher development costs, offset by increased production at Ivanpah.

 

Fourth quarter Adjusted EBITDA was $22 million, $9 million lower than the fourth quarter 2014 primarily due to higher development costs.

 

NRG Yield: Full year 2015 Adjusted EBITDA was $720 million, $138 million higher than  2014 primarily due to the Desert Sunlight and Alta Wind acquisitions.

 

Fourth quarter Adjusted EBITDA was $183 million, $24 million higher than the fourth quarter 2014 primarily due to the Desert Sunlight acquisition.

 

Asset Impairments and Valuation Allowance Tax Expense

 

NRG recorded total non-cash impairment charges of $5,086 million for the full year 2015; $3,549 million related to asset impairments and $1,537 million related to goodwill impairments.  The majority of the asset impairment charges were related to the Company’s Limestone and W.A. Parish coal fired facilities located in Texas, and for three coal fired facilities in the Company’s East region.  The annual goodwill impairment assessment resulted in non-cash charges to write down the Company’s investments in Texas Genco (acquired 2006) and the NRG Home Solar reporting units. The asset and goodwill impairments were primarily driven by the extended low commodity price environment, while the NRG Home Solar goodwill impairment was due to the lower than expected performance of the business.

 

The low commodity price environment and resulting impairments also lead to $3.0 billion in non-cash income tax expense related to a valuation allowance offsetting the Company’s net deferred tax assets. This allowance was necessary as the impairments impacted the Company’s cumulative and forecasted book earnings; however, the valuation allowance does not affect the Company’s ability to utilize its NOLs against future taxable income.

 

Dividend Reduction — Alignment

 

NRG’s Board of Directors has approved a reduction in the annual dividend to $0.12 per share from $0.58 per share. The reduction will allow NRG to reallocate approximately $145 million annually and provides additional flexibility to create shareholder value through all commodity, credit, and development cycles and seize market opportunities.

 

3



 

Liquidity and Capital Resources

 

Table 3: Corporate Liquidity

 

($ in millions)

 

12/31/15

 

12/31/14

 

Cash at NRG-Level

 

$

693

 

$

661

 

Revolver

 

1,373

 

1,367

 

NRG-Level Liquidity

 

$

2,066

 

$

2,028

 

Restricted cash

 

414

 

457

 

Cash at Non-Guarantor Subsidiaries

 

825

 

1,455

 

Total Liquidity

 

$

3,305

 

$

3,940

 

 

NRG-level cash as of December 31, 2015, was $693 million, an increase of $32 million over the end of 2014, and $1,373 million was available under the Company’s credit facilities at the end of 2015. Total liquidity was $3,305 million including restricted cash and cash at non-guarantor subsidiaries (primarily GenOn and NRG Yield)(5).

 

NRG Strategic Developments

 

NRG Yield

 

The Company has amended its partnership agreements with NRG Yield in order to reallocate $50 million of NRG Yield’s previously committed cash equity from the residential solar partnership to the business renewables partnership. This amendment reinforces NRG Energy’s relationship with NRG Yield by ensuring NRG Yield’s investment capital is more closely aligned with NRG Energy’s focus on renewable energy.

 

This amendment does not impact the existing ROFO agreement.

 

NRG Business

 

NRG Business’s multi-year capital investment program includes both generation additions and fuel conversions totaling approximately 4,659 MWs of generation capacity across the Company’s geographic footprint. This enables the Company to bid generation assets in regional forward capacity markets while also meeting key environmental compliance goals. Assets that completed or are undergoing planned fuel conversions or additions include Bowline 2 (COD second quarter 2015), Joliet Units 6-8 (expected COD second quarter 2016), New Castle Units 3-5 (expected COD second quarter 2016), and Shawville 1-4 (expected COD third quarter 2016). In Illinois, NRG completed the installation of environmental control upgrades at its 689 MW Waukegan coal facility (COD second quarter 2015) and environmental control upgrades continue at its 1,538 MW Powerton coal facility.  When combined with the fuel conversion at Joliet and the retirement of the 251 MW Will County Unit 3 in second quarter 2015, these actions are expected to result in significant emissions improvement in Illinois.

 

In 2015, NRG completed a gas conversion at the Big Cajun II Unit 2, enhanced environmental controls at Sayreville, Gilbert and W.A. Parish facilities. NRG is on track to successfully complete Avon Lake Unit 9 environmental enhancements by the middle of 2016.

 


(5)  See Appendix A-10 for the Full Year 2015 Sources and Uses of Liquidity detail.

 

4



 

Construction of the 360 MW Cielo Lindo peaker facility (formerly P.H. Robinson facility), preparations for the Company’s 527 MW Carlsbad peaker project, and the 262 MW Puente simple-cycle generation facility in Oxnard, CA remain on track.

 

2016 Guidance

 

NRG is reaffirming its guidance range for 2016 with respect to both Adjusted EBITDA and FCF before growth investments. The Company’s 2016 guidance now includes GreenCo’s NRG Renew.

 

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

 

($ in millions)

 

2016
Guidance

 

Adjusted EBITDA

 

$3,000 –$3,200

 

Interest payments(a)

 

(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(b)

 

(285)-(315)

 

Preferred dividends

 

(10)

 

Distributions to non-controlling interests

 

(195)-(205)

 

Free Cash Flow—before Growth Investments

 

$1,000 – $1,200

 

 


(a)         Reduced by $50 million versus prior guidance to reflect $691 million of debt retirement completed since third quarter 2015 earnings conference call

(b)         Increase of $50 million versus prior guidance to reflect timing of spend between 2015 into 2016

 

Capital Allocation Update

 

Through February 29, 2016, the Company utilized $385 million ($417 million par) of the $500 million of capital allocated to debt reduction at the NRG Corporate-level announced on its third quarter 2015 earnings conference call.  NRG intends to complete the remaining debt repurchases under the previously announced program and is allocating an additional $925 million towards additional NRG debt repurchases in 2016 for a total of $1.3 billion of incremental debt reduction.

 

When combined with 2016 repurchases already completed and approximately $370 million in non-discretionary amortization primarily associated with project financings, debt reduction represents nearly 75% of total NRG capital allocated in 2016.

 

In 2015, NRG’s GenOn subsidiaries retired $119 million of GenOn Energy, Inc. Senior Notes and $155 million of GenOn Americas Generation, LLC Senior Notes through open market purchases.

 

On January 18, 2016, NRG declared a quarterly dividend on the Company’s common stock of $0.145 per share, payable February 16, 2016, to stockholders of record as of February 1, 2016. Going forward and in line with today’s announcement, NRG’s dividend will be $0.03 per share, on a quarterly 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 February 29, 2016, NRG will host a conference call at 7:30 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.

 

5



 

About NRG

 

NRG is leading a customer-driven change in the U.S. energy industry by delivering cleaner and smarter energy choices, while building on the strength of the nation’s largest and most diverse competitive power portfolio. A Fortune 200 company, we create value through reliable and efficient conventional generation while driving innovation in solar and renewable power, electric vehicle ecosystems, carbon capture technology and customer-centric energy solutions. 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, 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 February 29, 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

 

6



 

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.

 

Contacts:

 

Media:

 

Investors:

 

 

 

 

 

Karen Cleeve

 

Kevin Cole, CFA

 

609.524.4608

 

609.524.4526

 

 

 

 

 

Marijke Shugrue

 

Lindsey Puchyr

 

609.524.5262

 

609.524.4527

 

 

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NRG ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

For the Year Ended December 31,

 

(In millions, except per share amounts)

 

2015

 

2014

 

2013

 

Operating Revenues

 

 

 

 

 

 

 

Total operating revenues

 

$

14,674

 

$

15,868

 

$

11,295

 

 

 

 

 

 

 

 

 

Cost of operations

 

10,755

 

11,794

 

8,130

 

Depreciation and amortization

 

1,566

 

1,523

 

1,256

 

Impairment losses

 

5,030

 

97

 

459

 

Selling, general and administrative

 

1,220

 

1,027

 

895

 

Acquisition-related transaction and integration costs

 

10

 

84

 

128

 

Development activity expenses

 

154

 

91

 

84

 

Total operating costs and expenses

 

18,735

 

14,616

 

10,952

 

Gain on postretirement benefits curtailment and sale of assets

 

21

 

19

 

 

Operating(Loss)/Income

 

(4,040

)

1,271

 

343

 

Other Income/(Expense)

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

36

 

38

 

7

 

Impairment losses on investments

 

(56

)

 

(99

)

Other income, net

 

33

 

22

 

13

 

(Loss)/gain on sale of equity-method investment

 

(14

)

18

 

 

Net gain/(loss) on debt extinguishment

 

75

 

(95

)

(50

)

Interest expense

 

(1,128

)

(1,119

)

(848

)

Total other expense

 

(1,054

)

(1,136

)

(977

)

(Loss)/Income Before Income Taxes

 

(5,094

)

135

 

(634

)

Income tax expense/(benefit)

 

1,342

 

3

 

(282

)

Net (Loss)/Income

 

(6,436

)

132

 

(352

)

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

 

(54

)

(2

)

34

 

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

 

(6,382

)

134

 

(386

)

Dividends for preferred shares

 

20

 

56

 

9

 

(Loss)/Income Available for Common Stockholders

 

$

(6,402

)

$

78

 

$

(395

)

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

 

 

 

 

 

 

 

Weighted average number of common shares outstanding — basic

 

329

 

334

 

323

 

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

 

$

(19.46

)

$

0.23

 

$

(1.22

)

Weighted average number of common shares outstanding — diluted

 

329

 

339

 

323

 

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

 

$

(19.46

)

$

0.23

 

$

(1.22

)

Dividends Per Common Share

 

$

0.58

 

$

0.54

 

$

0.45

 

 

8



 

NRG ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

 

 

 

For the Year Ended December 31,

 

 

 

2015

 

2014

 

2013

 

 

 

(In millions)

 

Net (Loss)/Income

 

$

(6,436

)

$

132

 

$

(352

)

Other Comprehensive (Loss)/Income, net of tax

 

 

 

 

 

 

 

Unrealized (loss)/gain on derivatives, net of income tax expense/(benefit) of $19, $(21), and $(6)

 

(15

)

(45

)

8

 

Foreign currency translation adjustments, net of income tax benefit of $0, $5, and $14

 

(11

)

(8

)

(24

)

Available-for-sale securities, net of income tax (benefit)/expense of $(3), $(2), and $2

 

17

 

(7

)

3

 

Defined benefit plan, net of income tax expense/(benefit) of $69, $(88), and $100

 

10

 

(129

)

168

 

Other comprehensive income/(loss)

 

1

 

(189

)

155

 

Comprehensive Loss

 

(6,435

)

(57

)

(197

)

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

 

(73

)

8

 

34

 

Comprehensive Loss Attributable to NRG Energy, Inc.

 

(6,362

)

(65

)

(231

)

Dividends for preferred shares

 

20

 

56

 

9

 

Comprehensive Loss Available for Common Stockholders

 

$

(6,382

)

$

(121

)

$

(240

)

 

9



 

NRG ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

 

 

As of December 31,

 

 

 

2015

 

2014

 

 

 

(In millions)

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

$

1,518

 

$

2,116

 

Funds deposited by counterparties

 

106

 

72

 

Restricted cash

 

414

 

457

 

Accounts receivable — trade, less allowance for doubtful accounts of $21 and $23

 

1,157

 

1,322

 

Inventory

 

1,252

 

1,247

 

Derivative instruments

 

1,915

 

2,425

 

Cash collateral paid in support of energy risk management activities

 

568

 

187

 

Renewable energy grant receivable

 

13

 

135

 

Current assets held-for-sale

 

6

 

 

Prepayments and other current assets

 

442

 

447

 

Total current assets

 

7,391

 

8,408

 

Property, Plant and Equipment

 

 

 

 

 

In service

 

24,909

 

29,487

 

Under construction

 

627

 

770

 

Total property, plant and equipment

 

25,536

 

30,257

 

Less accumulated depreciation

 

(6,804

)

(7,890

)

Net property, plant and equipment

 

18,732

 

22,367

 

Other Assets

 

 

 

 

 

Equity investments in affiliates

 

1,045

 

771

 

Notes receivable, less current portion

 

53

 

72

 

Goodwill

 

999

 

2,574

 

Intangible assets, net of accumulated amortization of $1,525 and $1,402

 

2,310

 

2,567

 

Nuclear decommissioning trust fund

 

561

 

585

 

Derivative instruments

 

305

 

480

 

Deferred income taxes

 

167

 

1,580

 

Non-current assets held-for-sale

 

105

 

17

 

Other non-current assets

 

1,214

 

1,045

 

Total other assets

 

6,759

 

9,691

 

Total Assets

 

$

32,882

 

$

40,466

 

 

10



 

NRG ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS (Continued)

 

 

 

As of December 31,

 

 

 

2015

 

2014

 

 

 

(In millions, except share data)

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Current portion of long-term debt and capital leases

 

$

481

 

$

474

 

Accounts payable

 

869

 

1,060

 

Derivative instruments

 

1,721

 

2,054

 

Cash collateral received in support of energy risk management activities

 

106

 

72

 

Accrued interest expense

 

242

 

252

 

Other accrued expenses

 

568

 

553

 

Current liabilities held-for-sale

 

2

 

 

Other current liabilities

 

386

 

394

 

Total current liabilities

 

4,375

 

4,859

 

Other Liabilities

 

 

 

 

 

Long-term debt and capital leases

 

18,983

 

19,701

 

Nuclear decommissioning reserve

 

326

 

310

 

Nuclear decommissioning trust liability

 

283

 

333

 

Postretirement and other benefit obligations

 

588

 

727

 

Deferred income taxes

 

19

 

21

 

Derivative instruments

 

493

 

438

 

Out-of-market contracts, net of accumulated amortization of $664 and $562

 

1,146

 

1,244

 

Non-current liabilities held-for-sale

 

4

 

 

Other non-current liabilities

 

900

 

847

 

Total non-current liabilities

 

22,742

 

23,621

 

Total Liabilities

 

27,117

 

28,480

 

2.822% convertible perpetual preferred stock; $0.01 par value; 250,000 shares issued and outstanding

 

302

 

291

 

Redeemable noncontrolling interest in subsidiaries

 

29

 

19

 

Commitments and Contingencies

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

Common stock; $0.01 par value; 500,000,000 shares authorized; 416,939,950 and 415,506,176 shares issued; and 314,190,042 and 336,662,624 shares outstanding at December 31, 2015 and 2014

 

4

 

4

 

Additional paid-in capital

 

8,296

 

8,327

 

Retained (deficit)/earnings

 

(3,007

)

3,588

 

Less treasury stock, at cost; 102,749,908 and 78,843,552 shares at December 31, 2015 and 2014

 

(2,413

)

(1,983

)

Accumulated other comprehensive loss

 

(173

)

(174

)

Noncontrolling interest

 

2,727

 

1,914

 

Total Stockholders’ Equity

 

5,434

 

11,676

 

Total Liabilities and Stockholders’ Equity

 

$

32,882

 

$

40,466

 

 

11



 

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

For the Year Ended December 31,

 

 

 

2015

 

2014

 

2013

 

 

 

(In millions)

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

Net (loss)/income

 

$

(6,436

)

$

132

 

$

(352

)

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

 

 

 

 

 

 

 

Distributions and equity in earnings of unconsolidated affiliates

 

37

 

49

 

84

 

Depreciation and amortization

 

1,566

 

1,523

 

1,256

 

Provision for bad debts

 

64

 

64

 

67

 

Amortization of nuclear fuel

 

45

 

46

 

36

 

Amortization of financing costs and debt discount/premiums

 

(11

)

(12

)

(33

)

Adjustment to (gain)/loss on debt extinguishment

 

(75

)

25

 

(15

)

Amortization of intangibles and out-of-market contracts

 

81

 

64

 

49

 

Amortization of unearned equity compensation

 

41

 

42

 

38

 

Gain on post retirement benefits curtailment and sales of assets

 

(7

)

(4

)

(3

)

Impairment losses

 

5,086

 

97

 

558

 

Changes in derivative instruments

 

233

 

(61

)

164

 

Changes in deferred income taxes and liability for uncertain tax benefits

 

1,326

 

(154

)

(67

)

Changes in collateral deposits in support of risk management activities

 

(381

)

146

 

(47

)

Changes in nuclear decommissioning trust liability

 

(2

)

19

 

15

 

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

 

 

 

 

 

 

 

Accounts receivable - trade

 

136

 

(2

)

(224

)

Inventory

 

(26

)

(245

)

11

 

Prepayments and other current assets

 

8

 

36

 

25

 

Accounts payable

 

(218

)

(12

)

275

 

Accrued expenses and other current liabilities

 

(9

)

(26

)

(114

)

Other assets and liabilities

 

(149

)

(217

)

(453

)

Net Cash Provided by Operating Activities

 

1,309

 

1,510

 

1,270

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

(31

)

(2,936

)

(494

)

Capital expenditures

 

(1,283

)

(909

)

(1,987

)

Decrease/(increase) in restricted cash, net

 

8

 

57

 

(22

)

Decrease/(increase) in restricted cash to support equity requirements for U.S. DOE funded projects

 

35

 

(206

)

(26

)

Decrease/(increase) in notes receivable

 

18

 

25

 

(11

)

Proceeds from renewable energy grants

 

82

 

916

 

55

 

Purchases of emission allowances, net of proceeds

 

41

 

(16

)

5

 

Investments in nuclear decommissioning trust fund securities

 

(629

)

(619

)

(514

)

Proceeds from sales of nuclear decommissioning trust fund securities

 

631

 

600

 

488

 

Proceeds from sale of assets, net

 

27

 

203

 

13

 

Investments in unconsolidated affiliates

 

(395

)

(103

)

 

Other

 

11

 

85

 

(35

)

Net Cash Used by Investing Activities

 

(1,485

)

(2,903

)

(2,528

)

Cash Flows from Financing Activities

 

 

 

 

 

 

 

Payment of dividends to preferred and common stockholders

 

(201

)

(196

)

(154

)

Net receipts from settlement of acquired derivatives that include financing elements

 

196

 

9

 

267

 

Payment for treasury stock

 

(437

)

(39

)

(25

)

Sales proceeds and other contributions from noncontrolling interests in subsidiaries

 

647

 

819

 

531

 

Proceeds from issuance of common stock

 

1

 

21

 

16

 

Proceeds from issuance of long-term debt

 

1,004

 

4,563

 

1,777

 

Payment of debt issuance and hedging costs

 

(21

)

(67

)

(50

)

Payments for short and long-term debt

 

(1,599

)

(3,827

)

(935

)

Other

 

(22

)

(18

)

 

Net Cash (Used)/Provided by Financing Activities

 

(432

)

1,265

 

1,427

 

Effect of exchange rate changes on cash and cash equivalents

 

10

 

(10

)

(2

)

Net (Decrease)/Increase in Cash and Cash Equivalents

 

(598

)

(138

)

167

 

Cash and Cash Equivalents at Beginning of Period

 

2,116

 

2,254

 

2,087

 

Cash and Cash Equivalents at End of Period

 

$

1,518

 

$

2,116

 

$

2,254

 

 

12



 

Appendix Table A-1: Fourth 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)

 

Home
Retail

 

Home
Solar

 

Business

 

Renew

 

Yield

 

Corp

 

Total

 

Net income/(loss)

 

140

 

(175

)

(4,664

)

(58

)

13

 

(1,614

)

(6,358

)

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

1

 

17

 

25

 

56

 

171

 

270

 

Loss on debt extinguishment

 

 

 

 

 

 

(84

)

(84

)

Income tax

 

 

 

 

(5

)

4

 

1,386

 

1,385

 

Depreciation, amortization and ARO expense

 

29

 

7

 

232

 

55

 

67

 

10

 

400

 

Amortization of contracts

 

1

 

 

(16

)

(1

)

14

 

 

(2

)

EBITDA

 

170

 

(167

)

(4,431

)

16

 

154

 

(131

)

(4,389

)

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

 

4

 

(29

)

23

 

43

 

41

 

Integration & transaction costs

 

1

 

(8

)

11

 

 

1

 

2

 

7

 

Deactivation costs

 

 

 

3

 

 

 

 

3

 

Asset write-offs and impairments

 

 

132

 

4,613

 

32

 

2

 

54

 

4,833

 

NRG Home Solar EBITDA

 

 

43

 

 

 

 

 

43

 

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

 

(27

)

 

108

 

3

 

3

 

 

87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

144

 

 

308

 

22

 

183

 

(32

)

625

 

 

Appendix Table A-2: Fourth Quarter 2014 Adjusted EBITDA Reconciliation by Operating Segment

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

 

($ in millions)

 

Home
Retail

 

Home
Solar

 

Business

 

Renew

 

Yield

 

Corp

 

Total

 

Net (loss)/income

 

(119

)

(37

)

577

 

(73

)

4

 

(255

)

97

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

16

 

35

 

77

 

178

 

306

 

Income tax

 

1

 

 

 

 

(11

)

81

 

71

 

Depreciation amortization and ARO expense

 

29

 

3

 

269

 

59

 

65

 

10

 

435

 

Amortization of contracts

 

1

 

 

(13

)

1

 

8

 

 

(3

)

EBITDA

 

(88

)

(34

)

849

 

22

 

143

 

14

 

906

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

 

4

 

17

 

16

 

(17

)

20

 

Integration & transaction costs, gain on sale

 

3

 

 

(21

)

(4

)

2

 

17

 

(3

)

Deactivation costs

 

 

 

27

 

 

 

 

27

 

Asset write-offs and impairments

 

 

 

11

 

 

 

(9

)

2

 

Legal settlements

 

1

 

 

 

 

 

 

1

 

NRG Home Solar EBITDA

 

 

34

 

 

 

 

 

34

 

MtM losses/(gains) on economic hedges

 

249

 

 

(568

)

(4

)

(2

)

(1

)

(326

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

165

 

 

302

 

31

 

159

 

4

 

661

 

 

13



 

Appendix Table A-3: Full Year 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)

 

Home
Retail

 

Home
Solar

 

Business

 

Renew

 

Yield

 

Corp

 

Total

 

Net income/(loss)

 

652

 

(324

)

(4,472

)

(124

)

55

 

(2,223

)

(6,436

)

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

3

 

69

 

104

 

238

 

702

 

1,116

 

Loss on debt extinguishment

 

 

 

 

 

9

 

(84

)

(75

)

Income tax

 

 

 

1

 

(18

)

12

 

1,347

 

1,342

 

Depreciation, amortization and ARO expense

 

123

 

24

 

939

 

213

 

267

 

34

 

1,600

 

Amortization of contracts

 

1

 

 

(57

)

1

 

54

 

1

 

 

EBITDA

 

776

 

(297

)

(3,520

)

176

 

635

 

(223

)

(2,453

)

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

 

14

 

(47

)

77

 

65

 

109

 

Integration & transaction costs and other non recurring costs

 

(12

)

(8

)

11

 

(3

)

3

 

15

 

6

 

Deactivation costs

 

 

 

11

 

 

 

 

11

 

Asset write-offs and impairments

 

36

 

132

 

4,854

 

42

 

3

 

55

 

5,122

 

NRG Home Solar EBITDA

 

 

173

 

 

 

 

 

173

 

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

 

(61

)

 

428

 

3

 

2

 

 

372

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

739

 

 

1,798

 

171

 

720

 

(88

)

3,340

 

 

Appendix Table A-4: Full Year 2014 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)

 

Home
Retail

 

Home
Solar

 

Business

 

Renew

 

Yield

 

Corp

 

Total

 

Net income/(loss)

 

137

 

(73

)

1,062

 

(147

)

99

 

(946

)

132

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

1

 

1

 

65

 

119

 

189

 

729

 

1,104

 

Loss on debt extinguishment

 

 

 

 

1

 

 

94

 

95

 

Income tax

 

1

 

 

 

 

4

 

(2

)

3

 

Depreciation amortization and ARO expense

 

121

 

7

 

986

 

196

 

204

 

32

 

1,546

 

Amortization of contracts

 

(2

)

 

(32

)

1

 

29

 

 

(4

)

EBITDA

 

258

 

(65

)

2,081

 

170

 

525

 

(93

)

2,876

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

 

8

 

(2

)

55

 

11

 

72

 

Integration & transaction costs, gain on sale

 

4

 

 

(37

)

(4

)

4

 

82

 

49

 

Deactivation costs

 

 

 

42

 

 

 

 

42

 

Asset write-offs and impairments

 

 

 

85

 

12

 

 

 

97

 

Legal settlement

 

5

 

 

 

 

 

 

5

 

NRG Home Solar EBITDA

 

 

65

 

 

 

 

 

65

 

MtM losses/(gains) on economic hedges

 

337

 

 

(343

)

(4

)

(2

)

(1

)

(13

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

604

 

 

1,836

 

172

 

582

 

(1

)

3,193

 

 

14



 

Appendix Table A-5: Full Year 2015 and Full Year 2014 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)

 

Twelve months ended
December 31, 2015

 

Twelve months ended
December 31, 2014

 

Net Cash Provided by Operating Activities

 

$

1,309

 

$

1,510

 

Reclassifying of net receipts (payments) for settlement of acquired derivatives that include financing elements

 

196

 

9

 

Merger and integration expenses

 

21

 

95

 

Return of capital from equity investments

 

38

 

 

Adjustment for change in collateral

 

381

 

(89

)

Adjusted Cash Flow from Operating Activities

 

$

1,945

 

$

1,525

 

Maintenance CapEx, net*

 

(413

)

(254

)

Environmental CapEx, net

 

(237

)

(254

)

Preferred dividends

 

(10

)

(9

)

Distributions to non-controlling interests

 

(158

)

(57

)

Free Cash Flow — before Growth investments

 

$

1,127

 

951

 

 


* Excludes merger and integration CapEx of $15 million in 2015 and $27 million in 2014

 

15



 

Appendix Table A-6: Fourth Quarter 2015 Regional Adjusted EBITDA Reconciliation for NRG Business

 

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

 

($ in millions)

 

East

 

Gulf
Coast

 

West

 

B2B

 

Carbon 360

 

Total

 

Net (loss)/income

 

(170

)

(4,495

)

(19

)

22

 

(2

)

(4,664

)

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

16

 

 

1

 

 

 

17

 

Depreciation, amortization and ARO expense

 

94

 

120

 

13

 

5

 

 

232

 

Amortization of contracts

 

(19

)

(1

)

3

 

1

 

 

(16

)

EBITDA

 

(79

)

(4,376

)

(2

)

28

 

(2

)

(4,431

)

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

3

 

(1

)

1

 

1

 

4

 

Non recurring costs

 

11

 

 

 

 

 

11

 

Deactivation costs

 

3

 

 

 

 

 

3

 

Asset write-offs and impairments

 

224

 

4,380

 

9

 

 

 

4,613

 

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

 

23

 

103

 

3

 

(21

)

 

108

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

182

 

110

 

9

 

8

 

(1

)

308

 

 

Appendix Table A-7: Fourth Quarter 2014 Regional Adjusted EBITDA Reconciliation for NRG 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)

 

467

 

290

 

(26

)

(151

)

(3

)

577

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

16

 

 

 

 

 

16

 

Depreciation amortization and ARO expense

 

92

 

151

 

23

 

3

 

 

269

 

Amortization of contracts

 

(16

)

5

 

(3

)

1

 

 

(13

)

EBITDA

 

559

 

446

 

(6

)

(147

)

(3

)

849

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

17

 

 

(13

)

(1

)

1

 

4

 

Integration & transaction costs, gain on sale

 

1

 

(22

)

 

 

 

(21

)

Deactivation costs

 

4

 

 

23

 

 

 

27

 

Asset write-offs and impairments

 

5

 

3

 

3

 

 

 

11

 

MtM (gains)/losses on economic hedges

 

(359

)

(371

)

6

 

156

 

 

(568

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

227

 

56

 

13

 

8

 

(2

)

302

 

 

16



 

Appendix Table A-8: Full Year 2015 Regional Adjusted EBITDA Reconciliation for NRG Business

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

 

($ in millions)

 

East

 

Gulf
Coast

 

West

 

B2B

 

Carbon 360

 

Total

 

Net (loss)/income

 

(1

)

(4,448

)

11

 

(21

)

(13

)

(4,472

)

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

68

 

 

1

 

 

 

69

 

Income tax expense

 

 

 

 

1

 

 

1

 

Depreciation, amortization and ARO expense

 

314

 

551

 

62

 

12

 

 

939

 

Amortization of contracts

 

(68

)

2

 

3

 

6

 

 

(57

)

EBITDA

 

313

 

(3,895

)

77

 

(2

)

(13

)

(3,520

)

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

3

 

6

 

1

 

4

 

14

 

Non recurring costs

 

11

 

 

 

 

 

11

 

Deactivation costs

 

9

 

 

2

 

 

 

11

 

Asset write-offs and impairments

 

448

 

4,397

 

9

 

 

 

4,854

 

Market to market (MtM) losses on economic hedges

 

276

 

83

 

8

 

61

 

 

428

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

1,057

 

588

 

102

 

60

 

(9

)

1,798

 

 

Appendix Table A-9: Full Year 2014 Regional Adjusted EBITDA Reconciliation for NRG 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)

 

916

 

223

 

89

 

(156

)

(10

)

1,062

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

64

 

(1

)

1

 

1

 

 

65

 

Depreciation amortization and ARO expense

 

303

 

592

 

77

 

13

 

1

 

986

 

Amortization of contracts

 

(50

)

21

 

(9

)

6

 

 

(32

)

EBITDA

 

1,233

 

835

 

158

 

(136

)

(9

)

2,081

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

26

 

1

 

(28

)

2

 

7

 

8

 

Integration & transaction costs, gain on sale

 

8

 

(45

)

 

 

 

(37

)

Deactivation costs

 

14

 

 

28

 

 

 

42

 

Asset write-offs and impairments

 

6

 

76

 

3

 

 

 

85

 

MtM (gains)/losses on economic hedges

 

(43

)

(480

)

10

 

170

 

 

(343

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

1,244

 

387

 

171

 

36

 

(2

)

1,836

 

 

17



 

Appendix Table A-10: Full Year 2015 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity for full year 2015

 

($ in millions)

 

Twelve months ended
December 31, 2015

 

 

 

 

 

Sources:

 

 

 

Adjusted Cash Flow from Operations

 

$

1,945

 

Equity Proceeds, NRG Yield, net of fees

 

599

 

Debt Proceeds, NRG Yield Revolver

 

551

 

Debt Proceeds, NRG Yield Convertible Notes, net of fees

 

288

 

Tax Equity Financing, net of fees

 

119

 

Other investing and financing activities

 

76

 

Debt proceeds, other project debt financing

 

15

 

 

 

 

 

Uses:

 

 

 

Debt Repayments

 

1,195

 

Maintenance and Environmental Capex, net

 

650

 

Growth Investments and Acquisitions, net

 

457

 

Share Repurchases

 

437

 

Debt Repayments, non-discretionary

 

405

 

Collateral Postings

 

381

 

NYLD Investment in Desert Sunlight

 

311

 

Common and Preferred Stock Dividends

 

200

 

Distributions to Non-Controlling Entities

 

158

 

Merger and Integration-related payments

 

34

 

 

 

 

 

Change in Total Liquidity

 

$

(635

)

 

18



 

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.

 

19