Attached files
| file | filename |
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| 8-K - 8-K - NRG ENERGY, INC. | nrg8-kxq22018pr.htm |
Exhibit 99.1
NRG Energy, Inc. Reports Second Quarter 2018 Results
• | Transformation Plan on track with $225 million in cost savings realized through second quarter of 2018, and up to $3 billion in asset sales on track to close in 2018 |
• | Completed $500 million of the previously announced 2018 $1 billion share buyback program |
• | Consummated settlement and obtained releases from GenOn |
PRINCETON, NJ - August 2, 2018 - NRG Energy, Inc. (NYSE: NRG) today reported second quarter 2018 income from continuing operations of $121 million. Income from continuing operations for the first six months of 2018 of $354 million, or $1.18 per diluted common share, compares to a loss from continuing operations of $70 million, or $(0.05) per diluted common share for the first six months of 2017. Adjusted EBITDA for the three and six months ending June 30, 2018, was $843 million and $1,392 million, respectively. Year-to-date cash from continuing operations totaled $524 million.
“Our business performed exceptionally well during the second quarter,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “These results demonstrate the strength of our integrated retail-generation platform. We also remain on track with our Transformation Plan objectives and continue to expect our announced asset sales to close during the second half of the year.”
Consolidated Financial Results
Three Months Ended | Six Months Ended | |||||||||||||||
($ in millions) | 6/30/18 | 6/30/17 | 6/30/18 | 6/30/17 | ||||||||||||
Income/(Loss) from Continuing Operations | $ | 121 | $ | 99 | $ | 354 | $ | (70 | ) | |||||||
Cash From Continuing Operations | $ | 167 | $ | 194 | $ | 524 | $ | 112 | ||||||||
Adjusted EBITDA | $ | 843 | $ | 686 | $ | 1,392 | $ | 1,070 | ||||||||
Free Cash Flow Before Growth Investments (FCFbG) | $ | 259 | $ | 240 | $ | 366 | $ | 208 | ||||||||
1
Segment Results
Table 1: Income/(Loss) from Continuing Operations
($ in millions) | Three Months Ended | Six Months Ended | ||||||||||||||
Segment | 6/30/18 | 6/30/17 | 6/30/18 | 6/30/17 | ||||||||||||
Retail | $ | (84 | ) | $ | 341 | $ | 861 | $ | 311 | |||||||
Generation a | 272 | (90 | ) | (265 | ) | (54 | ) | |||||||||
Renewables b | (12 | ) | (46 | ) | (45 | ) | (77 | ) | ||||||||
NRG Yield b | 96 | 44 | 96 | 42 | ||||||||||||
Corporate | (151 | ) | (150 | ) | (293 | ) | (292 | ) | ||||||||
Income/(Loss) from Continuing Operations | $ | 121 | $ | 99 | $ | 354 | $ | (70 | ) | |||||||
a. In accordance with GAAP, 2017 results have been restated to include full impact of the GenOn deconsolidation
b. In accordance with GAAP, 2017 results have been restated to include full impact of the assets in the NRG Yield Drop Down transactions
Table 2: Adjusted EBITDA
($ in millions) | Three Months Ended | Six Months Ended | ||||||||||||||
Segment | 6/30/18 | 6/30/17 | 6/30/18 | 6/30/17 | ||||||||||||
Retail | $ | 298 | $ | 204 | $ | 486 | $ | 337 | ||||||||
Generation a | 197 | 152 | 344 | 206 | ||||||||||||
Renewables b | 50 | 52 | 81 | 75 | ||||||||||||
NRG Yield b | 303 | 274 | 492 | 460 | ||||||||||||
Corporate | (5 | ) | 4 | (11 | ) | (8 | ) | |||||||||
Adjusted EBITDA c | $ | 843 | $ | 686 | $ | 1,392 | $ | 1,070 | ||||||||
a. In accordance with GAAP, 2017 results have been restated to include full impact of the GenOn deconsolidation
b. In accordance with GAAP, 2017 results have been restated to include full impact of the assets in the NRG Yield Drop Down transactions
c. See Appendices A-1 through A-2 for Operating Segment Reg G reconciliations
Retail: Second quarter Adjusted EBITDA was $298 million, $94 million higher than second quarter 2017 driven by higher gross margins, capacity obligations, favorable weather, higher customer count and usage and lower operating costs.
Generation: Second quarter Adjusted EBITDA was $197 million, $45 million higher than second quarter 2017 driven by:
• | Gulf Coast Region: $29 million increase due to higher realized energy prices, partially offset by higher operating costs due to timing and scope of outages; and |
• | East/West1: $16 million increase due to higher capacity revenues and lower operating costs. |
Renewables: Second quarter Adjusted EBITDA was $50 million, $2 million lower than second quarter 2017 due to the deconsolidation of Ivanpah, partially offset by increased generation from higher wind resources and Buckthorn Wind beginning operations in January of 2018.
NRG Yield: Second quarter Adjusted EBITDA was $303 million, $29 million higher than second quarter 2017 due to higher renewable production, growth in distributed generation partnerships and higher availability at Walnut Creek.
Corporate: Second quarter Adjusted EBITDA was $(5) million, $9 million lower than the second quarter 2017 due to the reduction in shared services revenue from GenOn, partially offset by lower G&A expenses due to Transformation Plan and reduced advisory fees as compared to 2017.
1 Includes International and BETM
2
Liquidity and Capital Resources
Table 3: Corporate Liquidity
($ in millions) | 6/30/18 | 12/31/17 | ||||||
Cash at NRG-Level a | $ | 632 | $ | 769 | ||||
Revolver Availability | 1,222 | 1,711 | ||||||
NRG-Level Liquidity | $ | 1,854 | $ | 2,480 | ||||
Restricted Cash | 286 | 508 | ||||||
Cash at Non-Guarantor Subsidiaries | 348 | 222 | ||||||
Total Liquidity | $ | 2,488 | $ | 3,210 | ||||
a. Includes unrestricted cash held at Midwest Generation (a non-guarantor subsidiary), which can be distributed to NRG without limitation
As of June 30, 2018, NRG-Level cash was at $632 million and $1.2 billion was available under the Company’s credit facilities at the end of the second quarter 2018. Total liquidity was $2.5 billion, including restricted cash and cash at non-guarantor subsidiaries. Overall liquidity as of the end of the second quarter was $722 million lower than at the end of 2017.
NRG Strategic Developments
Transformation Plan
Through the second quarter of 2018, NRG realized $225 million of its 2018 cost savings target as part of the previously announced Transformation Plan. With respect to the asset sales under the Transformation Plan, NRG continues to expect up to $3.2 billion of cash proceeds, with a majority of those proceeds coming from transactions announced earlier this year and on track to close in 2018.
Retail Acquisition
On June 1, 2018, NRG closed on the acquisition of retail provider XOOM Energy, LLC for $208 million2, representing an incremental $11 million of net income and $45 million of Adjusted EBITDA on an annualized basis. XOOM Energy is an electricity and natural gas provider with over 300,000 customers, primarily in the East region.
Canal 3 Sale
On June 29, 2018, NRG closed the sale of Canal 3 to Stonepeak Kestrel Holdings II LLC, realizing a $17 million gain in continuing operations. As a result, and as previously announced, the project financing and sale resulted in $133 million3 of proceeds which have been included in our 2018 capital available for allocation.
BETM Sale
On August 1, 2018, NRG closed on the sale of Boston Energy Trading and Marketing LLC (BETM) to Diamond Generating Corporation, a subsidiary of Mitsubishi Corporation, for $70 million.4
GenOn Update
In July 2018, NRG consummated a settlement with GenOn, which provided that certain payments contemplated by the Restructuring Support Agreement were accelerated and paid in July. The Company paid GenOn approximately $125 million in July 2018, which included (i) the settlement consideration of $261 million, (ii) the transition services credit of $28 million and (iii) the return of $15 million of collateral posted to NRG; offset by the (i) $151 million in borrowings under the intercompany secured revolving credit facility, (ii) related accrued interest and fees of $12 million, (iii) remaining payments due under the transition services agreement of $10 million and (iv) certain other balances due to NRG totaling $6 million. As of June 30, 2018, the Company had reserved for all amounts deemed to be uncollectible. Other than certain pension and postretirement obligations and certain REMA claims for which GenOn has posted collateral, the settlement provides NRG full releases from GenOn and its debtor and non debtor subsidiaries other than REMA. GenOn expects to emerge from Bankruptcy on October 1, 2018.
2 Includes transaction costs and working capital adjustments of $43 million
3 Represents $151 million of financing proceeds distributed to NRG plus $16 million of sale proceeds less $13.5 million cost for Canal option repaid to GenOn and $21 million of incremental CapEx costs than originally guided (original 2018 growth investment guidance assumed $103 million of CapEx spend at Canal 3; actual spend through closing of the sale of Canal 3 was $124 million)
3
4 Excludes working capital adjustments
Ivanpah Deconsolidation
The Company owns a 54.6% interest in the Ivanpah project, consisting of three solar electric generating projects with a total capacity of 392 MW. As the majority shareholder, NRG consolidated 100% of Ivanpah. On May 9, 2018, the project owners and the DOE agreed to amend the project's credit agreement in which a release of reserve funds by the DOE was used to make equity distributions to the partners and make a partial prepayment on the outstanding debt, along with the amendment of certain of Ivanpah's governing documents. These events caused NRG to deem Ivanpah a variable interest entity (VIE) and deconsolidate the entity and treat it as an equity method investment going forward. The deconsolidation reduced net property, plant, and equipment by $1.1 billion and reduced debt by $1.1 billion.
2018 Guidance
NRG is maintaining its guidance for 2018 with respect to Consolidated Adjusted EBITDA, Cash from Operations, and FCFbG as set forth below.
Table 4: 2018 Adjusted EBITDA, Cash from Operations, and FCF before Growth Investments Guidance
2018 | |
($ in millions) | Guidance Range |
Adjusted EBITDA a | $2,800 - $3,000 |
Cash From Operations | $2,015 - $2,215 |
Free Cash Flow Before Growth Investments (FCFbG) | $1,550 - $1,750 |
a. 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
On July 18, 2018, NRG declared a quarterly dividend on the company's common stock of $0.03 per share, payable August 15, 2018, to stockholders of record as of August 1, 2018, representing $0.12 on an annualized basis.
In connection with the $1 billion share repurchase authorization, NRG repurchased 15.7 million shares of its common stock for $500 million at an average cost of $31.80 per share through the first half of 2018. NRG expects to launch the remaining $500 million of the share buyback program following closing of the NRG Yield and Renewables or South Central transactions.
During the second quarter of 2018, NRG issued $575 million of 2.75% convertible senior notes due 2048. NRG intends to use cash on hand and the proceeds from the offering to repay $575 million of its outstanding indebtedness and, as a result, the convertible notes offering is expected to be leverage neutral while generating approximately $20 million of annual interest expense savings5. Since this offering, NRG has repurchased a total of $89 million of its 2022, 2027 and 2028 senior unsecured notes in the open market and on August 1, 2018, NRG issued notice to repurchase $486 million of its 2022 callable bonds.
Also, as previously announced, NRG intends to reduce corporate debt by an additional $640 million in the second half of 2018, and is temporarily reserving $1,065 million of additional cash to achieve its 3.0x corporate net debt to Adjusted EBITDA ratio as part of the capital allocation guidance.
The Company’s common stock dividend, debt reduction and share repurchases are subject to available capital, market conditions and compliance with associated laws and regulations.
4
5 Interest savings assumes average 6.2% interest rate on $575 million debt retired in 2018
Earnings Conference Call
On August 2, 2018, NRG will host a conference call at 8:00 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 companywide 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, risks related to project siting, financing, construction, permitting, government approvals and the negotiation of project development agreements, our ability to progress development pipeline projects, 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, our ability to close the Drop Down transactions with NRG Yield, 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 August 2, 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.
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Contacts:
Media: | Investors: | ||
Marijke Shugrue | Kevin L. Cole, CFA | ||
609.524.5262 | 609.524.4526 | ||
6
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(In millions, except for per share amounts) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Operating Revenues | |||||||||||||||
Total operating revenues | $ | 2,922 | $ | 2,701 | $ | 5,343 | $ | 5,083 | |||||||
Operating Costs and Expenses | |||||||||||||||
Cost of operations | 2,051 | 1,841 | 3,609 | 3,704 | |||||||||||
Depreciation and amortization | 227 | 260 | 462 | 517 | |||||||||||
Impairment losses | 74 | 63 | 74 | 63 | |||||||||||
Selling, general and administrative | 211 | 221 | 402 | 481 | |||||||||||
Reorganization costs | 23 | — | 43 | — | |||||||||||
Development costs | 16 | 18 | 29 | 35 | |||||||||||
Total operating costs and expenses | 2,602 | 2,403 | 4,619 | 4,800 | |||||||||||
Other income - affiliate | — | 39 | — | 87 | |||||||||||
Gain on sale of assets | 14 | 2 | 16 | 4 | |||||||||||
Operating Income | 334 | 339 | 740 | 374 | |||||||||||
Other Income/(Expense) | |||||||||||||||
Equity in earnings/(losses) of unconsolidated affiliates | 18 | (3 | ) | 16 | 2 | ||||||||||
Other income/(expense), net | (20 | ) | 14 | (23 | ) | 26 | |||||||||
Loss on debt extinguishment, net | (1 | ) | — | (3 | ) | (2 | ) | ||||||||
Interest expense | (202 | ) | (247 | ) | (369 | ) | (471 | ) | |||||||
Total other expense | (205 | ) | (236 | ) | (379 | ) | (445 | ) | |||||||
Income/(Loss) from Continuing Operations Before Income Taxes | 129 | 103 | 361 | (71 | ) | ||||||||||
Income tax expense/(benefit) | 8 | 4 | 7 | (1 | ) | ||||||||||
Income/(Loss) from Continuing Operations | 121 | 99 | 354 | (70 | ) | ||||||||||
Loss from discontinued operations, net of income tax | (25 | ) | (741 | ) | (25 | ) | (775 | ) | |||||||
Net Income/(Loss) | 96 | (642 | ) | 329 | (845 | ) | |||||||||
Less: Net income/(loss) attributable to noncontrolling interest and redeemable noncontrolling interests | 24 | (16 | ) | (22 | ) | (55 | ) | ||||||||
Net Income/(Loss) Attributable to NRG Energy, Inc. | $ | 72 | $ | (626 | ) | $ | 351 | $ | (790 | ) | |||||
Earnings/(Loss) per Share Attributable to NRG Energy, Inc. Common Stockholders | |||||||||||||||
Weighted average number of common shares outstanding — basic | 310 | 316 | 314 | 316 | |||||||||||
Income/(loss) from continuing operations per weighted average common share — basic | $ | 0.31 | $ | 0.36 | $ | 1.20 | $ | (0.05 | ) | ||||||
Income/(loss) from discontinued operations per weighted average common share — basic | $ | (0.08 | ) | $ | (2.34 | ) | $ | (0.08 | ) | $ | (2.45 | ) | |||
Earnings/(Loss) per Weighted Average Common Share — Basic | $ | 0.23 | $ | (1.98 | ) | $ | 1.12 | $ | (2.50 | ) | |||||
Weighted average number of common shares outstanding — diluted | 314 | 316 | 318 | 316 | |||||||||||
Income/(loss) from continuing operations per weighted average common share — diluted | $ | 0.31 | $ | 0.36 | $ | 1.18 | $ | (0.05 | ) | ||||||
Income/(loss) from discontinued operations per weighted average common share — diluted | $ | (0.08 | ) | $ | (2.34 | ) | $ | (0.08 | ) | $ | (2.45 | ) | |||
Earnings/(Loss) per Weighted Average Common Share — Diluted | $ | 0.23 | $ | (1.98 | ) | $ | 1.10 | $ | (2.50 | ) | |||||
Dividends Per Common Share | $ | 0.03 | $ | 0.03 | $ | 0.06 | $ | 0.06 | |||||||
7
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(In millions) | |||||||||||||||
Net income/(loss) | $ | 96 | $ | (642 | ) | $ | 329 | $ | (845 | ) | |||||
Other comprehensive income/(loss), net of tax | |||||||||||||||
Unrealized gain/(loss) on derivatives, net of income tax expense of $0, $0, $0, and $1 | 5 | (5 | ) | 19 | (1 | ) | |||||||||
Foreign currency translation adjustments, net of income tax expense of $0, $0, $0, and $0 | (4 | ) | 1 | (6 | ) | 8 | |||||||||
Available-for-sale securities, net of income tax expense of $0, $0, $0, and $0 | 1 | 1 | 1 | 1 | |||||||||||
Defined benefit plans, net of income tax expense of $0, $0, $0, and $0 | (1 | ) | 27 | (2 | ) | 27 | |||||||||
Other comprehensive income | 1 | 24 | 12 | 35 | |||||||||||
Comprehensive income/(loss) | 97 | (618 | ) | 341 | (810 | ) | |||||||||
Less: Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interest | 26 | (17 | ) | (12 | ) | (56 | ) | ||||||||
Comprehensive income/(loss) attributable to NRG Energy, Inc. | 71 | (601 | ) | 353 | (754 | ) | |||||||||
Comprehensive income/(loss) available for common stockholders | $ | 71 | $ | (601 | ) | $ | 353 | $ | (754 | ) | |||||
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2018 | December 31, 2017 | ||||||
(In millions, except shares) | (Unaudited) | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 980 | $ | 991 | |||
Funds deposited by counterparties | 71 | 37 | |||||
Restricted cash | 286 | 508 | |||||
Accounts receivable, net | 1,371 | 1,079 | |||||
Inventory | 485 | 532 | |||||
Derivative instruments | 851 | 626 | |||||
Cash collateral paid in support of energy risk management activities | 224 | 171 | |||||
Accounts receivable - affiliate | 57 | 95 | |||||
Current assets - held for sale | 100 | 115 | |||||
Prepayments and other current assets | 328 | 261 | |||||
Total current assets | 4,753 | 4,415 | |||||
Property, plant and equipment, net | 12,774 | 13,908 | |||||
Other Assets | |||||||
Equity investments in affiliates | 1,055 | 1,038 | |||||
Notes receivable, less current portion | 15 | 2 | |||||
Goodwill | 539 | 539 | |||||
Intangible assets, net | 1,860 | 1,746 | |||||
Nuclear decommissioning trust fund | 694 | 692 | |||||
Derivative instruments | 426 | 172 | |||||
Deferred income taxes | 126 | 134 | |||||
Non-current assets held-for-sale | 50 | 43 | |||||
Other non-current assets | 655 | 629 | |||||
Total other assets | 5,420 | 4,995 | |||||
Total Assets | $ | 22,947 | $ | 23,318 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities | |||||||
Current portion of long-term debt and capital leases | $ | 952 | $ | 688 | |||
Accounts payable | 975 | 881 | |||||
Accounts payable - affiliate | 29 | 33 | |||||
Derivative instruments | 709 | 555 | |||||
Cash collateral received in support of energy risk management activities | 72 | 37 | |||||
Current liabilities held-for-sale | 74 | 72 | |||||
Accrued expenses and other current liabilities | 719 | 890 | |||||
Accrued expenses and other current liabilities - affiliate | 133 | 161 | |||||
Total current liabilities | 3,663 | 3,317 | |||||
Other Liabilities | |||||||
Long-term debt and capital leases | 14,821 | 15,716 | |||||
Nuclear decommissioning reserve | 274 | 269 | |||||
Nuclear decommissioning trust liability | 410 | 415 | |||||
Deferred income taxes | 17 | 21 | |||||
Derivative instruments | 285 | 197 | |||||
Out-of-market contracts, net | 195 | 207 | |||||
Non-current liabilities held-for-sale | 12 | 8 | |||||
Other non-current liabilities | 1,130 | 1,122 | |||||
Total non-current liabilities | 17,144 | 17,955 | |||||
Total Liabilities | 20,807 | 21,272 | |||||
Redeemable noncontrolling interest in subsidiaries | 69 | 78 | |||||
Commitments and Contingencies | |||||||
Stockholders’ Equity | |||||||
Common stock | 4 | 4 | |||||
Additional paid-in capital | 8,481 | 8,376 | |||||
Accumulated deficit | (5,920 | ) | (6,268 | ) | |||
Less treasury stock, at cost — 116,267,484 and 101,580,045 shares, at June 30, 2018 and December 31, 2017, respectively | (2,871 | ) | (2,386 | ) | |||
Accumulated other comprehensive loss | (60 | ) | (72 | ) | |||
Noncontrolling interest | 2,437 | 2,314 | |||||
Total Stockholders’ Equity | 2,071 | 1,968 | |||||
Total Liabilities and Stockholders’ Equity | $ | 22,947 | $ | 23,318 | |||
9
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30, | |||||||
(In millions) | 2018 | 2017 | |||||
Cash Flows from Operating Activities | |||||||
Net income/(loss) | $ | 329 | $ | (845 | ) | ||
Loss from discontinued operations, net of income tax | (25 | ) | (775 | ) | |||
Income/(loss) from continuing operations | 354 | (70 | ) | ||||
Adjustments to reconcile net income to net cash provided/(used) by operating activities: | |||||||
Distributions and equity in earnings of unconsolidated affiliates | 27 | 26 | |||||
Depreciation, amortization and accretion | 485 | 517 | |||||
Provision for bad debts | 31 | 18 | |||||
Amortization of nuclear fuel | 24 | 24 | |||||
Amortization of financing costs and debt discount/premiums | 27 | 29 | |||||
Adjustment for debt extinguishment | 3 | — | |||||
Amortization of intangibles and out-of-market contracts | 48 | 51 | |||||
Amortization of unearned equity compensation | 26 | 16 | |||||
Impairment losses | 89 | 63 | |||||
Changes in deferred income taxes and liability for uncertain tax benefits | 4 | 8 | |||||
Changes in nuclear decommissioning trust liability | 41 | 2 | |||||
Changes in derivative instruments | (211 | ) | 7 | ||||
Changes in collateral deposits in support of energy risk management activities | (18 | ) | (189 | ) | |||
Gain on sale of emission allowances | (11 | ) | 11 | ||||
Gain on sale of assets | (16 | ) | (22 | ) | |||
Loss on deconsolidation of business | 22 | — | |||||
Changes in other working capital | (401 | ) | (379 | ) | |||
Cash provided by continuing operations | 524 | 112 | |||||
Cash used by discontinued operations | — | (38 | ) | ||||
Net Cash Provided by Operating Activities | 524 | 74 | |||||
Cash Flows from Investing Activities | |||||||
Acquisitions of businesses, net of cash acquired | (284 | ) | (16 | ) | |||
Capital expenditures | (691 | ) | (542 | ) | |||
Decrease in notes receivable | 4 | 8 | |||||
Purchases of emission allowances | (22 | ) | (30 | ) | |||
Proceeds from sale of emission allowances | 34 | 59 | |||||
Investments in nuclear decommissioning trust fund securities | (346 | ) | (279 | ) | |||
Proceeds from the sale of nuclear decommissioning trust fund securities | 303 | 277 | |||||
Proceeds from renewable energy grants and state rebates | — | 8 | |||||
Proceeds from sale of assets, net of cash disposed of | 18 | 35 | |||||
Deconsolidation of business | (160 | ) | — | ||||
Changes in investments in unconsolidated affiliates | (2 | ) | (30 | ) | |||
Other | — | 18 | |||||
Cash used by continuing operations | (1,146 | ) | (492 | ) | |||
Cash used by discontinued operations | — | (53 | ) | ||||
Net Cash Used by Investing Activities | (1,146 | ) | (545 | ) | |||
Cash Flows from Financing Activities | |||||||
Payment of dividends to common and preferred stockholders | (19 | ) | (19 | ) | |||
Payment for treasury stock | (500 | ) | — | ||||
Net receipts from settlement of acquired derivatives that include financing elements | — | 2 | |||||
Proceeds from issuance of stock | — | — | |||||
Proceeds from issuance of long-term debt | 1,605 | 946 | |||||
Payments for short and long-term debt | (848 | ) | (530 | ) | |||
Increase in notes receivable from affiliate | — | (125 | ) | ||||
Net contributions from noncontrolling interests in subsidiaries | 222 | 14 | |||||
Payment of debt issuance costs | (37 | ) | (36 | ) | |||
Other - contingent consideration | — | (10 | ) | ||||
Cash provided by continuing operations | 423 | 242 | |||||
Cash used by discontinued operations | — | (224 | ) | ||||
Net Cash Provided by Financing Activities | 423 | 18 | |||||
Effect of exchange rate changes on cash and cash equivalents | — | (8 | ) | ||||
Change in Cash from discontinued operations | — | (315 | ) | ||||
Net Decrease in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash | (199 | ) | (146 | ) | |||
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period | 1,536 | 1,386 | |||||
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period | $ | 1,337 | $ | 1,240 | |||
10
Appendix Table A-1: Second 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 | Renewables | NRG Yield | Corp/Elim | Total | ||||||||
Income/(Loss) from Continuing Operations | 305 | (33 | ) | 272 | (84 | ) | (12 | ) | 96 | (151 | ) | 121 | ||||
Plus: | ||||||||||||||||
Interest expense, net | — | 7 | 7 | 1 | 14 | 70 | 105 | 197 | ||||||||
Income tax | — | — | — | — | (5 | ) | 7 | 6 | 8 | |||||||
Loss on debt extinguishment | — | — | — | — | — | — | 1 | 1 | ||||||||
Depreciation and amortization | 43 | 23 | 66 | 31 | 40 | 82 | 8 | 227 | ||||||||
ARO Expense | 4 | 4 | 8 | — | 1 | 1 | 1 | 11 | ||||||||
Contract amortization | 3 | — | 3 | — | — | 18 | — | 21 | ||||||||
Lease amortization | — | (2 | ) | (2 | ) | — | — | — | — | (2 | ) | |||||
EBITDA | 355 | (1 | ) | 354 | (52 | ) | 38 | 274 | (30 | ) | 584 | |||||
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 3 | 5 | 8 | (6 | ) | 4 | 33 | 2 | 41 | |||||||
Acquisition-related transaction & integration costs | — | — | — | 1 | — | 1 | — | 2 | ||||||||
Reorganization costs | 2 | 1 | 3 | 1 | 3 | — | 16 | 23 | ||||||||
Deactivation costs | — | 7 | 7 | — | — | — | 3 | 10 | ||||||||
Gain on sale of assets | — | — | — | — | — | — | (14 | ) | (14 | ) | ||||||
Other non recurring charges | 19 | 2 | 21 | 8 | 10 | (5 | ) | 18 | 52 | |||||||
Impairments | — | 74 | 74 | — | — | — | — | 74 | ||||||||
Mark to market (MtM) (gains)/losses on economic hedges | (285 | ) | 15 | (270 | ) | 346 | (5 | ) | — | — | 71 | |||||
Adjusted EBITDA | 94 | 103 | 197 | 298 | 50 | 303 | (5 | ) | 843 | |||||||
1 Includes International, BETM and generation eliminations
Second Quarter 2018 condensed financial information by Operating Segment:
($ in millions) | Gulf Coast | East/West1 | Generation | Retail | Renewables | NRG Yield | Corp/Elim | Total | ||||||||
Operating revenues | 618 | 322 | 940 | 1,817 | 108 | 325 | (269 | ) | 2,921 | |||||||
Cost of sales | 341 | 91 | 432 | 1,319 | 2 | 17 | (255 | ) | 1,515 | |||||||
Economic gross margin | 277 | 231 | 508 | 498 | 106 | 308 | (14 | ) | 1,406 | |||||||
Operations & maintenance and other cost of operations 2 | 176 | 110 | 286 | 75 | 29 | 58 | (14 | ) | 434 | |||||||
Selling, marketing, general and administrative | 30 | 25 | 55 | 126 | 12 | 7 | 11 | 211 | ||||||||
Other expense/(income) 3 | (23 | ) | (7 | ) | (30 | ) | (1 | ) | 15 | (60 | ) | (6 | ) | (82 | ) | |
Adjusted EBITDA | 94 | 103 | 197 | 298 | 50 | 303 | (5 | ) | 843 | |||||||
1 Includes International, BETM and generation eliminations
2 Excludes deactivation costs of $10 million
3 Excludes gain on sale of assets of $14 million, acquisition-related transaction & integration costs of $2 million, reorganization costs of $23 million and loss on debt extinguishment of $1 million
11
The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions) | Condensed financial information | Interest, tax, depr., amort. | MtM | Deactivation | Other adj. | Adjusted EBITDA | ||||||
Operating revenues | 2,922 | 14 | (15 | ) | — | — | 2,921 | |||||
Cost of operations | 1,608 | (7 | ) | (86 | ) | — | — | 1,515 | ||||
Gross margin | 1,314 | 21 | 71 | — | — | 1,406 | ||||||
Operations & maintenance and other cost of operations | 444 | — | — | (10 | ) | — | 434 | |||||
Selling, marketing, general & administrative | 211 | — | — | — | — | 211 | ||||||
Other expense/(income) 1 | 538 | (441 | ) | — | — | (179 | ) | (82 | ) | |||
Income/(Loss) from Continuing Operations | 121 | 462 | 71 | 10 | 179 | 843 | ||||||
1 Other adj. includes gain on sale of assets of $14 million, acquisition-related transaction & integration costs of $2 million, reorganization costs of $23 million and loss on debt extinguishment of $1 million
12
Appendix Table A-2: Second Quarter 2017 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to income/(loss) from continuing operations:
($ in millions) | Gulf Coast | East/West1 | Generation | Retail | Renewables | NRG Yield | Corp/Elim | Total | ||||||||
Income/(Loss) from Continuing Operations | (148 | ) | 58 | (90 | ) | 341 | (46 | ) | 44 | (150 | ) | 99 | ||||
Plus: | ||||||||||||||||
Interest expense, net | — | 8 | 8 | 1 | 25 | 88 | 123 | 245 | ||||||||
Income tax | — | 2 | 2 | (12 | ) | (5 | ) | 8 | 11 | 4 | ||||||
Depreciation and amortization | 68 | 27 | 95 | 29 | 49 | 79 | 8 | 260 | ||||||||
ARO Expense | 4 | 2 | 6 | — | — | 1 | — | 7 | ||||||||
Contract amortization | 4 | 1 | 5 | — | — | 17 | — | 22 | ||||||||
Lease amortization | — | (2 | ) | (2 | ) | — | — | — | — | (2 | ) | |||||
EBITDA | (72 | ) | 96 | 24 | 359 | 23 | 237 | (8 | ) | 635 | ||||||
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 15 | 5 | 20 | (3 | ) | (5 | ) | 34 | 1 | 47 | ||||||
Acquisition-related transaction & integration costs | — | — | — | — | — | 1 | — | 1 | ||||||||
Deactivation costs | — | (1 | ) | (1 | ) | — | — | — | 4 | 3 | ||||||
Other non recurring charges | (25 | ) | (1 | ) | (26 | ) | 4 | 9 | 2 | 7 | (4 | ) | ||||
Impairments | 42 | (1 | ) | 41 | — | 22 | — | — | 63 | |||||||
Mark to market (MtM) (gains)/losses on economic hedges | 105 | (11 | ) | 94 | (156 | ) | 3 | — | — | (59 | ) | |||||
Adjusted EBITDA | 65 | 87 | 152 | 204 | 52 | 274 | 4 | 686 | ||||||||
1 Includes International, BETM and generation eliminations
Second Quarter 2017 condensed financial information by Operating Segment:
($ in millions) | Gulf Coast | East/West1 | Generation | Retail | Renewables | NRG Yield | Corp/Elim | Total | ||||||||
Operating revenues | 607 | 349 | 956 | 1,605 | 122 | 305 | (314 | ) | 2,674 | |||||||
Cost of sales | 363 | 134 | 497 | 1,213 | 3 | 14 | (305 | ) | 1,422 | |||||||
Economic gross margin | 244 | 215 | 459 | 392 | 119 | 291 | (9 | ) | 1,252 | |||||||
Operations & maintenance and other cost of operations 2 | 128 | 121 | 249 | 81 | 39 | 63 | (6 | ) | 426 | |||||||
Selling, marketing, general & administrative | 28 | 24 | 52 | 106 | 14 | 7 | 42 | 221 | ||||||||
Other expense/(income) 3 | 23 | (17 | ) | 6 | 1 | 14 | (53 | ) | (49 | ) | (81 | ) | ||||
Adjusted EBITDA | 65 | 87 | 152 | 204 | 52 | 274 | 4 | 686 | ||||||||
1 Includes International, BETM and generation eliminations
2 Excludes deactivation costs of $3 million
3 Excludes acquisition-related transaction & integration costs of $1 million
13
The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions) | Condensed financial information | Interest, tax, depr., amort. | MtM | Deactivation | Other adj. | Adjusted EBITDA | ||||||
Operating revenues | 2,701 | 14 | (41 | ) | — | — | 2,674 | |||||
Cost of operations | 1,412 | (8 | ) | 18 | — | — | 1,422 | |||||
Gross margin | 1,289 | 22 | (59 | ) | — | — | 1,252 | |||||
Operations & maintenance and other cost of operations | 429 | — | — | (3 | ) | — | 426 | |||||
Selling, marketing, general & administrative | 221 | — | — | — | — | 221 | ||||||
Other expense/(income) 1 | 540 | (514 | ) | — | — | (107 | ) | (81 | ) | |||
Income/(Loss) from Continuing Operations | 99 | 536 | (59 | ) | 3 | 107 | 686 | |||||
1 Other adj. includes acquisition-related transaction & integration costs of $1 million
14
Appendix Table A-3: YTD Second Quarter 2018 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to income/(loss) from continuing operations:
($ in millions) | Gulf Coast | East/West1 | Generation | Retail | Renewables | NRG Yield | Corp/Elim | Total | ||||||||
Income/(Loss) from Continuing Operations | (261 | ) | (4 | ) | (265 | ) | 861 | (45 | ) | 96 | (293 | ) | 354 | |||
Plus: | ||||||||||||||||
Interest expense, net | — | 10 | 10 | 2 | 28 | 124 | 196 | 360 | ||||||||
Income tax | — | — | — | — | (11 | ) | 6 | 12 | 7 | |||||||
Loss on debt extinguishment | — | — | — | — | — | — | 3 | 3 | ||||||||
Depreciation and amortization | 86 | 47 | 133 | 59 | 90 | 163 | 17 | 462 | ||||||||
ARO Expense | 11 | 8 | 19 | 2 | 2 | 2 | (2 | ) | 23 | |||||||
Contract Amortization | 5 | 1 | 6 | — | — | 35 | — | 41 | ||||||||
Lease amortization | — | (5 | ) | (5 | ) | — | — | — | 1 | (4 | ) | |||||
EBITDA | (159 | ) | 57 | (102 | ) | 924 | 64 | 426 | (66 | ) | 1,246 | |||||
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 2 | 12 | 14 | (12 | ) | 7 | 67 | — | 76 | |||||||
Acquisition-related transaction & integration costs | — | — | — | 3 | — | 2 | 1 | 6 | ||||||||
Reorganization costs | 4 | 3 | 7 | 4 | 3 | — | 29 | 43 | ||||||||
Deactivation costs | — | 10 | 10 | — | — | — | 6 | 16 | ||||||||
Gain on sale of business | — | — | — | — | 1 | — | (14 | ) | (13 | ) | ||||||
Other non recurring charges | 26 | 5 | 31 | 7 | 1 | (3 | ) | 33 | 69 | |||||||
Impairments | — | 74 | 74 | — | — | — | — | 74 | ||||||||
Market to market (MtM) (gains)/losses on economic hedges | 282 | 28 | 310 | (440 | ) | 5 | — | — | (125 | ) | ||||||
Adjusted EBITDA | 155 | 189 | 344 | 486 | 81 | 492 | (11 | ) | 1,392 | |||||||
1 Includes International, BETM and generation eliminations
YTD Second Quarter 2018 condensed financial information by Operating Segment:
($ in millions) | Gulf Coast | East/West1 | Generation | Retail | Renewables | NRG Yield | Corp/Elim | Total | ||||||||
Operating revenues | 1,142 | 696 | 1,838 | 3,304 | 204 | 567 | (451 | ) | 5,462 | |||||||
Cost of sales | 618 | 242 | 860 | 2,427 | 5 | 37 | (421 | ) | 2,908 | |||||||
Economic gross margin | 524 | 454 | 978 | 877 | 199 | 530 | (30 | ) | 2,554 | |||||||
Operations & maintenance and other cost of operations 2 | 353 | 227 | 580 | 147 | 64 | 127 | (30 | ) | 888 | |||||||
Selling, marketing, general & administrative | 59 | 47 | 106 | 241 | 22 | 13 | 20 | 402 | ||||||||
Other expense/(income) 3 | (43 | ) | (9 | ) | (52 | ) | 3 | 32 | (102 | ) | (9 | ) | (128 | ) | ||
Adjusted EBITDA | 155 | 189 | 344 | 486 | 81 | 492 | (11 | ) | 1,392 | |||||||
1 Includes International, BETM and generation eliminations
2 Excludes deactivation costs of $16 million
3 Excludes gain on sale of assets of $13 million, acquisition-related transaction & integration costs of $6 million, reorganization costs of $43 million and loss on debt extinguishment of $3 million
15
The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions) | Condensed financial information | Interest, tax, depr., amort. | MtM | Deactivation | Other adj. | Adjusted EBITDA | ||||||
Operating revenues | 5,343 | 28 | 91 | — | — | 5,462 | ||||||
Cost of operations | 2,705 | (13 | ) | 216 | — | — | 2,908 | |||||
Gross margin | 2,638 | 41 | (125 | ) | — | — | 2,554 | |||||
Operations & maintenance and other cost of operations | 904 | — | — | (16 | ) | — | 888 | |||||
Selling, marketing, general & administrative | 402 | — | — | — | — | 402 | ||||||
Other expense/(income) 1 | 978 | (848 | ) | — | — | (258 | ) | (128 | ) | |||
Income/(Loss) from Continuing Operations | 354 | 889 | (125 | ) | 16 | 258 | 1,392 | |||||
1 Other adj. includes gain on sale of assets of $13 million, acquisition-related transaction & integration costs of $6 million, reorganization costs of $43 million and loss on debt extinguishment of $3 million
16
Appendix Table A-4: YTD Second Quarter 2017 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to income/(loss) from continuing operations:
($ in millions) | Gulf Coast | East/West1 | Generation | Retail | Renewables | NRG Yield | Corp/Elim | Total | ||||||||
Income/(Loss) from Continuing Operations | (105 | ) | 51 | (54 | ) | 311 | (77 | ) | 42 | (292 | ) | (70 | ) | |||
Plus: | ||||||||||||||||
Interest expense, net | — | 17 | 17 | 3 | 48 | 163 | 235 | 466 | ||||||||
Income tax | — | 2 | 2 | (9 | ) | (10 | ) | 7 | 9 | (1 | ) | |||||
Loss on debt extinguishment | — | — | — | — | — | 2 | — | 2 | ||||||||
Depreciation and amortization | 138 | 54 | 192 | 57 | 96 | 156 | 16 | 517 | ||||||||
ARO Expense | 7 | 6 | 13 | — | 1 | 2 | — | 16 | ||||||||
Contract Amortization | 8 | 2 | 10 | 1 | — | 34 | — | 45 | ||||||||
Lease amortization | (1 | ) | (4 | ) | (5 | ) | — | — | — | 1 | (4 | ) | ||||
EBITDA | 47 | 128 | 175 | 363 | 58 | 406 | (31 | ) | 971 | |||||||
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 21 | 12 | 33 | (6 | ) | (10 | ) | 47 | 1 | 65 | ||||||
Acquisition-related transaction & integration costs | — | — | — | — | — | 2 | (1 | ) | 1 | |||||||
Deactivation costs | — | 1 | 1 | — | — | — | 4 | 5 | ||||||||
Other non recurring charges | (23 | ) | (3 | ) | (26 | ) | — | 8 | 5 | 19 | 6 | |||||
Impairments | 42 | (1 | ) | 41 | — | 22 | — | — | 63 | |||||||
MtM (gains)/losses on economic hedges | (17 | ) | (1 | ) | (18 | ) | (20 | ) | (3 | ) | — | — | (41 | ) | ||
Adjusted EBITDA | 70 | 136 | 206 | 337 | 75 | 460 | (8 | ) | 1,070 | |||||||
1 Includes International, BETM and generation eliminations
YTD Second Quarter 2017 condensed financial information by Operating Segment:
($ in millions) | Gulf Coast | East/West1 | Generation | Retail | Renewables | NRG Yield | Corp/Elim | Total | ||||||||
Operating revenues | 1,103 | 694 | 1,797 | 2,939 | 210 | 543 | (536 | ) | 4,953 | |||||||
Cost of sales | 655 | 294 | 949 | 2,211 | 7 | 30 | (514 | ) | 2,683 | |||||||
Economic gross margin | 448 | 400 | 848 | 728 | 203 | 513 | (22 | ) | 2,270 | |||||||
Operations & maintenance and other cost of operations 2 | 298 | 229 | 527 | 159 | 73 | 132 | (9 | ) | 882 | |||||||
Selling, marketing, general & administrative | 61 | 50 | 111 | 225 | 27 | 12 | 106 | 481 | ||||||||
Other expense/(income) 3 | 19 | (15 | ) | 4 | 7 | 28 | (91 | ) | (111 | ) | (163 | ) | ||||
Adjusted EBITDA | 70 | 136 | 206 | 337 | 75 | 460 | (8 | ) | 1,070 | |||||||
1 Includes International, BETM and generation eliminations
2 Excludes deactivation costs of $5 million
3 Excludes acquisition-related transaction & integration costs of $1 million and loss on debt extinguishment of $2 million
17
The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions) | Condensed financial information | Interest, tax, depr., amort. | MtM | Deactivation | Other adj. | Adjusted EBITDA | ||||||
Operating revenues | 5,083 | 29 | (159 | ) | — | — | 4,953 | |||||
Cost of operations | 2,817 | (16 | ) | (118 | ) | — | — | 2,683 | ||||
Gross margin | 2,266 | 45 | (41 | ) | — | — | 2,270 | |||||
Operations & maintenance and other cost of operations | 887 | — | — | (5 | ) | — | 882 | |||||
Selling, marketing, general & administrative | 481 | — | — | — | — | 481 | ||||||
Other expense/(income) 1 | 968 | (994 | ) | — | — | (137 | ) | (163 | ) | |||
Income/(Loss) from Continuing Operations | (70 | ) | 1,039 | (41 | ) | 5 | 137 | 1,070 | ||||
1 Other adj. includes acquisition-related transaction & integration costs of $1 million and loss on debt extinguishment of $2 million
18
Appendix Table A-5: 2018 and 2017 Three and Six Months Ended June 30 Adjusted Cash Flow from Operations Reconciliations
The following table summarizes the calculation of adjusted cash flow operating activities providing a reconciliation to net cash provided by operating activities:
Three Months Ended | ||||||
($ in millions) | June 30, 2018 | June 30, 2017 | ||||
Net Cash Provided by Operating Activities | 167 | 194 | ||||
Reclassifying of net receipts for settlement of acquired derivatives that include financing elements | — | 1 | ||||
Merger, integration and cost-to-achieve expenses (1) | 22 | — | ||||
Return of capital from equity investments | (4 | ) | 5 | |||
Adjustment for change in collateral | 181 | 141 | ||||
Adjusted Cash Flow from Operating Activities | 366 | 341 | ||||
Maintenance CapEx, net | (59 | ) | (49 | ) | ||
Environmental CapEx, net | — | (7 | ) | |||
Distributions to non-controlling interests | (48 | ) | (45 | ) | ||
Free Cash Flow Before Growth Investments (FCFbG) | 259 | 240 | ||||
(1) 2018 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call.
Six Months Ended | ||||||
($ in millions) | June 30, 2018 | June 30, 2017 | ||||
Net Cash Provided by Operating Activities | 524 | 112 | ||||
Reclassifying of net receipts for settlement of acquired derivatives that include financing elements | — | 2 | ||||
Sale of Land | 3 | 8 | ||||
Merger, integration and cost-to-achieve expenses (1) | 44 | — | ||||
Return of capital from equity investments | (2 | ) | 18 | |||
Adjustment for change in collateral (2) | 18 | 268 | ||||
Adjusted Cash Flow from Operating Activities | 587 | 408 | ||||
Maintenance CapEx, net (3) | (123 | ) | (84 | ) | ||
Environmental CapEx, net | — | (25 | ) | |||
Distributions to non-controlling interests | (98 | ) | (91 | ) | ||
Free Cash Flow Before Growth Investments (FCFbG) | 366 | 208 | ||||
(1) 2018 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call.
(2) 2017 reflects change in NRG’s cash collateral balance as of 2Q2017 including $79MM of collateral postings from deconsolidated affiliate (GenOn).
(3) Includes insurance proceeds of $18 million in 2017.
19
Appendix Table A-6: Second Quarter YTD 2018 Sources and Uses of Liquidity
The following table summarizes the sources and uses of liquidity through first quarter of 2018:
($ in millions) | Six Months Ended June 30, 2018 | |
Sources: | ||
Adjusted cash flow from operations | 587 | |
Convertible Note Issuance | 575 | |
NYLD revolver proceeds | 35 | |
Asset sales | 15 | |
NYLD equity issuance | 75 | |
Uses: | ||
Growth investments and acquisitions, net | (210 | ) |
Debt Repayment, net of proceeds | (250 | ) |
Decrease in credit facility | (489 | ) |
Share repurchases | (500 | ) |
Deconsolidation of Ivanpah | (160 | ) |
Maintenance and environmental capex, net | (123 | ) |
Distributions to non-controlling interests | (98 | ) |
Collateral (1) | (53 | ) |
Cost-to-achieve expenses(2) | (69 | ) |
Common Stock Dividends | (19 | ) |
Other Investing and Financing | (38 | ) |
Change in Total Liquidity | (722 | ) |
(1) Excludes impact of Funds deposited by Counterparties
(2) Includes capital expenditures associated with the Transformation Plan
20
Appendix Table A-7: 2018 Adjusted EBITDA Guidance Reconciliation
The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income:
2018 Adjusted EBITDA | ||||||||
($ in millions) | Low | High | ||||||
Income from Continuing Operations 1 | 410 | 610 | ||||||
Income Tax | 20 | 20 | ||||||
Interest Expense | 785 | 785 | ||||||
Depreciation, Amortization, Contract Amortization and ARO Expense | 1,180 | 1,180 | ||||||
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 135 | 135 | ||||||
Other Costs 2 | 270 | 270 | ||||||
Adjusted EBITDA | 2,800 | 3,000 | ||||||
1. | For purposes of guidance, discontinued operations are excluded and fair value adjustments related to derivatives are assumed to be zero. |
2. | Includes deactivation costs and cost-to-achieve expenses |
Appendix Table A-8: XOOM Annualized Adjusted EBITDA
The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income:
($ in millions) | ||||
Income from Continuing Operations | 44 | |||
Income Tax | — | |||
Interest Expense | — | |||
Depreciation, Amortization, Contract Amortization and ARO Expense | 1 | |||
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | — | |||
Other Costs | — | |||
Adjusted EBITDA | 45 | |||
21
Appendix Table A-9: 2018 FCFbG Guidance Reconciliation
The following table summarizes the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:
2018 | |||
($ in millions) | Guidance | ||
Adjusted EBITDA | $2,800 - $3,000 | ||
Cash Interest payments | (785 | ) | |
Cash Income tax | (40 | ) | |
Collateral / working capital / other | 40 | ||
Cash From Operations | $2,015 - $2,215 | ||
Adjustments: Acquired Derivatives, Cost-to-Achieve, Return of Capital Dividends, Collateral and Other | — | ||
Adjusted Cash flow from operations | $2,015 - $2,215 | ||
Maintenance capital expenditures, net | (210) - (240) | ||
Environmental capital expenditures, net | (0) - (5) | ||
Distributions to non-controlling interests | (220) - (250) | ||
Free Cash Flow - before Growth | $1,550 - $1,750 | ||
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
22
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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