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NRG Energy, Inc. Reports Second Quarter 2021 Results

  • Texas legislature takes positive action to improve system wide reliability
  • Direct Energy integration and synergies on track
  • Announced retirements and strategic review of PJM generation fleet
  • Published 11th annual sustainability report
  • Reaffirming 2021 guidance ranges

NRG Energy, Inc. (NYSE: NRG) today reported a second quarter 2021 net income of $1,078 million, or $4.40 per diluted common share and Adjusted EBITDA for the second quarter of $656 million.

“Our business delivered strong results during the second quarter, demonstrating the value of our diversified consumer services platform,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “We remain focused on advancing the strategic priorities outlined during our Investor Day and further strengthening our position as a customer-focused company.”

Consolidated Financial Results

 

 

Three Months Ended

 

Six Months Ended

($ in millions)

 

 

6/30/2021

 

6/30/2020

 

6/30/2021

 

6/30/2020

Net Income/(Loss)

 

$

1,078

 

 

$

313

 

 

$

996

 

 

$

434

 

Cash provided by Operating Activities

 

$

1,294

 

 

$

484

 

 

$

377

 

 

$

692

 

Adjusted EBITDAa

 

$

656

 

 

$

574

 

 

$

1,223

 

 

$

922

 

a. Three and six months ended 6/30/2021 excludes the loss due to Winter Storm Uri of $82 million and $1,049 million, respectively

Segments Results

Table 1: Net Income/(Loss)

($ in millions)

 

Three Months Ended

 

Six Months Ended

Segment

 

6/30/2021

 

6/30/2020

 

6/30/2021

 

6/30/2020

Texas

 

$

792

 

 

$

350

 

 

$

367

 

 

$

512

 

East

 

772

 

 

142

 

 

1,125

 

 

162

 

West/Services/Othera

 

(486)

 

 

(179)

 

 

(496)

 

 

(240)

 

Net Income

 

$

1,078

 

 

$

313

 

 

$

996

 

 

$

434

 

a. Includes Corporate segment

Second quarter Net Income was $1,078 million, $765 million higher than second quarter 2020, driven by the acquisition of Direct Energy and the resulting mark-to-market on economic hedge positions in 2021 versus 2020 driven by large movements in gas prices and ERCOT heat rates partially offset by $306 million in impairment losses due to the planned retirement of certain PJM coal assets.

Table 2: Adjusted EBITDA

($ in millions)

 

Three Months Ended

 

Six Months Ended

Segment

 

6/30/2021

 

6/30/2020

 

6/30/2021

 

6/30/2020

Texas

 

$

321

 

 

$

378

 

 

$

574

 

 

$

573

 

East

 

290

 

 

133

 

 

557

 

 

219

 

West/Services/Othera

 

45

 

 

63

 

 

92

 

 

130

 

Adjusted EBITDAb

 

$

656

 

 

$

574

 

 

$

1,223

 

 

$

922

 

a. Includes Corporate segment

b. Three and six months ended 6/30/2021 excludes the loss due to Winter Storm Uri of $82 million and $1,049 million, respectively

The following discussion of financial results exclude the impact from Winter Storm Uri:

Texas: Second quarter Adjusted EBITDA was $321 million, $57 million lower than second quarter of 2020. This decrease is driven by less favorable customer load in 2021 as a result of weaker weather and stay-at-home trends as well as increased costs to serve retail load, partially offset by the acquisition of Direct Energy.

East: Second quarter Adjusted EBITDA was $290 million, $157 million higher than second quarter of 2020. This increase is driven by the acquisition of Direct Energy, favorable weather and early intra-year settlement of demand response capacity obligations.

West/Services/Other: Second quarter Adjusted EBITDA was $45 million, $18 million lower than second quarter of 2020. This decrease is due to higher fuel costs, lower generation volumes from forced outages, and lower equity earnings following the sale of Agua Caliente in February 2021. These were partially offset by an increase due to the acquisition of Direct Energy.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

($ in millions)

 

06/30/21

 

12/31/20

Cash and Cash Equivalents

 

$

361

 

 

$

3,905

 

Restricted Cash

 

15

 

 

6

 

Total

 

$

376

 

 

$

3,911

 

Total Revolving Credit Facility and collective collateral facilities

 

2,967

 

 

3,129

 

Total Liquidity, excluding collateral received

 

$

3,343

 

 

$

7,040

 

As of June 30, 2021, NRG cash was at $0.4 billion, and $3.0 billion was available under the Company’s credit facilities. Total liquidity was $3.3 billion. Overall liquidity as of the end of the second quarter 2021 was approximately $3.7 billion lower than at the end of 2020, driven by the closing of the $3.6 billion Direct Energy acquisition and the impact of Winter Storm Uri.

NRG Strategic Developments

COVID-19

NRG continues to remain focused on protecting the health and well-being of its employees while supporting its customers and the communities in which it operates and assuring the continuity of its operations. During 2020, summer-critical office employees returned to the workplace, and safety protocols were successfully implemented. The Company has now completed its phased employee return approach within a set of safety protocols to ensure employee well-being. NRG has also implemented changes in the workplace to provide flexibility for employees to support its ability to attract and retain top talent.

Texas Legislation and Winter Storm Uri Updates

In the wake of Winter Storm Uri, the Texas legislature passed an omnibus bill, SB3, that directs numerous regulatory reforms, including the adoption of mandatory weatherization standards for both the electric and natural-gas sectors, improved coordination between those sectors, improvements to public communications and transmission-and-distribution utility protocols before and during energy emergencies. Other reforms not embodied in SB3 include an expansion of the PUCT from three to five commissioners and an overhaul of ERCOT governance.

The legislature also signed into law HB4492 and SB1580 that directs securitization of certain costs resulting from extraordinary uplift charges and market-participant defaults within ERCOT as a result of the storm. ERCOT filed applications consistent with HB4492 on July 16, 2021 and the PUCT will have until mid-October to issue orders consistent with the law. We expect that the results of these proceedings will mitigate all or a portion of the financial impacts associated with uplift and default-related costs.

The Company expects Winter Storm Uri's total 2021 loss before income tax to be $1,060 million driven by resettlement data, ERCOT system wide counterparty defaults, provisions for credits losses, increased uplift charges to load, ancillary charges and other estimates including results from other regions. The Company plans to mitigate the loss by a range of $360-$560 million which includes, but is not limited to, customer bad debt mitigation, counterparty default recovery, ERCOT default and uplift regulatory securitization as noted above, and one-time cost savings. The total net impact to cash flow is expected to be $600 million based on the mid-point of the mitigants of which $150 million will to be realized in 2022 for bill credits owed to large Commercial and Industrial (C&I) customers.

PJM Retirements

On June 17, 2021, NRG announced the retirement of 55% (or 1,600 MW’s) of its PJM coal fleet by June 2022 due to the decline in forward PJM capacity prices. The Company also announced it is conducting a strategic review of its remaining PJM generation fleet. On July 30, 2021, PJM identified reliability impacts resulting from the proposed deactivation of Indian River 4. The Company has until August 29, 2021 to notify PJM if it elects not to pursue continued operations.

Based on results of the capacity auction and the announced retirements, the Company recorded $306 million of impairment losses on the PJM generating assets and goodwill during the quarter ended June 30, 2021.

Sustainability Update

NRG released its 2020 Sustainability Report, providing an update on the Company’s comprehensive sustainability strategy with a focus on how customer choice and competitive markets have enabled the acceleration of decarbonization across the power sector. NRG demonstrated progress across all of its previously announced sustainability initiatives and recorded a 55% reduction in its carbon footprint from its current 2014 baseline as of December 31, 2020. The report also highlights the Company’s commitments to safety, well-being, and community during an unprecedented year, building on more than a decade of leadership in each of the five pillars of NRG’s comprehensive sustainability framework, which encompasses its business, customers, workplace, operations, and supply chain.

2021 Guidance

NRG is reaffirming its guidance range for 2021 with respect to Adjusted EBITDA, Adjusted Cash from Operations and Free Cash Flow before Growth Investments (FCFbG) which excludes the full year impact of Winter Storm Uri. NRG's FCFbG for the six months ended June 30, 2021 was $768 million.

Table 4: 2021 Adjusted EBITDA, Adjusted Cash from Operations, and FCFbG Guidance

 

 

2021

(In millions)

 

Guidance

Adjusted EBITDAa

 

$2,400 - $2,600

Adjusted Cash Flow From Operations

 

$1,630 - $1,830

FCFbG

 

$1,440 - $1,640

a. Non-GAAP financial measure; see Appendix Tables A-4 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 20, 2021, NRG declared a quarterly dividend on the Company's common stock of $0.325 per share, payable on August 16, 2021 to stockholders of record as of August 2, 2021.

The Company’s deleveraging program will extend into 2023 by reducing debt as of December 31, 2021 to achieve a strong balance sheet of 3x net debt-to-adjusted EBITDA and then by 2023, grow into its target investment grade metrics of 2.5 - 2.75x, primarily through the full realization of Direct Energy’s run-rate earnings. The Company remains committed to maintaining a strong balance sheet and to achieve investment grade credit metrics.

The Company's common stock dividend and debt reductions are subject to available capital, market conditions, and compliance with associated laws and regulations.

Earnings Conference Call

On August 5, 2021, NRG will host a conference call at 9:00 a.m. Eastern to discuss these results. Investors, the news media, and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG’s website at 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 bringing the power of energy to people and organizations by putting customers at the center of everything we do. We generate electricity and provide energy solutions and natural gas to millions of customers through our diverse portfolio of retail brands. A Fortune 500 company, operating in the United States and Canada, NRG delivers innovative solutions while advocating for competitive energy markets and customer choice, 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.

Forward-Looking Statements

In addition to historical information, the information presented in this presentation 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, the potential impact of COVID-19 or any other pandemic on the Company’s operations, financial position, risk exposure and liquidity, general economic conditions, hazards customary in the power industry, weather conditions and extreme weather events, competition in wholesale power and gas markets, the volatility of energy and fuel prices, failure of customers or counterparties to perform under contracts, changes in the wholesale power and gas markets, changes in government or market regulations, the condition of capital markets generally, our ability to access capital markets, cyberterrorism and inadequate cybersecurity, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify, execute or successfully implement acquisitions, repowerings or asset sales, our ability to implement value enhancing improvements to plant operations and company-wide processes, our ability to achieve our net debt targets our ability to maintain investment grade credit metrics, our ability to proceed with projects under development or the inability to complete the construction of such projects on schedule or within budget, the inability to maintain or create successful partnering relationships, our ability to operate our business 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, including Direct Energy, our ability to realize anticipated benefits of transactions (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, and our ability to execute our Capital Allocation Plan. Achieving investment grade credit metrics is not an indication of or guarantee that the Company will receive investment grade credit ratings. 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 5, 2021. 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 presentation should be considered in connection with information regarding risks and uncertainties that may affect NRG's future results included in NRG's filings with the Securities and Exchange Commission at www.sec.gov.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

Three months ended June 30,

 

Six months ended June 30,

(In millions, except for per share amounts)

2021

 

2020

 

2021

 

2020

Operating Revenues

 

 

 

 

 

 

 

Total operating revenues

$

5,243

 

 

$

2,238

 

 

$

13,334

 

 

$

4,257

 

Operating Costs and Expenses

 

 

 

 

 

 

 

Cost of operations

2,957

 

 

1,434

 

 

9,821

 

 

2,891

 

Depreciation and amortization

53

 

 

110

 

 

370

 

 

219

 

Selling, general and administrative costs

308

 

 

186

 

 

638

 

 

377

 

Provision for credit losses

40

 

 

24

 

 

651

 

 

48

 

Acquisition-related transaction and integration costs

22

 

 

 

 

64

 

 

 

Total operating costs and expenses

3,686

 

 

1,754

 

 

11,850

 

 

3,535

 

Gain on sale of assets

 

 

 

 

17

 

 

6

 

Operating Income

1,557

 

 

484

 

 

1,501

 

 

728

 

Other Income/(Expense)

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

14

 

 

12

 

 

8

 

 

1

 

Impairment losses on investments

 

 

 

 

 

 

(18)

 

Other income, net

12

 

 

14

 

 

34

 

 

40

 

Interest expense

(125)

 

 

(96)

 

 

(252)

 

 

(193)

 

Total other expense

(99)

 

 

(70)

 

 

(210)

 

 

(170)

 

Income Before Income Taxes

1,458

 

 

414

 

 

1,291

 

 

558

 

Income tax expense

380

 

 

101

 

 

295

 

 

124

 

Net Income

1,078

 

 

313

 

 

996

 

 

434

 

Income per Share

 

 

 

 

 

 

 

Weighted average number of common shares outstanding — basic

245

 

 

245

 

 

245

 

 

246

 

Income per Weighted Average Common Share — Basic

$

4.40

 

 

$

1.28

 

 

$

4.07

 

 

$

1.76

 

Weighted average number of common shares outstanding — diluted

245

 

 

246

 

 

245

 

 

247

 

Income per Weighted Average Common Share — Diluted

$

4.40

 

 

$

1.27

 

 

$

4.07

 

 

$

1.76

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

Three months ended June 30,

 

Six months ended June 30,

(In millions)

2021

 

2020

 

2021

 

2020

Net Income

$

1,078

 

 

$

313

 

 

$

996

 

 

$

434

 

Other Comprehensive Income/(Loss)

 

 

 

 

 

 

 

Foreign currency translation adjustments

2

 

 

13

 

 

5

 

 

(2)

 

Defined benefit plans

19

 

 

 

 

19

 

 

 

Other comprehensive income/(loss)

21

 

 

13

 

 

24

 

 

(2)

 

Comprehensive Income

1,099

 

 

326

 

 

1,020

 

 

432

 

 

 

 

 

 

 

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

June 30, 2021

 

December 31, 2020

(In millions, except share data)

(Unaudited)

 

(Audited)

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

361

 

 

$

3,905

 

Funds deposited by counterparties

533

 

 

19

 

Restricted cash

15

 

 

6

 

Accounts receivable, net

2,822

 

 

904

 

Inventory

365

 

 

327

 

Derivative instruments

3,975

 

 

560

 

Cash collateral paid in support of energy risk management activities

80

 

 

50

 

Prepayments and other current assets

473

 

 

257

 

Total current assets

8,624

 

 

6,028

 

Property, plant and equipment, net

2,016

 

 

2,547

 

Other Assets

 

 

 

Equity investments in affiliates

164

 

 

346

 

Operating lease right-of-use assets, net

307

 

 

301

 

Goodwill

1,793

 

 

579

 

Intangible assets, net

2,921

 

 

668

 

Nuclear decommissioning trust fund

957

 

 

890

 

Derivative instruments

1,724

 

 

261

 

Deferred income taxes

2,499

 

 

3,066

 

Other non-current assets

614

 

 

216

 

Total other assets

10,979

 

 

6,327

 

Total Assets

$

21,619

 

 

$

14,902

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current Liabilities

 

 

 

Current portion of long-term debt and finance leases

$

79

 

 

$

1

 

Current portion of operating lease liabilities

79

 

 

69

 

Accounts payable

2,166

 

 

649

 

Derivative instruments

2,849

 

 

499

 

Cash collateral received in support of energy risk management activities

533

 

 

19

 

Accrued expenses and other current liabilities

1,225

 

 

678

 

Total current liabilities

6,931

 

 

1,915

 

Other Liabilities

 

 

 

Long-term debt and finance leases

8,712

 

 

8,691

 

Non-current operating lease liabilities

272

 

 

278

 

Nuclear decommissioning reserve

312

 

 

303

 

Nuclear decommissioning trust liability

624

 

 

565

 

Derivative instruments

945

 

 

385

 

Deferred income taxes

64

 

 

19

 

Other non-current liabilities

1,215

 

 

1,066

 

Total other liabilities

12,144

 

 

11,307

 

Total Liabilities

19,075

 

 

13,222

 

Commitments and Contingencies

 

 

 

Stockholders' Equity

 

 

 

Common stock; $0.01 par value; 500,000,000 shares authorized; 423,541,425 and 423,057,848 shares issued

and 244,775,477 and 244,231,933 shares outstanding at June 30, 2021 and December 31, 2020, respectively

4

 

 

4

 

Additional paid-in-capital

8,519

 

 

8,517

 

Accumulated deficit

(567)

 

 

(1,403)

 

Less treasury stock, at cost - 178,765,948 and 178,825,915 at June 30, 2021 and December 31, 2020,

respectively

(5,230)

 

 

(5,232)

 

Accumulated other comprehensive loss

(182)

 

 

(206)

 

Total Stockholders' Equity

2,544

 

 

1,680

 

Total Liabilities and Stockholders' Equity

$

21,619

 

 

$

14,902

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Six months ended June 30,

(In millions)

2021

 

2020

Cash Flows from Operating Activities

 

 

 

Net Income

$

996

 

 

$

434

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

Distributions from and equity in earnings of unconsolidated affiliates

14

 

 

7

 

Depreciation and amortization

370

 

 

219

 

Accretion of asset retirement obligations

14

 

 

18

 

Provision for credit losses

651

 

 

48

 

Amortization of nuclear fuel

25

 

 

25

 

Amortization of financing costs and debt discounts

20

 

 

12

 

Loss on debt extinguishment, net

 

 

1

 

Amortization of in-the-money contracts, emissions allowances and retirements of RECs

108

 

 

33

 

Amortization of unearned equity compensation

10

 

 

12

 

Net gain on sale and disposal of assets

(25)

 

 

(15)

 

Impairment losses

306

 

 

18

 

Changes in derivative instruments

(2,430)

 

 

(131)

 

Changes in deferred income taxes and liability for uncertain tax benefits

257

 

 

116

 

Changes in collateral deposits in support of energy risk management activities

696

 

 

58

 

Changes in nuclear decommissioning trust liability

30

 

 

36

 

Changes in other working capital

(665)

 

 

(199)

 

Cash provided by operating activities

377

 

 

692

 

Cash Flows from Investing Activities

 

 

 

Payments for acquisitions of businesses, net of cash acquired

(3,521)

 

 

(5)

 

Capital expenditures

(143)

 

 

(116)

 

Net sales/(purchases) of emission allowances

1

 

 

(4)

 

Investments in nuclear decommissioning trust fund securities

(253)

 

 

(257)

 

Proceeds from the sale of nuclear decommissioning trust fund securities

226

 

 

220

 

Proceeds from sale of assets, net of cash disposed

198

 

 

15

 

Changes in investments in unconsolidated affiliates

 

 

2

 

Cash used by investing activities

(3,492)

 

 

(145)

 

Cash Flows from Financing Activities

 

 

 

Payments of dividends to common stockholders

(159)

 

 

(148)

 

Payments for share repurchase activity

(9)

 

 

(229)

 

Net receipts/(payments) from settlement of acquired derivatives that include financing elements

191

 

 

(5)

 

Net proceeds/(repayments) of Revolving Credit Facility and Receivables Securitization Facilities

75

 

 

(83)

 

Payments of debt issuance costs

(2)

 

 

(1)

 

Proceeds from issuance of common stock

1

 

 

1

 

Repayments of long-term debt and finance leases

(4)

 

 

(61)

 

Proceeds from issuance of long-term debt

 

 

59

 

Purchase of and distributions to noncontrolling interests from subsidiaries

 

 

(2)

 

Cash provided/(used) by financing activities

93

 

 

(469)

 

Effect of exchange rate changes on cash and cash equivalents

1

 

 

(1)

 

Net (Decrease)/Increase in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted

Cash

(3,021)

 

 

77

 

Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period

3,930

 

 

385

 

Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period

$

909

 

 

$

462

 

Appendix Table A-1: Second Quarter 2021 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)

Texas

East

West/Services/

Other1

Corp/Elim

Total

Net Income/(Loss)

792

 

772

 

40

 

(526)

 

1,078

 

Plus:

 

 

 

 

 

Interest expense, net

 

1

 

 

124

 

125

 

Income tax

 

12

 

1

 

367

 

380

 

Depreciation and amortization

84

 

(54)

 

16

 

7

 

53

 

ARO Expense

5

 

3

 

4

 

 

12

 

Contract amortization

(8)

 

81

 

6

 

 

79

 

EBITDA

873

 

815

 

67

 

(28)

 

1,727

 

Winter Storm Uri

71

 

5

 

2

 

4

 

82

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

18

 

 

18

 

Acquisition-related transaction & integration costs

 

 

 

22

 

22

 

Deactivation costs

 

15

 

 

 

15

 

Other non recurring charges

2

 

 

 

1

 

3

 

Impairments

 

306

 

 

 

306

 

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

(625)

 

(851)

 

(41)

 

 

(1,517)

 

Adjusted EBITDA

321

 

290

 

46

 

(1)

 

656

 

1 Includes International and Generation eliminations

Second Quarter 2021 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/Services/

Other1

Corp/Elim

Total

Operating revenues

2,028

 

2,732

 

571

 

(2)

 

5,329

 

Cost of sales

1,388

 

2,173

 

453

 

 

4,014

 

Economic gross margin2

640

 

559

 

118

 

(2)

 

1,315

 

Operations & maintenance and other cost of operations3

228

 

150

 

62

 

(1)

 

439

 

Selling, marketing, general and administrative

129

 

126

 

42

 

9

 

306

 

Provision for credit losses

41

 

(1)

 

1

 

 

41

 

Other (income)4

(8)

 

(1)

 

(31)

 

(5)

 

(45)

 

Winter Storm Impacts

(71)

 

(5)

 

(2)

 

(4)

 

(82)

 

Adjusted EBITDA

321

 

290

 

46

 

(1)

 

656

 

1 Includes International and Generation eliminations

2 Excludes MtM gain of $1,517 million and contract amortization of $79 million

3 Excludes deactivation costs of $15 million

4 Excludes acquisition-related transaction & integration of $22 million

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)

Condensed

financial

information

Interest, tax,

depr., amort.

MtM

Deactivation

Winter

Storm Uri

Other adj.

Adjusted

EBITDA

Operating revenues

5,243

 

16

 

70

 

 

(5)

 

1

 

5,325

 

Cost of operations

2,490

 

(63)

 

1,587

 

 

(58)

 

(1)

 

3,955

 

Gross margin

2,753

 

79

 

(1,517)

 

 

53

 

2

 

1,370

 

Operations & maintenance and

other cost of operations

467

 

 

 

(15)

 

(2)

 

(14)

 

436

 

Selling, marketing, general &

administrative

308

 

 

 

 

(6)

 

(1)

 

301

 

Provision for credit losses

40

 

 

 

 

(21)

 

 

19

 

Other expense/(income)1

860

 

(558)

 

 

 

 

(344)

 

(42)

 

Net Income/(Loss)

1,078

 

637

 

(1,517)

 

15

 

82

 

361

 

656

 

1 Other adj. includes $306 million impairments, acquisition-related transaction & integration costs of $22 million, and adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates of $18 million

Appendix Table A-2: Second Quarter 2020 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)

Texas

East

West/Services/

Other1

Corp/Elims

Total

Net Income/(Loss)

350

 

142

 

29

 

(208)

 

313

 

Plus:

 

 

 

 

 

Interest expense, net

 

2

 

1

 

91

 

94

 

Income tax

 

 

1

 

100

 

101

 

Depreciation and amortization

59

 

32

 

9

 

10

 

110

 

ARO Expense

3

 

3

 

1

 

 

7

 

Contract amortization

1

 

 

 

 

1

 

EBITDA

413

 

179

 

41

 

(7)

 

626

 

Adjustment to reflect NRG share of adjusted EBITDA in

unconsolidated affiliates

1

 

 

24

 

 

25

 

Acquisition-related transaction & integration costs

 

 

 

2

 

2

 

Reorganization costs

 

 

 

(1)

 

(1)

 

Deactivation costs

2

 

 

1

 

 

3

 

Other non recurring charges

3

 

(1)

 

 

4

 

6

 

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

(41)

 

(45)

 

(1)

 

 

(87)

 

Adjusted EBITDA

378

 

133

 

65

 

(2)

 

574

 

1 Includes International, remaining renewables and Generation eliminations

Second Quarter 2020 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/Services/

Other1

Corp/Elim

Total

Operating revenues

1,578

 

505

 

114

 

(2)

 

2,195

 

Cost of sales

880

 

203

 

54

 

(2)

 

1,135

 

Economic gross margin2

698

 

302

 

60

 

 

1,060

 

Operations & maintenance and other cost of operations3

190

112

28

(2)

 

328

 

Selling, marketing, general & administrative

110

 

57

 

11

 

8

 

186

 

Provision for credit losses

22

 

2

 

 

 

24

 

Other (income)4

(2)

 

(2)

 

(44)

 

(4)

 

(52)

 

Adjusted EBITDA

378

 

133

 

65

 

(2)

 

574

 

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gain of $87 million and contract amortization of $1 million

3 Excludes deactivation costs of $3 million

4 Excludes acquisition-related transaction & integration costs of $2 million

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)

Condensed

financial

information

Interest, tax,

depr., amort.

MtM

Deactivation

Other adj.

Adjusted

EBITDA

Operating revenues

2,238

 

 

(42)

 

 

(1)

 

2,195

 

Cost of operations

1,092

 

(1)

 

45

 

 

(1)

 

1,135

 

Gross margin

1,146

 

1

 

(87)

 

 

 

1,060

 

Operations & maintenance and other cost of

operations

342

 

 

 

(3)

 

(11)

 

328

 

Selling, marketing, general & administrative

186

 

 

 

 

 

186

 

Provision for credit losses

24

 

 

 

 

 

24

 

Other expense/(income)1

281

 

(305)

 

 

 

(28)

 

(52)

 

Net Income/(Loss)

313

 

306

 

(87)

 

3

 

39

 

574

 

1 Other adj. includes adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates of $25 million and acquisition-related transaction & integration costs of $2 million

Appendix Table A-3: YTD Second Quarter 2021 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)

Texas

East

West/Services/

Other1

Corp/Elim

Total

Net Income/(Loss)

367

 

1,125

 

109

 

(605)

 

996

 

Plus:

 

 

 

 

 

Interest expense, net

 

3

 

1

 

246

 

250

 

Income tax

 

16

 

2

 

277

 

295

 

Depreciation and amortization

161

 

155

 

40

 

14

 

370

 

ARO Expense

7

 

5

 

2

 

1

 

15

 

Contract amortization

(7)

 

81

 

6

 

 

80

 

EBITDA

528

 

1,385

 

160

 

(67)

 

2,006

 

Winter Storm Uri Impact

1,192

 

(140)

 

(9)

 

6

 

1,049

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

37

 

1

 

38

 

Acquisition-related transaction & integration costs

 

 

 

66

 

66

 

Legal Settlements

 

 

 

6

 

6

 

Deactivation costs

 

16

 

 

 

16

 

Gain on sale of business

 

 

(17)

 

(15)

 

(32)

 

Other non recurring charges

3

 

3

 

1

 

(1)

 

6

 

Impairments

 

306

 

 

 

306

 

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

(1,149)

 

(1,013)

 

(76)

 

 

(2,238)

 

Adjusted EBITDA

574

 

557

 

96

 

(4)

 

1,223

 

1 Includes International and Generation eliminations

YTD Second Quarter 2021 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/Services/

Other1

Corp/Elim

Total

Operating revenues

5,731

 

6,561

 

1,164

 

(4)

 

13,452

 

Cost of sales

4,994

 

5,294

 

909

 

 

11,197

 

Economic gross margin2

737

 

1,267

 

255

 

(4)

 

2,255

 

Operations & maintenance and other cost of operations3

454

 

297

 

119

 

(9)

 

861

 

Selling, marketing, general and administrative

268

 

272

 

76

 

24

 

640

 

Provision for credit losses

642

 

6

 

3

 

 

651

 

Other (income)4

(9)

 

(5)

 

(48)

 

(9)

 

(71)

 

Winter Storm Uri Impact

(1,192)

 

140

 

9

 

(6)

 

(1,049)

 

Adjusted EBITDA

574

 

557

 

96

 

(4)

 

1,223

 

1 Includes International and Generation eliminations

2 Excludes MtM loss of $2,238 million and contract amortization of $80 million

3 Excludes deactivation costs of $16 million

4 Excludes acquisition-related transaction & integration costs of $66 million

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)

Condensed

financial

information

Interest, tax,

depr., amort.

MtM

Deactivation

Winter

Storm Uri

Other adj.

Adjusted

EBITDA

Operating revenues

13,334

 

16

 

102

 

 

(2,665)

 

3

 

10,790

 

Cost of operations

8,921

 

(64)

 

2,340

 

 

(3,079)

 

2

 

8,120

 

Gross margin

4,413

 

80

 

(2,238)

 

 

414

 

1

 

2,670

 

Operations & maintenance and

other cost of operations

900

 

 

 

(16)

 

(2)

 

(19)

 

863

 

Selling, marketing, general &

administrative

638

 

 

 

 

(27)

 

(3)

 

608

 

Provision for credit losses

651

 

 

 

 

(606)

 

 

45

 

Other expense/(income)1

1,228

 

(915)

 

 

 

 

(382)

 

(69)

 

Net Income/(Loss)

996

 

995

 

(2,238)

 

16

 

1,049

 

405

 

1,223

 

1 Other adj. includes $306 million impairments, acquisition-related transaction & integration costs of $66 million, adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates of $38 million, and gain on sale of business of ($32) million

Appendix Table A-4: YTD Second Quarter 2020 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)

Texas

East

West/Services/

Other1

Corp/Elims

Total

Net Income/ (Loss)

512

 

162

 

74

 

(314)

 

434

 

Plus:

 

 

 

 

 

Interest expense, net

 

6

 

1

 

181

 

188

 

Income tax

 

 

1

 

123

 

124

 

Loss on debt extinguishment

 

1

 

 

 

1

 

Depreciation and amortization

118

 

64

 

18

 

19

 

219

 

ARO Expense

7

 

11

 

1

 

(1)

 

18

 

Contract amortization

2

 

 

 

 

2

 

EBITDA

639

 

244

 

95

 

8

 

986

 

Adjustment to reflect NRG share of adjusted EBITDA in

unconsolidated affiliates

2

 

 

48

 

 

50

 

Acquisition-related transaction & integration costs

1

 

 

 

2

 

3

 

Reorganization costs

1

 

 

2

3

 

Deactivation costs

2

 

 

2

 

(1)

 

3

 

Gain on sale of business

 

 

 

(15)

 

(15)

 

Other non recurring charges

 

 

(1)

 

6

 

5

 

Impairments

18

 

 

 

 

18

 

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

(90)

 

(25)

 

(16)

 

 

(131)

 

Adjusted EBITDA

573

 

219

 

128

 

2

 

922

 

1 Includes International, remaining renewables and Generation eliminations

YTD Second Quarter 2020 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/Services/

Other1

Corp/Elim

Total

Operating revenues

2,936

 

1,046

 

242

 

(6)

 

4,218

 

Cost of sales

1,710

 

491

 

86

 

(3)

 

2,284

 

Economic gross margin2

1,226

 

555

 

156

 

(3)

 

1,934

 

Operations & maintenance and other cost of operations3

394

 

218

 

60

 

(2)

 

670

 

Selling, marketing, general & administrative

217

 

120

 

24

 

10

 

371

 

Provision for credit losses

45

 

3

 

 

 

48

 

Other (income)4

(3)

 

(5)

 

(56)

 

(13)

 

(77)

 

Adjusted EBITDA

573

 

219

 

128

 

2

 

922

 

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gain of $131 million and contract amortization of $2 million

3 Excludes deactivation costs of $3 million

4 Excludes acquisition-related transaction & integration costs of $3 million, reorganization costs of $3 million

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)

Condensed

financial

information

Interest, tax,

depr., amort.

MtM

Deactivation

Other adj.

Adjusted

EBITDA

Operating revenues

4,257

 

 

(39)

 

 

 

4,218

 

Cost of operations

2,194

 

(2)

 

92

 

 

 

2,284

 

Gross margin

2,063

 

2

 

(131)

 

 

 

1,934

 

Operations & maintenance and other cost of operations

697

 

 

 

(3)

 

(24)

 

670

 

Selling, marketing, general & administrative

377

 

 

 

 

(6)

 

371

 

Provision for credit losses

48

 

 

 

 

 

48

 

Other expense/(income) 1

507

 

(531)

 

 

 

(53)

 

(77)

 

Net Income/(Loss)

434

 

533

 

(131)

 

3

 

83

 

922

 

1 Other adj. includes adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates of $50 million, impairments $18 million, and gain on sale of business of ($15) million

Appendix Table A-5: 2021 and 2020 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:

 

Six Months Ended

($ in millions)

 

June 30, 2021

 

June 30, 2020

Adjusted EBITDA

 

$

1,223

 

 

922

Winter Storm Uri loss

 

(1,049)

 

 

Interest payments

 

(191)

 

 

(172)

 

Income tax

 

12

 

 

(4)

 

Collateral / working capital / other

 

382

 

 

(54)

 

Cash Provided by Operating Activities

 

$

377

 

 

$

692

 

Winter Storm Uri:

 

 

 

 

Loss

 

1,049

 

 

 

C&I credits and remaining open accounts receivables

 

(111)

 

 

 

Net payments from settlement of acquired derivatives that include

financing elements

 

191

 

 

 

Merger and integration costs

 

66

 

 

3

 

Encina site improvement and GenOn pension

 

14

 

 

3

 

Proceeds from investment and asset sales

 

 

 

12

 

Adjustment for change in collateral

 

(696)

 

 

(58)

 

Nuclear decommissioning trust liability

 

(27)

 

 

(37)

 

Adjusted Cash Flow from Operating Activities

 

$

863

 

 

$

615

 

Maintenance Capital Expenditures, net

 

(94)

 

 

(82)

 

Environmental Capital Expenditures, net

 

(1)

 

 

(1)

 

Free Cash Flow Before Growth Investments (FCFbG)

 

$

768

 

 

$

532

 

 

 

 

 

 

Appendix Table A-6: Second Quarter 2021 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity through second quarter of 2021:

($ in millions)

Six months ended

June 30, 2021

Sources:

 

Cash provided by operating activities1

377

 

Net proceeds of Revolving Credit Facility and Receivables Securitization Facilities

75

 

Proceeds from asset sales

198

 

Net receipts from settlement of acquired derivatives that include financing elements

191

 

Uses:

 

Payments for acquisition of businesses, net of cash acquired

(3,521)

 

Funds deposited by counterparties

(514)

 

Decrease in Credit Facility

(162)

 

Growth investments and acquisitions, net1

(47)

 

Maintenance and Environmental CapEx, net

(96)

 

Net nuclear decommissioning trust liability

(27)

 

Share repurchases

(9)

 

Common Stock Dividends

(159)

 

Other Investing and Financing

(3)

 

Change in Total Liquidity

(3,697)

 

1 Cash provided by operating activities includes GenOn pension, Encina site improvements, and small book acquisitions

Appendix Table A-7: 2021 Guidance Reconciliation

The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to Net (Loss)/Income, and the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:

($ in millions)

 

2021

Guidance

Net Loss1

 

$ (340) - (140)

Winter Storm Uri

 

1,060

 

Interest expense, net

 

450

 

Income tax

 

(80)

 

Depreciation, Amortization, Contract Amortization, and ARO Expense2

 

834

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

75

 

Impairments

 

306

 

Other Costs3

 

95

 

Adjusted EBITDA

 

2,400 - 2,600

Interest payments, net

 

(460)

 

Income tax

 

(25)

 

Working capital / other assets and liabilities

 

(315)

 

Cash provided by Operating Activities

 

1,600 - 1,800

Adjustments: Proceeds from investment and asset sales, Collateral, GenOn Pension, Nuclear

Decommissioning Trust Liability

 

30

 

Adjusted Cash flow from Operations

 

1,630 - 1,830

Maintenance capital expenditures, net

 

(180) - (195)

Environmental capital expenditures, net

 

(5) - (10)

Free Cash Flow before Growth

 

$ 1,440 - 1,640

1 For purposes of guidance fair value adjustments related to derivatives are assumed to be zero

2 Provisional amounts related to the Direct Energy acquisition are subject to revision until evaluations are completed; for details see Note 4 of NRG 2Q21 10Q

3 Includes deactivation costs and integration expenses

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 expense (loss on debt extinguishment), income taxes, depreciation and amortization, asset retirement obligation expenses, contract amortization consisting of amortization of power and fuel contracts and amortization of emission allowances. 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 forward position of economic hedges, adjustments to exclude the Adjusted EBITDA related to the non-controlling interest, gains or losses on the repurchase, modification or extinguishment of debt, the impact of restructuring and any extraordinary, unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA from our unconsolidated investments. The reader is encouraged to evaluate each adjustment and the reasons NRG considers it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this news release.

Management believes Adjusted EBITDA is useful to investors and other users of NRG's financial statements in evaluating its operating performance because it provides an additional tool to compare business performance across companies and across periods and adjusts for items that we do not consider indicative of NRG’s future operating performance. This measure is widely used by debt-holders to analyze operating performance and debt service capacity and by equity investors to measure our operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations, and for evaluating actual results against such expectations, and in communications with NRG's Board of Directors, shareholders, creditors, analysts and investors concerning its financial performance.

Adjusted cash flow from operating activities is a non-GAAP measure NRG provides to show cash from operations with the reclassification of net payments of derivative contracts acquired in business combinations from financing to operating cash flow, as well as the add back of merger, integration, related restructuring costs and changes in the nuclear decommissioning trust liability. 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. The company excludes changes in the nuclear decommissioning trust liability as these amounts are offset by changes in the decommissioning fund shown in cash from investing.

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.

Contacts

Media:

Candice Adams

609.524.5428

Investors:

Kevin L. Cole, CFA

609.524.4526

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