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NRG Energy, Inc. Reports First Quarter 2020 Results

  • Comprehensive COVID-19 Response – Protecting the safety and well-being of our employees while safely operating our power plants and supporting our customers and communities
  • Published 10th annual Sustainability Report – achieved 41% Greenhouse Gas (GHG) emissions reduction since 2014
  • Announcing a change in business segments based on geography, enhancing disclosures of the Integrated Business Model
  • Reaffirming 2020 Guidance

NRG Energy, Inc. (NYSE: NRG) today reported first quarter 2020 income from continuing operations of $121 million, or $0.49 per diluted common share and Adjusted EBITDA for the first quarter of $349 million, cash flow from operations of $208 million and free cash flow before growth of $167 million.

"Our platform performed well during the first quarter, demonstrating resiliency and stability amid the COVID-19 pandemic," said Mauricio Gutierrez, NRG President and Chief Executive Officer. "We are prepared for the upcoming summer and remain focused on protecting employee safety and well-being while maintaining safe and reliable operations and customer service during this period of volatility."

Consolidated Financial Results

 

 

Three Months Ended

($ in millions)

 

3/31/2020

 

3/31/2019

Income from Continuing Operations

 

$

 

121

 

 

$

 

94

 

 

Cash provided/(used) by Continuing Operations

 

$

 

208

 

 

$

 

(99

)

 

Adjusted EBITDA

 

$

 

349

 

 

$

 

333

 

 

Free Cash Flow Before Growth Investments (FCFbG)

 

$

 

167

 

 

$

 

10

 

 

Change in business segments

As part of seeking to perfect the integrated business model, with the majority of our generation serving our retail customers, the Company began managing its operations based on the combined results of the retail and wholesale generation businesses with a geographical focus in 2020. As a result, the Company changed its business segments from Retail and Generation to Texas, East and West/Other beginning in the first quarter of 2020. The Company's updated segment structure reflects how management currently makes financial decisions and allocates resources. The Company's businesses are segregated as follows:

  • Texas, which includes all activity related to customer, plant and market operations in Texas;
  • East, which includes the remaining activity related to customer operations and all activity related to plant and market operations in the East;
  • West/Other, which includes the following assets and activities: (i) all activity related to plant and market operations in the West; (ii) activity related to the Cottonwood power plant that was sold to Cleco on February 4, 2019 and is being leased back through May 2025; (iii) the remaining renewables activity, including the Company’s equity method investments in Ivanpah Master Holdings, LLC and Agua Caliente, the remaining Home Solar assets and the remaining NFL stadium solar generating assets; (iv) activity related to the Company’s equity method investment for the Gladstone power plant in Australia; and (v) Corporate activities

Segments Results

Table 1: Income/(Loss) from Continuing Operations

($ in millions)

 

Three Months Ended

Segment

 

3/31/2020

 

3/31/2019

Texas

 

$

 

162

 

 

 

$

 

150

 

 

East

 

 

24

 

 

 

 

99

 

 

West/Otherb

 

 

(65

)

 

 

 

(155

)

 

Income from Continuing Operations

 

$

 

121

 

 

 

$

 

94

 

 

  1. Segment results for 2019 have been recast per the new business segments
  2. Includes Corporate segment

Table 2: Adjusted EBITDA

($ in millions)

 

Three Months Ended

Segment

 

3/31/2020

 

3/31/2019

Texas

 

$

 

195

 

 

$

 

179

 

East

 

 

90

 

 

 

144

 

West/Otherb

 

 

64

 

 

 

10

 

Adjusted EBITDAc

 

 

349

 

 

 

333

 

  1. Segment results for 2019 have been recast per the new business segments
  2. Includes Corporate segment
  3. See Appendices A-1 through A-4 for Operating Segment Reg G reconciliations.

Texas: First quarter Adjusted EBITDA was $195 million, $16 million higher than first quarter of 2019, driven by the acquisition of Stream Energy, higher revenues from margin enhancement activities, lower supply costs; partially offset by higher operating costs driven by STP nuclear refueling outage in the first quarter of 2020 and emission credit sales in 2019.

East: First quarter Adjusted EBITDA was $90 million, $54 million lower than first quarter of 2019, due to the write-down of oil inventory in 2020 ($29 million), gain on settlement of Midwest Generation asbestos liability in 2019 ($27 million) and lower capacity revenues; partially offset by lower operations costs due to lower generation.

West/Other: First quarter Adjusted EBITDA was $64 million, $54 million higher than first quarter of 2019, driven by higher margin from Sunrise facility due to improved availability in 2020 and outage insurance proceeds ($30 million).

Liquidity and Capital Resources

Table 3: Corporate Liquidity

($ in millions)

 

03/31/20

 

12/31/19

Cash and Cash Equivalents

 

$

 

759

 

 

$

 

345

 

Restricted Cash

 

 

8

 

 

 

8

Total

 

$

 

767

 

 

$

 

353

 

Total credit facility availability

 

 

1,183

 

 

 

1,794

 

Total Liquidity, excluding collateral received

 

$

 

1,950

 

 

$

 

2,147

 

As of March 31, 2020, NRG cash was at $0.8 billion, and $1.2 billion was available under the Company’s credit facilities. Total liquidity was $2.0 billion, including restricted cash. Overall liquidity as of the end of the first quarter 2020 was $197 million lower than at the end of 2019 driven by the increase in dividends and share repurchases.

Due to market conditions, primarily as a result of COVID-19, the Company drew $552 million on its revolving credit facility in the first quarter of 2020 as a precaution and to proportionally increase cash on hand. As of May 7, 2020, $250 million of borrowings were outstanding.

COVID-19

In March 2020, the World Health Organization categorized COVID-19 as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. Electricity has been deemed a 'critical and essential business operation' under various state and federal governmental COVID-19 mandates. As a result of COVID-19, there has been a reduction in load within the markets in which we operate, and we expect demand uncertainty to continue until the economy recovers.

NRG activated its Crisis Management Team ("CMT") in January 2020, which proactively began managing the Company's response to the impacts of COVID-19. The CMT implemented the business continuity plans for the Company and has taken a variety of measures to ensure the ongoing availability of the Company’s services, while maintaining the Company's commitment to its core values of health and safety. Pursuant to the Company’s Infectious Disease & Pandemic Policy, NRG implemented restrictions on business travel and face-to-face sales channels, instituted remote work practices and enhanced cleaning and hygiene protocols in all of its facilities. In order to effectively serve the Company’s customers, select essential employees and contractors are continuing to report to plant and certain office locations. The Company is also requiring pre-entry screening, including temperature checks, separation of work crews, additional personal protective equipment for employees and contractors when social distancing cannot be maintained, and a ban on all non-essential visitors. As a result of these business continuity measures, the Company has not experienced any material disruptions in its ability to continue its business operations to date.

NRG remains 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. On April 1, 2020, NRG committed $2 million to COVID-19 relief efforts, including funding for urgently needed safety equipment supporting first responders, as well as funds that aid local communities and teachers. The Company also allocated funding to the NRG Employee Relief Fund, which assists employees adversely impacted by natural disasters and other extraordinary events.

Sustainability Update

NRG released its 2019 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, including a 41% reduction in carbon emissions, marking significant progress towards its target of reducing emissions 50% by 2025 from a 2014 baseline. The report also features a discussion of the business rationale to re-align the Company’s science-based target to limit global warming to a 1.5 degree Celsius trajectory through a long-term carbon emissions goal of ‘net-zero’ by 2050. NRG’s 10th sustainability report continues the Company’s commitment to leading in transparency by using the Sustainability Accounting Standards Board (SASB) and the Task Force for Climate-related Financial Disclosure (TCFD.)

2020 Guidance

NRG is reaffirming its guidance range for 2020 with respect to Adjusted EBITDA, Cash From Operations and Free Cash Flow before Growth Investments (FCFbG) as set forth below.

Table 4: 2020 Adjusted EBITDA, Cash from Operations, and FCFbG Guidance

 

 

 

2020

($ in millions)

 

 

Guidance

Adjusted EBITDAa

 

 

$1,900-$2,100

Adjusted Cash From Operations

 

 

$1,450-$1,650

FCFbG

 

 

$1,275-$1,475

  1. Non-GAAP financial measure; see Appendix Tables A-8 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

As part of the Company's newly adopted long-term capital allocation policy, the return of capital to shareholders during the first quarter of 2020 was comprised of a quarterly dividend of $0.30 per share, or $74 million, and share repurchases of $224 million through May 7, 2020 at an average price of $33.05 per share.

The Company’s common stock dividend, debt reduction and share repurchases are subject to available capital, market conditions and compliance with associated laws and regulations.

Earnings Conference Call

On May 7, 2020, NRG will host a conference call at 9:00 a.m. Eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG’s website at http://www.nrg.com and clicking on "Presentations & Webcasts" in the "Investors" section found at the top of the home page. 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 more than 3.7 million residential, small business, and commercial and industrial 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, and by 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.

Forward-Looking Statements

In addition to historical information, the information presented in this press release 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, 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, 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 companywide processes, our ability to achieve margin enhancement under our publicly announced transformation plan, 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, 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 a 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, free cash flow guidance and excess cash guidance are estimates as of May 7, 2020. 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 press release should be considered in connection with information regarding risks and uncertainties that may affect NRG's future results included in NRG's filings with the Securities and Exchange Commission at www.sec.gov.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

Three months ended March 31,

(In millions, except for per share amounts)

2020

 

2019

Operating Revenues

 

 

 

Total operating revenues

$

 

2,019

 

 

 

$

 

2,165

 

 

Operating Costs and Expenses

 

 

 

Cost of operations

 

1,457

 

 

 

 

1,651

 

 

Depreciation and amortization

 

109

 

 

 

 

85

 

 

Selling, general and administrative

 

209

 

 

 

 

194

 

 

Reorganization costs

 

3

 

 

 

 

13

 

 

Development costs

 

3

 

 

 

 

2

 

 

Total operating costs and expenses

 

1,781

 

 

 

 

1,945

 

 

Gain on sale of assets

 

6

 

 

 

 

1

 

 

Operating Income

 

244

 

 

 

 

221

 

 

Other (Expense)/Income

 

 

 

Equity in losses of unconsolidated affiliates

 

(11

)

 

 

 

(21

)

 

Impairment losses on investments

 

(18

)

 

 

 

Other income, net

 

27

 

 

 

 

12

 

 

Interest expense

 

(98

)

 

 

 

(114

)

 

Total other expense

 

(100

)

 

 

 

(123

)

 

Income from Continuing Operations Before Income Taxes

 

144

 

 

 

 

98

 

 

Income tax expense

 

23

 

 

 

 

4

 

 

Income from Continuing Operations

 

121

 

 

 

 

94

 

 

Income from discontinued operations, net of income tax

 

 

 

388

 

 

Net Income

$

 

121

 

 

 

$

 

482

 

 

Earnings per Share

 

 

 

Weighted average number of common shares outstanding — basic

 

248

 

 

 

 

278

 

 

Income from continuing operations per weighted average common share — basic

$

 

0.49

 

 

 

$

 

0.34

 

 

Income from discontinued operations per weighted average common share — basic

$

 

 

 

$

 

1.39

 

 

Earnings per Weighted Average Common Share — Basic

$

 

0.49

 

 

 

$

 

1.73

 

 

Weighted average number of common shares outstanding — diluted

 

249

 

 

 

 

280

 

 

Income from continuing operations per weighted average common share — diluted

$

 

0.49

 

 

 

$

 

0.34

 

 

Income from discontinued operations per weighted average common share — diluted

$

 

 

 

$

 

1.38

 

 

Earnings per Weighted Average Common Share — Diluted

$

 

0.49

 

 

 

$

 

1.72

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

Three months ended March 31,

 

2020

 

2019

 

(In millions)

Net Income

$

 

121

 

 

 

$

 

482

 

 

Other Comprehensive Loss

 

 

 

Foreign currency translation adjustments

 

(15

)

 

 

 

1

 

 

Defined benefit plans

 

 

 

(3

)

 

Other comprehensive loss

 

(15

)

 

 

 

(2

)

 

Comprehensive Income

$

 

106

 

 

 

$

 

480

 

 

 

 

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

March 31, 2020

 

December 31, 2019

(In millions, except share data)

(Unaudited)

 

 

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

 

759

 

 

 

$

 

345

 

 

Funds deposited by counterparties

 

51

 

 

 

 

32

 

 

Restricted cash

 

8

 

 

 

 

8

 

 

Accounts receivable, net

 

915

 

 

 

 

1,025

 

 

Inventory

 

372

 

 

 

 

383

 

 

Derivative instruments

 

884

 

 

 

 

860

 

 

Cash collateral paid in support of energy risk management activities

 

200

 

 

 

 

190

 

 

Prepayments and other current assets

 

290

 

 

 

 

245

 

 

Total current assets

 

3,479

 

 

 

 

3,088

 

 

Property, plant and equipment, net

 

2,573

 

 

 

 

2,593

 

 

Other Assets

 

 

 

Equity investments in affiliates

 

350

 

 

 

 

388

 

 

Operating lease right-of-use assets, net

 

446

 

 

 

 

464

 

 

Goodwill

 

579

 

 

 

 

579

 

 

Intangible assets, net

 

769

 

 

 

 

789

 

 

Nuclear decommissioning trust fund

 

702

 

 

 

 

794

 

 

Derivative instruments

 

434

 

 

 

 

310

 

 

Deferred income taxes

 

3,265

 

 

 

 

3,286

 

 

Other non-current assets

 

225

 

 

 

 

240

 

 

Total other assets

 

6,770

 

 

 

 

6,850

 

 

Total Assets

$

 

12,822

 

 

 

$

 

12,531

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current Liabilities

 

 

 

Current portion of long-term debt

$

 

640

 

 

 

$

 

88

 

 

Current portion of operating lease liabilities

 

71

 

 

 

 

73

 

 

Accounts payable

 

708

 

 

 

 

722

 

 

Derivative instruments

 

832

 

 

 

 

781

 

 

Cash collateral received in support of energy risk management activities

 

51

 

 

 

 

32

 

 

Accrued expenses and other current liabilities

 

550

 

 

 

 

663

 

 

Total current liabilities

 

2,852

 

 

 

 

2,359

 

 

Other Liabilities

 

 

 

Long-term debt

 

5,807

 

 

 

 

5,803

 

 

Non-current operating lease liabilities

 

473

 

 

 

 

483

 

 

Nuclear decommissioning reserve

 

303

 

 

 

 

298

 

 

Nuclear decommissioning trust liability

 

390

 

 

 

 

487

 

 

Derivative instruments

 

370

 

 

 

 

322

 

 

Deferred income taxes

 

15

 

 

 

 

17

 

 

Other non-current liabilities

 

1,076

 

 

 

 

1,084

 

 

Total other liabilities

 

8,434

 

 

 

 

8,494

 

 

Total Liabilities

 

11,286

 

 

 

 

10,853

 

 

Redeemable noncontrolling interest in subsidiaries

 

 

 

20

 

 

Commitments and Contingencies

 

 

 

Stockholders' Equity

 

 

 

Common stock; $0.01 par value; 500,000,000 shares authorized; 422,979,893 and 421,890,790 shares issued and 245,623,854 and 248,996,189 shares outstanding at March 31, 2020 and December 31, 2019, respectively

 

4

 

 

 

 

4

 

 

Additional paid-in-capital

 

8,498

 

 

 

 

8,501

 

 

Accumulated deficit

 

(1,570

)

 

 

 

(1,616

)

 

Less treasury stock, at cost - 177,356,039 and 172,894,601 shares at March 31, 2020 and December 31, 2019, respectively

 

(5,189

)

 

 

 

(5,039

)

 

Accumulated other comprehensive loss

 

(207

)

 

 

 

(192

)

 

Total Stockholders' Equity

 

1,536

 

 

 

 

1,658

 

 

Total Liabilities and Stockholders' Equity

$

 

12,822

 

 

 

$

 

12,531

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Three months ended March 31,

(In millions)

2020

 

2019

Cash Flows from Operating Activities

 

 

 

Net Income

$

 

121

 

 

 

$

 

482

 

 

Income from discontinued operations, net of income tax

 

 

 

388

 

 

Income from continuing operations

 

121

 

 

 

 

94

 

 

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

 

 

 

Distributions from and equity in losses of unconsolidated affiliates

 

16

 

 

 

 

21

 

 

Depreciation and amortization

 

109

 

 

 

 

85

 

 

Accretion of asset retirement obligations

 

11

 

 

 

 

7

 

 

Provision for credit losses

 

24

 

 

 

 

26

 

 

Amortization of nuclear fuel

 

13

 

 

 

 

13

 

 

Amortization of financing costs and debt discount/premiums

 

6

 

 

 

 

7

 

 

Loss on debt extinguishment, net

 

1

 

 

 

 

Amortization of emissions allowances and energy credits

 

7

 

 

 

 

6

 

 

Amortization of unearned equity compensation

 

5

 

 

 

 

4

 

 

(Gain)/loss on sale of assets and disposal of assets

 

(14

)

 

 

 

3

 

 

Impairment losses

 

18

 

 

 

 

Changes in derivative instruments

 

(46

)

 

 

 

(15

)

 

Changes in deferred income taxes and liability for uncertain tax benefits

 

19

 

 

 

 

(2

)

 

Changes in collateral deposits in support of energy risk management activities

 

9

 

 

 

 

(123

)

 

Changes in nuclear decommissioning trust liability

 

8

 

 

 

 

9

 

 

Changes in other working capital

 

(99

)

 

 

 

(234

)

 

Cash provided/(used) by continuing operations

 

208

 

 

 

 

(99

)

 

Cash provided by discontinued operations

 

 

 

8

 

 

Net Cash Provided/(Used) by Operating Activities

 

208

 

 

 

 

(91

)

 

Cash Flows from Investing Activities

 

 

 

Payments for acquisitions of businesses

 

 

 

(16

)

 

Capital expenditures

 

(66

)

 

 

 

(49

)

 

Net purchases of emission allowances

 

(8

)

 

 

 

Investments in nuclear decommissioning trust fund securities

 

(121

)

 

 

 

(122

)

 

Proceeds from the sale of nuclear decommissioning trust fund securities

 

112

 

 

 

 

113

 

 

Proceeds from sale of assets, net of cash disposed and sale of discontinued operations, net of fees

 

15

 

 

 

 

1,313

 

 

Net distributions from investments in unconsolidated affiliates

 

 

 

4

 

 

Contributions to discontinued operations

...