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NRG Energy, Inc. Reports Second Quarter 2019 Results

NRG Energy, Inc. (NYSE:NRG) today reported second quarter 2019 income from continuing operations of $189 million, or $0.75 per diluted common share and Adjusted EBITDA for the second quarter of $469 million.

“Our platform performed well during both the quarter and first half of the year, demonstrating the stability of our integrated model,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. "I am also pleased to announce that we have completed our deleveraging program, aligning our credit profile with investment grade metrics and enhancing our financial flexibility to create significant and sustainable shareholder value.”

Consolidated Financial Results

NRG completed the sale of its Renewables Platform, and its interests in Clearway Energy, as well as the South Central Portfolio, on August 31, 2018, and February 4, 2019, respectively. As a result, 2018 financial information for the sales were recast to reflect the presentation of these entities as discontinued operations.

Three Months Ended

Six Months Ended

($ in millions)

6/30/19

6/30/18

6/30/19

6/30/18

Income from Continuing Operations

$

189

$

27

$

283

$

265

Cash provided by Continuing Operations

$

516

$

18

$

381

$

264

Adjusted EBITDA

$

469

$

517

$

801

$

853

Free Cash Flow Before Growth Investments (FCFbG)

$

230

$

174

$

204

$

216

Segment Results

Table 1: Income/(Loss) from Continuing Operations

($ in millions)

Three Months Ended

Six Months Ended

Segment

6/30/19

6/30/18

6/30/19

6/30/18

Retail

$

(280

)

$

(84

)

$

(170

)

$

860

Generation a

618

252

731

(319

)

Corporate

(149

)

(141

)

(278

)

(276

)

Income from Continuing Operationsa

$

189

$

27

$

283

$

265

a. In accordance with GAAP, 2018 results have been recast to reflect the discontinued operations of the South Central Portfolio, Clearway Energy, the Renewables Platform and Carlsbad Energy Center.

Second quarter Income from Continuing Operations was $189 million, $162 million higher than second quarter 2018, driven by Generation gains on mark-to-market hedge positions in 2019 partially offset by Retail losses on mark-to-market hedge positions in 2019, both driven by large movements in gas prices and ERCOT heat rates.

Table 2: Adjusted EBITDA

($ in millions)

Three Months Ended

Six Months Ended

Segment

6/30/19

6/30/18

6/30/19

6/30/18

Retail

$

240

$

298

$

393

$

486

Generation a

230

231

414

385

Corporate

(1

)

(12

)

(6

)

(18

)

Adjusted EBITDA b

$

469

$

517

$

801

$

853

a. In accordance with GAAP, 2018 results have been recast to reflect the discontinued operations of the South Central Portfolio, Clearway Energy, the Renewables Platform and Carlsbad Energy Center.

b. See Appendices A-1 through A-4 for Operating Segment Reg G reconciliations.

Retail: Second quarter Adjusted EBITDA was $240 million, $58 million lower than second quarter 2018, driven by higher supply costs, milder weather and capacity obligations, partially offset by the acquisition of XOOM.

Generation: Second quarter Adjusted EBITDA was $230 million, $1 million lower than second quarter 2018, driven by:

  • Texas Region: $85 million increase due to higher generation and higher realized power prices; and
  • East/West1: $86 million decrease due to 2018 asset sales and deconsolidations combined with lower insurance proceeds and lower generation.

Liquidity and Capital Resources
Table 3: Corporate Liquidity

($ in millions)

6/30/19

12/31/18

Cash and Cash Equivalents

$

294

$

563

Restricted Cash

11

17

Total

$

305

$

580

Total credit facility availability

1,799

1,397

Total Liquidity, excluding collateral received

$

2,104

$

1,977

As of June 30, 2019, NRG cash was at $0.3 billion, and $1.8 billion was available under the Company’s credit facilities. Total liquidity was $2.1 billion, including restricted cash. Overall liquidity as of the end of the second quarter 2019 was $127 million higher than at the end of 2018 driven by asset sale proceeds, net of share repurchases and debt reductions executed during the period, and an increase in NRG's revolver capacity.

NRG Strategic Developments

Transformation Plan

Through the second quarter of 2019, NRG realized $261 million of its cost savings target as part of the previously announced Transformation Plan, and is on track to realize $590 million in savings in 2019. Margin Enhancement provided $30 million in uplift through the second quarter toward the $135 million 2019 target.

Retail Acquisition

On May 15, 2019, NRG entered into an agreement to acquire Stream Energy's retail electricity and natural gas business operating in 9 states and Washington, D.C. for $300 million and estimated transaction costs and working capital adjustments of approximately $25 million. The acquisition increased NRG's retail portfolio by approximately 600,000 Retail Customer Equivalents or 450,000 customers. The acquisition closed on August 1, 2019.

Renewable Power Purchase Agreements

During the first half of 2019, NRG began execution of its capital-light strategy to provide competitively priced renewable offerings to retail customers. NRG entered into power purchase agreements with third-party project developers and other counterparties, totaling approximately 1.3 GWs, with an average tenor of approximately ten years. NRG expects to continue evaluating and executing agreements such as these that support the needs of its platform.

Pre-Summer Maintenance and Gregory Natural Gas Plant

NRG expanded pre-summer maintenance of the Texas fleet by increasing spending by $21 million, including the return of its 385 MW Gregory natural gas plant in Corpus Christi, Texas to service in June 2019.

2019 Guidance

NRG is reaffirming its guidance range for 2019 with respect to Adjusted EBITDA, Cash From Operations and Free Cash Flow before Growth Investments (FCFbG) as set forth below.

Table 4: 2019 Adjusted EBITDA, Cash from Operations, and FCFbG Guidance

2019

($ in millions)

Guidance

Adjusted EBITDAa

$1,850-$2,050

Adjusted Cash From Operations

$1,405-$1,605

FCFbG

$1,250-$1,450

a. 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

Through August 7, 2019, NRG completed $1.25 billion in share repurchases, including the $1 billion share repurchase program announced on the fourth quarter 2018 earnings call, at an average price of $38.80 per share2.

In addition, the Board of Directors of the Company has authorized an incremental $250 million share repurchase program, which is expected to be executed in 2019. In total, NRG has allocated $1.5 billion of capital available for allocation to share repurchases in 2019.

During the second quarter of 2019, NRG completed several debt transactions to extend maturities, reduce interest expense and further align its credit profile with investment grade:

  • Refinanced $733 million of 6.25% Senior Unsecured Notes due 2024 with new 5.25% Senior Unsecured Notes due 2029
  • Issued $1.1 billion of aggregate principal amount of Senior Secured First Lien Notes, consisting of $600 million 3.75% Senior Secured First Lien Notes due 2024 and $500 million 4.45% Senior Secured First Lien Notes due 2029. The proceeds from the issuance of the Senior Secured First Lien Notes, as well as $598 million3 of cash on hand, were used to repay the Company's $1.7 billion 2023 Term Loan facility
  • Amended its existing credit agreement, increasing the aggregate revolving commitments by $184 million to $2.6 billion, extending the maturity to 2024, and reducing the borrowing costs by 0.5%, among other modifications

Both the new secured notes and amended credit facility provide for a release of the collateral securing the debt if NRG obtains an investment grade rating from two out of the three rating agencies. In aggregate, these transactions will generate annual interest savings of approximately $25 million.

On July 19, 2019, NRG declared a quarterly dividend on the Company's common stock of $0.03 per share, payable August 15, 2019, to stockholders of record as of August 1, 2019, representing $0.12 on an annualized basis.

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

1 Includes International and Renewables

2 As of August 7, 2019, 252,987,889 shares outstanding

3 Includes $4 million of term loan amortization

Earnings Conference Call

On August 7, 2019, NRG will host a conference call at 9:00 a.m. Eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG’s website at http://www.nrg.com and clicking on “Investors” 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, putting customers at the center of everything we do. We generate electricity and provide energy solutions and natural gas to more than 3.5 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, 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 implement and execute on our publicly announced transformation plan, including any cost savings and margin enhancement, our ability to achieve our net debt targets, our ability to achieve 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 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, 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 August 7, 2019. 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
June 30,

Six months ended
June 30,

(In millions, except for per share amounts)

2019

2018

2019

2018

Operating Revenues

Total operating revenues

$

2,465

$

2,461

$

4,630

$

4,526

Operating Costs and Expenses

Cost of operations

1,845

1,889

3,496

3,274

Depreciation and amortization

85

112

170

232

Impairment losses

1

74

1

74

Selling, general and administrative

211

200

405

376

Reorganization costs

2

23

15

43

Development costs

2

3

4

8

Total operating costs and expenses

2,146

2,301

4,091

4,007

Gain on sale of assets

1

14

2

16

Operating Income

320

174

541

535

Other Income/(Expense)

Equity in earnings/(losses) of unconsolidated affiliates

5

(21

)

6

Other income/(expense), net

20

(23

)

32

(23

)

Loss on debt extinguishment, net

(47

)

(1

)

(47

)

(3

)

Interest expense

(105

)

(123

)

(219

)

(239

)

Total other expense

(132

)

(142

)

(255

)

(259

)

Income from Continuing Operations Before Income Taxes

188

32

286

276

Income tax (benefit)/expense

(1

)

5

3

11

Income from Continuing Operations

189

27

283

265

Income from discontinued operations, net of income tax

13

69

401

64

Net Income

202

96

684

329

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

1

24

1

(22

)

Net Income Attributable to NRG Energy, Inc

$

201

$

72

683

351

Earnings per Share Attributable to NRG Energy, Inc.

Weighted average number of common shares outstanding — basic

265

310

272

314

Income from continuing operations per weighted average common share — basic

$

0.71

$

0.01

$

1.04

$

0.92

Income from discontinued operations per weighted average common share — basic

$

0.05

$

0.22

$

1.47

$

0.20

Earnings per Weighted Average Common Share — Basic

$

0.76

$

0.23

$

2.51

$

1.12

Weighted average number of common shares outstanding — diluted

267

314

274

318

Income from continuing operations per weighted average common share — diluted.

$

0.70

$

0.01

$

1.03

$

0.90

Income from discontinued operations per weighted average common share — diluted

$

0.05

$

0.22

$

1.46

$

0.20

Earnings per Weighted Average Common Share — Diluted

$

0.75

$

0.23

$

2.49

$

1.10

Dividends Per Common Share

$

0.03

$

0.03

$

0.06

$

0.06

 

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 

Three months ended June 30,

Six months ended June 30,

2019

2018

2019

2018

(In millions)

Net Income

$

202

$

96

$

684

$

329

Other Comprehensive (Loss)/Income

Unrealized gain on derivatives

5

19

Foreign currency translation adjustments

(1

)

(4

)

(6

)

Available-for-sale securities

1

1

1

1

Defined benefit plans

(3

)

(1

)

(6

)

(2

)

Other comprehensive (loss)/income

(3

)

1

(5

)

12

Comprehensive Income

199

97

679

341

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

1

26

1

(12

)

Comprehensive Income Attributable to NRG Energy, Inc.

$

198

$

71

$

678

$

353

 

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 

June 30, 2019

December 31, 2018

(In millions, except share data)

(Unaudited)

ASSETS

Current Assets

Cash and cash equivalents

$

294

$

563

Funds deposited by counterparties

31

33

Restricted cash

11

17

Accounts receivable, net

1,049

1,024

Inventory

370

412

Derivative instruments

850

764

Cash collateral paid in support of energy risk management activities

163

287

Prepayments and other current assets

277

302

Current assets - held-for-sale

1

Current assets - discontinued operations

197

Total current assets

3,045

3,600

Property, plant and equipment, net

2,610

3,048

Other Assets

Equity investments in affiliates

383

412

Operating lease right-of-use assets, net

499

Goodwill

573

573

Intangible assets, net

561

591

Nuclear decommissioning trust fund

748

663

Derivative instruments

426

317

Deferred income taxes

55

46

Other non-current assets

271

289

Non-current assets - held-for-sale

77

Non-current assets - discontinued operations

1,012

Total other assets

3,516

3,980

Total Assets

$

9,171

$

10,628

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Current portion of long-term debt and capital leases

$

87

$

72

Current portion of operating lease liabilities

74

Accounts payable

723

863

Derivative instruments

778

673

Cash collateral received in support of energy risk management activities

31

33

Accrued expenses and other current liabilities

601

680

Current liabilities - held-for-sale

5

Current liabilities - discontinued operations

72

Total current liabilities

2,294

2,398

Other Liabilities

Long-term debt and capital leases

5,794

6,449

Non-current operating lease liabilities

513

Nuclear decommissioning reserve

290

282

Nuclear decommissioning trust liability

448

371

Derivative instruments

374

304

Deferred income taxes

71

65

Other non-current liabilities

1,016

1,274

Non-current liabilities - held-for-sale

65

Non-current liabilities - discontinued operations

635

Total other liabilities

8,506

9,445

Total Liabilities

10,800

11,843

Redeemable noncontrolling interest in subsidiaries

19

19

Commitments and Contingencies

Stockholders' Equity

Common stock; $0.01 par value; 500,000,000 shares authorized; 421,830,474 and 420,288,886 shares issued and 258,570,598 and 283,650,039 shares outstanding at June 30, 2019 and December 31, 2018, respectively

4

4

Additional paid-in-capital

8,488

8,510

Accumulated deficit

(5,355

)

(6,022

)

Less treasury stock, at cost - 163,259,876 and 136,638,847 shares at June 30, 2019 and December 31, 2018, respectively

(4,686

)

(3,632

)

Accumulated other comprehensive loss

(99

)

(94

)

Total Stockholders' Equity

(1,648

)

(1,234

)

Total Liabilities and Stockholders' Equity

$

9,171

$

10,628

 

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

Six months ended June 30,

(In millions)

2019

2018

Cash Flows from Operating Activities

Net Income

$

684

$

329

Income from discontinued operations, net of income tax.

401

64

Net income from continuing operations.

283

265

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

Distributions and equity earnings of unconsolidated affiliates

22

12

Depreciation, amortization and accretion

184

252

Provision for bad debts

52

30

Amortization of nuclear fuel

27

24

Amortization of financing costs and debt discount/premiums

13

13

Adjustment for debt extinguishment

47

3

Amortization of intangibles and out-of-market contracts

14

20

Amortization of unearned equity compensation

10

15

Loss/(gain) on sale and disposal of assets

1

(16

)

Impairment losses

1

88

Changes in derivative instruments

(22

)

(145

)

Changes in deferred income taxes and liability for uncertain tax benefits

(5

)

(2

)

Changes in collateral deposits in support of energy risk management activities

125

(9

)

Changes in nuclear decommissioning trust liability

17

41

Loss on deconsolidation of Ivanpah project

22

Changes in other working capital

(388

)

(349

)

Cash provided by continuing operations

381

264

Cash provided by discontinued operations

8

249

Net Cash Provided by Operating Activities

389

513

Cash Flows from Investing Activities

Payments for acquisitions of businesses

(21

)

(211

)

Capital expenditures

(107

)

(282

)

Net proceeds from sale of emission allowances

(1

)

3

Investments in nuclear decommissioning trust fund securities

(209

)

(346

)

Proceeds from the sale of nuclear decommissioning trust fund securities

191

303

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

1,289

146

Deconsolidation of Ivanpah project

(160

)

Changes in investments in unconsolidated affiliates

7

(15

)

Contributions to discontinued operations

(44

)

(16

)

Cash provided/(used) by continuing operations

1,105

(578

)

Cash used by discontinued operations

(2

)

(584

)

Net Cash Provided/(Used) by Investing Activities

1,103

(1,162

)

Cash Flows from Financing Activities

Payments of dividends to common stockholders

(16

)

(19

)

Payments for treasury stock

(1,039

)

(500

)

Payments for debt extinguishment costs

(24

)

Distributions to noncontrolling interests from subsidiaries

(1

)

(14

)

Proceeds from issuance of common stock

2

11

Proceeds from issuance of short and long-term debt

1,833

994

Payment of debt issuance costs

(33

)

(19

)

Payments for short and long-term debt

(2,485

)

(348

)

Cash (used)/provided by continuing operations

(1,763

)

105

Cash provided by discontinued operations

43

345

Net Cash (Used)/Provided by Financing Activities

(1,720

)

450

Change in Cash from discontinued operations

49

10

Net Decrease in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash.

(277

)

(209

)

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

613

1,086

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

$

336

$

877

Appendix Table A-1: Second Quarter 2019 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)

Texas

East/
West1

Generation

Retail

Corp/
Elim

Total

Income/(Loss) from Continuing Operations

539

79

618

(280

)

(149

)

189

Plus:

Interest expense, net

6

6

1

92

99

Income tax

1

(2

)

(1

)

Loss on debt extinguishment

47

47

Depreciation and amortization

22

23

45

32

8

85

ARO Expense

3

4

7

7

Contract amortization

6

6

6

EBITDA

570

112

682

(246

)

(4

)

432

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

5

28

33

33

Acquisition-related transaction & integration costs

1

1

Reorganization costs

2

2

Legal Settlement

3

8

11

11

Deactivation costs

7

7

2

9

Other non recurring charges

2

2

(1

)

1

Impairments

1

1

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

(444

)

(61

)

(505

)

484

(21

)

Adjusted EBITDA

134

96

230

240

(1

)

469

1 Includes International, remaining renewables and Generation eliminations

Second Quarter 2019 condensed financial information by Operating Segment:

($ in millions)

Texas

East/
West1

Generation

Retail

Corp/
Elim

Total

Operating revenues

513

330

843

1,746

(365

)

2,224

Cost of sales

226

124

350

1,288

(365

)

1,273

Economic gross margin2

287

206

493

458

951

Operations & maintenance and other cost of operations3

130

125

255

83

(1

)

337

Selling, marketing, general and administrative4

29

31

60

135

5

200

Other expense/(income)5

(6

)

(46

)

(52

)

(3

)

(55

)

Adjusted EBITDA

134

96

230

240

(1

)

469

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gain of $21 million and contract amortization of $6 million

3 Excludes deactivation costs of $9 million

4 Excludes legal settlement of $11 million

5 Excludes acquisition-related transaction & integration costs of $1 million, reorganization costs of $2 million and loss on debt extinguishment of $47 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

2,465

(241

)

2,224

Cost of operations

1,499

(6

)

(220

)

1,273

Gross margin

966

6

(21

)

951

Operations & maintenance and other cost of operations

346

(9

)

337

Selling, marketing, general & administrative1

211

(11

)

200

Other expense/(income)2

220

(190

)

(85

)

(55

)

Income/(Loss) from Continuing Operations

189

196

(21

)

9

96

469

1 Other adj. includes legal settlement of $11 million

2 Other adj. includes impairments of $1 million, acquisition-related transaction & integration costs of $1 million, reorganization costs of $2 million and loss on debt extinguishment of $47 million

Appendix Table A-2: Second Quarter 2018 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)

Texas

East/
West1

Generation

Retail

Corp/
Elim

Total

Income/(Loss) from Continuing Operations

286

(34

)

252

(84

)

(141

)

27

Plus:

Interest expense, net

15

15

1

105

121

Income tax

1

1

4

5

Loss on debt extinguishment

1

1

Depreciation and amortization

21

53

74

30

8

112

ARO Expense

4

4

8

1

9

Contract amortization

7

7

7

Lease amortization

(2

)

(2

)

(2

)

EBITDA

318

37

355

(53

)

(22

)

280

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

3

15

18

18

Acquisition-related transaction & integration costs

1

1

Reorganization costs

1

2

3

1

19

23

Legal Settlement

13

13

6

19

Deactivation costs

7

7

3

10

Gain on sale of business

(16

)

(16

)

Other non recurring charges

4

4

3

(3

)

4

Impairments

6

95

101

1

102

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

(293

)

23

(270

)

346

76

Adjusted EBITDA

48

183

231

298

(12

)

517

1 Includes International, remaining renewables and Generation eliminations

Second Quarter 2018 condensed financial information by Operating Segment:

($ in millions)

Texas

East/
West1

Generation

Retail

Corp/
Elim

Total

Operating revenues

412

481

893

1,814

(256

)

2,451

Cost of sales

223

165

388

1,318

(254

)

1,452

Economic gross margin2

189

316

505

496

(2

)

999

Operations & maintenance and other cost of operations3

138

125

263

75

(5

)

333

Selling, marketing, general & administrative4

12

33

45

125

11

181

Other expense/(income)5

(9

)

(25

)

(34

)

(2

)

4

(32

)

Adjusted EBITDA

48

183

231

298

(12

)

517

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM loss of $76 million and contract amortization of $7 million

3 Excludes deactivation costs of $10 million

4 Excludes legal settlement of $19 million

5 Excludes gain on sale of business of $16 million, acquisition-related transaction & integration costs of $1 million, reorganization costs of $23 million and loss on debt extinguishment of $1 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

2,461

(10

)

2,451

Cost of operations

1,545

(7

)

(86

)

1,452

Gross margin

916

7

76

999

Operations & maintenance and other cost of operations

343

(10

)

333

Selling, marketing, general & administrative1

200

(19

)

181

Other expense/(income)2

346

(245

)

(133

)

(32

)

Income/(Loss) from Continuing Operations

27

252

76

10

152

517

1 Other adj. includes legal settlement of $19 million

2 Other adj. includes impairments of $102 million, gain on sale of business of $16 million, acquisition-related transaction & integration costs of $1 million, reorganization costs of $23 million and loss on debt extinguishment of $1 million

Appendix Table A-3: YTD Second Quarter 2019 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)

Texas

East/
West1

Generation

Retail

Corp/
Elim

Total

Income/(Loss) from Continuing Operations

582

149

731

(170

)

(278

)

283

Plus:

Interest expense, net

13

13

1

192

206

Income tax

1

1

1

1

3

Loss on debt extinguishment

47

47

Depreciation and amortization

43

48

91

63

16

170

ARO Expense

7

7

14

14

Contract Amortization

11

11

11

EBITDA

643

218

861

(105

)

(22

)

734

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

8

57

65

65

Acquisition-related transaction & integration costs

1

1

Reorganization costs

1

1

3

11

15

Legal Settlement

3

8

11

11

Deactivation costs

8

8

5

13

Other non recurring charges

(1

)

2

1

1

2

Impairments

1

1

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

(475

)

(58

)

(533

)

492

(41

)

Adjusted EBITDA

178

236

414

393

(6

)

801

1 Includes International, remaining renewables and Generation eliminations

YTD Second Quarter 2019 condensed financial information by Operating Segment:

($ in millions)

Texas

East/
West1

Generation

Retail

Corp/
Elim

Total

Operating revenues

900

761

1,661

3,353

(645

)

4,369

Cost of sales

421

313

734

2,523

(643

)

2,614

Economic gross margin2

479

448

927

830

(2

)

1,755

Operations & maintenance and other cost of operations3

260

217

477

163

(2

)

638

Selling, marketing, general & administrative4

52

54

106

277

11

394

Other expense/(income)5

(11

)

(59

)

(70

)

(3

)

(5

)

(78

)

Adjusted EBITDA

178

236

414

393

(6

)

801

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gain of $41 million and contract amortization of $11 million

3 Excludes deactivation costs of $13 million

4 Excludes legal settlement of $11 million

5 Excludes acquisition-related transaction & integration costs of $1 million, reorganization costs of $15 million and loss on debt extinguishment of $47 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

4,630

(261

)

4,369

Cost of operations

2,845

(11

)

(220

)

2,614

Gross margin

1,785

11

(41

)

1,755

Operations & maintenance and other cost of operations

651

(13

)

638

Selling, marketing, general & administrative1

405

(11

)

394

Other expense/(income)2

446

(393

)

(131

)

(78

)

Income/(Loss) from Continuing Operations

283

404

(41

)

13

142

801

1 Other adj. includes legal settlement of $11 million

2 Other adj. includes impairments of $1 million, acquisition-related transaction & integration costs of $1 million, reorganization costs of $15 million and loss on debt extinguishment of $47 million

Appendix Table A-4: YTD Second Quarter 2018 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)

Texas

East/
West1

Generation

Retail

Corp/
Elim

Total

Income/(Loss) from Continuing Operations

(314

)

(5

)

(319

)

860

(276

)

265

Plus:

Interest expense, net

36

36

2

195

233

Income tax

11

11

Loss on debt extinguishment

3

3

Depreciation and amortization

42

118

160

56

16

232

ARO Expense

11

8

19

1

20

Contract Amortization

12

1

13

13

Lease amortization

(4

)

(4

)

(4

)

EBITDA

(249

)

154

(95

)

918

(50

)

773

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

2

23

25

1

26

Acquisition-related transaction & integration costs

1

4

5

Reorganization costs

2

4

6

5

32

43

Legal Settlement

13

13

6

19

Deactivation costs

10

10

5

15

Gain on sale of business

1

1

(17

)

(16

)

Other non recurring charges

5

5

2

7

Impairments

15

95

110

1

111

MtM (gains)/losses on economic hedges

278

32

310

(440

)

(130

)

Adjusted EBITDA

61

324

385

486

(18

)

853

1 Includes International, remaining renewables and Generation eliminations

YTD Second Quarter 2018 condensed financial information by Operating Segment:

($ in millions)

Texas

East/
West1

Generation

Retail

Corp/
Elim

Total

Operating revenues

730

1,008

1,738

3,300

(426

)

4,612

Cost of sales

373

393

766

2,428

(419

)

2,775

Economic gross margin2

357

615

972

872

(7

)

1,837

Operations & maintenance and other cost of operations3

279

269

548

146

(7

)

687

Selling, marketing, general & administrative4

35

62

97

240

20

357

Other expense/(income)5

(18

)

(40

)

(58

)

(2

)

(60

)

Adjusted EBITDA

61

324

385

486

(18

)

853

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gain of $130 million and contract amortization of $13 million

3 Excludes deactivation costs of $15 million

4 Excludes legal settlement of $19 million

5 Excludes gain on sale of business of $16 million, acquisition-related transaction & integration costs of $5 million, reorganization costs of $43 million and loss on debt extinguishment 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

4,526

86

4,612

Cost of operations

2,572

(13

)

216

2,775

Gross margin

1,954

13

(130

)

1,837

Operations & maintenance and other cost of operations

702

(15

)

687

Selling, marketing, general & administrative

376

(19

)

357

Other expense/(income) 1

611

(492

)

(179

)

(60

)

Income/(Loss) from Continuing Operations

265

505

(130

)

15

198

853

1 Other adj. includes legal settlement of $19 million

2 Other adj. includes impairments of $111 million, gain on sale of business of $16 million, acquisition-related transaction & integration costs of $5 million, reorganization costs of $43 million and loss on debt extinguishment of $3 million

Appendix Table A-5: 2019 and 2018 Three Months and Six Months Ended December 31 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, 2019

June 30, 2018

Net Cash Provided by Operating Activities

516

18

Merger, integration and cost-to-achieve expenses1

2

22

Adjustment for change in collateral

(246

)

182

Adjusted Cash Flow from Operating Activities

272

222

Maintenance CapEx, net

(41

)

(45

)

Environmental CapEx, net

$

(1

)

Distributions to non-controlling interests

(3

)

Free Cash Flow Before Growth Investments (FCFbG)

230

174

 

1 2019 and 2018 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call

Six Months Ended

($ in millions)

June 30, 2019

June 30, 2018

Net Cash Provided by Operating Activities

381

264

Merger, integration and cost-to-achieve expenses1

18

44

Sale of Land

3

GenOn Settlement2

5

Adjustment for change in collateral

(123

)

18

Adjusted Cash Flow from Operating Activities

282

329

Maintenance CapEx, net

(76

)

(100

)

Environmental CapEx, net

(2

)

Distributions to non-controlling interests

(13

)

Free Cash Flow Before Growth Investments (FCFbG)

204

216

1 2019 and 2018 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call

2 2019 includes final restructuring fee of $5 million

Appendix Table A-6: Second Quarter YTD 2019 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity through second quarter of 2019:

($ in millions)

Six Months Ended
June 30, 2019

Sources:

Adjusted cash flow from operations

282

Increase in credit facility

402

Collateral1

125

Asset sales

1,289

Uses:

Share repurchases

(1,039

)

Debt Repayment, net of proceeds

(652

)

Financing Fees - Debt issuance and Debt extinguishment costs

(57

)

Growth investments and acquisitions, net

(60

)

GenOn Settlement (Final Restructuring Fee)

(5

)

Maintenance and Environmental CapEx, net

(78

)

Cost-to-achieve expenses2

(45

)

Common Stock Dividends

(16

)

Other Investing and Financing

(19

)

Change in Total Liquidity

127

1 Excludes impact of Funds deposited by counterparties

2 Includes capital expenditures associated with the Transformation Plan

Appendix Table A-7: 2019 Adjusted EBITDA Guidance Reconciliation
The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to Income from Continuing Operations:

2019 Guidance

($ in millions)

Low

High

Income from Continuing Operations 1

940

1,140

Income Tax

15

15

Interest Expense

335

335

Depreciation, Amortization, Contract Amortization and ARO Expense

430

430

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

80

80

Other Costs 2

50

50

Adjusted EBITDA

1,850

2,050

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: 2019 FCFbG Guidance Reconciliation
The following table summarizes the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:

2019

($ in millions)

Guidance

Adjusted EBITDA

$1,850 - $2,050

Interest payments

(335

)

Income tax

(15

)

Working capital / other assets and liabilities

(145

)

Cash From Operations

$1,355 - $1,555

Adjustments: Acquired Derivatives, Cost-to-Achieve, Return of Capital Dividends, Collateral and Other

50

Adjusted Cash flow from Operations

$1,405 - $1,605

Maintenance capital expenditures, net

(145) - (165)

Environmental capital expenditures, net

(0) - (5)

Free Cash Flow before Growth

$1,250 - $1,450

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 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.

Contacts:

Media:
Candice Adams
609.524.5428

Investors:
Kevin L. Cole, CFA
609.524.4526

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