Financial News

NRG Energy, Inc. Reports Second Quarter 2022 Results

  • Received $689 million Winter Storm Uri Securitization
  • Published 12th annual Sustainability Report
  • Executing $1 billion share repurchase program; $595 million remaining to be completed
  • Maintaining 2022 Adjusted EBITDA and FCFbG guidance

NRG Energy, Inc. (NYSE: NRG) today reported a second quarter 2022 Net Income of $513 million, or $2.16 per diluted common share, and Adjusted EBITDA for the second quarter of $358 million.

“During the second quarter, we made good progress on our growth priorities while navigating volatile market conditions," said Mauricio Gutierrez, NRG President and Chief Executive Officer. “I am confident in the ability of our customer-focused strategy to deliver significant value to both consumers and shareholders.”

Consolidated Financial Results

 

Three Months Ended

 

Six Months Ended

($ in millions)

 

6/30/2022

 

6/30/2021

 

6/30/2022

 

6/30/2021

Net Income

 

$

513

 

$

1,078

 

$

2,249

 

$

996

Cash provided by Operating Activities

 

$

1,513

 

$

1,294

 

$

3,189

 

$

377

Adjusted EBITDAa

 

$

358

 

$

656

 

$

867

 

$

1,223

a. Three and six months ended 6/30/21 excludes the loss due to Winter Storm Uri of $82 million and $1,049 million, respectively

Segments Results

Table 1: Net Income

($ in millions)

 

Three Months Ended

 

Six Months Ended

Segment

 

6/30/2022

 

6/30/2021

 

6/30/2022

 

6/30/2021

Texas

 

$

766

 

 

$

783

 

 

$

1,539

 

 

$

350

 

East

 

 

(10

)

 

 

783

 

 

 

1,531

 

 

 

1,139

 

West/Services/Othera

 

 

(243

)

 

 

(488

)

 

 

(821

)

 

 

(493

)

Net Income

 

$

513

 

 

$

1,078

 

 

$

2,249

 

 

$

996

 

a. Includes Corporate segment

Second quarter net income was $513 million, $565 million lower than second quarter 2021, primarily driven by lower mark-to-market gains on economic hedge positions. This was partially offset by lower impairment losses in the second quarter of 2022 compared to the second quarter of 2021.

Table 2: Adjusted EBITDA

($ in millions)

 

Three Months Ended

 

Six Months Ended

Segment

 

6/30/2022

 

6/30/2021

 

6/30/2022

 

6/30/2021

Texas

 

$

251

 

$

312

 

$

449

 

$

558

East

 

 

61

 

 

281

 

 

386

 

 

541

West/Services/Other a

 

 

46

 

 

63

 

 

32

 

 

124

Adjusted EBITDAb

 

$

358

 

$

656

 

$

867

 

$

1,223

a. Includes Corporate segment

b. Three and six months ended 6/30/21 excludes the loss due to Winter Storm Uri of $82 million and $1,049 million, respectively

Texas: Second quarter Adjusted EBITDA was $251 million, $61 million lower than the second quarter of 2021. This decrease was driven primarily by the extended outage at W.A. Parish Unit 8 that began in the second quarter of 2022. Favorable weather-driven retail load was offset by higher supply costs.

East: Second quarter Adjusted EBITDA was $61 million, $220 million lower than the second quarter of 2021. This decrease was driven primarily by the December 2021 sale of the 4.8 GW fossil generation assets, higher supply costs, and lower demand response revenues associated with an early settlement in 2021.

West/Services/Other: Second quarter Adjusted EBITDA was $46 million, $17 million lower than the second quarter of 2021. This decrease was driven primarily by the December 2021 sale of the 4.8 GW fossil generation assets and higher natural gas supply costs.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

($ in millions)

 

06/30/22

 

12/31/21

Cash and Cash Equivalents

 

$

580

 

$

250

Restricted Cash

 

 

44

 

 

15

Total

 

 

624

 

 

265

Total Revolving Credit Facility and collective collateral facilities

 

 

2,460

 

 

2,421

Total Liquidity, excluding collateral received

 

$

3,084

 

$

2,686

As of June 30, 2022, NRG's cash was at $580 million, and $2.5 billion was available under the Company’s credit facilities. Total liquidity was $3.1 billion, which was approximately $398 million higher than at the end of 2021.

NRG Strategic Developments

ERCOT Securitization Proceeds

In 2021, the Texas Legislature passed HB 4492 for ERCOT to mitigate exceptionally high price adders and ancillary service costs incurred by Load Serving Entities (LSEs) during Winter Storm Uri. HB 4492 authorized ERCOT to raise $2.1 billion of financing to distribute to LSEs that were charged and paid to ERCOT those highly priced ancillary service and ORDPA during Winter Storm Uri. The Company accounted for the expected proceeds as a reduction to cost of operations during December 2021 and received the proceeds of $689 million from ERCOT in June 2022.

W.A. Parish Unit 8 Extended Outage

In May 2022, W.A. Parish Unit 8 came offline as a result of damage to certain components of the steam turbine/generator. Based on management's current assessment of necessary restoration efforts, the Company is targeting to return the unit to service by the end of the second quarter of 2023.

Sale of Watson

On June 1, 2022, the Company closed on the sale of its 49% ownership in the Watson natural gas generating facility to Tesoro Refining & Marketing Company LLC for $59 million. NRG recognized a gain on the sale of $46 million.

Sustainability Update

NRG released its 2021 sustainability report, providing an update on the Company’s comprehensive sustainability strategy. As of December 31, 2021, NRG recorded an approximately 44% reduction in total greenhouse gas emissions, from the 2014 baseline, and a 64% decrease in revenue carbon intensity since 2019. The report also highlights the Company’s commitments to safety and well-being, community, and builds on more than a decade of leadership across business, customers, workplace, operations, and supply chain.

2022 Guidance

NRG is maintaining its Adjusted EBITDA and FCFbG guidance for 2022 as set forth below.

Table 4: 2022 Adjusted EBITDA, Adjusted Cash from Operations, and FCFbG Guidance

 

 

2022

(In millions)

 

Guidance

Adjusted EBITDAa

 

$1,950 - $2,250

Adjusted Cash Flow from Operations

 

$1,470 - $1,770

FCFbG

 

$1,140 - $ 1,440

a. Non-GAAP financial measure; see Appendix Table A-7 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 announced on December 6, 2021, the Company's Board of Directors authorized $1 billion for share repurchases. The program began in 2021 with $39 million in share repurchases completed in December of that year, and an incremental $366 million completed through July 31, 2022; the balance of $595 million under the current program is expected to be executed by the end of 2022.

On July 20, 2022, NRG announced that its Board of Directors declared a quarterly dividend on the Company's common stock of $0.35 per share, or $1.40 per share on an annualized basis. The dividend is payable on August 15, 2022, to stockholders of record as of August 1, 2022.

The Company remains committed to maintaining a strong balance sheet, continues to work to achieve investment-grade credit metrics, and expects to grow into its target investment grade metrics, primarily through the realization of Direct Energy run-rate earnings and other growth initiatives.

The Company's share repurchase program and common stock dividend are subject to maintaining satisfactory credit metrics, available capital, market conditions, and compliance with associated laws and regulations. The timing and amount of any shares of NRG’s common stock that are repurchased under the share repurchase authorization will be determined by NRG’s management based on market conditions and other factors. NRG will only repurchase shares when management believes it would not jeopardize the company’s ability to maintain satisfactory credit ratings.

Earnings Conference Call

On August 4, 2022, NRG will host a conference call at 9:00 a.m. Eastern (8:00 a.m. Central) 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 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 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 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, the potential impact of COVID-19 or any other pandemic on the Company’s operations, financial position, risk exposure and liquidity, data privacy, 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 or asset sales, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to achieve our net debt targets, our ability to achieve or 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 execute our market 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, adjusted cash flow from operations and free cash flow guidance are estimates as of August 4, 2022. 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)

2022

 

2021

 

2022

 

2021

Revenue

 

 

 

 

 

 

 

Revenue

$

7,282

 

 

$

5,243

 

 

$

15,178

 

 

$

13,334

 

Operating Costs and Expenses

 

 

 

 

 

 

 

Cost of operations (excluding depreciation and amortization shown below)

 

5,887

 

 

 

2,948

 

 

 

10,817

 

 

 

9,805

 

Depreciation and amortization

 

157

 

 

 

53

 

 

 

340

 

 

 

370

 

Impairment losses

 

155

 

 

 

306

 

 

 

155

 

 

 

306

 

Selling, general and administrative costs

 

325

 

 

 

317

 

 

 

647

 

 

 

654

 

Provision for credit losses

 

26

 

 

 

40

 

 

 

51

 

 

 

651

 

Acquisition-related transaction and integration costs

 

10

 

 

 

22

 

 

 

18

 

 

 

64

 

Total operating costs and expenses

 

6,560

 

 

 

3,686

 

 

 

12,028

 

 

 

11,850

 

Gain on sale of assets

 

32

 

 

 

 

 

 

29

 

 

 

17

 

Operating Income

 

754

 

 

 

1,557

 

 

 

3,179

 

 

 

1,501

 

Other Income/(Expense)

 

 

 

 

 

 

 

Equity in earnings/(losses) of unconsolidated affiliates

 

4

 

 

 

14

 

 

 

(11

)

 

 

8

 

Other income, net

 

12

 

 

 

12

 

 

 

12

 

 

 

34

 

Interest expense

 

(105

)

 

 

(125

)

 

 

(208

)

 

 

(252

)

Total other expense

 

(89

)

 

 

(99

)

 

 

(207

)

 

 

(210

)

Income Before Income Taxes

 

665

 

 

 

1,458

 

 

 

2,972

 

 

 

1,291

 

Income tax expense

 

152

 

 

 

380

 

 

 

723

 

 

 

295

 

Net Income

$

513

 

 

$

1,078

 

 

$

2,249

 

 

$

996

 

Income per Share

 

 

 

 

 

 

 

Weighted average number of common shares outstanding — basic and diluted

 

237

 

 

 

245

 

 

 

240

 

 

 

245

 

Income per Weighted Average Common Share —Basic and Diluted

$

2.16

 

 

$

4.40

 

 

$

9.37

 

 

$

4.07

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

Three months ended June 30,

 

Six months ended June 30,

(In millions)

2022

 

2021

 

2022

 

2021

Net Income

$

513

 

 

$

1,078

 

$

2,249

 

 

$

996

Other Comprehensive (Loss)/Income

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(22

)

 

 

2

 

 

(13

)

 

 

5

Defined benefit plans

 

20

 

 

 

19

 

 

19

 

 

 

19

Other comprehensive (loss)/income

 

(2

)

 

 

21

 

 

6

 

 

 

24

Comprehensive Income

$

511

 

 

$

1,099

 

$

2,255

 

 

$

1,020

 

 

 

 

 

 

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

June 30, 2022

 

December 31, 2021

(In millions, except share data)

(Unaudited)

 

(Audited)

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

580

 

 

$

250

 

Funds deposited by counterparties

 

3,970

 

 

 

845

 

Restricted cash

 

44

 

 

 

15

 

Accounts receivable, net

 

3,862

 

 

 

3,245

 

Uplift securitization proceeds receivable from ERCOT

 

 

 

 

689

 

Inventory

 

604

 

 

 

498

 

Derivative instruments

 

11,323

 

 

 

4,613

 

Cash collateral paid in support of energy risk management activities

 

295

 

 

 

291

 

Prepayments and other current assets

 

470

 

 

 

395

 

Total current assets

 

21,148

 

 

 

10,841

 

Property, plant and equipment, net

 

1,598

 

 

 

1,688

 

Other Assets

 

 

 

Equity investments in affiliates

 

127

 

 

 

157

 

Operating lease right-of-use assets, net

 

237

 

 

 

271

 

Goodwill

 

1,657

 

 

 

1,795

 

Intangible assets, net

 

2,450

 

 

 

2,511

 

Nuclear decommissioning trust fund

 

836

 

 

 

1,008

 

Derivative instruments

 

4,548

 

 

 

2,527

 

Deferred income taxes

 

1,501

 

 

 

2,155

 

Other non-current assets

 

233

 

 

 

229

 

Total other assets

 

11,589

 

 

 

10,653

 

Total Assets

$

34,335

 

 

$

23,182

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current Liabilities

 

 

 

Current portion of long-term debt and finance leases

$

62

 

 

$

4

 

Current portion of operating lease liabilities

 

82

 

 

 

81

 

Accounts payable

 

2,933

 

 

 

2,274

 

Derivative instruments

 

8,000

 

 

 

3,387

 

Cash collateral received in support of energy risk management activities

 

3,970

 

 

 

845

 

Accrued expenses and other current liabilities

 

1,390

 

 

 

1,324

 

Total current liabilities

 

16,437

 

 

 

7,915

 

Other Liabilities

 

 

 

Long-term debt and finance leases

 

7,970

 

 

 

7,966

 

Non-current operating lease liabilities

 

201

 

 

 

236

 

Nuclear decommissioning reserve

 

330

 

 

 

321

 

Nuclear decommissioning trust liability

 

485

 

 

 

666

 

Derivative instruments

 

2,565

 

 

 

1,412

 

Deferred income taxes

 

71

 

 

 

73

 

Other non-current liabilities

 

976

 

 

 

993

 

Total other liabilities

 

12,598

 

 

 

11,667

 

Total Liabilities

 

29,035

 

 

 

19,582

 

Commitments and Contingencies

 

 

 

Stockholders' Equity

 

 

 

Common stock; $0.01 par value; 500,000,000 shares authorized; 423,868,387 and 423,547,174 shares issued and 235,146,021, and 243,753,899 shares outstanding at June 30, 2022 and December 31, 2021, respectively

 

4

 

 

 

4

 

Additional paid-in-capital

 

8,442

 

 

 

8,531

 

Retained earnings

 

2,600

 

 

 

464

 

Treasury stock, at cost 188,722,366, and 179,793,275 shares at June 30, 2022 and December 31, 2021, respectively

 

(5,626

)

 

 

(5,273

)

Accumulated other comprehensive loss

 

(120

)

 

 

(126

)

Total Stockholders' Equity

 

5,300

 

 

 

3,600

 

Total Liabilities and Stockholders' Equity

$

34,335

 

 

$

23,182

 

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Six months ended June 30,

(In millions)

2022

 

2021

Cash Flows from Operating Activities

 

 

 

Net Income

$

2,249

 

 

$

996

 

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

 

 

 

Distributions from and equity in (losses)/earnings of unconsolidated affiliates

 

16

 

 

 

14

 

Depreciation and amortization

 

340

 

 

 

370

 

Accretion of asset retirement obligations

 

16

 

 

 

14

 

Provision for credit losses

 

51

 

 

 

651

 

Amortization of nuclear fuel

 

28

 

 

 

25

 

Amortization of financing costs and debt discounts

 

11

 

 

 

20

 

Amortization of in-the-money contracts and emissions allowances

 

128

 

 

 

108

 

Amortization of unearned equity compensation

 

14

 

 

 

10

 

Net gain on sale and disposal of assets

 

(46

)

 

 

(25

)

Impairment losses

 

155

 

 

 

306

 

Changes in derivative instruments

 

(3,918

)

 

 

(2,430

)

Changes in deferred income taxes and liability for uncertain tax benefits

 

672

 

 

 

257

 

Changes in collateral deposits in support of energy risk management activities

 

3,121

 

 

 

696

 

Changes in nuclear decommissioning trust liability

 

(5

)

 

 

30

 

Uplift securitization proceeds received from ERCOT

 

689

 

 

 

 

Changes in other working capital

 

(332

)

 

 

(665

)

Cash provided by operating activities

 

3,189

 

 

 

377

 

Cash Flows from Investing Activities

 

 

 

Payments for acquisitions of businesses and assets, net of cash acquired

 

(53

)

 

 

(3,521

)

Capital expenditures

 

(150

)

 

 

(143

)

Net (purchases)/sales of emission allowances

 

(19

)

 

 

1

 

Investments in nuclear decommissioning trust fund securities

 

(271

)

 

 

(253

)

Proceeds from the sale of nuclear decommissioning trust fund securities

 

278

 

 

 

226

 

Proceeds from sales of assets, net of cash disposed

 

96

 

 

 

198

 

Cash used by investing activities

 

(119

)

 

 

(3,492

)

Cash Flows from Financing Activities

 

 

 

Payments of dividends to common stockholders

 

(168

)

 

 

(159

)

Payments for share repurchase activity

 

(366

)

 

 

(9

)

Net receipts from settlement of acquired derivatives that include financing elements

 

950

 

 

 

191

 

Net proceeds of Revolving Credit Facility and Receivables Securitization Facilities

 

 

 

 

75

 

Repayments of long-term debt and finance leases

 

(2

)

 

 

(4

)

Payments of debt issuance costs

 

 

 

 

(2

)

Proceeds from issuance of common stock

 

 

 

 

1

 

Cash provided by financing activities

 

414

 

 

 

93

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

1

 

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

 

3,484

 

 

 

(3,021

)

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

 

1,110

 

 

 

3,930

 

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

$

4,594

 

 

$

909

 

Appendix Table A-1: Second Quarter 2022 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/ Other

Corp/Elim

Total

Net Income/(Loss)

$

766

 

$

(10

)

$

18

 

$

(261

)

$

513

 

Plus:

 

 

 

 

 

Interest expense, net

 

 

 

(2

)

 

8

 

 

88

 

 

94

 

Income tax

 

 

 

(1

)

 

11

 

 

142

 

 

152

 

Depreciation and amortization

 

77

 

 

50

 

 

22

 

 

8

 

 

157

 

ARO Expense

 

3

 

 

5

 

 

1

 

 

 

 

9

 

Contract amortization

 

(2

)

 

(25

)

 

5

 

 

 

 

(22

)

EBITDA

 

844

 

 

17

 

 

65

 

 

(23

)

 

903

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

 

 

 

17

 

 

 

 

17

 

Acquisition and divestiture integration and transaction costs

 

 

 

 

 

 

 

14

 

 

14

 

Deactivation costs

 

 

 

5

 

 

 

 

 

 

5

 

Loss/(gain) on sale of assets

 

12

 

 

 

 

(44

)

 

 

 

(32

)

Other non recurring charges

 

1

 

 

20

 

 

(5

)

 

(1

)

 

15

 

Impairments

 

 

 

155

 

 

 

 

 

 

155

 

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

 

(606

)

 

(136

)

 

23

 

 

 

 

(719

)

Adjusted EBITDA

$

251

 

$

61

 

$

56

 

$

(10

)

$

358

 

Second Quarter 2022 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/Services/ Other

Corp/Elim

Total

Revenue1

$

2,697

$

3,633

 

$

1,110

 

$

3

 

$

7,443

 

Cost of fuel, purchased power and other cost of sales2

 

2,039

 

3,339

 

 

961

 

 

4

 

 

6,343

 

Economic gross margin

 

658

 

294

 

 

149

 

 

(1

)

 

1,100

 

Operations & maintenance and other cost of operations3

 

243

 

122

 

 

54

 

 

(1

)

 

418

 

Selling, marketing, general and administrative4

 

155

 

105

 

 

53

 

 

10

 

 

323

 

Provision for credit losses

 

9

 

11

 

 

6

 

 

 

 

26

 

Other

 

 

(5

)

 

(20

)

 

 

 

(25

)

Adjusted EBITDA

$

251

$

61

 

$

56

 

$

(10

)

$

358

 

1 Excludes MtM loss of $148 million and contract amortization of $13 million

2 Includes TDSP expense, capacity and emission credits

3 Excludes other non recurring of $15 million, ARO expense of $9 million and deactivation costs of $5 million

4 Excludes acquisition and divestiture integration and transaction costs of $2 million

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

($ in millions)

Condensed Consolidated Results of Operations

Interest, tax, depr., amort.

MtM

Deactivation

Other adj.2

Adjusted EBITDA

Revenue

$

7,282

$

13

 

$

148

 

$

 

$

 

$

7,443

 

Cost of operations (excluding depreciation and amortization shown below)1

 

5,441

 

35

 

 

867

 

 

 

 

 

 

6,343

 

Depreciation and Amortization

 

157

 

(157

)

 

 

 

 

 

 

 

 

Gross margin

 

1,684

 

135

 

 

(719

)

 

 

 

0

 

 

1,100

 

Operations & maintenance and other cost of operations

 

446

 

 

 

 

 

(5

)

 

(23

)

 

418

 

Selling, marketing, general & administrative

 

325

 

 

 

 

 

 

 

(2

)

 

323

 

Provision for credit losses

 

26

 

 

 

 

 

 

 

 

 

26

 

Other

 

374

 

(246

)

 

 

 

 

 

(153

)

 

(25

)

Net Income/(Loss)

$

513

$

381

 

$

(719

)

$

5

 

$

178

 

$

358

 

1 Excludes Operations & maintenance and other cost of operations of $446 million

2 Other adj. includes impairments of $155 million, adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates of $17 million, other non recurring charges of $15 million, acquisition and divestiture integration and transaction costs of $14 million, ARO expenses of $9 million and gain on sale of assets ($32) million

Appendix Table A-2: 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/ Other

Corp/Elim

Total

Net Income/(Loss)

$

783

 

$

783

 

$

38

 

$

(526

)

$

1,078

 

Plus:

 

 

 

 

 

Interest expense, net

 

 

 

(2

)

 

3

 

 

124

 

 

125

 

Income tax

 

 

 

 

 

13

 

 

367

 

 

380

 

Depreciation and amortization

 

84

 

 

(56

)

 

18

 

 

7

 

 

53

 

ARO Expense

 

5

 

 

3

 

 

4

 

 

 

 

12

 

Contract amortization

 

(8

)

 

77

 

 

10

 

 

 

 

79

 

EBITDA

 

864

 

 

805

 

 

86

 

 

(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 and divestiture integration and transaction costs

 

 

 

 

 

 

 

22

 

 

22

 

Legal Settlement

 

 

 

 

 

 

 

2

 

 

2

 

Deactivation costs

 

 

 

15

 

 

 

 

 

 

15

 

Other non recurring charges

 

2

 

 

1

 

 

 

 

(2

)

 

1

 

Impairments

 

 

 

306

 

 

 

 

 

 

306

 

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

 

(625

)

 

(851

)

 

(41

)

 

 

 

(1,517

)

Adjusted EBITDA

$

312

 

$

281

 

$

65

 

$

(2

)

$

656

 

Second Quarter 2021 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/Services/ Other

Corp/Elim

Total

Revenue1

$

2,028

 

$

2,484

 

$

820

 

$

(3

)

$

5,329

 

Cost of fuel, purchased power and other cost of sales2

 

1,388

 

 

1,951

 

 

676

 

 

(1

)

 

4,014

 

Economic gross margin

 

640

 

 

533

 

 

144

 

 

(2

)

 

1,315

 

Operations & maintenance and other cost of operations3

 

225

 

 

139

 

 

66

 

 

(1

)

 

429

 

Selling, marketing, general & administrative4

 

140

 

 

121

 

 

46

 

 

9

 

 

316

 

Provision for credit losses

 

40

 

 

(2

)

 

2

 

 

 

 

40

 

Other

 

(6

)

 

(1

)

 

(33

)

 

(4

)

 

(44

)

Winter Storm Uri impact

 

(71

)

 

(5

)

 

(2

)

 

(4

)

 

(82

)

Adjusted EBITDA

$

312

 

$

281

 

$

65

 

$

(2

)

$

656

 

1 Excludes MtM loss of $70 million and contract amortization of $16 million

2 Includes TDSP expense, capacity and emission credits

3 Excludes ARO expense of $12 million and deactivation costs of $15 million

4 Excludes acquisition and divestiture integration and transaction costs of $22 million

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

($ in millions)

Condensed Consolidated Results of Operations

Interest, tax, depr., amort.

MtM

Deactivation

Winter Storm Uri

Other adj.2

Adjusted EBITDA

Revenue

$

5,243

$

16

 

$

70

 

$

 

$

(5

)

$

1

 

$

5,325

 

Cost of operations (excluding depreciation and amortization shown below)1

 

2,490

 

(63

)

 

1,587

 

 

 

 

(58

)

 

(1

)

 

3,955

 

Depreciation and amortization

 

53

 

(53

)

 

 

 

 

 

 

 

 

 

Gross margin

 

2,700

 

132

 

 

(1,517

)

 

 

 

53

 

 

2

 

 

1,370

 

Operations & maintenance and other cost of operations

 

458

 

 

 

 

 

(15

)

 

(2

)

 

(14

)

 

427

 

Selling, marketing, general & administrative

 

317

 

 

 

 

 

 

 

(6

)

 

(1

)

 

310

 

Provision for credit losses

 

40

 

 

 

 

 

 

 

(21

)

 

 

 

19

 

Other

 

807

 

(505

)

 

 

 

 

 

 

(344

)

 

(42

)

Net Income/(Loss)

$

1,078

$

637

 

$

(1,517

)

$

15

 

$

82

 

$

361

 

$

656

 

1 Excludes Operations & maintenance and other cost of operations of $458 million

2 Other adj. includes adjustment to reflect Impairments of $306 million, acquisition and divestiture integration and transaction costs of $22 million and NRG share of adjusted EBITDA in unconsolidated affiliates of $18 million and ARO expenses of $12 million

Appendix Table A-3: YTD Second Quarter 2022 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/ Other

Corp/Elim

Total

Net Income/(Loss)

$

1,539

 

$

1,531

 

$

143

 

$

(964

)

$

2,249

 

Plus:

 

 

 

 

 

Interest expense, net

 

 

 

(3

)

 

15

 

 

182

 

 

194

 

Income tax

 

 

 

(1

)

 

10

 

 

714

 

 

723

 

Depreciation and amortization

 

153

 

 

128

 

 

43

 

 

16

 

 

340

 

ARO expense

 

6

 

 

7

 

 

3

 

 

 

 

16

 

Contract and emission credit amortization, net

 

(4

)

 

122

 

 

7

 

 

 

 

125

 

EBITDA

 

1,694

 

 

1,784

 

 

221

 

 

(52

)

 

3,647

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

 

 

 

35

 

 

 

 

35

 

Acquisition and divestiture integration and transaction costs

 

 

 

 

 

 

 

24

 

 

24

 

Deactivation costs

 

 

 

9

 

 

 

 

 

 

9

 

Loss/(gain) on sale of assets

 

12

 

 

 

 

(43

)

 

2

 

 

(29

)

Other non-recurring charges

 

2

 

 

20

 

 

(11

)

 

11

 

 

22

 

Impairments

 

 

 

155

 

 

 

 

 

 

155

 

Mark-to-market (MtM) for economic hedging activities, net

 

(1,259

)

 

(1,582

)

 

(155

)

 

 

 

(2,996

)

Adjusted EBITDA

$

449

 

$

386

 

$

47

 

$

(15

)

$

867

 

YTD Second Quarter 2022 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/ Services/ Other

Corp/Elim

Total

Revenue1

$

4,722

 

$

8,490

 

$

2,266

 

$

3

 

$

15,481

 

Cost of fuel, purchased power and other cost of sales2

 

3,497

 

 

7,606

 

 

2,016

 

 

5

 

 

13,124

 

Economic gross margin

 

1,225

 

 

884

 

 

250

 

 

(2

)

 

2,357

 

Operations & maintenance and other cost of operations3

 

471

 

 

254

 

 

110

 

 

(2

)

 

833

 

Selling, general and administrative costs4

 

302

 

 

222

 

 

102

 

 

17

 

 

643

 

Provision for credit losses

 

12

 

 

25

 

 

14

 

 

 

 

51

 

Other

 

(9

)

 

(3

)

 

(23

)

 

(2

)

 

(37

)

Adjusted EBITDA

$

449

 

$

386

 

$

47

 

$

(15

)

$

867

 

1 Excludes MtM loss of $281 million and contract amortization of $22 million

2 Includes TDSP expenses, capacity and emissions credits

3 Excludes ARO expense of $16 million, deactivation costs of $9 million and other-non recurring charges of $9 million

4 Excludes acquisition and divestiture integration and transaction costs of $4 million

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

($ in millions)

Condensed Consolidated Results of Operations

Interest, tax, depr., amort.

MtM

Deactivation

Other adj.2

Adjusted EBITDA

Revenue

$

15,178

$

22

 

$

281

 

$

 

$

 

$

15,481

 

Cost of operations (excluding depreciation and amortization shown below)1

 

9,950

 

(103

)

 

3,277

 

 

 

 

 

 

13,124

 

Depreciation and amortization

 

340

 

(340

)

 

 

 

 

 

Gross margin

 

4,888

 

465

 

 

(2,996

)

 

 

 

 

 

2,357

 

Operations & maintenance and other cost of operations

 

867

 

 

 

 

 

(9

)

 

(25

)

 

833

 

Selling, general and administrative costs

 

647

 

 

 

 

 

 

 

(4

)

 

643

 

Provision for credit losses

 

51

 

 

 

 

 

 

 

 

 

51

 

Other

 

1,074

 

(917

)

 

 

 

 

 

(194

)

 

(37

)

Net Income/(Loss)

$

2,249

$

1,382

 

$

(2,996

)

$

9

 

$

223

 

$

867

 

1 Excludes Operations & maintenance and other cost of operations of $867 million

2 Includes adjustment to reflect impairments of $155 million, NRG share of Adj EBITDA of $35 million, acquisition and divestiture integration and transaction costs of $24 million, other non-recurring charges of $22 million, ARO expense $16 million and gain on sale of assets ($29) million

Appendix Table A-4: 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 (Loss)/Income:

($ in millions)

Texas

East

West/ Services/ Other

Corp/Elim

Total

Net (Loss)/Income

$

350

 

$

1,139

 

$

112

 

$

(605

)

$

996

 

Plus:

 

 

 

 

 

Interest expense, net

 

1

 

 

(2

)

 

6

 

 

246

 

 

251

 

Income tax

 

 

 

 

 

18

 

 

277

 

 

295

 

Depreciation and amortization

 

161

 

 

150

 

 

45

 

 

14

 

 

370

 

ARO expense

 

7

 

 

5

 

 

2

 

 

 

 

14

 

Contract and emission credit amortization, net

 

(7

)

 

77

 

 

10

 

 

 

 

80

 

EBITDA

 

512

 

 

1,369

 

 

193

 

 

(68

)

 

2,006

 

Winter Storm Uri impact

 

1,193

 

 

(138

)

 

(10

)

 

4

 

 

1,049

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

 

 

 

37

 

 

1

 

 

38

 

Acquisition and divestiture integration and transaction costs

 

 

 

 

 

 

 

66

 

 

66

 

Legal settlements

 

 

 

 

 

 

 

9

 

 

9

 

Deactivation costs

 

 

 

16

 

 

 

 

 

 

16

 

Loss/(gain) on sale of assets

 

 

 

 

 

(17

)

 

 

 

(17

)

Other non recurring charges

 

2

 

 

1

 

 

1

 

 

(16

)

 

(12

)

Impairments

 

 

 

306

 

 

 

 

 

 

306

 

Mark-to-market (MtM) for economic hedging activities, net

 

(1,149

)

 

(1,013

)

 

(76

)

 

 

 

(2,238

)

Adjusted EBITDA

$

558

 

$

541

 

$

128

 

$

(4

)

$

1,223

 

YTD Second Quarter 2021 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/ Services/ Other

Corp/Elim

Total

Revenue1

$

5,731

 

$

5,983

 

$

1,743

 

$

(5

)

$

13,452

 

Cost of fuel, purchased power and other cost of sales2

 

4,994

 

 

4,768

 

 

1,436

 

 

(1

)

 

11,197

 

Economic gross margin

 

737

 

 

1,215

 

 

307

 

 

(4

)

 

2,255

 

Operations & maintenance and other cost of operations3

 

453

 

 

275

 

 

125

 

 

(2

)

 

851

 

Selling, marketing, general & administrative4

 

285

 

 

261

 

 

87

 

 

18

 

 

651

 

Provision for credit losses

 

642

 

 

4

 

 

5

 

 

 

 

651

 

Other

 

(8

)

 

(4

)

 

(48

)

 

(12

)

 

(72

)

Winter Storm Uri impact

 

(1,193

)

 

138

 

 

10

 

 

(4

)

 

(1,049

)

Adjusted EBITDA

$

558

 

$

541

 

$

128

 

$

(4

)

$

1,223

 

1 Excludes MtM loss of $102 million and contract amortization of $16 million

2 Includes TDSP expenses, capacity and emissions credits

3 Excludes deactivation expense of $16M and ARO expense of $14 million

4 Excludes acquisition and divestiture integration and transaction costs of $66 million and other non-recurring charges of ($12) million

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

($ in millions)

Condensed Consolidated Results of Operations

Interest, tax, depr., amort.

MtM

Deactivation

Winter Storm Uri

Other adj.2

Adjusted EBITDA

Revenue

$

13,334

$

16

 

$

102

 

$

 

$

(2,665

)

$

3

 

$

10,790

 

Cost of operations (excluding depreciation and amortization shown below)1

 

8,921

 

(64

)

 

2,340

 

 

 

 

(3,079

)

 

2

 

 

8,120

 

Depreciation and amortization

 

370

 

(370

)

 

 

 

 

 

 

 

 

 

Gross margin

 

4,043

 

450

 

 

(2,238

)

 

 

 

414

 

 

1

 

 

2,670

 

Operations & maintenance and Other cost of operations

 

884

 

 

 

 

 

(16

)

 

(2

)

 

(17

)

 

849

 

Selling, marketing, general & administrative

 

654

 

 

 

 

 

 

 

(27

)

 

(3

)

 

624

 

Provision for credit losses

 

651

 

 

 

 

 

 

 

(606

)

 

 

 

45

 

Other

 

858

 

(546

)

 

 

 

 

 

 

 

(383

)

 

(71

)

Net (Loss)/Income

$

996

$

996

 

$

(2,238

)

$

16

 

$

1,049

 

$

404

 

$

1,223

 

1 Excludes Operations & maintenance and other cost of operations of $884 million

2 Other adj. includes adjustment to reflect impairments of $306 million, acquisition and divestiture integration and transaction costs of $66 million and NRG share of adjusted EBITDA in unconsolidated affiliates of $38 million, ARO expense of $14 million, deactivation costs of $9 million, other non recurring charges of ($12) million and gain on sale of assets of ($17) million

Appendix Table A-5: 2022 and 2021 Six Months Ended June 30 Adjusted Cash Flow From Operations Reconciliations

The following table summarizes the calculation of adjusted cash flow from operating activities providing a reconciliation to net cash provided by operating activities:

 

 

Six Months Ended

($ in millions)

 

June 30, 2022

 

June 30, 2021

Adjusted EBITDA

 

$

867

 

 

$

1,223

 

Winter Storm Uri loss

 

 

 

 

 

(1,049

)

Interest payments, net

 

 

(178

)

 

 

(191

)

Income tax

 

 

(36

)

 

 

12

 

Collateral / working capital / other

 

 

2,536

 

 

 

382

 

Cash Provided by Operating Activities

 

 

3,189

 

 

 

377

 

Winter Storm Uri:

 

 

 

 

Loss

 

 

 

 

 

1,049

 

Securitization, C&I credits, and remaining open accounts receivables

 

 

(624

)

 

 

(111

)

Net receipts from settlement of acquired derivatives that include

financing elements

 

 

950

 

 

 

191

 

Acquisition and divestiture transaction and integration costs

 

 

24

 

 

 

66

 

Encina site improvement

 

 

9

 

 

 

14

 

GenOn Settlement

 

 

4

 

 

 

 

Adjustment for change in collateral

 

 

(3,121

)

 

 

(696

)

Nuclear decommissioning trust liability

 

 

7

 

 

 

(27

)

Adjusted Cash Flow from Operating Activities

 

 

438

 

 

 

863

 

Maintenance Capital Expenditures

 

 

(101

)

 

 

(94

)

Environmental Capital Expenditures

 

 

(1

)

 

 

(1

)

Free Cash Flow Before Growth Investments (FCFbG)

 

$

336

 

 

$

768

 

Appendix Table A-6: Six Months Ended June 30, 2022 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity through second quarter of 2022:

Six months ended

($ in millions)

June 30, 2022

Sources:

 

Adjusted Cash Flow from Operating Activities

$

438

 

Uplift securitization proceeds received from ERCOT

 

689

 

Increase in availability of collective collateral facilities

 

39

 

Proceeds from sale of assets

 

96

 

Uses:

 

Payments for share repurchase activity

 

(366

)

Payments of dividends to common stockholders

 

(168

)

Maintenance and Environmental capital expenditures, net

 

(102

)

Winter Storm Uri

 

(65

)

Payments for acquisitions of businesses and assets, net of cash acquired

 

(53

)

Growth Investment capital expenditures

 

(48

)

Acquisition and divestiture integration and transaction costs

 

(24

)

Net (purchases)/sales of emission allowances

 

(19

)

Encina site improvement

 

(5

)

GenOn Settlement

 

(4

)

Other investing and financing

 

(10

)

Change in Total Liquidity

$

398

 

Appendix Table A-7: 2022 Guidance Reconciliation

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

 

2022

($ in millions)

 

Guidance

Net Income1

 

$

350 - 650

 

Interest expense, net

 

 

380

 

Income tax

 

 

165

 

Depreciation, amortization, contract amortization, and ARO expense

 

 

760

 

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

 

 

70

 

Impairments2

 

 

155

 

Other costs3

 

 

70

 

Adjusted EBITDA

 

 

1,950 - 2,250

 

Interest payments, net

 

 

(360

)

Income tax

 

 

(50

)

Working capital / other assets and liabilities4

 

 

(80

)

Cash provided by Operating Activities

 

 

1,460 - 1,760

 

Adjustments: proceeds from investment and asset sales, collateral, nuclear decommissioning trust liability

 

 

10

 

Adjusted Cash flow from Operations

 

1,470 - 1,770

 

Maintenance capital expenditures4

 

 

(310) - (330

)

Environmental capital expenditures

 

 

(5) - (10

)

Free Cash Flow before Growth

 

$

1,140 - 1,440

 

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

2 Represents impairments of Midwest Generation goodwill and PJM generating assets

3 Includes deactivation costs and integration expenses

4 Maintenance capital expenditures excludes W.A. Parish expected insurance recoveries classified in Working capital / other assets and liabilities

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 (including 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.

Economic gross margin is a non-GAAP financial measure NRG provides to show gross margin excluding the impact of unrealized mark-to-market gains and losses on economic hedge positions as they relate to hedges that will settle in future periods, and contract and emission credit amortization as it is based on the valuation of acquired intangible assets as of the date of acquisition and is not reflective of current economic conditions or Company performance. Management believes economic gross margin is useful to investors and other users of NRG's financial statements in evaluating its current period operating performance.

Adjusted cash flow from operating activities is a non-GAAP financial 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 acquisition and divestiture transaction and integration costs, changes in the nuclear decommissioning trust liability, and the impact of extraordinary, unusual or non-recurring items. 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 acquisition and divestiture transaction and integration 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 investments) 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 investments as a measure of cash available for discretionary expenditures.

Free Cash Flow before Growth Investment is utilized by Management in making decisions regarding the allocation of capital. Free Cash Flow before Growth Investment 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 Investment 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:

Laura Avant

713.537.5437

Investors:

Kevin L. Cole, CFA

609.524.4526

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