- Completed acquisition of Vivint Smart Home, advancing our
consumer services platform
- Strong first quarter financial and operational
results
- Updating 2023 Adjusted EBITDA and FCFbG guidance as a result
of the Vivint acquisition
NRG Energy, Inc. (NYSE: NRG) today reported a first quarter 2023
Net Loss of $1.3 billion, or $(5.82) per common share. Adjusted
EBITDA for the first quarter was $646 million, Net Cash Used by
Operating Activities was $1.6 billion, and Free Cash Flow Before
Growth (FCFbG) was $203 million.
"NRG delivered strong financial and operational results during
the first quarter," said Mauricio Gutierrez, NRG President and
Chief Executive Officer. "We are pleased to welcome our new Vivint
colleagues and are excited about the attractive opportunity for our
consumer services platform."
Consolidated Financial Results
Three Months Ended
($ in millions)
3/31/2023
3/31/2022
Net (Loss)/Income
$
(1,335
)
$
1,736
Cash (Used)/Provided by Operating
Activities
$
(1,598
)
$
1,676
Adjusted EBITDA
$
646
$
536
Free Cash Flow Before Growth Investments
(FCFbG)
$
203
$
239
Segments Results
Table 1: Net (Loss)/Income
($ in millions)
Three Months Ended
Segment
3/31/2023
3/31/2022
Texas
$
284
$
771
East
(1,402
)
1,538
West/Services/Othera
(178
)
(573
)
Vivintb
$
(39
)
N/A
Net (Loss)/Income
$
(1,335
)
$
1,736
a. Includes Corporate segment
b. Vivint Smart Home acquired in March
2023
First quarter net loss was $1.3 billion, $3.1 billion lower than
the first quarter of 2022. This was driven by unrealized
mark-to-market losses on economic hedges primarily in the East, due
to large declines in natural gas and power prices. Certain hedge
positions are required to be marked-to-market every period, while
the customer contracts related to these items are not, resulting in
temporary unrealized losses or gains on the economic hedges that
are not reflective of the expected economics at future
settlement.
Table 2: Adjusted EBITDA
($ in millions)
Three Months Ended
Segment
3/31/2023
3/31/2022
Texas
$
254
$
211
East
314
332
West/Services/Othera
5
(7
)
Vivintb
$
73
N/A
Adjusted EBITDA
$
646
$
536
a. Includes Corporate segment
b. Vivint Smart Home acquired in March
2023
Texas: First quarter Adjusted EBITDA was $254 million,
$43 million higher than the first quarter of 2022. This increase
was primarily driven by higher margins, the April 2022 return of
Limestone Unit 1 from an extended outage, and current-year
optimization of realized lower market power prices. The increase
was partially offset by a decrease in retail load primarily driven
by unfavorable weather and higher operating costs due to an
increase in planned outages in the first quarter of 2023 compared
to the first quarter of 2022.
East: First quarter Adjusted EBITDA was $314 million, $18
million lower than the first quarter of 2022. This decrease was
driven by PJM asset retirements in the second quarter of 2022 and
lower capacity prices. This was partially offset by increased
retail power margins.
West/Services/Other: First quarter Adjusted EBITDA was $5
million, $12 million higher than the first quarter of 2022. This
increase was primarily driven by a higher gross margin from
Cottonwood.
Vivint: Adjusted EBITDA included $73 million in March;
the acquisition closed in March 2023.
Liquidity and Capital Resources
Table 3: Corporate Liquidity
($ in millions)
3/31/23
12/31/22
Cash and Cash Equivalents
$
407
$
430
Restricted Cash
32
40
Total
439
470
Total Revolving Credit Facility and
collective collateral facilities
3,094
2,324
Total Liquidity, excluding collateral
received
$
3,533
$
2,794
As of March 31, 2023, NRG's cash was at $407 million, and $3.1
billion was available under the Company’s credit facilities. Total
liquidity was $3.5 billion, $739 million higher than at the end of
2022. This increase was due to planned additional liquidity related
to the end of the winter season, specific initiatives to optimize
the amount of collateral supporting our market operations activity,
and the addition of Vivint Smart Home's revolving credit
facility.
NRG Strategic Developments
Vivint Smart Home Acquisition
On March 10, 2023, NRG completed the acquisition of Vivint Smart
Home, paying $12 per share or $2.609 billion in cash. The Company
funded the acquisition by issuing $740 million of 7.00% Senior
Secured First Lien Notes due in 2033, issuing $650 million of
10.25% Series A Fixed-Rate Reset Cumulative Redeemable Perpetual
Preferred Stock, drawing $900 million from its Revolving Credit
Facility and Receivables Securitization Facilities, and cash on
hand.
Sale of Astoria
On January 6, 2023, NRG closed on the sale of land and related
assets from the Astoria site, within the East region of operations,
for net proceeds of $209 million. As part of the transaction, the
Company entered into an agreement to lease the land back for the
purpose of operating the Astoria gas turbines. The lease agreement
is expected to end at the end of the year.
W.A. Parish Outage
In May 2022, W.A. Parish Unit 8 came offline as a result of
damage to the steam turbine/generator. Based on work completed to
date, NRG is targeting to return the unit to service by the end of
the second quarter of 2023. The Company expects lost revenues and
expenditures incurred in 2023 to be offset by insurance
recoveries.
2023 Guidance
Following the close of the Vivint Smart Home acquisition, NRG is
updating 2023 guidance to reflect the 10-month ownership of Vivint
Smart Home, harmonizing the combined Adjusted EBITDA, and expanding
Adjusted EBITDA and FCFbG guidance ranges. NRG Adjusted EBITDA has
been updated to exclude amortization of customer acquisition costs
(primarily related to capitalized sales commissions) and
stock-based compensation. Excluding the updates for the Vivint
Smart Home acquisition and EBITDA harmonization, NRG’s previous
standalone 2023 Adjusted EBITDA, Cash provided by Operating
Activities, and FCFbG guidance remain unchanged. As compared to
Vivint's historical presentation of Adjusted EBITDA, amortization
of customer acquisition costs continues to be excluded, but
amortization of customer fulfillment costs (primarily related to
the sale and installation of equipment) is no longer excluded.
Table 4: Adjusted EBITDA and FCFbG
Guidancea
2023
(In millions)
Guidance
Adjusted EBITDAb
$3,010 - $3,250
Cash provided by Operating Activities
$1,610 - $1,850
FCFbG
$1,620 - $1,860
a. Non-GAAP financial measure; see
Appendix Table A-5 for GAAP Reconciliation from Net Income to
FCFbG. Adjusted EBITDA 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.
b. Adjusted EBITDA guidance shown above
has been updated to reflect the inclusion of Vivint and the
harmonization of the definitions for the combined company.
Capital Allocation Update
NRG is committed to maintaining a strong balance sheet and
credit ratings and remains focused on achieving investment-grade
credit metrics. The Company expects to achieve 2.50x to 2.75x
corporate net debt to adjusted EBITDA by late 2025 or 2026, which
will primarily be achieved through debt reduction and the
realization of growth initiatives.
The Company expects to use its excess free cash flow to reduce
debt, pay its common and preferred stock dividends, and fund its
growth investment initiatives. In addition, NRG is targeting
additional asset sales with projected proceeds, net of any required
deleveraging, of $500 million during 2023.
On April 19, 2023, NRG announced that its Board of Directors
declared a quarterly dividend on the Company's common stock of
$0.3775 per share, or $1.51 per share. The dividend is payable on
May 15, 2023, to stockholders of record as of May 1, 2023.
In December 2021, the Company announced that the Board of
Directors authorized $1 billion for share repurchases as part of
NRG’s Capital Allocation policy. The Company has executed $653
million in share repurchases at an average price of $40.40 per
share. The remaining balance of $347 million under the current
program is expected to be repurchased in 2023, subject to the
availability of excess cash and full visibility of the achievement
of the Company's 2023 targeted credit metrics.
Earnings Conference Call
On May 4, 2023, 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 through the
investor relations website under “presentations and webcasts” on
investors.nrg.com. The webcast will be archived on the site for
those unable to listen in real time.
About NRG
NRG Energy is a leading energy and home services company powered
by people and our passion for a smarter, cleaner, and more
connected future. A Fortune 500 company operating in the United
States and Canada, NRG delivers innovative solutions that help
people, organizations, and businesses achieve their goals while
also advocating for competitive energy markets and customer choice.
More information is available at www.nrg.com. Connect with NRG on
Facebook and 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,
including increasing interest rates and rising inflation, hazards
customary in the power industry, weather conditions and extreme
weather events, competition in wholesale power, gas and smart home
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 and
NRG’s ability to access capital markets, NRG’s ability to execute
its market operations strategy, risks related to data privacy,
cyberterrorism and inadequate cybersecurity, the loss of data,
unanticipated outages at NRG’s generation facilities, NRG’s ability
to achieve its net debt targets, adverse results in current and
future litigation, complaints, product liability claims and/or
adverse publicity, failure to identify, execute or successfully
implement acquisitions or asset sales, risks of the smart home and
security industry, including risks of and publicity surrounding the
sales, subscriber origination and retention process, the impact of
changes in consumer spending patterns, consumer preferences,
geopolitical tensions, demographic trends, supply chain
disruptions, NRG’s ability to implement value enhancing
improvements to plant operations and companywide processes, NRG’s
ability to achieve or maintain investment grade credit metrics,
NRG’s 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, NRG’s ability to operate its business
efficiently, NRG’s ability to retain retail customers, the ability
to successfully integrate businesses of acquired companies,
including Direct Energy and Vivint, NRG’s 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 NRG’s ability to
execute its 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, cash provided by operating activities and free cash flow
before growth guidance are estimates as of May 4, 2023. These
estimates are based on assumptions NRG 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. For a more detailed discussion
of these factors, see the information under the captions “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in NRG’s most recent Annual
Report on Form 10-K, and in subsequent SEC filings. NRG’s
forward-looking statements speak only as of the date of this
communication or as of the date they are made.
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March
31,
(In millions, except for per share
amounts)
2023
2022
Revenue
Revenue
$
7,722
$
7,896
Operating Costs and Expenses
Cost of operations (excluding depreciation
and amortization shown below)
8,778
4,930
Depreciation and amortization
190
183
Selling, general and administrative
costs
426
347
Acquisition-related transaction and
integration costs
71
8
Total operating costs and expenses
9,465
5,468
Gain/(loss) on sale of assets
199
(3
)
Operating (Loss)/Income
(1,544
)
2,425
Other Income/(Expense)
Equity in earnings/(losses) of
unconsolidated affiliates
5
(15
)
Other income, net
16
—
Interest expense
(148
)
(103
)
Total other expense
(127
)
(118
)
(Loss)/Income Before Income
Taxes
(1,671
)
2,307
Income tax (benefit)/expense
(336
)
571
Net (Loss)/Income
$
(1,335
)
$
1,736
Less: Cumulative dividends attributable to
Series A Preferred Stock
4
—
Net (Loss)/Income Available for Common
Stockholders
$
(1,339
)
$
1,736
(Loss)/Income per Share
Weighted average number of common shares
outstanding — basic and diluted
230
242
(Loss)/Income per Weighted Average
Common Share —Basic and Diluted
$
(5.82
)
$
7.17
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME
(Unaudited)
Three months ended March
31,
(In millions)
2023
2022
Net (Loss)/Income
$
(1,335
)
$
1,736
Other Comprehensive Income
Foreign currency translation
adjustments
1
9
Defined benefit plans
—
(1
)
Other comprehensive income
1
8
Comprehensive (Loss)/Income
$
(1,334
)
$
1,744
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
March 31, 2023
December 31, 2022
(In millions, except share data and
liquidation preference on preferred stock)
(Unaudited)
(Audited)
ASSETS
Current Assets
Cash and cash equivalents
$
407
$
430
Funds deposited by counterparties
330
1,708
Restricted cash
32
40
Accounts receivable, net
3,519
4,773
Inventory
722
751
Derivative instruments
4,400
7,886
Cash collateral paid in support of energy
risk management activities
293
260
Prepayments and other current assets
505
383
Total current assets
10,208
16,231
Property, plant and equipment,
net
1,835
1,692
Other Assets
Equity investments in affiliates
136
133
Operating lease right-of-use assets,
net
247
225
Goodwill
5,343
1,650
Intangible assets, net
4,419
2,132
Nuclear decommissioning trust fund
879
838
Derivative instruments
3,350
4,108
Deferred income taxes
2,925
1,881
Other non-current assets
354
256
Total other assets
17,653
11,223
Total Assets
$
29,696
$
29,146
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Current portion of long-term debt and
finance leases
$
971
$
63
Current portion of operating lease
liabilities
94
83
Accounts payable
2,330
3,643
Derivative instruments
4,350
6,195
Cash collateral received in support of
energy risk management activities
330
1,708
Deferred revenue current
688
176
Accrued expenses and other current
liabilities
1,563
1,114
Total current liabilities
10,326
12,982
Other Liabilities
Long-term debt and finance leases
11,332
7,976
Non-current operating lease
liabilities
196
180
Nuclear decommissioning reserve
344
340
Nuclear decommissioning trust
liability
514
477
Derivative instruments
1,893
2,246
Deferred income taxes
133
134
Deferred revenue non-current
848
10
Other non-current liabilities
1,030
973
Total other liabilities
16,290
12,336
Total Liabilities
26,616
25,318
Commitments and Contingencies
Stockholders' Equity
Preferred stock; 10,000,000 shares
authorized; 650,000 Series A shares issued and outstanding at March
31, 2023 (liquidation preference $1,000); 0 shares issued and
outstanding at December 31, 2022
650
—
Common stock; $0.01 par value; 500,000,000
shares authorized; 424,292,409 and 423,897,001 shares issued and
229,956,438 and 229,561,030 shares outstanding at March 31, 2023
and December 31, 2022, respectively
4
4
Additional paid-in-capital
8,481
8,457
(Accumulated deficit)/Retained
earnings
(15
)
1,408
Treasury stock, at cost 194,335,971 shares
at March 31, 2023 and December 31, 2022
(5,864
)
(5,864
)
Accumulated other comprehensive loss
(176
)
(177
)
Total Stockholders' Equity
3,080
3,828
Total Liabilities and Stockholders'
Equity
$
29,696
$
29,146
NRG ENERGY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March
31,
(In millions)
2023
2022
Cash Flows from Operating
Activities
Net (Loss)/Income
$
(1,335
)
$
1,736
Adjustments to reconcile net (loss)/income
to cash (used)/provided by operating activities:
Distributions from and equity in
(earnings)/losses of unconsolidated affiliates
(5
)
18
Depreciation and amortization
190
183
Accretion of asset retirement
obligations
6
7
Provision for credit losses
35
25
Amortization of nuclear fuel
13
14
Amortization of financing costs and debt
discounts
20
6
Amortization of in-the-money contracts and
emissions allowances
119
147
Amortization of unearned equity
compensation
30
6
Net gain on sale of assets and disposal of
assets
(187
)
(6
)
Changes in derivative instruments
1,599
(2,816
)
Changes in current and deferred income
taxes and liability for uncertain tax benefits
(338
)
575
Changes in collateral deposits in support
of risk management activities
(1,412
)
2,007
Changes in nuclear decommissioning trust
liability
(16
)
(7
)
Changes in other working capital
(317
)
(219
)
Cash (used)/provided by operating
activities
(1,598
)
1,676
Cash Flows from Investing
Activities
Payments for acquisitions of businesses
and assets, net of cash acquired
(2,492
)
(26
)
Capital expenditures
(142
)
(60
)
Net purchases of emission allowances
(18
)
(18
)
Investments in nuclear decommissioning
trust fund securities
(87
)
(151
)
Proceeds from the sale of nuclear
decommissioning trust fund securities
99
161
Proceeds from sales of assets, net of cash
disposed
219
14
Proceeds from insurance recoveries for
property, plant and equipment, net
71
—
Cash used by investing
activities
(2,350
)
(80
)
Cash Flows from Financing
Activities
Proceeds from issuance of preferred stock,
net of fees
636
—
Payments of dividends to common
stockholders
(87
)
(85
)
Payments for share repurchase activity
(8
)
(188
)
Net receipts from settlement of acquired
derivatives that include financing elements
336
561
Net proceeds of Revolving Credit Facility
and Receivables Securitization Facilities
950
—
Proceeds from issuance of long-term
debt
731
—
Payments of debt issuance costs
(18
)
—
Repayments of long-term debt and finance
leases
(4
)
(1
)
Cash provided by financing
activities
2,536
287
Effect of exchange rate changes on cash
and cash equivalents
3
3
Net (Decrease)/Increase in Cash and
Cash Equivalents, Funds Deposited by Counterparties and Restricted
Cash
(1,409
)
1,886
Cash and Cash Equivalents, Funds
Deposited by Counterparties and Restricted Cash at Beginning of
Period
2,178
1,110
Cash and Cash Equivalents, Funds
Deposited by Counterparties and Restricted Cash at End of
Period
$
769
$
2,996
Appendix Table A-1: First Quarter 2023 Adjusted EBITDA
Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted
EBITDA and provides a reconciliation to Net Income/(Loss)1:
($ in millions)
Texas
East
West/Services/
Other
Vivint2
Corp/Elim
Total
Net (Loss)/Income
$
284
$
(1,402
)
$
(304
)
$
(39
)
$
126
$
(1,335
)
Plus:
Interest expense, net
—
(6
)
6
26
106
132
Income tax
—
—
(47
)
—
(289
)
(336
)
Depreciation and amortization
75
30
24
52
9
190
ARO Expense
2
3
1
—
—
6
Contract amortization
1
115
3
—
—
119
EBITDA
362
(1,260
)
(317
)
39
(48
)
(1,224
)
Stock-based compensation
6
2
1
4
—
13
Amortization of customer acquisition
costs3
14
11
1
—
—
26
Adjustment to reflect NRG share of
adjusted EBITDA in unconsolidated affiliates
—
—
4
—
—
4
Acquisition and divestiture integration
and transaction costs4
—
—
—
30
42
72
Deactivation costs
—
4
3
—
—
7
(Gain) on sale of assets
—
(199
)
—
—
—
(199
)
Other non-recurring charges
1
1
2
—
(1
)
3
Mark to market (MtM) losses/(gains) on
economic hedges
(129
)
1,755
318
—
—
1,944
Adjusted EBITDA
$
254
$
314
$
12
$
73
$
(7
)
$
646
1 This schedule reflects 2023 results
under the harmonization of the Adjusted EBITDA definition
2 Vivint Smart Home acquired in March
2023
3 Amortization of customer acquisition
costs, which are excluded from the calculation of Adjusted EBITDA,
is the P&L recognition of capitalized costs related to
commissions and other costs related to securing the new
customer
4 Includes stock-based compensation of $20
million
First Quarter 2023 condensed financial
information by Operating Segment:
($ in millions)
Texas
East
West/Services/
Other
Vivint1
Corp/Elim
Total
Revenue2
$
2,034
$
4,152
$
1,307
$
148
$
1
$
7,642
Cost of fuel, purchased power and other
cost of sales3
1,367
3,600
1,185
11
2
6,165
Economic gross margin
667
552
122
137
(1
)
1,477
Operations & maintenance and other
cost of operations4
262
103
69
18
(1
)
451
Selling, marketing, general and
administrative5
152
135
49
46
7
389
Other
(1
)
—
(8
)
—
—
(9
)
Adjusted EBITDA
$
254
$
314
$
12
$
73
$
(7
)
$
646
1 Vivint Smart Home acquired in March
2023
2 Excludes MtM gain of $91 million and
contract amortization of expense of $11 million
3 Includes TDSP expense, capacity and
emission credits
4 Excludes deactivation costs of $7
million, ARO expense of $6 million, other non-recurring charges of
$3 million, amortization of customer acquisition costs of $2
million and stock-based compensation of $1 million
5 Excludes amortization of customer
acquisition costs of $24 million, stock-based compensation of $12
million and divestiture costs of $1 million
The following table reconciles the
condensed financial information to Adjusted EBITDA:
($ in millions)
Condensed
Consolidated
Results of
Operations
Interest, tax,
depr.,
amort.
MtM
Deactivation
Other adj.2
Adjusted
EBITDA
Revenue
$
7,722
$
11
$
(91
)
$
—
$
—
$
7,642
Cost of operations (excluding depreciation
and amortization shown below)1
8,308
(108
)
(2,035
)
—
—
6,165
Depreciation and Amortization
190
(190
)
—
—
—
—
Gross margin
(776
)
309
1,944
—
0
1,477
Operations & maintenance and other
cost of operations
470
—
—
(7
)
(12
)
451
Selling, marketing, general &
administrative
426
—
—
—
(37
)
389
Other
(337
)
204
—
—
124
(9
)
Net Income/(Loss)
$
(1,335
)
$
105
$
1,944
$
7
$
(75
)
$
646
1 Excludes Operations & maintenance
and other cost of operations of $470 million
2 Other adj. includes gain on sales of
assets ($199) million, acquisition and divestiture integration and
transaction costs of $72 million, amortization of customer
acquisition costs of $26 million, stock-based compensation of $13
million, ARO expenses of $6 million, NRG share of adjusted EBITDA
in unconsolidated affiliates of $4 million and other non-recurring
charges of $3 million
Appendix Table A-2: First Quarter 2022
Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the
calculation of Adjusted EBITDA and provides a reconciliation to Net
Income/(Loss)1:
($ in millions)
Texas
East
West/Services/
Other
Corp/Elim
Total
Net Income/(Loss)
$
771
$
1,538
$
130
$
(703
)
$
1,736
Plus:
Interest expense, net
—
(1
)
7
94
100
Income tax
—
—
(1
)
572
571
Depreciation and amortization
77
77
21
8
183
ARO Expense
3
2
2
—
7
Contract amortization
(2
)
147
2
—
147
EBITDA
849
1,763
161
(29
)
2,744
Stock-based compensation
3
1
2
—
6
Amortization of customer acquisition
costs2
14
7
—
—
21
Adjustment to reflect NRG share of
adjusted EBITDA in unconsolidated affiliates
—
—
18
—
18
Acquisition and divestiture integration
and transaction costs
—
—
—
10
10
Deactivation costs
—
4
—
—
4
Loss on sale of assets
—
—
1
2
3
Other non-recurring charges
(2
)
3
(6
)
12
7
Mark to market (MtM) losses/(gains) on
economic hedges
(653
)
(1,446
)
(178
)
—
(2,277
)
Adjusted EBITDA
$
211
$
332
$
(2
)
$
(5
)
$
536
1 In 2022, Stock-based compensation and
Amortization of customer acquisition costs were not excluded from
Adjusted EBITDA. This schedule reflects 2022 results under the
harmonization of the Adjusted EBITDA definition. The combined
quarterly impact of these two changes is approximately $28 million
per quarter for 2Q through 4Q of 2022
2 Amortization of customer acquisition
costs, which are excluded from the calculation of Adjusted EBITDA,
is the P&L recognition of capitalized costs related to
commissions and other costs related to securing the new
customer
First Quarter 2022 condensed financial
information by Operating Segment:
($ in millions)
Texas
East
West/Services/
Other
Corp/Elim
Total
Revenue1
$
2,022
$
4,854
$
1,162
$
—
$
8,038
Cost of fuel, purchased power and other
cost of sales2
1,457
4,267
1,056
1
6,781
Economic gross margin
565
587
106
(1
)
1,257
Operations & maintenance and other
cost of operations3
227
131
57
—
415
Selling, marketing, general &
administrative4
132
124
55
8
319
Other
(5
)
—
(4
)
(4
)
(13
)
Adjusted EBITDA
$
211
$
332
$
(2
)
$
(5
)
$
536
1 Excludes MtM loss of $133 million and
contract amortization expense of $9 million
2 Includes TDSP expense, capacity and
emission credits
3 Excludes ARO expense of $7 million,
deactivation costs of $4 million, amortization of customer
acquisition costs of $1 million and other non-recurring charges of
($6) million
4 Excludes amortization of customer
acquisition costs of $20 million, stock-based compensation of $6
million and acquisition and integration 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
$
7,896
$
9
$
133
$
—
$
—
$
8,038
Cost of operations (excluding depreciation
and amortization shown below)1
4,509
(138
)
2,410
—
—
6,781
Depreciation and amortization
183
(183
)
—
—
—
—
Gross margin
3,204
330
(2,277
)
—
—
1,257
Operations & maintenance and other
cost of operations
421
—
—
(4
)
(2
)
415
Selling, marketing, general &
administrative
347
—
—
—
(28
)
319
Other
700
(671
)
—
—
(42
)
(13
)
Net Income/(Loss)
$
1,736
$
1,001
$
(2,277
)
$
4
$
72
$
536
1 Excludes Operations & maintenance
and other cost of operations of $421 million
2 Other adj. includes amortization of
customer acquisition costs of $21 million, NRG share of adjusted
EBITDA in unconsolidated affiliates of $18 million, acquisition and
divestiture integration and transaction costs of $10 million, ARO
expenses of $7 million, other non-recurring charges of $7 million,
stock-based compensation of $6 million and gain on sales of assets
$3 million
Appendix Table A-3: 2023 and 2022 Three
Months Ended March 31 Free Cash Flow before Growth Investments
(FCFbG)
The following table summarizes the
calculation of FCFbG, providing a reconciliation to Cash provided
by Operating Activities:
Three Months Ended
($ in millions)
March 31, 2023
March 31, 2022
Adjusted EBITDA
$
646
$
536
Interest payments, net
(91
)
(95
)
Income tax
4
18
Net Deferred revenue1
(2
)
(50
)
Capitalized contract costs2
(56
)
(22
)
Collateral / working capital / other
assets and liabilities
(2,099
)
1,289
Cash (used) provided by Operating
Activities
(1,598
)
1,676
Winter Storm Uri C&I credits
—
25
Net receipts from settlement of acquired
derivatives that include
financing elements
336
561
Acquisition and divestiture integration
and transaction costs3
56
10
Astoria fees
3
—
Encina site improvement
3
5
Adjustment for change in collateral
1,412
(2,007
)
Nuclear decommissioning trust
liability
12
10
Effect of exchange rate changes on cash
and cash equivalents
3
3
Adjusted Cash Flow from
Operations
227
283
Maintenance Capital Expenditures, net4
(41
)
(43
)
Environmental Capital Expenditures
—
(1
)
Net Cash for Growth Initiatives
17
—
Free Cash Flow Before Growth
Investments (FCFbG)
$
203
$
239
1 The cash impact of deferred revenue is
the net change in the balance sheet from capitalizing proceeds
received from installation and equipment and then recognizing those
proceeds as revenue on a straight-line basis over the expected
period of benefit.
2 Capitalized contract costs represent the
costs directly related and incremental to the origination of new
contracts, modification of existing contracts or to the fulfillment
of the related subscriber contracts. These costs include installed
products, commissions, other compensation and cost of installation
of new or upgraded customer contracts. These costs are amortized on
a straight-line basis over the expected period of benefit.
3 Excludes $16 MM non-cash stock-based compensation.
4 Maintenance capital expenditures, net
includes W.A. Parish Unit 8 and Limestone Unit 1 insurance
recoveries related to property, plant and equipment
Appendix Table A-4: Three Months Ended
March 31, 2023 Sources and Uses of Liquidity
The following table summarizes the sources
and uses of liquidity for the three months ending March 31,
2023:
($ in millions)
Three months ended
March 31, 2023
Sources:
Adjusted Cash Flow from Operating
Activities
$
227
Increase in NRG revolving credit
facility
645
Increase in availability of collective
collateral facilities
125
Proceeds of revolving credit facility and
receivables securitization facilities
950
Proceeds from issuance of long-term
debt
731
Proceeds from issuance of preferred stock,
net of fees
636
Proceeds from sale of assets, net of cash
disposed
219
Uses:
Payments for acquisitions of businesses
and assets, net of cash acquired
(2,492
)
Payments of dividends
(87
)
Acquisition and divestiture integration
and transaction costs1
(56
)
Maintenance and Environmental capital
expenditures, net
(41
)
Cash collateral paid in support of energy
risk management activities
(33
)
Growth Investment capital expenditures
(30
)
Net purchases of emission allowances
(18
)
Payments of debt issuance costs
(18
)
Payments for share repurchase activity
(8
)
Encina site improvement
(3
)
Other investing and financing
(8
)
Change in Total Liquidity
$
739
1 Excludes $16 MM non-cash stock-based
compensation.
Appendix Table A-5: 2023 Guidance
Reconciliations
The following table summarizes the
calculation of Adjusted EBITDA providing reconciliation to Net
Income, and the calculation of Free Cash Flow before Growth
providing a reconciliation to Cash provided by Operating
Activities:
2023
($ in millions)
Guidance
Net Income1
$
805 - 1,045
Interest expense, net
680
Income tax
310
Depreciation and amortization
1,010
ARO Expense
20
Amortization of customer acquisition
costs2
120
Stock-based compensation3
75
Acquisition and divestiture integration
and transaction costs
180
Other costs4
(190)
Adjusted EBITDA5
3,010 - 3,250
Interest payments, net
(590)
Income tax
(95)
Net Deferred Revenue6
215
Amortization of customer fulfillment
costs7
35
Capitalized contract costs
(690)
Working capital / other assets and
liabilities8
(275)
Cash provided by Operating
Activities
1,610 - 1,850
Acquisition and other costs8
210
Adjusted Cash Flow from
Operations
1,810 - 2,060
Maintenance capital expenditures, net9
(270) - (290)
Environmental capital expenditures
(10) - (15)
Net Cash for Growth Initiatives
90
Free Cash Flow before Growth
$
1,620 - 1,860
1 For purposes of guidance, fair value
adjustments related to derivatives are assumed to be zero.
2 Amortization of customer acquisition
costs, which are excluded from the calculation of Adjusted EBITDA,
is the P&L recognition of capitalized costs related to
commissions and other costs related to securing the new customer.
NRG was previously including these costs in the calculation of
Adjusted EBITDA. On a stand-alone basis, NRG amortization of
customer acquisition costs is $90 MM and Vivint is $30 MM.
3 Stock-based compensation was previously
included in NRG’s calculation of Adjusted EBITDA. On a stand-alone
basis NRG stock-based compensation is expected to be $30 MM and
Vivint is expected to be $45 MM.
4 Includes adjustments for sale of assets,
adjustments to reflect NRG share of Adjusted EBITDA in
unconsolidated affiliates, deactivation costs, and other
non-recurring expenses.
5 Previously, Vivint excluded the
amortization of customer fulfillment costs (primarily related to
the sale and installation of equipment) in its calculation of
Adjusted EBITDA. The updated Adjusted EBITDA calculation does not
exclude the impact of customer fulfillment costs. Vivint’s customer
fulfillment costs are expected to be $35 MM and is shown in Cash
provided by Operating Activities. The net impact of the
harmonization of Adjusted EBITDA is $85 MM.
6 The cash impact of deferred revenue is
the net change in the balance sheet from capitalizing proceeds
received from installation and equipment and then recognizing those
proceeds as revenue on a straight-line basis over the expected
period of benefit.
7 Amortization of customer fulfillment
costs, which are included in the calculation of adjusted EBITDA, is
the P&L recognition of capitalized contract costs related to
the installation of equipment necessary for a customer to receive
the Smart Home service.
8 Working capital / other assets and
liabilities includes payments for acquisition and divestiture
integration and transition costs, which is adjusted in Acquisition
and Other Costs.
9 Maintenance capital expenditures, net
includes W.A. Parish Unit 8 and Limestone Unit 1 expected insurance
recoveries related to property, plant and equipment.
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 the impact of stock-based compensation,
amortization of customer acquisition costs (primarily amortized
commissions), impairment losses, deactivation costs, gains or
losses on sales, dispositions or retirements of assets, any
mark-to-market gains or losses from forward position of economic
hedges, adjustments to exclude the Adjusted EBITDA related to the
non-controlling interest, gains or losses on the repurchase,
modification or extinguishment of debt, the impact of restructuring
and any extraordinary, unusual or non-recurring items, plus
adjustments to reflect the Adjusted EBITDA from our unconsolidated
investments. The reader is encouraged to evaluate each adjustment
and the reasons NRG considers it appropriate for supplemental
analysis. As an analytical tool, Adjusted EBITDA is subject to all
of the limitations applicable to EBITDA. In addition, in evaluating
Adjusted EBITDA, the reader should be aware that in the future NRG
may incur expenses similar to the adjustments in this news
release.
Management believes Adjusted EBITDA is useful to investors and
other users of NRG's financial statements in evaluating its
operating performance because it provides an additional tool to
compare business performance across companies and across periods
and adjusts for items that we do not consider indicative of NRG’s
future operating performance. This measure is widely used by
debt-holders to analyze operating performance and debt service
capacity and by equity investors to measure our operating
performance without regard to items such as interest expense,
taxes, depreciation and amortization, which can vary substantially
from company to company depending upon accounting methods and book
value of assets, capital structure and the method by which assets
were acquired. Management uses Adjusted EBITDA as a measure of
operating performance to assist in comparing performance from
period to period on a consistent basis and to readily view
operating trends, as a measure for planning and forecasting overall
expectations, and for evaluating actual results against such
expectations, and in communications with NRG's Board of Directors,
shareholders, creditors, analysts and investors concerning its
financial performance.
Adjusted cash flow from operations is a non-GAAP measure NRG
provides to show cash flow from operations with the
reclassification of net payments of derivative contracts acquired
in business combinations from financing to operating cash flow, as
well as the add back of merger, integration, related restructuring
costs, 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 merger, integration related restructuring costs
as they are one time and unique in nature and do not reflect
ongoing cash from operations and they are fully disclosed to
investors. The company excludes changes in the nuclear
decommissioning trust liability as these amounts are offset by
changes in the decommissioning fund shown in cash from
investing.
Free Cash Flow before Growth Investments is adjusted cash flow
from operations less maintenance and environmental capital
expenditures, net of funding, dividends from preferred instruments
treated as debt by ratings agencies, 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 Investments is utilized by
Management in making decisions regarding the allocation of capital.
Free Cash Flow before Growth Investments 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 Investments is a performance measure and is not
intended to represent net income (loss), cash provided by operating
activities (the most directly comparable U.S. GAAP measure), or
liquidity and is not necessarily comparable to similarly titled
measures reported by other companies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503006131/en/
Media: Laura Avant 713.537.5437
Investors: Brendan Mulhern 609.524.4767
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