- Strong second quarter performance resulted in GAAP Net
Income of $308 million and Adjusted EBITDA of $819 million
- Energy business benefited from customer growth, strong plant
operations, diversified supply strategy and favorable market
conditions
- Vivint Smart Home segment increased second quarter revenue
by 12%1 , surpassed 2 million customers, and delivered impressive
monthly recurring service margin
- Completed $200 million in debt reduction and $50 million in
share repurchases through July
- Increasing 2023 growth contribution target to $60 million
from $30 million
NRG Energy, Inc. (NYSE: NRG) today reported second quarter 2023
results.
“NRG had a solid second quarter with strong financial results
and excellent progress on our strategic priorities. Our plants
performed well during this period of record peak demand, and we
continued to grow our customers and margins," said Mauricio
Gutierrez, NRG President and Chief Executive Officer. “We are
advancing our consumer strategy and delivering on our commitments.
NRG is well-positioned to create significant shareholder value
capitalizing on the convergence of energy and smart technologies in
the home.”
Quarterly Financial
Results
NRG reported second quarter 2023 Net Income of $308 million.
Adjusted EBITDA for the second quarter was $819 million, Cash
Provided by Operating Activities was $570 million, and Free Cash
Flow Before Growth Investments (FCFbG) was $425 million.
NRG Strategic
Developments
Enhanced Operating Efficiency and Growth Initiatives - $300
Million Growth and $250 Million Cost Savings Plan Through
2025
During its June 2023 Investor Day, NRG provided a strategic
update on its consumer services strategy. NRG is positioned to
fully capitalize on its market leadership and approximately 7.5
million residential customer base. NRG's enhanced consumer services
platform is creating new, high-margin recurring revenue streams
while extending customer tenure and reach. Through a combination of
cross-selling, bundling, and organic growth, NRG expects to achieve
$300 million of incremental FCFbG by 2025. Given the positive
results of various initiatives to date, the Company is increasing
the growth plan’s 2023 contribution to FCFbG to $60 million, from
$30 million.
Reflecting the Company's focus on cost discipline and
operational excellence, NRG in June announced an additional $150
million cost reduction program that is expected to be completed by
2025, derived from operations and maintenance efficiencies,
sourcing optimization, automation, service levels, and spans of
control. This $150 million cost reduction program is incremental to
the $100 million in cost synergies related to the Vivint Smart Home
acquisition and totals $250 million in cost savings by 2025.
Additionally, NRG expects to complete its $300 million in Direct
Energy cost synergies program by the end of 2023.
Revised Capital Allocation Framework
In June 2023, having line-of-sight to its investment needs
following the Vivint Smart Home acquisition, NRG revised its
long-term capital allocation policy to target allocating
approximately 80% of cash available for allocation after debt
reduction to be returned to shareholders. As part of the revised
capital allocation framework, the Board of Directors approved an
increase in its share repurchase authorization to $2.7 billion to
be executed through 2025. NRG has executed $50 million in share
repurchases in July 2023.
Also in June 2023, NRG provided visibility in achieving its
target investment grade credit metrics of 2.50-2.75x net debt /
adjusted corporate EBITDA by 2025, allocating up to $2.55 billion
of capital available for allocation to debt reduction. As part of
this plan, the Company expects to reduce its debt by $1.4 billion
in 2023 with $900 million funded with cash from operations and $500
million with proceeds from the sale of STP. As of July 31, 2023,
the Company executed $200 million in debt reduction.
On July 17, 2023, NRG announced that its Board of Directors
declared a quarterly dividend on the Company's common stock of
$0.3775 per share. The dividend is payable on August 15, 2023, to
stockholders of record as of August 1, 2023.
NRG'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.
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, the Company expects to return the unit to service in late
August 2023. NRG expects lost revenues and expenditures incurred in
2023 to be offset by insurance recoveries.
Sale of 44% Equity Interest in the South Texas Project
(STP)
On May 31, 2023, the Company entered into an agreement to sell
its 44% equity interest in STP for $1.75 billion, unlocking
significant shareholder value. The transaction is subject to
regulatory approvals by the United States Nuclear Regulatory
Commission and the Hart-Scott-Rodino Act and is expected to close
by the end of 2023.
Year in Review, Including 13th Annual Sustainability
Update
NRG released its 2022 Year in Review, including its 13th year of
sustainability reporting, providing an update on the Company’s
dedication to people, commitment to environmental stewardship, and
governance. The report highlights a record year of safety
performance and customer retention, as well as many initiatives
that reflect NRG's commitment to employee well-being and community.
Additionally, as of December 31, 2022, NRG recorded an
approximately 42% reduction in greenhouse gas emissions from the
2014 base year and a 60% decrease in revenue carbon intensity since
2020.
1 Adjusted to reflect the sale of Vivint Smart Home's Canada
business, which was completed in June 2022
Consolidated Financial
Results
Three Months Ended
Six Months Ended
($ in millions)
6/30/2023
6/30/2022
6/30/2023
6/30/2022
Net Income/(Loss)
$
308
$
513
$
(1,027)
$
2,249
Cash Provided/(Used) by Operating
Activities
$
570
$
1,513
$
(1,028)
$
3,189
Adjusted EBITDA
$
819
$
386
$
1,465
$
922
Free Cash Flow Before Growth Investments
(FCFbG)
$
425
$
97
$
628
$
336
Segments Results
Table 1: Net Income/(Loss)
($ in millions)
Three Months Ended
Six Months Ended
Segment
6/30/2023
6/30/2022
6/30/2023
6/30/2022
Texas
$
785
$
762
$
1,069
$
1,533
East
(101)
(12)
(1,503)
1,526
West/Services/Othera
(353)
(237)
(531)
(810)
Vivint Smart Homeb
$
(23)
N/A
$
(62)
N/A
Net Income/(Loss)
$
308
$
513
$
(1,027)
$
2,249
- Includes Corporate segment
- Vivint Smart Home acquired in March 2023
Net Income for the second quarter was $205 million lower than
the second quarter of 2022, primarily driven by lower
mark-to-market non-cash gains on economic hedge positions in Texas
and the East. Net Loss for the six months ended June 30, 2023 was
$1.0 billion, $3.3 billion lower than the prior year. This was
driven by unrealized mark-to-market non-cash losses on economic
natural gas and power hedges in the first quarter of 2023. Certain
hedge positions are required to be marked-to-market every period,
while the customer contracts related to these items are not,
resulting in temporary unrealized non-cash losses or gains on the
economic hedges that are not reflective of the expected economics
at future settlement.
Table 2: Adjusted EBITDA
($ in millions)
Three Months Ended
Six Months Ended
Segment
6/30/2023
6/30/2022
6/30/2023
6/30/2022
Texas
$
504
$
263
$
758
$
474
East
77
68
391
400
West/Services/Othera
21
55
26
48
Vivint Smart Homeb
$
217
N/A
$
290
N/A
Adjusted EBITDA
$
819
$
386
$
1,465
$
922
- Includes Corporate segment
- Vivint Smart Home acquired in March 2023
Texas: Second quarter Adjusted EBITDA was $504 million,
$241 million higher than the second quarter of 2022. This increase
was primarily driven by lower retail supply costs, including the
impact of lower power pricing, the diversified supply strategy, and
improved plant performance coupled with the 2022 impact of the W.A.
Parish Unit 8 extended outage. This increase was partially offset
by a decrease in retail load and higher operating costs due to an
increase in planned outages in the second quarter of 2023 compared
to the second quarter of 2022.
East: Second quarter Adjusted EBITDA was $77 million, $9
million higher than the second quarter of 2022. This increase was
primarily driven by increased retail power margins, partially
offset by asset retirements and lower retail natural gas
margins.
West/Services/Other: Second quarter Adjusted EBITDA was
$21 million, $34 million lower than the second quarter of 2022,
primarily driven by lower contributions from the services
businesses and Cottonwood.
Vivint Smart Home: Adjusted EBITDA was $217 million in
the second quarter of 2023.
Liquidity and Capital
Resources
Table 3: Corporate Liquidity
($ in millions)
6/30/23
12/31/22
Cash and Cash Equivalents
$
422
$
430
Restricted Cash
26
40
Total
448
470
Total Revolving Credit Facility and
collective collateral facilities
4,067
2,324
Total Liquidity, excluding collateral
deposited by counterparties
$
4,515
$
2,794
As of June 30, 2023, NRG's cash was $422 million, and $4.1
billion was available under the Company’s credit facilities. Total
liquidity was $4.5 billion, $1.7 billion higher than at the end of
2022. This increase was due to specific initiatives to optimize the
amount of collateral supporting NRG's market operations activity
and increases in credit facilities.
2023 Guidance
NRG is reaffirming its Adjusted EBITDA, Cash provided by
operating activities, and FCFbG guidance for 2023 as set forth
below.
Table 4: Adjusted EBITDA, Cash Provided by Operating
Activities, and FCFbG Guidancea
2023
(In millions)
Guidance
Adjusted EBITDA
$3,010 - $3,250
Cash Provided by Operating Activities
$1,610 - $1,850
FCFbG
$1,620 - $1,860
- Non-GAAP financial measure; see Appendix Table A-8 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.
Earnings Conference Call
On August 8, 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 company wide 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 Smart Home, 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 August 8, 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 June
30,
Six months ended June
30,
(In millions, except for per share
amounts)
2023
2022
2023
2022
Revenue
Revenue
$
6,348
$
7,282
$
14,070
$
15,178
Operating Costs and Expenses
Cost of operations (excluding depreciation
and amortization shown below)
4,962
5,887
13,740
10,817
Depreciation and amortization
315
157
505
340
Impairment losses
—
155
—
155
Selling, general and administrative
costs
522
351
948
698
Acquisition-related transaction and
integration costs
22
10
93
18
Total operating costs and expenses
5,821
6,560
15,286
12,028
Gain on sale of assets
3
32
202
29
Operating Income/(Loss)
530
754
(1,014
)
3,179
Other Income/(Expense)
Equity in earnings/(losses) of
unconsolidated affiliates
5
4
10
(11
)
Other income, net
13
12
29
12
Interest expense
(151
)
(105
)
(299
)
(208
)
Total other expense
(133
)
(89
)
(260
)
(207
)
Income/(Loss) Before Income
Taxes
397
665
(1,274
)
2,972
Income tax expense/(benefit)
89
152
(247
)
723
Net Income/(Loss)
$
308
$
513
$
(1,027
)
$
2,249
Less: Cumulative dividends attributable to
Series A Preferred Stock
17
—
21
—
Net Income/(Loss) Available for Common
Stockholders
$
291
$
513
$
(1,048
)
$
2,249
Income/(Loss) per Share
Weighted average number of common shares
outstanding — basic
231
237
230
240
Income/(Loss) per Weighted Average
Common Share — Basic
$
1.26
$
2.16
$
(4.56
)
$
9.37
Weighted average number of common shares
outstanding — diluted
232
237
230
240
Income/(Loss) per Weighted Average
Common Share —Diluted
$
1.25
$
2.16
$
(4.56
)
$
9.37
NRG ENERGY, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME/(LOSS) (Unaudited)
Three months ended June
30,
Six months ended June
30,
(In millions)
2023
2022
2023
2022
Net Income/(Loss)
$
308
$
513
$
(1,027
)
$
2,249
Other Comprehensive
Income/(Loss)
Foreign currency translation
adjustments
6
(22
)
8
(13
)
Defined benefit plans
—
20
(1
)
19
Other comprehensive income/(loss)
6
(2
)
7
6
Comprehensive Income/(Loss)
$
314
$
511
$
(1,020
)
$
2,255
NRG ENERGY, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2023
December 31, 2022
(In millions, except share data and
liquidation preference on preferred stock)
(Unaudited)
(Audited)
ASSETS
Current Assets
Cash and cash equivalents
$
422
$
430
Funds deposited by counterparties
365
1,708
Restricted cash
26
40
Accounts receivable, net
3,274
4,773
Inventory
686
751
Derivative instruments
4,423
7,886
Cash collateral paid in support of energy
risk management activities
270
260
Prepayments and other current assets
580
383
Current assets - held-for-sale
75
—
Total current assets
10,121
16,231
Property, plant and equipment,
net
1,706
1,692
Other Assets
Equity investments in affiliates
139
133
Operating lease right-of-use assets,
net
221
225
Goodwill
5,143
1,650
Customer relationships, net
2,446
943
Other intangible assets, net
1,897
1,189
Nuclear decommissioning trust fund
—
838
Derivative instruments
2,910
4,108
Deferred income taxes
2,711
1,881
Other non-current assets
536
251
Non-current assets - held-for-sale
1,161
5
Total other assets
17,164
11,223
Total Assets
$
28,991
$
29,146
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Current portion of long-term debt and
finance leases
$
1,319
$
63
Current portion of operating lease
liabilities
91
83
Accounts payable
2,107
3,643
Derivative instruments
3,832
6,195
Cash collateral received in support of
energy risk management activities
365
1,708
Deferred revenue current
731
176
Accrued expenses and other current
liabilities
1,395
1,110
Current liabilities - held-for-sale
36
4
Total current liabilities
9,876
12,982
Other Liabilities
Long-term debt and finance leases
10,737
7,976
Non-current operating lease
liabilities
165
180
Nuclear decommissioning reserve
—
340
Nuclear decommissioning trust
liability
—
477
Derivative instruments
1,889
2,246
Deferred income taxes
130
134
Deferred revenue non-current
927
10
Other non-current liabilities
988
942
Non-current liabilities -
held-for-sale
947
31
Total other liabilities
15,783
12,336
Total Liabilities
25,659
25,318
Commitments and Contingencies
Stockholders' Equity
Preferred stock; 10,000,000 shares
authorized; 650,000 Series A shares issued and outstanding at June
30, 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; 424,675,214 and 423,897,001 shares issued and
230,425,759 and 229,561,030 shares outstanding at June 30, 2023 and
December 31, 2022, respectively
4
4
Additional paid-in-capital
8,504
8,457
Retained earnings
205
1,408
Treasury stock, at cost 194,249,455 and
194,335,971 shares at June 30, 2023 and December 31, 2022,
respectively
(5,861
)
(5,864
)
Accumulated other comprehensive loss
(170
)
(177
)
Total Stockholders' Equity
3,332
3,828
Total Liabilities and Stockholders'
Equity
$
28,991
$
29,146
NRG ENERGY, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited)
Six months ended June
30,
(In millions)
2023
2022
Cash Flows from Operating
Activities
Net (Loss)/Income
$
(1,027
)
$
2,249
Adjustments to reconcile net (loss)/income
to cash (used)/provided by operating activities:
Distributions from and equity in
(earnings)/losses of unconsolidated affiliates
(9
)
16
Depreciation and amortization
505
340
Accretion of asset retirement
obligations
5
16
Provision for credit losses
80
51
Amortization of nuclear fuel
26
28
Amortization of financing costs and debt
discounts
31
11
Amortization of in-the-money contracts and
emissions allowances
112
128
Amortization of unearned equity
compensation
61
14
Net gain on sale of assets and disposal of
assets
(187
)
(46
)
Impairment losses
—
155
Changes in derivative instruments
1,515
(3,918
)
Changes in current and deferred income
taxes and liability for uncertain tax benefits
(282
)
672
Changes in collateral deposits in support
of risk management activities
(1,355
)
3,121
Changes in nuclear decommissioning trust
liability
2
(5
)
Uplift securitization proceeds received
from ERCOT
—
689
Changes in other working capital
(505
)
(332
)
Cash (used)/provided by operating
activities
(1,028
)
3,189
Cash Flows from Investing
Activities
Payments for acquisitions of businesses
and assets, net of cash acquired
(2,498
)
(53
)
Capital expenditures
(324
)
(150
)
Net purchases of emission allowances
(25
)
(19
)
Investments in nuclear decommissioning
trust fund securities
(185
)
(271
)
Proceeds from the sale of nuclear
decommissioning trust fund securities
180
278
Proceeds from sales of assets, net of cash
disposed
229
96
Proceeds from insurance recoveries for
property, plant and equipment, net
121
—
Cash used by investing
activities
(2,502
)
(119
)
Cash Flows from Financing
Activities
Proceeds from issuance of preferred stock,
net of fees
635
—
Payments of dividends to common
stockholders
(174
)
(168
)
Payments for share repurchase
activity(a)
(16
)
(366
)
Net receipts from settlement of acquired
derivatives that include financing elements
318
950
Net proceeds of Revolving Credit
Facility
700
—
Proceeds from issuance of long-term
debt
731
—
Payments of debt issuance costs
(22
)
—
Repayments of long-term debt and finance
leases
(10
)
(2
)
Cash provided by financing
activities
2,162
414
Effect of exchange rate changes on cash
and cash equivalents
3
—
Net (Decrease)/Increase in Cash and
Cash Equivalents, Funds Deposited by Counterparties and Restricted
Cash
(1,365
)
3,484
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
$
813
$
4,594
(a) Includes $(16) million and $(6) million for tax withholdings
on equity awards during the six months ended June 30, 2023 and June
30, 2022, respectively
Appendix Table A-1: Second Quarter 2023 Adjusted EBITDA
Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted
EBITDA and provides a reconciliation to Net Income/(Loss)1:
($ in millions)
Texas
East
West/Services/ Other
Vivint Smart Home
Corp/Elim
Total
Net Income/(Loss)
$
785
$
(101
)
$
(129
)
$
(23
)
$
(224
)
$
308
Plus:
Interest expense, net
3
(4
)
6
28
104
137
Income tax
—
1
1
—
87
89
Depreciation and amortization
73
30
23
180
9
315
ARO Expense
2
(2
)
(1
)
—
—
(1
)
Contract and emission credit amortization,
net
3
(16
)
3
—
—
(10
)
EBITDA
866
(92
)
(97
)
185
(24
)
838
Stock-based compensation
5
2
1
18
—
26
Amortization of customer acquisition
costs2
12
11
1
4
—
28
Adjustment to reflect NRG share of
adjusted EBITDA in unconsolidated affiliates
—
—
4
—
—
4
Acquisition and divestiture integration
and transaction costs3
—
—
—
7
16
23
Deactivation costs
—
6
3
—
—
9
(Gain) on sale of assets
—
(3
)
—
—
—
(3
)
Other non-recurring charges
(45
)
1
(2
)
3
1
(42
)
Mark to market (MtM) (gains)/losses on
economic hedges
(334
)
152
118
—
—
(64
)
Adjusted EBITDA
$
504
$
77
$
28
$
217
$
(7
)
$
819
1 This schedule reflects 2023 results under the harmonization of
the Adjusted EBITDA definition 2 Amortization of customer
acquisition costs, which are excluded from the calculation of
Adjusted EBITDA, is the income statement recognition of capitalized
costs related to commissions and other costs related to securing
the new customer 3 Includes stock-based compensation of $3
million
Second Quarter 2023 condensed financial information by Operating
Segment:
($ in millions)
Texas
East
West/Services/ Other
Vivint Smart Home
Corp/Elim
Total
Revenue1
$
2,515
$
2,458
$
870
$
444
$
(6
)
$
6,281
Cost of fuel, purchased power and other
cost of sales2
1,587
2,144
742
41
(5
)
4,509
Economic gross margin
928
314
128
403
(1
)
1,772
Operations & maintenance and other
cost of operations3
267
117
58
53
(1
)
494
Selling, marketing, general and
administrative4
157
123
52
134
5
471
Other
—
(3
)
(10
)
(1
)
2
(12
)
Adjusted EBITDA
$
504
$
77
$
28
$
217
$
(7
)
$
819
1 Excludes MtM gain of $75 million and contract amortization of
expense of $8 million 2 Includes TDSP expense, capacity and
emission credits 3 Excludes other non-recurring charges of ($45)
million, deactivation costs of $9 million, stock-based compensation
of $2 million, ARO expenses of ($1) million and amortization of
customer acquisition costs of $1 million 4 Excludes amortization of
customer acquisition costs of $27 million and stock-based
compensation of $24 million
The following table reconciles the condensed financial
information to Adjusted EBITDA:
($ in millions)
Condensed Consolidated Results
of Operations
Interest, tax, depr.,
amort.
MtM
Deactivation
Other adj.2
Adjusted EBITDA
Revenue
$
6,348
$
8
$
(75
)
$
—
$
—
$
6,281
Cost of operations (excluding depreciation
and amortization shown below)1
4,502
18
(11
)
—
—
4,509
Depreciation and Amortization
315
(315
)
—
—
—
—
Gross margin
1,531
305
(64
)
—
—
1,772
Operations & maintenance and other
cost of operations
460
—
—
(9
)
43
494
Selling, marketing, general &
administrative
522
—
—
—
(51
)
471
Other
241
(226
)
—
—
(27
)
(12
)
Net Income/(Loss)
$
308
$
531
$
(64
)
$
9
$
35
$
819
1 Excludes Operations & maintenance and other cost of
operations of $460 million 2 Other adj. includes amortization of
customer acquisition costs of $28 million, stock-based compensation
of $26 million, acquisition and divestiture integration and
transaction costs of $23 million, NRG share of adjusted EBITDA in
unconsolidated affiliates of $4 million. other non-recurring
charges of ($42) million, gain on sales of assets ($3) million and
ARO expenses of ($1) million
Appendix Table A-2: Second Quarter 2022 Adjusted EBITDA
Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted
EBITDA and provides a reconciliation to Net Income/(Loss)1:
($ in millions)
Texas
East
West/Services/ Other
Corp/Elim
Total
Net Income/(Loss)
$
762
$
(12
)
$
24
$
(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 and emission credit amortization,
net
(2
)
(25
)
5
—
(22
)
EBITDA
840
15
71
(23
)
903
Stock-based compensation
4
2
2
—
8
Amortization of customer acquisition
costs2
12
7
1
—
20
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
(Gain)/loss 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
$
263
$
68
$
65
$
(10
)
$
386
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 2 Amortization of customer acquisition
costs, which are excluded from the calculation of Adjusted EBITDA,
is the income statement recognition of capitalized costs related to
commissions and other costs related to securing the new
customer
Second Quarter 2022 condensed financial information by Operating
Segment:
($ in millions)
Texas
East
West/Services/ Other
Corp/Elim
Total
Revenue1
$
2,693
$
3,631
$
1,116
$
3
$
7,443
Cost of fuel, purchased power and other
cost of sales2
2,039
3,339
961
4
6,343
Economic gross margin
654
292
155
(1
)
1,100
Operations & maintenance and other
cost of operations3
242
122
54
(1
)
417
Selling, marketing, general &
administrative4
148
107
57
10
322
Other
1
(5
)
(21
)
—
(25
)
Adjusted EBITDA
$
263
$
68
$
65
$
(10
)
$
386
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 charges of $15 million, ARO expense
of $9 million, deactivation costs of $5 million 4 Excludes
amortization of customer acquisition costs of $20 million,
stock-based compensation of $8 million and acquisition and
integration 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
$
7,282
$
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
)
—
—
1,100
Operations & maintenance and other
cost of operations
446
—
—
(5
)
(24
)
417
Selling, marketing, general &
administrative
351
—
—
—
(29
)
322
Other
374
(246
)
—
—
(153
)
(25
)
Net Income/(Loss)
$
513
$
381
$
(719
)
$
5
$
206
$
386
1 Excludes Operations & maintenance and other cost of
operations of $446 million 2 Other adj. includes impairments costs
of $155 million, amortization of customer acquisition costs of $20
million, 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, stock-based compensation
of $8 million and gain on sales of assets ($32) million
Appendix Table A-3: YTD Second Quarter 2023 Adjusted EBITDA
Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted
EBITDA and provides a reconciliation to Net Income/(Loss)1:
($ in millions)
Texas
East
West/ Services/ Other
Vivint Smart Home2
Corp/Elim
Total
Net Income/(Loss)
$
1,069
$
(1,503
)
$
(433
)
$
(62
)
$
(98
)
$
(1,027
)
Plus:
Interest expense, net
3
(10
)
12
54
210
269
Income tax
—
1
(46
)
—
(202
)
(247
)
Depreciation and amortization
148
60
47
232
18
505
ARO expense
4
1
—
—
—
5
Contract and emission credit amortization,
net
4
99
6
—
—
109
EBITDA
1,228
(1,352
)
(414
)
224
(72
)
(386
)
Stock-based compensation
11
4
2
22
—
39
Amortization of customer acquisition
costs3
26
22
2
4
—
54
Adjustment to reflect NRG share of
adjusted EBITDA in unconsolidated affiliates
—
—
8
—
—
8
Acquisition and divestiture integration
and transaction costs4
—
—
—
37
58
95
Deactivation costs
—
10
6
—
—
16
(Gain) on sale of assets
—
(202
)
—
—
—
(202
)
Other non-recurring charges
(44
)
2
—
3
—
(39
)
Mark to market (MtM) (gains)/losses on
economic hedges
(463
)
1,907
436
—
—
1,880
Adjusted EBITDA
$
758
$
391
$
40
$
290
$
(14
)
$
1,465
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 income
statement recognition of capitalized costs related to commissions
and other costs related to securing the new customer 4 Includes
stock-based compensation of $23 million
YTD Second Quarter 2023 condensed financial information by
Operating Segment:
($ in millions)
Texas
East
West/ Services/ Other
Vivint Smart Home1
Corp/Elim
Total
Revenue2
$
4,549
$
6,610
$
2,177
$
592
$
(5
)
$
13,923
Cost of fuel, purchased power and other
cost of sales3
2,954
5,744
1,927
52
(3
)
10,674
Economic gross margin
1,595
866
250
540
(2
)
3,249
Operations & maintenance and other
cost of operations4
529
220
127
71
(2
)
945
Selling, general and administrative
costs5
309
258
101
180
12
860
Other
(1
)
(3
)
(18
)
(1
)
2
(21
)
Adjusted EBITDA
$
758
$
391
$
40
$
290
$
(14
)
$
1,465
1 Vivint Smart Home acquired in March 2023 2 Excludes MtM gain
of $166 million and contract amortization of $19 million 3 Includes
TDSP expense, capacity and emission credits 4 Excludes other
non-recurring charges of ($42) million, deactivation costs of $16
million, ARO expense of $5 million, amortization of customer
acquisition costs of $3 million and stock-based compensation of $3
million 5 Excludes amortization of customer acquisition costs of
$51 million, stock-based compensation of $36 million and
acquisition and divestiture integration and transaction 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
$
14,070
$
19
$
(166
)
$
—
$
—
$
13,923
Cost of operations (excluding depreciation
and amortization shown below)1
12,810
(90
)
(2,046
)
—
—
10,674
Depreciation and amortization
505
(505
)
—
—
—
—
Gross margin
755
614
1,880
—
—
3,249
Operations & maintenance and other
cost of operations
930
—
—
(16
)
31
945
Selling, general and administrative
costs
948
—
—
—
(88
)
860
Other
(96
)
(22
)
—
—
97
(21
)
Net Income/(Loss)
$
(1,027
)
$
636
$
1,880
$
16
$
(40
)
$
1,465
1 Excludes Operations & maintenance and other cost of
operations of $930 million 2 Includes acquisition and divestiture
integration and transaction costs of $95 million, amortization of
customer acquisition costs of $54 million, stock-based compensation
of $39 million, NRG share of adjusted EBITDA in unconsolidated
affiliates of $8 million, ARO expense of $5 million, gain on sale
of assets ($202) million and other non-recurring charges of ($39)
million
Appendix Table A-4: YTD Second Quarter 2022 Adjusted EBITDA
Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted
EBITDA and provides a reconciliation to Net (Loss)/Income1:
($ in millions)
Texas
East
West/ Services/ Other
Corp/Elim
Total
Net Income/(Loss)
$
1,533
$
1,526
$
154
$
(964
)
$
2,249
Plus:
Interest expense, net
—
(3
)
15
182
194
Income tax
—
(1
)
10
714
723
Depreciation and amortization
154
127
43
16
340
ARO expense
6
7
3
—
16
Contract and emission credit amortization,
net
(4
)
122
7
—
125
EBITDA
1,689
1,778
232
(52
)
3,647
Stock-based compensation
7
3
4
—
14
Amortization of customer acquisition
costs2
26
14
1
—
41
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
(Gain)/loss on sale of assets
12
—
(43
)
2
(29
)
Other non-recurring charges
(1
)
23
(11
)
11
22
Impairments
—
155
—
—
155
Mark to market (MtM) (gains)/losses on
economic hedges
(1,259
)
(1,582
)
(155
)
—
(2,996
)
Adjusted EBITDA
$
474
$
400
$
63
$
(15
)
$
922
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. 2 Amortization of customer acquisition
costs, which are excluded from the calculation of Adjusted EBITDA,
is the income statement recognition of capitalized costs related to
commissions and other costs related to securing the new
customer
YTD Second Quarter 2022 condensed financial information by
Operating Segment:
($ in millions)
Texas
East
West/ Services/ Other
Corp/Elim
Total
Revenue1
$
4,715
$
8,485
$
2,278
$
3
$
15,481
Cost of fuel, purchased power and other
cost of sales2
3,496
7,606
2,017
5
13,124
Economic gross margin
1,219
879
261
(2
)
2,357
Operations & maintenance and other
cost of operations3
469
253
111
(1
)
832
Selling, marketing, general &
administrative4
280
231
112
18
641
Other
(4
)
(5
)
(25
)
(4
)
(38
)
Adjusted EBITDA
$
474
$
400
$
63
$
(15
)
$
922
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 expense
of $9 million, other non-recurring charges of $8 million,
amortization of customer acquisition costs of $1 million and
stock-based compensation costs of $1 million 4 Excludes
amortization of customer acquisition costs of $40 million,
stock-based compensation costs of $13 million and 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
)
(26
)
832
Selling, marketing, general &
administrative
698
—
—
—
(57
)
641
Other
1,074
(917
)
—
—
(195
)
(38
)
Net Income/(Loss)
$
2,249
$
1,382
$
(2,996
)
$
9
$
278
$
922
1 Excludes Operations & maintenance and other cost of
operations of $867 million 2 Other adj. includes adjustment to
reflect impairments of $155 million, amortization of customer
acquisition costs of $41 million, NRG share of adjusted EBITDA in
unconsolidated affiliates of $35 million, acquisition and
divestiture integration and transaction costs of $24 million, other
non-recurring charges of $22 million, ARO expense of $16 million,
stock-based compensation costs of $14 million and gain on sale of
assets of ($29) million
Appendix Table A-5: 2023 and 2022 Three Months Ended June 30
Free Cash Flow before Growth Investments (FCFbG)
The following table summarizes the calculation of FCFbG,
providing a reconciliation to Cash provided by operating
activities:
Three Months Ended
($ in millions)
June 30, 2023
June 30, 2022
Adjusted EBITDA
$
819
$
386
Interest payments, net
(114
)
(83
)
Income tax
(36
)
(54
)
Net deferred revenue1
121
14
Amortization of customer fulfillment
costs2
(6
)
—
Capitalized contract costs3
(243
)
(4
)
Collateral / working capital / other
assets and liabilities
29
1,254
Cash provided by operating
activities
570
1,513
Winter Storm Uri securitization, C&I
credits, and remaining open accounts receivables
—
(649
)
Net receipts from settlement of acquired
derivatives that include
financing elements
(18
)
389
Acquisition and divestiture integration
and transaction costs4
19
14
Encina site improvement
4
4
GenOn settlement
—
4
Adjustment for change in collateral
(57
)
(1,114
)
Nuclear decommissioning trust
liability
(17
)
(3
)
Effect of exchange rate changes on cash
and cash equivalents
—
(3
)
Adjusted cash provided by operating
activities
501
155
Maintenance capital expenditures, net5
(113
)
(58
)
Net cash for growth initiatives
37
—
Free Cash Flow before Growth
Investments (FCFbG)
$
425
$
97
1 The cash impact of deferred revenue is the net change in the
balance sheet from capitalizing proceeds received from installation
and equipment sales and then recognizing those proceeds as revenue
on a straight-line basis over the expected period of benefit. 2
Amortization of customer fulfillment costs, which are included in
the calculation of Adjusted EBITDA, is the income statement
recognition of capitalized contract costs related to the sale and
installation of equipment necessary for a customer to receive the
Vivint Smart Home service. 3 Capitalized contract costs represents
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. 4 Three months ended June 30, 2023 excludes $4
million non-cash stock-based compensation. 5 Includes W.A. Parish
Unit 8 and Limestone Unit 1 insurance recoveries related to
property, plant and equipment.
Appendix Table A-6: 2023 and 2022 Six Months Ended June 30
Free Cash Flow before Growth Investments (FCFbG)
The following table summarizes the calculation of FCFbG,
providing a reconciliation to Cash (used)/provided by operating
activities:
Six Months Ended
($ in millions)
June 30, 2023
June 30, 2022
Adjusted EBITDA
$
1,465
$
922
Interest payments, net
(205
)
(178
)
Income tax
(32
)
(36
)
Net deferred revenue1
119
(36
)
Amortization of customer fulfillment
costs2
(6
)
—
Capitalized contract costs3
(299
)
19
Collateral / working capital / other
assets and liabilities
(2,070
)
2,498
Cash (used)/provided by operating
activities
(1,028
)
3,189
Winter Storm Uri securitization, C&I
credits and remaining open receivables
—
(624
)
Net receipts from settlement of acquired
derivatives that include
financing elements
318
950
Acquisition and divestiture integration
and transaction costs4
75
24
Astoria fees
3
—
Encina site improvement
7
9
GenOn settlement
—
4
Adjustment for change in collateral
1,355
(3,121
)
Nuclear decommissioning trust
liability
(5
)
7
Effect of exchange rate changes on cash
and cash equivalents
3
—
Adjusted cash provided by operating
activities
728
438
Maintenance capital expenditures, net5
(154
)
(101
)
Environmental capital expenditures
—
(1
)
Net cash for growth initiatives
54
—
Free Cash Flow before Growth
Investments (FCFbG)
628
336
1 The cash impact of deferred revenue is the net change in the
balance sheet from capitalizing proceeds received from installation
and equipment sales and then recognizing those proceeds as revenue
on a straight-line basis over the expected period of benefit. 2
Amortization of customer fulfillment costs, which are included in
the calculation of Adjusted EBITDA, is the income statement
recognition of capitalized contract costs related to the sale and
installation of equipment necessary for a customer to receive the
Vivint Smart Home service. 3 Capitalized contract costs represents
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. 4 Six months ended June 30, 2023 excludes $20
million non-cash stock-based compensation. 5 Includes W.A. Parish
Unit 8 and Limestone Unit 1 insurance recoveries related to
property, plant and equipment.
Appendix Table A-7: Six Months Ended June 30, 2023 Sources
and Uses of Liquidity
The following table summarizes the sources and uses of liquidity
for the six months ending June 30, 2023:
($ in millions)
Six months ended June 30,
2023
Sources:
Adjusted cash provided by operating
activities
728
Increase in NRG revolving credit
facility
645
Increase in availability of collective
collateral facilities
1,182
Proceeds of revolving credit facility and
receivables securitization facilities
700
Proceeds from issuance of long-term
debt
731
Proceeds from issuance of preferred stock,
net of fees
635
Proceeds from sale of assets, net of cash
disposed
229
Uses:
Payments for acquisitions of businesses
and assets, net of cash acquired
(2,498
)
Payments of dividends
(174
)
Maintenance capital expenditures, net
(154
)
Cash collateral paid in support of energy
risk management activities
(10
)
Investments and integration capital
expenditures
(49
)
Acquisition and divestiture integration
and transaction costs1
(75
)
Net purchases of emission allowances
(25
)
Payments of debt issuance costs
(22
)
Payments for share repurchase activity
(16
)
Encina site improvement
(7
)
Other investing and financing
(15
)
Change in Total Liquidity
$
1,805
1 Excludes $20 million non-cash stock-based compensation.
Appendix Table A-8: 2023 Guidance Reconciliations
The following table summarizes the calculation of Adjusted
EBITDA providing reconciliation to Net Income, and the calculation
of FCFbG providing a reconciliation to Cash provided by operating
activities:
2023
($ in millions)
Guidance
Net Income1
$ 805 - 1,045
Interest expense, net
580
Income tax
310
Depreciation and amortization
1,110
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
(560)
Income tax
(95)
Net deferred revenue6
215
Amortization of customer fulfillment
costs7
35
Capitalized contract costs
(690)
Working capital / other assets and
liabilities8
(305)
Cash provided by operating
activities
1,610 - 1,850
Acquisition and other costs8
210
Adjusted cash provided by operating
activities
1,820 - 2,060
Maintenance capital expenditures, net9
(270) - (290)
Environmental capital expenditures
(10) - (15)
Net cash for growth initiatives
90
Free Cash Flow before Growth
Investments (FCFbG)
$ 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 income statement recognition of capitalized
costs related to commissions and other costs related to securing
the new customer. NRG amortization of customer acquisition costs,
excluding Vivint Smart Home, is expected to be $90 million and
Vivint Smart Home is expected to be $30 million. 3 NRG stock-based
compensation, excluding Vivint Smart Home, is expected to be $30
million and Vivint Smart Home is expected to be $45 million. 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 Vivint Smart Home's
customer fulfillment costs are expected to be $35 million and is
shown in Cash provided by Operating Activities. 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 income statement recognition of capitalized
contract costs related to the installation of equipment necessary
for a customer to receive the Vivint 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 provided by operating activities is a non-GAAP
measure NRG provides to show cash Cash provided/(used) by operating
activities 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 Cash provided/(used) by operating
activities 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 Flows from Operating Activities 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 Flows from
Investing Activities.
Free Cash Flow before Growth Investments is Adjusted Cash
provided by operating activities less maintenance and environmental
capital expenditures, net of funding and insurance recoveries
related to property, plant and equipment, 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/(used) 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/20230807792982/en/
Media: Laura Avant 713.537.5437
Investors: Brendan Mulhern 609.524.4767
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