Market Overview

NRG Energy, Inc. Reports Second Quarter 2015 Results, Reaffirms 2015 Full Year Guidance and Offers Next Drop Down to NRG Yield

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PRINCETON, N.J.--(BUSINESS WIRE)--

NRG Energy, Inc. (NYSE: NRG) today reported second quarter Adjusted EBITDA of $729 million1, with $338 million from NRG Business and NRG Renew combined5, $204 million from NRG Home Retail, and $187 million from NRG Yield. Year-to-date adjusted cash flow from operations totaled $678 million. Net loss for the first six months of 2015 was $145 million, or $0.43 per diluted common share compared to a net loss of $147 million, or $0.48 per diluted common share for the first six months of 2014.

"Our competitive retail business continues to lead the way, achieving record results in a low supply cost environment while our wholesale unit continues to deliver solid operational performance through a strongly hedged baseload position," said David Crane, NRG's Chief Executive Officer. "After a weather impeded start of the year, NRG Home Solar's pace of customer bookings has us easily in the top four in the residential solar industry, with California still to come."

Segment Results

             

Table 1: Adjusted EBITDA

($ in millions)

Three Months Ended

Six Months Ended
Segment       6/30/15       6/30/14     6/30/15       6/30/14
Business (1)(2) $ 285     $ 301 $ 821     $ 896
Home Retail 204 157 370 272
Renew (1) 66 77 98 89
NRG Yield (1) 187 141 309 233
Corporate         (13 )       1       (29 )       4
Adjusted EBITDA(3)       $ 729       $ 677     $ 1,569       $ 1,494
 

(1) In accordance with GAAP, 2014 results have been restated to include full impact of the assets in
the NRG Yield drop down transactions which closed on January 2, 2015 and June 30, 2014.

(2) See Appendices A-6 through A-9 for NRG Business regional details.

(3) See Appendices A-1 through A-4 for Operating Segment Reg G reconciliations; excludes negative
contribution of $47 million and $87 million from Home Solar for the three and six months ended
June 30, 2015, respectively, and $6 million and $7 million for the three and six months ended
June 30, 2014, respectively.

 
           

Table 2: Net Income/(Loss)

($ in millions) Three Months Ended Six Months Ended
Segment         6/30/15         6/30/14         6/30/15         6/30/14  
Business (1) $ (1 )     $ 99 $ 28     $ 93
Home Retail 212 (50 ) 316 135
Home Solar (54 ) (7 ) (99 ) (9 )
Renew (1) (18 ) 2 (73 ) (63 )
NRG Yield (1) 41 42 25 68
Corporate         (189 )       (166 )       (342 )       (371 )
Net Loss(2)       $ (9 )     $ (80 )     $ (145 )     $ (147 )
 

(1) In accordance with GAAP, 2014 results have been restated to include full impact of the assets in
the NRG Yield drop down transactions which closed on January 2, 2015 and June 30, 2014.

(2) Includes mark-to-market gains and losses of economic hedges.

 

NRG Business: Second quarter Adjusted EBITDA was $285 million; $16 million lower than in the second quarter 2014 primarily driven by:

  • East Region: $11 million lower due to lower energy margins caused by milder weather and lower capacity revenues due to lower base residual auction prices and less capacity following plant deactivations, partially offset by lower operating costs due to fewer outages and decreased run time
  • West Region: $26 million lower due to decreased pricing and a decline in contracted volumes from certain capacity contracts including the retirement of Coolwater
  • Gulf Coast Region: $27 million increase due to higher realized energy margins, partially offset by increased outage costs during planned outages for fuel conversion and back-end control installations.

NRG Home Retail: Second quarter Adjusted EBITDA was $204 million, $47 million higher than second quarter 2014 driven primarily by favorable supply costs, partially offset by an increase in operating costs associated with customer growth in Texas.

NRG Renew: Second quarter Adjusted EBITDA was $66 million, $11 million lower than in second quarter 2014 primarily due to lower generation by wind assets following the drop in wind resource availability in 2015 and increased distributed solar development costs, partially offset by the ramp up of Ivanpah as generation continues to increase year over year.

NRG Yield: Second quarter Adjusted EBITDA was $187 million, $46 million higher than in second quarter 2014 primarily due to the Alta Wind acquisition.

Liquidity and Capital Resources

               

Table 3: Corporate Liquidity

($ in millions)       6/30/15     3/31/15     12/31/14
Cash at NRG-Level $ 709 $ 786 $ 661
Revolver         1,409       1,424       1,367
NRG-Level Liquidity $ 2,118 $ 2,210 $ 2,028
Restricted cash 433 443 457
Cash at Non-Guarantor Subsidiaries         1,437       1,378       1,455
Total Liquidity $ 3,988 $ 4,031 $ 3,940
 

NRG-level cash as of June 30, 2015, was $709 million, an increase of $48 million over the end of 2014, and $1,409 million was available under the Company's credit facilities at the end of the current quarter. Total liquidity was $3,988 million including restricted cash and cash at non-guarantor subsidiaries (primarily GenOn and NRG Yield)6.

NRG Strategic Developments

Next Drop Down to NRG Yield

NRG Energy offered NRG Yield the opportunity to acquire a 75% stake in a portfolio of 12 wind projects totaling net 814 MW. The transaction is expected to result in approximately $35 million of Adjusted EBITDA and $20 million of CAFD on an annual run-rate basis7 to NRG Yield and is expected to close in the third quarter of 2015, subject to negotiation with, and approval by, NRG Yield Independent Directors.

Including this most recent offer and the residential and distributed generation solar partnerships with NRG Yield, NRG is targeting drop downs to NRG Yield over the second half of 2015 which are expected to result in an aggregate of $600 million in drop down proceeds, of which $200 million is expected to be available for incremental share repurchase capacity pursuant to the Company's previously announced capital allocation program.

NRG Yield

On June 29, 2015, NRG Yield issued 28,198,000 shares of Class C common stock at $22.00 per share for net proceeds of $600 million. Additionally, NRG Yield issued $287.5 million of 3.25% convertible senior notes due 2020. The net proceeds of both of these issuances were used for the acquisition of a 25% interest in the Desert Sunlight Solar Farm for $2858 million, to repay a portion of the $491 million in debt associated with the Alta X and Alta XI wind facilities (in order to facilitate the tax equity financing transaction described below) and to repay outstanding indebtedness under NRG Yield's revolving credit facility.

On June 30, 2015, NRG Yield closed a new tax equity facility in order to monetize production tax credits from the Alta Wind X and XI projects. This financing resulted in $119 million of cash proceeds after expenses and is expected to provide ongoing annual cash payments indexed to and limited by the projects' wind production levels during the course of the tax equity investor's investment holding period. Proceeds from this transaction and a portion of the proceeds from the recently completed equity and debt offerings were utilized to repay the entire $491 million of outstanding project debt associated with the Alta X and Alta XI wind facilities.

By 2016, the Desert Sunlight acquisition and the Alta X and Alta XI debt repayment and tax equity financing arrangement are expected to increase both the annual run-rate EBITDA by approximately $45 million and CAFD by approximately $50 million, including $9 million for debt service associated with the recently issued convertible senior notes.

NRG Home Solar

While the strong sales momentum positions the Company for robust growth over the balance of the year, NRG is revising its expectations for NRG Home Solar with a negative EBITDA contribution of $100 million to $175 million, due primarily to an increase in expenses associated with positioning NRG Home Solar in certain key residential solar markets, including a comprehensive sales and marketing push into the large and fast-growing California market set to start in August.

In advance of NRG Home Solar's push into California, investments across the platform are yielding strong results. While overall bookings and deployments for the first half of 2015 lag original expectations, June sales exceeded March sales by nearly 90%.

Outlook for 2015

Driven by robust second quarter results and a significantly hedged baseload portfolio over the remainder of 2015, the Company is reaffirming its guidance range for fiscal year 2015. As in previous quarters, the Company's guidance assumes normalized weather in its core merchant markets over the remainder of the year.

           

Table 4: 2015 Adjusted EBITDA and FCF before Growth Investments Guidance

 
        8/4/15     5/8/15
($ in millions)       2015     2015
Adjusted EBITDA (1) $3,200 –3,400 $3,200 –3,400
Interest payments (1,160) (1,160)
Income tax (40) (40)
Adjusted EBITDA from NRG Home Solar (175) (100)
Working capital/other changes       250     250
Adjusted Cash Flow from Operations $2,075 – 2,275 $2,150 – 2,350
Maintenance capital expenditures, net (480)-(510) (480)-(510)
Environmental capital expenditures, net (305)-(335) (305)-(335)
Preferred dividends (10) (10)
Distributions to non-controlling interests       (160)-(170)     (190)-(210)
Free Cash Flow – before Growth Investments       $1,100 – 1,300     $1,100 – 1,300
 

(1) 2015 guidance excludes expected negative contribution of $175 million from NRG Home Solar.

 

2015 Capital Allocation Update

During the second quarter, NRG repurchased $107 million of its common stock at an average cost of $24.53 per share. Together with repurchases completed during the first quarter of 2015 under the December 2014 common stock repurchase program, NRG has purchased a total of $186 million of NRG common stock since December 31, 2014.

Consistent with the capital allocation policy announced last quarter, NRG intends to allocate cash in an amount equal to the expected $600 million of proceeds from NRG Yield equally towards the repurchase of NRG shares, the repayment of corporate debt and the reinvestment in NRG Yield eligible projects of which $200 million is expected to be available for share repurchases. NRG currently has $51 million in remaining authorized buyback capacity.

On July 15, 2015, NRG declared a quarterly dividend on the Company's common stock of $0.145 per share, payable August 17, 2015, to stockholders of record as of August 3, 2015, representing $0.58 on an annualized basis.

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

Earnings Conference Call

On August 4, 2015, NRG will host a conference call at 8:00 a.m. Eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG's website at http://www.nrgenergy.com and clicking on "Investors." The webcast will be archived on the site for those unable to listen in real time.

About NRG

NRG is leading a customer-driven change in the U.S. energy industry by delivering cleaner and smarter energy choices, while building on the strength of the nation's largest and most diverse competitive power portfolio. A Fortune 200 company, we create value through reliable and efficient conventional generation while driving innovation in solar and renewable power, electric vehicle ecosystems, carbon capture technology and customer-centric energy solutions. Our retail electricity providers serve almost 3 million residential and commercial customers throughout the country. More information is available at www.nrgenergy.com. Connect with NRG Energy on Facebook and follow us on Twitter @nrgenergy.

Safe Harbor Disclosure

In addition to historical information, the information presented in this communication 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 have been correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated above include, among others, general economic conditions, hazards customary in the power industry, weather conditions, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets, changes in government regulation of markets and of environmental emissions, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify or successfully implement acquisitions and repowerings, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to obtain federal loan guarantees, the inability to maintain or create successful partnering relationships with NRG Yield and other third parties, our ability to operate our businesses efficiently including NRG Yield, our ability to retain retail customers, our ability to realize value through our commercial operations strategy and the creation of NRG Yield, the ability to successfully integrate the businesses of acquired companies, the ability to realize anticipated benefits of acquisitions (including expected cost savings and other synergies) and the ability to sell assets to NRG Yield, Inc. or the risk that anticipated benefits may take longer to realize than expected and our ability to pay dividends and initiate share repurchases under our capital allocation plan, which 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 and free cash flow guidance are estimates as of August 4, 2015. These estimates are based on assumptions 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 Earnings Presentation should be considered in connection with information regarding risks and uncertainties that may affect NRG's future results included in NRG's filings with the Securities and Exchange Commission at www.sec.gov.

           

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(Unaudited)

 

 

Three months ended June 30, Six months ended June 30,

(In millions, except for per share amounts)

2015     2014 2015     2014
Operating Revenues
Total operating revenues $ 3,397   $ 3,621   $ 7,223   $ 7,107  
Operating Costs and Expenses
Cost of operations 2,434 2,828 5,496 5,565
Depreciation and amortization 396 386 791 721
Selling, general and administrative 291 257 554 479
Acquisition-related transaction and integration costs 3 40 13 52
Development activity expenses 41   21   75   40  
Total operating costs and expenses 3,165 3,532 6,929 6,857
Gain on postretirement benefits curtailment and sale of assets     14   19  
Operating Income 232   89   308   269  
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates 8 14 5 21
Other income, net 4 5 23 16
Loss on debt extinguishment (7 ) (40 ) (7 ) (81 )
Interest expense (263 ) (274 ) (564 ) (529 )
Total other expense (258 ) (295 ) (543 ) (573 )
Loss Before Income Taxes (26 ) (206 ) (235 ) (304 )
Income tax benefit (17 ) (126 ) (90 ) (157 )
Net Loss (9 ) (80 ) (145 ) (147 )

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

5   17   (11 ) 6  
Net Loss Attributable to NRG Energy, Inc. (14 ) (97 ) (134 ) (153 )
Dividends for preferred shares 5   3   10   5  
Loss Available for Common Stockholders $ (19 ) $ (100 ) $ (144 ) $ (158 )

Loss per Share Attributable to NRG Energy, Inc. Common Stockholders

Weighted average number of common shares outstanding — basic and diluted

333 337 335 331
Loss per Weighted Average Common Share — Basic and Diluted $ (0.06 ) $ (0.30 ) $ (0.43 ) $ (0.48 )
Dividends Per Common Share $ 0.14   $ 0.14   $ 0.29   $ 0.26  
 
                 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

 
Three months ended June 30, Six months ended June 30,
2015 2014 2015 2014
(In millions)
Net Loss $ (9 ) $ (80 ) $ (145 ) $ (147 )
Other Comprehensive Income/(Loss), net of tax
Unrealized gain/(loss) on derivatives, net of income tax
expense/(benefit) of $12, $(3), $6 and $(6) 16 (19 ) 4 (28 )

Foreign currency translation adjustments, net of income tax

expense/(benefit) of $6, $2, $(1) and $4 9 (3 ) (2 ) 3

Available-for-sale securities, net of income tax benefit of $(3), $(6),

$(7) and $(4) (3 ) 7 (4 ) 13

Defined benefit plans, net of tax expense/(benefit) of $0, $(7), $4 and $(7)

(1 ) 10   6   12  
Other comprehensive income/(loss) 21   (5 ) 4    
Comprehensive Income/(loss) 12 (85 ) (141 ) (147 )

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

12   12   (17 ) (3 )
Comprehensive Loss Attributable to NRG Energy, Inc. (97 ) (124 ) (144 )
Dividends for preferred shares 5   3   10   5  
Comprehensive Loss Available for Common Stockholders $ (5 ) $ (100 ) $ (134 ) $ (149 )
           

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 
June 30, 2015 December 31, 2014

(In millions, except shares)

(unaudited)  
ASSETS
Current Assets
Cash and cash equivalents $ 2,146 $ 2,116
Funds deposited by counterparties 33 72
Restricted cash 433 457
Accounts receivable — trade, less allowance for doubtful accounts of $19 and $23 1,413 1,322
Inventory 1,153 1,247
Derivative instruments 1,805 2,425
Cash collateral paid in support of energy risk management activities 299 187
Deferred income taxes 193 174
Renewable energy grant receivable, net 19 135
Prepayments and other current assets 516   447
Total current assets 8,010   8,582
Property, plant and equipment, net of accumulated depreciation of $8,611 and $7,890 22,304   22,367
Other Assets
Equity investments in affiliates 1,077 771
Notes receivable, less current portion 65 72
Goodwill 2,555 2,574
Intangible assets, net of accumulated amortization of $1,506 and $1,402 2,428 2,567
Nuclear decommissioning trust fund 576 585
Derivative instruments 491 480
Deferred income taxes 1,454 1,406
Other non-current assets 1,405   1,261
Total other assets 10,051   9,716
Total Assets $ 40,365   $ 40,665
 
           

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
June 30, 2015 December 31, 2014

(In millions, except shares)

(unaudited)  
LIABILITIES AND STOCKHOLDERS' EQUITY  
 
Current Liabilities
Current portion of long-term debt and capital leases $ 636 $ 474
Accounts payable 1,080 1,060
Derivative instruments 1,638 2,054
Cash collateral received in support of energy risk management activities 33 72
Accrued expenses and other current liabilities 1,082   1,199  

Total current liabilities

4,469   4,859  
Other Liabilities
Long-term debt and capital leases 19,661 19,900
Nuclear decommissioning reserve 318 310
Nuclear decommissioning trust liability 311 333
Deferred income taxes 18 21
Derivative instruments 522 438
Out-of-market contracts, net of accumulated amortization of $613 and $562 1,193 1,244
Other non-current liabilities 1,527   1,574  
Total non-current liabilities 23,550   23,820  
Total Liabilities 28,019   28,679  
2.822% convertible perpetual preferred stock 296 291
Redeemable noncontrolling interest in subsidiaries 33 19
Commitments and Contingencies
Stockholders' Equity
Common stock 4 4
Additional paid-in capital 8,365 8,327
Retained earnings 3,346 3,588
Less treasury stock, at cost — 86,245,318 and 78,843,552 shares, respectively (2,166 ) (1,983 )
Accumulated other comprehensive loss (170 ) (174 )
Noncontrolling interest 2,638   1,914  
Total Stockholders' Equity 12,017   11,676  
Total Liabilities and Stockholders' Equity $ 40,365   $ 40,665  
 
       

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
Six months ended June 30,
2015     2014
(In millions)
Cash Flows from Operating Activities
Net loss $ (145 ) $ (147 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Distributions and equity in earnings of unconsolidated affiliates 40 39
Depreciation and amortization 791 721
Provision for bad debts 29 30
Amortization of nuclear fuel 23 20
Amortization of financing costs and debt discount/premiums (7 ) (9 )
Adjustment for debt extinguishment 7 21
Amortization of intangibles and out-of-market contracts 32 22
Amortization of unearned equity compensation 24 24
Changes in deferred income taxes and liability for uncertain tax benefits (98 ) (514 )
Changes in nuclear decommissioning trust liability (4 ) 6
Changes in derivative instruments 186 535
Changes in collateral deposits supporting energy risk management activities (112 ) (297 )
Loss on sale of emission allowances (6 ) 2
Gain on postretirement benefits curtailment and sale of assets (14 ) (19 )
Cash used by changes in other working capital (288 ) (64   )
Net Cash Provided by Operating Activities 458   370    
Cash Flows from Investing Activities
Acquisitions of businesses, net of cash acquired (30 ) (1,817 )
Capital expenditures (583 ) (507 )
Increase in restricted cash, net (3 ) (6 )
Decrease in restricted cash to support equity requirements for U.S. DOE funded projects 27 21
Decrease in notes receivable 7 2
Investments in nuclear decommissioning trust fund securities (354 ) (340 )
Proceeds from the sale of nuclear decommissioning trust fund securities 358 334
Proceeds from renewable energy grants and state rebates 61 429
Proceeds from sale of assets, net of cash disposed of 1 77
Cash proceeds to fund cash grant bridge loan payment 57
Investments in unconsolidated affiliates (353 ) (22 )
Other 9   19    
Net Cash Used by Investing Activities (860 ) (1,753   )
Cash Flows from Financing Activities
Payment of dividends to common and preferred stockholders (102 ) (91 )
Payment for treasury stock (186 )

Net receipts from/(payments for) settlement of acquired derivatives that include

financing elements 91 (167 )
Proceeds from issuance of long-term debt 629 3,886
Contributions to, net of distributions from, noncontrolling interest in subsidiaries 670 10
Proceeds from issuance of common stock 1 8
Payment of debt issuance costs (12 ) (43 )
Payments for short and long-term debt (662 ) (2,969   )
Net Cash Provided by Financing Activities 429   634    
Effect of exchange rate changes on cash and cash equivalents 3   (24   )
Net Increase/(Decrease) in Cash and Cash Equivalents 30 (773 )
Cash and Cash Equivalents at Beginning of Period 2,116   2,254    
Cash and Cash Equivalents at End of Period $ 2,146   $ 1,481    
 
                               

Appendix Table A-1: Second Quarter 2015 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss)

 
Home Home
($ in millions)       Retail     Solar     Business     Renew     Yield     Corp     Total
Net Income/(Loss)       212     (54)     (1)     (18)     41     (189)     (9)
Plus:
Interest Expense, net - 1 17 23 44 175 260
Loss on Debt Extinguishment - - - - 7 - 7
Income Tax - - - (3) 4 (18) (17)

Depreciation, Amortization and ARO Expense

32 6 235 64 58 8 403
Amortization of Contracts       1     -     (19)     2     14     1     (1)
EBITDA 245 (47) 232 68 168 (23) 643

Adjustment to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates

- - 11 (4) 14 9 30

Integration & Transaction Costs

1 - - - 1 1 3
Deactivation costs - - 3 - - - 3
NRG Home Solar EBITDA - 47 - - - - 47

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

      (42)     -     39     2     4     -     3
Adjusted EBITDA       204     -     285     66     187     (13)     729
 
                               

Appendix Table A-2: Second Quarter 2014 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net (loss)/income

 
Home Home
($ in millions)       Retail     Solar     Business     Renew     Yield     Corp     Total
Net (Loss)/Income       (50)     (7)     99     2     42     (166)     (80)
Plus:
Interest Expense, net - - 16 30 35 187 268
Loss on Debt Extinguishment - - - - - 40 40
Income Tax - - - - 2 (128) (126)
Depreciation Amortization and ARO Expense 32 1 239 51 54 11 388
Amortization of Contracts       -     -     (8)     -     -     -     (8)
EBITDA (18) (6) 346 83 133 (56) 482

Adjustment to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates

- - - (5) 8 17

20

Integration & Transaction Costs, gain on sale

- - 2 - - 38 40
Deactivation Costs - - 3 - - - 3
Asset Write Offs and Impairments - - 5 - - 2 7
NRG Home Solar EBITDA - 6 - - - - 6

MtM losses/(gains) on economic hedges

      175     -     (55)     (1)     -     -     119
Adjusted EBITDA       157     -     301     77     141     1     677
 
                               

Appendix Table A-3: YTD Second Quarter 2015 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss)

 
Home Home
($ in millions)       Retail     Solar     Business     Renew     Yield     Corp     Total
Net Income/(Loss)       316       (99 )     28       (73 )     25       (342 )     (145 )
Plus:
Interest Expense, net - 1 35 54 114 354 558
Loss on Debt Extinguishment - - - - 7 - 7
Income Tax - - - (9 ) - (81 ) (90 )
Depreciation, Amortization and ARO Expense 63 11 475 128 113 15 805
Amortization of Contracts       1       -       (31 )     -       26       1       (3 )
EBITDA 380 (87 ) 507 100 285 (53 ) 1,132

Adjustment to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates

- - 16 (4 ) 26 12 50

Integration & Transaction Costs

- - - - 1 12 13
Deactivation costs - - 6 - - - 6
NRG Home Solar EBITDA - 87 - - - - 87

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

      (10 )     -       292       2       (3 )     -       281  
Adjusted EBITDA       370       -       821       98       309       (29 )     1,569  
 
                               

Appendix Table A-4: YTD Second Quarter 2014 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss)

 
Home Home
($ in millions)       Retail     Solar     Business     Renew     Yield     Corp     Total
Net Income/(Loss)       135     (9 )     93       (63 )     68     (371 )     (147 )
Plus:
Interest Expense, net 1 - 33 56 61 370 521
Loss on Debt Extinguishment - - - 1 - 80 81
Income Tax - - - - 5 (162 ) (157 )
Depreciation Amortization and ARO Expense 61 2 470 100 78 16 727
Amortization of Contracts       -     -       (7 )     -       1     (1 )     (7 )
EBITDA 197 (7 ) 589 94 213 (68 ) 1,018

Adjustment to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates

- - (4 ) (5 ) 20 20 31

Integration & Transaction Costs, gain on sale

- - (16 ) - - 50 34
Deactivation Costs - - 6 - - - 6
Asset Write Offs and Impairments - - 5 - - 2 7
Legal Settlement 4 - - - - - 4
NRG Home Solar EBITDA - 7 - - - - 7

MtM losses on economic hedges

      71     -       316       -       -     -       387  
Adjusted EBITDA       272     -       896       89       233     4       1,494  
 
           

Appendix Table A-5: 2015 and 2014 YTD Second Quarter Adjusted Cash Flow from Operations
Reconciliations

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

 
Six months ended Six months ended
($ in millions) June 30, 2015 June 30, 2014
Net Cash Provided by Operating Activities 458 370
Adjustment for change in collateral 112 297

Reclassifying of net receipts (payments) for settlement of acquired derivatives that include financing elements

91 (167 )
Add: Merger and integration expenses       17       64  
Adjusted Cash Flow from Operating Activities       678       564  
Maintenance CapEx, net* (189 ) (164 )
Environmental CapEx, net (127 ) (86 )
Preferred dividends (5 ) (5 )
Distributions to non-controlling interests       (83 )     (23 )
Free Cash Flow – before Growth investments       274       286  
 

* Excludes merger and integration CapEx of $9 million in Q2 2015 and $11 million in Q2 2014

 
                           

Appendix Table A-6: Second Quarter 2015 Regional Adjusted EBITDA Reconciliation for NRG Business

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
Gulf
($ in millions)       East     Coast     West     B2B     Carbon 360     Total
Net Income/(Loss)       98       (116 )     (11 )     28       -       (1 )
Plus:
Interest Expense, net 17 - - - - 17
Depreciation, Amortization and ARO Expense 76 143 16 - - 235
Amortization of Contracts       (18 )     -       (2 )     1       -       (19 )
EBITDA 173 27 3 29 - 232

Adjustment to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates

- 12 2 - (3 ) 11
Deactivation costs 2 - 1 - - 3

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

      (31 )     76       14       (20 )     -       39  
Adjusted EBITDA       144       115       20       9       (3 )     285  
 
                           

Appendix Table A-7: Second Quarter 2014 Regional Adjusted EBITDA Reconciliation for NRG Business

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net (loss)/income

 

($ in millions)

      East     Gulf Coast     West     B2B     Carbon 360     Total
Net (Loss)/Income       (9 )     144       32       (66 )     (2 )     99  
Plus:
Interest Expense, net 16 - - - - 16
Depreciation Amortization and ARO Expense 72 143 21 2 1 239
Amortization of Contracts       (10 )     5       (3 )     -       -       (8 )
EBITDA 69 292 50 (64 ) (1 ) 346

Adjustment to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates

- 1 (5 ) 3 1 -

Integration & Transaction Costs, gain on sale

2 - - - - 2
Deactivation Costs 1 - 2 - - 3
Asset Write Offs and Impairments - 5 - - - 5
MtM losses/(gains) on economic hedges       83       (210 )     (1 )     73       -       (55 )
Adjusted EBITDA       155       88       46       12       -       301  
 
                           

Appendix Table A-8: YTD Second Quarter 2015 Regional Adjusted EBITDA Reconciliation for NRG Business

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
Gulf
($ in millions)       East     Coast     West     B2B     Carbon 360     Total
Net Income/(Loss)       186       (79 )     (35 )     (37 )     (7 )     28  
Plus:
Interest Expense, net 35 - - - - 35
Depreciation, Amortization and ARO Expense 153 287 32 3 - 475
Amortization of Contracts       (33 )     2       (3 )     3       -       (31 )
EBITDA 341 210 (6 ) (31 ) (7 ) 507

Adjustment to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates

 

- 10 4 - 2 16
Deactivation costs 4 - 2 - - 6

Market to Market (MtM) losses on economic hedges

      222       11       13       46       -       292  
Adjusted EBITDA       567       231       13       15       (5 )     821  
 
                           

Appendix Table A-9: YTD Second Quarter 2014 Regional Adjusted EBITDA Reconciliation for NRG Business

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss)

 
($ in millions)       East    

Gulf Coast

    West     B2B     Carbon 360     Total
Net Income/(Loss)       176       (156 )     40       37       (4 )     93  
Plus:
Interest Expense, net 33 - - - - 33
Depreciation Amortization and ARO Expense 142 287 33 7 1 470
Amortization of Contracts       (16 )     11       (5 )     3       -       (7 )
EBITDA 335 142 68 47 (3 ) 589

Adjustment to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates

- - (9 ) 2 3 (4 )

Integration & Transaction Costs, gain on sale

7 (23 ) - - - (16 )
Deactivation Costs 2 - 4 - - 6
Asset Write Offs and Impairments - 5 - - - 5

MtM losses/(gains) on economic
hedges

      330       29       1       (44 )     -       316  
Adjusted EBITDA       674       153       64       5       -       896  
 
               

Appendix Table A-10: Run-Rate 2015 Adjusted EBITDA and Cash Available for Distribution Reconciliation for NRG Yield

The following table summarizes the calculation of adjusted EBITDA and cash available for distribution to net income:

 
Alta X-XI Tax 75% interest of
Desert Sunlight Equity, net of EME Wind Drop
Run-Rate Corp Debt Down
($ in millions)            

Run-Rate9

   

Run-Rate10

Income/(Loss) before Tax       13       -       (9 )
Plus:
Interest Expense, net - - 10
Depreciation, Amortization, and ARO Expense - - 45

Adjustments to reflect Yield's pro-rata share of Adjusted

EBITDA from Unconsolidated Affiliates       32       -       1  
Adjusted EBITDA       45       -       47  
Pro-rata Adjusted EBITDA from unconsolidated affiliates (45 ) - (10 )
Cash distributions from unconsolidated affiliates 22 - 10
Tax Equity Proceeds - - 9
Distributions to non-controlling interest - (4 ) (7 )
Cash interest paid - 11 (11 )
Maintenance Capital expenditures - - (1 )
Principal amortization of indebtedness       -       21       (17 )
Cash Available for Distribution       22       28       20  
 
       

Appendix Table A-11: YTD Second Quarter 2015 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity for YTD second quarter of 2015

 
($ in millions)      

Six months ended
June 30, 2015

Sources:
Adjusted Cash Flow from Operations $ 678
Equity Proceeds, NRG Yield, net of fees 600
Debt Proceeds, NRG Yield Revolver 282
Debt Proceeds, NRG Yield Convertible Notes, net of fees 281
Tax Equity Financing, net of fees 119
Cash Grant Proceeds, growth projects 55
Increase in Credit Facility 42
Debt proceeds, other project debt financing 11
Cash Grant Proceeds, other solar       6
Uses:
Debt Repayments 662
Maintenance and Environmental Capex, net 316
NYLD Investment in Desert Sunlight 285
Growth Investments and Acquisitions, net 211
Share Repurchases 186
Collateral Postings 112
Common and Preferred Stock Dividends 102
Distributions to Non-Controlling Entities 83
Other investing and financing activities 44
Merger and Integration-related payments       25
Change in Total Liquidity       $ 48
 

EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that NRG's future results will be unaffected by unusual or non-recurring items.

EBITDA represents net income before interest (including loss on debt extinguishment), taxes, depreciation and amortization. EBITDA is presented because NRG considers it an important supplemental measure of its performance and believes debt-holders frequently use EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:

  • EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
  • EBITDA does not reflect changes in, or cash requirements for, working capital needs;
  • EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
  • Other companies in this industry may calculate EBITDA differently than NRG does, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the growth of NRG's business. NRG compensates for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally. See the statements of cash flow included in the financial statements that are a part of this news release.

Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for mark-to-market gains or losses, asset write offs and impairments; and factors which we do not consider indicative of future operating performance. 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.

Adjusted cash flow from operating activities is a non-GAAP measure NRG provides to show cash from operations with the reclassification of net payments of derivative contracts acquired in business combinations from financing to operating cash flow, as well as the add back of merger and integration related costs. The Company provides the reader with this alternative view of operating cash flow because the cash settlement of these derivative contracts materially impact operating revenues and cost of sales, while GAAP requires NRG to treat them as if there was a financing activity associated with the contracts as of the acquisition dates. The Company adds back merger and integration related costs as they are one time and unique in nature and do not reflect ongoing cash from operations and they are fully disclosed to investors.

Free cash flow (before Growth investments) is adjusted cash flow from operations less maintenance and environmental capital expenditures, net of funding, and preferred stock dividends 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.

Cash Available for Distribution (CAFD) is adjusted EBITDA plus cash dividends from unconsolidated affiliates, less maintenance capital expenditures, pro-rata adjusted EBITDA from unconsolidated affiliates, cash interest paid, income taxes paid, principal amortization of indebtedness and changes in others assets. Management believes cash available for distribution is a relevant supplemental measure of the Company's ability to earn and distribute cash returns to investors.

1 Excludes negative contribution from Home Solar of $47 million and $87 million for second quarter and first six months of 2015, respectively

2 Reflects NRG Yields pro-rata share of EBITDA and CAFD expected to be generated by the portfolio on an annual run-rate basis.

3 Excludes projected negative contribution of $175 million from NRG Home Solar

4 Based upon 1/3 of target of $600 million in 2015 drop down proceeds as part of previously announced capital allocation program

5 Includes Corporate segment

6 See Appendix A-11 for the YTD Second Quarter Sources and Uses of Liquidity detail.

7 Reflects NRG Yields pro-rata share of EBITDA and CAFD expected to be generated by the portfolio on an annual run-rate basis.

8 Subject to working capital adjustments.

9 Alta reflects interest and principal savings on debt extinguishment of $491 million of non-recourse debt a run rate basis

10 75% interest in 814 net MW of wind assets primarily acquired by NRG in the EME transaction, Adjusted EBITDA will be consolidated on NRG Yield, 75% pro-rata Adjusted EBITDA is approximately $35 million

NRG Energy, Inc.:
Media:
Karen Cleeve, 609-524-4608
Marijke Shugrue, 609-524-5262
or
Investors:
Matthew Orendorff, 609-524-4526
Lindsey Puchyr, 609-524-4527

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