NRG Energy, Inc. Reports First Quarter Results, Completes 311 MW Solar Asset Drop Down and Reaffirms 2017 Financial Guidance
NRG Energy, Inc. (NYSE:NRG) today reported first quarter net loss of $203 million, or $0.52 per diluted common share compared to net income of $47 million, or $0.24 per diluted common share for the first three months of 2016. Adjusted EBITDA for the three months ended March 31, 2017 was $412 million and year-to-date cash used by operations totaled $68 million.
“We are pleased to reaffirm our financial guidance amid challenging market conditions this quarter,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “We remain focused on our strategic priorities of simplifying and streamlining the business, optimizing our portfolio and strengthening the balance sheet.”
| Consolidated Financial Results | |||||||||
| Three Months Ended | |||||||||
| ($ in millions) | 3/31/17 | 3/31/16 | |||||||
| Net (Loss)/Income | $ | (203 | ) | $ | 47 | ||||
| Cash (Used by)/From Operations | $ | (68 | ) | $ | 554 | ||||
| Adjusted EBITDA | $ | 412 | $ | 812 | |||||
| Free Cash Flow Before Growth Investments (FCFbG) | $ | (96 | ) | $ | 249 | ||||
1 Prior to working capital adjustments
| Segment Results
Table 1: Net (Loss)/Income |
||||||||||
| ($ in millions) | Three Months Ended | |||||||||
| Segment | 3/31/17 | 3/31/16 | ||||||||
| Generation | $ | 67 | $ | 191 | ||||||
| Retail | (33 | ) | 150 | |||||||
| Renewables 1 | (31 | ) | (40 | ) | ||||||
| NRG Yield 1 | (1 | ) | 2 | |||||||
| Corporate | (205 | ) | (256 | ) | ||||||
| Net (Loss)/Income 2 | $ | (203 | ) | $ | 47 | |||||
- In accordance with GAAP, 2016 results have been restated to include full impact of the assets in the NRG Yield Drop Down transactions which closed onSeptember 1, 2016, andMarch 27, 2017.
2. Includes mark-to-market gains and losses of economic hedges.
| Table 2: Adjusted EBITDA | ||||||||||
| ($ in millions) | Three Months Ended | |||||||||
| Segment | 3/31/17 | 3/31/16 | ||||||||
| Generation 1 | $ | 111 | $ | 466 | ||||||
| Retail | 133 | 156 | ||||||||
| Renewables 2 | 25 | 33 | ||||||||
| NRG Yield 2 | 184 | 198 | ||||||||
| Corporate | (41 | ) | (41 | ) | ||||||
| Adjusted EBITDA 3 | $ | 412 | $ | 812 | ||||||
- See Appendices A-4 through A-5 for Generation regional Reg G reconciliations.
2.In accordance with GAAP, 2016 results have been restated to include full impact of the assets in the NRG Yield Drop Down transactions which closed onSeptember 1, 2016, and March 27, 2017.
3. See Appendices A-1 through A-2 for Operating Segment Reg G reconciliations.
Generation: First quarter Adjusted EBITDA was $111 million, $355 million lower than first quarter 2016 primarily driven by:
- Gulf Coast Region: $117 million decrease due primarily to lower realized energy margins in Texas from lower realized prices, including the impact of hedges, and lower cleared auction prices in PJM resulting in lower capacity revenues in South Central
- East Region: $136 million decrease due to lower capacity prices, lower realized energy margins on lower dispatch, monetization of hedges from 2017 in 2016, and assets sold in 2016; partially offset by reduced operating costs from fewer planned outages and plant deactivations
- West Region: $54 million decrease due to the gain from sale of emissions credits in the first quarter of 2016 and the retirement of Pittsburg on January 1, 2017
- Other Generation: $48 million decrease driven mainly by lower trading results at BETM
Retail: First quarter Adjusted EBITDA was $133 million, $23 million lower than first quarter 2016 due primarily to lower margin from mild weather and associated supply costs, which was partially offset by customer growth.
Renewables: First quarter Adjusted EBITDA was $25 million, $8 million lower than first quarter 2016 due to a transmission outage at Agua Caliente and lower solar insolation, partially offset by higher generation at Ivanpah.
NRG Yield: First quarter Adjusted EBITDA was $184 million, $14 million lower than first quarter 2016 due to a forced outage at El Segundo Energy Center, lower solar and wind resource primarily in California, which led to decreased production, partially offset by the acquisition of the Utah utility-scale solar assets.
Corporate: First quarter Adjusted EBITDA was unchanged from the first quarter 2016 as higher advisory spend incurred to assist the Company in its strategic review as well as advisory services associated with GenOn was offset by lower operating losses at residential solar.
| Liquidity and Capital Resources
Table 3: Corporate Liquidity |
|||||||||
| ($ in millions) | 3/31/17 | 12/31/16 | |||||||
| Cash at NRG-Level 1 | $ | 381 | $ | 570 | |||||
| Revolver Availability | 1,364 | 1,217 | |||||||
| NRG-Level Liquidity | $ | 1,745 | $ | 1,787 | |||||
| Restricted cash | 397 | 446 | |||||||
| Cash at Non-Guarantor Subsidiaries | 1,132 | 1,403 | |||||||
| Total Liquidity | $ | 3,274 | $ | 3,636 | |||||
1 Includes unrestricted cash held at Midwest Generation (a non-guarantor subsidiary), which can be distributed to NRG without limitation.
NRG-Level cash as of March 31, 2017, was $381 million, a decrease of $189 million from December 31, 2016, and $1.4 billion was available under the Company’s credit facilities at the end of the first quarter 2017. Total liquidity was $3.3 billion, including restricted cash and cash at non-guarantor subsidiaries (primarily GenOn and NRG Yield). On February 28, 2017, GenOn drew $125 million on letters of credit under its intercompany revolver with NRG to support the GenOn Mid-Atlantic operating leases; NRG subsequently drew $125 million on its revolver facility to fund the GenOn intercompany draw.
NRG Strategic Developments
On May 1, 2017, NRG offered its remaining 25% interest in NRG Wind TE Holdco, an 814 net MW portfolio of twelve wind projects to NRG Yield. NRG Yield currently owns a 75% interest in the portfolio, which it acquired in 2015. The acquisition is subject to negotiation and approval by NRG Yield’s independent directors.
Drop Down to NRG Yield
On March 27, 2017, the Company sold to NRG Yield, Inc.: (i) a 16% interest in the Agua Caliente solar project, representing ownership of approximately 46 net MW of capacity and (ii) NRG’s interests in seven utility-scale solar projects located in Utah representing 265 net MW of capacity. NRG Yield Inc. paid cash consideration of $130 million, plus $1 million in working capital adjustments, and assumed non-recourse debt of approximately $463 million2.
Business Review Committee
During the quarter, the NRG Board of Directors established the Business Review Committee (BRC). The BRC was established to evaluate and make recommendations to the Board regarding the Company’s (a) operational and cost excellence initiatives, (b) potential portfolio and/or asset de-consolidations, dispositions and optimization, (c) capital structure and allocation and (d) broader strategic initiatives. NRG plans to update the market as soon as practicable following a recommendation from the BRC.
2017 Guidance
NRG is reaffirming its guidance range for fiscal year 2017 with respect to both Adjusted EBITDA and FCF before growth investments.
2 Approximately $328 million on balance sheet and $135 million pro-rata share of unconsolidated debt
| Table 4: 2017 Adjusted EBITDA and FCF before Growth Investments Guidance | ||
| 2017 | ||
| ($ in millions) | Guidance | |
| Adjusted EBITDA1 | $2,700 – $2,900 | |
| Cash From Operations | $1,355 – $1,555 | |
| Free Cash Flow Before Growth Investments (FCFbG) | $800 – $1,000 |
- Non-GAAP financial measure; see Appendix Tables A-1 through A-5 for GAAP Reconciliation to Net Income that excludes fair value adjustments related to derivatives. The Company is unable to provide guidance for Net Income due to the impact of such fair value adjustments related to derivatives in a given year.
Capital Allocation Update
On April 7, 2017, NRG declared a quarterly dividend on the company’s common stock of $0.03 per share, payable May 15, 2017, to stockholders of record as of May 1, 2017, representing $0.12 on an annualized basis.
The Company’s common stock dividend, debt reduction and share repurchases are subject to available capital, market conditions and compliance with associated laws and regulations.
Earnings Conference Call
On May 2, 2017 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.nrg.comand clicking on “Investors.” The webcast will be archived on the site for those unable to listen in real time.
