• Transformation Plan on track with $80 million in cost savings realized in the first quarter of 2018, and $3 billion in asset sales still expected to close in 2018
• Closed drop down of a 154 MW solar utility-scale project to NRG Yield for $42 million and announced the sale of the Canal 3 project
• Announced acquisition of XOOM Energy, a retail business that expands NRG’s retail sales capabilities and East presence
• Share repurchases underway with $93 million purchased through March 31, 2018
• Maintaining 2018 guidance

PRINCETON, N.J.--(BUSINESS WIRE)--May 3, 2018-- NRG Energy, Inc. (NYSE: NRG) today reported a first quarter 2018 net income of $233 million, or $0.88 per basic common share. Adjusted EBITDA for the first quarter 2018 was $549 million and cash from operations was $357 million.

“I am pleased with our strong first quarter results and good execution against our Transformation Plan goals,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “Asset sales are underway and we expect to close them in the second half of this year. Right-sizing our portfolio and transitioning our platform to be more customer-driven leaves us well-positioned for market upside this summer and beyond."

Consolidated Financial Results

Segment Results

Table 1: Income/(Loss) from Continuing Operations

Table 2: Adjusted EBITDA

Retail: First quarter Adjusted EBITDA was $188 million, $55 million higher than first quarter 2017 due to lower operating costs and higher gross margin with increased customer count, higher customer usage and favorable weather in 2018.

Generation: First quarter Adjusted EBITDA was $147 million, $93 million higher than first quarter 2017 driven by:

• Gulf Coast Region: $57 million increase due to the sale of NOx emissions credits and higher realized energy prices, partially offset by lower reliability-must-run revenues
• East/West¹: $36 million increase due to higher capacity revenues, increased pricing in PJM and ISO-NE and higher trading results at BETM, partially offset by lower generation volumes

Renewables: First quarter Adjusted EBITDA was $32 million, $9 million higher than first quarter 2017 due to lower customer acquisition costs, new maintenance service contracts and higher availability of Agua Caliente.

NRG Yield: First quarter Adjusted EBITDA was $189 million, $3 million higher than first quarter 2017 due to growth in distributed generation partnerships and higher availability at El Segundo, partially offset by lower renewable production in 2018 driven by lower wind resources.

Corporate: First quarter Adjusted EBITDA was $(7) million, $4 million better than the first quarter 2017 due to lower G&A expenses and advisory fees, partially offset by the reduction in shared services revenue from GenOn.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

NRG-Level Cash as of March 31, 2018, was $467 million, a decrease of $302 million from December 31, 2017, and $1.6 billion was available under the Company’s credit facilities at the end of the first quarter 2018. Total liquidity was $2.8 billion, including restricted cash and cash at non-guarantor subsidiaries (primarily NRG Yield).

NRG Strategic Developments

Transformation Plan

During the first quarter of 2018, NRG realized $80 million of its 2018 cost savings target as part of the previously announced Transformation Plan. With respect to the asset sales under the Transformation Plan, NRG continues to expect up to $3.2 billion of cash proceeds, with a majority of those proceeds coming from transactions announced earlier this year and on track to close in 2018.

As part of the Transformation Plan asset sales, on March 30, 2018, NRG closed on the sale of the 154 MW Buckthorn Solar utility-scale project to NRG Yield for cash consideration of $42 million, excluding working capital adjustments, plus assumed non-recourse debt of approximately $131 million².

Retail Acquisition

As previously announced at NRG's Analyst Day conference on March 27, 2018, NRG entered into an agreement to acquire retail provider XOOM Energy, LLC for $210 million³, representing an incremental $45 million of Adjusted EBITDA on an annual basis. The acquisition is expected to close in the second quarter of 2018.

Canal 3 Sale

On March 22, 2018, NRG agreed to sell Canal 3 to Stonepeak Kestrel Holdings II LLC in conjunction with GenOn's sale of Canal Units 1 and 2 to Stonepeak Kestrel Holdings LLC. The final purchase price for the Canal 3 sale will be determined based on a formula including capital reimbursement, return on capital and a development fee. The Canal 3 sale is expected to enhance 2018 capital allocation by approximately $130 million early in the third quarter of 2018.

2018 Guidance

NRG is maintaining its guidance for 2018 with respect to Consolidated Adjusted EBITDA, Cash from Operations, and FCFbG as set forth below.

Table 4: 2018 Adjusted EBITDA, Cash from Operations, and FCF before Growth Investments Guidance

Capital Allocation Update

On April 19, 2018, NRG declared a quarterly dividend on the company's common stock of $0.03 per share, payable May 15, 2018, to stockholders of record as of May 1, 2018, representing $0.12 on an annualized basis.

In the first quarter of 2018, NRG repurchased 3.1 million shares of its common stock for $93 million at an average cost of $29.75 per share.

On March 21, 2018, NRG announced that it had repriced its $1.872 billion Term Loan B due June 2023. The transaction was leverage neutral and the Company expects interest savings over the remaining life of the loan to total approximately $47 million. Expected annualized interest savings are estimated to be approximately $9 million.

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 3, 2018, 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.com and clicking on “Investors” then "Presentations & Webcasts." The webcast will be archived on the site for those unable to listen in real time.

About NRG

At NRG, we’re redefining power by putting customers at the center of everything we do. We create value by generating electricity and serving nearly 3 million residential and commercial customers through our portfolio of retail electricity brands. A Fortune 500 company, NRG delivers customer-focused solutions for managing electricity, while enhancing energy choice and working towards a sustainable energy future. More information is available at www.nrg.com. Connect with NRG on Facebook, LinkedIn and follow us on Twitter @nrgenergy, @nrginsight.

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 be correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated herein include, among others, general economic conditions, hazards customary in the power industry, weather conditions, 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 regulations, 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, execute or successfully implement acquisitions, repowerings or asset sales, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to implement and execute on our publicly announced transformation plan, including any cost savings, margin enhancement, asset sale, and net debt targets, our ability to proceed with projects under development or the inability to complete the construction of such projects on schedule or within budget, risks related to project siting, financing, construction, permitting, government approvals and the negotiation of project development agreements, our ability to progress development pipeline projects, the timing or completion of GenOn's emergence from bankruptcy, the inability to maintain or create successful partnering relationships, our ability to operate our businesses efficiently, our ability to retain retail customers, our ability to realize value through our commercial operations strategy, the ability to successfully integrate businesses of acquired companies, our ability to realize anticipated benefits of transactions (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, our ability to close the Drop Down transactions with NRG Yield, and our ability to execute our Capital Allocation Plan. 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 and free cash flow guidance are estimates as of May 3, 2018. These estimates are based on assumptions the company believed to be reasonable as of that date. NRG disclaims any current intention to update such guidance, except as required by law. The foregoing review of factors that could cause NRG’s actual results to differ materially from those contemplated in the forward-looking statements included in this Earnings 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.

Appendix Table A-6: 2018 FCFbG Guidance Reconciliation
The following table summarizes the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:

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. As NRG defines it, Adjusted EBITDA represents EBITDA excluding impairment losses, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from accounting for derivatives, adjustments to exclude the Adjusted EBITDA related to the non-controlling interest, gains or losses on the repurchase, modification or extinguishment of debt, the impact of restructuring and any extraordinary, unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA from our unconsolidated investments. The reader is encouraged to evaluate each adjustment and the reasons NRG considers it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this news release.

Management believes Adjusted EBITDA is useful to investors and other users of NRG's financial statements in evaluating its operating performance because it provides an additional tool to compare business performance across companies and across periods and adjusts for items that we do not consider indicative of NRG’s future operating performance. This measure is widely used by debt-holders to analyze operating performance and debt service capacity and by equity investors to measure our operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations, and for evaluating actual results against such expectations, and in communications with NRG's Board of Directors, shareholders, creditors, analysts and investors concerning its financial performance.

Adjusted cash flow from 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, integration and related restructuring 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, integration related restructuring costs as they are one time and unique in nature and do not reflect ongoing cash from operations and they are fully disclosed to investors.

Free cash flow (before Growth) is adjusted cash flow from operations less maintenance and environmental capital expenditures, net of funding, preferred stock dividends and distributions to non-controlling interests and is used by NRG predominantly as a forecasting tool to estimate cash available for debt reduction and other capital allocation alternatives. The reader is encouraged to evaluate each of these adjustments and the reasons NRG considers them appropriate for supplemental analysis. Because we have mandatory debt service requirements (and other non-discretionary expenditures) investors should not rely on free cash flow before Growth as a measure of cash available for discretionary expenditures.

Free Cash Flow before Growth is utilized by Management in making decisions regarding the allocation of capital. Free Cash Flow before Growth 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 is a performance measure and is not intended to represent net income (loss), cash from operations (the most directly comparable U.S. GAAP measure), or liquidity and is not necessarily comparable to similarly titled measures reported by other companies.

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Source: NRG Energy, Inc.

NRG Energy, Inc.
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