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NRG Reports Strong Second Quarter Results; Provides Full-Year Outlook for First Time
MINNEAPOLIS--(BUSINESS WIRE)--Aug. 5, 2004--NRG Energy, Inc. (NYSE:NRG) today reported earnings of $83 million, or $0.83 per diluted share, for the second quarter ended June 30, 2004. This included $14 million or $0.14 per diluted share related to discontinued operations. Earnings from ongoing operations were $69 million, or $0.69 per diluted share.
"Our strong second quarter performance was attributable to our employees maintaining focus on all phases of asset management: plant operations, managing commercial risk, resolving legacy issues, and continuing to pursue transactions which further reduce our balance sheet debt," said David Crane, NRG's President and Chief Executive Officer. "Additionally, continued higher natural gas prices supported higher power prices, which improved margins at our coal facilities and helped to offset the impact of unseasonably mild weather during the quarter."
Second Quarter Financial Highlights:- $282 million in EBITDA;
- $1.34 billion of liquidity as of June 30; and
- Asset sales resulting in $97 million of cash proceeds and $94 million in balance sheet debt elimination.
The Company reported $282 million of EBITDA and $233 million of Adjusted EBITDA. Adjusted EBITDA excludes certain unusual or nonrecurring items that are listed in the attached EBITDA reconciliation tables.
Operational Summary
During the quarter, NRG benefited from sustained higher natural gas prices, which led to improved energy revenue margin at NRG's coal-fired facilities. The Company continued to expand its Powder River Basin (PRB) coal conversion program, aimed at substantially reducing sulfur emissions from NRG's coal-fired plants in New York and Delaware. NRG plant staff focused on preparing for the high-demand summer season with increased seasonal maintenance schedules and continued efforts to improve operations and efficiencies at its facilities.
During the three months ended June 30, 2004, the Company incurred $5.6 million of one-time costs related to its corporate relocation activities, primarily related to employee severance and termination benefits.
Equity earnings from West Coast Power, a joint venture with Dynegy, were higher than expected due to favorable market conditions and settlement adjustments. NRG continues to work with Dynegy to secure a replacement contract for the California Department of Water Resources that expires at year-end 2004.
Liquidity and Cash Flow
Liquidity as of June 30, 2004, remains healthy at $1.34 billion as set forth below:
Corporate Liquidity (in millions) March 31, 2004 June 30, 2004
Unrestricted Cash:
Domestic 665 676
International 169 145
Restricted Cash:
Domestic 90 97
International 52 55
----------------------------------------------------------------------
Total Cash 976 973
Letter of Credit Availability 137 118
Revolver Availability 250 250
----------------------------------------------------------------------
Total Current Liquidity $1,363 $1,341
Year-to-date cash flow from operations remains strong at $317 million, while net cash flow generated for the first six months was $270 million.
"We continue to make significant progress in selling our noncore assets and gaining flexibility on our balance sheet," commented Crane.
During the second quarter, NRG completed sales of noncore assets, resulting in $97 million in cash proceeds and $94 million in balance sheet debt reduction. Additionally during the quarter, NRG executed a purchase and sale agreement for its Batesville facility, which is expected to reduce debt further by $292 million and contribute additional cash proceeds of $27 million. In July, FERC approved the transfer of NRG's McClain assets to OG&E Electric Services that will result in an additional $157 million reduction in balance sheet debt.
Outlook
NRG expects the high fuel price environment to continue through the remainder of the year, notwithstanding the mild weather this summer. NRG expects reported cash flow from operations to be $513 million and reported EBITDA to be approximately $837 million; adjusted cash flow from operations and adjusted EBITDA for 2004 are expected to be $441 million and $850 million, respectively. This outlook assumes normalized weather conditions for the second half of the year and no unusual or unforeseen events or significant changes in foreign exchange rates.
Beyond 2004, NRG continues to operate in an overbuilt and challenging wholesale power generation market. The recent suggestion of an improvement in values for power generation assets, in our opinion, is more reflective of the influx of money into funds seeking to invest in this sector than in any sustained recovery in wholesale electricity prices.
Earnings Conference Call
On August 5, NRG will host a conference call at 9 a.m. Eastern to discuss these results. To access the live webcast and accompanying slide presentation, log on to NRG's website at http://www.nrgenergy.com and click on "Investors." To participate in the call, dial 877-407-8035. International callers should dial 201-689-8035. Participants should dial in or log on approximately five minutes prior to the scheduled start time.
The call will be available for replay shortly after completion of the live event on the "Investors" section of the NRG website.
About NRG
NRG Energy, Inc. owns and operates a diverse portfolio of power-generating facilities, primarily in the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities.
Safe Harbor Disclosure
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks, uncertainties and assumptions and include, but are not limited to, expected earnings, future growth and financial performance, and typically can be identified by the use of words such as "expect," "estimate," "anticipate," "forecast," "plan," "believe" and similar terms. 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, foreign exchange rates, 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 and related government regulation, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, our ability to convert facilities to burn western coal, our substantial indebtedness and the possibility that we may incur additional indebtedness, adverse results in current and future litigation, the willingness of counterparties to negotiate new contracts in California, and the amount of proceeds from asset sales.
NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The adjusted EBITDA guidance is an estimate as of today's date, August 5, 2004 and is based on assumptions believed to be reasonable as of this date. NRG expressly disclaims any current intention to update such guidance. 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 news 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.
More information on NRG is available at www.nrgenergy.com
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Reorganized Predecessor Reorganized Predecessor
NRG Company NRG Company
----------- ----------- ----------- -----------
Three Months Six Months
Ended Ended
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(In thousands)
Operating Revenues
Revenues from
majority-owned
operations $573,674 $ 441,599 $1,173,992 $ 936,609
-------- --------- ---------- ----------
Operating Costs and Expenses
Cost of majority-owned
operations 353,750 381,845 735,801 759,432
Depreciation and
amortization 53,168 63,768 108,174 122,906
General, administrative
and development 45,837 39,147 82,329 87,663
Corporate relocation
charges 5,645 -- 6,761 --
Reorganization charges (2,661) 6,334 3,589 6,334
Restructuring and
impairment charges 1,676 269,631 1,676 291,767
-------- --------- ---------- ----------
Total operating costs
and expenses 457,415 760,725 938,330 1,268,102
-------- --------- ---------- ----------
Operating Income/(Loss) 116,259 (319,126) 235,662 (331,493)
-------- --------- ---------- ----------
Other Income (Expense)
Minority interest in
earnings of consolidated
subsidiaries (201) -- (709) --
Equity in earnings of
unconsolidated
affiliates 46,101 46,857 63,814 92,486
Write downs and
gains/(losses) on
sales of equity
method investments 1,205 (132,436) (533) (149,027)
Other income, net 8,052 (7,953) 11,708 3,542
Interest expense (66,225) (92,087) (159,371) (260,761)
-------- --------- ---------- ----------
Total other expense (11,068) (185,619) (85,091) (313,760)
-------- --------- ---------- ----------
Income/(Loss) From
Continuing Operations
Before Income Taxes 105,191 (504,745) 150,571 (645,253)
Income Tax Expense 36,322 4,305 50,602 37,342
-------- --------- ---------- ----------
Income/(Loss) From
Continuing Operations 68,869 (509,050) 99,969 (682,595)
Income/(Loss) on
Discontinued
Operations, net of
Income Taxes 14,155 (99,351) 13,290 61,562
-------- --------- ---------- ----------
Net Income/(Loss) $ 83,024 $(608,401) $ 113,259 $ (621,033)
======== ========= ========== ==========
Weighted Average Number
of Common Shares
Outstanding -- Diluted 100,478 100,214
Income From Continuing
Operations per
Weighted Average
Common Share --
Diluted $ 0.69 $ 1.00
Income From
Discontinued
Operations per
Weighted Average
Common Share --
Diluted 0.14 0.13
-------- ----------
Net Income per Weighted
Average Common Share
-- Diluted $ 0.83 $ 1.13
======== ==========
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (REORGANIZED COMPANY)
(Unaudited)
June 30, December 31,
2004 2003
----------- ------------
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents $ 820,876 $ 551,223
Restricted cash 151,673 116,067
Accounts receivable -- trade, less allowance
for doubtful accounts of $322 and $0 313,649 201,908
Xcel Energy settlement receivable -- 640,000
Current portion of notes receivable --
affiliates 1,917 200
Current portion of notes receivable 123,060 65,141
Taxes receivable 14,824 --
Inventory 203,672 194,926
Derivative instruments valuation 11,670 772
Prepayments and other current assets 229,961 222,178
Current deferred income taxes 961 1,850
Current assets -- discontinued operations 56,955 119,574
---------- ----------
Total current assets 1,929,218 2,113,839
---------- ----------
Property, Plant and Equipment
In service 3,935,915 3,885,465
Under construction 104,794 139,171
---------- ----------
Total property, plant and equipment 4,040,709 4,024,636
Less accumulated depreciation (119,487) (11,800)
---------- ----------
Net property, plant and equipment 3,921,222 4,012,836
---------- ----------
Other Assets
Equity investments in affiliates 677,684 737,998
Notes receivable, less current portion --
affiliates 122,539 130,152
Notes receivable, less current portion 612,118 691,444
Intangible assets, net of accumulated
amortization of $34,404 and $5,212 356,068 432,361
Debt issuance costs, net of accumulated
amortization of $4,992 and $454 63,038 74,337
Derivative instruments valuation 53,474 59,907
Funded letter of credit 250,000 250,000
Other assets 116,129 123,145
Non-current assets -- discontinued operations 451,785 618,968
---------- ----------
Total other assets 2,702,835 3,118,312
---------- ----------
Total Assets $8,553,275 $9,244,987
========== ==========
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (REORGANIZED COMPANY)
(Unaudited)
June 30, December 31,
2004 2003
----------- ------------
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and capital
leases $ 96,385 $ 801,229
Short-term debt 17,826 19,019
Accounts payable -- trade 137,033 158,683
Accounts payable -- affiliates 6,372 7,040
Accrued taxes -- 16,095
Accrued property, sales and other taxes 16,136 22,322
Accrued salaries, benefits and related costs 33,072 19,331
Accrued interest 20,038 8,982
Derivative instruments valuation 20,979 429
Creditor pool obligation 25,000 540,000
Other bankruptcy settlement 221,283 220,000
Other current liabilities 113,773 102,861
Current liabilities -- discontinued
operations 23,121 110,190
---------- ----------
Total current liabilities 731,018 2,026,181
---------- ----------
Other Liabilities
Long-term debt and capital leases 3,922,417 3,327,782
Deferred income taxes 144,522 149,493
Postretirement and other benefit obligations 110,842 105,946
Derivative instruments valuation 159,567 153,503
Other long-term obligations 473,247 480,938
Noncurrent liabilities -- discontinued
operations 469,911 558,884
---------- ----------
Total non-current liabilities 5,280,506 4,776,546
---------- ----------
Total Liabilities 6,011,524 6,802,727
---------- ----------
Minority Interest 5,673 5,004
Commitments and Contingencies
Stockholders' Equity
Serial Preferred Stock; 10,000,000 shares
authorized, none issued and outstanding
at June 30, 2004 and December 31, 2003 -- --
Common stock; $.01 par value; 500,000,000
shares authorized; 100,006,798 shares at
June 30, 2004 and 100,000,000 shares at
December 31, 2003 issued and outstanding 1,000 1,000
Additional paid-in capital 2,410,751 2,403,429
Retained earnings 124,284 11,025
Accumulated other comprehensive income 43 21,802
---------- ----------
Total stockholders' equity 2,536,078 2,437,256
---------- ----------
Total Liabilities and Stockholders' Equity $8,553,275 $9,244,987
========== ==========
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Reorganized Predecessor
NRG Company
------------ -----------
Six Months Ended
June 30,
------------------------
(In thousands) 2004 2003
--------- ---------
Cash Flows from Operating Activities
Net Income/(loss) $ 113,259 $(621,033)
Adjustments to reconcile net income/(loss) to
net cash provided (used) by operating
activities
Distributions in excess of (less than)
equity in earnings of unconsolidated
affiliates 4,751 (23,943)
Depreciation and amortization 113,499 145,221
Amortization of debt issuance costs 20,060 11,090
Amortization of debt discount 11,795 --
Deferred income taxes 49,384 36,525
Minority interest 2,089 466
Unrealized (gains)/losses on derivatives (21,458) 17,796
Asset impairment 1,676 347,913
Write downs and losses on sales of equity
method investments 533 148,841
Gain on sale of discontinued operations (13,012) (218,536)
Amortization of power contracts and emission
credits 34,517 --
Cash provided (used) by changes in certain
working capital items, net of acquisition
affects 264 179,692
--------- ---------
Net Cash Provided by Operating Activities 317,357 24,032
--------- ---------
Net Cash Provided by Investing Activities 1,558 27,517
--------- ---------
Net Cash Used by Financing Activities (85,672) (33,522)
--------- ---------
Change in Cash from Discontinued Operations 10,822 24,062
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 25,588 (93,163)
--------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents 269,653 (51,074)
Cash and Cash Equivalents at Beginning of
Period 551,223 360,860
--------- ---------
Cash and Cash Equivalents at End of Period $ 820,876 $ 309,786
========= =========
NRG ENERGY, INC. AND SUBSIDIARIES
Reconciliation of NonGAAP Financial Measures
Adjusted Net Income Reconciliation
The following table summarizes the calculation of adjusted net income
and provides a reconciliation to GAAP net income/(loss), including
per share amounts:
Three Months Ended
Reorganized Predecessor
NRG NRG
(Dollars in thousand, except per share June 30, Diluted June 30,
amounts) 2004 EPS 2003
Net Income (Loss) $ 83,024 $ 0.83 $(608,401)
Plus:
(Income) Loss from Discontinued
Operations, net of tax (2,257) (0.02) 97,285
(Gain) Loss from Discontinued
Operations (11,898) (0.12) 2,066
Corporate relocation charges, net
of tax 3,692 0.04 -
Reorganization items, net of tax (1,740) (0.02) 4,206
Restructuring and impairment
charges, net of tax 1,096 0.01 179,035
FERC-authorized settlement with
Connecticut Light and Power,
net of tax (25,085) (0.25) -
Write downs and (gains)/losses on
sales of equity method investments,
net of tax (788) 0.01 87,937
-------- ------ ---------
Adjusted Net Income $ 46,044 $ 0.46 $(237,872)
EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
Three Months Ended
Reorganized Predecessor
NRG NRG
----------- -----------
June 30, June 30,
2004 2003
(Dollars in thousands)
Net Income / (Loss) $ 83,024 $(608,401)
Plus:
Income Tax Expense 36,322 4,305
Interest expense, excluding amortization of
debt issuance costs and debt discount/(premium)
noted below 60,210 88,168
Depreciation and amortization 53,168 63,768
WCP CDWR contract amortization (included in
equity in earnings of unconsolidated
affiliates) 30,638 -
Amortization of power contracts 8,614 -
Amortization of emission credits 3,648 -
Amortization of debt issuance costs and debt
discount/(premium) 6,015 3,919
-------- ---------
EBITDA $281,639 $(448,241)
Plus:
(Income) Loss from Discontinued Operations,
net of Income taxes (2,257) 97,285
(Gain) Loss from Discontinued Operations (11,898) 2,066
Corporate relocation charges 5,645 -
Reorganization items (2,661) 6,334
Restructuring and impairment charges 1,676 269,631
FERC-authorized settlement with Connecticut
Light and Power (38,357) -
Write downs and (gains)/losses on sales of
equity method investments (1,205) 132,436
-------- ---------
Adjusted EBITDA $232,582 $ 59,511
Forecasted Adjusted EBITDA Reconciliation
The following table summarizes the calculation of adjusted EBITDA and
provides a reconciliation to forecasted cash flow from operations:
$ in millions Reported Adjustment Adjusted
Outlook Outlook
EBITDA 837 13(1) 850
Interest Payments (278) 15(2) (263)
Income Tax (36) -- (36)
Other Cash Used by Operations (50) -- (50)
Working Capital Changes (60) -- (60)
Xcel Settlement, net 100 (100) --
Cash Flow from Operations 513 ( 72) 441
(1) Adjustments to EBITDA include a $38.5 million reduction for a
settlement with CT Light and Power and increases for the following
items: losses on discontinued operations of $2 million, corporate
relocation charges of $30 million, reorganization and
restructuring charges of $5 million and impairment charges and
losses on sales of equity investments of $14 million.
(2) Prepayment penalty from debt refinancing.
EBITDA, Adjusted EBITDA and adjusted net income are nonGAAP 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 and adjusted net income 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, 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 debts;
- 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 press release.
Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for reorganization, restructuring, impairment and corporate relocation charges, discontinued operations, and write downs and losses on the sales of equity method investments; 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 presentation.
Similar to Adjusted EBITDA, Adjusted net income represents net income adjusted for reorganization, restructuring, impairment and corporate relocation charges, discontinued operations, and write downs and losses on the sales of equity method investments; 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. In addition, in evaluating Adjusted net income, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this presentation.
CONTACT: NRG Energy, Inc.Meredith Moore, 612-373-8892 (Media Relations)
or
Katy Sullivan, 612-373-8875 (Investor Relations)
SOURCE: NRG Energy, Inc.