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NRG Energy, Inc. Reports First Quarter 2005 Results and Announces $100 Million Improvement Initiative
PRINCETON, N.J.--(BUSINESS WIRE)--May 10, 2005--NRG Energy, Inc. (NYSE:NRG) today reported net income for the quarter ended March 31, 2005 of $22.6 million, or $0.21 per diluted share versus the prior year of $30.2 million, or $0.30 per diluted share, which included $1.2 million loss or $0.01 per diluted share related to discontinued operations. Weaker year-on-year performance was largely the result of very mild peak season weather in the Northeast United States and Australia relative to 2004 and mark-to-market losses.
Adjusted net income, excluding discontinued operations and other nonrecurring items, was $14.4 million or $0.16 per diluted share for the three months ended March 31, 2005 and $36.5 million or $0.36 per diluted shares for the comparable period ended March 31, 2004. Adjustments were primarily associated with asset impairments, restructuring and relocation charges and litigation settlements (see Table A-1).
"During the first quarter, we launched internally a cost improvement initiative called 'F.O.R.@NRG' as the logical follow on to our highly successful Powder River Basin coal conversion program," said David Crane, NRG President and CEO. "We are sufficiently pleased with the progress made to date with F.O.R.@NRG that we expect a $100 million per year recurring benefit by the end of its implementation period. Even excluding the expected first year benefits from F.O.R.@NRG, our continuing dedication to all phases of portfolio and asset management enables us to raise our 2005 adjusted EBITDA guidance to $600 million, notwithstanding the soft margins we experienced in the first quarter."
First Quarter Highlights:
- $154 million of adjusted EBITDA for 2005 including $39.5
million in mark-to-market losses (see Table A-2);
- 48% net debt to total capital at March 31, 2005 (see Table
A-3);
- $416 million of high-yield debt redeemed and repurchased;
- $70.8 million TermoRio arbitration award collected;
- 100% low-sulfur coal achieved at Huntley 67 and Dunkirk 4; and
- $63.5 million sale of Enfield completed on April 1, 2005.
NRG's operating income for the quarter was $46.4 million as compared to $119.7 million for the first quarter 2004. While domestic generation output and power prices for the first quarter of 2005 increased over the first quarter 2004, compressed oil and dark spark spreads drove operating income lower. Revenues of $601 million for the three months ended March 31, 2005 remained relatively unchanged compared to first quarter 2004. Increased generation from our New York City, South Central, and Indian River facilities drove higher merchant revenues which, combined with higher financial revenues from settled hedging activity, offset the mark-to-market losses associated with forward financial sales of electricity supporting our Northeast assets. Higher cost of energy of $59.5 million also impacted first quarter operating income. Of this total increase, $45.4 million was due to fuel price increases at our Northeast and South Central regions. Increased generation largely accounted for the remainder. NRG continues to focus on environmental and operating improvements at the plants and has begun a number of significant outages at the South Central, Western New York and Indian River plants. This work increased operating and maintenance expenses by $11.6 million, as compared to the first quarter 2004. The increased expenses were substantially attributable to the aggressive implementation of our Powder River Basin conversion program and related environmental remediation at NRG's Big Cajun II, Huntley and Dunkirk coal-fired plants.
Income from continuing operations for the quarter totaled $22.6 million versus $31.4 million for the first quarter of 2004. Offsetting the lower operating income were lower interest expense, higher equity earnings, higher other income, and lower income taxes. Lower interest expense of $6.7 million was primarily due to the Senior Credit Facility refinancing in December 2004 which reduced the first lien debt interest rate by 212.5 basis points. A $12 million after-tax mark-to-market gain associated with Enfield's natural gas contract contributed to an increase in equity earnings. Additionally, the settlement associated with the TermoRio project resulted in $13.5 million gain, adding to an increase in other income. The effective tax rate for the first quarter 2005 was 17.5% due to the appropriation of a full valuation allowance and earnings in foreign jurisdictions taxed at rates lower than the U.S. statutory rate.
Cash flow from operations totaled $64 million for the three months ended March 31, 2005, as compared to $350 million for the three months ended March 31, 2004. In the first quarter of 2004, NRG received $125 million from Xcel Energy, Inc. related to its emergence from Chapter 11. Additionally, during the first quarter of 2005, the Company increased its hedging activity which required increased credit support compared to the same quarter last year. Prepayments and other current assets increased in the first quarter of 2005 by $124.5 million, primarily to support the increased level of hedging transactions. Collateral requirements will fluctuate throughout the year as forward power prices move and, since March 31, 2005, approximately $41 million of cash collateral has been returned as of May 6, 2005.
Regional Segment Review of Results Table 1: Adjusted EBITDA by region (in millions) Q1 2005 Q1 2004 ---------------------------------------------------------------------- Northeast $54.0 $114.8 South Central $25.2 $29.7 West Coast $3.5 $33.3 Australia $18.1 $40.6 Other International $36.7 $13.6 Other North America $2.2 $12.3 Thermal, Alternative Energy, Nongenerating and Other $14.7 $12.9 ---------------------------------------------------------------------- Adjusted Total EBITDA $154.4 $257.2
Northeast: The Northeast region had first quarter 2005 adjusted EBITDA of $54.0 million versus $114.8 million in 2004. Mild weather during the first quarter 2005 kept peak period spark spreads in the Northeast compressed. Although gas prices were 13% higher than the first quarter last year, resulting in higher power prices, overall spreads were compressed for coal and oil in the first quarter this year versus the same quarter in 2004. Total Northeast generation for the quarter increased slightly over last year and partially offset the compressed margins. During the quarter, dark spreads increased significantly in the forward market and provided the opportunity for the Company to increase the dark hedge position for 2006. As the quarter ended with the forward market at a high point, the existing financial hedges that do not receive hedge accounting treatment had a $39.5 million unrealized mark-to-market loss. Subsequent to quarter end, forward prices softened during April reversing $27 million of the mark-to-market loss recorded in the first quarter of 2005.
South Central: The South Central region generated $25.2 million in adjusted EBITDA during the quarter as compared with $29.7 million last year. The region's power sales are largely contracted, and normally would not experience swings in year-on-year results. However during the first quarter 2005, the Big Cajun II facility experienced unplanned outages that required the purchase of energy in the merchant market at higher costs than our coal-based generation to meet contracted full-service load-following obligations. In spite of these outages, total generation from the South Central assets increased by 8.8% over last year due to a higher power price environment.
West Coast: The West Coast region delivered adjusted EBITDA of $3.5 million versus $33.3 in 2004, primarily reflecting the loss of the equity earnings contributed by the California Department of Water Resources (CDWR) contract that expired at the end of 2004.
Australia: Adjusted EBITDA in the first quarter 2005 totaled $18.1 million, down from $40.6 in 2004. Unseasonably mild weather and significantly lower pool prices drove the quarter-on-quarter decline. Average pool prices for the three months ended March 31, 2005 were $23.26 per megawatt hour versus $40.33 per megawatt hour in 2004. Thirty-five percent of the region's generation was contracted with a major retailer at a price above the average clearing market price, helping to offset weak pool prices.
Other North America: First quarter 2005 adjusted EBITDA totaled $2.2 million versus $12.3 million in 2004. First quarter 2004 reflected an EBITDA contribution of $11 million from Kendall, which was sold in the fourth quarter 2004.
Other International: First quarter adjusted EBITDA was $36.7 million versus $13.6 million in 2004. These results were driven primarily by the Company's German operations, Schkopau and MIBRAG, which are largely contracted, coupled with a mark-to-market after tax benefit of $12 million related to our Enfield investment.
On February 25, 2005, the Company collected $70.8 million of an arbitration award arising out of the Company's participation in the TermoRio project in Brazil. Previous to its receipt, that potential award had been carried on the Company's balance sheet at $57.3 million. As a result, the difference of approximately $13.5 million was included in the first quarter 2005 earnings. The entire $70.8 million is included in the Company's first quarter 2005 net cash flow.
Thermal and Other: Adjusted EBITDA was $14.7 million in first quarter 2005 versus $12.9 million in the first quarter of 2004. A significant portion of this segment is driven by NRG Thermal's output which is largely contracted and which provides steam heating to approximately 565 customers and chilled water to 90 customers. Additionally, this segment includes corporate costs, which have been fully allocated out to the regions in 2005, resulting in higher adjusted EBITDA against the first quarter of 2004.
Liquidity and Capital Resources
The Company completed several significant capital transactions during the first quarter 2005. NRG redeemed $375 million of 8% high yield second priority notes and also purchased in the market an additional $41 million of high yield notes at an average cost of approximately 108. The Company had $1.31 billion in high yield notes as of March 31, 2005.
As of March 31, 2005, liquidity continued to be strong with $1.2 billion at quarter end as shown below:
Table 2: Corporate Liquidity (in millions) March 31, 2005 December 31, 2004 ---------------------------------------------------------------------- Unrestricted Cash: Domestic $510 $921 International 253 189 Restricted Cash: Domestic 60 54 International 18 59 ---------------------------------------------------------------------- Total Cash 841 1,223 Letter of Credit Availability 176 193 Revolver Availability 150 150 ---------------------------------------------------------------------- Total Current Liquidity $1,167 $1,566
Focus on Return on Invested Capital@NRG (F.O.R.@NRG)
Focus on ROIC at NRG is a comprehensive cost and margin improvement program consisting of a large number of asset, portfolio and headquarters-specific targeted initiatives which can be implemented over the short to medium term with limited incremental capital required to be invested. We expect recurring benefits of $100 million by the end of the three-year implementation period, from value enhancing improvements made to plant operations and companywide processes. Some of the projects underway include recapturing nameplate capacity at the Huntley, Dunkirk and Indian River coal plants, reducing forced outages at Big Cajun II and other major baseload facilities, and increasing fuel efficiency at our higher capacity factor plants.
Portfolio Update
On April 1, 2005, the Company completed the sale of its 25% interest in the Enfield project to Infrastructure Alliance Limited for $63.5 million, creating a pretax gain of approximately $10.0 million which will be recorded in the second quarter (subject to working capital adjustments).
2005 Adjusted EBITDA Outlook Raised
During the Company's year-end earnings call, the adjusted EBITDA guidance, excluding the $60 million mark-to-market gains recorded in the 2004 results, was $560 million. The updated adjusted EBITDA guidance, prior to the 2004 and 2005 mark-to-market impacts, is revised upward to $600 million. The increase in the adjusted EBITDA guidance includes the updated timing for asset sales, the Company's first quarter results, and an updated view on margins and costs.
The first quarter mark-to-market loss of $39.5 million is excluded from the guidance as it will continue to fluctuate throughout the year with changes in forward power prices. The first quarter mark-to-market loss of $39.5 million decreased to $12 million by the end of April 2005. Our revised adjusted EBITDA guidance also does not include the targeted first year financial improvements of up to $30 million arising out of the F.O.R.@NRG initiative.
The Company's adjusted EBITDA guidance of $600 million (see Table A-6) excludes unusual or nonrecurring events and assumes normal weather patterns in our core regions for the balance of the year. The gross margin associated with this EBITDA estimate is substantially hedged in terms of downside protection while the Company retains the potential to benefit from extreme weather events, locational supply-demand imbalances, and gas price spikes through its dual fuel-fired peaking units.
Earnings Conference Call
On May 10, 2005, NRG will host a conference call at 9:00 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.
Annual Meeting
On Tuesday, May 24, 2005, NRG will host its Annual Meeting of Stockholders at the Hotel DuPont in Wilmington, Delaware beginning at 10:00 am eastern.
About NRG
NRG Energy, Inc. owns and operates a diverse portfolio of power-generating facilities, primarily in the Northeast, South Central and West Coast regions of the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities. NRG also has ownership interests in international generating facilities in Australia and Germany.
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, post-closing adjustments associated with the Enfield sale, expected benefits and EBITDA improvements of the F.O.R.@NRG initiative and typically can be identified by the use of words such as "will," "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, 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, adverse results in current and future litigation, and the inability to implement value enhancing improvements to plant operations and company-wide processes.
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, May 10, 2005 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)
Three Months Ended
-------------------------
March 31, March 31,
2005 2004
------------ ------------
(In thousands, except per
share amounts)
Operating Revenues
Revenues from majority-owned operations $601,142 $600,265
Operating Costs and Expenses
Cost of majority-owned operations 452,922 381,753
Depreciation and amortization 48,424 55,006
General, administrative and development 49,894 36,392
Other charges
Corporate relocation charges 3,455 1,116
Reorganization items -- 6,250
------------ ------------
Total operating costs and expenses 554,695 480,517
------------ ------------
Operating Income 46,447 119,748
Other Income/(Expense)
Minority interest in earnings of
consolidated subsidiaries (474) (508)
Equity in earnings of unconsolidated
affiliates 36,964 17,713
Write downs and losses on sales of equity
method investments -- (1,738)
Other income, net 25,502 3,657
Refinancing expenses (25,024) (30,417)
Interest expense (55,991) (62,729)
------------ ------------
Total other expense (19,023) (74,022)
Income From Continuing Operations Before
Income Taxes 27,424 45,726
Income Tax Expense 4,802 14,280
------------ ------------
Income From Continuing Operations 22,622 31,446
Loss From Discontinued Operations, net of
Income Taxes (4) (1,211)
------------ ------------
Net Income 22,618 30,235
Dividends for Preferred Shares 3,872 --
------------ ------------
Income Available for Common Stockholders $18,746 $30,235
============ ============
Weighted Average Number of Common Shares
Outstanding-- Basic 87,043 100,018
Income From Continuing Operations per
Weighted Average Common Share-- Basic $0.21 $0.31
Loss From Discontinued Operations per
Weighted Average Common Share -- Basic -- (0.01)
------------ ------------
Net Income per Weighted Average Common Share
-- Basic $0.21 $0.30
============ ============
Weighted Average Number of Common Shares
Outstanding-- Diluted 87,722 100,018
Income From Continuing Operations per
Weighted Average Common Share-- Diluted $0.21 $0.31
Loss From Discontinued Operations per
Weighted Average Common Share -- Diluted -- (0.01)
------------ ------------
Net Income per Weighted Average Common Share
-- Diluted $0.21 $0.30
============ ============
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2005 2004
------------ ------------
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents $763,025 $1,110,045
Restricted cash 78,259 112,824
Accounts receivable -- trade, less
allowance for doubtful accounts of $1,011
and $1,011 229,392 272,101
Accounts receivable - affiliates 503 --
Current portion of notes receivable and
other investments 26,860 85,447
Income taxes receivable 36,650 37,484
Inventory 208,757 248,010
Derivative instruments valuation 35,196 79,759
Prepayments and other current assets 294,149 169,608
Deferred income taxes 1,023 --
Current assets -- discontinued operations 3,019 3,010
------------ ------------
Total current assets 1,676,833 2,118,288
------------ ------------
Property, Plant and Equipment
In service 3,562,719 3,564,658
Under construction 24,601 17,429
------------ ------------
Total property, plant and equipment 3,587,320 3,582,087
Less accumulated depreciation (254,886) (207,536)
------------ ------------
Net property, plant and equipment 3,332,434 3,374,551
------------ ------------
Other Assets
Equity investments in affiliates 754,240 734,950
Notes receivable and other investments,
less current portion -- affiliates, less
reserve for uncollectible notes
receivable of $14,304 and $4,402 118,281 128,046
Notes receivable and other investments,
less current portion, less reserve for
uncollectible notes receivable of $3,794
and $3,794 650,837 676,476
Intangible assets, net of accumulated
amortization of $59,823 and $55,010 284,909 294,350
Debt issuance costs, net of accumulated
amortization of $4,120 and $3,635 40,807 48,485
Derivative instruments valuation 24,464 41,787
Funded letter of credit 350,000 350,000
Other assets 60,493 63,095
------------ ------------
Total other assets 2,284,031 2,337,189
------------ ------------
Total Assets $7,293,298 $7,830,028
============ ============
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2005 2004
------------ ------------
(In thousands, except for
share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and
capital leases $85,092 $512,252
Accounts payable -- trade 129,741 166,131
Accounts payable -- affiliates -- 5,591
Accrued property, sales and other taxes 13,608 11,134
Accrued salaries, benefits and related
costs 23,781 35,206
Accrued interest 44,575 11,057
Derivative instruments valuation 123,742 16,772
Deferred income taxes -- 334
Other bankruptcy settlement 177,425 175,576
Other current liabilities 147,721 152,526
Current liabilities -- discontinued
operations 1,374 1,362
------------ ------------
Total current liabilities 747,059 1,087,941
------------ ------------
Other Liabilities
Long-term debt and capital leases 3,143,369 3,253,866
Deferred income taxes 123,055 134,325
Postretirement and other benefit
obligations 109,754 116,383
Derivative instruments valuation 158,458 148,445
Non-current out-of-market contracts 314,021 318,664
Other long-term obligations 79,835 71,055
Non-current liabilities -- discontinued
operations 1,081 1,081
------------ ------------
Total non-current liabilities 3,929,573 4,043,819
------------ ------------
Total Liabilities 4,676,632 5,131,760
------------ ------------
Minority Interest 6,576 6,104
Commitments and Contingencies
Stockholders' Equity
4% Convertible perpetual preferred stock;
$.01 par value; 10,000,000 shares
authorized, 420,000 issued and
outstanding at March 31, 2005 and
December 31, 2004 (shown at liquidation
value, net of issuance costs) 406,306 406,359
Common stock; $.01 par value; 500,000,000
shares authorized; 100,045,104 and
100,041,935 shares issued at March 31,
2005 and December 31, 2004; 87,045,104
and 87,041,935 outstanding at March 31,
2005 and December 31, 2004 1,000 1,000
Additional paid-in capital 2,420,982 2,417,021
Retained earnings 215,388 196,642
Less treasury stock, at cost -- 13,000,000
shares (405,312) (405,312)
Accumulated other comprehensive
income/(loss) (28,274) 76,454
------------ ------------
Total stockholders' equity 2,610,090 2,692,164
------------ ------------
Total Liabilities and Stockholders' Equity $7,293,298 $7,830,028
============ ============
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
-------------------------
March 31, March 31,
2005 2004
------------ ------------
(In thousands)
Cash Flows from Operating Activities
Net income $22,618 $30,235
Adjustments to reconcile net income to net
cash provided by operating activities
Distributions less/(more) than equity
earnings of unconsolidated
affiliates (31,996) 19,709
Depreciation and amortization 48,423 59,114
Reserve for note and interest receivable (98) --
Amortization of financing costs and debt
discount/(premium) 2,344 9,243
Write-off of deferred financing costs
and debt premium (8,413) 15,312
Write down and loss on sale of equity
method investments -- 1,738
Deferred income taxes and investment tax
credits (5,548) 11,948
Unrealized (gains) losses on derivatives 85,082 (5,393)
Minority interest 474 1,428
Amortization of power contracts and
emission credits 11,153 22,747
Amortization of unearned equity
compensation 2,064 --
Cash provided by (used in) changes in
certain working capital items, net of
effects from acquisitions and
dispositions
Accounts receivable, net 41,506 (29,674)
Xcel Energy settlement receivable -- 288,000
Inventory 39,700 21,035
Prepayments and other current assets (124,549) 29,793
Accounts payable (35,701) (1,978)
Accounts payable - affiliates, net (9,030) --
Accrued expenses 18,683 40,529
Other current liabilities (2,482) (6,410)
Creditor pool obligation payments -- (163,000)
Other assets and liabilities 9,611 5,779
------------ ------------
Net Cash Provided by Operating Activities 63,841 350,155
------------ ------------
Cash Flows from Investing Activities
Proceeds from sale of investments -- 2,500
Decrease (Increase) in restricted cash and
trust funds 34,325 (17,714)
Decrease in notes receivable 68,202 15,940
Capital expenditures (11,782) (34,728)
Return of capital from projects 1,095 --
Investments in projects -- (476)
------------ ------------
Net Cash Provided (Used) by Investing
Activities 91,840 (34,478)
------------ ------------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 203,545 486,028
Payment of dividends to preferred
stockholders (3,872) --
Deferred debt issuance costs (1,293) (7,233)
Issuance expense of preferred shares (53) --
Principal payments on short and long-term
debt (698,943) (516,912)
------------ ------------
Net Cash Used by Financing Activities (500,616) (38,117)
------------ ------------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (2,033) (401)
Change in Cash from Discontinued Operations (52) 3,098
Net Increase (Decrease) in Cash and Cash
Equivalents (347,020) 280,257
Cash and Cash Equivalents at Beginning of
Period 1,110,045 551,223
------------ ------------
Cash and Cash Equivalents at End of Period $763,025 $831,480
============ ============
NRG ENERGY, INC. AND SUBSIDIARIES
Reconciliation of NonGAAP Financial Measures
----------------------------------------------------------------------
Appendix Table A-1: 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 Three Months Ended
(Dollars in thousands,
except per share Diluted
amounts) 03/31/2005 Diluted EPS 03/31/2004 EPS
----------------------------------------------------------------------
Net Income $22,618 $0.26 $30,235 $0.30
Plus:
(Income) Loss from
Discontinued
Operations, net of
tax 4 0.00 732 0.01
Corporate relocation
charges, net of tax 2,089 0.02 675 0.01
Reorganization
items, net of tax - - 3,778 0.04
Gain on Crockett,
net of tax (2,138) (0.02) - -
Gain on TermoRio
Settlement, net of
tax (8,180) (0.09) - -
Write downs and
(gains)/losses on
sales of equity
method investments,
net of tax - - 1,051 0.01
-----------------------------------------------
Adjusted Net Income $14,393 $0.16 $36,470 $0.36
----------------------------------------------------------------------
----------------------------------------------------------------------
Appendix Table A-2: EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Three Months Ended Three Months Ended
03/31/2005 03/31/2004
Net Income: $22,618 $30,235
Plus:
Income Tax Expense 4,802 14,280
Interest Expense 53,647 56,885
Amortization and Write Downs
of Finance Costs 1,413 2,063
Amortization of Debt
Discount/Premium 931 3,781
Refinancing Expenses 25,024 30,417
Depreciation Expense 48,424 55,006
WCP CDWR contract amortization - 30,968
Amortization of power
contracts 7,528 16,965
Amortization of emission
credits 3,626 6,270
-------------------------------------
EBITDA $168,013 $246,870
Loss from Discontinued
Operations 4 1,211
Corporate relocation charges 3,455 1,116
Reorganization items - 6,250
Gain on Crockett (3,536) -
Gain on TermoRio Settlement (13,532) -
Write Downs/Loss on Sales of
Equity Investments - 1,738
-------------------------------------
Adjusted EBITDA $154,404 $257,185
----------------------------------------------------------------------
----------------------------------------------------------------------
Appendix Table A-3: Net Debt to Capital Reconciliation
The following table summarizes the calculation of Net Debt to Capital:
----------------------------------------------------------------------
Numerator Gross Debt $3,228,461
Total Cash (841,284)
-----------
Net Debt $2,387,177
Denominator Book Value of Equity $2,610,090
Net Debt 2,387,177
-----------
Capital $4,997,267
Net Debt to Capital 48%
----------------------------------------------------------------------
----------------------------------------------------------------------
Appendix Table A-4: First Quarter 2005 Regional EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Three months
ending March 31, South Other
2005 Northeast Central West NA Australia
---------------------------------------------------------------------
Net Income: $32,860 $9,306 $3,259 $(5,162) $10,180
Plus:
Income Tax
Expense/Benefit - - 28 222 634
Interest Expense 88 1,742 - 4,418 3,619
Amortization and
Write Downs of
Finance Costs - - - - 6
Amortization of
Debt
Discount/Premium - 598 - 1,233 (193)
Refinancing
Expense - - - - (9,783)
Depreciation
Expense 18,609 15,142 198 1,993 6,594
Amortization of
power contract - (2,736) - 2,974 7,075
Amortization of
emission credits 2,468 1,158 - - -
EBITDA $54,025 $25,210 $3,485 $5,678 $18,132
Nonrecurring
Charges 4 - - - -
Discontinued
Operations - - - 4 -
Gain on TermoRio - - - - -
Gain on Crockett - - - (3,536) -
Adjusted EBITDA $54,029 $25,210 $3,485 $2,146 $18,132
Three months
ending March 31, Other Alt.
2005 Int'l Energy Non-Gen Corp
---------------------------------------------------------------------
Net Income: $42,268 $538 $5,109 $(75,740)
Plus:
Income Tax
Expense/Benefit 4,069 242 15 (408)
Interest Expense 3,104 26 2,243 38,407
Amortization and
Write Downs of
Finance Costs - - 5 1,402
Amortization of
Debt
Discount/Premium - - (234) (473)
Refinancing
Expense - - - 34,807
Depreciation
Expense 796 1,316 2,739 1,039
Amortization of
power contract - - 214 -
Amortization of
emission credits - - - -
EBITDA $50,237 $2,122 $10,091 $(966)
Nonrecurring
Charges - - - 3,451
Discontinued
Operations - - - -
Gain on TermoRio (13,532) - - -
Gain on Crockett - - - -
Adjusted EBITDA $36,705 $2,122 $10,091 $2,485
----------------------------------------------------------------------
Appendix Table A-5: First Quarter 2004 Regional EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Three months
ending March 31, South
2004 Northeast Central West Other NA Australia
----------------------------------------------------------------------
Net Income: $87,428 $11,377 $1,211 $(11,219) $13,136
Plus:
Income Tax
Expense/Benefit - - 152 335 3,264
Interest Expense (714) 1,716 - 8,221 5,168
Refinancing
Expense - - - - -
Amortization and
Write Downs of
Finance Costs - - - - -
Amortization of
Debt
Discount/Premium - 634 - 3,965 (185)
Depreciation
Expense 18,529 16,962 202 7,610 5,125
WCP CDWR contract
amortization - - 30,968 - -
Amortization of
power contract 4,485 (3,195) 814 2,484 12,163
Amortization of
emission credits 4,751 1,519 - - -
EBITDA $114,479 $29.013 $33,347 $11,396 $38,671
Reorganization
Items 321 724 - 150 -
Corporate
Relocation
Charges - - - - -
Discontinued
Operations - - - 984 -
Write Downs/Loss
on Sales of
Equity
Investments - - - (235) 1,973
Adjusted EBITDA $114,800 $29,737 $33,347 $12,295 $40,644
Three months
ending March 31, Other Alt.
2004 Int'l Energy Non-Gen Corp
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Net Income: $10,330 $544 $8,734 $(91,306)
Plus:
Income Tax
Expense/Benefit 4,143 4 178 6,204
Interest Expense (1,503) 7 2,506 41,484
Refinancing
Expense - - - 30,417
Amortization and
Write Downs of
Finance Costs - - - 2,063
Amortization of
Debt
Discount/Premium - (5) (284) (344)
Depreciation
Expense 724 1,389 3,124 1,341
WCP CDWR contract
amortization - - - -
Amortization of
power contract - - 214 -
Amortization of
emission credits - - - -
EBITDA $13,694 $1,939 $14,472 $(10,141)
Reorganization
Items 1 - 688 4,366
Corporate
Relocation
Charges - - - 1,116
Discontinued
Operations (120) 347 - -
Write Downs/Loss
on Sales of
Equity
Investments - - - -
Adjusted EBITDA $13,575 $2,286 $15,160 $(4,659)
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Appendix Table A-6: Forecasted EBITDA Reconciliation
The following table summarizes the calculation of adjusted EBITDA and
provides a reconciliation to forecasted cash flow from operations:
----------------------------------------------------------------------
$ in millions Outlook
EBITDA $620
Nonrecurring Items (20)
-------
Adjusted EBITDA 600
Interest Payments (231)
Income Tax (18)
Other Cash Used by Operations 121
Working Capital Changes (5)
-------
Cash Flow from Operations $467
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 news 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 news release.
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 news release.
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