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NRG Energy, Inc. Reports Third Quarter 2005 Results
PRINCETON, N.J., Nov 07, 2005 (BUSINESS WIRE) -- NRG Energy, Inc. (NYSE:NRG):
-- Strong third quarter operational results driven by the Northeast region
-- Full year adjusted EBITDA guidance, before mark-to-market (MtM) adjustments, increased from $633 million to $700 million
-- Domestic MtM unrealized losses on hedges, before tax, for the 2005 third quarter of $173.2 million
-- Texas Genco acquisition approval process on track for first quarter 2006 close
-- Reliability-must-run (RMR) extension application filed regarding the Company's Connecticut assets
NRG Energy, Inc. (NYSE:NRG) today reported a net loss of ($26.9) million, or ($0.39) per diluted share for the quarter ended September 30, 2005 compared to net income of $54.2 million or $0.54 per diluted share for the same period last year. Net income for the nine months ended September 30, 2005 and 2004 totaled $19.6 million, or $0.07 per diluted share versus $167.5 million or $1.67 per diluted share. The decrease in the quarter and year-to-date results versus 2004 is primarily due to unrealized MtM accruals, which are economically neutral to the Company in that offsetting gains on underlying accrual positions will be recognized as power is delivered and the hedges settle (see Table 1). The year-to-date results also include $51 million of non-cash expenses related to the reversal of 2004 MtM gains. These items were partially offset by the strong operating results from our Northeast assets due to higher energy prices and increased generation, the sale of surplus emission credits, and lower interest expense. Generation across the portfolio increased 17% as compared to the third quarter 2004, including a 42% increase in output from our Northeast region.
"Our stronger commercial results were underpinned by an operating performance that improved during the quarter and was particularly strong among our oil and gas plants in the Northeast," said David Crane, NRG's President and Chief Executive Officer. "While the sharp increase in electricity prices in the forward market led to mark-to-market losses on our forward hedge positions, I am pleased that our commercial results improved significantly this quarter on a year-on-year basis."
Third Quarter and Year-to-Date 2005 Financial Highlights
-- 42% increase in generation quarter over quarter from Northeast assets;
-- $263 million and $568 million of adjusted EBITDA for three and nine months ending September 30, 2005, respectively, before $173.2 million and $206.2 million of domestic realized MtM losses, respectively (see Tables A-3 and A-4);
-- $250 million accelerated share repurchase reducing our outstanding common shares by 6.3 million to 80.7 million, $250 million 3.625% convertible preferred issuance, and $229 million 8% note repurchase; and
-- 51.9% net debt-to-total capital ratio at September 30, 2005 (see Table A-5).
Generation from our oil-fired and gas-fired assets increased significantly over 2004 and drove the overall Company's generation improvement. Our oil-fired assets increased their generation 327% and 129% for the quarter and year-to-date, respectively, while our New York City gas-fired assets increased 92% and 96% for the quarter and year-to-date, respectively. Financial results realized by our Northeast assets improved with higher energy margins due to the steep rise in natural gas and power prices. Additionally, operating results for the quarter included $22 million of gains from emission credit sales, which represents a portion of our 2005 surplus position. Year-to-date debt repurchases of $645 million and the 2004 refinancing of our credit facility, drove interest expense lower versus last year by $20.3 million and $42.9 million for the quarter and year-to-date, respectively. These improvements were offset by higher purchased energy costs at South Central, changes to our asset portfolio due to the disposition of assets and expirations of contracts, and the unrealized MtM losses. Operating and maintenance expense was flat quarter over quarter and $27 million higher year-to-date due to an increased number of planned outages this year versus 2004.
The fuel and energy markets in which the Company transacts, at times experience significant volatility. During the first half of this year, the Company entered into financial transactions to lock in forward prices for a significant portion of its expected power generation for the balance of 2005 and calendar year 2006. While all of these transactions are economic hedges of the portfolio, 70% of our current portfolio of forward sales are afforded hedge accounting treatment. During the third quarter, the forward prices for power rose sharply along with the price movements of natural gas. As a result of prices rising above the levels at which the forward sales were put in place, the MtM for a portion of the hedges is recorded in operating results at September 30, 2005. Additionally, our hedging activity requires cash and letter of credit collateral support when prices rise above the hedged prices. Collateral supporting our trading activity was $759 million at September 30, 2005. The scheduled settlement of the underlying hedges and the reversal of the MtM losses to income and the return of collateral over the coming quarters are provided in Table 1.
Table 1: Estimated Roll-off Schedule of Domestic Unrealized Pretax
(Losses) and Collateral as of September 30, 2005
9 mos
ended
($in millions) 9/30/05 Q4 2005 Q1 2006 Q2 2006
------------------------------------ -------- ------- ------- --------
Reversal of Unrealized MtM losses ($8.5) ($42.2) ($78.3) ($22.9)
------------------------------------ -------- ------- ------- --------
Return of Cash and LOC Collateral - $165.9 $273.4 $105.1
------------------------------------ -------- ------- ------- --------
2007 &
($in millions) Q3 2006 Q4 2006 beyond Total
------------------------------------ -------- ------- ------- --------
Reversal of Unrealized MtM losses ($35.5) ($9.4) ($9.4) ($206.2)
------------------------------------ -------- ------- ------- --------
Return of Cash and LOC Collateral $117.6 $61.8 $35.2 $758.9
------------------------------------ -------- ------- ------- --------
For 2007 and beyond, we expect to utilize hedging strategies that are option-based with a goal of establishing a floor on earnings, leaving upside market participation, minimizing MtM swings and optimizing collateral support of our hedging program. For 2007, we already have locked in a floor on 30% of our projected on-peak coal generation at current forward prices while preserving the majority of the Company's ability to benefit from further upward movement in northeastern electricity prices.
"The coordinated transactions we recently entered into with respect to our 2007 position are indicative of the broader array of tools we intend to use to forward hedge our baseload assets while preserving the ability of those assets to benefit from the upside in commodity prices," said Crane.
Regional Segment Review of Results
Table 2: Three Months Income from Continuing Operations before
Taxes and Adjusted EBITDA by region
($in millions) Income from Continuing Adjusted EBITDA
Operations before Taxes
----------------------------------------------------------------------
Three months ending 9/30/05 9/30/04 9/30/05 9/30/04
----------------------------------------------------------------------
Northeast (1) $4.1 $87.8 $25.1 $109.5
South Central $(8.4) $14.4 $5.7 $30.4
Australia $2.3 $2.3 $14.4 $9.0
Western $6.0 $18.2 $6.0 $47.2
Other North America $(1.0) $(19.0) $7.2 $38.5
Other International $22.9 $26.7 $24.7 $34.1
Alternative Energy, $(54.1) (2) $(72.5) (3) $6.7 $2.2
Non-generation,
and Other
----------------------------------------------------------------------
Total $(28.2) $57.9 $89.8 $270.9
----------------------------------------------------------------------
(1) Includes MtM loss of $172.4 million and $4.8 million in 2005 and
2004, respectively.
(2) Includes interest expense of $34.7 million and interest income.
(3) Includes interest expense of $79.1 million and interest income.
Table 3: Nine Months Income from Continuing Operations before
Taxes and Adjusted EBITDA by region
($in millions) Income from Continuing Adjusted EBITDA
Operations before Taxes
----------------------------------------------------------------------
Nine months ending 9/30/05 9/30/04 9/30/05 9/30/04
----------------------------------------------------------------------
Northeast (1) $75.9 $231.5 $138.4 $303.5
South Central $(5.9) $42.3 $39.4 $92.0
Australia $18.8 $10.4 $49.8 $60.2
Western $15.2 $42.8 $15.6 $135.5
Other North America $(13.7) $(31.6) $8.6 $67.4
Other International $91.4 $67.3 $74.0 $72.4
Alternative Energy, $(153.5) (2) $(155.4) (3) $36.4 $25.7
Non-generation,
and Other
----------------------------------------------------------------------
Total $28.2 $207.3 $362.2 $756.7
----------------------------------------------------------------------
(1) Includes MtM loss of $205.8 million and $0.6 million in 2005 and
2004, respectively.
(2) Includes interest expense of $124.2 million and interest income.
(3) Includes interest expense of $171.7 million, the $38.5 million
CL&P settlement and interest income.
Northeast: Our New York City gas-fired assets and dual fuel-fired assets across the region were able to take advantage of higher average power prices, and improved spark and liquid spreads. Excluding the MtM losses of $172.4 million and $205.8 million for the three and nine months ended September 30, 2005, respectively, this region showed a favorable increase versus 2004. This was due to a steep increase in power prices and a 42% increase in generation. With respect to 2006 and beyond, on November 1, 2005, the Company filed an application for the extension of the reliability-must-run status of its Middletown, Montville, and Devon (Connecticut) plants with the Federal Energy Regulatory Commission (FERC). The Company expects FERC to act upon the application within 60 days.
South Central: Due to hotter than normal weather in the third quarter, coop and long term customer load demand was strong with 2.7 million megawatt hours delivered to customers, an increase of 9.5% over 2004. Consequently, South Central was required to purchase more energy to meet its contract load requirements. With on-peak power prices 85.7% higher coupled with increased demand and higher forced outage rates versus the third quarter of 2004, South Central incurred $58.4 million more in purchased energy costs. The quarter-on-quarter results also reflect the impact of third quarter 2004's mild weather, which generally provided favorable financial results for South Central.
Australia: Generation was higher by 2.9% due to increased output from Playford and an outage in the third quarter of 2004. Higher maintenance cost at the Playford station, and lower pool prices this quarter versus the third quarter of 2004 offset this increase. For the nine months ended September 30, 2005, the region experienced unseasonably mild weather and weak pool prices in the first quarter which drove the unfavorable results versus last year. Higher generation helped offset weak pool prices, with generation increasing 5.0% over generation levels from the first nine months of 2004.
Western: Lower results are primarily attributable to the expirations at the end of 2004 of the California Department of Water Resources (CDWR) contract and the Red Bluff RMR agreement. With respect to 2006, WCP has been notified by the California Independent System Operator (CAISO) that effective January 1, 2006, Encina unit 4 and El Segundo units 3 and 4 will not be relisted as RMR qualifying facilities. A tolling agreement for the total capacity of the El Segundo plant has been executed with a major load serving entity for the period May 2006 through April 2008. With the loss of RMR designation, the CAISO no longer has the right to call on the facility as a reliability resource. The Red Bluff and Chowchilla facilities have received capacity contracts for the period April 1, 2006 through December 31, 2007.
Liquidity and Capital Resources
Liquidity at September 30, 2005 decreased 44% and 56% from June 30, 2005 and December 31, 2004, respectively. The decreases were primarily attributable to:
-- $645 million in par value debt repurchased year-to-date
-- $250 million of stock repurchased during the third quarter
-- $598.1 million in cash collateral posted during 2005 bringing total cash collateral to $631.4 million
These declines were partially offset by the issuance of $250 million of perpetual preferred shares and $105.2 million of asset sale proceeds and cash flow from operations.
Table 4: Corporate Liquidity ($ in millions) 9/30/05 6/30/05(1) 12/31/04(1) ------------------------------------------------------------------- Unrestricted Cash: Domestic $409 $493 $921 International 95 330 189 Restricted Cash: Domestic 73 66 54 International 19 21 59 ------------------------------------------------------------------- Total Cash $596 $910 $1,223 Letter of Credit 23 172 193 Availability Revolver Availability 70 150 150 ------------------------------------------------------------------- Total Current Liquidity $689 $1,232 $1,566 (1) These amounts have not been reclassified for discontinued operations.
Texas Genco Transaction:
As previously announced, on September 30, 2005, we entered into an agreement to purchase Texas Genco for a total purchase price of approximately $5.8 billion for the stock of Texas Genco which includes the assumption by the Company of approximately $2.5 billion of indebtedness. The Company expects to finance the acquisition and refinance the $2.5 billion in debt assumed in the acquisition through a combination of a new senior secured credit facility, an unsecured high yield notes offering and the sale of common and preferred equity securities in the public markets.
Since announcing the planned acquisition of Texas Genco, the Company and Texas Genco filed an application with the Nuclear Regulatory Commission seeking consent to the indirect transfer of control of Texas Genco's 44% ownership interest in the South Texas Nuclear Project. Applications for approval of the acquisition also have been filed with FERC in accordance with Federal Power Act, the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the Public Utility Commission of Texas has been notified. The Company continues to work toward a first quarter 2006 transaction close date.
Outlook
The Company expects the high and volatile commodity price environment that has existed over the past several months as the direct or indirect result of extreme weather, production disruptions in the Gulf of Mexico and the general tightening of the supply-demand balance for wholesale electricity across all of our domestic regions to persist for the balance of 2005 and into 2006. As a result of the generally projected positive impact of these external factors on the unhedged portion of our domestic portfolio, and our success in achieving our 2005 internal financial objectives from FORNRG, we are increasing our full-year 2005 guidance for adjusted EBITDA (excluding MtM) from $633 million to $700 million. In addition, due to the impact of the $426 million in collateral postings during the third quarter, we are modifying our full-year 2005 cash flow from operations guidance from $419 million to $109 million (see Table 5).
Table 5: 2005 Reconciliation of Adjusted EBITDA Guidance ($ in
million)
----------------------------------------------------------------------
August 2005 November 2005
guidance(1) guidance(1)
Adjusted EBITDA, net of MtM $633 $700
Add back domestic unrealized MtM losses 33 156
----------------------------
Adjusted EBITDA with MtM losses $600 $544
Interest Payments (225) (235)
Income Tax (13) (14)
Other Funds Used by Operations 104 221
Working Capital Changes (47) (407)
----------------------------
Cash flow from Operations $419 $109
(1) EBITDA guidance includes $51 million of non-cash expenses related
to the reversal of 2004 MtM gains.
Earnings Conference Call
On November 7, 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.
About NRG
NRG Energy, Inc. owns and operates a diverse portfolio of power-generating facilities, primarily in the Northeast, South Central and Western 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, expected benefits, results and timing of the Texas Genco acquisition, 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 use western coal successfully, adverse results in current and future litigation, the inability to implement value enhancing improvements to plant operations and company-wide processes and the timing of and the ability to complete the Texas Genco acquisition and failure to realize expected benefits of the acquisition.
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, November 7, 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended Ended
-------------------- -----------------------
September September September September
30, 30, 30, 30,
2005 2004 2005 2004
---------- --------- ----------- -----------
(In thousands, except for per share amounts)
Operating Revenues
Revenues from majority-
owned operations $765,316 $604,632 $1,942,828 $1,770,669
---------- --------- ----------- -----------
Operating Costs and
Expenses
Cost of majority-owned
operations 668,373 379,855 1,555,737 1,112,479
Depreciation and
amortization 48,802 51,060 144,317 158,603
General, administrative
and development 47,185 54,031 149,641 135,673
Other charges
Corporate relocation
charges 1,740 5,713 5,651 12,474
Reorganization items -- (5,245) -- (1,656)
Impairment charges 6,000 40,507 6,223 42,183
---------- --------- ----------- -----------
Total operating
costs and expenses 772,100 525,921 1,861,569 1,459,756
---------- --------- ----------- -----------
Operating
Income/(Expense) (6,784) 78,711 81,259 310,913
---------- --------- ----------- -----------
Other Income (Expense)
Minority interest in
earnings of
consolidated
subsidiaries (13) (18) (36) (18)
Equity in earnings of
unconsolidated
affiliates 29,077 53,373 82,501 117,187
Write downs and
gains/(losses) on sales
of equity method
investments 4,333 (13,524) 15,894 (14,057)
Other income, net 9,956 5,478 43,208 17,145
Refinancing expense (19,012) -- (44,036) (30,417)
Interest expense (45,791) (66,110) (150,598) (193,463)
---------- --------- ----------- -----------
Total other expense (21,450) (20,801) (53,067) (103,623)
---------- --------- ----------- -----------
Income/(Loss) From
Continuing Operations
Before Income Taxes (28,234) 57,910 28,192 207,290
Income Tax Expense 8,511 14,559 21,201 65,136
---------- --------- ----------- -----------
Income/(Loss) From
Continuing Operations (36,745) 43,351 6,991 142,154
Income from discontinued
operations, net of
income taxes 9,864 10,870 12,612 25,326
---------- --------- ----------- -----------
Net Income/(Loss) (26,881) 54,221 19,603 167,480
Preference stock
dividends 4,200 -- 12,272 --
---------- --------- ----------- -----------
Income/(Loss) Available
for Common Stockholders $(31,081) $54,221 $7,331 $167,480
========== ========= =========== ===========
Weighted Average Number
of Common Shares
Outstanding -- Basic 83,529 100,101 85,860 100,066
Income/(Loss) From
Continuing Operations
per Weighted Average
Common Share -- Basic $(0.51) $0.43 $(0.08) $1.42
Income From Discontinued
Operations per Weighted
Average Common Share --
Basic 0.12 0.11 0.15 0.25
---------- --------- ----------- -----------
Income/(Loss) Available
for Common Stockholders
per Weighted Average
Common Share -- Basic $(0.39) $0.54 $0.07 $1.67
========== ========= =========== ===========
Weighted Average Number
of Common Shares
Outstanding -- Diluted 83,529 100,616 85,860 100,328
Income/(Loss) From
Continuing Operations
per Weighted Average
Common Share -- Diluted $(0.51) $0.43 $(0.08) $1.42
Income From Discontinued
Operations per Weighted
Average Common Share --
Diluted 0.12 0.11 0.15 0.25
---------- --------- ----------- -----------
Income/(Loss) Available
for Common Stockholders
per Weighted Average
Common Share -- Diluted $(0.39) $0.54 $0.07 $1.67
========== ========= =========== ===========
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2005 2004
------------- -------------
(unaudited)
-------------
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents $504,336 $1,103,678
Restricted cash 91,508 109,633
Accounts receivable, less allowance for
doubtful accounts of $3,280 and $6,591 308,839 269,611
Current portion of notes receivable 24,934 85,447
Income taxes receivable 31,237 37,484
Inventory 203,547 248,010
Derivative instruments valuation 451,545 79,759
Prepayments and other current assets 129,289 135,520
Collateral on deposit in support of
energy risk management activities 631,436 33,325
Deferred income taxes 44,832 --
Current assets -- discontinued
operations -- 15,821
------------- -------------
Total current assets 2,421,503 2,118,288
------------- -------------
Property, plant and equipment, net of
accumulated depreciation of $346,886 and
$205,928 3,226,714 3,329,000
------------- -------------
Other Assets
Equity investments in affiliates 651,412 734,950
Notes receivable, less current portion,
less reserve for uncollectible notes
of $0 and $8,196 712,020 804,450
Intangible assets, net 268,897 294,350
Derivative instruments valuation 31,973 41,787
Funded letter of credit 350,000 350,000
Other non-current assets 132,848 111,574
Non-current assets -- discontinued
operations -- 45,884
------------- -------------
Total other assets 2,147,150 2,382,995
------------- -------------
Total Assets $7,795,367 $7,830,283
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and
capital leases $176,024 $511,258
Accounts payable 152,968 171,722
Derivative instruments valuation 973,143 16,772
Deferred income taxes -- 334
Other bankruptcy settlement 175,945 175,576
Accrued expenses and other current
liabilities 389,396 209,367
Current liabilities -- discontinued
operations -- 2,912
------------- -------------
Total current liabilities 1,867,476 1,087,941
------------- -------------
Other Liabilities
Long-term debt and capital leases 2,866,374 3,212,596
Deferred income taxes 103,199 134,580
Derivative instruments valuation 198,554 148,445
Out-of-market contracts 302,639 318,664
Other non-current liabilities 190,897 187,438
Non-current liabilities -- discontinued
operations -- 47,759
------------- -------------
Total non-current liabilities 3,661,663 4,049,482
------------- -------------
Total Liabilities 5,529,139 5,137,423
Minority Interest 869 696
3.625% Convertible Perpetual Preferred
Stock; $.01 par value; 10,000,000 shares
authorized, 250,000 shares issued and
outstanding (at liquidation value, net of
issuance costs) 246,191 --
Commitments and Contingencies
Stockholders' Equity
4% Convertible Perpetual Preferred
Stock; $.01 par value; 10,000,000
shares authorized, 420,000 issued and
outstanding (at liquidation value, net
of issuance costs) 406,155 406,359
Common Stock; $.01 par value;
500,000,000 shares authorized;
80,701,198 and 87,041,935 outstanding 1,000 1,000
Additional paid-in capital 2,427,322 2,417,021
Retained earnings 203,973 196,642
Less treasury stock, at cost --
19,346,788 and 13,000,000 shares (663,529) (405,312)
Accumulated other comprehensive
income/(loss) (355,753) 76,454
------------- -------------
Total stockholders' equity 2,019,168 2,692,164
------------- -------------
Total Liabilities and Stockholders' Equity $7,795,367 $7,830,283
============= =============
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
----------------------
2005 2004
---------- -----------
(In thousands)
Cash Flows from Operating Activities
Net income $19,603 $167,480
Adjustments to reconcile net income to net
cash provided by/(used in) operating
activities
Distributions in excess of/(less than)
equity in earnings of unconsolidated
affiliates 1,100 (13,703)
Depreciation and amortization 145,076 164,872
Reserve for note and interest receivable (98) 4,572
Amortization of debt issuance costs and debt
discount 7,651 22,813
Write-off of deferred financing costs/(debt
premium) (7,701) 15,312
Deferred income taxes (53,605) 67,655
Minority interest 899 1,961
Unrealized (gains)/losses on derivatives 252,256 (33,232)
Asset impairment 6,223 42,183
Write downs and (gains)/losses on sales of
equity method investments (15,894) 14,057
Gain on TermoRio settlement (13,532) --
Gain on sale of discontinued operations (10,735) (29,924)
Amortization of power contracts and emission
credits 16,118 42,822
Amortization of unearned equity compensation 8,404 10,533
Collateral deposit payments in support of
energy risk management activities (598,111) (28,783)
Cash (used)/provided by changes in other
working capital, net of disposition affects 128,544 146,803
---------- -----------
Net Cash (Used)/Provided by Operating
Activities (113,802) 595,421
---------- -----------
Cash Flows from Investing Activities
Proceeds on sale of equity method investments 69,575 29,693
Proceeds on sale of discontinued operations 35,658 246,498
Return of capital from (investments in)
equity method investments and projects 1,333 (672)
Decrease in notes receivable, net 100,354 36,609
Capital expenditures (45,518) (78,293)
Increase/(decrease) in restricted cash and
trust funds, net 17,915 (23,029)
---------- -----------
Net Cash Provided by Investing Activities 179,317 210,806
---------- -----------
Cash Flows from Financing Activities
Payment of dividends to preferred
stockholders (12,272) --
Repayment of minority interest obligations (3,581) --
Accelerated share repurchase payment, net (250,717) --
Issuance of 3.625% Preferred Stock, net 246,126 --
Deferred debt issuance costs (1,539) (8,497)
Issuance expense of 4% Preferred Stock (204) --
Net borrowings under revolving credit
facility 80,000 --
Proceeds from issuance of long-term debt, net 249,139 531,207
Principal payments on short and long-term
debt (979,379) (750,343)
---------- -----------
Net Cash Used by Financing Activities (672,427) (227,633)
---------- -----------
Change in Cash from Discontinued Operations 8,051 (26,486)
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (481) (2,507)
---------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents (599,342) 549,601
Cash and Cash Equivalents at Beginning of
Period 1,103,678 549,181
---------- -----------
Cash and Cash Equivalents at End of Period $504,336 $1,098,782
========== ===========
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 Diluted Diluted
per share amounts) 9/30/2005 EPS 9/30/2004 EPS
----------------------------- ---------- ---------- ---------- -------
Net Income (Loss) $(26,881) $(0.39) $54,221 $0.54
Plus:
Income from
discontinued
operations, net of
tax (9,864) (0.12) (10,870) (0.11)
Corporate relocation
charges, net of tax 1,052 0.01 3,454 0.03
Reorganization items,
net of tax - - (3,171) (0.03)
Impairment charge, net
of tax 3,627 0.04 24,486 0.24
Write down of note
receivable, net of
tax - - 2,764 0.03
Write downs and
(gains)/losses on
sales of equity
method investments,
net of tax (2,619) (0.03) 8,175 0.08
---------- ---------- ---------- -------
Adjusted Net Income (Loss) $(34,685) $(0.48) $79,059 $0.79
Note: Diluted EPS in 2005 is after adjusting for preferred stock
dividends
----------------------------------------------------------------------
----------------------------------------------------------------------
Appendix Table A-2: 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.
----------------------------------------------------------------------
Nine Months Ended Nine Months Ended
(Dollars in thousands, except Diluted Diluted
per share amounts) 9/30/2005 EPS 9/30/2004 EPS
----------------------------- ---------- ---------- ---------- -------
Net Income $19,603 $0.07 $167,480 $1.67
Plus:
Income from
discontinued
operations, net of
tax (12,612) (0.15) (25,326) (0.25)
Corporate relocation
charges, net of tax 3,416 0.04 7,541 0.08
Reorganization items,
net of tax - - (1,001) (0.01)
Impairment charges,
net of tax 3,762 0.04 25,500 0.25
FERC-authorized
settlement with CL&P,
net of tax - - (23,279) (0.23)
Proceeds received on
Crockett contingency,
net of tax (2,138) (0.02) - -
Gain on TermoRio
settlement, net of
tax (8,180) (0.10) - -
Write down of note
receivable, net of
tax - - 2,764 0.03
Write downs and
(gains)/losses on
sales of equity
method investments,
net of tax (2,811) (0.03) 8,497 0.08
---------- ---------- ---------- -------
Adjusted Net Income (Loss) $1,040 $(0.15) $162,176 $1.62
Note: Diluted EPS in 2005 is after adjusting for preferred stock
dividends
----------------------------------------------------------------------
Appendix Table A-3: Three Month EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Three Months Three Months
Ended Ended
9/30/2005 9/30/2004
Net Income (Loss): $(26,881) $54,221
Plus:
Income Tax Expense 8,511 14,559
Interest Expense 43,191 60,312
Amortization and Write Downs of
Finance Costs 1,372 2,380
Amortization of Debt
Discount/Premium 1,228 3,418
Refinancing Expense 19,012 -
Depreciation Expense 48,802 51,060
WCP CDWR Contract Amortization - 28,098
Amortization of Power Contracts (2,337) 3,715
Amortization of Emission Credits 3,318 4,920
------------- --------------
EBITDA 96,216 222,683
Income from Discontinued
Operations (9,864) (10,870)
Corporate Relocation Charges 1,740 5,713
Reorganization items - (5,245)
Impairment charges 6,000 40,507
Write down of Note Receivable - 4,572
Write Downs, (Gain)/Loss on
Sales of Equity Investments (4,333) 13,524
------------- --------------
Adjusted EBITDA $89,759 $270,884
----------------------------------------------------------------------
----------------------------------------------------------------------
Appendix Table A-4: Nine Month EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Nine Months Nine Months
Ended Ended
9/30/2005 9/30/2004
Net Income (Loss): $19,603 $167,480
Plus:
Income Tax Expense 21,201 65,136
Interest Expense 143,062 175,825
Amortization and Write Downs of
Finance Costs 4,220 6,917
Amortization of Debt
Discount/Premium 3,316 10,721
Refinancing Expenses 44,036 30,417
Depreciation Expense 144,317 158,603
WCP CDWR Contract Amortization - 89,704
Amortization of Power Contracts 6,485 29,294
Amortization of Emission Credits 9,634 14,838
------------- --------------
EBITDA 395,874 748,935
Income from Discontinued
Operations (12,612) (25,326)
Corporate Relocation Charges 5,651 12,474
Reorganization items - (1,656)
Impairment charges 6,223 42,183
FERC-authorized Settlement with
CL&P - (38,509)
Gain on Crockett (3,536) -
Gain on TermoRio Settlement (13,532) -
Write down of Note Receivable - 4,572
Write Downs, (Gain)/Loss on
Sales of Equity Investments (15,894) 14,057
------------- --------------
Adjusted EBITDA $362,174 $756,730
----------------------------------------------------------------------
Appendix Table A-5: Net Debt to Capital Reconciliation
The following table summarizes the calculation of Net Debt to
Capital:
----------------------------------------------------------------------
Numerator Gross Debt $3,042,398
Total Cash 595,844
-----------
Net Debt 2,446,554
Denominator Net Debt 2,446,554
Mezzanine Preferred 246,191
Book Value of
Equity 2,019,168
-----------
Capital 4,711,913
Net Debt to Capital 51.9%
----------------------------------------------------------------------
Appendix Table A-6: Third Quarter 2005 Regional EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Three months ending South Other
September 30, 2005 Northeast Central Western NA Australia
------------------------- --------- -------- ------- ------- ---------
Net Income (Loss): 4,157 (8,352) 5,941 (2,608) 2,296
Plus:
Income Tax
Expense/(Benefit) 14 - 45 709 (41)
Interest Expense (23) 1,742 - 3,640 2,897
Amortization and Write
Downs of Finance Costs - - - - 22
Amortization of Debt
(Discount)/Premium - 607 - 1,232 -
Debt Extinguishment - - - - -
Depreciation Expense 18,643 15,284 30 1,670 7,117
Amortization of Power
Contract - (4,521) - - 2,123
Amortization of
Emission Credits 2,341 977 - - -
EBITDA $25,132 $5,737 $6,016 $4,643 $14,414
Income from
Discontinued
Operations - - - 871 -
Corporate Relocation
charges 6 4 - - -
Impairment charges - - - 6,000 -
Write Down and
(Gain)/Losses on Sales
of Equity Method
Investments - - - (4,333) -
Adjusted EBITDA $25,138 $5,741 $6,016 $7,181 $14,414
Three months ending Other Alt.
September 30, 2005 Int'l Energy Non-Gen Corp
------------------------- --------- -------- -------- ---------
Net Income (Loss): 17,255 11,731 10,167 (67,468)
Plus:
Income Tax
Expense/(Benefit) 5,606 424 1,527 227
Interest Expense 948 52 2,192 31,743
Amortization and Write
Downs of Finance Costs - - 5 1,345
Amortization of Debt
(Discount)/Premium - - (230) (381)
Debt Extinguishment - - - 19,012
Depreciation Expense 906 1,320 2,744 1,088
Amortization of Power
Contract - - 61 -
Amortization of
Emission Credits - - - -
EBITDA $24,715 $13,527 $16,466 $(14,434)
Income from
Discontinued
Operations - (10,735) - -
Corporate Relocation
charges - - - 1,730
Impairment charges - - - -
Write Down and
(Gain)/Losses on Sales
of Equity Method
Investments - - - -
Adjusted EBITDA $24,715 $2,792 $16,466 $(12,704)
Appendix Table A-7: Third Quarter 2004 Regional EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Three months ending South Other
September 30, 2004 Northeast Central Western NA Australia
----------------------- --------- -------- -------- -------- ---------
Net Income (Loss): 87,821 14,407 18,425 (7,702) 4,117
Plus:
Income Tax
Expense/(Benefit) - - (245) 384 (1,861)
Interest Expense 35 1,716 - 7,652 (2,966)
Amortization and
Write Downs of
Finance Costs - - - - -
Amortization of Debt
Discount/Premium - 636 - 3,936 (308)
Refinancing Expenses - - - - -
Depreciation Expense 18,190 15,658 197 5,005 5,179
WCP CDWR Contract
Amortization - - 28,098 - -
Amortization of
Power Contract - (4,333) 763 2,199 4,872
Amortization of
Emission Credits 3,325 1,595 - - -
EBITDA $109,371 $29,679 $47,238 $11,474 $9,033
Income from
Discontinued
Operations - - - (11,724) -
Corporate Relocation
charges 3 - - - -
Reorganization items (134) 11 - (34) -
Impairment charges 247 740 - 24,520 -
Bad Debt Expense - - - 4,572 -
Write Downs and
(Gain)/Loss on
Sales of Equity
Investments - - - 9,694 -
Adjusted EBITDA $109,487 $30,430 $47,238 $38,502 $9,033
Three months ending Other Alt.
September 30, 2004 Int'l Energy Non-Gen Corp
----------------------- --------- -------- -------- ---------
Net Income (Loss): 24,244 3,181 4,040 (94,312)
Plus:
Income Tax
Expense/(Benefit) 2,422 (2,028) 3,410 12,477
Interest Expense 6,712 398 2,311 44,454
Amortization and
Write Downs of
Finance Costs - - - 2,380
Amortization of Debt
Discount/Premium - (2) (260) (584)
Refinancing Expenses - - - -
Depreciation Expense 732 1,301 2,717 2,081
WCP CDWR Contract
Amortization - - - -
Amortization of Power
Contract - - 214 -
Amortization of
Emission Credits - - - -
EBITDA $34,110 $2,850 $12,432 $(33,504)
Income from
Discontinued
Operations - (3,540) - 4,394
Corporate Relocation
charges - - - 5,710
Reorganization items - - 272 (5,360)
Impairment charges - - - 15,000
Bad Debt Expense - - - -
Write Downs and
(Gain)/Loss on Sales
of Equity
Investments - 3,830 - -
Adjusted EBITDA $34,110 $3,140 $12,704 $(13,760)
Appendix Table A-8: Nine Months 2005 Regional EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Nine months ending South Other
September 30, 2005 Northeast Central Western NA Australia
----------------------- --------- -------- -------- -------- ---------
Net Income (Loss): 75,897 (5,863) 15,109 (13,734) 16,689
Plus:
Income Tax Expense 14 - 70 1,864 2,089
Interest Expense 73 5,226 - 10,707 9,572
Amortization and
Write Downs of
Finance Costs - - - - 50
Amortization of Debt
Discount/Premium - 1,807 - 3,664 (193)
Refinancing Expense - - - - (9,783)
Depreciation Expense 55,834 45,511 425 5,014 19,829
Amortization of Power
Contract - (10,419) - 4,862 11,553
Amortization of
Emission Credits 6,554 3,080 - - -
EBITDA $138,372 $39,342 $15,604 $12,377 $49,806
Income from
Discontinued
Operations - - - (1,877) -
Corporate Relocation
charges 18 6 - - -
Impairment charges - - - 6,000 -
Gain on TermoRio - - - - -
Gain on Crockett - - - (3,536) -
Write Down and
(Gains)/Losses on
Sales of Equity
Method Investments - - - (4,333) -
Adjusted EBITDA $138,390 $39,348 $15,604 $8,631 $49,806
Nine months ending Other Alt.
September 30, 2005 Int'l Energy Non-Gen Corp
----------------------- --------- -------- -------- ---------
Net Income (Loss): 77,961 15,389 17,703 (179,548)
Plus:
Income Tax Expense 13,389 840 2,080 855
Interest Expense 5,180 215 6,697 105,392
Amortization and
Write Downs of
Finance Costs - - 15 4,155
Amortization of Debt
Discount/Premium - - (696) (1,266)
Refinancing Expense - - - 53,819
Depreciation Expense 2,560 3,954 8,223 2,967
Amortization of
Power Contract - - 489 -
Amortization of
Emission Credits - - - -
EBITDA $99,090 $20,398 $34,511 $(13,626)
Income from
Discontinued
Operations - (10,735) - -
Corporate Relocation
charges - - - 5,627
Impairment charges - 223 - -
Gain on TermoRio (13,532) - - -
Gain on Crockett - - - -
Write Down and
(Gains)/Losses on
Sales of Equity
Method Investments (11,561) - - -
Adjusted EBITDA $73,997 $9,886 $34,511 $(7,999)
Appendix Table A-9: Nine Months 2004 Regional EBITDA Reconciliation
The following table summarizes the calculation of EBITDA and provides
a reconciliation to net income/(loss):
----------------------------------------------------------------------
Nine months ending South Other
September 30, 2004 Northeast Central Western NA Australia
---------------------- --------- -------- --------- -------- ---------
Net Income (Loss): 231,479 42,278 42,688 (17,983) 12,345
Plus:
Income Tax
Expense/(Benefit) - - 92 1,103 (1,967)
Interest Expense 713 4,096 3 22,908 8,340
Amortization and
Write Downs of
Finance Costs - - - - -
Amortization of Debt
(Discount)/Premium - 1,901 - 11,824 (669)
Refinancing expense - - - - -
Depreciation Expense 54,101 47,192 602 18,915 17,190
WCP CDWR contract
amortization - - 89,704 - -
Amortization of
power contract 6,374 (10,993) 2,407 7,182 23,682
Amortization of
emission credits 10,352 4,486 - - -
EBITDA $303,019 $88,960 $135,496 $43,949 $58,921
(Income)/ Loss from
discontinued
operations - - - (14,699) -
Corporate Relocation
Charges 3 1 - - -
Reorganization Items 215 664 - 117 -
Impairment charges 247 2,416 - 24,520 -
Bad debt expense - - - 4,572 -
FERC-authorized
settlement with
CL&P - - - - -
Write Downs,
(Gain)/Loss on
Sales of Equity
Investments - - - 8,959 1,268
Adjusted EBITDA $303,484 $92,041 $135,496 $67,418 $60,189
Nine months ending Other Alt.
September 30, 2004 Int'l Energy Non-Gen Corp
---------------------- --------- -------- --------- ---------
Net Income (Loss): 67,768 7,456 56,477 (275,028)
Plus:
Income Tax
Expense/(Benefit) 11,872 (2,020) 4,036 52,020
Interest Expense 3,053 414 7,227 129,071
Amortization and
Write Downs of
Finance Costs - - - 6,917
Amortization of
Debt
(Discount)/Premium - (10) (815) (1,510)
Refinancing expense - - - 30,417
Depreciation
Expense 2,069 3,979 8,570 5,985
WCP CDWR contract
amortization - - - -
Amortization of
power contract - - 642 -
Amortization of
emission credits - - - -
EBITDA $84,762 $9,819 $76,137 $(52,128)
(Income)/ Loss from
discontinued
operations (12,357) (2,663) - 4,393
Corporate
Relocation Charges - - - 12,469
Reorganization
Items - - 432 (3,083)
Impairment charges - - - 15,000
Bad debt expense - - - -
FERC-authorized
settlement with
CL&P - - (38,509) -
Write Downs,
(Gain)/Loss on
Sales of Equity
Investments - 3,830 - -
Adjusted EBITDA $72,405 $10,986 $38,060 $(23,349)
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 gains or 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 gains or 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.
SOURCE: NRG Energy, Inc.
NRG Energy, Inc. Meredith Moore, 609-524-4522 (Media Relations) Jay Mandel, 609-524-4525 (Media Relations) Nahla Azmy, 609-524-4526 (Investor Relations) Katy Sullivan, 609-524-4527 (Investor Relations)