Full-Year 2012 Financial and Business Highlights¹

• $1,917 million of Adjusted EBITDA, including $656 million delivered by NRG’s retail businesses;
• $898 million of Free Cash Flow (FCF) before growth investments;
• $0.36 per share annualized dividend initiated in the third quarter of 2012;
• $310 million/year² in total annual synergiesarising out of GenOn merger;
  • Cost synergies increased to $185 million from $175 million
• 142,000 increase in Retail customer count during 2012; 91,000 in the East market and 51,000 in the Texas market; and
• 290 MW of solar generation came online during 2012

Reaffirming 2013 and 2014 Guidance

• Reaffirming guidance for Adjusted EBITDA and FCF before growth investments:
  • Adjusted EBITDA guidance: $2,535-$2,735 million and $2,700 -$2,900 million, for 2013 and 2014 respectively
  • FCF before growth investments of $900-$1,100 million for each of 2013 and 2014

Capital Allocation

• Planning a 33% increase in annual common stock dividend (from $0.36 to $0.48 per share) commencing with the next quarterly payment; and

• $200 million share repurchase program authorized

PRINCETON, N.J.--(BUSINESS WIRE)--Feb. 27, 2013-- NRG Energy, Inc. (NYSE: NRG) today reported 2012 full-year adjusted EBITDA of $1,917 million with Wholesale contributing $1,175 million, Retail contributing $656 million and Solar contributing $86 million. Full-year adjusted cash flow from operations totaled $1,127 million while 2012 net income was $559 million, or $2.35 per diluted common share compared to 2011 net income of $197 million, or $0.78 per diluted common share. These results include seventeen days of performance from the GenOn business which became part of NRG on December 15, 2012.

Fourth quarter adjusted EBITDA was $420 million and adjusted cash flow from operations was $134 million. Wholesale contributed $245 million of fourth quarter adjusted EBITDA, Retail contributed $152 million and Solar contributed $23 million. Net income for the fourth quarter of 2012 totaled $516 million, or $2.06 per diluted common share, compared to a 2011 net loss of $109 million or ($0.48) per diluted common share. Included in the $516 million of net income is $560 million of bargain purchase gain associated with the GenOn merger.

“NRG withstood a weak commodity price environment in 2012 to achieve solid financial results and robust free cash flow,” commented David Crane, NRG’s President and Chief Executive Officer. “With the GenOn integration now well underway and proceeding smoothly we are in a strong position to both reinvest in the growth of our own businesses and step up our capital allocation program for 2013.”

Segment Results

(1) Alternative Energy includes the results of the Company’s Solar projects
(2) Detailed adjustments by region are shown in Appendix A

(1) Alternative Energy includes the results of the Company’s Solar projects

Retail: Full-year 2012 adjusted EBITDA totaled $656 million; $8 million lower than in 2011. Gross margin was favorable by $124 million driven by the acquisition of Energy Plus which added $112 million, with the remaining difference primarily due to additional load resulting from increased customer count and usage. Offsetting the higher margin realized in 2012 was an increase in operating costs, which was primarily the result of the Energy Plus acquisition and increased marketing and selling expense.

Fourth-quarter adjusted EBITDA was $152 million; $8 million lower than the fourth quarter 2011. Gross margin was unfavorable by $10 million primarily driven by the impact of lower margin on acquisitions and renewals in both ERCOT and Northeast markets. Partially offsetting lower margins was a decrease in bad debt from improved customer payment behavior compared to the fourth quarter 2011.

Gulf Coast – Texas: Full year adjusted EBITDA totaled $880 million; $38 million higher compared to 2011. Gross margin increased $126 million, driven by a combination of higher realized energy margin and improved bi-lateral capacity contracts with load serving entities. The year-over-year increase in realized energy margin was largely attributable to the combination of the unprecedented August 2011 hot weather—that resulted in power price spikes—and lower coal transportation costs in 2012. Meanwhile, unplanned outages contributed to a nearly 7.5 million MWh decline in generation combined with an increase in operations and maintenance costs which partially offset the improvement in gross margin.

Fourth-quarter adjusted EBITDA was $190 million; $10 million lower than the fourth quarter 2011. The lower results were attributable to higher operating costs as a result of increased planned outages in the fourth quarter of 2012 as compared to 2011 partially offset by a $24 million increase in gross margin due primarily to higher realized energy margin, largely attributable to higher realized average power prices and lower coal transportation costs.

Gulf Coast - South Central: Full-year adjusted EBITDA totaled $99 million; $26 million lower than 2011. Gross margin in 2012 decreased by $24 million due to 12% lower average realized prices as a result of lower natural gas prices. An 18% decline in coal generation at Big Cajun II was partially offset by a 36% increase in generation at Cottonwood.

Fourth-quarter adjusted EBITDA was $16 million; $3 million lower than the fourth quarter 2011. Gross margins declined $10 million driven by lower realized prices and a decline in volumes related to mild weather offset by lower operating expenses resulting from a maintenance outage performed on Big Cajun unit 1 in the fall of 2011.

East: Full-year adjusted EBITDA totaled $117 million; $29 million higher compared to 2011. For the year, gross margin was higher by $57 million as the region benefited from increased revenues resulting from the Reliability Support Services (RSS) Agreement in Western New York, additional energy sales to the Company’s retail providers and the GenOn merger. Meanwhile, lower realized capacity prices and higher delivered coal prices partially offset the gains. The GenOn transaction led to higher operating expenses; however, this was partially offset by favorable equity earnings with a full year of contribution from the GenConn Middletown facility, which became operational in June 2011.

Fourth-quarter adjusted EBITDA was $34 million; $40 million higher than the fourth quarter 2011. The improvement was the result of a $68 million increase in gross margin due to the addition of GenOn and contributions from the RSS Agreement in Western New York. Offsetting the increase in gross margin were higher operating expenses resulting from the GenOn acquisition.

West: Full-year adjusted EBITDA totaled $87 million; $14 million higher than 2011. Favorable gross margin of $24 million was due to an over 900% increase in generation as our facilities were needed for system reliability as a result of the extended outage at the San Onofre nuclear plant. Also contributing to the higher gross margin was contingent rental income related to the Long Beach power purchase agreement (PPA) and contributions from the GenOn acquisition. Partially offsetting the gains in gross margin were higher operating expenses, which resulted from the addition of the GenOn assets.

Fourth-quarter adjusted EBITDA was $18 million; $4 million higher than the fourth quarter 2011. Gross margin improved $13 million due to a nearly 1,900% increase in generation at our Encina facility. Offsetting the increase in gross margin were higher operating expenses resulting from the GenOn acquisition.

Alternative Energy: Full-year adjusted EBITDA totaled $52 million, up $67 million from 2011. Solar gross margin was $117 million, a $106 million increase driven by the addition of the Company’s Agua Caliente solar facility, which as of December 31,2012 had reached commercial operations on 253 MW, and the addition of the Roadrunner facility, which began commercial operations in late 2011. Offsetting the improved margin were NRG’s continued development efforts in new businesses.

Fourth-quarter adjusted EBITDA was $17 million; $23 million higher than the fourth quarter 2011. Solar gross margin was $30 million, a $26 million increase driven by the addition of the Company’s Agua Caliente solar facility, which had $19 million in gross margin and CVSR which had $2 million in gross margin in the fourth quarter of 2012.

GenOn stand-alone results: Full-year adjusted EBITDA for GenOn totaled $543 million. This calculation is based on GenOn’s previous methodology. See appendix for a detailed reconciliation.

Liquidity and Capital Resources

⁽¹⁾ On October 24^th, NRG redeemed the remaining $270 million outstanding of the 2017 Senior Notes

Total current liquidity, as of December 31, 2012, was $3,362 million, an increase of $1,292 million from December 31, 2011 driven largely by NRG’s free cash flow, the GenOn acquisition and a $385 million increase in Revolver availability primarily due to the sell-down of the Agua Caliente project. The $75 million decrease in restricted cash is primarily due to reduced collateral requirements for the Company’s solar projects as NRG continues to contribute equity. Cash and cash equivalents increased by $982 million due to the following items:

• $1,127 million of adjusted cash flow from operations;
• $983 million cash acquired in the GenOn transaction, net of $686 million used to retire the GenOn term loan at closing;
• $174 million in gross proceeds from the sale of Schkopau, partially offset by $42 million of cash remaining on Schkopau’s balance sheet on date of sale;
• $122 million in proceeds from the sell down of the Agua Caliente project;
• Partially offset by $1,382 million of cash outflows consisting of the following items:
  • $733 million for solar and conventional growth investments (net of debt and third party funding of $2,337 million);
  • $220 million of cash paid for maintenance and environmental capital expenditures (net of financing of $47 million);
  • $172 million net paydown of Senior Notes and $79 million of scheduled debt amortization;
  • $50 million in payments of dividends to preferred and common shareholders;
  • $46 million in merger related payments; and
  • $82 million in other investing and financing activities

Growth Initiatives and Developments

NRG continued to advance its leadership position in sustainable energy including:

Solar

• Agua Caliente – As of December 31, 2012, 253 MW of generation capacity have achieved commercial operation making Agua Caliente the largest operating solar photovoltaic (PV) project in the United States. Overall, construction at Agua Caliente is several months ahead of schedule and currently is expected to reach completion in early 2014. Power generated by Agua Caliente is being sold under a 25-year PPA with Pacific Gas and Electric Co (PG&E).
• CVSR – Construction of the California Valley Solar Ranch project is ahead of schedule with 127 MW having achieved operation by December 31, 2012, with the remaining 123 MW expected to come on line by the fourth quarter of 2013. Power from this project is being sold to PG&E under a 25-year PPA.
• Ivanpah – Unit 1 (124 MW) is expected to reach commercial operations in August 2013. The remaining two units (each at 127 MW) currently are expected to be completed in the third and fourth quarter of 2013. Power from Units 1 and 3 will be sold to Pacific Gas & Electric via two 25-year PPAs, and power from Unit 2 will be sold to Southern California Edison under a 20-year PPA.
• Other Solar – Avra Valley (25 MW under a 20-year PPA with Tucson Electric Power) reached commercial operation in December 2012. The Borrego project (26 MW under a 25-year PPA with San Diego Gas & Electric) and Alpine (66 MW under a 20 year PPA with Pacific Gas & Electric) reached commercial operation in the first quarter of 2013. Our Distributed Generation scale installations continued with Gillette Stadium achieving commercial operation in December 2012 and Lincoln Financial Field achieving commercial operation in February 2013.

Conventional

• Marsh Landing –The Company is continuing construction of the Marsh Landing project, a 720 MW natural gas-fueled peaking facility adjacent to the Company's Contra Costa generating facility near Antioch, California. The facility is being constructed pursuant to a 10 year PPA with PG&E. The Company expects to achieve commercial operation in the second quarter of 2013.
• El Segundo –The Company is continuing construction, at its El Segundo Power Generating Station, of a 550 MW fast-start, combined-cycle plant. The plant is being constructed pursuant to a 10 year, 550 MW PPA with Southern California Edison. The Company expects a commercial operation date in the third quarter of 2013.
• Petra Nova –Petra Nova continues with the development of its peaking unit at NRG’s WA Parish Generating Station and on August 14, 2012, signed a $24 million lump-sum, turnkey EPC contract. Petra Nova is targeting a second quarter 2013 commercial operation date and it is anticipated that the unit will eventually be used as a cogeneration facility dedicated to a Carbon Capture Utilization and Storage Project, funded in part by the U.S. Department of Energy, at the Parish facility. The peaking unit is being financed, largely with the proceeds of a $54 million tax-exempt bond financing that was completed on May 3, 2012, of which NRG has drawn $23 million through December 31, 2012.

Outlook for 2013 and 2014

NRG is reaffirming the guidance announced by the Company on January 22, 2013 for both adjusted EBITDA and FCF before growth investments for 2013 and 2014.

Notes:

• Current guidance, including all components thereof, is identical to the guidance provided on January 22, 2013.
• Subtotals and totals are rounded

Change in Methodology for Adjusted EBITDA and Free Cash Flow before growth investments

Beginning in 2013, NRG will modify the calculation of both Adjusted EBITDA and FCF before growth investments primarily to provide greater clarity for partially owned investments, including solar projects such as Agua Caliente and Ivanpah:

• Adjusted EBITDA (Revised)
  • Increase adjusted EBITDA to reflect pro rata portion of Adjusted EBITDA from NRG’s equity investments in unconsolidated subsidiaries (previously adjusted EBITDA included only GAAP equity earnings attributed to such investments);
  • Discontinue deduction of non-controlling interest (GAAP earnings) and disclose non-controlling pro rata EBITDA (and debt) for such investments separately;
  • Exclude plant deactivation costs; and
  • Exclude interest income (now included as a reduction to interest expense)
• Free Cash Flow Before Growth (Revised)
  • Reduce FCF Before Growth Investments by distributions to non-controlling interests

The following tables reflect the change in our guidance ranges as we implement our new methodology of calculating adjusted EBITDA (Revised) and FCF before growth investments (Revised):

(1) The pro-rata amount of Adjusted EBITDA associated with non-controlling interests is $60 million and $105 million in 2013 and 2014, respectively. A detailed reconciliation is shown in Appendix A

A detailed reconciliation of adjusted EBITDA and FCF before Growth Investments from our current to revised methodology can be found in Appendix A.

2013 Capital Allocation Program

While NRG deployed a substantial amount of its excess capital in 2012 to invest in new growth projects ($733 million), to pay down corporate debt ($172 million), and to pay common stock dividends ($41 million), the Company’s substantial ongoing Free Cash Flow generation continues to contribute to a significant cash surplus in excess of its core operating requirements.

Having substantially completed its $1 billion debt reduction target announced in connection with the GenOn transaction, placing key credit ratios in line with the Company’s long held prudent balance sheet management targets and with de facto constraints on paying down significantly more of its debt at this time, NRG wants to return more of its excess capital to shareholders. Accordingly, the Company hereby announces its intentions to increase its common stock dividend in 2013 by 33% to $0.48 per share annually, representing approximately a 2% yield against our current market price per share. In addition, NRG is authorized to repurchase $200 million of its common stock. These actions do not foreclose the possibility of further or different capital allocation actions later in 2013.

Earnings Conference Call

On February 27, 2013, NRG will host a conference call at 9:00 am eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG’s website at http://www.nrgenergy.com and clicking on “Investors.” The webcast will be archived on the site for those unable to listen in real time.

About NRG

NRG is at the forefront of changing how people think about and use energy. We deliver cleaner and smarter energy choices for our customers, backed by the nation’s largest independent power generation portfolio of fossil fuel, nuclear, solar and wind facilities. A Fortune 300 company, NRG is challenging the U.S. energy industry by becoming the largest developer of solar power, building the first privately funded electric vehicle charging infrastructure, and providing customers with the most advanced smart energy solutions to better manage their energy use. In addition to 47,000 megawatts of generation capacity, enough to supply nearly 40 million homes, our retail electricity providers – Reliant, Green Mountain Energy and Energy Plus – serve more than two million customers. More information is available at www.nrgenergy.com. Connect with NRG Energy on Facebook and follow us on Twitter @nrgenergy.

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 our Adjusted EBITDA, free cash flow guidance, expected earnings, future growth, financial performance, capital allocation, environmental capital expenditures, expected benefits from the GenOn acquisition and development projects, 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, successful partnering relationships, government loan guarantees, competition in wholesale and retail power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets, changes in government regulation of markets and of environmental emissions, our ability to utilize tax incentives, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, adverse results in current and future litigation, our inability to implement value enhancing improvements to plant operations and companywide processes, the ability to successfully integrate the businesses of NRG and GenOn, the ability to realize anticipated benefits of the transaction (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, our ability to maintain retail customers, and our ability to achieve the expected benefits and timing of development projects. Furthermore, any common stock dividend or share repurchases are subject to available capital, market conditions, and compliance with associated laws and regulations.

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 and free cash flows are estimates as of today’s date, February 27, 2013 and are 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. In addition, NRG makes available free of charge at www.nrgenergy.com (in the “Investors” section), copies of materials it files with, or furnishes to, the SEC.

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(LOSS)

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Appendix Table A-1: Fourth Quarter 2012 Regional Adjusted EBITDA Reconciliation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss)

Appendix Table A-2: Fourth Quarter 2011 Regional Adjusted EBITDA Reconciliation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss)

Appendix Table A-3: YTD 2012 Regional Adjusted EBITDA Reconciliation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss)

Appendix Table A-4: YTD 2011 Regional Adjusted EBITDA Reconciliation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss)

Appendix Table A-5: 2012, 2013 and 2014 Adjusted EBITDA and FCF before Growth Investments (Current) to Adjusted EBITDA and FCF before Growth Investments (Revised)
The following table summarizes the calculation of Adjusted EBITDA (Current) to Adjusted EBITDA (Revised) and FCF before Growth Investments (Current) to FCF before Growth Investments (Revised)

Appendix Table A-6: 2012, 2013 and 2014 Pro rata Adjusted EBITDA and Pro-rata Debt apportioned to Non-controlling interests
The following table summarizes the pro-rata Adjusted EBITDA and Debt associated with the Non-controlling interests, as well as the addition of NRG’s pro-rata debt in unconsolidated affiliates

Appendix Table A-7: 2012 Full-Year Adjusted Cash Flow from Operations Reconciliation
The following table summarizes the calculation of adjusted cash flow operating activities providing a reconciliation to net cash provided by operating activities

Appendix Table A-8: YTD 2012 GenOn Energy, Inc. Adjusted EBITDA Reconciliation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net loss

EBITDA, Adjusted EBITDA and Adjusted EBITDAR are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that NRG’s future results will be unaffected by unusual or non-recurring items.

EBITDA represents net income before interest (including loss on debt extinguishment), taxes, depreciation and amortization. EBITDA is presented because NRG considers it an important supplemental measure of its performance and believes debt-holders frequently use EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:

• EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
• EBITDA does not reflect changes in, or cash requirements for, working capital needs;
• EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
• Other companies in this industry may calculate EBITDA differently than NRG does, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the growth of NRG’s business. NRG compensates for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally. See the statements of cash flow included in the financial statements that are a part of this news release.

Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for mark-to-market gains or losses, asset write offs and impairments; and 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.

Adjusted cash flow from operating activities is a non-GAAP measure NRG provides to show cash from operations with the reclassification of net payments of derivative contracts acquired in business combinations from financing to operating cash flow, as well as the add back of merger and integration related costs. The Company provides the reader with this alternative view of operating cash flow because the cash settlement of these derivative contracts materially impact operating revenues and cost of sales, while GAAP requires NRG to treat them as if there was a financing activity associated with the contracts as of the acquisition dates. The Company adds back merger and integration related costs as they are one time and unique in nature do not reflect ongoing cash from operations and they are fully disclosed to investors.

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

¹ Results include GenOn activity from December 15 through December 31 of 2012
² Projected for the full year of operations in 2014

Source: NRG Energy, Inc.

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