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NRG Reports Strong First Quarter Results
NRG Reports Strong First Quarter Results
MINNEAPOLIS (May 11, 2004) -- NRG Energy, Inc. (NYSE: NRG) reported solid earnings and robust cash flow for the first quarter of 2004, including net income of $30 million, or $0.30 per diluted share. Cash flow from operations was $350 million for the quarter.
“Favorable market conditions, including sustained high gas prices and manageable western coal prices, underpinned by solid operating performance across the portfolio resulted in strong first quarter financial results for NRG,” said David Crane, NRG's President and Chief Executive Officer. “I am pleased that we stayed focused on execution while making the transition out of Chapter 11.”
Financial Highlights (1)- $350 million in cash flow from operations including $125 million net from Xcel settlement (2);
- $259 million in EBITDA ($266 million in adjusted EBITDA) for the first quarter;
- $30 million in net income ($34 million in adjusted net income) for the first quarter;
- $1.4 billion of liquidity as of March 31; and
- Reliability-must-run (RMR) agreements approved by the Federal Energy Regulatory Commission (FERC) for select Connecticut facilities.
(1) The Company implemented SOP 90-7, fresh start accounting,
accordingly the financial results and financial position are
not comparative
to prior periods.
(2) Gross proceeds from the Xcel settlement were $288 million
of which $163 million
was distributed to the Predecessor Company's creditors.
Operational Summary
NRG's strong financial results were supported by our facilities' excellent
operational performance. Plant staff maintained focus on operating
our plants enabling the Company to realize good margins in the
energy market. All of the regions achieved an in-market availability
rate—the measure of how frequently a unit is available when
called on to operate—of 95 percent or greater.
High gas prices throughout the first quarter led to higher energy prices, which helped to widen the energy revenue margin realized at NRG's baseload coal facilities in the Northeast region. Because the Company hedged over 90 percent of our estimated coal needs for 2004 prior to the recent rise in coal prices, we largely have been spared the volatility of the spot eastern coal market. In addition, NRG has reduced our dependence on eastern coal as we are converting some of our coal facilities in the Northeast to burn a blend of eastern and western coal. This conversion program is aimed at substantially reducing sulfur emissions from NRG's coal-fired plants.
The Company took advantage of the high gas price environment by hedging forward a portion of our northeastern coal-fired generation for the balance of 2004. In New York and New England, NRG has contracted sales for 500 megawatts (MW) of baseload coal generation for the remainder of the year. The Company also sold 700 MW (maximum) of load following capabilities as a part of the New Jersey Basic Generation Service auction and the Maryland Standard Offer Services Request for Proposal process.
During the first quarter, NRG took additional steps to stabilize our Connecticut portfolio. In mid-March FERC approved NRG's request to receive RMR payments retroactive to January 17, 2004 for certain of our Connecticut facilities. The RMR agreements cover Middletown, Montville, and Devon units 11-14. FERC also approved an extension of NRG's operating and maintenance expense cost tracker for these facilities and Norwalk Harbor. Previously, Devon 7 and 8 received FERC approval on a separate RMR agreement. However, the RMR agreement for Devon 8 has since expired and the unit will be retired, pursuant to a declaration by the New England Independent System Operator that the unit is no longer needed for reliability. These RMR agreements are expected to contribute up to $30 million in revenues per quarter subject to refund and will remain in place at least until the locational installed capacity (LICAP) market is implemented in New England.
“We've made significant progress with our Connecticut assets,” said Crane. “In addition to the expiration of the cash negative Connecticut Light & Power contract, these RMR agreements will provide us with a recovery of our costs sufficient to keep these units available to support the reliability and integrity of the Connecticut electrical grid.”
Liquidity and Cash Flow
Liquidity, as of March 31, 2004, remains healthy at almost $1.4
billion as set forth below:
Corporate Liquidity (in millions) | December
31, 2003
|
March
31, 2004
|
||
Unrestricted: | ||||
Domestic Unrestricted Cash | 418
|
665
|
||
International Unrestricted Cash | 134
|
168
|
||
Restricted Cash: | ||||
Domestic | 111
|
123
|
||
International | 46
|
52
|
||
Total Cash | 709 |
1,008
|
||
Letter of Credit Availability | 248
|
137
|
||
Revolver Availability | 250
|
250
|
||
Total Current Liquidity | $1,207 |
$1,395 |
||
Cash flow from operations remains strong at $350 million while net cash flow generated was $280 million.
NRG continues to make progress in divesting noncore assets. In the first quarter, NRG completed asset sales resulting in $3 million in cash proceeds. Subsequent to March 31, NRG has completed sales resulting in $94 million in cash proceeds. Additionally NRG has executed a purchase and sale agreement for our Batesville facility, which will further reduce debt by $292 million and contribute cash proceeds of $27 million.
California Dispute Resolution
In late April, West Coast Power, a 50/50 joint venture beneficially
owned by NRG and Dynegy., reached a settlement with FERC, Pacific
Gas and Electric Company, San Diego Gas and Electric Company,
Southern California Edison, The California Department of Water
Resources (CDWR), the California Electricity Oversight Board,
the California Attorney General, and the California Public Utilities
Commission. This settlement puts an end to a substantial portion
of the litigation associated with the California crisis and should
open the door for West Coast Power to negotiate or bid on new
commercial arrangements to replace the CDWR contract when it
expires on December 31, 2004. This settlement has no impact on
the Company's financial position.
Management Appointments
NRG today announced a number of appointments that serve to flesh
out the Company's management team. NRG named James Ingoldsby
the Company's Vice President and Controller and Caroline
Angoorly as Vice President, New Business.
In his role as Vice President and Controller, Ingoldsby directs NRG's financial accounting and reporting activities, as well as ensuring the Company's compliance with Sarbanes-Oxley legislation. Ingoldsby, who led the Sarbanes-Oxley implementation at chemical company Hercules, Inc. previously held various executive positions at General Electric Betz, formerly Betz Dearborn, including serving as Controller and Director of Business Analysis. Ingoldsby reports to Robert Flexon, NRG's Chief Financial Officer.
As Vice President, New Business, Angoorly will spearhead the Company's initiatives in the environmental arena, including renewables, new technologies, environmental remediation and compliance. She will also manage NRG's Resource Recovery business. Angoorly comes to NRG from Enel North America, Inc. where she served as Vice President and General Counsel. Prior to joining Enel in 2001, she served as the Director and Chief Financial Officer at Line56Media and from 1994 to 2000 she was a partner in the Global Finance Group at Milbank, Tweed, Hadley & McCloy. Angoorly will report to David Crane.
Outlook
Notwithstanding our robust first quarter financial performance,
NRG continues to operate our core business in an overbuilt and
challenging wholesale power generation market. The structural
change required to cause a general recovery in the commodity
price cycle for electricity has yet to occur. Moreover, our business
continues to be highly seasonal and weather dependent with the
first and third quarters historically being the strongest. As
such, our current focus is on ensuring that all of our plants
achieve the highest possible level of availability for the summer
peak season.
Earnings Conference Call
On May 11, NRG will host a conference call at 9 a.m. Eastern to
discuss these results and present our longer-term business strategy.
To access the live webcast and accompanying slide presentation,
log on to NRG's website at www.nrgenergy.com and click
on “Investors.” To participate in the call, dial
877.407.0727. International callers should dial 201.689.8035.
Participants should dial in or log on approximately five minutes
prior to the scheduled start time.
The call will be available for replay shortly after completion of the live event on the “Investors” section of the NRG website.
About NRG
NRG Energy, Inc. owns and operates a diverse portfolio of power-generating
facilities, primarily in the United States. Its operations include
baseload, intermediate, peaking, and cogeneration facilities,
thermal energy production and energy resource recovery facilities.
Safe Harbor Disclosure
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Such forward-looking
statements are subject to certain risks, uncertainties and assumptions
and include, but are not limited to, expected earnings, future
growth and financial performance, and typically can be identified
by the use of words such as “expect,” “estimate,” “anticipate,” “forecast,” “plan,” “believe” and
similar terms. Although NRG believes that its expectations are
reasonable, it can give no assurance that these expectations
will prove to have been correct, and actual results may vary
materially. Factors that could cause actual results to differ
materially from those contemplated above include, among others,
general economic conditions, hazards customary in the power industry,
competition in wholesale power markets, the volatility of energy
and fuel prices, failure of customers to perform under contracts,
changes in the wholesale power markets and related government
regulation, the condition of capital markets generally, our ability
to access capital markets, unanticipated outages at our generation
facilities, our ability to convert facilities to burn western
coal, our substantial indebtedness and the possibility that we
may incur additional indebtedness, adverse results in current
and future litigation, the willingness of counterparties to negotiate
new contracts in California, and the amount of proceeds from
asset sales.
NRG undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. The 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 |
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Contacts: | Investor Inquiries Media Inquiries |
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NRG ENERGY, INC. AND SUBSIDIARIES Adjusted Net Income Reconciliation
EBITDA Reconciliation
EBITDA, Adjusted EBITDA and adjusted net income 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 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 believe 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:
Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the growth of NRG's business. NRG compensates for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally. See the statements of cash flow included in the financial statements that are a part of this press release. Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for reorganization, restructuring, impairment and corporate relocation charges, discontinued operations, and write downs and losses on the sales of equity method investments; factors which we do not consider indicative of future operating performance. The reader is encouraged to evaluate each adjustment and the reasons NRG considers it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this presentation. Similar to Adjusted EBITDA, Adjusted net income represents net income adjusted for reorganization, restructuring, impairment and corporate relocation charges, discontinued operations, and write downs and losses on the sales of equity method investments; factors which we do not consider indicative of future operating performance. The reader is encouraged to evaluate each adjustment and the reasons NRG considers it appropriate for supplemental analysis. In addition, in evaluating Adjusted Net Income, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this presentation. |