UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||||||||
(609 ) 524-4500
Registrant's telephone number, including area code
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.02 Results of Operations and Financial Condition
On November 5, 2020, NRG Energy, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report on Form 8-K and is hereby incorporated by reference.
Item 9.01 Financial Statements and Exhibits
Exhibits
| Exhibit Number | Document | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NRG Energy, Inc.
(Registrant)
By: /s/ Christine A. Zoino
Christine A. Zoino
Corporate Secretary
Dated: November 5, 2020
Exhibit 99.1
NRG Energy, Inc. Reports Third Quarter 2020 Results
•Narrowing 2020 Adjusted EBITDA and increasing FCFbG guidance; maintaining 2021 Adjusted EBITDA and lowering FCFbG guidance due to deferral of certain items into 2021
•Direct Energy acquisition on track to close by year end; updated financing plan no longer requires new equity issuance
•Ongoing portfolio optimization, targeting a minimum $250 million equity proceed over next 6-12 months
PRINCETON, NJ - November 5, 2020 - NRG Energy, Inc. (NYSE: NRG) today reported third quarter 2020 income from continuing operations of $249 million, or $1.02 per diluted common share and Adjusted EBITDA for the Third quarter of $752 million.
“Our business performed well during the important summer months, delivering stable results amid the COVID-19 pandemic,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. "As we move towards the end of the year, we look forward to closing the Direct Energy acquisition and continue advancing our customer-centric strategy.”
Consolidated Financial Resultsa
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| ($ in millions) | 9/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | |||||||||||||||||||||||||
| Income from Continuing Operations | $ | 249 | $ | 374 | $ | 683 | $ | 657 | |||||||||||||||||||||
| Cash provided by Continuing Operations | $ | 694 | $ | 472 | $ | 1,386 | $ | 889 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 752 | $ | 792 | $ | 1,674 | $ | 1,593 | |||||||||||||||||||||
| Free Cash Flow Before Growth Investments (FCFbG) | $ | 630 | $ | 433 | $ | 1,199 | $ | 673 | |||||||||||||||||||||
a. In accordance with GAAP, 2019 results have been recast to reflect the discontinued operations of the South Central Portfolio and Carlsbad Energy Center
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Segments Results
Table 1: Income/(Loss) from Continuing Operations
| ($ in millions) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| Segment | 9/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||||||||||||
| Texas | $ | 288 | $ | 348 | $ | 800 | $ | 757 | ||||||||||||||||||
East | 149 | 121 | 319 | 280 | ||||||||||||||||||||||
West/Othera | (188) | (95) | (436) | (380) | ||||||||||||||||||||||
Income from Continuing Operationsb | $ | 249 | $ | 374 | $ | 683 | $ | 657 | ||||||||||||||||||
a. Includes Corporate segment
b. In accordance with GAAP, 2019 results have been recast to reflect the discontinued operations of the South Central Portfolio and Carlsbad Energy Center.
Table 2: Adjusted EBITDA
| ($ in millions) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| Segment | 9/30/2020 | 9/30/2019 | 9/30/2020 | 9/30/2019 | ||||||||||||||||||||||
| Texas | $ | 514 | $ | 581 | $ | 1,087 | $ | 1,085 | ||||||||||||||||||
East | 146 | 143 | 374 | 380 | ||||||||||||||||||||||
West/Othera | 92 | 68 | 213 | 128 | ||||||||||||||||||||||
Adjusted EBITDAb | $ | 752 | $ | 792 | $ | 1,674 | $ | 1,593 | ||||||||||||||||||
a. Includes Corporate segment
b. In accordance with GAAP, 2019 results have been recast to reflect the discontinued operations of the South Central Portfolio and Carlsbad Energy Center.
Texas: Third quarter Adjusted EBITDA was $514 million, $67 million lower than third quarter of 2019. This decrease is driven by a reduction of load due to weather and COVID-19 partially offset by lower supply costs resulting from reductions in power and fuel prices.
East: Third quarter Adjusted EBITDA was $146 million, $3 million higher than third quarter of 2019. This increase is driven by higher gross margins and increased sales of portable power products; partially offset by lower capacity revenues and higher operating expenses.
West/Other: Third quarter Adjusted EBITDA was $92 million, $24 million higher than third quarter of 2019. This increase is driven by higher gross margin primarily due to MISO uplift payments resulting from out-of-market dispatch during an extreme weather event and increased California resource adequacy pricing, partially offset by lower realized pricing in the West, lower generation from forced outages at Cottonwood facility in 2020 and the sales of emissions in 2019.
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Liquidity and Capital Resources
Table 3: Corporate Liquidity
| ($ in millions) | 09/30/20 | 12/31/19 | ||||||||||||
| Cash and Cash Equivalents | $ | 697 | $ | 345 | ||||||||||
| Restricted Cash | 6 | 8 | ||||||||||||
| Total | $ | 703 | $ | 353 | ||||||||||
| Total credit facility availability | 2,815 | 1,794 | ||||||||||||
| Total Liquidity, excluding collateral received | $ | 3,518 | $ | 2,147 | ||||||||||
As of September 30, 2020, NRG cash was at $0.7 billion, and $2.8 billion was available under the Company’s credit facilities. Total liquidity was $3.5 billion, including restricted cash. Overall liquidity as of the end of the third quarter 2020 was approximately $1.4 billion higher than at the end of 2019, driven by improved cash from operations and the increase in credit facilities of approximately $0.9 billion during the third quarter. This increase in credit facilities reflects mainly the additional liquidity associated with the new Receivables Securitization and Repurchase facilities but excludes the additional commitments to the Company's existing revolving credit facility which become available coincident with the closing of the Direct Energy acquisition.
NRG Strategic Developments
Acquisition of Direct Energy
On July 24, 2020, the Company entered into a definitive purchase agreement with Centrica to acquire Direct Energy. Direct Energy is a leading retail provider of electricity, natural gas, and home and business energy related products and services in North America.
The Company will pay an aggregate purchase price of $3.625 billion in cash, subject to purchase price adjustment, including a working capital adjustment. The Company updated its financing plan and is now expecting to fund the purchase price using a combination of increased cash on hand and approximately $2.9 billion in newly-issued secured and unsecured corporate debt — a $0.5 billion increase from the previous estimate. The portion of the purchase price previously expected to be funded by $750 million in equity/equity-linked securities is now expected to be funded with a combination of the expected increases of 2020 cash on hand and debt to be repaid in 2021 with future targeted asset sale proceeds.
As part of NRG’s ongoing portfolio optimization strategy, NRG expects to realize a minimum $250 million net proceeds (net of debt repayment associated with assets sold) over the next 6-12 months from ongoing and prospective monetization of non-core assets and businesses. The first $200 million in net proceeds will be used to repay a portion of the increased leverage associated with Direct Energy acquisition in order to maintain investment grade metrics in 2021 and any additional proceeds will be available for capital allocation.
The acquisition remains on track to close by year end 2020. The shareholders of Centrica approved the acquisition on August 20, 2020. The transaction has received approvals under the Canadian Competition Act and early termination of the waiting period under the HSR Act has been granted. The transaction remains subject to customary closing conditions, including the receipt of approval under the Federal Power Act.
Increase in collateral facilities to support the acquisition of Direct Energy
During the third quarter, the Company amended its existing credit agreement to, among other things, increase the existing revolving commitments by an aggregate amount of $1,075 million. The increase will become effective upon closing of the Direct Energy acquisition and total revolving commitments available at that time, and subject to usage, will be $3.7 billion.
In September 2020, the Company also entered into a revolving accounts receivable financing facility for an amount up to $750 million, subject to adjustments on a seasonal basis, and an uncommitted repurchase facility related to the Receivable Securitization for up to $75 million.
Finally, as of November 5, 2020, the Company had extended and increased its existing $80 million CDS LC facility by an incremental $87 million.
The incremental liquidity available under these facilities will cover approximately $2.0 billion of the $3.5 billion of incremental collateral needs associated with the Direct Energy acquisition.
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Midwest Generation lease buyout
On September 29, 2020, Midwest Generation, LLC closed on the purchase agreement and acquired all of the ownership interests in the Powerton facility and Units 7 and 8 of the Joliet facility, which were being leased through 2034 and 2030, respectively, for approximately $260 million. The Company has initially funded the purchase with cash on hand and expects that before year end NRG will borrow under its Revolving Credit Facility in an amount equal to the operating lease liability of $148 million.
COVID-19
In March 2020, the World Health Organization categorized COVID-19 as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. Electricity was deemed a 'critical and essential business operation' under various state and federal governmental COVID-19 mandates. NRG had activated its Crisis Management Team ("CMT") in January 2020 to proactively manage the Company's response to the impacts of COVID-19.
NRG continues to remain focused on protecting the health and well-being of its employees, while supporting its customers and the communities in which it operates and assuring the continuity of its operations. In June 2020, summer-critical office employees returned to the offices and safety protocols were successfully implemented. The Company will continue to evaluate additional return to normal work operations on a location by location basis as COVID-19 conditions evolve.
The Company continues to maintain certain restrictions on business travel and face-to-face sales channels, remote work practices remain in place and there are enhanced cleaning and hygiene protocols in all of its facilities. In addition, select essential employees and contractors are continuing to report to plant and certain office locations. The Company also continues to require pre-entry screening, including temperature checks, separation of work crews, additional personal protective equipment for employees and contractors when social distancing cannot be maintained, and a ban on all non-essential visitors. The Company has not experienced any material disruptions in its ability to continue its business operations to date.
2020 and 2021 Guidance
NRG has narrowed the range of its Adjusted EBITDA guidance, while increasing Cash From Operations and Free Cash Flow before Growth Investments (FCFbG) guidance for 2020; NRG is maintaining its Adjusted EBITDA guidance for fiscal year 2021 while lowering its Cash Flow From Operations and FCFbG guidance due to the deferral of certain cash flow items into 2021.
Table 4: 2020 and 2021 Adjusted EBITDA, Cash from Operations, and FCFbG Guidance
| 2020 | 2021 | ||||||||||
| ($ in millions) | Narrowed Guidance | Updated Guidance | |||||||||
Adjusted EBITDAa | $1,950-$2,050 | $1,900-$2,100 | |||||||||
| Cash From Operations | $1,590-$1,690 | $1,350-$1,550 | |||||||||
| FCFbG | $1,450-$1,550 | $1,200-$1,400 | |||||||||
a. Non-GAAP financial measure; see Appendix Tables A-5 for GAAP Reconciliation to Net Income that excludes fair value adjustments related to derivatives. The Company is unable to provide guidance for Net Income due to the impact of such fair value adjustments related to derivatives in a given year
Capital Allocation Update
As part of the Company's long-term capital allocation policy, the return of capital to shareholders during the nine months ending September 30, 2020 was comprised of a quarterly dividend of $.30 per share, or $221 million, and share repurchases of $228 million through August 6, 2020 at an average price of $33.05 per share. Upon completion of the previously announced November 2020 dividend, the total amount of capital returned to shareholders during 2020 will be $523 million.
The Company does not anticipate executing any further share repurchases over the remainder of 2020 and has allocated all of its remaining 2020 excess capital to fund the Direct Energy acquisition.
The Company's common stock dividend, debt reduction and share repurchases are subject to available capital, market conditions and compliance with associated laws and regulations.
Earnings Conference Call
On November 5, 2020, NRG will host a conference call at 9:00 a.m. 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 www.nrg.com and clicking on “Investors” then "Presentations & Webcasts." The webcast will be archived on the site for those unable to listen in real time.
4
About NRG
At NRG, we’re bringing the power of energy to people and organizations by putting customers at the center of everything we do. We generate electricity and provide energy solutions and natural gas to more than 3.7 million residential, small business, and commercial and industrial customers through our diverse portfolio of retail brands. A Fortune 500 company, operating in the United States and Canada, NRG delivers innovative solutions while advocating for competitive energy markets and customer choice, and by working towards a sustainable energy future. More information is available at www.nrg.com. Connect with NRG on Facebook, LinkedIn and follow us on Twitter @nrgenergy.
Forward-Looking Statements
In addition to historical information, the information presented in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These statements involve estimates, expectations, projections, goals, assumptions, known and unknown risks and uncertainties and can typically be identified by terminology such as “may,” “should,” “could,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “expect,” “intend,” “seek,” “plan,” “think,” “anticipate,” “estimate,” “predict,” “target,” “potential” or “continue” or the negative of these terms or other comparable terminology. Such forward-looking statements include, but are not limited to, statements about the Company’s future revenues, income, indebtedness, capital structure, plans, expectations, objectives, projected financial performance and/or business results and other future events, and views of economic and market conditions.
Although NRG believes that its expectations are reasonable, it can give no assurance that these expectations will prove to be correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated herein include, among others, the potential impact of COVID-19 or any other pandemic on the Company’s operations, financial position, risk exposure and liquidity, 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, changes in government regulations, the condition of capital markets generally, our ability to access capital markets, cyberterrorism and inadequate cybersecurity, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify, execute or successfully implement acquisitions, repowerings or asset sales, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to achieve margin enhancement under our publicly announced transformation plan, our ability to achieve our net debt targets, our ability to maintain investment grade credit metrics, our ability to proceed with projects under development or the inability to complete the construction of such projects on schedule or within budget, the inability to maintain or create successful partnering relationships, our ability to operate our business efficiently, our ability to retain retail customers, our ability to realize value through our commercial operations strategy, the ability to consummate the Direct Energy acquisition, the ability to successfully integrate businesses of acquired companies including Direct Energy, our ability to realize anticipated benefits of transactions (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, and our ability to execute our Capital Allocation Plan. Achieving investment grade credit metrics is not a indication of or guarantee that the Company will receive investment grade credit ratings. Debt and share repurchases may be made from time to time subject to market conditions and other factors, including as permitted by United States securities laws. Furthermore, any common stock dividend is subject to available capital and market conditions.
NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The adjusted EBITDA, free cash flow guidance and excess cash guidance are estimates as of November 5, 2020. These estimates are based on assumptions the company believed to be reasonable as of that date. NRG disclaims any current intention to update such guidance, except as required by law. 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 press 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.
Contacts:
Media: | Investors: | ||||||||||
Candice Adams | Kevin L. Cole, CFA | ||||||||||
609.524.5428 | 609.524.4526 | ||||||||||
5
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| (In millions, except for per share amounts) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| Operating Revenues | |||||||||||||||||||||||
| Total operating revenues | $ | 2,809 | $ | 2,996 | $ | 7,066 | $ | 7,626 | |||||||||||||||
| Operating Costs and Expenses | |||||||||||||||||||||||
| Cost of operations | 2,034 | 2,153 | 4,925 | 5,649 | |||||||||||||||||||
| Depreciation and amortization | 99 | 91 | 318 | 261 | |||||||||||||||||||
| Impairment losses | 29 | — | 29 | 1 | |||||||||||||||||||
| Selling, general and administrative costs | 253 | 210 | 670 | 615 | |||||||||||||||||||
| Reorganization costs | — | 1 | 3 | 16 | |||||||||||||||||||
| Development costs | 1 | 1 | 6 | 5 | |||||||||||||||||||
| Total operating costs and expenses | 2,416 | 2,456 | 5,951 | 6,547 | |||||||||||||||||||
| Gain on sale of assets | — | — | 6 | 2 | |||||||||||||||||||
| Operating Income | 393 | 540 | 1,121 | 1,081 | |||||||||||||||||||
| Other Income/(Expense) | |||||||||||||||||||||||
| Equity in earnings of unconsolidated affiliates | 36 | 29 | 37 | 8 | |||||||||||||||||||
| Impairment losses on investments | — | (107) | (18) | (107) | |||||||||||||||||||
| Other income, net | 11 | 17 | 52 | 49 | |||||||||||||||||||
| Loss on debt extinguishment, net | — | — | (1) | (47) | |||||||||||||||||||
| Interest expense | (99) | (99) | (292) | (318) | |||||||||||||||||||
| Total other expense | (52) | (160) | (222) | (415) | |||||||||||||||||||
| Income from Continuing Operations Before Income Taxes | 341 | 380 | 899 | 666 | |||||||||||||||||||
| Income tax expense | 92 | 6 | 216 | 9 | |||||||||||||||||||
| Income from Continuing Operations | 249 | 374 | 683 | 657 | |||||||||||||||||||
| (Loss)/income from discontinued operations, net of income tax | — | (2) | — | 399 | |||||||||||||||||||
| Net Income | 249 | 372 | 683 | 1,056 | |||||||||||||||||||
| Less: Net income attributable to redeemable noncontrolling interests | — | — | — | 1 | |||||||||||||||||||
| Net Income Attributable to NRG Energy, Inc. | $ | 249 | $ | 372 | $ | 683 | $ | 1,055 | |||||||||||||||
| Earnings per Share | |||||||||||||||||||||||
| Weighted average number of common shares outstanding — basic | 244 | 254 | 246 | 266 | |||||||||||||||||||
| Income from continuing operations per weighted average common share — basic | $ | 1.02 | $ | 1.47 | $ | 2.78 | $ | 2.47 | |||||||||||||||
| (Loss)/income from discontinued operations per weighted average common share — basic | $ | — | $ | (0.01) | $ | — | $ | 1.50 | |||||||||||||||
| Earnings per Weighted Average Common Share — Basic | $ | 1.02 | $ | 1.46 | $ | 2.78 | $ | 3.97 | |||||||||||||||
| Weighted average number of common shares outstanding — diluted | 245 | 256 | 247 | 268 | |||||||||||||||||||
| Income from continuing operations per weighted average common share — diluted | $ | 1.02 | $ | 1.46 | $ | 2.77 | $ | 2.45 | |||||||||||||||
| (Loss)/income from discontinued operations per weighted average common share — diluted | $ | — | $ | (0.01) | $ | — | $ | 1.49 | |||||||||||||||
| Earnings per Weighted Average Common Share — Diluted | $ | 1.02 | $ | 1.45 | $ | 2.77 | $ | 3.94 | |||||||||||||||
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Net Income | $ | 249 | $ | 372 | $ | 683 | $ | 1,056 | |||||||||||||||
| Other Comprehensive Income/(Loss) | |||||||||||||||||||||||
| Foreign currency translation adjustments | 4 | (4) | 2 | (4) | |||||||||||||||||||
| Available-for-sale securities | — | (14) | — | (13) | |||||||||||||||||||
| Defined benefit plans | — | (41) | — | (47) | |||||||||||||||||||
| Other comprehensive income/(loss) | 4 | (59) | 2 | (64) | |||||||||||||||||||
| Comprehensive Income | 253 | 313 | 685 | 992 | |||||||||||||||||||
| Less: Comprehensive income attributable to redeemable noncontrolling interest | — | — | — | 1 | |||||||||||||||||||
| Comprehensive Income Attributable to NRG Energy, Inc. | $ | 253 | $ | 313 | $ | 685 | $ | 991 | |||||||||||||||
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2020 | December 31, 2019 | ||||||||||
| (In millions, except share data) | (Unaudited) | (Audited) | |||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 697 | $ | 345 | |||||||
| Funds deposited by counterparties | 15 | 32 | |||||||||
| Restricted cash | 6 | 8 | |||||||||
| Accounts receivable, net | 1,126 | 1,025 | |||||||||
| Inventory | 330 | 383 | |||||||||
| Derivative instruments | 578 | 860 | |||||||||
| Cash collateral paid in support of energy risk management activities | 77 | 190 | |||||||||
| Prepayments and other current assets | 258 | 245 | |||||||||
| Total current assets | 3,087 | 3,088 | |||||||||
| Property, plant and equipment, net | 2,573 | 2,593 | |||||||||
| Other Assets | |||||||||||
| Equity investments in affiliates | 376 | 388 | |||||||||
| Operating lease right-of-use assets, net | 345 | 464 | |||||||||
| Goodwill | 579 | 579 | |||||||||
| Intangible assets, net | 721 | 789 | |||||||||
| Nuclear decommissioning trust fund | 828 | 794 | |||||||||
| Derivative instruments | 315 | 310 | |||||||||
| Deferred income taxes | 3,087 | 3,286 | |||||||||
| Other non-current assets | 314 | 240 | |||||||||
| Total other assets | 6,565 | 6,850 | |||||||||
| Total Assets | $ | 12,225 | $ | 12,531 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Current portion of long-term debt | $ | 3 | $ | 88 | |||||||
| Current portion of operating lease liabilities | 69 | 73 | |||||||||
| Accounts payable | 753 | 722 | |||||||||
| Derivative instruments | 495 | 781 | |||||||||
| Cash collateral received in support of energy risk management activities | 15 | 32 | |||||||||
| Accrued expenses and other current liabilities | 651 | 663 | |||||||||
| Total current liabilities | 1,986 | 2,359 | |||||||||
| Other Liabilities | |||||||||||
| Long-term debt | 5,792 | 5,803 | |||||||||
| Non-current operating lease liabilities | 297 | 483 | |||||||||
| Nuclear decommissioning reserve | 311 | 298 | |||||||||
| Nuclear decommissioning trust liability | 508 | 487 | |||||||||
| Derivative instruments | 318 | 322 | |||||||||
| Deferred income taxes | 17 | 17 | |||||||||
| Other non-current liabilities | 1,062 | 1,084 | |||||||||
| Total other liabilities | 8,305 | 8,494 | |||||||||
| Total Liabilities | 10,291 | 10,853 | |||||||||
| Redeemable noncontrolling interest in subsidiaries | — | 20 | |||||||||
| Commitments and Contingencies | |||||||||||
| Stockholders' Equity | |||||||||||
| Common stock; $0.01 par value; 500,000,000 shares authorized; 423,041,349 and 421,890,790 shares issued and 244,147,420 and 248,996,189 shares outstanding at September 30, 2020 and December 31, 2019, respectively | 4 | 4 | |||||||||
| Additional paid-in-capital | 8,511 | 8,501 | |||||||||
| Accumulated deficit | (1,157) | (1,616) | |||||||||
| Less treasury stock, at cost - 178,893,929 and 172,894,601 shares at September 30, 2020 and December 31, 2019, respectively | (5,234) | (5,039) | |||||||||
| Accumulated other comprehensive loss | (190) | (192) | |||||||||
| Total Stockholders' Equity | 1,934 | 1,658 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 12,225 | $ | 12,531 | |||||||
8
NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine months ended September 30, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net Income | $ | 683 | $ | 1,056 | |||||||
| Income from discontinued operations, net of income tax | — | 399 | |||||||||
| Income from continuing operations | 683 | 657 | |||||||||
| Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
| Distributions from and equity in losses/(earnings) of unconsolidated affiliates | 6 | (5) | |||||||||
| Depreciation and amortization | 318 | 261 | |||||||||
| Accretion of asset retirement obligations | 46 | 31 | |||||||||
| Provision for credit losses | 74 | 87 | |||||||||
| Amortization of nuclear fuel | 40 | 40 | |||||||||
| Amortization of financing costs and debt discount/premiums | 23 | 20 | |||||||||
| Loss on debt extinguishment, net | 1 | 47 | |||||||||
| Amortization of emissions allowances and energy credits | 60 | 28 | |||||||||
| Amortization of unearned equity compensation | 17 | 15 | |||||||||
| Gain on sale and disposal of assets | (22) | (20) | |||||||||
| Impairment losses | 47 | 108 | |||||||||
| Changes in derivative instruments | (7) | 36 | |||||||||
| Changes in deferred income taxes and liability for uncertain tax benefits | 202 | (3) | |||||||||
| Changes in collateral deposits in support of energy risk management activities | 96 | 129 | |||||||||
| Changes in nuclear decommissioning trust liability | 39 | 27 | |||||||||
| Changes in other working capital | (237) | (569) | |||||||||
| Cash provided by continuing operations | 1,386 | 889 | |||||||||
| Cash provided by discontinued operations | — | 8 | |||||||||
| Net Cash Provided by Operating Activities | 1,386 | 897 | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Payments for acquisitions of assets and businesses | (277) | (348) | |||||||||
| Capital expenditures | (167) | (183) | |||||||||
| Net proceeds from notes receivable | — | 2 | |||||||||
| Net (purchases)/sales of emission allowances | (15) | 14 | |||||||||
| Investments in nuclear decommissioning trust fund securities | (360) | (295) | |||||||||
| Proceeds from the sale of nuclear decommissioning trust fund securities | 318 | 271 | |||||||||
| Proceeds from sale of assets, net of cash disposed and sale of discontinued operations, net of fees | 15 | 1,293 | |||||||||
| Changes in investments in unconsolidated affiliates | 2 | (94) | |||||||||
| Contributions to discontinued operations | — | (44) | |||||||||
| Cash (used)/provided by continuing operations | (484) | 616 | |||||||||
| Cash used by discontinued operations | — | (2) | |||||||||
| Net Cash (Used)/Provided by Investing Activities | (484) | 614 | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Payments of dividends to common stockholders | (221) | (24) | |||||||||
| Payments for share repurchase activity | (229) | (1,322) | |||||||||
| Payments for debt extinguishment costs | — | (24) | |||||||||
| Purchase of and distributions to noncontrolling interests from subsidiaries | (2) | (1) | |||||||||
| Proceeds from issuance of common stock | 1 | 3 | |||||||||
| Proceeds from issuance of long-term debt | 59 | 2,668 | |||||||||
| Payments of debt issuance costs | (24) | (34) | |||||||||
| Repayments of long-term debt | (62) | (2,892) | |||||||||
| Net repayments of Revolving Credit Facility | (83) | (215) | |||||||||
| Other | (6) | — | |||||||||
| Cash used by continuing operations | (567) | (1,841) | |||||||||
| Cash provided by discontinued operations | — | 43 | |||||||||
| Net Cash Used by Financing Activities | (567) | (1,798) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (2) | — | |||||||||
| Change in Cash from discontinued operations | — | 49 | |||||||||
| Net Increase/(Decrease) in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash | 333 | (336) | |||||||||
| Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period | 385 | 613 | |||||||||
| Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period | $ | 718 | $ | 277 | |||||||
9
Appendix Table A-1: Third Quarter 2020 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to income/(loss) from continuing operations:
| ($ in millions) | Texas | East | West/Other1 | Corp/Elim | Total | ||||||||||||
| Income/(Loss) from Continuing Operations | 288 | 149 | 17 | (205) | 249 | ||||||||||||
| Plus: | |||||||||||||||||
| Interest expense, net | — | 3 | 1 | 93 | 97 | ||||||||||||
| Income tax | — | 1 | — | 91 | 92 | ||||||||||||
| Depreciation and amortization | 49 | 34 | 9 | 7 | 99 | ||||||||||||
| ARO Expense | 22 | 3 | 3 | — | 28 | ||||||||||||
| Contract amortization | 2 | — | — | — | 2 | ||||||||||||
| EBITDA | 361 | 190 | 30 | (14) | 567 | ||||||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | — | — | 25 | — | 25 | ||||||||||||
| Acquisition-related transaction & integration costs | — | — | — | 10 | 10 | ||||||||||||
| Reorganization costs | — | — | — | (1) | (1) | ||||||||||||
| Deactivation costs | — | 2 | — | — | 2 | ||||||||||||
| Other non recurring charges | 1 | (1) | 2 | — | 2 | ||||||||||||
| Impairments | — | — | 29 | — | 29 | ||||||||||||
| Mark to market (MtM) (gains)/losses on economic hedges | 152 | (45) | 11 | — | 118 | ||||||||||||
| Adjusted EBITDA | 514 | 146 | 97 | (5) | 752 | ||||||||||||
Includes International, remaining renewables and Generation eliminations
Third Quarter 2020 condensed financial information by Operating Segment:
| ($ in millions) | Texas | East | West/Other1 | Corp/Elim | Total | ||||||||||||
| Operating revenues | 1,991 | 650 | 132 | (3) | 2,770 | ||||||||||||
| Cost of sales | 1,140 | 316 | 60 | (1) | 1,515 | ||||||||||||
Economic gross margin2 | 851 | 334 | 72 | (2) | 1,255 | ||||||||||||
Operations & maintenance and other cost of operations3 | 187 | 114 | 27 | (1) | 327 | ||||||||||||
Selling, marketing, general and administrative | 153 | 74 | 11 | 7 | 245 | ||||||||||||
Other (income)4 | (3) | — | (63) | (3) | (69) | ||||||||||||
| Adjusted EBITDA | 514 | 146 | 97 | (5) | 752 | ||||||||||||
1 Includes International, remaining renewables and Generation eliminations
2 Excludes MtM gain of $118 million and contract amortization of $2 million
3 Excludes deactivation costs of $2 million
4 Includes development costs. Excludes $342 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment
10
The following table reconciles the condensed financial information to Adjusted EBITDA:
| ($ in millions) | Condensed financial information | Interest, tax, depr., amort. | MtM | Deactivation | Other adj. | Adjusted EBITDA | ||||||||||||||
| Operating revenues | 2,809 | — | (41) | — | 2 | 2,770 | ||||||||||||||
| Cost of operations | 1,674 | (2) | (157) | — | — | 1,515 | ||||||||||||||
| Gross margin | 1,135 | 2 | 116 | 0 | 2 | 1,255 | ||||||||||||||
| Operations & maintenance and other cost of operations | 360 | — | — | (4) | (29) | 327 | ||||||||||||||
Selling, marketing, general & administrative | 253 | — | — | — | (8) | 245 | ||||||||||||||
Other expense/(income)1 | 273 | (288) | — | — | (54) | (69) | ||||||||||||||
| Income from Continuing Operations | 249 | 290 | 116 | 4 | 93 | 752 | ||||||||||||||
1 Other adj. acquisition-related transaction & integration costs of $10 million and deactivation costs of $2 million
11
Appendix Table A-2: Third Quarter 2019 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to income/(loss) from continuing operations:
| ($ in millions) | Texas | East | West/Other1 | Corp/Elims | Total | ||||||||||||
| Income/(Loss) from Continuing Operations | 348 | 121 | 15 | (110) | 374 | ||||||||||||
| Plus: | |||||||||||||||||
| Interest expense, net | 1 | 4 | 2 | 88 | 95 | ||||||||||||
| Income tax | — | — | 1 | 5 | 6 | ||||||||||||
| Depreciation and amortization | 45 | 31 | 8 | 7 | 91 | ||||||||||||
| ARO Expense | 3 | 3 | 11 | — | 17 | ||||||||||||
| Contract amortization | 5 | — | — | — | 5 | ||||||||||||
| EBITDA | 402 | 159 | 37 | (10) | 588 | ||||||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 3 | — | 22 | 1 | 26 | ||||||||||||
| Acquisition-related transaction & integration costs | 1 | — | — | — | 1 | ||||||||||||
| Reorganization costs | 1 | — | — | — | 1 | ||||||||||||
| Deactivation costs | — | 2 | 1 | 2 | 5 | ||||||||||||
| Other non recurring charges | — | (1) | 1 | — | — | ||||||||||||
| Impairments | 102 | — | — | 5 | 107 | ||||||||||||
| Mark to market (MtM) (gains)/losses on economic hedges | 72 | (17) | 9 | — | 64 | ||||||||||||
| Adjusted EBITDA | 581 | 143 | 70 | (2) | 792 | ||||||||||||
1 Includes International, remaining renewables and Generation eliminations
Third Quarter 2019 condensed financial information by Operating Segment:
| ($ in millions) | Texas | East | West/Other1 | Corp/Elim | Total | ||||||||||||
| Operating revenues | 2,421 | 667 | 120 | (2) | 3,206 | ||||||||||||
| Cost of sales | 1,539 | 340 | 71 | (2) | 1,948 | ||||||||||||
Economic gross margin2 | 882 | 327 | 49 | — | 1,258 | ||||||||||||
Operations & maintenance and other cost of operations3 | 187 | 115 | 25 | (2) | 325 | ||||||||||||
Selling, marketing, general & administrative | 128 | 69 | 6 | 5 | 208 | ||||||||||||
Other (income)4 | (14) | — | (52) | (1) | (67) | ||||||||||||
| Adjusted EBITDA | 581 | 143 | 70 | (2) | 792 | ||||||||||||
1 Includes International, remaining renewables and Generation eliminations
2 Excludes MtM gain of $64 million and contract amortization of $5 million
3 Excludes deactivation costs of $5 million
4 Includes development costs. Excludes $326 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition related transaction & integration costs, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment
12
The following table reconciles the condensed financial information to Adjusted EBITDA:
| ($ in millions) | Condensed financial information | Interest, tax, depr., amort. | MtM | Deactivation | Other adj. | Adjusted EBITDA | ||||||||||||||
| Operating revenues | 2,996 | — | 210 | — | — | 3,206 | ||||||||||||||
| Cost of operations | 1,807 | (5) | 146 | — | 1,948 | |||||||||||||||
| Gross margin | 1,189 | 5 | 64 | — | — | 1,258 | ||||||||||||||
| Operations & maintenance and other cost of operations | 346 | — | — | (5) | (16) | 325 | ||||||||||||||
Selling, marketing, general & administrative1 | 210 | — | — | — | (2) | 208 | ||||||||||||||
Other expense/(income)2 | 259 | (193) | — | — | (133) | (67) | ||||||||||||||
| Income from Continuing Operations | 374 | 198 | 64 | 5 | 151 | 792 | ||||||||||||||
1 Other adj. includes impairments of $107 million, acquisition-related transaction & integration costs of $1 million, and reorganization costs of $1 million
13
Appendix Table A-3: YTD Third Quarter 2020 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to income/(loss) from continuing operations:
| ($ in millions) | Texas | East | West/Other1 | Corp/Elim | Total | ||||||||||||
| Income/(Loss) from Continuing Operations | 800 | 319 | 83 | (519) | 683 | ||||||||||||
| Plus: | |||||||||||||||||
| Interest expense, net | — | 10 | 2 | 272 | 284 | ||||||||||||
| Income tax | — | — | 1 | 215 | 216 | ||||||||||||
| Loss on debt extinguishment | — | 1 | — | — | 1 | ||||||||||||
| Depreciation and amortization | 167 | 100 | 25 | 26 | 318 | ||||||||||||
| ARO Expense | 29 | 14 | 4 | (1) | 46 | ||||||||||||
| Contract amortization | 4 | — | — | — | 4 | ||||||||||||
| EBITDA | 1,000 | 444 | 115 | (7) | 1,552 | ||||||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 2 | — | 72 | — | 74 | ||||||||||||
| Acquisition-related transaction & integration costs | 1 | — | — | 13 | 14 | ||||||||||||
| Reorganization costs | — | — | — | 1 | 1 | ||||||||||||
| Deactivation costs | 2 | 1 | 2 | — | 5 | ||||||||||||
| Gain on sale of business | — | — | — | (15) | (15) | ||||||||||||
| Other non recurring charges | 2 | (1) | 3 | 5 | 9 | ||||||||||||
| Impairments | 18 | — | 29 | — | 47 | ||||||||||||
| Mark to market (MtM) (gains)/losses on economic hedges | 62 | (70) | (5) | — | (13) | ||||||||||||
| Adjusted EBITDA | 1,087 | 374 | 216 | (3) | 1,674 | ||||||||||||
1 Includes International, remaining renewables and Generation eliminations
YTD Third Quarter 2020 condensed financial information by Operating Segment:
| ($ in millions) | Texas | East | West/Other1 | Corp/Elim | Total | ||||||||||||
| Operating revenues | 4,927 | 1,735 | 335 | (9) | 6,988 | ||||||||||||
| Cost of sales | 2,850 | 828 | 125 | (4) | 3,799 | ||||||||||||
Economic gross margin2 | 2,077 | 907 | 210 | (5) | 3,189 | ||||||||||||
Operations & maintenance and other cost of operations3 | 581 | 332 | 87 | (3) | 997 | ||||||||||||
Selling, marketing, general and administrative | 415 | 204 | 28 | 16 | 663 | ||||||||||||
Other (income)4 | (6) | (3) | (121) | (15) | (145) | ||||||||||||
| Adjusted EBITDA | 1,087 | 374 | 216 | (3) | 1,674 | ||||||||||||
1 Includes International, remaining renewables and Generation eliminations
2 Excludes MtM loss of $13 million and contract amortization of $4 million
3 Excludes deactivation costs of $5 million
5 Excludes acquisition-related transaction & integration costs of $14 million and reorganization costs of $1 million
14
The following table reconciles the condensed financial information to Adjusted EBITDA:
| ($ in millions) | Condensed financial information | Interest, tax, depr., amort. | MtM | Deactivation | Other adj. | Adjusted EBITDA | ||||||||||||||
| Operating revenues | 7,066 | — | (78) | — | — | 6,988 | ||||||||||||||
| Cost of operations | 3,868 | (4) | (64) | — | (1) | 3,799 | ||||||||||||||
| Gross margin | 3,198 | 4 | (14) | — | 1 | 3,189 | ||||||||||||||
| Operations & maintenance and other cost of operations | 1,057 | — | — | (10) | (50) | 997 | ||||||||||||||
Selling, marketing, general & administrative1 | 670 | — | — | — | (7) | 663 | ||||||||||||||
Other expense/(income)2 | 788 | (819) | — | — | (114) | (145) | ||||||||||||||
| Income/(Loss) from Continuing Operations | 683 | 823 | (14) | 10 | 172 | 1,674 | ||||||||||||||
2 Other adj. includes impairments of $47 million, acquisition-related transaction & integration costs of $14 million, reorganization costs of $1 million and loss on debt extinguishment of $1 million
15
Appendix Table A-4: YTD Third Quarter 2019 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to income/(loss) from continuing operations:
| ($ in millions) | Texas | East | West/Other1 | Corp/Elims | Total | ||||||||||||
| Income/(Loss) from Continuing Operations | 757 | 280 | 10 | (390) | 657 | ||||||||||||
| Plus: | |||||||||||||||||
| Interest expense, net | 1 | 13 | 8 | 280 | 302 | ||||||||||||
| Income tax | — | — | 1 | 8 | 9 | ||||||||||||
| Loss on debt extinguishment | — | — | — | 47 | 47 | ||||||||||||
| Depreciation and amortization | 125 | 87 | 26 | 23 | 261 | ||||||||||||
| ARO Expense | 9 | 9 | 13 | — | 31 | ||||||||||||
| Contract amortization | 16 | — | — | — | 16 | ||||||||||||
| EBITDA | 908 | 389 | 58 | (32) | 1,323 | ||||||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 11 | — | 79 | 1 | 91 | ||||||||||||
| Acquisition-related transaction & integration costs | 1 | — | — | 1 | 2 | ||||||||||||
| Reorganization costs | 5 | — | — | 11 | 16 | ||||||||||||
| Legal Settlement | 3 | 6 | 2 | — | 11 | ||||||||||||
| Deactivation costs | — | 6 | 5 | 6 | 17 | ||||||||||||
| Other non recurring charges | 2 | (2) | 2 | — | 2 | ||||||||||||
| Impairments | 103 | — | — | 5 | 108 | ||||||||||||
| Mark to market (MtM) (gains)/losses on economic hedges | 52 | (19) | (10) | — | 23 | ||||||||||||
| Adjusted EBITDA | 1,085 | 380 | 136 | (8) | 1,593 | ||||||||||||
1 Includes International, remaining renewables and Generation eliminations
YTD Third Quarter 2019 condensed financial information by Operating Segment:
| ($ in millions) | Texas | East | West/Other1 | Corp/Elim | Total | ||||||||||||
| Operating revenues | 5,483 | 1,799 | 299 | (6) | 7,575 | ||||||||||||
| Cost of sales | 3,502 | 904 | 158 | (2) | 4,562 | ||||||||||||
Economic gross margin2 | 1,981 | 895 | 141 | (4) | 3,013 | ||||||||||||
Operations & maintenance and other cost of operations3 | 550 | 311 | 85 | (4) | 942 | ||||||||||||
Selling, marketing, general & administrative4 | 367 | 206 | 23 | 15 | 611 | ||||||||||||
Other (income)5 | (21) | (2) | (103) | (7) | (133) | ||||||||||||
| Adjusted EBITDA | 1,085 | 380 | 136 | (8) | 1,593 | ||||||||||||
1 Includes International, remaining renewables and Generation eliminations
2 Excludes MtM gain of $23 million and contract amortization of $16 million
3 Excludes deactivation costs of $17 million
4 Excludes legal settlement of $11 million
5 Excludes acquisition-related transaction & integration costs of $2 million, reorganization costs of $16 million and loss on debt extinguishment of $47 million
16
The following table reconciles the condensed financial information to Adjusted EBITDA:
| ($ in millions) | Condensed financial information | Interest, tax, depr., amort. | MtM | Deactivation | Other adj. | Adjusted EBITDA | ||||||||||||||
| Operating revenues | 7,626 | — | (51) | — | — | 7,575 | ||||||||||||||
| Cost of operations | 4,652 | (16) | (74) | — | — | 4,562 | ||||||||||||||
| Gross margin | 2,974 | 16 | 23 | — | — | 3,013 | ||||||||||||||
| Operations & maintenance and other cost of operations | 997 | — | — | (20) | (35) | 942 | ||||||||||||||
Selling, marketing, general & administrative 1 | 615 | — | — | — | (4) | 611 | ||||||||||||||
Other expense/(income) 2 | 705 | (572) | — | — | (266) | (133) | ||||||||||||||
| Income/(Loss) from Continuing Operations | 657 | 588 | 23 | 20 | 305 | 1,593 | ||||||||||||||
1 Other adj. includes legal settlement of $11 million
2 Other adj. includes impairments of $108 million, acquisition-related transaction & integration costs of $2 million, reorganization costs of $16 million and loss on debt extinguishment of $47 million
17
Appendix Table A-5: 2020 and 2019 Three Months and Six Months Ended September 30 Adjusted Cash Flow from Operations Reconciliations
The following table summarizes the calculation of adjusted cash flow operating activities providing a reconciliation to net cash provided by operating activities:
| Three Months Ended | ||||||||||||||
| ($ in millions) | September 30, 2020 | September 30, 2019 | ||||||||||||
| Net Cash Provided by Operating Activities | 694 | 472 | ||||||||||||
Merger, integration and cost-to-achieve expenses1 | 12 | 1 | ||||||||||||
GenOn Settlement | — | 13 | ||||||||||||
| Encina site improvement | 1 | — | ||||||||||||
| Adjustment for change in collateral | (38) | 3 | ||||||||||||
| Adjusted Cash Flow from Operating Activities | 669 | 488 | ||||||||||||
| Maintenance CapEx, net | (39) | (55) | ||||||||||||
| Environmental CapEx, net | (1) | — | ||||||||||||
| Free Cash Flow Before Growth Investments (FCFbG) | 630 | 433 | ||||||||||||
1 Includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call
| Nine Months Ended | ||||||||||||||
| ($ in millions) | September 30, 2020 | September 30, 2019 | ||||||||||||
| Net Cash Provided by Operating Activities | 1,386 | 889 | ||||||||||||
Merger, integration and cost-to-achieve expenses1 | 15 | 19 | ||||||||||||
GenOn Settlement | — | 18 | ||||||||||||
| Encina site improvement | 4 | — | ||||||||||||
| Proceeds from investment and asset sales | 12 | — | ||||||||||||
| Adjustment for change in collateral | (95) | (120) | ||||||||||||
| Adjusted Cash Flow from Operating Activities | 1,322 | 806 | ||||||||||||
| Maintenance CapEx, net | (121) | (131) | ||||||||||||
| Environmental CapEx, net | (2) | (2) | ||||||||||||
| Free Cash Flow Before Growth Investments (FCFbG) | 1,199 | 673 | ||||||||||||
1 Includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call
18
Appendix Table A-6: Third Quarter YTD 2020 Sources and Uses of Liquidity
The following table summarizes the sources and uses of liquidity through third quarter of 2020:
| ($ in millions) | Nine Months Ended September 30, 2020 | ||||
| Sources: | |||||
| Adjusted cash flow from operations | 1,322 | ||||
| Increase in Credit Facility | 1,021 | ||||
Collateral | 95 | ||||
| Uses: | |||||
| Share repurchases | (228) | ||||
| Revolver pay down | (83) | ||||
| Financing Fees - Debt issuance and Debt extinguishment costs | (3) | ||||
| Growth investments and acquisitions, net | (46) | ||||
| Maintenance and Environmental CapEx, net | (122) | ||||
Encina ARO and Other Investment and Financing1 | (4) | ||||
| Midwest Generation lease buyout | (260) | ||||
Other Investing and Financing | (101) | ||||
| Common Stock Dividends | (220) | ||||
| Change in Total Liquidity | 1,371 | ||||
1 Includes $4 million of expenditures for Encina site improvements classified as asset retirement obligation payments
19
Appendix Table A-7: 2020 and 2021 Guidance Reconciliation
The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to Income from Continuing Operations, and the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:
| 2020 | 2021 | ||||||||||
| ($ in millions) | Guidance | Guidance | |||||||||
Income from Continuing Operations 1 | $1,020 - $1,120 | $1,010 - $1,210 | |||||||||
| Income Tax | 20 | 20 | |||||||||
| Interest Expense | 345 | 325 | |||||||||
| Depreciation, Amortization, Contract Amortization and ARO Expense | 480 | 450 | |||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 65 | 70 | |||||||||
Other Costs 2 | 20 | 25 | |||||||||
| Adjusted EBITDA | $1,950 - $2,050 | $1,900 - $2,100 | |||||||||
| Interest payments | (350) | (325) | |||||||||
| Income tax | (20) | (20) | |||||||||
| Working capital / other assets and liabilities | 10 | (205) | |||||||||
| Cash From Operations | $1,590 - $1,690 | $1,350 - $1,550 | |||||||||
| Adjustments: Acquired Derivatives, Cost-to-Achieve, Return of Capital Dividends, Collateral, GenOn Pension and Other | 40 | 30 | |||||||||
| Adjusted Cash flow from Operations | $1,630 - $1,730 | $1,380 - $1,580 | |||||||||
| Maintenance capital expenditures, net | (165) - (175) | (170) - (185) | |||||||||
| Environmental capital expenditures, net | (5) | (5) - (10) | |||||||||
| Free Cash Flow before Growth | $1,450 - $1,550 | $1,200 - $1,400 | |||||||||
1 For purposes of guidance fair value adjustments related to derivatives are assumed to be zero
2 Includes deactivation costs and cost-to-achieve expenses
EBITDA and Adjusted EBITDA 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.
20
Adjusted EBITDA is presented as a further supplemental measure of operating performance. As NRG defines it, Adjusted EBITDA represents EBITDA excluding impairment losses, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from accounting for derivatives, adjustments to exclude the Adjusted EBITDA related to the non-controlling interest, gains or losses on the repurchase, modification or extinguishment of debt, the impact of restructuring and any extraordinary, unusual or non-recurring items plus adjustments to reflect the Adjusted EBITDA from our unconsolidated investments. 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.
Management believes Adjusted EBITDA is useful to investors and other users of NRG's financial statements in evaluating its operating performance because it provides an additional tool to compare business performance across companies and across periods and adjusts for items that we do not consider indicative of NRG’s future operating performance. This measure is widely used by debt-holders to analyze operating performance and debt service capacity and by equity investors to measure our operating performance without regard to items such as interest expense, taxes, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired. Management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis and to readily view operating trends, as a measure for planning and forecasting overall expectations, and for evaluating actual results against such expectations, and in communications with NRG's Board of Directors, shareholders, creditors, analysts and investors concerning its financial performance.
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, integration and related restructuring 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, integration related restructuring costs as they are one time and unique in nature and do not reflect ongoing cash from operations and they are fully disclosed to investors.
Free cash flow (before Growth) is adjusted cash flow from operations less maintenance and environmental capital expenditures, net of funding, preferred stock dividends and distributions to non-controlling interests 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 before Growth as a measure of cash available for discretionary expenditures.
Free Cash Flow before Growth is utilized by Management in making decisions regarding the allocation of capital. Free Cash Flow before Growth is presented because the Company believes it is a useful tool for assessing the financial performance in the current period. In addition, NRG’s peers evaluate cash available for allocation in a similar manner and accordingly, it is a meaningful indicator for investors to benchmark NRG's performance against its peers. Free Cash Flow before Growth is a performance measure and is not intended to represent net income (loss), cash from operations (the most directly comparable U.S. GAAP measure), or liquidity and is not necessarily comparable to similarly titled measures reported by other companies.
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