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) | |||||||||||||
(713 ) 537-3000
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 7, 2022 , NRG Energy, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2022. 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 7, 2022
Exhibit 99.1
NRG Energy, Inc. Reports Third Quarter 2022 Results
• Narrowing 2022 Adjusted EBITDA guidance and initiating 2023 financial guidance
• Executing current $1 billion share repurchase program; $397 million remaining to be completed
• Announcing 2023 capital allocation: $600 million incremental share repurchase program; 8% increase in annual
dividend; $331 million growth/other
HOUSTON—November 7, 2022—NRG Energy, Inc. (NYSE: NRG) today reported a third quarter 2022 Net Income of $67 million, or $0.29 per diluted common share, and Adjusted EBITDA for the third quarter of $452 million.
“We made significant progress on our key strategic priorities in the third quarter, and our platform performed well during extreme Summer conditions," said Mauricio Gutierrez, NRG President, and Chief Executive Officer. “We remain on track to achieve our long-term goals, and I am excited about the opportunities ahead to provide even more value for stakeholders.”
Consolidated Financial Results
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| ($ in millions) | 9/30/2022 | 9/30/2021 | 9/30/2022 | 9/30/2021 | ||||||||||||||||||||||
| Net Income | $ | 67 | $ | 1,618 | $ | 2,316 | $ | 2,614 | ||||||||||||||||||
| Cash provided by Operating Activities | $ | (1,431) | $ | 1,478 | $ | 1,758 | $ | 1,855 | ||||||||||||||||||
Adjusted EBITDAa | $ | 452 | $ | 767 | $ | 1,319 | $ | 1,990 | ||||||||||||||||||
| Free Cash Flow Before Growth Investments (FCFbG) | $ | (42) | $ | 395 | $ | 294 | $ | 1,163 | ||||||||||||||||||
a. Three and nine months ended 9/30/21 excludes the loss due to Winter Storm Uri of $21 million and $1,070 million, respectively
Segments Results
Table 1: Net Income
| ($ in millions) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| Segment | 9/30/2022 | 9/30/2021 | 9/30/2022 | 9/30/2021 | ||||||||||||||||||||||
| Texas | $ | (475) | $ | 251 | $ | 1,064 | $ | 600 | ||||||||||||||||||
East | 555 | 1,980 | 2,086 | 3,119 | ||||||||||||||||||||||
West/Services/Othera | (13) | (613) | (834) | (1,105) | ||||||||||||||||||||||
Net Income | $ | 67 | $ | 1,618 | $ | 2,316 | $ | 2,614 | ||||||||||||||||||
a. Includes Corporate segment
Third quarter net income was $67 million, $1,551 million lower than third quarter 2021, primarily driven by mark-to-market gains on economic hedge positions in 2021, which were due to large movements in natural gas and power prices.
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Table 2: Adjusted EBITDA
| ($ in millions) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
| Segment | 9/30/2022 | 9/30/2021 | 9/30/2022 | 9/30/2021 | ||||||||||||||||||||||
| Texas | $ | 183 | $ | 446 | $ | 632 | $ | 1,004 | ||||||||||||||||||
East | 175 | 219 | 561 | 760 | ||||||||||||||||||||||
West/Services/Other a | 94 | 102 | 126 | 226 | ||||||||||||||||||||||
Adjusted EBITDAb | $ | 452 | $ | 767 | $ | 1,319 | $ | 1,990 | ||||||||||||||||||
a. Includes Corporate segment
b. Three and nine months ended 9/30/21 excludes the loss due to Winter Storm Uri of $21 million and $1,070 million, respectively
Texas: Third quarter Adjusted EBITDA was $183 million, $263 million lower than the third quarter of 2021. This decrease was primarily driven by higher supply costs as a result of the previously announced unplanned outage at W.A. Parish Unit 8 and higher ancillary charges, partially offset by higher revenue rates and increased load driven by weather.
East: Third quarter Adjusted EBITDA was $175 million, $44 million lower than the third quarter of 2021. This decrease was primarily driven by the 4.8 GW asset sale which was completed in December 2021, PJM asset retirements, and supply chain constraints, partially offset by higher revenue rates and the realization of Direct Energy synergies.
West/Services/Other: Third quarter Adjusted EBITDA was $94 million, $8 million lower than the third quarter of 2021. This decrease was primarily driven by the 4.8 GW asset sale and the sale of the equity interest in the Watson generating facility, partially offset by higher gross margin from Cottonwood.
Liquidity and Capital Resources
Table 3: Corporate Liquidity
| ($ in millions) | 9/30/22 | 12/31/21 | ||||||||||||
| Cash and Cash Equivalents | $ | 333 | $ | 250 | ||||||||||
| Restricted Cash | 46 | 15 | ||||||||||||
| Total | 379 | 265 | ||||||||||||
| Total Revolving Credit Facility and collective collateral facilities | 2,395 | 2,421 | ||||||||||||
| Total Liquidity, excluding collateral received | $ | 2,774 | $ | 2,686 | ||||||||||
As of September 30, 2022, NRG's cash was at $333 million, and $2.4 billion was available under the Company’s credit facilities. Total liquidity was $2.8 billion, which was approximately $88 million higher than at the end of 2021.
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NRG Strategic Developments
Astoria
On September 9, 2022, the Company entered into a definitive purchase agreement to sell land and related assets from the Astoria site, within the East region of operations, for initial proceeds of $212 million, subject to purchase price adjustments and certain other indemnifications. As part of the transaction, NRG will enter into an agreement to lease the land back for the purpose of operating the Astoria facility through the planned April 30, 2023 retirement date. The operating lease agreement is expected to end six months after the facility's actual retirement date. The transaction is expected to close in the fourth quarter of 2022 and is subject to various closing conditions.
As a result of the agreement for the Astoria sale mentioned above, and the planned withdrawal and cancellation of the proposed Astoria redevelopment project, the Company recorded an impairment of $43 million in the third quarter of 2022.
W.A. Parish Unit 8 Extended Outage
In May 2022, W.A. Parish Unit 8 came offline as a result of damage to certain components of the steam turbine/generator. Based on management's current assessment of necessary restoration efforts, the Company continues to target the return to service of the unit by the end of the second quarter of 2023.
Growth Plan
At its June 2021 Investor Day, NRG provided its five-year roadmap to grow through its integrated home strategy. In 2021 and 2022, the Company focused on ‘optimizing its core’ and staging for growth through its test and learn pilot programs. During this time, the Company enhanced its business model and go-to-market strategies. In 2023, the Company expects to enter its next phase of growth, ‘grow from core,’ through executing identified investment and strategic partnerships, while evaluating incremental vertical integration and partnership opportunities. Consistent with its strategic and capital allocation priorities, the Company expects to allocate approximately $220 million for growth-related projects in 2023.
Narrowing 2022 Guidance and Initiating 2023 Guidance
NRG is narrowing its 2022 Adjusted EBITDA as well as narrowing and adjusting down the 2022 FCFbG guidance, and is initiating guidance for the 2023 fiscal year. 2022 FCFbG guidance has been reduced as a result of increasing natural gas and coal inventories, which is expected to be partially reversed in 2023, and the impact of higher commodities prices on working capital.
Table 4: Adjusted EBITDA and FCFbG Guidance
| 2022 | 2023 | |||||||||||||
| (In millions) | Revised Guidance | Guidance | ||||||||||||
Adjusted EBITDAa | $1,950 - $2,050 | $2,270 - $2,470 | ||||||||||||
| Cash provided by Operating Activities | $1,230 - $1,330 | $1,925 - $2,125 | ||||||||||||
| FCFbG | $950 - $1,050 | $1,520 - $1,720 | ||||||||||||
a. Non-GAAP financial measure; see Appendix Table A-8 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.
2022 Capital Allocation Update
As announced on December 6, 2021, the Company's Board of Directors authorized $1 billion for share repurchases. The program began in 2021 with $39 million in share repurchases completed in December of that year, an incremental $564 million was completed through October 31, 2022, resulting in a balance of $397 million under the current program expected to be completed by the end of 2022.
On October 21, 2022, NRG announced that its Board of Directors declared a quarterly dividend on the Company's common stock of $0.35 per share, or $1.40 per share on an annualized basis. The dividend is payable on November 15, 2022, to stockholders of record as of November 1, 2022.
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2023 Capital Allocation
The Company is announcing its expected 2023 capital allocation plan, consistent with its capital allocation priorities and 2021 Investor Day roadmap. The Board of Directors approved $600 million incremental share repurchases program, to be completed in 2023; an 8% increase in its annual dividend to $1.51 per share beginning in the first quarter of 2023; $331 million in growth and other spend; and $628 million to be allocated at a future date.
The Company remains committed to maintaining a strong balance sheet, continues to work to achieve investment-grade credit metrics, and expects to grow into its target investment grade metrics, primarily through the realization of Direct Energy run-rate earnings and other growth initiatives.
The Company's share repurchase program and common stock dividend are subject to maintaining satisfactory credit metrics, available capital, market conditions, and compliance with associated laws and regulations. The timing and amount of any shares of NRG’s common stock that are repurchased under the share repurchase authorization will be determined by NRG’s management based on market conditions and other factors. NRG will only repurchase shares when management believes it would not jeopardize the company’s ability to maintain satisfactory credit ratings.
Earnings Conference Call
On November 7, 2022, NRG will host a conference call at 9:00 a.m. Eastern (8:00 a.m. Central) 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.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.
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 millions of 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, 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, general economic conditions, hazards customary in the power industry, weather conditions and extreme weather events, competition in wholesale power and gas markets, the volatility of energy and fuel prices, failure of customers or counterparties to perform under contracts, changes in the wholesale power and gas markets, changes in government or market regulations, the condition of capital markets generally, our ability to access capital markets, the potential impact of COVID-19 or any other pandemic on the Company’s operations, financial position, risk exposure and liquidity, data privacy, 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 or asset sales, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to achieve our net debt targets, our ability to achieve or 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
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maintain or create successful partnering relationships, our ability to operate our business efficiently, our ability to retain retail customers, our ability to execute our market operations strategy, 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 an 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, adjusted cash flow from operations and free cash flow guidance are estimates as of November 7, 2022. 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: | ||||||||||
Laura Avant | Kevin L. Cole, CFA | ||||||||||
713.537.5437 | 609.524.4526 | ||||||||||
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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) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Revenue | $ | 8,510 | $ | 6,609 | $ | 23,688 | $ | 19,943 | |||||||||||||||
| Operating Costs and Expenses | |||||||||||||||||||||||
| Cost of operations (excluding depreciation and amortization shown below) | 7,802 | 3,692 | 18,619 | 13,496 | |||||||||||||||||||
| Depreciation and amortization | 145 | 199 | 485 | 569 | |||||||||||||||||||
| Impairment losses | 43 | — | 198 | 306 | |||||||||||||||||||
| Selling, general and administrative costs | 326 | 318 | 973 | 973 | |||||||||||||||||||
| Provision for credit losses | 52 | 64 | 103 | 715 | |||||||||||||||||||
| Acquisition-related transaction and integration costs | 8 | 17 | 26 | 81 | |||||||||||||||||||
| Total operating costs and expenses | 8,376 | 4,290 | 20,404 | 16,140 | |||||||||||||||||||
| Gain on sale of assets | 22 | — | 51 | 17 | |||||||||||||||||||
| Operating Income | 156 | 2,319 | 3,335 | 3,820 | |||||||||||||||||||
| Other Income/(Expense) | |||||||||||||||||||||||
| Equity in earnings of unconsolidated affiliates | 11 | 15 | — | 23 | |||||||||||||||||||
| Other income, net | 21 | 8 | 33 | 42 | |||||||||||||||||||
| Loss on debt extinguishment | — | (57) | — | (57) | |||||||||||||||||||
| Interest expense | (105) | (122) | (313) | (374) | |||||||||||||||||||
| Total other expense | (73) | (156) | (280) | (366) | |||||||||||||||||||
| Income Before Income Taxes | 83 | 2,163 | 3,055 | 3,454 | |||||||||||||||||||
| Income tax expense | 16 | 545 | 739 | 840 | |||||||||||||||||||
| Net Income | $ | 67 | $ | 1,618 | $ | 2,316 | $ | 2,614 | |||||||||||||||
| Income per Share | |||||||||||||||||||||||
| Weighted average number of common shares outstanding — basic and diluted | 235 | 245 | 238 | 245 | |||||||||||||||||||
| Income per Weighted Average Common Share —Basic and Diluted | $ | 0.29 | $ | 6.60 | $ | 9.73 | $ | 10.67 | |||||||||||||||
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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, | ||||||||||||||||||||||
| (In millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Net Income | $ | 67 | $ | 1,618 | $ | 2,316 | $ | 2,614 | |||||||||||||||
| Other Comprehensive (Loss)/Income | |||||||||||||||||||||||
| Foreign currency translation adjustments | (32) | (11) | (45) | (6) | |||||||||||||||||||
| Defined benefit plans | (2) | 1 | 17 | 20 | |||||||||||||||||||
| Other comprehensive (loss)/income | (34) | (10) | (28) | 14 | |||||||||||||||||||
| Comprehensive Income | $ | 33 | $ | 1,608 | $ | 2,288 | $ | 2,628 | |||||||||||||||
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | ||||||||||
| (In millions, except share data) | (Unaudited) | (Audited) | |||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | 333 | $ | 250 | |||||||
| Funds deposited by counterparties | 3,134 | 845 | |||||||||
| Restricted cash | 46 | 15 | |||||||||
| Accounts receivable, net | 4,061 | 3,245 | |||||||||
| Uplift securitization proceeds receivable from ERCOT | — | 689 | |||||||||
| Inventory | 772 | 498 | |||||||||
| Derivative instruments | 9,938 | 4,613 | |||||||||
| Cash collateral paid in support of energy risk management activities | 262 | 291 | |||||||||
| Prepayments and other current assets | 417 | 395 | |||||||||
| Total current assets | 18,963 | 10,841 | |||||||||
| Property, plant and equipment, net | 1,598 | 1,688 | |||||||||
| Other Assets | |||||||||||
| Equity investments in affiliates | 126 | 157 | |||||||||
| Operating lease right-of-use assets, net | 236 | 271 | |||||||||
| Goodwill | 1,650 | 1,795 | |||||||||
| Intangible assets, net | 2,227 | 2,511 | |||||||||
| Nuclear decommissioning trust fund | 789 | 1,008 | |||||||||
| Derivative instruments | 4,914 | 2,527 | |||||||||
| Deferred income taxes | 1,516 | 2,155 | |||||||||
| Other non-current assets | 224 | 229 | |||||||||
| Total other assets | 11,682 | 10,653 | |||||||||
| Total Assets | $ | 32,243 | $ | 23,182 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Current portion of long-term debt and finance leases | $ | 62 | $ | 4 | |||||||
| Current portion of operating lease liabilities | 82 | 81 | |||||||||
| Accounts payable | 2,871 | 2,274 | |||||||||
| Derivative instruments | 6,841 | 3,387 | |||||||||
| Cash collateral received in support of energy risk management activities | 3,134 | 845 | |||||||||
| Accrued expenses and other current liabilities | 1,376 | 1,324 | |||||||||
| Total current liabilities | 14,366 | 7,915 | |||||||||
| Other Liabilities | |||||||||||
| Long-term debt and finance leases | 7,974 | 7,966 | |||||||||
| Non-current operating lease liabilities | 197 | 236 | |||||||||
| Nuclear decommissioning reserve | 335 | 321 | |||||||||
| Nuclear decommissioning trust liability | 433 | 666 | |||||||||
| Derivative instruments | 2,802 | 1,412 | |||||||||
| Deferred income taxes | 84 | 73 | |||||||||
| Other non-current liabilities | 922 | 993 | |||||||||
| Total other liabilities | 12,747 | 11,667 | |||||||||
| Total Liabilities | 27,113 | 19,582 | |||||||||
| Commitments and Contingencies | |||||||||||
| Stockholders' Equity | |||||||||||
Common stock; $0.01 par value; 500,000,000 shares authorized; 423,894,539 and 423,547,174 shares issued and 232,125,137, and 243,753,899 shares outstanding at September 30, 2022 and December 31, 2021, respectively | 4 | 4 | |||||||||
| Additional paid-in-capital | 8,450 | 8,531 | |||||||||
| Retained earnings | 2,584 | 464 | |||||||||
Treasury stock, at cost 191,769,402, and 179,793,275 shares at September 30, 2022 and December 31, 2021, respectively | (5,754) | (5,273) | |||||||||
| Accumulated other comprehensive loss | (154) | (126) | |||||||||
| Total Stockholders' Equity | 5,130 | 3,600 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 32,243 | $ | 23,182 | |||||||
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine months ended September 30, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Cash Flows from Operating Activities | |||||||||||
| Net Income | $ | 2,316 | $ | 2,614 | |||||||
| Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
| Distributions from and equity in earnings of unconsolidated affiliates | 7 | 8 | |||||||||
| Depreciation and amortization | 485 | 569 | |||||||||
| Accretion of asset retirement obligations | 20 | 21 | |||||||||
| Provision for credit losses | 103 | 715 | |||||||||
| Amortization of nuclear fuel | 42 | 39 | |||||||||
| Amortization of financing costs and debt discounts | 17 | 30 | |||||||||
| Loss on debt extinguishment | — | 57 | |||||||||
| Amortization of in-the-money contracts and emissions allowances | 122 | 111 | |||||||||
| Amortization of unearned equity compensation | 21 | 16 | |||||||||
| Net gain on sale and disposal of assets | (82) | (29) | |||||||||
| Impairment losses | 198 | 306 | |||||||||
| Changes in derivative instruments | (4,480) | (4,419) | |||||||||
| Changes in deferred income taxes and liability for uncertain tax benefits | 688 | 782 | |||||||||
| Changes in collateral deposits in support of energy risk management activities | 2,321 | 1,970 | |||||||||
| Changes in nuclear decommissioning trust liability | 2 | 38 | |||||||||
| Uplift securitization proceeds received from ERCOT | 689 | — | |||||||||
| Changes in other working capital | (711) | (973) | |||||||||
| Cash provided by operating activities | 1,758 | 1,855 | |||||||||
| Cash Flows from Investing Activities | |||||||||||
| Payments for acquisitions of businesses and assets, net of cash acquired | (60) | (3,534) | |||||||||
| Capital expenditures | (250) | (219) | |||||||||
| Net (purchases)/sales of emission allowances | (4) | 6 | |||||||||
| Investments in nuclear decommissioning trust fund securities | (361) | (460) | |||||||||
| Proceeds from the sale of nuclear decommissioning trust fund securities | 363 | 424 | |||||||||
| Proceeds from sales of assets, net of cash disposed | 107 | 198 | |||||||||
| Cash used by investing activities | (205) | (3,585) | |||||||||
| Cash Flows from Financing Activities | |||||||||||
| Payments of dividends to common stockholders | (252) | (239) | |||||||||
| Payments for share repurchase activity | (484) | (9) | |||||||||
| Net receipts from settlement of acquired derivatives that include financing elements | 1,596 | 396 | |||||||||
| Repayments of long-term debt and finance leases | (4) | (1,360) | |||||||||
| Proceeds from issuance of long-term debt | — | 1,100 | |||||||||
| Payments for debt extinguishment costs | — | (48) | |||||||||
| Payments of debt issuance costs | (1) | (18) | |||||||||
| Proceeds from issuance of common stock | — | 1 | |||||||||
| Cash provided/(used) by financing activities | 855 | (177) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (5) | (2) | |||||||||
| Net Increase/(Decrease) in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash | 2,403 | (1,909) | |||||||||
| Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period | 1,110 | 3,930 | |||||||||
| Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period | $ | 3,513 | $ | 2,021 | |||||||
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Appendix Table A-1: Third Quarter 2022 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net Income/(Loss):
| ($ in millions) | Texas | East | West/Services/ Other | Corp/Elim | Total | ||||||||||||
| Net (Loss)/Income | $ | (475) | $ | 555 | $ | 88 | $ | (101) | $ | 67 | |||||||
| Plus: | |||||||||||||||||
| Interest expense, net | — | (1) | 7 | 79 | 85 | ||||||||||||
| Income tax | — | — | 18 | (2) | 16 | ||||||||||||
| Depreciation and amortization | 77 | 39 | 22 | 7 | 145 | ||||||||||||
| ARO Expense | 2 | 2 | — | — | 4 | ||||||||||||
| Contract amortization | 4 | (19) | 5 | — | (10) | ||||||||||||
| EBITDA | (392) | 576 | 140 | (17) | 307 | ||||||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | — | — | 13 | — | 13 | ||||||||||||
| Acquisition and divestiture integration and transaction costs | — | — | — | 8 | 8 | ||||||||||||
| Deactivation costs | — | 7 | 1 | — | 8 | ||||||||||||
| (Gain)/loss on sale of assets | (22) | — | — | — | (22) | ||||||||||||
| Other non-recurring charges | 1 | 4 | — | 1 | 6 | ||||||||||||
| Impairments | — | 43 | — | — | 43 | ||||||||||||
| Mark to market (MtM) losses/(gains) on economic hedges | 596 | (455) | (52) | — | 89 | ||||||||||||
| Adjusted EBITDA | $ | 183 | $ | 175 | $ | 102 | $ | (8) | $ | 452 | |||||||
Third Quarter 2022 condensed financial information by Operating Segment:
| ($ in millions) | Texas | East | West/Services/ Other | Corp/Elim | Total | ||||||||||||
Revenue1 | $ | 3,145 | $ | 4,158 | $ | 1,172 | $ | 8 | $ | 8,483 | |||||||
Cost of fuel, purchased power and other cost of sales2 | 2,501 | 3,749 | 978 | 8 | 7,236 | ||||||||||||
Economic gross margin | 644 | 409 | 194 | — | 1,247 | ||||||||||||
Operations & maintenance and other cost of operations3 | 269 | 117 | 55 | (1) | 440 | ||||||||||||
Selling, marketing, general and administrative | 149 | 108 | 60 | 9 | 326 | ||||||||||||
| Provision for credit losses | 41 | 7 | 4 | — | 52 | ||||||||||||
Other | 2 | 2 | (27) | — | (23) | ||||||||||||
| Adjusted EBITDA | $ | 183 | $ | 175 | $ | 102 | $ | (8) | $ | 452 | |||||||
1 Excludes MtM gain of $33 million and contract amortization of $6 million
2 Includes TDSP expense, capacity and emission credits
3 Excludes other non-recurring charges of $8 million, deactivation costs of $8 million and ARO expense of $4 million
10
The following table reconciles the condensed financial information to Adjusted EBITDA:
| ($ in millions) | Condensed Consolidated Results of Operations | Interest, tax, depr., amort. | MtM | Deactivation | Other adj.2 | Adjusted EBITDA | ||||||||||||||
| Revenue | $ | 8,510 | $ | 6 | $ | (33) | $ | — | $ | — | $ | 8,483 | ||||||||
Cost of operations (excluding depreciation and amortization shown below)1 | 7,342 | 16 | (122) | — | — | 7,236 | ||||||||||||||
| Depreciation and Amortization | 145 | (145) | — | — | — | — | ||||||||||||||
| Gross margin | 1,023 | 135 | 89 | — | 0 | 1,247 | ||||||||||||||
| Operations & maintenance and other cost of operations | 460 | — | — | (8) | (12) | 440 | ||||||||||||||
Selling, marketing, general & administrative | 326 | — | — | — | — | 326 | ||||||||||||||
| Provision for credit losses | 52 | — | — | — | — | 52 | ||||||||||||||
Other | 118 | (101) | — | — | (40) | (23) | ||||||||||||||
| Net Income/(Loss) | $ | 67 | $ | 236 | $ | 89 | $ | 8 | $ | 52 | $ | 452 | ||||||||
1 Excludes Operations & maintenance and other cost of operations of $460 million
2 Other adj. includes impairments of $43 million, adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates of $13 million, acquisition and divestiture integration and transaction costs of $8 million, other non-recurring charges of $6 million, ARO expenses of $4 million and gain on sale of assets ($22) million
11
Appendix Table A-2: Third Quarter 2021 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net Income/(Loss):
| ($ in millions) | Texas | East | West/Services/ Other | Corp/Elim | Total | ||||||||||||
| Net Income/(Loss) | $ | 251 | $ | 1,980 | $ | 126 | $ | (739) | $ | 1,618 | |||||||
| Plus: | |||||||||||||||||
| Interest expense, net | — | 1 | 3 | 117 | 121 | ||||||||||||
| Income tax | — | — | 14 | 531 | 545 | ||||||||||||
| Loss on debt extinguishment | — | — | — | 57 | 57 | ||||||||||||
| Depreciation and amortization | 84 | 87 | 21 | 7 | 199 | ||||||||||||
| ARO Expense | 3 | 4 | — | — | 7 | ||||||||||||
| Contract amortization | 7 | (54) | 5 | — | (42) | ||||||||||||
| EBITDA | 345 | 2,018 | 169 | (27) | 2,505 | ||||||||||||
| Winter Storm URI | 19 | — | — | 2 | 21 | ||||||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | — | — | 17 | — | 17 | ||||||||||||
| Acquisition and divestiture integration and transaction costs | — | — | — | 17 | 17 | ||||||||||||
| Legal Settlement | — | (15) | — | 3 | (12) | ||||||||||||
| Deactivation costs | — | — | 1 | — | 1 | ||||||||||||
| Other non-recurring charges | — | (1) | 1 | 3 | 3 | ||||||||||||
| Mark to market (MtM) losses/(gains) on economic hedges | 82 | (1,783) | (84) | — | (1,785) | ||||||||||||
| Adjusted EBITDA | $ | 446 | $ | 219 | $ | 104 | $ | (2) | $ | 767 | |||||||
Third Quarter 2021 condensed financial information by Operating Segment:
| ($ in millions) | Texas | East | West/Services/ Other | Corp/Elim | Total | ||||||||||||
Revenue1 | $ | 2,636 | $ | 3,087 | $ | 885 | $ | 1 | $ | 6,609 | |||||||
Cost of fuel, purchased power and other cost of sales2 | 1,797 | 2,593 | 715 | 2 | 5,107 | ||||||||||||
Economic gross margin | 839 | 494 | 170 | (1) | 1,502 | ||||||||||||
Operations & maintenance and other cost of operations3 | 203 | 148 | 52 | (2) | 401 | ||||||||||||
Selling, marketing, general & administrative4 | 150 | 124 | 44 | 13 | 331 | ||||||||||||
| Provision for credit losses | 58 | 3 | 3 | — | 64 | ||||||||||||
Other | 1 | — | (33) | (8) | (40) | ||||||||||||
| Winter Storm Uri impact | (19) | — | — | (2) | (21) | ||||||||||||
| Adjusted EBITDA | $ | 446 | $ | 219 | $ | 104 | $ | (2) | $ | 767 | |||||||
1 Excludes MtM gain of $3 million and contract amortization of $3 million
2 Includes TDSP expense, capacity and emission credits
3 Excludes ARO expense of $7 million, other non-recurring charges of $3 million and deactivation costs of $1 million
4 Excludes legal settlements of $12 million
12
The following table reconciles the condensed financial information to Adjusted EBITDA:
| ($ in millions) | Condensed Consolidated Results of Operations | Interest, tax, depr., amort. | MtM | Deactivation | Winter Storm Uri | Other adj.2 | Adjusted EBITDA | ||||||||||||||||
| Revenue | $ | 6,609 | $ | 3 | $ | (3) | $ | — | $ | 2 | $ | — | $ | 6,611 | |||||||||
Cost of operations (excluding depreciation and amortization shown below)1 | 3,280 | 45 | 1,782 | — | 15 | — | 5,122 | ||||||||||||||||
| Depreciation and amortization | 199 | (199) | — | — | — | — | |||||||||||||||||
| Gross margin | 3,130 | 157 | (1,785) | — | (13) | — | 1,489 | ||||||||||||||||
| Operations & maintenance and other cost of operations | 412 | — | — | (1) | — | (10) | 401 | ||||||||||||||||
Selling, marketing, general & administrative | 318 | — | — | — | (2) | 13 | 329 | ||||||||||||||||
| Provision for credit losses | 64 | — | — | — | (32) | — | 32 | ||||||||||||||||
Other | 718 | (666) | — | — | (92) | (40) | |||||||||||||||||
| Net Income/(Loss) | $ | 1,618 | $ | 823 | $ | (1,785) | $ | 1 | $ | 21 | $ | 89 | $ | 767 | |||||||||
1 Excludes Operations & maintenance and other cost of operations of $412 million
2 Other adj. includes adjustment to reflect loss on debt extinguishment of $57 million, acquisition and divestiture integration and transaction costs of $17 million, NRG share of adjusted EBITDA in unconsolidated affiliates of $17 million, ARO expenses of $7 million, other non-recurring charges of $3 million and legal settlements of ($12) million
13
Appendix Table A-3: YTD Third Quarter 2022 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net Income/(Loss):
| ($ in millions) | Texas | East | West/ Services/ Other | Corp/Elim | Total | ||||||||||||
| Net Income/(Loss) | $ | 1,064 | $ | 2,086 | $ | 231 | $ | (1,065) | $ | 2,316 | |||||||
| Plus: | |||||||||||||||||
| Interest expense, net | — | (4) | 22 | 261 | 279 | ||||||||||||
| Income tax | — | (1) | 28 | 712 | 739 | ||||||||||||
| Depreciation and amortization | 230 | 167 | 65 | 23 | 485 | ||||||||||||
| ARO expense | 8 | 9 | 3 | — | 20 | ||||||||||||
| Contract and emission credit amortization, net | — | 103 | 12 | — | 115 | ||||||||||||
| EBITDA | 1,302 | 2,360 | 361 | (69) | 3,954 | ||||||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | — | — | 48 | — | 48 | ||||||||||||
| Acquisition and divestiture integration and transaction costs | — | — | — | 32 | 32 | ||||||||||||
| Deactivation costs | — | 16 | 1 | — | 17 | ||||||||||||
| (Gain)/loss on sale of assets | (10) | — | (43) | 2 | (51) | ||||||||||||
| Other non-recurring charges | 3 | 24 | (11) | 12 | 28 | ||||||||||||
| Impairments | — | 198 | — | — | 198 | ||||||||||||
| Mark to market (MtM) (gains)/losses on economic hedges | (663) | (2,037) | (207) | — | (2,907) | ||||||||||||
| Adjusted EBITDA | $ | 632 | $ | 561 | $ | 149 | $ | (23) | $ | 1,319 | |||||||
YTD Third Quarter 2022 condensed financial information by Operating Segment:
| ($ in millions) | Texas | East | West/ Services/ Other | Corp/Elim | Total | ||||||||||||
Revenue1 | $ | 7,867 | $ | 12,648 | $ | 3,438 | $ | 11 | $ | 23,964 | |||||||
Cost of fuel, purchased power and other cost of sales2 | 5,998 | 11,355 | 2,994 | 13 | 20,360 | ||||||||||||
Economic gross margin | 1,869 | 1,293 | 444 | (2) | 3,604 | ||||||||||||
Operations & maintenance and other cost of operations3 | 740 | 370 | 165 | (1) | 1,274 | ||||||||||||
Selling, general and administrative costs4 | 450 | 331 | 161 | 24 | 966 | ||||||||||||
| Provision for credit losses | 53 | 32 | 18 | — | 103 | ||||||||||||
Other | (6) | (1) | (49) | (2) | (58) | ||||||||||||
| Adjusted EBITDA | $ | 632 | $ | 561 | $ | 149 | $ | (23) | $ | 1,319 | |||||||
1 Excludes MtM loss of $248 million and contract amortization of $28 million
2 Includes TDSP expenses, capacity and emissions credits
3 Excludes ARO expense of $20 million, deactivation costs of $17 million and other-non recurring charges of $16 million
4 Excludes acquisition and divestiture integration and transaction costs of $7 million
14
The following table reconciles the condensed financial information to Adjusted EBITDA:
| ($ in millions) | Condensed Consolidated Results of Operations | Interest, tax, depr., amort. | MtM | Deactivation | Other adj.2 | Adjusted EBITDA | ||||||||||||||
| Revenue | $ | 23,688 | $ | 28 | $ | 248 | $ | — | $ | — | $ | 23,964 | ||||||||
Cost of operations (excluding depreciation and amortization shown below)1 | 17,292 | (87) | 3,155 | — | — | 20,360 | ||||||||||||||
| Depreciation and amortization | 485 | (485) | — | |||||||||||||||||
| Gross margin | 5,911 | 600 | (2,907) | — | — | 3,604 | ||||||||||||||
| Operations & maintenance and other cost of operations | 1,327 | — | — | (17) | (36) | 1,274 | ||||||||||||||
Selling, general and administrative costs | 973 | — | — | — | (7) | 966 | ||||||||||||||
| Provision for credit losses | 103 | — | — | — | — | 103 | ||||||||||||||
Other | 1,192 | (1,018) | — | — | (232) | (58) | ||||||||||||||
| Net Income/(Loss) | $ | 2,316 | $ | 1,618 | $ | (2,907) | $ | 17 | $ | 275 | $ | 1,319 | ||||||||
1 Excludes Operations & maintenance and other cost of operations of $1,327 million
2 Includes adjustment to reflect impairments of $198 million, NRG share of Adj EBITDA of $48 million, acquisition and divestiture integration and transaction costs of $32 million, other non-recurring charges of $28 million, ARO expense $20 million and gain on sale of assets ($51) million
15
Appendix Table A-4: YTD Third Quarter 2021 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net (Loss)/Income:
| ($ in millions) | Texas | East | West/ Services/ Other | Corp/Elim | Total | ||||||||||||
| Net Income/(Loss) | $ | 600 | $ | 3,119 | $ | 239 | $ | (1,344) | $ | 2,614 | |||||||
| Plus: | |||||||||||||||||
| Interest expense, net | 1 | (1) | 9 | 364 | 373 | ||||||||||||
| Income tax | — | — | 32 | 808 | 840 | ||||||||||||
| Loss on debt extinguishment | — | — | — | 57 | 57 | ||||||||||||
| Depreciation and amortization | 245 | 237 | 66 | 21 | 569 | ||||||||||||
| ARO expense | 10 | 9 | 2 | — | 21 | ||||||||||||
| Contract and emission credit amortization, net | — | 23 | 15 | — | 38 | ||||||||||||
| EBITDA | 856 | 3,387 | 363 | (94) | 4,512 | ||||||||||||
| Winter Storm Uri impact | 1,212 | (138) | (10) | 6 | 1,070 | ||||||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 1 | — | 55 | — | 56 | ||||||||||||
| Acquisition and divestiture integration and transaction costs | — | — | — | 83 | 83 | ||||||||||||
| Legal settlements | — | (15) | — | 11 | (4) | ||||||||||||
| Deactivation costs | — | 16 | 1 | — | 17 | ||||||||||||
| (Gain)/loss on sale of assets | — | — | (17) | — | (17) | ||||||||||||
| Other non-recurring charges | 2 | — | — | (12) | (10) | ||||||||||||
| Impairments | — | 306 | — | — | 306 | ||||||||||||
| Mark to market (MtM) (gains)/losses on economic hedges | (1,067) | (2,796) | (160) | — | (4,023) | ||||||||||||
| Adjusted EBITDA | $ | 1,004 | $ | 760 | $ | 232 | $ | (6) | $ | 1,990 | |||||||
YTD Third Quarter 2021 condensed financial information by Operating Segment:
| ($ in millions) | Texas | East | West/ Services/ Other | Corp/Elim | Total | ||||||||||||
Revenue1 | $ | 8,367 | $ | 9,070 | $ | 2,628 | $ | (4) | $ | 20,061 | |||||||
Cost of fuel, purchased power and other cost of sales2 | 6,791 | 7,361 | 2,151 | 1 | 16,304 | ||||||||||||
Economic gross margin | 1,576 | 1,709 | 477 | (5) | 3,757 | ||||||||||||
Operations & maintenance and other cost of operations3 | 656 | 423 | 177 | (5) | 1,251 | ||||||||||||
Selling, marketing, general & administrative4 | 435 | 385 | 131 | 31 | 982 | ||||||||||||
| Provision for credit losses | 700 | 7 | 8 | — | 715 | ||||||||||||
Other | (7) | (4) | (81) | (19) | (111) | ||||||||||||
| Winter Storm Uri impact | (1,212) | 138 | 10 | (6) | (1,070) | ||||||||||||
| Adjusted EBITDA | $ | 1,004 | $ | 760 | $ | 232 | $ | (6) | $ | 1,990 | |||||||
1 Excludes MtM loss of $99 million and contract amortization of $19 million
2 Includes TDSP expenses, capacity and emissions credits
3 Excludes deactivation expense of $17 million, ARO expense of $21 million, other non-recurring charges of $4 million, and legal settlements of $2 million
4 Excludes acquisition and divestiture integration and transaction costs of $3 million, legal settlement of $2 million and other non-recurring charges of ($14) million
16
The following table reconciles the condensed financial information to Adjusted EBITDA:
| ($ in millions) | Condensed Consolidated Results of Operations | Interest, tax, depr., amort. | MtM | Deactivation | Winter Storm Uri | Other adj.2 | Adjusted EBITDA | ||||||||||||||||
| Revenue | $ | 19,943 | $ | 19 | $ | 99 | $ | — | $ | (2,650) | $ | — | $ | 17,411 | |||||||||
Cost of operations (excluding depreciation and amortization shown below)1 | 12,201 | (19) | 4,122 | — | (3,052) | — | 13,252 | ||||||||||||||||
| Depreciation and amortization | 569 | (569) | — | — | — | — | |||||||||||||||||
| Gross margin | 7,173 | 607 | (4,023) | — | 402 | — | 4,159 | ||||||||||||||||
| Operations & maintenance and Other cost of operations | 1,295 | — | — | (17) | (2) | (27) | 1,249 | ||||||||||||||||
| Selling, marketing, general & administrative | 973 | — | — | — | (29) | 9 | 953 | ||||||||||||||||
| Provision for credit losses | 715 | — | — | — | (637) | — | 78 | ||||||||||||||||
Other | 1,576 | (1,213) | — | — | — | (474) | (111) | ||||||||||||||||
| Net Income/(Loss) | $ | 2,614 | $ | 1,820 | $ | (4,023) | $ | 17 | $ | 1,070 | $ | 492 | $ | 1,990 | |||||||||
1 Excludes Operations & maintenance and other cost of operations of $1,295 million
2 Other adj. includes adjustment to reflect impairments of $306 million, acquisition and divestiture integration and transaction costs of $83 million, loss on debt extinguishment $57 million, NRG share of adjusted EBITDA in unconsolidated affiliates of $56 million, ARO expense of $21 million, legal settlement of $4 million, gain on sale of assets of ($17) million and other non-recurring charges of ($10) million
17
Appendix Table A-5: 2022 and 2021 Three Months Ended September 30 Adjusted Cash Flow From Operations Reconciliations
The following table summarizes the calculation of adjusted cash flow from operating activities providing a reconciliation to net cash provided by operating activities:
| Three Months Ended | ||||||||||||||
| ($ in millions) | September 30, 2022 | September 30, 2021 | ||||||||||||
| Adjusted EBITDA | $ | 452 | $ | 767 | ||||||||||
| Winter Storm Uri loss | — | (21) | ||||||||||||
| Interest payments, net | (76) | (143) | ||||||||||||
| Income tax | (11) | (20) | ||||||||||||
| Collateral / working capital / other | (1,796) | 895 | ||||||||||||
| Cash Provided by Operating Activities | (1,431) | 1,478 | ||||||||||||
| Winter Storm Uri loss | — | 21 | ||||||||||||
| Securitization, C&I credits, and remaining open accounts receivables | 16 | 4 | ||||||||||||
| Net receipts from settlement of acquired derivatives that include financing elements | 646 | 205 | ||||||||||||
Acquisition and divestiture transaction and integration costs | 8 | 16 | ||||||||||||
Encina site improvement | 2 | 4 | ||||||||||||
| Adjustment for change in collateral | 800 | (1,274) | ||||||||||||
| Nuclear decommissioning trust liability | (5) | (9) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (5) | (3) | ||||||||||||
| Adjusted Cash Flow from Operating Activities | 31 | 442 | ||||||||||||
| Maintenance Capital Expenditures | (73) | (47) | ||||||||||||
| Free Cash Flow Before Growth Investments (FCFbG) | $ | (42) | $ | 395 | ||||||||||
18
Appendix Table A-6: 2022 and 2021 Nine 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:
| Nine Months Ended | ||||||||||||||
| ($ in millions) | September 30, 2022 | September 30, 2021 | ||||||||||||
| Adjusted EBITDA | $ | 1,319 | $ | 1,990 | ||||||||||
| Winter Storm Uri loss | — | (1,070) | ||||||||||||
| Interest payments, net | (254) | (333) | ||||||||||||
| Income tax | (47) | (8) | ||||||||||||
| Collateral / working capital / other | 740 | 1,276 | ||||||||||||
| Cash Provided by Operating Activities | 1,758 | 1,855 | ||||||||||||
| Winter Storm Uri loss | — | 1,070 | ||||||||||||
| Securitization, C&I credits, and remaining open accounts receivables | (608) | (107) | ||||||||||||
| Net receipts from settlement of acquired derivatives that include financing elements | 1,596 | 396 | ||||||||||||
Acquisition and divestiture transaction and integration costs | 32 | 82 | ||||||||||||
Encina site improvement | 11 | 19 | ||||||||||||
| GenOn Settlement | 4 | — | ||||||||||||
| Adjustment for change in collateral | (2,321) | (1,970) | ||||||||||||
| Nuclear decommissioning trust liability | 2 | (36) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (5) | (2) | ||||||||||||
| Adjusted Cash Flow from Operating Activities | 469 | 1,307 | ||||||||||||
| Maintenance Capital Expenditures | (174) | (142) | ||||||||||||
| Environmental Capital Expenditures | (1) | (2) | ||||||||||||
| Free Cash Flow Before Growth Investments (FCFbG) | $ | 294 | $ | 1,163 | ||||||||||
19
Appendix Table A-7: Nine Months Ended September 30, 2022 Sources and Uses of Liquidity
The following table summarizes the sources and uses of liquidity through third quarter of 2022:
| ($ in millions) | Nine months ended September 30, 2022 | ||||
| Sources: | |||||
| Adjusted Cash Flow from Operating Activities | $ | 469 | |||
| Uplift securitization proceeds received from ERCOT | 689 | ||||
| Proceeds from sale of assets | 107 | ||||
| Return of cash collateral paid | 29 | ||||
| Uses: | |||||
| Payments for share repurchase activity | (484) | ||||
| Payments of dividends to common stockholders | (252) | ||||
| Maintenance and Environmental capital expenditures, net | (175) | ||||
| Growth Investment capital expenditures | (75) | ||||
| Winter Storm Uri | (81) | ||||
| Payments for acquisitions of businesses and assets, net of cash acquired | (60) | ||||
| Acquisition and divestiture integration and transaction costs | (32) | ||||
| Decrease in availability of collective collateral facilities | (26) | ||||
Encina site improvement | (11) | ||||
| GenOn Settlement | (4) | ||||
| Net (purchases)/sales of emission allowances | (4) | ||||
| Other investing and financing | (2) | ||||
| Change in Total Liquidity | $ | 88 | |||
20
Appendix Table A-8: 2022 and 2023 Guidance Reconciliations
The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to Net Income/(Loss), and the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:
| 2022 | 2023 | ||||||||||
| ($ in millions) | Guidance | Guidance | |||||||||
Net Income1 | $ 345 - 445 | $ 735 - 935 | |||||||||
| Interest expense, net | 380 | 430 | |||||||||
| Income tax | 125 | 310 | |||||||||
| Depreciation, amortization, contract amortization, and ARO expense | 760 | 700 | |||||||||
| Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates | 70 | 15 | |||||||||
Impairments2 | 198 | — | |||||||||
Other costs3 | 70 | 80 | |||||||||
| Adjusted EBITDA | 1,950 - 2,050 | 2,270 - 2,470 | |||||||||
| Interest payments, net | (360) | (375) | |||||||||
| Income tax | (50) | (95) | |||||||||
Working capital / other assets and liabilities4 | (310) | 125 | |||||||||
| Cash provided by Operating Activities | 1,230 - 1,330 | 1,925 - 2,125 | |||||||||
| Adjustments: proceeds from investment and asset sales, collateral, nuclear decommissioning trust liability | 10 | 10 | |||||||||
| Adjusted Cash flow from Operations | 1,240 - 1,340 | 1,935 - 2,135 | |||||||||
Maintenance capital expenditures4 | (275) - (295) | (395) - (415) | |||||||||
| Environmental capital expenditures | (2) - (5) | (10) - (15) | |||||||||
| Free Cash Flow before Growth | $ 950 - 1,050 | $ 1,520 - 1,720 | |||||||||
1 For purposes of guidance, fair value adjustments related to derivatives are assumed to be zero
2 2022 represents impairments of Midwest Generation goodwill, PJM generating assets, and Astoria development spend
3 Includes deactivation costs and integration expenses
4 Maintenance capital expenditures excludes W.A. Parish expected insurance recoveries classified in Working capital / other assets and liabilities
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 expense (including loss on debt extinguishment), income taxes, depreciation and amortization, asset retirement obligation expenses, contract amortization consisting of amortization of power and fuel contracts and amortization of emission allowances. 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
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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. 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 forward position of economic hedges, 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.
Economic gross margin is a non-GAAP financial measure NRG provides to show gross margin excluding the impact of unrealized mark-to-market gains and losses on economic hedge positions as they relate to hedges that will settle in future periods, and contract and emission credit amortization as it is based on the valuation of acquired intangible assets as of the date of acquisition and is not reflective of current economic conditions or Company performance. Management believes economic gross margin is useful to investors and other users of NRG's financial statements in evaluating its current period operating performance.
Adjusted cash flow from operating activities is a non-GAAP financial 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 acquisition and divestiture transaction and integration costs, changes in the nuclear decommissioning trust liability, and the impact of extraordinary, unusual or non-recurring items. 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 acquisition and divestiture transaction and integration 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. The company excludes changes in the nuclear decommissioning trust liability as these amounts are offset by changes in the decommissioning fund shown in cash from investing.
Free cash flow (before Growth investments) 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 investments as a measure of cash available for discretionary expenditures.
Free Cash Flow before Growth Investment is utilized by Management in making decisions regarding the allocation of capital. Free Cash Flow before Growth Investment 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 Investment 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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