NRG Energy, Inc. Reports First Quarter 2021 Results

: Business Wire; Posted On May 06, 2021

Winter Storm Uri expected net impact of $500 to $700 million
Reinstating 2021 Adjusted EBITDA and FCFbG guidance
Announced appointment of Alberto Fornaro as Executive Vice President and Chief Financial Officer
Designated Houston, TX as sole Corporate Headquarters

HOUSTON--(BUSINESS WIRE)--NRG Energy, Inc. (NYSE: NRG) today reported a first quarter 2021 net loss of $(82) million, or $(0.33) per diluted common share and Adjusted EBITDA for the first quarter of $567 million.

“NRG is committed to helping Texans recover from the impacts of Winter Storm Uri and working with our stakeholders on lasting solutions to improve resilience in the ERCOT market,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “We remain focused on advancing our customer-centric strategy and strengthening our platform.”

Consolidated Financial Results
	Three Months Ended
($ in millions)	3/31/2021			3/31/2020
Net (Loss)/Income	$	(82	)	$	121
Cash (used)/provided by Operating Activities	$	(917	)	$	208
Adjusted EBITDA^a	$	567		$	349
a. Excludes the loss due to Winter Storm Uri of $967 million

Loss from Winter Storm Uri

During the quarter ended March 31, 2021, Winter Storm Uri's financial impact was a loss of $967 million. Based on forecasted expenses and estimated mitigants, the total cash impact from Winter Storm Uri is expected to be in the range of $500 to $700 million over time. The following impacts are further discussed in the related sections below:

($ in millions)	Winter Storm Uri Impact
Net ERCOT settlements and results from other regions	$	25
ERCOT shortfall payment (reduced by $90 million for discounting long term payable)		(95	)
Uplift and ancillary service charges		(395	)
Provision for credit losses for bilateral financial hedging risk		(393	)
Provision for credit losses for business counterparty risk		(109	)
Total impact to Loss Before Income Taxes for quarter ended March 31, 2021		(967	)
Expenses to be incurred beyond March 31, 2021		(8	)
Total impact to Loss Before Income Taxes during 2021		(975	)
Estimated mitigants		275 - 475
Total net cash flow impact	$	(500) - (700	)

Segments Results
Table 1: Net (Loss)/Income
($ in millions)	Three Months Ended
Segment	3/31/2021			3/31/2020
Texas	$	(425	)	$	162
East	353			20
West/Services/Other^a	(10		)	(61		)
Net (Loss)/Income	$	(82	)	$	121
a. Includes Corporate segment

Table 2: Adjusted EBITDA^a
($ in millions)	Three Months Ended
Segment	3/31/2021		3/31/2020
Texas	$	254	$	195
East	266		86
West/Services/Other^b	47		68
Adjusted EBITDA	$	567	$	349
a. Excludes the loss due to Winter Storm Uri of $967 million b. Includes Corporate segment

The following discussion of financial results exclude the impact from Winter Storm Uri:

Texas: First quarter Adjusted EBITDA was $254 million, $59 million higher than first quarter of 2020. This increase is driven by the acquisition of Direct Energy as well as lower supply costs, partially offset by a reduction of load due to weather.

East: First quarter Adjusted EBITDA was $266 million, $180 million higher than first quarter of 2020. This increase is driven by the acquisition of Direct Energy, prior year write-down of oil inventory by $29 million, and lower plant operating costs.

West/Services/Other: First quarter Adjusted EBITDA was $47 million, $21 million lower than first quarter of 2020. This decrease is due to the receipt of outage insurance proceeds in 2020 of $30 million and lower equity earnings due to the sale of Agua Caliente in February 2021, partially offset by an increase due to the acquisition of Direct Energy.

Liquidity and Capital Resources
Table 3: Corporate Liquidity
($ in millions)	05/04/21		03/31/21		12/31/20
Cash and Cash Equivalents	$	575	$	501	$	3,905
Restricted Cash	15		18		6
Total	590		$	519	$	3,911
Total credit facilities available	3,473		2,724		3,129
Total Liquidity, excluding collateral received	4,063		$	3,243	$	7,040

As of March 31, 2021, NRG cash was at $0.5 billion, and $2.7 billion was available under the Company’s credit facilities. Total liquidity was $3.2 billion, including restricted cash. Overall liquidity as of the end of the first quarter 2021 was approximately $3.8 billion lower than at the end of 2020, driven by the closing of the $3.6 billion Direct Energy acquisition. As of May 4, 2021, NRG had $4.1 billion of liquidity available to continue to support its operations.

NRG Strategic Developments

Winter Storm Uri

During February 2021, Texas experienced unprecedented cold temperatures for a prolonged duration, resulting in a power emergency, blackouts, and an estimated all-time peak demand of 77 GWs (without load shed). Ahead of the event, NRG launched residential customer communications calling for conservation across all of its brands and initiated residential, commercial and industrial demand response programs to curtail customer load. The Company maximized available generating capacity and brought in additional resources to supplement in-state staff with technical and operating experts from the rest of its U.S. fleet.

During the quarter ended March 31, 2021, Winter Storm Uri's financial impact was a loss of $967 million. The impact is driven by resettlement data, ERCOT system wide counterparty defaults, provisions for credits losses, increased uplift charges to load, ancillary charges and other estimates including results from other regions. The Company expects the total 2021 loss before income tax to be $975 million, and a net cash flow impact of $350-550 million, after deducting $150 million of bill credits owed to large Commercial and Industrial (C&I) customers to be paid in 2022 and $275-475 million of estimated mitigants that the Company is pursuing. These potential offsets include, but are not limited to, customer bad debt mitigation, counterparty default recovery, ERCOT default and uplift regulatory securitization, and one-time cost savings.

In February 2021, NRG announced an initial $10 million commitment to provide relief for Texans impacted by the unprecedented effects of Winter Storm Uri. The relief effort included $3 million in cash donations and $7 million covering in-kind relief efforts and customer assistance. The funding addressed the immediate needs of the community, including food, water, and temporary or damaged housing; providing financial relief for customers through this difficult time; and aiding affected employees. Following the initial announcement, NRG provided additional tranches of financial support totaling over $1.5 million, volunteer support for several community events, and continues to provide assistance to customers.

Sale of 4.8GW of fossil generation assets in East and West regions

On February 28, 2021, the Company entered into a definitive purchase agreement with Generation Bridge, an affiliate of ArcLight Capital Partners, to sell approximately 4,850 MWs of fossil generating assets from its East and West regions of operations for total proceeds of $760 million, subject to standard purchase price adjustments and certain other indemnifications. As part of the transaction, NRG is entering into a tolling agreement for its 866 MW Arthur Kill plant in New York City through April 2025.

The transaction is expected to close in the fourth quarter of 2021, and is subject to various closing conditions, approvals and consents, including Federal Energy Regulatory Commission (FERC), New York State Public Service Commission (NYSPSC), and antitrust review under Hart-Scott-Rodino Act.

Closed sale of remaining ownership in Agua Caliente

On February 3, 2021, the Company completed the sale of its remaining 35% ownership in the Agua Caliente solar project to Clearway Energy for $202 million.

Closed acquisition of Direct Energy

On January 5, 2021, the Company closed on the Direct Energy acquisition, paying an aggregate purchase price of $3.625 billion in cash, plus an initial purchase price adjustment of $77 million. As part of the acquisition, Direct Energy had cash and margin collateral totaling $385 million. The Company funded the acquisition using $715 million of cash on hand, a $166 million draw on its corporate revolver, and approximately $2.9 billion in newly issued secured and unsecured corporate debt. In addition, the Company increased its collective liquidity and collateral facilities by $3.4 billion. The final purchase price adjustment resulted in a reduction of $38 million and the Company is expecting to receive this payment from Centrica during the second quarter.

The Company remains on track to achieve operational and cost synergies of $135 million in 2021 and an annual run-rate of $300 million to be achieved in 2023 by leveraging NRG’s scalable operational platform and best-in-class cost discipline. This includes $51 million from realized synergies in the first quarter of 2021.

Today, NRG announced the designation of Houston, TX as the Company’s sole Corporate Headquarters. The move to a single headquarters simplifies business operations, as a significant portion of the Company’s employees and customers reside in Texas. NRG will maintain regional offices in the markets that it serves as the Company continues to grow. As the company makes progress against Direct Energy integration milestones, it will continue to evaluate real estate needs and consolidate as appropriate.

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. During 2020, summer-critical office employees returned to the offices and safety protocols were successfully implemented. The Company is currently planning to begin returning certain employees to the offices through a phased approach expected to be completed by the end of summer.

2021 Guidance Reinstated

NRG is reinstating guidance for Adjusted EBITDA, Adjusted Cash from Operations and Free Cash Flow before Growth Investments (FCFbG) for 2021 which excludes the full year impact of Winter Storm Uri.

Table 4: 2021 Adjusted EBITDA, Adjusted Cash from Operations, and FCFbG Guidance
		2021
(In millions)		Guidance
Adjusted EBITDA^a		$2,400 - $2,600
Adjusted Cash Flow From Operations		$1,630 - $1,830
FCFbG		$1,440 - $1,640

Non-GAAP financial measure; see Appendix Tables A-4 for GAAP Reconciliation to Net Income (Loss)/Income that excludes fair value adjustments related to derivatives. The Company is unable to provide guidance for Net Income (Loss)/Income due to the impact of such fair value adjustments related to derivatives in a given year

Capital Allocation Update

On April 19, 2021, NRG declared a quarterly dividend on the Company's common stock of $0.325 per share, payable on May 17, 2021 to stockholders of record as of May 3, 2021.

In light of the impact of Winter Storm Uri, the Company’s deleveraging program will extend into 2022. The Company remains committed to maintaining a strong balance sheet and continues to work closely with rating agencies to achieve investment grade credit ratings.

The Company's common stock dividend and debt reductions are subject to available capital, market conditions, and compliance with associated laws and regulations.

Earnings Conference Call

On May 6, 2021, 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.

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 presentation 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 and extreme weather events, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers or counterparties to perform under contracts, changes in the wholesale power markets, changes in government or market 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 company-wide processes, 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 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 and free cash flow guidance are estimates as of May 6, 2021. 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 presentation 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.

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three months ended March 31,
(In millions, except for per share amounts)	2021			2020
Operating Revenues
Total operating revenues	$	8,091		$	2,019
Operating Costs and Expenses
Cost of operations	6,864			1,457
Depreciation and amortization	317			109
Selling, general and administrative costs	330			190
Provision for credit losses	611			24
Acquisition-related transaction and integration costs	42			1
Total operating costs and expenses	8,164			1,781
Gain on sale of assets	17			6
Operating (Loss)/Income	(56		)	244
Other (Expense)/Income
Equity in losses of unconsolidated affiliates	(6		)	(11		)
Impairment losses on investments	—			(18		)
Other income, net	22			27
Interest expense	(127		)	(98		)
Total other expense	(111		)	(100		)
(Loss)/Income Before Income Taxes	(167		)	144
Income tax (benefit)/expense	(85		)	23
Net (Loss)/Income	(82		)	121
(Loss)/Income per Share
Weighted average number of common shares outstanding — basic	245			248
(Loss)/Income per Weighted Average Common Share — Basic	$	(0.33	)	$	0.49
Weighted average number of common shares outstanding — diluted	245			249
(Loss)/Income per Weighted Average Common Share — Diluted	$	(0.33	)	$	0.49

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
	Three months ended March 31,
(In millions)	2021			2020
Net (Loss)/Income	$	(82	)	$	121
Other Comprehensive Income/(Loss)
Foreign currency translation adjustments	3			(15		)
Other comprehensive income/(loss)	3			(15		)
Comprehensive (Loss)/Income	(79		)	106

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31, 2021			December 31, 2020
(In millions, except share data)	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash and cash equivalents	$	501		$	3,905
Funds deposited by counterparties	55			19
Restricted cash	18			6
Accounts receivable, net	3,037			904
Inventory	316			327
Derivative instruments	1,816			560
Cash collateral paid in support of energy risk management activities	298			50
Prepayments and other current assets	511			257
Total current assets	6,552			6,028
Property, plant and equipment, net	2,328			2,547
Other Assets
Equity investments in affiliates	162			346
Operating lease right-of-use assets, net	312			301
Goodwill	1,572			579
Intangible assets, net	3,054			668
Nuclear decommissioning trust fund	909			890
Derivative instruments	1,008			261
Deferred income taxes	2,719			3,066
Other non-current assets	625			216
Total other assets	10,361			6,327
Total Assets	$	19,241		$	14,902
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and finance leases	$	831		$	1
Current portion of operating lease liabilities	79			69
Accounts payable	2,216			649
Derivative instruments	1,606			499
Cash collateral received in support of energy risk management activities	55			19
Accrued expenses and other current liabilities	1,008			678
Total current liabilities	5,795			1,915
Other Liabilities
Long-term debt and finance lease	8,705			8,691
Non-current operating lease liabilities	280			278
Nuclear decommissioning reserve	308			303
Nuclear decommissioning trust liability	580			565
Derivative instruments	834			385
Deferred income taxes	30			19
Other non-current liabilities	1,192			1,066
Total other liabilities	11,929			11,307
Total Liabilities	17,724			13,222
Commitments and Contingencies
Stockholders' Equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 423,519,121 and 423,057,848 shares issued and 244,693,206 and 244,231,933 shares outstanding at March 31, 2021 and December 31, 2020, respectively	4			4
Additional paid-in-capital	8,513			8,517
Accumulated deficit	(1,565		)	(1,403		)
Less treasury stock, at cost - 178,825,915 at March 31, 2021 and December 31, 2020	(5,232		)	(5,232		)
Accumulated other comprehensive loss	(203		)	(206		)
Total Stockholders' Equity	1,517			1,680
Total Liabilities and Stockholders' Equity	$	19,241		$	14,902

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three months ended March 31,
(In millions)	2021			2020
Cash Flows from Operating Activities
Net (Loss)/Income	$	(82	)	$	121
Adjustments to reconcile net (loss)/income to cash (used)/provided by operating activities:
Distributions from and equity in losses of unconsolidated affiliates	17			16
Depreciation and amortization	317			109
Accretion of asset retirement obligations	3			11
Provision for credit losses	611			24
Amortization of nuclear fuel	13			13
Amortization of financing costs and debt discounts	11			6
Amortization of emissions allowances and energy credits	7			7
Amortization of unearned equity compensation	4			5
Gain on sale and disposal of assets	(18		)	(14		)
Impairment losses	—			18
Changes in derivative instruments	(902		)	(46		)
Changes in deferred income taxes and liability for uncertain tax benefits	(71		)	19
Changes in collateral deposits in support of energy risk management activities	1			9
Changes in nuclear decommissioning trust liability	15			8
Changes in other working capital	(843		)	(98		)
Net Cash (Used)/Provided by Operating Activities	(917		)	208
Cash Flows from Investing Activities
Payments for acquisitions of businesses, net of cash acquired	(3,482		)	—
Capital expenditures	(63		)	(66		)
Net purchases of emission allowances	(5		)	(8		)
Investments in nuclear decommissioning trust fund securities	(129		)	(121		)
Proceeds from the sale of nuclear decommissioning trust fund securities	118			112
Proceeds from sale of assets, net of cash disposed	197			15
Net Cash Used by Investing Activities	(3,364		)	(68		)
Cash Flows from Financing Activities
Payments of dividends to common stockholders	(80		)	(74		)
Payments for share repurchase activity	(9		)	(179		)
Net payments from settlement of acquired derivatives that include financing elements	190			(3		)
Net proceeds of Revolving Credit Facility and Receivables Securitization Facilities	825			552
Payments of debt issuance costs	(2		)	—
Proceeds from issuance of common stock	1			—
Repayments of long-term debt and finance leases	(1		)	(60		)
Proceeds from issuance of long-term debt	—			59
Purchase of and distributions to noncontrolling interests from subsidiaries	—			(2		)
Net Cash Provided by Financing Activities	924			293
Effect of exchange rate changes on cash and cash equivalents	1			—
Net (Decrease)/increase in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash	(3,356		)	433
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period	3,930			385
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period	$	574		$	818

Contacts

Media:
Candice Adams
609.524.5428

Investors:
Kevin L. Cole, CFA
609.524.4526

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