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NRG Energy, Inc. Reports Full Year Results and Maintains 2021 Guidance

·21-min read
  • Aiding Texas communities and performing root-cause analysis

  • Significant advancement of customer-focused strategy:

    • Closed Direct Energy acquisition on January 5, 2021

    • Closed on sale of Agua Caliente on February 3, 2021

    • Announcing sale of 4.8GW of fossil generation assets

  • Maintaining 2021 guidance

NRG Energy, Inc. (NYSE: NRG) today reported full year 2020 income from continuing operations of $510 million, or $2.07 per diluted common share. Adjusted EBITDA for the full year of 2020 was $2.0 billion, cash from continuing operations was $1.8 billion and Free Cash Flow Before Growth (FCFbG) was $1.5 billion.

"Our priority today is both helping our Texas communities recover and working with all necessary stakeholders to improve the resilience of the energy system," said Mauricio Gutierrez, NRG President and Chief Executive Officer. "We continue to advance our customer-focused strategy with the completion of the Direct Energy acquisition and today’s announced sale of 4.8 GW non-core fossil generating assets. Our integrated platform performed well in 2020 and continues to perform through unprecedented conditions, further validating our business model."

Consolidated Financial Resultsa

Three Months Ended

Twelve Months Ended

(In millions)

12/31/20

12/31/19

12/31/20

12/31/19

Income/(Loss) from Continuing Operations

$

(173)

$

3,463

$

510

$

4,120

Cash From Continuing Operations

$

451

$

516

$

1,837

$

1,405

Adjusted EBITDA

$

330

$

384

$

2,004

$

1,977

Free Cash Flow Before Growth Investments (FCFbG)

$

387

$

539

$

1,547

$

1,212

a. In accordance with GAAP, 2019 results have been recast to reflect the discontinued operations
of the South Central Portfolio and Carlsbad Energy Center

Segment Results

Table 1: Income/(Loss) from Continuing Operations

(In millions)

Three Months Ended

Twelve Months Ended

Segment

12/31/20

12/31/19

12/31/20

12/31/19

Texas

$

(1)

$

215

$

799

$

972

East

52

7

371

287

West/Othera

(224)

3,241

(660)

2,861

Income/(Loss) from Continuing Operationsb

$

(173)

$

3,463

510

$

4,120

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

Twelve Months Ended

Segment

12/31/20

12/31/19

12/31/20

12/31/19

Texas

$

231

$

251

$

1319

$

1339

East

86

103

459

484

West/Othera

13

30

226

154

Adjusted EBITDAb

$

330

$

384

$

2004

$

1977

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: Fourth quarter Adjusted EBITDA was $231 million, $20 million lower than fourth quarter of 2019. This decrease is driven by a reduction of load primarily due to weather, increase in bad debt expenses related to COVID-19; partially offset by lower supply costs.

East: Fourth quarter Adjusted EBITDA was $86 million, $17 million lower than fourth quarter of 2019. This decrease is driven by lower capacity revenues and higher operating expenses, partially offset by lower supply costs.

West/Other: Fourth quarter Adjusted EBITDA was $13 million, $17 million lower than fourth quarter of 2019. This decrease is driven by lower realized pricing at our Cottonwood facility.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

(In millions)

2/26/21

12/31/20

12/31/19

Cash and Cash Equivalents

$

1,923

$

3,905

$

345

Restricted Cash

12

6

8

Total

$

1,935

$

3,911

$

353

Total credit facility availability

1,865

3,129

1,794

Total Liquidity, excluding collateral received

$

3,800

$

7,040

$

2,147

As of December 31, 2020, NRG cash was at $3.9 billion, and $3.1 billion was available under the Company’s credit facilities. Total liquidity was $7.0 billion, including restricted cash. Overall liquidity as of year-end 2020 was approximately $4.9 billion higher than at the end of 2019, driven by $2.9 billion in financings and a $1.5 billion increase in credit facilities to fund the Direct Energy acquisition of which $1.4 billion was issued in the fourth quarter. The increases in credit facility and Put Option Agreement facility became available coincident with the closing of the Direct Energy acquisition. As of February 26, 2021, NRG had $3.8 billion of liquidity available to continue to support its operations.

NRG Strategic Developments

Extreme weather event in Texas during February 2021

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 and 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. NRG is committed to working with all necessary stakeholders on a comprehensive, objective, and exhaustive root cause analysis of the entirety of the energy system.

The estimated financial impact is still preliminary, due to customer meter and settlement data not being finalized, as well as potential customer and counterparty risk and expected ERCOT default allocations. Based on a preliminary analysis, Winter Storm Uri’s financial impact is expected to be within NRG’s current guidance range. The Company separately stress-tested assumptions and although at a lower probability, this stress-test analysis indicated a potential plus or minus $100 million to guidance ranges. NRG’s integrated platform continues to deliver stable results through unprecedented events.

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.

Closed sale of remaining ownership in Agua Caliente

On November 19, 2020, the Company entered into an agreement to sell its 35% ownership in Agua Caliente to Clearway Energy for $202 million. The sale of the solar project closed on February 3, 2021.

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, subject to a 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, $166 million draw on its corporate revolver and approximately $2.9 billion in newly issued secured and unsecured corporate debt. In addition, the Company completed the expansion of its liquidity facilities by $3.4 billion.

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.

2021 Guidance

Following the closing of the Direct Energy acquisition, NRG updated 2021 guidance to reflect the combination of NRG and Direct Energy based on NRG’s previously disclosed guidance. NRG is maintaining its Adjusted EBITDA, Adjusted Cash from Operations and Free Cash Flow before Growth Investments (FCFbG) guidance for 2021.

Table 4: 2021 Adjusted EBITDA, Adjusted Cash from Operations, and FCFbG Guidance

2021

(In millions)

Guidance

Adjusted EBITDAa

$2,400-$2,600

Adjusted Cash From Operations

$1,630-$1,830

FCFbG

$1,440-$1,640

a. Non-GAAP financial measure; see Appendix Tables 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.

Capital Allocation Update

As part of the Company's long-term capital allocation policy, the return of capital to shareholders during the twelve months ending December 31, 2020 was comprised of a quarterly dividend of $.30 per share, or $295 million, and share repurchases of $228 million at an average price of $33.05 per share.

On January 21, 2021, NRG declared an 8% increase to its quarterly dividend on the Company's common stock from $0.30 per share to $0.325 per share, which was paid on February 16, 2021 to stockholders of record as of February 1, 2021, representing $1.30 per share on an annualized basis. This increase is in-line with the Company's previously announced annual dividend growth rate target of 7-9% per share.

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 March 1, 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 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 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 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 and free cash flow guidance are estimates as of March 1, 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

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended December 31,

(In millions, except per share amounts)

2020

2019

2018

Operating Revenues

Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

9,093

$

9,821

$

9,478

Operating Costs and Expenses

Cost of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,540

7,303

7,108

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

435

373

421

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75

5

99

Selling, general and administrative costs . . . . . . . . . . . . . . . . . . . . . . . . . .

933

827

799

Reorganization costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23

90

Development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

7

11

Total operating costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,991

8,538

8,528

Other income - affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

7

32

Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,105

1,290

982

Other Income/(Expense)

Equity in earnings of unconsolidated affiliates . . . . . . . . . . . . . . . . . . . . .

17

2

9

Impairment losses on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(18)

(108)

(15)

Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67

66

18

Loss on debt extinguishment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)

(51)

(44)

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(401)

(413)

(483)

Total other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(344)

(504)

(515)

Income from Continuing Operations Before Income Taxes . . . . . . . . . . . . . .

761

786

467

Income tax expense/(benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

251

(3,334)

7

Income from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

510

4,120

460

Income from discontinued operations, net of income tax . . . . . . . . . . . . . . . .

321

(192)

Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

510

4,441

268

Less: Net income attributable to noncontrolling interest
and redeemable interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Net Income Attributable to NRG Energy, Inc. . . . . . . . . . . . . . . . . . . . . . $

510

$

4,438

$

268

Earnings/(Loss) Per Share Attributable to NRG Energy, Inc. Common

Stockholders

Weighted average number of common shares outstanding — basic . . . . . . . . .

245

262

304

Income from continuing operations per weighted average common share —

basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2.08

$

15.71

$

1.51

Income/(loss) from discontinued operations per weighted average common

share — basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

$

1.23

$

(0.63)

Net Income per Weighted Average Common Share — Basic . . . . . . . . . $

2.08

$

16.94

$

0.88

Weighted average number of common shares outstanding — diluted . . . . . . .

246

264

308

Income from continuing operations per weighted average common share —

diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

2.07

$

15.59

$

1.49

Income/(loss) from discontinued operations per weighted average common

share — diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

$

1.22

$

(0.62)

Net Income per Weighted Average Common Share — Diluted . . . . . . . .

$

2.07

$

16.81

$

0.87

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Year Ended December 31,

(In millions)

2020

2019

2018

Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

510

$

4,441

$

268

Other Comprehensive Income/(Loss), net of tax . . . . . . . . . . . . . . . . . . . .

Unrealized gain on derivatives, net of income tax . . . . . . . . . . . . . . .

23

Foreign currency translation adjustments, net of income tax

8

(1)

(11)

Available-for-sale securities, net of income tax

(19)

1

Defined benefit plans, net of income tax

(22)

(78)

(35)

Other comprehensive (loss)

(14)

(98)

(22)

Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

496

4,343

246

Less: Comprehensive income attributable to noncontrolling interests
and redeemable noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . .

3

14

Comprehensive Income Attributable to NRG Energy, Inc. . . . . . . . . . . .

$

496

$

4,340

$

232

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31,

(In millions)

2019

2020

ASSETS

Current Assets

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

3,905

$

345

Funds deposited by counterparties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

32

Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68

68

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

904

1,025

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

327

383

Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

560

860

Cash collateral posted in support of energy risk management...

50

190

Prepayments and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

257

245

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,028

3,088

Property, plant and equipment, net

2,547

2,593

Other Assets

Equity investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

346

388

Operating lease right-of-use assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

301

464

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

579

579

Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

668

789

Nuclear decommissioning trust fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

890

794

Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

261

310

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,066

3,286

Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

216

240

Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,327

6,850

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

14,902

$

12,531

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

As of December 31,

(In millions, except share data)

2020

2019

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Current portion of long-term debt and finance lease . . . . . . . . . . . . . . . . . . . . .

$

1

$

88

Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .

69

73

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

649

722

Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

499

781

Cash collateral received in support of energy risk management activities . . . .

19

32

Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . .

678

663

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,915

2,359

Other Liabilities

Long-term debt and finance lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,691

5,803

Non-current operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

278

483

Nuclear decommissioning reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

303

298

Nuclear decommissioning trust liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

565

487

Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

385

322

Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

17

Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,066

1,084

Total other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,307

8,494

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,222

10,853

Redeemable noncontrolling interest in subsidiaries . . . . . . . . . . . . . . . . . . . . .

20

Commitments and Contingencies

Stockholders' Equity

Common stock; $0.01 par value; 500,000,000 shares authorized;

423,057,848 and 421,890,790 shares issued; and 244,231,933 and

248,996,189 shares outstanding at December 31, 2020 and 2019 . . . . . . . . . .

4

4

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,517

8,501

Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,403)

(1,616)

Treasury stock, at cost; 178,825,915 and 172,894,601 shares at

December 31, 2020 and 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,232)

(5,039)

Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(206)

(192)

Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,680

1,658

Total Liabilities and Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

14,902

$

12,531

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended December 31,

(In millions)

2020

2019

2018

Cash Flows from Operating Activities

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

510

$

4,441

$

268

Income/(loss) from discontinued operations, net of income tax — 321 (192)

321

(192)

Income from continuing operations 510 4,120 460

510

4,120

460

Adjustments to reconcile net income to net cash provided by operating activities:

Distributions from and equity in earnings of unconsolidated affiliates . . . . . . . . . . . . . . . . . . . . . . .

45

14

46

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

435

373

421

Accretion expense related to asset retirement obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45

51

38

Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108

95

85

Amortization of nuclear fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54

52

48

Amortization of financing costs and debt discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48

26

29

Loss on debt extinguishment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

51

44

Amortization of emission allowances, out-of-market contracts and REC retirements . . . . . . . . . . .

70

72

71

Amortization of unearned equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22

20

25

Net gain on sale of assets and disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(23)

(23)

(49)

Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93

113

114

Changes in derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

137

34

37

Changes in deferred income taxes and liability for uncertain tax benefits . . . . . . . . . . . . . . . . . . . .

228

(3,353)

5

Changes in collateral deposits in support of risk management activities . . . . . . . . . . . . . . . . . . . . .

127

105

(105)

Changes in nuclear decommissioning trust liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51

37

60

Oil lower of cost or market adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29

2

GenOn settlement, net of insurance proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(63)

Net loss on deconsolidation of Agua Caliente and Ivanpah projects . . . . . . . . . . . . . . . . . . . . . . . .

13

Cash provided/(used) by changes in other working capital, net of acquisition and disposition effects:

Accounts receivable - trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

(83)

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27

22

29

Prepayments and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

29

(41)

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(56)

(177)

113

Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(42)

(75)

(192)

Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(84)

(186)

(104)

Cash provided by continuing operations

1,837

1,405

1,003

Cash provided by discontinued operations

8

374

Net Cash Provided by Operating Activities

1,837

1,413

1,377

Cash Flows from Investing Activities

Payments for acquisitions of assets, businesses and leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(284)

(355)

(243)

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(230)

(228)

(388)

Net (purchases)/sales of emissions allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10)

11

19

Investments in nuclear decommissioning trust fund securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(492)

(416)

(572)

Proceeds from sales of nuclear decommissioning trust fund securities . . . . . . . . . . . . . . . . . . . . . .

439

381

513

Proceeds from sale of assets, net of cash disposed and sale of discontinued operations, net of fees

81

1,294

1,564

Deconsolidations of Agua Caliente and Ivanpah projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(268)

Changes in investments in unconsolidated affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

(91)

(39)

Net contributions to discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(44)

(60)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

(6)

Cash (used)/provided by continuing operations

(494)

558

520

Cash used by discontinued operations

(2)

(725)

Net Cash (Used)/Provided by Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(494)

556

(205)

For the Year Ended December 31,

(In millions)

2020

2019

2018

Cash Flows from Financing Activities

Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,234

1,833

1,100

Payments for short and long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(335)

(2,571)

(1,734)

Net (repayments)/proceeds of Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(83)

83

Payments of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(75)

(35)

(19)

Payments of dividends to common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(295)

(32)

(37)

Payments for share repurchase activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(229)

(1,440)

(1,250)

Payments for debt extinguishment costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

(26)

(32)

Purchase of and distributions to noncontrolling interests from subsidiaries . . . . . . . . . . . . . . . . . . .

(2)

(2)

(16)

Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

3

21

Receivable from affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(26)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)

(4)

(4)

Cash provided/(used) by continuing operations

2,204

(2,191)

(1,997)

Cash provided by discontinued operations

43

471

Net Cash Provided/(Used) by Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,204

(2,148)

(1,526)

Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)

1

Change in Cash from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49

120

Net Increase/(Decrease) in Cash and Cash Equivalents, Funds Deposited by Counterparties and

Restricted Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,545

(228)

(473)

Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at

Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

385

613

1,086

Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of

Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

3,930

$

385

$

613

Appendix Table A-1: Fourth 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

$

(1)

52

(67)

(157)

(173)

Plus:

Interest expense, net

3

106

109

Income tax

(1)

35

34

Loss on debt extinguishment

2

5

7

Depreciation and amortization

60

42

7

8

117

ARO Expense

(4)

2

1

(1)

Contract amortization

1

1

EBITDA

56

100

(55)

(7)

94

Adjustment to reflect NRG share of adjusted
EBITDA in unconsolidated affiliates

7

25

(1)

31

Acquisition-related transaction, integration costs,
and costs to achieve

11

11

Reorganization costs

(2)

(2)

Deactivation costs

3

1

4

Gain on sale of business

3

3

Other non recurring charges

7

5

2

14

Impairments

14

33

(5)

42

Mark to market (MtM) (gains)/losses on economic hedges

147

(22)

8

133

Adjusted EBITDA

$

231

86

14

(1)

330

1 Includes International, remaining renewables and Generation eliminations

Fourth Quarter 2020 condensed financial information by Operating Segment:

(In millions)

Texas

East

West/

Other1

Corp/Elim

Total

Operating revenues

$

1,381

531

101

(2)

2,011

Cost of sales

805

252

65

(2)

1,120

Economic gross margin2

576

279

36

...

891

Operations & maintenance and other cost of operations3

198

111

26

(2)

333

Selling, marketing, general & administrative

146

85

11

6

248

Other (income)4

1

(3)

(15)

(3)

(20)

Adjusted EBITDA

$

231

86

14

(1)

330

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gains of $133 million and contract amortization of $1 million

3 Excludes $4 million of deactivation costs

4 Includes development costs. Excludes $343 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition-related transaction costs, integration costs, costs to achieve, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

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

$

2,027

(18)

2

2,011

Cost of operations

1,271

(1)

(151)

1

1,120

Gross margin

756

1

133

1

891

Operations & maintenance and other cost of operations1

344

(4)

(7)

333

Selling, marketing, general &

administrative2

262

(14)

248

Other expense/(income)3

323

(260)

(83)

(20)

Income/(Loss) from Continuing

Operations

$

(173)

261

133

4

105

330

1 Other adj. includes ARO expense

2 Other adj. includes other non recurring charges

3 Other adj. includes gain on sale of assets, acquisition-related transaction costs, integration costs, costs to achieve, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

Appendix Table A-2: Fourth 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/Elim

Total

Income/(Loss) from Continuing Operations

$

215

7

(3)

3,244

3,463

Plus:

Interest expense, net

4

88

92

Income tax

2

(3,345)

(3,343)

Loss on debt extinguishment

3

1

4

Depreciation and amortization

63

34

7

8

112

ARO Expense

17

3

1

21

Contract amortization

3

3

EBITDA

298

50

8

(4)

352

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

24

1

25

Acquisition-related transaction, integration costs & costs to achieve

1

1

Reorganization costs

1

6

7

Legal Settlements

1

1

Deactivation costs

(1)

6

2

3

10

Gain on sale of business

(6)

(6)

Other non recurring charges

(6)

3

(3)

(2)

(8)

Impairments

1

4

5

Mark to market (MtM) (gains)/losses on economic hedges

(42)

44

(5)

(3)

Adjusted EBITDA

$

251

103

30

384

1 Includes International, remaining renewables and Generation eliminations

Fourth Quarter 2019 condensed financial information by Operating Segment:

(In millions

Texas

East

West/
Other1

Corp/Elim

Total

Operating revenues

$

1,542

550

128

(6)

2,214

Cost of sales

982

257

76

2

1,317

Economic gross margin2

560

293

52

(8)

897

Operations & maintenance and other cost of operations3

193

109

26

(1)

327

Selling, marketing, general & administrative4

116

82

9

3

210

Other (income)5

(1)

(13)

(10)

(24)

Adjusted EBITDA

$

251

103

30

384

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM loss of $3 million and contract amortization of $3 million

3 Excludes $10 million of deactivation costs

4 Excludes legal settlements of $1 million

5 Includes development costs. Excludes $3,204 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition-related transaction costs, integration costs, costs to achieve, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

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

$

2,195

18

1

2,214

Cost of operations

1,298

(3)

21

1

1,317

Gross margin

897

3

(3)

897

Operations & maintenance and other cost of operations1

418

(10)

(81)

327

Selling, marketing, general &

administrative2

244

(34)

210

Other expense/(income)3

(3,228)

3,139

65

(24)

Income/(Loss) from Continuing

Operations

$

3,463

(3,136)

(3)

10

50

384

1 Other adj. includes ARO expense and lease amortization

2 Other adj. includes legal settlements and other non recurring charges

3 Other adj. includes gain on sale of assets, acquisition-related transaction costs, integration costs, costs to achieve, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

Appendix Table A-3: Full Year 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

$

799

371

19

(679)

510

Plus:

Interest expense, net

13

3

377

393

Income tax

(1)

2

250

251

Loss on debt extinguishment

4

5

9

Depreciation and amortization

227

142

32

34

435

ARO Expense

25

16

4

45

Contract amortization

5

5

EBITDA

1,056

545

65

(18)

1,648

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

9

97

(1)

105

Acquisition-related transaction, integration costs, and costs to achieve

2

23

25

Reorganization costs

(1)

(1)

Deactivation costs

2

5

2

9

Gain on sale of business

2

(19)

(17)

Other non recurring charges

9

2

12

23

Impairments

32

61

93

Mark to market (MtM) (gains)/losses on economic hedges

209

(93)

3

119

Adjusted EBITDA

$

1,319

459

230

(4)

2,004

1 Includes International, remaining renewables and Generation eliminations

Full Year 2020 condensed financial information by Operating Segment:

(In millions)

Texas

East

West/
Other1

Corp/Elim

Total

Operating revenues

$

6,307

2,266

437

(12)

8,998

Cost of sales

3,656

1,080

190

(6)

4,920

Economic gross margin2

2,651

1,186

247

(6)

4,078

Operations & maintenance and other cost of operations3

779

444

113

(6)

1,330

Selling, marketing, general and administrative

561

289

38

23

911

Other (income)4

(8)

(6)

(134)

(19)

(167)

Adjusted EBITDA

$

1,319

459

230

(4)

2,004

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gain of $119 million and contract amortization of $5 million

3 Excludes $9 million of deactivation costs

4 Includes development costs. Excludes $1,277 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition-related transaction costs, integration costs, costs to achieve, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

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

$

9,093

(95)

8,998

Cost of operations

5,139

(5)

(214)

4,920

Gross margin

3,954

5

119

4,078

Operations & maintenance and other cost of operations1

1,401

(9)

(62)

1,330

Selling, marketing, general &

administrative2

933

(22)

911

Other expense/(income)3

1,110

(1,079)

(198)

(167)

Income from Continuing

Operations

$

510

1,084

119

9

282

2,004

1 Other adj. includes ARO expense and other non recurring charges

2 Other adj. includes legal settlements and other non recurring charges

3 Other adj. includes gain on sale of assets, acquisition-related transaction costs, integration costs, costs to achieve, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

Appendix Table A-4: Full Year 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

$

972

287

7

2,854

4,120

Plus:

Interest expense, net

17

9

368

394

Income tax

2

1

(3,337)

(3,334)

Loss on debt extinguishment

3

48

51

Depreciation and amortization

188

121

33

31

373

ARO Expense

28

11

13

(1)

51

Contract amortization

19

19

EBITDA

1,207

438

66

(37)

1,674

Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates

12

104

(1)

115

Acquisition-related transaction, integration costs, and costs to achieve

1

1

1

3

Reorganization costs

6

17

23

Legal Settlements

3

6

2

2

13

Deactivation costs

(1)

12

7

9

27

Gain on sale of business

(6)

(6)

Other non recurring charges

(2)

2

(2)

(3)

(5)

Impairments

103

4

6

113

Mark to market (MtM) (gains)/losses on economic hedges

10

25

(15)

20

Adjusted EBITDA

$

1,339

484

166

(12)

1,977

1 Includes International, remaining renewables and Generation eliminations

Full Year 2019 condensed financial information by Operating Segment:

(In millions)

Texas

East

West/

Other1

Corp/
Elim

Total

Operating revenues

$

7,022

2,348

424

(6)

9,788

Cost of sales

4,484

1,162

233

(1)

5,878

Economic gross margin2

2,538

1,186

191

(5)

3,910

Operations & maintenance and other cost of operations3

742

420

112

(4)

1,270

Selling, marketing, general & administrative4

483

288

32

12

815

Other (income)5

(26)

(6)

(119)

(1)

(152)

Adjusted EBITDA

$

1,339

484

166

(12)

1,977

1 Includes International, remaining renewables and Generation eliminations

2 Excludes MtM gain of $20 million and contract amortization of $19 million

3 Excludes $27 million of deactivation costs

4 Excludes legal settlements of $13 million

5 Includes development costs. Excludes $2,277 million of interest expense, income tax, depreciation and amortization, gain on sale of assets, acquisition-related transaction costs, integration costs, costs to achieve, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

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

$

9,821

0

(33)

9,788

Cost of operations

5,950

(19)

(53)

5,878

Gross margin

3,871

19

20

0

0

3,910

Operations & maintenance and other cost of operations1

1,353

(27)

(56)

1,270

Selling, marketing, general & administrative2

827

(12)

815

Other expense/(income)3

(2,429)

2,567

(290)

(152)

Income/(Loss) from Continuing

Operations

$

4,120

(2,548)

20

27

358

1,977

1 Other adj. includes ARO expense and lease amortization

2 Other adj. includes legal settlements, acquisition-related transaction & integration costs and other non recurring charges

3 Other adj. includes gain on sale of assets, acquisition-related transaction costs, integration costs, costs to achieve, reorganization costs, other non recurring charges, impairments and loss on debt extinguishment

Appendix Table A-5: 2020 and 2019 Three Months Ended December 31 and Full Year 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)

December 31, 2020

December 31, 2019

Net Cash Provided by Operating Activities

$

451

$

516

Merger, integration and cost-to-achieve expenses1

11

20

Note repayment

5

Encina Site improvement

7

1

Proceeds from investment and asset sales

2

Adjustment for change in collateral

(32)

23

Nuclear Decommissioning Trust Liability2

(12)

Adjusted Cash Flow from Operating Activities

425

567

Maintenance CapEx, net

(35)

(25)

Environmental CapEx, net

(1)

(1)

Distributions to non-controlling interests

(2)

(2)

Free Cash Flow before Growth

$

387

$

539

1 2019 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call
2 2019 includes $10 million of Nuclear Decommissioning Trust Liability

Twelve Months Ended

December 31, 2020

December 31, 2019

Net Cash Provided by Operating Activities

$

1,837

$

1,405

Merger, integration and cost-to-achieve expenses1

26

39

GenOn settlement2

18

Note repayment

5

Encina Site improvement

11

1

Proceeds from investment and asset sales

12

2

Adjustment for change in collateral

(127)

(97)

Nuclear Decommissioning Trust Liability3

(51)

Adjusted Cash Flow from Operating Activities

1,708

1,373

Maintenance CapEx, net

(156)

(156)

Environmental CapEx, net

(3)

(3)

Distributions to non-controlling interests

(2)

(2)

Free Cash Flow before Growth

$

1,547

$

1,212

1 2019 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call

2 2019 includes final restructuring fee of $5 million and pension contribution of $13 million

3 2019 includes $37 million of Nuclear Decommissioning Trust Liability

Appendix Table A-6: Full Year 2020 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity for the full year 2020:

Twelve Months Ended

(In millions)

December 31, 2020

Sources:

Adjusted cash flow from operations

$

1,708

Proceeds from issuance of long-term debt

3,234

Increase in Credit Facility

1,335

Proceeds from asset sales

81

Collateral

127

Uses:

Share repurchases

(229)

Corporate Debt payments

(335)

Revolver pay down

(83)

Financing Fees - Debt issuance and Debt extinguishment costs

(80)

Midwest Generation lease buyout

(260)

Growth investments and acquisitions, net

(120)

Maintenance and Environmental CapEx, net

(159)

Encina site improvement

(11)

Other Investing and Financing

(20)

Common Stock Dividends

(295)

Change in Total Liquidity

$

4,893

Appendix Table A-7: 2021 Adjusted EBITDA Guidance Reconciliation

The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income:

2021 Adjusted EBITDA

(In millions)

Low

High

Income from Continuing Operations1

$

1,180

$

1,380

Income Tax

25

25

Interest Expense

475

475

Depreciation, Amortization, Contract Amortization and ARO Expense

555

555

Adjustment to reflect NRG share of adjusted
EBITDA in unconsolidated affiliates

70

70

Other Costs2

95

95

Adjusted EBITDA

$

2,400

$

2,600

1 For purposes of guidance, discontinued operations are excluded and fair value adjustments related to derivatives are assumed to be zero

2 Includes deactivation costs and integration costs

Appendix Table A-8: 2021 FCFbG Guidance Reconciliation

The following table summarizes the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:

2021

(In millions)

Guidance

Adjusted EBITDA

$2,400 - $2,600

Interest payments

(475)

Income tax

(25)

Working capital / other assets and liabilities

(300)

Cash From Operations

$1,600 - $1,800

Adjustments: Acquired Derivatives, Integration Costs, Return of Capital Dividends, Collateral, GenOn Pension and Other

30

Adjusted Cash flow from Operations

$1,630 - $1,830

Maintenance capital expenditures, net

(180) - (195)

Environmental capital expenditures, net

(5) - (10)

Free Cash Flow before Growth

$1,440 - $1,640

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.

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, related restructuring costs and changes in the nuclear decommissioning trust liability. 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. 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) 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210301005489/en/

Contacts

Media:
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609.524.5428

Investors:
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609.524.4526