|Three Months Ended||Six Months Ended|
|($ in millions)||6/30/16||6/30/15||6/30/16||6/30/15|
|Cash From Operations||319||198||873||458|
|Free Cash Flow (FCF) Before Growth Investments||(29||)||(90||)||220||274|
- Net loss of $276 million for the second quarter of 2016, compared with a net loss of$9 million in the second quarter of 2015, driven by $198 million in impairments and the loss on sale of assets and $80 million loss on debt extinguishment
- Adjusted EBITDA of $779 million for the second quarter of 2016 represents a $98 million increase compared to the second quarter of 2015
NRG Energy, Inc. (NYSE:NRG) today reported a second quarter net loss of $276 million. The net loss for the first six months of 2016 was $229 million, or $0.37 per diluted common share compared to a net loss of $145 million, or $0.43 per diluted common share for the first six months of 2015. Adjusted EBITDA for the three and six months ended June 30, 2016, was$779 million and $1,592 million, respectively. Year-to-date cash from operations totaled $873 million.
“During the second quarter, our integrated competitive power platform, unique in our sector, performed exceptionally well,” said Mauricio Gutierrez, NRG’s President and Chief Executive Officer. “Our consistent performance continues to validate the strategic direction of our integrated approach, positioning us for market recovery while providing stability during periods of low commodity prices. While we execute our plan and simplify our value proposition, we remain focused on strengthening the balance sheet and increasing financial flexibility.”
1 Subject to working capital changes.
2 For comparability, 2015 results have been restated to include the negative contribution from residential solar of $47 million and $87 million for the three and six months ended June 30, 2015.
Table 1: Net Loss
|($ in millions)||Three Months Ended||Six Months Ended|
|NRG Yield (1)||58||38||60||18|
|Net Loss (3)||(276||)||(9||)||(229||)||(145||)|
(1) In accordance with GAAP, 2015 results have been restated to include full impact of the assets in the NYLD Drop Down transaction which closed on November 3, 2015.
(2) Includes residential solar.
(3) Includes mark-to-market gains and losses of economic hedges.
Table 2: Adjusted EBITDA
|($ in millions)||Three Months Ended||Six Months Ended|
|NRG Yield (2)||240||199||428||331|
|Adjusted EBITDA (4)||779||681||1,592||1,482|
(1) See Appendices A-6 through A-9 for Generation regional Reg G reconciliations.
(2) In accordance with GAAP, 2015 results have been restated to include full impact of the assets in the NYLD Drop Down transaction which closed on November 3, 2015.
(3) 2016 includes residential solar, 2015 results have been restated to include negative contribution of $47 million and $87 million for the three and six months ended June 30, 2015, respectively.
(4) See Appendices A-1 through A-4 for Operating Segment Reg G reconciliations.
Generation: Second quarter Adjusted EBITDA was $302 million, $9 million higher than second quarter 2015 primarily driven by:
- Gulf Coast Region: $26 million increase primarily due to higher South Central capacity revenues and favorable operating costs from reduced outages across the region, partially offset by lower energy margins in Texas from the decline in power prices on mild weather;
- East Region: $19 million lower due to lower energy margins on milder weather and lower dispatch, and lower capacity revenues due to lower pricing and plant deactivations.
Retail Mass: Second quarter Adjusted EBITDA was $213 million, $4 million higher than second quarter 2015 driven by operating cost efficiencies and lower supply costs offset by lower rates to customers and the impact from milder weather.
Renewables: Second quarter Adjusted EBITDA was $57 million, $9 million lower than second quarter 2015 due primarily to unplanned outages at Ivanpah.
NRG Yield: Second quarter Adjusted EBITDA was $240 million, $41 million higher than second quarter 2015 due to increased wind production and the acquisitions of Desert Sunlight and Spring Canyon.
Corporate: Second quarter Adjusted EBITDA was $(33) million, $53 million better than second quarter 2015 due to reduced spend at residential solar, lower headcount and favorable trading results at BETM.
Liquidity and Capital Resources
Table 3: Corporate Liquidity
($ in millions)
|Cash at NRG-Level (1)||$600||$693|
|Cash at Non-Guarantor Subsidiaries||789||825|
(1)Includes $250 million of unrestricted cash held at Midwest Gen (a non-guarantor subsidiary) which can be distributed to NRG without limitation
NRG-Level cash as of June 30, 2016, was $600 million, a decrease of $93 million from the end of 2015, and $1.3 billion was available under the Company’s credit facilities at the end of the second quarter of 2016. Total liquidity was $3.1 billion, including restricted cash and cash at non-guarantor subsidiaries (primarily GenOn and NRG Yield).
NRG Strategic Developments
NRG entered into two transactions to realize the value of its remaining stake in CVSR for a total cash consideration of $180 million:
- On July 15, 2016, CVSR Holdco, the indirect owner of the CVSR project, which is 51.05% owned by NRG, issued $200 million of senior secured notes, before fees, of which NRG’s pro-rata share of cash proceeds from the borrowings was $101.5 million.
- On August 8, 2016, NRG agreed to sell its 51.05% interest in the CVSR facility toNRG Yield for total cash consideration of approximately $78.5 million3 plus assumed project level debt. The sale is subject to customary closing conditions and is expected to close in the third quarter of 2016.
On July 12, 2016, GenOn completed the sale of Aurora for cash proceeds of $369 million, including $4 million in adjustments for the PJM base residual auction results and estimated working capital, which is subject to further adjustment, and NRG completed the sale of Rockford for cash proceeds of $56 million, including $1 million in adjustments for the PJM base residual auction results.
On May 26, 2016, the California Public Utilities Commission approved the resource adequacy purchase agreement between Southern California Edison and NRG for the construction of the 262 MW natural gas peaking Puente Power Project; the project has a targeted completion for the second quarter 2020.
3 Subject to working capital changes
NRG is reaffirming its guidance range for fiscal year 2016 with respect to Adjusted EBITDA and FCF before growth investments.
Table 4: 2016 Adjusted EBITDA and FCF before Growth Investments Guidance
|($ in millions)||2016|
|Adjusted EBITDA||$3,000 – 3,200|
|Cash Interest payments||(1,090)|
|Debt Extinguishment Cash Cost||(100)|
|Cash Income tax||(40)|
|Collateral / working capital / other||285|
|Cash From Operations||$2,055 – 2,255|
|Adjustments: Acquired Derivatives, Cost-to-Achieve, Return of Capital Dividends, and Collateral||(210)|
|Adjusted Cash flow from operations||$1,845 – 2,045|
|Maintenance capital expenditures, net||(435) – (465)|
|Environmental capital expenditures, net||(285) – (315)|
|Distributions to non-controlling interests||(170) – (180)|
|Free Cash Flow – before Growth Investments||$1,000 – 1,200|
Capital Allocation Update
On June 13, 2016, NRG retired 100% of the outstanding shares of its $345 million 2.822% preferred stock for $226 million cash resulting in an annual dividend savings of $10 million.
Year to date, NRG has reduced its 2018 corporate debt maturities by 84% through a combination of debt reduction and maturity extensions. The company issued new Senior Notes due 2026 and 2027 totaling approximately $2.25 billion at an average coupon rate of 6.9% permitting it to seek to redeem all of its Senior Notes due 2020, and a portion of the notes due 2021 and to significantly reduce the outstanding balances of its remaining Senior Notes due 2018, 2022 and 2023. The company also extended the maturity of the $1.9 billion2018 secured term loan facility to 2023 and extended the maturity of $2.2 billion of its secured revolving credit facility from 2018 to 2021.
Through June 30, 2016, NRG allocated $320 million of the $1.3 billion of 2016 NRG-level capital to debt repurchases, thereby reducing corporate debt by $337 million. Combined with the debt repurchases in 2015 and the planned redemption of a portion of 2020 and 2021 Senior Notes in September 2016, NRG will have retired $642 million4 of corporate debt resulting in an annual interest savings of $50 million. NRG expects to allocate approximately$439 million of 2016 capital toward further corporate debt reduction during the year and continues to maintain a reserve totaling $430 million which is expected to be used to retire a portion of its 2018 Senior Notes (currently $587 million outstanding).
On July 13, 2016, NRG declared a quarterly dividend on the company’s common stock of$0.03 per share, payable August 15, 2016, to stockholders of record as of August 1, 2016, representing $0.12 on an annualized basis.
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.
4 Includes $246 million in 2015 at cash cost of $226 million, $337 million through June YTD 2016 at a cash cost of $375 million, and proforma for $59 million to be completed inSeptember 2016 as part of the 2020/21 Senior Notes extension at a cash cost of $100 millionfollowing the issuance of the 2026/27 Senior Notes, extended revolver and 2023 term loan.