Energy, Automobile, EV, Renewable News | NRG Energy, Inc. Reports Full Year 2023 Financial Results

NRG Energy, Inc. Reports Full Year 2023 Financial Results

February 28, 2024

Exceeded revised guidance on Free Cash Flow before Growth and achieved high end of Adjusted EBITDA revised guidance
Delivered exceptional operational performance through volatile summer and winter conditions
Expanded margins and grew customer count in both the Energy and Smart Home portfolios
Completed $300 million Direct Energy synergy program and approximately $40 million toward current $250 million cost savings program
Ahead of pace on current $300 million growth program, with approximately $100 million realized to date
Returned $1.5 billion to shareholders or approximately 17% of 2023 average market capitalization
Paid down $1.52 billion of debt using $1.4 billion of cash
Increased annual common dividend by 8% for fifth consecutive year
Reaffirming 2024 Adjusted EBITDA and Free Cash Flow before Growth guidance ranges and capital allocation policy

HOUSTON–(BUSINESS WIRE)–NRG Energy, Inc. (NYSE: NRG) today reported Net Income for the three months ended December 31, 2023 of $482 million and a full year Net Loss of $202 million. The Net Loss was driven by unrealized non-cash mark-to-market losses on economic hedges due to large movements in natural gas and power prices. Adjusted EBITDA for full year 2023 was $3.3 billion, Net Cash Used by Operating Activities was $221 million, and Free Cash Flow Before Growth (FCFbG) was $1.9 billion.

“We delivered very strong financial performance in 2023,” said Larry Coben, NRG Chair, Interim President and Chief Executive Officer. “The Company is well positioned for 2024 and ahead of pace against the plan we laid out at our June 2023 Investor Day. We remain focused on executing against our consumer and capital allocation strategy.”

NRG is reaffirming its 2024 guidance ranges of $3,300 to $3,550 million in Adjusted EBITDA and $1,825 to $2,075 million in Free Cash Flow before Growth. The Company returned approximately $1.5 billion in share repurchases and common stock dividends in 2023 and remains committed to a capital allocation framework that is expected to return almost $5.5 billion over the next four years.

Consolidated Financial Results

Table 1

	Three Months Ended					Twelve Months Ended
($ in millions)	12/31/23		12/31/22			12/31/23			12/31/22
Net Income/(Loss)	$	482	$	(1,095	)	$	(202	)	$	1,221
Cash Provided/(Used) by Operating Activities	$	241	$	(1,398	)	$	(221	)	$	360
Adjusted EBITDA	$	844	$	463		$	3,282		$	1,865
Free Cash Flow Before Growth Investments (FCFbG)	$	942	$	274		$	1,925		$	568

NRG’s full year 2023 Adjusted EBITDA and FCFbG grew significantly compared to 2022, due to strong consolidated financial and operational performance across the Company.

The energy platform performed above plan, delivering strong customer count and product margins. In addition, the diversified supply portfolio benefited from targeted reliability investments in the generation fleet, resulting in approximately 15% annualized improvement on In-the-Money Availability, stabilizing and reducing supply costs despite volatile load and power price conditions in Texas. Since joining the NRG platform in March 2023, Smart Home has exceeded performance targets with increased average monthly recurring revenue, products sold per subscriber, and subscriber count.

Reaffirming 2024 Guidance

NRG is reaffirming its Adjusted EBITDA and FCFbG guidance for 2024 as set forth below.

Table 2: Adjusted EBITDA, Cash Provided by Operating Activities, and FCFbG Guidance^a

		2024
($ in millions)		Guidance
Adjusted EBITDA		$3,300 – $3,550
Cash Provided by Operating Activities		$1,825 – $2,075
FCFbG		$1,825 – $2,075

a. Adjusted EBITDA and FCFbG are non-GAAP financial measures; see Appendix Table A-8 for GAAP Reconciliation. Adjusted EBITDA 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. Cash Provided by Operating Activities does not include changes in collateral deposits in support of risk management activities which are primarily associated with fair value adjustments related to derivatives.

Capital Allocation

The Company’s long-term capital allocation policy is to target approximately 80% of recurring cash available for allocation (CAFA), after debt reduction consistent with achieving targeted credit metrics by 2025, to return of capital, and approximately 20% to strategic growth investments. As part of this plan, the Company expects to increase its dividend per share by 7-9% annually, complete its $2.7 billion share repurchase authorization, and reduce debt by up to $2.55 billion by year-end 2025.

In 2023, the Company returned approximately $1.5 billion to shareholders and paid down debt by $1.52 billion. NRG exceeded its original share repurchase target by $150 million and debt reduction target by $120 million. The Company returned $1.15 billion through share repurchases and returned $347 million in common dividends representing $1.51 per share. The Company’s $950 million accelerated share repurchase program executed in the fourth quarter of 2023 is planned to conclude by the end of the first quarter of 2024, at which time the Company expects to enter into a new share repurchase program.

For 2024, the Company reiterates its previously announced capital allocation plan that includes $500 million in debt paydown, $825 million in share repurchases, and an 8% increase of the annual common dividend.

On January 19, 2024, NRG declared a quarterly dividend on the Company’s common stock of $0.4075 per share, or $1.63 per share on an annualized basis. This represents an increase of 8% to the annual common dividend for the fifth consecutive year.

NRG’s share repurchase program and common stock dividend are subject to maintaining satisfactory credit metrics, available capital, market conditions, and compliance with associated laws and regulations. The timing and amount of any shares of NRG’s common stock repurchased under the share repurchase authorization will be determined by NRG’s management based on market conditions and other factors. NRG will only repurchase shares when management believes it would not jeopardize the Company’s ability to maintain satisfactory credit ratings.

NRG Strategic Developments

$550 Million 2023 – 2025 Growth and Cost Initiatives

The Company has identified select growth and cost opportunities throughout the business totaling $550 million of accretive and recurring FCFbG through 2025. These opportunities are comprised of $300 million of planned growth leveraging the capabilities of the Energy and Smart Home platforms, and $250 million of cost efficiency initiatives. As of December 31, 2023, NRG achieved approximately $100 million of the $300 million growth plan and achieved approximately $40 million of the $250 million cost initiatives.

Brownfield Generation Development

NRG continues to evaluate brownfield development opportunities at three of its existing generation sites in Texas, totaling up to 1.5 GW of dispatchable, natural gas fired capacity. The Texas Energy Fund, a low-cost Texas loan program to facilitate dispatchable new build generation, was formally approved in November 2023. NRG is awaiting the issuance of the Texas Energy Fund’s rules and regulations.

Virtual Power Plant Opportunity

NRG is uniquely positioned to leverage its customer portfolio, product ecosystem, and market expertise in expanding access to Virtual Power Plant (VPP) opportunities. Demand response and management will continue to be a strategic priority in 2024.

Segment Results

Table 3: Net Income/(Loss)

($ in millions)	Three Months Ended						Twelve Months Ended
Segment	12/31/23			12/31/22			12/31/23			12/31/22
Texas	$	1,559		$	213		$	3,091		$	1,265
East		(531	)		(1,757	)		(1,718	)		326
West/Services/Other^a		(501	)		449			(1,464	)		(370	)
Vivint Smart Home^b		(45	)		—			(111	)		—
Net Income/(Loss)	$	482		$	(1,095	)	$	(202	)	$	1,221

a. Includes Corporate segment

b. Vivint Smart Home acquired in March 2023

Net Income/(Loss) for the full year 2023 was $1.4 billion lower than prior year primarily driven by a $4.1 billion negative impact from higher unrealized non-cash mark-to-market losses on economic hedges due to large movements in natural gas and power prices. Certain economic hedge positions are required to be marked-to-market every period, while the customer contracts related to these items are not, resulting in temporary unrealized non-cash losses or gains on the economic hedges that are not reflective of the expected economics at future settlement. Partially offsetting these losses were the gain on sale of the Company’s 44% equity interest in STP and gross margin expansion in Texas.

Table 4: Adjusted EBITDA

($ in millions)	Three Months Ended				Twelve Months Ended
Segment	12/31/23		12/31/22		12/31/23		12/31/22
Texas	$	382	$	216	$	1,692	$	886
East		218		190		780		773
West/Services/Other^a		6		57		57		206
Vivint Smart Home^b		238		—		753		—
Adjusted EBITDA	$	844	$	463	$	3,282	$	1,865

a. Includes Corporate Segment

b. Vivint Smart Home acquired in March 2023

Texas: Full year 2023 Adjusted EBITDA was $1,692 million, $806 million higher than prior year. This increase was primarily driven by lower retail supply costs as a result of solid execution of NRG’s diversified supply strategy and improved plant performance, coupled with higher revenue rates.

East: Full year 2023 Adjusted EBITDA was $780 million, $7 million higher than prior year. This increase was primarily driven by higher retail power margins, partially offset by the impact of asset retirements and lower natural gas gross margin.

West/Services/Other: Full year 2023 Adjusted EBITDA was $57 million, $149 million lower than prior year. This decline was primarily driven by lower average realized pricing at Cottonwood, timing of planned outages, and lower contributions from the services business.

Vivint Smart Home: Adjusted EBITDA was $753 million, with subscriber growth of 6% over 2022 and expanded monthly recurring service margin.

Liquidity and Capital Resources

Table 5: Corporate Liquidity

(In millions)	12/31/23		12/31/22
Cash and Cash Equivalents	$	541	$	430
Restricted Cash		24		40
Total	$	565	$	470
Total credit facility availability		4,278		2,324
Total Liquidity, excluding collateral received	$	4,843	$	2,794

As of December 31, 2023, NRG’s unrestricted cash was $541 million, and $4.3 billion was available under the Company’s credit facilities. Total liquidity was $4.8 billion, which was $2.0 billion higher than December 31, 2022. This increase was due to specific initiatives to optimize the amount of collateral supporting NRG’s market operations activity and increases in credit facilities.

Earnings Conference Call

On February 28, 2024, NRG will host a conference call at 9:00 a.m. Eastern (8:00 a.m. Central) to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials through the investor relations website under “presentations and webcasts” on investors.nrg.com. The webcast will be archived on the site for those unable to listen in real-time.

About NRG

NRG Energy is a leading energy and home services company powered by people and our passion for a smarter, cleaner, and more connected future. A Fortune 500 company operating in the United States and Canada, NRG delivers innovative solutions that help people, organizations, and businesses achieve their goals while also advocating for competitive energy markets and customer choice. More information is available at www.nrg.com. Connect with NRG on Facebook and LinkedIn, and follow us on X.

Forward-Looking Statements

In addition to historical information, the information presented in this press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These statements involve estimates, expectations, projections, goals, assumptions, known and unknown risks and uncertainties and can typically be identified by terminology such as “may,” “should,” “could,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “expect,” “intend,” “seek,” “plan,” “think,” “anticipate,” “estimate,” “predict,” “target,” “potential” or “continue” or the negative of these terms or other comparable terminology. Such forward-looking statements include, but are not limited to, statements about the Company’s future revenues, income, indebtedness, capital structure, plans, expectations, objectives, projected financial performance and/or business results and other future events, and views of economic and market conditions.

Although NRG believes that its expectations are reasonable, it can give no assurance that these expectations will prove to be correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated herein include, among others, general economic conditions, hazards customary in the power industry, weather conditions and extreme weather events, competition in wholesale power, gas and smart home markets, the volatility of energy and fuel prices, failure of customers or counterparties to perform under contracts, changes in the wholesale power and gas markets, changes in government or market regulations, the condition of capital markets generally and NRG’s ability to access capital markets, NRG’s ability to execute its market operations strategy, risks related to data privacy, cyberterrorism and inadequate cybersecurity, the loss of data, unanticipated outages at NRG’s generation facilities, NRG’s ability to achieve its net debt targets, adverse results in current and future litigation, complaints, product liability claims and/or adverse publicity, failure to identify, execute or successfully implement acquisitions or asset sales, risks of the smart home and security industry, including risks of and publicity surrounding the sales, subscriber origination and retention process, the impact of changes in consumer spending patterns, consumer preferences, geopolitical tensions, demographic trends, supply chain disruptions, NRG’s ability to implement value enhancing improvements to plant operations and company-wide processes, NRG’s ability to achieve or maintain investment grade credit metrics, NRG’s 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, NRG’s ability to operate its business efficiently, NRG’s ability to retain retail customers, the ability to successfully integrate businesses of acquired companies, including Direct Energy and Vivint Smart Home, NRG’s 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 NRG’s ability to execute its 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, cash provided by operating activities and Free Cash Flow before Growth guidance are estimates as of February 28, 2024. These estimates are based on assumptions NRG believed to be reasonable as of that date. NRG disclaims any current intention to update such guidance, except as required by law. The foregoing review of factors that could cause NRG’s actual results to differ materially from those contemplated in the forward-looking statements included in this press release should be considered in connection with information regarding risks and uncertainties that may affect NRG’s future results included in NRG’s filings with the Securities and Exchange Commission at www.sec.gov. For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in NRG’s most recent Annual Report on Form 10-K, and in subsequent SEC filings. NRG’s forward-looking statements speak only as of the date of this communication or as of the date they are made.

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Year Ended December 31,
(In millions, except per share amounts)		2023			2022			2021
Revenue
Revenue	$	28,823		$	31,543		$	26,989
Operating Costs and Expenses
Cost of operations (excluding depreciation and amortization shown below)		26,526			27,446			20,482
Depreciation and amortization		1,127			634			785
Impairment losses		26			206			544
Selling, general and administrative costs		1,968			1,228			1,293
Provision for credit losses		251			11			698
Acquisition-related transaction and integration costs		119			52			93
Total operating costs and expenses		30,017			29,577			23,895
Gain on sale of assets		1,578			52			247
Operating Income		384			2,018			3,341
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates		16			6			17
Impairment losses on investments		(102	)		—			—
Other income, net		47			56			63
Gain/(Loss) on debt extinguishment		109			—			(77	)
Interest expense		(667	)		(417	)		(485	)
Total other expense		(597	)		(355	)		(482	)
(Loss)/Income Before Income Taxes		(213	)		1,663			2,859
Income tax (benefit)/expense		(11	)		442			672
Net (Loss)/Income		(202	)		1,221			2,187
Less: Cumulative dividends attributable to Series A Preferred Stock		54			—			—
Net (Loss)/Income Available for Common Stockholders	$	(256	)	$	1,221		$	2,187
(Loss)/Income Per Share
Weighted average number of common shares outstanding — basic and diluted		228			236			245
(Loss)/Income per Weighted Average Common Share — Basic and Diluted	$	(1.12	)	$	5.17		$	8.93

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

	For the Year Ended December 31,
(In millions)		2023			2022			2021
Net (Loss)/Income	$	(202	)	$	1,221		$	2,187
Other Comprehensive Income/(Loss), net of tax
Foreign currency translation adjustments		9			(35	)		(5	)
Defined benefit plans		30			(16	)		85
Other comprehensive income/(loss)		39			(51	)		80
Comprehensive (Loss)/Income	$	(163	)	$	1,170		$	2,267

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	As of December 31,
(In millions)		2023		2022
ASSETS
Current Assets
Cash and cash equivalents	$	541	$	430
Funds deposited by counterparties		84		1,708
Restricted cash		24		40
Accounts receivable, net		3,542		4,773
Inventory		607		751
Derivative instruments		3,862		7,886
Cash collateral paid in support of energy risk management activities		441		260
Prepayments and other current assets		626		383
Total current assets		9,727		16,231
Property, plant and equipment, net		1,763		1,692
Other Assets
Equity investments in affiliates		42		133
Operating lease right-of-use assets, net		179		225
Goodwill		5,079		1,650
Customer relationships, net		2,164		943
Other intangible assets, net		1,763		1,189
Nuclear decommissioning trust fund		—		838
Derivative instruments		2,293		4,108
Deferred income taxes		2,251		1,881
Other non-current assets		777		256
Total other assets		14,548		11,223
Total Assets	$	26,038	$	29,146

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)

	As of December 31,
(In millions, except share data)		2023			2022
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and finance leases	$	620		$	63
Current portion of operating lease liabilities		90			83
Accounts payable		2,325			3,643
Derivative instruments		4,019			6,195
Cash collateral received in support of energy risk management activities		84			1,708
Deferred revenue current		720			176
Accrued expenses and other current liabilities		1,642			1,114
Total current liabilities		9,500			12,982
Other Liabilities
Long-term debt and finance leases		10,133			7,976
Non-current operating lease liabilities		128			180
Nuclear decommissioning reserve		—			340
Nuclear decommissioning trust liability		—			477
Derivative instruments		1,488			2,246
Deferred income taxes		22			134
Deferred revenue non-current		914			10
Other non-current liabilities		947			973
Total other liabilities		13,632			12,336
Total Liabilities		23,132			25,318
Commitments and Contingencies
Stockholders’ Equity
Preferred stock; 10,000,000 shares authorized; 650,000 Series A shares issued and outstanding at December 31, 2023 (aggregate liquidation preference $650); 0 shares issued and outstanding at December 31, 2022		650			—
Common stock; $0.01 par value; 500,000,000 shares authorized; 267,330,470 and 423,897,001 shares issued; and 208,130,950 and 229,561,030 shares outstanding at December 31, 2023 and 2022, respectively		3			4
Additional paid-in capital		3,416			8,457
Retained earnings		820			1,408
Treasury stock, at cost; 59,199,520 and 194,335,971 shares at December 31, 2023 and 2022, respectively		(1,892	)		(5,864	)
Accumulated other comprehensive loss		(91	)		(177	)
Total Stockholders’ Equity		2,906			3,828
Total Liabilities and Stockholders’ Equity	$	26,038		$	29,146

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Year Ended December 31,
(In millions)		2023			2022			2021
Cash Flows from Operating Activities
Net (loss)/income	$	(202	)	$	1,221		$	2,187
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in and distributions from (earnings)/losses of unconsolidated affiliates		(6	)		7			20
Depreciation and amortization		1,127			634			785
Accretion of asset retirement obligations		27			55			30
Provision for credit losses		251			11			698
Amortization of nuclear fuel		47			54			51
Amortization of financing costs and debt discounts		52			23			39
(Gain)/Loss on debt extinguishment		(109	)		—			77
Amortization of in-the-money contracts and emissions allowances		137			158			106
Amortization of unearned equity compensation		101			28			21
Net gain on sale of assets and disposal of assets		(1,559	)		(102	)		(261	)
Impairment losses		128			206			544
Changes in derivative instruments		2,455			(3,221	)		(3,626	)
Changes in deferred income taxes and liability for uncertain tax benefits		(92	)		382			604
Changes in collateral deposits in support of risk management activities		(1,806	)		896			797
Changes in nuclear decommissioning trust liability		—			9			40
Uplift securitization proceeds received/(receivable) from ERCOT		—			689			(689	)
Cash (used)/provided by changes in other working capital, net of acquisition and disposition effects:
Accounts receivable – trade		840			(1,560	)		(1,232	)
Inventory		189			(252	)		(61	)
Prepayments and other current assets		(233	)		17			31
Accounts payable		(1,455	)		1,295			476
Accrued expenses and other current liabilities		360			(29	)		(55	)
Other assets and liabilities		(473	)		(161	)		(89	)
Cash (used)/provided by operating activities	$	(221	)	$	360		$	493
Cash Flows from Investing Activities
Payments for acquisitions of businesses and assets, net of cash acquired	$	(2,523	)	$	(62	)	$	(3,559	)
Capital expenditures		(598	)		(367	)		(269	)
Net purchases of emissions allowances		(24	)		(6	)		—
Investments in nuclear decommissioning trust fund securities		(367	)		(454	)		(751	)
Proceeds from sales of nuclear decommissioning trust fund securities		355			448			710
Proceeds from sale of assets, net of cash disposed		2,007			109			830
Proceeds from insurance recoveries for property, plant and equipment, net		240			—			—
Cash used by investing activities	$	(910	)	$	(332	)	$	(3,039	)