Energy, Automobile, EV, Renewable News | NRG Energy, Inc. Reports Full Year Results and Maintains 2022 Guidance

NRG Energy, Inc. Reports Full Year Results and Maintains 2022 Guidance

February 24, 2022

2021 financial results in line with guidance
Reduced Winter Storm Uri financial impact to $380 million
Closed 4.8 GW asset sale and corresponding $500 million debt reduction
Executing $1 billion 2022 share repurchase program
Maintaining 2022 Adjusted EBITDA and FCFbG guidance

HOUSTON–(BUSINESS WIRE)–NRG Energy, Inc. (NYSE: NRG) today reported a full year 2021 Net Income of $2.2 billion, or $8.93 per diluted common share. Adjusted EBITDA for the full year 2021 was $2.4 billion, Net Cash Provided by Operating Activities was $0.5 billion, and Free Cash Flow Before Growth (FCFbG) was $1.5 billion.

“We have made significant progress across all of our strategic priorities, including advancing our customer-focused strategy, the integration of Direct Energy, and optimizing our generation portfolio,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “Our leading consumer services platform positions NRG to deliver on our compelling growth plan and create significant value for our stakeholders.”

Consolidated Financial Results

	Three Months Ended						Twelve Months Ended
(In millions)	12/31/21			12/31/20			12/31/21		12/31/20
Net Income/(Loss)	$	(427	)	$	(173	)	$	2,187	$	510
Net Cash Provided by Operating Activities	$	(1,362	)	$	451		$	493	$	1,837
Adjusted EBITDA^a	$	433		$	330		$	2,423	$	2,004
Free Cash Flow Before Growth Investments (FCFbG)	$	349		$	387		$	1,512	$	1,547

^a Three and twelve months ended 12/31/2021 excludes Winter Storm Uri income/(loss) of $690 million and ($380) million, respectively

Segment Results

Table 1: Net Income/(Loss)

(In millions)	Three Months Ended						Twelve Months Ended
Segment	12/31/21			12/31/20			12/31/21			12/31/20
Texas	$	695		$	—		$	1,293		$	800
East		(1,214	)		44			1,909			352
West/Services/Other^a		92			(217	)		(1,015	)		(642	)
Net Income/(Loss)	$	(427	)	$	(173	)		2,187		$	510

a. Includes Corporate segment

Fourth quarter Net Loss was $427 million, compared to a Net Loss of $173 million in 2020, driven by $1.2 billion of mark-to-market losses on economic hedges in 2021 versus 2020, which were primarily driven by large movements in natural gas and power prices, coupled with a $213 million impairment on the Joliet generation facility in PJM, partially offset by realization of Winter Storm Uri mitigants and the acquisition of Direct Energy.

Table 2: Adjusted EBITDA

(In millions)	Three Months Ended				Twelve Months Ended
Segment	12/31/21		12/31/20		12/31/21		12/31/20
Texas	$	162	$	231	$	1,166	$	1,319
East		228		77		988		437
West/Services/Other^a		43		22		269		248
Adjusted EBITDA^b	$	433	$	330		2,423	$	2,004

a. Includes Corporate Segment

b. Three and twelve months ended 12/31/2021 excludes Winter Storm Uri income/(loss) of $690 million and ($380) million, respectively

Texas: Fourth quarter Adjusted EBITDA was $162 million, $69 million lower than fourth quarter of 2020. This decrease is primarily driven by milder weather and increased supply costs including replacement power costs associated with the outage at Limestone Unit 1 power plant, partially offset by the acquisition of Direct Energy.

East: Fourth quarter Adjusted EBITDA was $228 million, $151 million higher than fourth quarter of 2020. This increase is driven by the acquisition of Direct Energy, partially offset by the 4.8 GW asset sale in early December 2021.

West/Services/Other: Fourth quarter Adjusted EBITDA was $43 million, $21 million higher than fourth quarter of 2020. This increase was due to the acquisition of Direct Energy, partially offset by the sale of Agua Caliente in February 2021.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

(In millions)	12/31/21		12/31/20
Cash and Cash Equivalents	$	250	$	3,905
Restricted Cash		15		6
Total	$	265	$	3,911
Total credit facility availability		2,421		3,129
Total Liquidity, excluding collateral received	$	2,686	$	7,040

As of December 31, 2021, NRG cash was $0.3 billion, and $2.4 billion was available under the Company’s credit facilities. Total liquidity was $2.7 billion, including restricted cash. Overall liquidity as of December 31, 2021, was approximately $4.4 billion less than December 31, 2020, which included the liquidity procured to close the $3.6 billion Direct Energy acquisition on January 5, 2021. The remaining impact is primarily due to the impact of Winter Storm Uri.

NRG Strategic Developments

Texas Legislation and Winter Storm Uri Updates

The Texas Legislature passed measures to ensure the physical and financial stability of the state’s energy markets, including Senate Bill (SB3) and House Bill (HB) 4492. Consistent with SB 3, the PUCT implemented mandatory weatherization standards for the power sector in 2021, which the Company certified its compliance on December 1, 2021. Natural gas weatherization standards remain outstanding, pending mapping of critical infrastructure and further regulatory action by that industry’s regulator, the Texas Railroad Commission. At the same time, the PUCT announced its intention to introduce a product for reserves to ensure fuel availability in the instance of supply failures in the natural gas system. More comprehensive reforms to introduce a meaningful resource adequacy policy also remain under active consideration. In addition to the physical reliability of the system, the PUCT, consistent with HB 4492, authorized ERCOT to obtain $2.1 billion of financing to offset the costs of certain online reserves and exceptionally highly priced ancillary services borne by load serving entities (LSEs) and their customers during Winter Storm Uri (Uplift Securitization).

The Company is reducing its expected Winter Storm Uri financial loss to $380 million, from a previously expected range of $500-$700 million. This reduction reflects successful mitigations of $708 million, including: customer bad debt mitigation, uplift and default securitizations. The Company expects to receive uplift securitization proceeds in the second quarter of 2022 and continues to pursue additional mitigants including, but not limited to, customer bad debt mitigation, counterparty default recovery, and additional ERCOT default recovery.

Sale of 4.8 GW of Fossil Generating Assets

On December 1, 2021, the Company closed the previously announced sale of approximately 4,850 MW of fossil generating assets from its East and West regions to Generation Bridge, an affiliate of ArcLight Capital Partners, resulting in net proceeds of $623 million. The Company recorded a gain of $210 million from the sale. As part of the transaction, NRG entered into a tolling agreement for the 866 MW Arthur Kill plant in New York City through April 2025.

PJM Retirements

On June 17, 2021, NRG announced the retirement of 55% (or 1,600 MW) of its PJM coal fleet by June 2022 due to the decline in forward PJM capacity prices. PJM has previously identified reliability impacts resulting from the proposed deactivation of Indian River 4. The Company has responded to PJM indicating its willingness to operate the facility in support of the reliability need and is entering into discussions with PJM and the independent market monitor to propose a suitable reliability-must-run arrangement.

Sustainability Update

In 2021, NRG became the first North American power company to receive validation from the Science Based Targets initiative (SBTi) that the company’s climate goals are 1.5 degree Celsius-aligned. In recognition of its commitments, the Company was awarded the Climate Leadership Award for Excellence in Greenhouse Gas Management. NRG also established a new sustainability goal in 2021: 100% electrification of our light-duty fleet by 2030. Rounding out the year, the Company published its inaugural Task Force on Climate-related Financial Disclosures (TCFD) report, reinforcing our commitment to transparent disclosure of our climate-related opportunities and risks.

Maintaining 2022 Guidance

NRG is maintaining its Adjusted EBITDA, Adjusted Cash from Operations, and Free Cash Flow Before Growth Investments (FCFbG) guidance for 2022 as set forth below.

Table 4: 2022 Adjusted EBITDA, Adjusted Cash from Operations, and FCFbG Guidance

		2022
(In millions)		Guidance
Adjusted EBITDA^a		$1,950 – $2,250
Adjusted Cash From Operations		$1,380 – $1,680
FCFbG		$1,140 – $1,440

a. Non-GAAP financial measure; see Appendix Table A-8 for GAAP Reconciliation to Net Income that excludes fair value adjustments related to derivatives. The Company is unable to provide guidance for Net Income due to the impact of such fair value adjustments related to derivatives in a given year

Capital Allocation Update

As announced on December 6, 2021, the NRG Board of Directors authorized $1 billion for share repurchases. The program began in 2021 with $39 million in share repurchases and the balance will be executed throughout 2022.

On January 21, 2022, NRG declared a quarterly dividend on the Company’s common stock of $0.35 per share, or $1.40 per share on an annualized basis. This dividend represents an 8% increase from the prior year, in line with the Company’s previously announced annual dividend growth rate target of 7-9% per share.

As previously disclosed, with closing on the sale of 4.8 GW of fossil generating assets, the Company redeemed $500 million of 6.625% Senior Notes due in 2027. In connection with the redemptions, a $20 million loss on debt extinguishment was recorded, which included the write-off of previously deferred financing costs of $3 million.

The Company remains committed to maintaining a strong balance sheet and continues to work to achieve investment grade credit metrics. The Company expects to grow into its target investment grade metrics of 2.50x-2.75x corporate net debt to adjusted EBITDA primarily through the realization of Direct Energy run-rate earnings and other growth initiatives.

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

Earnings Conference Call

On February 24, 2022, NRG will host a conference call at 9:00 a.m. Eastern (8:00 a.m. Central) to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG’s website at http://www.nrg.com and clicking on “Investors” then “Presentations & Webcasts.” The webcast will be archived on the site for those unable to listen in real time.

About NRG

At NRG, we’re bringing the power of energy to people and organizations by putting customers at the center of everything we do. We generate electricity and provide energy solutions and natural gas to millions of customers through our diverse portfolio of retail brands. A Fortune 500 company, operating in the United States and Canada, NRG delivers innovative solutions while advocating for competitive energy markets and customer choice, working towards a sustainable energy future. More information is available at www.nrg.com. Connect with NRG on Facebook, LinkedIn and follow us on Twitter @nrgenergy.

Forward-Looking Statements

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

Although NRG believes that its expectations are reasonable, it can give no assurance that these expectations will prove to be correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated herein include, among others, general economic conditions, hazards customary in the power industry, weather conditions and extreme weather events, competition in wholesale power and gas markets, the volatility of energy and fuel prices, failure of customers or counterparties to perform under contracts, changes in the wholesale power and gas markets, changes in government or market regulations, the condition of capital markets generally, our ability to access capital markets, the potential impact of COVID-19 or any other pandemic on the Company’s operations, financial position, risk exposure and liquidity, data privacy, cyberterrorism and inadequate cybersecurity, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify, execute or successfully implement acquisitions or asset sales, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to achieve our net debt targets, our ability to achieve or maintain investment grade credit metrics, our ability to proceed with projects under development or the inability to complete the construction of such projects on schedule or within budget, the inability to 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 market operations strategy, the ability to successfully integrate businesses of acquired companies, including Direct Energy, our ability to realize anticipated benefits of transactions (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, and our ability to execute our Capital Allocation Plan. Achieving investment grade credit metrics is not an indication of or guarantee that the Company will receive investment grade credit ratings. Debt and share repurchases may be made from time to time subject to market conditions and other factors, including as permitted by United States securities laws. Furthermore, any common stock dividend is subject to available capital and market conditions.

NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The adjusted EBITDA and free cash flow guidance are estimates as of February 24, 2022. These estimates are based on assumptions the company believed to be reasonable as of that date. NRG disclaims any current intention to update such guidance, except as required by law. The foregoing review of factors that could cause NRG’s actual results to differ materially from those contemplated in the forward-looking statements included in this press release should be considered in connection with information regarding risks and uncertainties that may affect NRG’s future results included in NRG’s filings with the Securities and Exchange Commission at www.sec.gov.

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
	For the Year Ended December 31,
(In millions, except per share amounts)	2021			2020			2019
Operating Revenues
Total operating revenues	$	26,989		$	9,093		$	9,821
Operating Costs and Expenses
Cost of operations (excluding depreciation and amortization shown below)		20,482			6,540			7,303
Depreciation and amortization		785			435			373
Impairment losses		544			75			5
Selling, general and administrative costs		1,293			810			760
Provision for credit losses		698			108			95
Acquisition-related transaction and integration costs		93			23			2
Total operating costs and expenses		23,895			7,991			8,538
Gain on sale of assets		247			3			7
Operating Income		3,341			1,105			1,290
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates		17			17			2
Impairment losses on investments		—			(18	)		(108	)
Other income, net		63			67			66
Loss on debt extinguishment		(77	)		(9	)		(51	)
Interest expense		(485	)		(401	)		(413	)
Total other expense		(482	)		(344	)		(504	)
Income from Continuing Operations Before Income Taxes		2,859			761			786
Income tax expense/(benefit)		672			251			(3,334	)
Income from Continuing Operations		2,187			510			4,120
Income from discontinued operations, net of income tax		—			—			321
Net Income		2,187			510			4,441
Less: Net income attributable to redeemable noncontrolling interest		—			—			3
Net Income Attributable to NRG Energy, Inc.	$	2,187		$	510		$	4,438
Income Per Share Attributable to NRG Energy, Inc. Common Stockholders
Weighted average number of common shares outstanding — basic		245			245			262
Income from continuing operations per weighted average common share — basic	$	8.93		$	2.08		$	15.71
Income from discontinued operations per weighted average common share — basic	$	—		$	—		$	1.23
Net Income per Weighted Average Common Share — Basic	$	8.93		$	2.08		$	16.94
Weighted average number of common shares outstanding — diluted		245			246			264
Income from continuing operations per weighted average common share — diluted	$	8.93		$	2.07		$	15.59
Income from discontinued operations per weighted average common share — diluted	$	—		$	—		$	1.22
Net Income per Weighted Average Common Share — Diluted	$	8.93		$	2.07		$	16.81

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	For the Year Ended December 31,
(In millions)	2021			2020			2019
Net Income	$	2,187		$	510		$	4,441
Other Comprehensive Income/(Loss), net of tax
Foreign currency translation adjustments, net of income tax		(5	)		8			(1	)
Available-for-sale securities, net of income tax		—			—			(19	)
Defined benefit plans, net of income tax		85			(22	)		(78	)
Other comprehensive income/(loss)		80			(14	)		(98	)
Comprehensive Income		2,267			496			4,343
Less: Net income attributable to redeemable noncontrolling interest		—			—			3
Comprehensive Income Attributable to NRG Energy, Inc.	$	2,267		$	496		$	4,340

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	As of December 31,
(In millions)	2021		2020
ASSETS
Current Assets
Cash and cash equivalents	$	250	$	3,905
Funds deposited by counterparties		845		19
Restricted cash		15		6
Accounts receivable, net		3,245		904
Uplift securitization proceeds receivable from ERCOT		689		—
Inventory		498		327
Derivative instruments		4,613		560
Cash collateral paid in support of energy risk management activities		291		50
Prepayments and other current assets		395		257
Total current assets		10,841		6,028
Property, plant and equipment, net		1,688		2,547
Other Assets
Equity investments in affiliates		157		346
Operating lease right-of-use assets, net		271		301
Goodwill		1,795		579
Intangible assets, net		2,511		668
Nuclear decommissioning trust fund		1,008		890
Derivative instruments		2,527		261
Deferred income taxes		2,155		3,066
Other non-current assets		229		216
Total other assets		10,653		6,327
Total Assets	$	23,182	$	14,902

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
	As of December 31,
(In millions, except share data)	2021			2020
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and finance leases	$	4		$	1
Current portion of operating lease liabilities		81			69
Accounts payable		2,274			649
Derivative instruments		3,387			499
Cash collateral received in support of energy risk management activities		845			19
Accrued expenses and other current liabilities		1,324			678
Total current liabilities		7,915			1,915
Other Liabilities
Long-term debt and finance leases		7,966			8,691
Non-current operating lease liabilities		236			278
Nuclear decommissioning reserve		321			303
Nuclear decommissioning trust liability		666			565
Derivative instruments		1,412			385
Deferred income taxes		73			19
Other non-current liabilities		993			1,066
Total other liabilities		11,667			11,307
Total Liabilities		19,582			13,222
Commitments and Contingencies
Stockholders’ Equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 423,547,174 and 423,057,848 shares issued; and 243,753,899 and 244,231,933 shares outstanding at December 31, 2021 and 2020, respectively		4			4
Additional paid-in capital		8,531			8,517
Retained earnings/(accumulated deficit)		464			(1,403	)
Treasury stock, at cost; 179,793,275 and 178,825,915 shares at December 31, 2021 and 2020, respectively		(5,273	)		(5,232	)
Accumulated other comprehensive loss		(126	)		(206	)
Total Stockholders’ Equity		3,600			1,680
Total Liabilities and Stockholders’ Equity	$	23,182		$	14,902

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Year Ended December 31,
(In millions)	2021			2020			2019
Cash Flows from Operating Activities
Net income	$	2,187		$	510		$	4,441
Income from discontinued operations, net of income tax		—			—			321
Income from continuing operations		2,187			510			4,120
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from and equity in earnings of unconsolidated affiliates		20			45			14
Depreciation and amortization		785			435			373
Accretion of asset retirement obligations		30			45			51
Provision for credit losses		698			108			95
Amortization of nuclear fuel		51			54			52
Amortization of financing costs and debt discounts		39			48			26
Loss on debt extinguishment		77			9			51
Amortization of in-the-money contracts and emission allowances		106			70			72
Amortization of unearned equity compensation		21			22			20
Net gain on sale of assets and disposal of assets		(261	)		(23	)		(23	)
Impairment losses		544			93			113
Changes in derivative instruments		(3,626	)		137			34
Changes in deferred income taxes and liability for uncertain tax benefits		604			228			(3,353	)
Changes in collateral deposits in support of risk management activities		797			127			105
Changes in nuclear decommissioning trust liability		40			51			37
Oil lower of cost or market adjustment		—			29			—
Uplift securitization proceeds receivable from ERCOT		(689	)		—			—
Cash (used)/provided by changes in other working capital, net of acquisition and disposition effects:
Accounts receivable – trade		(1,232	)		—			5
Inventory		(61	)		27			22
Prepayments and other current assets		31			4			29
Accounts payable		476			(56	)		(177	)
Accrued expenses and other current liabilities		(55	)		(42	)		(75	)
Other assets and liabilities		(89	)		(84	)		(186	)
Cash provided by continuing operations		493			1,837			1,405
Cash provided by discontinued operations		—			—			8
Net Cash Provided by Operating Activities	$	493		$	1,837		$	1,413
Cash Flows from Investing Activities
Payments for acquisitions of assets, businesses and leases	$	(3,559	)	$	(284	)	$	(355	)
Capital expenditures		(269	)		(230	)		(228	)
Net (purchases)/sales of emissions allowances		—			(10	)		11
Investments in nuclear decommissioning trust fund securities		(751	)		(492	)		(416	)
Proceeds from sales of nuclear decommissioning trust fund securities		710			439			381
Proceeds from sale of assets, net of cash disposed and sale of discontinued operations, net of fees		830			81			1,294
Changes in investments in unconsolidated affiliates		—			2			(91	)
Net contributions to discontinued operations		—			—			(44	)
Other		—			—			6
Cash (used)/provided by continuing operations		(3,039	)		(494	)		558
Cash used by discontinued operations		—			—			(2	)
Net Cash (Used)/Provided by Investing Activities	$	(3,039	)	$	(494	)	$	556
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt	$	1,100		$	3,234		$	1,833
Payments for short and long-term debt		(1,861	)		(335	)		(2,571	)
Payments of dividends to common stockholders		(319	)		(295	)		(32	)
Net receipts/(payments) from settlement of acquired derivatives that include financing elements		938			(7	)		(4	)
Payments for share repurchase activity		(48	)		(229	)		(1,440	)
Payments for debt extinguishment costs		(65	)		(5	)		(26	)
Payments of debt issuance costs		(18	)		(75	)		(35	)
Net (repayments)/proceeds of Revolving Credit Facility		—			(83	)		83
Proceeds from issuance of common stock		1			1			3
Purchase of and distributions to noncontrolling interests from subsidiaries		—			(2	)		(2	)
Cash (used)/provided by continuing operations		(272	)		2,204			(2,191	)
Cash provided by discontinued operations		—			—			43
Net Cash (Used)/Provided by Financing Activities	$	(272	)	$	2,204		$	(2,148	)
Effect of exchange rate changes on cash and cash equivalents		(2	)		(2	)		—
Change in Cash from discontinued operations		—			—			49
Net (Decrease)/Increase in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash		(2,820	)		3,545			(228	)
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period		3,930			385			613
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period	$	1,110		$	3,930		$	385