Energy, Automobile, EV, Renewable News | NRG Energy, Inc. Reports Second Quarter 2022 Results

NRG Energy, Inc. Reports Second Quarter 2022 Results

August 4, 2022

Received $689 million Winter Storm Uri Securitization
Published 12^th annual Sustainability Report
Executing $1 billion share repurchase program; $595 million remaining to be completed
Maintaining 2022 Adjusted EBITDA and FCFbG guidance

HOUSTON–(BUSINESS WIRE)–NRG Energy, Inc. (NYSE: NRG) today reported a second quarter 2022 Net Income of $513 million, or $2.16 per diluted common share, and Adjusted EBITDA for the second quarter of $358 million.

“During the second quarter, we made good progress on our growth priorities while navigating volatile market conditions,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “I am confident in the ability of our customer-focused strategy to deliver significant value to both consumers and shareholders.”

Consolidated Financial Results

	Three Months Ended				Six Months Ended
($ in millions)	6/30/2022		6/30/2021		6/30/2022		6/30/2021
Net Income	$	513	$	1,078	$	2,249	$	996
Cash provided by Operating Activities	$	1,513	$	1,294	$	3,189	$	377
Adjusted EBITDA^a	$	358	$	656	$	867	$	1,223
a. Three and six months ended 6/30/21 excludes the loss due to Winter Storm Uri of $82 million and $1,049 million, respectively

Segments Results

Table 1: Net Income

($ in millions)	Three Months Ended						Six Months Ended
Segment	6/30/2022			6/30/2021			6/30/2022			6/30/2021
Texas	$	766		$	783		$	1,539		$	350
East		(10	)		783			1,531			1,139
West/Services/Other^a		(243	)		(488	)		(821	)		(493	)
Net Income	$	513		$	1,078		$	2,249		$	996
a. Includes Corporate segment

Second quarter net income was $513 million, $565 million lower than second quarter 2021, primarily driven by lower mark-to-market gains on economic hedge positions. This was partially offset by lower impairment losses in the second quarter of 2022 compared to the second quarter of 2021.

Table 2: Adjusted EBITDA

($ in millions)	Three Months Ended				Six Months Ended
Segment	6/30/2022		6/30/2021		6/30/2022		6/30/2021
Texas	$	251	$	312	$	449	$	558
East		61		281		386		541
West/Services/Other ^a		46		63		32		124
Adjusted EBITDA^b	$	358	$	656	$	867	$	1,223
a. Includes Corporate segment
b. Three and six months ended 6/30/21 excludes the loss due to Winter Storm Uri of $82 million and $1,049 million, respectively

Texas: Second quarter Adjusted EBITDA was $251 million, $61 million lower than the second quarter of 2021. This decrease was driven primarily by the extended outage at W.A. Parish Unit 8 that began in the second quarter of 2022. Favorable weather-driven retail load was offset by higher supply costs.

East: Second quarter Adjusted EBITDA was $61 million, $220 million lower than the second quarter of 2021. This decrease was driven primarily by the December 2021 sale of the 4.8 GW fossil generation assets, higher supply costs, and lower demand response revenues associated with an early settlement in 2021.

West/Services/Other: Second quarter Adjusted EBITDA was $46 million, $17 million lower than the second quarter of 2021. This decrease was driven primarily by the December 2021 sale of the 4.8 GW fossil generation assets and higher natural gas supply costs.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

($ in millions)	06/30/22		12/31/21
Cash and Cash Equivalents	$	580	$	250
Restricted Cash		44		15
Total		624		265
Total Revolving Credit Facility and collective collateral facilities		2,460		2,421
Total Liquidity, excluding collateral received	$	3,084	$	2,686

As of June 30, 2022, NRG’s cash was at $580 million, and $2.5 billion was available under the Company’s credit facilities. Total liquidity was $3.1 billion, which was approximately $398 million higher than at the end of 2021.

NRG Strategic Developments

ERCOT Securitization Proceeds

In 2021, the Texas Legislature passed HB 4492 for ERCOT to mitigate exceptionally high price adders and ancillary service costs incurred by Load Serving Entities (LSEs) during Winter Storm Uri. HB 4492 authorized ERCOT to raise $2.1 billion of financing to distribute to LSEs that were charged and paid to ERCOT those highly priced ancillary service and ORDPA during Winter Storm Uri. The Company accounted for the expected proceeds as a reduction to cost of operations during December 2021 and received the proceeds of $689 million from ERCOT in June 2022.

W.A. Parish Unit 8 Extended Outage

In May 2022, W.A. Parish Unit 8 came offline as a result of damage to certain components of the steam turbine/generator. Based on management’s current assessment of necessary restoration efforts, the Company is targeting to return the unit to service by the end of the second quarter of 2023.

Sale of Watson

On June 1, 2022, the Company closed on the sale of its 49% ownership in the Watson natural gas generating facility to Tesoro Refining & Marketing Company LLC for $59 million. NRG recognized a gain on the sale of $46 million.

Sustainability Update

NRG released its 2021 sustainability report, providing an update on the Company’s comprehensive sustainability strategy. As of December 31, 2021, NRG recorded an approximately 44% reduction in total greenhouse gas emissions, from the 2014 baseline, and a 64% decrease in revenue carbon intensity since 2019. The report also highlights the Company’s commitments to safety and well-being, community, and builds on more than a decade of leadership across business, customers, workplace, operations, and supply chain.

2022 Guidance

NRG is maintaining its Adjusted EBITDA and 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 Flow from Operations		$1,470 – $1,770
FCFbG		$1,140 – $ 1,440
a. Non-GAAP financial measure; see Appendix Table A-7 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 Company’s Board of Directors authorized $1 billion for share repurchases. The program began in 2021 with $39 million in share repurchases completed in December of that year, and an incremental $366 million completed through July 31, 2022; the balance of $595 million under the current program is expected to be executed by the end of 2022.

On July 20, 2022, NRG announced that its Board of Directors declared a quarterly dividend on the Company’s common stock of $0.35 per share, or $1.40 per share on an annualized basis. The dividend is payable on August 15, 2022, to stockholders of record as of August 1, 2022.

The Company remains committed to maintaining a strong balance sheet, continues to work to achieve investment-grade credit metrics, and expects to grow into its target investment grade metrics, 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 August 4, 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 execute 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, adjusted cash flow from operations and free cash flow guidance are estimates as of August 4, 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three months ended June 30,						Six months ended June 30,
(In millions, except for per share amounts)	2022			2021			2022			2021
Revenue
Revenue	$	7,282		$	5,243		$	15,178		$	13,334
Operating Costs and Expenses
Cost of operations (excluding depreciation and amortization shown below)		5,887			2,948			10,817			9,805
Depreciation and amortization		157			53			340			370
Impairment losses		155			306			155			306
Selling, general and administrative costs		325			317			647			654
Provision for credit losses		26			40			51			651
Acquisition-related transaction and integration costs		10			22			18			64
Total operating costs and expenses		6,560			3,686			12,028			11,850
Gain on sale of assets		32			—			29			17
Operating Income		754			1,557			3,179			1,501
Other Income/(Expense)
Equity in earnings/(losses) of unconsolidated affiliates		4			14			(11	)		8
Other income, net		12			12			12			34
Interest expense		(105	)		(125	)		(208	)		(252	)
Total other expense		(89	)		(99	)		(207	)		(210	)
Income Before Income Taxes		665			1,458			2,972			1,291
Income tax expense		152			380			723			295
Net Income	$	513		$	1,078		$	2,249		$	996
Income per Share
Weighted average number of common shares outstanding — basic and diluted		237			245			240			245
Income per Weighted Average Common Share —Basic and Diluted	$	2.16		$	4.40		$	9.37		$	4.07

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

	Three months ended June 30,					Six months ended June 30,
(In millions)	2022			2021		2022			2021
Net Income	$	513		$	1,078	$	2,249		$	996
Other Comprehensive (Loss)/Income
Foreign currency translation adjustments		(22	)		2		(13	)		5
Defined benefit plans		20			19		19			19
Other comprehensive (loss)/income		(2	)		21		6			24
Comprehensive Income	$	511		$	1,099	$	2,255		$	1,020

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2022			December 31, 2021
(In millions, except share data)	(Unaudited)			(Audited)
ASSETS
Current Assets
Cash and cash equivalents	$	580		$	250
Funds deposited by counterparties		3,970			845
Restricted cash		44			15
Accounts receivable, net		3,862			3,245
Uplift securitization proceeds receivable from ERCOT		—			689
Inventory		604			498
Derivative instruments		11,323			4,613
Cash collateral paid in support of energy risk management activities		295			291
Prepayments and other current assets		470			395
Total current assets		21,148			10,841
Property, plant and equipment, net		1,598			1,688
Other Assets
Equity investments in affiliates		127			157
Operating lease right-of-use assets, net		237			271
Goodwill		1,657			1,795
Intangible assets, net		2,450			2,511
Nuclear decommissioning trust fund		836			1,008
Derivative instruments		4,548			2,527
Deferred income taxes		1,501			2,155
Other non-current assets		233			229
Total other assets		11,589			10,653
Total Assets	$	34,335		$	23,182
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and finance leases	$	62		$	4
Current portion of operating lease liabilities		82			81
Accounts payable		2,933			2,274
Derivative instruments		8,000			3,387
Cash collateral received in support of energy risk management activities		3,970			845
Accrued expenses and other current liabilities		1,390			1,324
Total current liabilities		16,437			7,915
Other Liabilities
Long-term debt and finance leases		7,970			7,966
Non-current operating lease liabilities		201			236
Nuclear decommissioning reserve		330			321
Nuclear decommissioning trust liability		485			666
Derivative instruments		2,565			1,412
Deferred income taxes		71			73
Other non-current liabilities		976			993
Total other liabilities		12,598			11,667
Total Liabilities		29,035			19,582
Commitments and Contingencies
Stockholders’ Equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 423,868,387 and 423,547,174 shares issued and 235,146,021, and 243,753,899 shares outstanding at June 30, 2022 and December 31, 2021, respectively		4			4
Additional paid-in-capital		8,442			8,531
Retained earnings		2,600			464
Treasury stock, at cost 188,722,366, and 179,793,275 shares at June 30, 2022 and December 31, 2021, respectively		(5,626	)		(5,273	)
Accumulated other comprehensive loss		(120	)		(126	)
Total Stockholders’ Equity		5,300			3,600
Total Liabilities and Stockholders’ Equity	$	34,335		$	23,182

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six months ended June 30,
(In millions)	2022			2021
Cash Flows from Operating Activities
Net Income	$	2,249		$	996
Adjustments to reconcile net income to cash provided by operating activities:
Distributions from and equity in (losses)/earnings of unconsolidated affiliates		16			14
Depreciation and amortization		340			370
Accretion of asset retirement obligations		16			14
Provision for credit losses		51			651
Amortization of nuclear fuel		28			25
Amortization of financing costs and debt discounts		11			20
Amortization of in-the-money contracts and emissions allowances		128			108
Amortization of unearned equity compensation		14			10
Net gain on sale and disposal of assets		(46	)		(25	)
Impairment losses		155			306
Changes in derivative instruments		(3,918	)		(2,430	)
Changes in deferred income taxes and liability for uncertain tax benefits		672			257
Changes in collateral deposits in support of energy risk management activities		3,121			696
Changes in nuclear decommissioning trust liability		(5	)		30
Uplift securitization proceeds received from ERCOT		689			—
Changes in other working capital		(332	)		(665	)
Cash provided by operating activities		3,189			377
Cash Flows from Investing Activities
Payments for acquisitions of businesses and assets, net of cash acquired		(53	)		(3,521	)
Capital expenditures		(150	)		(143	)
Net (purchases)/sales of emission allowances		(19	)		1
Investments in nuclear decommissioning trust fund securities		(271	)		(253	)
Proceeds from the sale of nuclear decommissioning trust fund securities		278			226
Proceeds from sales of assets, net of cash disposed		96			198
Cash used by investing activities		(119	)		(3,492	)
Cash Flows from Financing Activities
Payments of dividends to common stockholders		(168	)		(159	)
Payments for share repurchase activity		(366	)		(9	)
Net receipts from settlement of acquired derivatives that include financing elements		950			191
Net proceeds of Revolving Credit Facility and Receivables Securitization Facilities		—			75
Repayments of long-term debt and finance leases		(2	)		(4	)
Payments of debt issuance costs		—			(2	)
Proceeds from issuance of common stock		—			1
Cash provided by financing activities		414			93
Effect of exchange rate changes on cash and cash equivalents		—			1
Net Increase/(Decrease) in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash		3,484			(3,021	)
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period		1,110			3,930
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period	$	4,594		$	909

Appendix Table A-1: Second Quarter 2022 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net Income/(Loss):

($ in millions)	Texas			East			West/Services/ Other			Corp/Elim			Total
Net Income/(Loss)	$	766		$	(10	)	$	18		$	(261	)	$	513
Plus:
Interest expense, net		—			(2	)		8			88			94
Income tax		—			(1	)		11			142			152
Depreciation and amortization		77			50			22			8			157
ARO Expense		3			5			1			—			9
Contract amortization		(2	)		(25	)		5			—			(22	)
EBITDA		844			17			65			(23	)		903
Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates		—			—			17			—			17
Acquisition and divestiture integration and transaction costs		—			—			—			14			14
Deactivation costs		—			5			—			—			5
Loss/(gain) on sale of assets		12			—			(44	)		—			(32	)
Other non recurring charges		1			20			(5	)		(1	)		15
Impairments		—			155			—			—			155
Mark to market (MtM) (gains)/losses on economic hedges		(606	)		(136	)		23			—			(719	)
Adjusted EBITDA	$	251		$	61		$	56		$	(10	)	$	358

Second Quarter 2022 condensed financial information by Operating Segment:

($ in millions)	Texas		East			West/Services/ Other			Corp/Elim			Total
Revenue¹	$	2,697	$	3,633		$	1,110		$	3		$	7,443
Cost of fuel, purchased power and other cost of sales²		2,039		3,339			961			4			6,343
Economic gross margin		658		294			149			(1	)		1,100
Operations & maintenance and other cost of operations³		243		122			54			(1	)		418
Selling, marketing, general and administrative⁴		155		105			53			10			323
Provision for credit losses		9		11			6			—			26
Other		—		(5	)		(20	)		—			(25	)
Adjusted EBITDA	$	251	$	61		$	56		$	(10	)	$	358
¹ Excludes MtM loss of $148 million and contract amortization of $13 million
²Includes TDSP expense, capacity and emission credits
³ Excludes other non recurring of $15 million, ARO expense of $9 million and deactivation costs of $5 million
⁴ Excludes acquisition and divestiture integration and transaction costs of $2 million

The following table reconciles the condensed financial information to Adjusted EBITDA:

($ in millions)	Condensed Consolidated Results of Operations		Interest, tax, depr., amort.			MtM			Deactivation			Other adj.²			Adjusted EBITDA
Revenue	$	7,282	$	13		$	148		$	—		$	—		$	7,443
Cost of operations (excluding depreciation and amortization shown below)¹		5,441		35			867			—			—			6,343
Depreciation and Amortization		157		(157	)		—			—			—			—
Gross margin		1,684		135			(719	)		—			0			1,100
Operations & maintenance and other cost of operations		446		—			—			(5	)		(23	)		418
Selling, marketing, general & administrative		325		—			—			—			(2	)		323
Provision for credit losses		26		—			—			—			—			26
Other		374		(246	)		—			—			(153	)		(25	)
Net Income/(Loss)	$	513	$	381		$	(719	)	$	5		$	178		$	358
¹ Excludes Operations & maintenance and other cost of operations of $446 million
²Other adj. includes impairments of $155 million, adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates of $17 million, other non recurring charges of $15 million, acquisition and divestiture integration and transaction costs of $14 million, ARO expenses of $9 million and gain on sale of assets ($32) million