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NRG Energy, Inc. Reports Third Quarter Results

Increases 2023 Share Repurchases to $1.15 Billion

Increases 2023 Guidance

Initiates Strong 2024 Financial Guidance Above 2023 Investor Day Plan

  • Solid third quarter performance with GAAP Net Income of $343 million and Adjusted EBITDA of $973 million; increasing mid-point of 2023 Adjusted EBITDA guidance by $95 million
  • Completed sale of STP for $1.75 billion
  • Increasing 2023 share repurchase allocation by 15% to $1.15 billion; executed $200 million of share repurchases to date and expect to complete the remaining $950 million through new accelerated share repurchase program
  • On track to achieve 2023 debt reduction target of $1.4 billion; executed $800 million of debt reduction to date and expect to complete remaining $600 million by year-end
  • Initiating 2024 financial guidance above Investor Day plan and announcing 2024 capital allocation plan of $1.16 billion returned to shareholders and $500 million of debt reduction; increasing annual common stock dividend by 8% to $1.63 per share

NRG Energy, Inc. (NYSE: NRG) today reported third quarter 2023 Net Income of $343 million. Adjusted EBITDA for the third quarter was $973 million, Cash Provided by Operating Activities was $566 million, and Free Cash Flow Before Growth Investments (FCFbG) was $355 million.

“I am proud of our team’s work in the quarter, which is reflected in our solid financial and operational performance and the increased guidance we are announcing today. Our results continue to validate the ability of NRG’s consumer strategy to generate substantial cash flows and significant long-term shareholder value,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “We are well-positioned to finish the year strong and enter 2024 with significant momentum. We have line of sight to achieving our 2025 growth targets and believe that our continued focus on the emerging demand-side management opportunity will drive additional value to consumers and shareholders.”

Consolidated Financial Results

Table 1

 

 

 

Three Months Ended

 

Nine Months Ended

($ in millions)

 

9/30/2023

 

9/30/2022

 

9/30/2023

 

9/30/2022

Net Income/(Loss)

 

$

343

 

$

67

 

 

$

(684

)

 

$

2,316

Cash Provided/(Used) by Operating Activities

 

$

566

 

$

(1,431

)

 

$

(462

)

 

$

1,758

Adjusted EBITDA

 

$

973

 

$

480

 

 

$

2,438

 

 

$

1,402

Free Cash Flow Before Growth Investments (FCFbG)

 

$

355

 

$

(42

)

 

$

983

 

 

$

294

NRG’s third quarter and year-to-date Adjusted EBITDA grew significantly year-over-year as the Company realized strong consolidated financial and operational performance. The home and business integrated retail platforms continued to trend above plan with expanded margins, near-record retention, and increased customer count through the sale of energy and secondary products tailored to meet customers’ growing individual needs. Actions to enhance NRG’s diversified supply strategy provided predictable supply costs despite volatile load and power price conditions in Texas. Smart Home continued to surpass its plan with expanded margins, more products sold, favorable retention, and increased customer count.

Given the strong financial performance, NRG has been able to execute on its debt reduction and share repurchase programs on an accelerated basis. Through October 31, 2023, NRG reduced debt by $800 million and repurchased $200 million of common stock. Following the closing of the STP transaction, NRG plans to execute $600 million of debt reduction before the end of the year and initiate a $950 million accelerated share repurchase program.

Increasing 2023 Guidance and Initiating 2024 Guidance

NRG is raising the mid-point of its 2023 Adjusted EBITDA guidance by $95 million, inclusive of the negative impacts of an earnings reduction from the sale of STP and an increase in accruals as part of the Company's annual incentive plan reflecting the expected financial outperformance for the year.

In addition to raising its 2023 guidance, NRG initiated strong 2024 financial guidance above its June 2023 Investor Day plan.

Table 2: Adjusted EBITDA, Cash Provided by Operating Activities, and FCFbG Guidancea

 

 

 

2023

 

2023

 

2024

(In millions)

 

Original Guidance

 

Revised Guidance

 

Guidance

Adjusted EBITDA

 

$3,010 - $3,250

 

$3,150 - $3,300

 

$3,300 - $3,550

Cash Provided by Operating Activities

 

$1,610 - $1,850

 

$1,750 - $1,900

 

$1,825 - $2,075

FCFbG

 

$1,620 - $1,860

 

$1,725 - $1,875

 

$1,825 - $2,075

a. Adjusted EBITDA and FCFbG are non-GAAP financial measures; see Appendix Table A-8 for GAAP Reconciliation from Net Income to FCFbG. 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.

2023 Capital Allocation

In June 2023, NRG revised its long-term capital allocation policy to target approximately 80% of cash available for allocation to be returned to shareholders, after debt reduction. As part of the revised capital allocation framework, the Company announced an increase to its share repurchase authorization to $2.7 billion, to be executed through 2025.

NRG is increasing its 2023 share repurchase allocation from $997 million to $1.15 billion following strong year-to-date financial and operational performance, and the sale of Gregory. During the three months ended September 30, 2023, the Company completed $50 million of share repurchases at an average price of $37.82. Through October 31, 2023, an additional $150 million of share repurchases were executed at an average price of $40.17. Following the closing of the STP transaction, the Company plans to initiate a $950 million accelerated share repurchase program.

As part of the plan to achieve its target investment grade credit metrics, the Company plans to reduce debt by $1.4 billion in 2023 with $900 million funded from cash from operations and an additional $500 million with proceeds from the sale of STP. As of October 31, 2023, NRG had reduced debt by $800 million. Following the closing of STP, the Company plans to execute the remaining $600 million in debt reduction by year end.

2024 Capital Allocation

The Company is announcing its 2024 capital allocation plan, consistent with its capital allocation priorities and 2023 Investor Day roadmap. The plan includes $500 million in debt reduction, $825 million in share repurchases, an 8% increase of the annual common dividend to $1.63 per share consistent with the Company’s 7-9% long-term growth target, and $342 million in growth and other.

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 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.

NRG Strategic Developments

Sale of 44% Equity Interest in the South Texas Project (STP)

On November 1, 2023, the Company closed on the sale of its 44% equity interest in STP for $1.75 billion, unlocking significant shareholder value. Net proceeds from the transaction were approximately $1.6 billion after transaction adjustments, taxes, and fees.

Sale of Gregory

On October 2, 2023, the Company closed on the sale of its 100% ownership in the Gregory natural gas generating facility for $102 million. The asset historically generated negative to modestly positive cash flow.

W.A. Parish Return-to-Service

In May 2022, W.A. Parish Unit 8 came offline as a result of damage to the steam turbine/generator. The extended forced outage ended in mid-August with a partial (~50%) return to service. In early September, the unit returned to full operations.

Retirement of Joliet

During the second quarter of 2022, the Company announced the planned retirement of the Joliet generating facility in 2023. On September 1, 2023, the Joliet generating facility was fully retired.

Segments Results

Table 3: Net Income/(Loss)

 

($ in millions)

 

Three Months Ended

 

Nine Months Ended

Segment

 

9/30/2023

 

9/30/2022

 

9/30/2023

 

9/30/2022

Texas

 

$

463

 

 

$

(481

)

 

$

1,532

 

 

$

1,052

 

East

 

 

316

 

 

 

557

 

 

 

(1,187

)

 

 

2,083

 

West/Services/Othera

 

 

(432

)

 

 

(9

)

 

 

(963

)

 

 

(819

)

Vivint Smart Homeb

 

$

(4

)

 

 

N/A

 

 

$

(66

)

 

 

N/A

 

Net Income/(Loss)

 

$

343

 

 

$

67

 

 

$

(684

)

 

$

2,316

 

a. Includes Corporate segment

b. Vivint Smart Home acquired in March 2023

Net Income for the third quarter of 2023 was $276 million higher than the third quarter of 2022, primarily driven by lower retail supply costs in Texas and approximately $50 million in property damage insurance recoveries for W.A. Parish, which are excluded from Adjusted EBITDA. Partially offsetting the increases were lower contributions from the services business and Cottonwood and an increase in accruals as part of the Company's annual incentive plan reflecting the expected financial outperformance for the year.

Net Loss for the nine months ended September 30, 2023 was $684 million, $3.0 billion lower than the prior year. This was driven by unrealized mark-to-market non-cash losses on economic natural gas and power hedges in the first quarter of 2023. Certain 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.

Table 4: Adjusted EBITDA

 

($ in millions)

 

Three Months Ended

 

Nine Months Ended

Segment

 

9/30/2023

 

9/30/2022

 

9/30/2023

 

9/30/2022

Texas

 

$

552

 

$

196

 

$

1,310

 

$

670

East

 

 

171

 

 

183

 

 

562

 

 

583

West/Services/Othera

 

 

25

 

 

101

 

 

51

 

 

149

Vivint Smart Homeb

 

$

225

 

 

N/A

 

$

515

 

 

N/A

Adjusted EBITDA

 

$

973

 

$

480

 

$

2,438

 

$

1,402

a. Includes Corporate segment

b. Vivint Smart Home acquired in March 2023

Texas: Third quarter Adjusted EBITDA was $552 million, $356 million higher than the third quarter of 2022. This increase was primarily driven by lower retail supply costs, including the impact of lower realized power prices, NRG's diversified supply strategy, and improved plant performance coupled with the 2022 impact of the W.A. Parish Unit 8 extended outage, and lower restorations costs for W.A. Parish in the third quarter of 2023 as compared to the third quarter of 2022.

East: Third quarter Adjusted EBITDA was $171 million, $12 million lower than the third quarter of 2022. This decline was primarily driven by asset retirements.

West/Services/Other: Third quarter Adjusted EBITDA was $25 million, $76 million lower than the third quarter of 2022. This decline was primarily driven by lower contributions from the services business and Cottonwood.

Vivint Smart Home: Adjusted EBITDA was $225 million in the third quarter of 2023, with subscriber growth of 7% over the third quarter of 2022 and expanded monthly recurring service margin.

Liquidity and Capital Resources

Table 5: Corporate Liquidity

 

($ in millions)

 

9/30/23

 

12/31/22

Cash and Cash Equivalents

 

$

401

 

$

430

Restricted Cash

 

 

11

 

 

40

Total

 

 

412

 

 

470

Total Revolving Credit Facility and collective collateral facilities

 

 

3,723

 

 

2,324

Total Liquidity, excluding collateral deposited by counterparties

 

$

4,135

 

$

2,794

As of September 30, 2023, NRG's unrestricted cash was $401 million, and $3.7 billion was available under the Company’s credit facilities. Total liquidity was $4.1 billion, $1.3 billion higher than at the end of 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.

On August 29, 2023, the Company formed a new Delaware trust, Alexander Funding Trust II, which issued $500 million pre-capitalized trust securities redeemable July 31, 2028 (the P-Caps). This P-Caps will replace the Company’s existing pre-capitalized trust securities redeemable 2023 issued by Alexander Funding Trust, which mature on November 15, 2023.

Earnings Conference Call

On November 2, 2023, 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 (formerly known as 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, including increasing interest rates and rising inflation, 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 companywide 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 November 2, 2023. 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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three months ended

September 30,

 

Nine months ended

September 30,

(In millions, except for per share amounts)

2023

 

2022

 

2023

 

2022

Revenue

 

 

 

 

 

 

 

Revenue

$

7,946

 

 

$

8,510

 

 

$

22,016

 

 

$

23,688

 

Operating Costs and Expenses

 

 

 

 

 

 

 

Cost of operations (excluding depreciation and amortization shown below)

 

6,421

 

 

 

7,802

 

 

 

20,161

 

 

 

18,619

 

Depreciation and amortization

 

308

 

 

 

145

 

 

 

813

 

 

 

485

 

Impairment losses

 

 

 

 

43

 

 

 

 

 

 

198

 

Selling, general and administrative costs

 

638

 

 

 

378

 

 

 

1,586

 

 

 

1,076

 

Acquisition-related transaction and integration costs

 

18

 

 

 

8

 

 

 

111

 

 

 

26

 

Total operating costs and expenses

 

7,385

 

 

 

8,376

 

 

 

22,671

 

 

 

20,404

 

Gain on sale of assets

 

 

 

 

22

 

 

 

202

 

 

 

51

 

Operating Income/(Loss)

 

561

 

 

 

156

 

 

 

(453

)

 

 

3,335

 

Other Income/(Expense)

 

 

 

 

 

 

 

Equity in earnings of unconsolidated affiliates

 

6

 

 

 

11

 

 

 

16

 

 

 

 

Other income, net

 

14

 

 

 

21

 

 

 

43

 

 

 

33

 

Interest expense

 

(173

)

 

 

(105

)

 

 

(472

)

 

 

(313

)

Total other expense

 

(153

)

 

 

(73

)

 

 

(413

)

 

 

(280

)

Income/(Loss) Before Income Taxes

 

408

 

 

 

83

 

 

 

(866

)

 

 

3,055

 

Income tax expense/(benefit)

 

65

 

 

 

16

 

 

 

(182

)

 

 

739

 

Net Income/(Loss)

$

343

 

 

$

67

 

 

$

(684

)

 

$

2,316

 

Less: Cumulative dividends attributable to Series A Preferred Stock

 

17

 

 

 

 

 

 

38

 

 

 

 

Net Income/(Loss) Available for Common Stockholders

$

326

 

 

$

67

 

 

$

(722

)

 

$

2,316

 

Income/(Loss) per Share

 

 

 

 

 

 

 

Weighted average number of common shares outstanding — basic

 

230

 

 

 

235

 

 

 

230

 

 

 

238

 

Income/(Loss) per Weighted Average Common Share — Basic

$

1.42

 

 

$

0.29

 

 

$

(3.14

)

 

$

9.73

 

Weighted average number of common shares outstanding — diluted

 

232

 

 

 

235

 

 

 

230

 

 

 

238

 

Income/(Loss) per Weighted Average Common Share —Diluted

$

1.41

 

 

$

0.29

 

 

$

(3.14

)

 

$

9.73

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)

 

 

Three months ended

September 30,

 

Nine months ended

September 30,

(In millions)

2023

 

2022

 

2023

 

2022

Net Income/(Loss)

$

343

 

 

$

67

 

 

$

(684

)

 

$

2,316

 

Other Comprehensive (Loss)/Income

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(8

)

 

 

(32

)

 

 

 

 

 

(45

)

Defined benefit plans

 

1

 

 

 

(2

)

 

 

 

 

 

17

 

Other comprehensive (loss)/income

 

(7

)

 

 

(34

)

 

 

 

 

 

(28

)

Comprehensive Income/(Loss)

$

336

 

 

$

33

 

 

$

(684

)

 

$

2,288

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

September 30, 2023

 

December 31, 2022

(In millions, except share data and liquidation preference on preferred stock)

(Unaudited)

 

(Audited)

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

401

 

 

$

430

 

Funds deposited by counterparties

 

263

 

 

 

1,708

 

Restricted cash

 

11

 

 

 

40

 

Accounts receivable, net

 

3,764

 

 

 

4,773

 

Inventory

 

630

 

 

 

751

 

Derivative instruments

 

3,710

 

 

 

7,886

 

Cash collateral paid in support of energy risk management activities

 

2

 

 

 

260

 

Prepayments and other current assets

 

601

 

 

 

383

 

Current assets - held-for-sale

 

86

 

 

 

 

Total current assets

 

9,468

 

 

 

16,231

 

Property, plant and equipment, net

 

1,779

 

 

 

1,692

 

Other Assets

 

 

 

Equity investments in affiliates

 

146

 

 

 

133

 

Operating lease right-of-use assets, net

 

206

 

 

 

225

 

Goodwill

 

5,143

 

 

 

1,650

 

Customer relationships, net

 

2,299

 

 

 

943

 

Other intangible assets, net

 

1,907

 

 

 

1,189

 

Nuclear decommissioning trust fund

 

 

 

 

838

 

Derivative instruments

 

2,530

 

 

 

4,108

 

Deferred income taxes

 

2,540

 

 

 

1,881

 

Other non-current assets

 

739

 

 

 

251

 

Non-current assets - held-for-sale

 

1,153

 

 

 

5

 

Total other assets

 

16,663

 

 

 

11,223

 

Total Assets

$

27,910

 

 

$

29,146

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current Liabilities

 

 

 

Current portion of long-term debt and finance leases

$

920

 

 

$

63

 

Current portion of operating lease liabilities

 

91

 

 

 

83

 

Accounts payable

 

2,200

 

 

 

3,643

 

Derivative instruments

 

3,128

 

 

 

6,195

 

Cash collateral received in support of energy risk management activities

 

263

 

 

 

1,708

 

Deferred revenue current

 

731

 

 

 

176

 

Accrued expenses and other current liabilities

 

1,553

 

 

 

1,110

 

Current liabilities - held-for-sale

 

44

 

 

 

4

 

Total current liabilities

 

8,930

 

 

 

12,982

 

Other Liabilities

 

 

 

Long-term debt and finance leases

 

10,741

 

 

 

7,976

 

Non-current operating lease liabilities

 

148

 

 

 

180

 

Nuclear decommissioning reserve

 

 

 

 

340

 

Nuclear decommissioning trust liability

 

 

 

 

477

 

Derivative instruments

 

1,552

 

 

 

2,246

 

Deferred income taxes

 

129

 

 

 

134

 

Deferred revenue non-current

 

989

 

 

 

10

 

Other non-current liabilities

 

977

 

 

 

942

 

Non-current liabilities - held-for-sale

 

926

 

 

 

31

 

Total other liabilities

 

15,462

 

 

 

12,336

 

Total Liabilities

 

24,392

 

 

 

25,318

 

Commitments and Contingencies

 

 

 

Stockholders' Equity

 

 

 

Preferred stock; 10,000,000 shares authorized; 650,000 Series A shares issued and

outstanding at September 30, 2023 (liquidation preference $1,000); 0 shares issued

and outstanding at December 31, 2022

 

650

 

 

 

 

Common stock; $0.01 par value; 500,000,000 shares authorized; 424,908,449 and

423,897,001 shares issued and 229,336,853 and 229,561,030 shares outstanding at

September 30, 2023 and December 31, 2022, respectively

 

4

 

 

 

4

 

Additional paid-in-capital

 

8,527

 

 

 

8,457

 

Retained earnings

 

425

 

 

 

1,408

 

Treasury stock, at cost 195,571,596 and 194,335,971 shares at September 30, 2023

and December 31, 2022, respectively

 

(5,911

)

 

 

(5,864

)

Accumulated other comprehensive loss

 

(177

)

 

 

(177

)

Total Stockholders' Equity

 

3,518

 

 

 

3,828

 

Total Liabilities and Stockholders' Equity

$

27,910

 

 

$

29,146

 

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

Nine months ended September 30,

(In millions)

2023

 

2022

Cash Flows from Operating Activities

 

 

 

Net (Loss)/Income

$

(684

)

 

$

2,316

 

Adjustments to reconcile net (loss)/income to cash (used)/provided by operating activities:

 

 

 

Equity in and distributions from (earnings)/losses of unconsolidated affiliates

 

(16

)

 

 

7

 

Depreciation and amortization

 

813

 

 

 

485

 

Accretion of asset retirement obligations

 

14

 

 

 

20

 

Provision for credit losses

 

165

 

 

 

103

 

Amortization of nuclear fuel

 

42

 

 

 

42

 

Amortization of financing costs and debt discounts

 

42

 

 

 

17

 

Amortization of in-the-money contracts and emissions allowances

 

111

 

 

 

122

 

Amortization of unearned equity compensation

 

87

 

 

 

21

 

Net gain on sale of assets and disposal of assets

 

(187

)

 

 

(82

)

Impairment losses

 

 

 

 

198

 

Changes in derivative instruments

 

1,553

 

 

 

(4,480

)

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

 

(225

)

 

 

688

 

Changes in collateral deposits in support of risk management activities

 

(1,188

)

 

 

2,321

 

Changes in nuclear decommissioning trust liability

 

(4

)

 

 

2

 

Uplift securitization proceeds received from ERCOT

 

 

 

 

689

 

Changes in other working capital

 

(985

)

 

 

(711

)

Cash (used)/provided by operating activities

 

(462

)

 

 

1,758

 

Cash Flows from Investing Activities

 

 

 

Payments for acquisitions of businesses and assets, net of cash acquired

 

(2,502

)

 

 

(60

)

Capital expenditures

 

(493

)

 

 

(250

)

Net purchases of emissions allowances

 

(25

)

 

 

(4

)

Investments in nuclear decommissioning trust fund securities

 

(293

)

 

 

(361

)

Proceeds from the sale of nuclear decommissioning trust fund securities

 

280

 

 

 

363

 

Proceeds from sales of assets, net of cash disposed

 

229

 

 

 

107

 

Proceeds from insurance recoveries for property, plant and equipment, net

 

173

 

 

 

 

Cash used by investing activities

 

(2,631

)

 

 

(205

)

Cash Flows from Financing Activities

 

 

 

Proceeds from issuance of preferred stock, net of fees

 

635

 

 

 

 

Payments of dividends to preferred and common stockholders

 

(295

)

 

 

(252

)

Payments for share repurchase activity(a)

 

(69

)

 

 

(484

)

Net receipts from settlement of acquired derivatives that include financing elements

 

332

 

 

 

1,596

 

Net proceeds of Revolving Credit Facility

 

300

 

 

 

 

Proceeds from issuance of long-term debt

 

731

 

 

 

 

Payments of debt issuance costs

 

(29

)

 

 

(1

)

Repayments of long-term debt and finance leases

 

(15

)

 

 

(4

)

Cash provided by financing activities

 

1,590

 

 

 

855

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

(5

)

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

and Restricted Cash

 

(1,503

)

 

 

2,403

 

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

Beginning of Period

 

2,178

 

 

 

1,110

 

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

of Period

$

675

 

 

$

3,513

 

  1. Includes $(19) million and $(6) million of equivalent shares purchased in lieu of tax withholdings on equity compensation issuances during the nine months ended September 30, 2023 and September 30, 2022, respectively

Appendix Table A-1: Third Quarter 2023 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net Income/(Loss)1:

($ in millions)

Texas

East

West/Services/

Other

Vivint

Smart Home

Corp/Elim

Total

Net Income/(Loss)

$

463

 

$

316

 

$

(168

)

$

(4

)

$

(264

)

$

343

 

Plus:

 

 

 

 

 

 

Interest expense, net

 

(1

)

 

(2

)

 

6

 

 

43

 

 

109

 

 

155

 

Income tax

 

 

 

(2

)

 

(37

)

 

(20

)

 

124

 

 

65

 

Depreciation and amortization

 

71

 

 

27

 

 

23

 

 

178

 

 

9

 

 

308

 

ARO Expense

 

3

 

 

6

 

 

 

 

 

 

 

 

9

 

Contract and emission credit amortization, net

 

5

 

 

(16

)

 

4

 

 

 

 

 

 

(7

)

EBITDA

 

541

 

 

329

 

 

(172

)

 

197

 

 

(22

)

 

873

 

Stock-based compensation

 

4

 

 

2

 

 

1

 

 

19

 

 

 

 

26

 

Amortization of customer acquisition costs2

 

13

 

 

12

 

 

1

 

 

9

 

 

 

 

35

 

Adjustment to reflect NRG share of adjusted

EBITDA in unconsolidated affiliates

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Acquisition and divestiture integration and

transaction costs

 

 

 

 

 

 

 

2

 

 

18

 

 

20

 

Deactivation costs

 

 

 

9

 

 

2

 

 

 

 

 

 

11

 

Other non-recurring charges3

 

(48

)

 

3

 

 

(2

)

 

(2

)

 

1

 

 

(48

)

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

economic hedges

 

42

 

 

(184

)

 

195

 

 

 

 

 

 

53

 

Adjusted EBITDA

$

552

 

$

171

 

$

28

 

$

225

 

$

(3

)

$

973

 

1 This schedule reflects 2023 results under the harmonization of the Adjusted EBITDA definition

2 Amortization of customer acquisition costs, which are excluded from the calculation of Adjusted EBITDA, is the income statement recognition of capitalized costs related to commissions and other costs related to securing the new customer

3 Other non-recurring includes $(50) million of property insurance proceeds

Third Quarter 2023 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/Services/

Other

Vivint

Smart Home

Corp/Elim

Total

Revenue1

$

3,686

 

$

2,875

$

987

 

$

478

$

(5

)

$

8,021

 

Cost of fuel, purchased power and other cost

of sales2

 

2,659

 

 

2,449

 

844

 

 

50

 

(3

)

 

5,999

 

Economic gross margin

 

1,027

 

 

426

 

143

 

 

428

 

(2

)

 

2,022

 

Operations & maintenance and other cost of

operations3

 

256

 

 

110

 

58

 

 

56

 

(1

)

 

479

 

Selling, marketing, general and administrative4

 

221

 

 

143

 

64

 

 

146

 

3

 

 

577

 

Other

 

(2

)

 

2

 

(7

)

 

1

 

(1

)

 

(7

)

Adjusted EBITDA

$

552

 

$

171

$

28

 

$

225

$

(3

)

$

973

 

1 Excludes MtM loss of $70 million and contract amortization of $5 million

2 Includes TDSP expense, capacity and emission credits

3 Excludes other non-recurring charges of $(51) million, deactivation costs of $11 million, ARO expenses of $9 million, stock-based compensation of $2 million, and amortization of customer acquisition costs of $1 million

4 Excludes amortization of customer acquisition costs of $34 million, stock-based compensation of $24 million, acquisition and divestiture integration and transaction costs of $2 million and other non-recurring costs of $1 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

$

7,946

$

5

 

$

70

$

 

$

 

$

8,021

 

Cost of operations (excluding depreciation

and amortization shown below)1

 

5,970

 

12

 

 

17

 

 

 

 

 

5,999

 

Depreciation and Amortization

 

308

 

(308

)

 

 

 

 

 

 

 

Gross margin

 

1,668

 

301

 

 

53

 

 

 

 

 

2,022

 

Operations & maintenance and other cost of

operations

 

451

 

 

 

 

(11

)

 

39

 

 

479

 

Selling, marketing, general & administrative

 

638

 

 

 

 

 

 

(61

)

 

577

 

Other

 

236

 

(220

)

 

 

 

 

(23

)

 

(7

)

Net Income

$

343

$

521

 

$

53

$

11

 

$

45

 

$

973

 

1 Excludes Operations & maintenance and other cost of operations of $451 million

2 Other adj. includes amortization of customer acquisition costs of $35 million, stock-based compensation of $26 million, acquisition and divestiture integration and transaction costs of $20 million, ARO expenses of $9 million, NRG share of adjusted EBITDA in unconsolidated affiliates of $3 million and other non-recurring charges of $(48) million

Appendix Table A-2: Third Quarter 2022 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net (Loss)/Income1:

($ in millions)

Texas

East

West/Services/

Other

Corp/Elim

Total

Net (Loss)/Income

$

(481

)

$

557

 

$

92

 

$

(101

)

$

67

 

Plus:

 

 

 

 

 

Interest expense, net

 

 

 

(1

)

 

7

 

 

79

 

 

85

 

Income tax

 

 

 

 

 

18

 

 

(2

)

 

16

 

Depreciation and amortization

 

79

 

 

37

 

 

22

 

 

7

 

 

145

 

ARO Expense

 

2

 

 

2

 

 

 

 

 

 

4

 

Contract and emission credit amortization, net

 

4

 

 

(19

)

 

5

 

 

 

 

(10

)

EBITDA

 

(396

)

 

576

 

 

144

 

 

(17

)

 

307

 

Stock-based compensation

 

4

 

 

1

 

 

2

 

 

 

 

7

 

Amortization of customer acquisition costs2

 

12

 

 

8

 

 

1

 

 

 

 

21

 

Adjustment to reflect NRG share of adjusted EBITDA in

unconsolidated affiliates

 

 

 

 

 

13

 

 

 

 

13

 

Acquisition and divestiture integration and transaction costs

 

 

 

 

 

 

 

8

 

 

8

 

Deactivation costs

 

 

 

7

 

 

1

 

 

 

 

8

 

(Gain) on sale of assets

 

(22

)

 

 

 

 

 

 

 

(22

)

Other non-recurring charges

 

2

 

 

3

 

 

1

 

 

 

 

6

 

Impairments

 

 

 

43

 

 

 

 

 

 

43

 

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

 

596

 

 

(455

)

 

(52

)

 

 

 

89

 

Adjusted EBITDA

$

196

 

$

183

 

$

110

 

$

(9

)

$

480

 

1 In 2022, Stock-based compensation and Amortization of customer acquisition costs were not excluded from Adjusted EBITDA. This schedule reflects 2022 results under the harmonization of the Adjusted EBITDA definition

2 Amortization of customer acquisition costs, which are excluded from the calculation of Adjusted EBITDA, is the income statement recognition of capitalized costs related to commissions and other costs related to securing the new customer

Third Quarter 2022 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/Services/

Other

Corp/Elim

Total

Revenue1

$

3,141

$

4,156

$

1,178

 

$

8

 

$

8,483

 

Cost of fuel, purchased power and other cost of sales2

 

2,501

 

3,749

 

978

 

 

8

 

 

7,236

 

Economic gross margin

 

640

 

407

 

200

 

 

 

 

1,247

 

Operations & maintenance and other cost of operations3

 

269

 

116

 

55

 

 

(1

)

 

439

 

Selling, marketing, general & administrative4

 

175

 

106

 

61

 

 

10

 

 

352

 

Other

 

 

2

 

(26

)

 

 

 

(24

)

Adjusted EBITDA

$

196

$

183

$

110

 

$

(9

)

$

480

 

1 Excludes MtM gain of $(33) million and contract amortization of $6 million

2 Includes TDSP expense, capacity and emission credits

3 Excludes deactivation costs of $8 million, other non-recurring charges of $7 million, ARO expense of $4 million, stock-based compensation of $1 million and amortization of customer acquisition costs of $1 million

4 Excludes amortization of customer acquisition costs of $20 million and stock-based compensation of $6 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

$

8,510

$

6

 

$

(33

)

$

 

$

 

$

8,483

 

Cost of operations (excluding depreciation

and amortization shown below)1

 

7,342

 

16

 

 

(122

)

 

 

 

 

 

7,236

 

Depreciation and amortization

 

145

 

(145

)

 

 

 

 

 

 

 

 

Gross margin

 

1,023

 

135

 

 

89

 

 

 

 

 

 

1,247

 

Operations & maintenance and other cost of

operations

 

460

 

 

 

 

 

(8

)

 

(13

)

 

439

 

Selling, marketing, general & administrative

 

378

 

 

 

 

 

 

 

(26

)

 

352

 

Other

 

118

 

(101

)

 

 

 

 

 

(41

)

 

(24

)

Net Income

$

67

$

236

 

$

89

 

$

8

 

$

80

 

$

480

 

1 Excludes Operations & maintenance and other cost of operations of $460 million

2 Other adj. includes impairments charges of $43 million, amortization of customer acquisition costs of $21 million, NRG share of adjusted EBITDA in unconsolidated affiliates of $13 million, acquisition and divestiture integration and transaction costs of $8 million, stock-based compensation of $7 million, other non-recurring charges of $6 million, ARO expenses of $4 million, and gain on sale of assets $(22) million

Appendix Table A-3: YTD Third Quarter 2023 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net Income/(Loss)1:

($ in millions)

Texas

East

West/

Services/

Other

Vivint

Smart

Home2

Corp/Elim

Total

Net Income/(Loss)

$

1,532

 

$

(1,187

)

$

(601

)

$

(66

)

$

(362

)

$

(684

)

Plus:

 

 

 

 

 

 

Interest expense, net

 

2

 

 

(12

)

 

18

 

 

97

 

 

319

 

 

424

 

Income tax

 

 

 

(1

)

 

(83

)

 

(20

)

 

(78

)

 

(182

)

Depreciation and amortization

 

219

 

 

87

 

 

70

 

 

410

 

 

27

 

 

813

 

ARO expense

 

7

 

 

7

 

 

 

 

 

 

 

 

14

 

Contract and emission credit amortization, net

 

9

 

 

83

 

 

10

 

 

 

 

 

 

102

 

EBITDA

 

1,769

 

 

(1,023

)

 

(586

)

 

421

 

 

(94

)

 

487

 

Stock-based compensation

 

15

 

 

6

 

 

3

 

 

41

 

 

 

 

65

 

Amortization of customer acquisition costs3

 

39

 

 

34

 

 

3

 

 

13

 

 

 

 

89

 

Adjustment to reflect NRG share of adjusted

EBITDA in unconsolidated affiliates

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Acquisition and divestiture integration and

transaction costs4

 

 

 

 

 

 

 

39

 

 

76

 

 

115

 

Deactivation costs

 

 

 

19

 

 

8

 

 

 

 

 

 

27

 

(Gain) on sale of assets

 

 

 

(202

)

 

 

 

 

 

 

 

(202

)

Other non-recurring charges5

 

(92

)

 

5

 

 

(2

)

 

1

 

 

1

 

 

(87

)

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

economic hedges

 

(421

)

 

1,723

 

 

631

 

 

 

 

 

 

1,933

 

Adjusted EBITDA

$

1,310

 

$

562

 

$

68

 

$

515

 

$

(17

)

$

2,438

 

1 This schedule reflects 2023 results under the harmonization of the Adjusted EBITDA definition

2 Vivint Smart Home acquired in March 2023

3 Amortization of customer acquisition costs, which are excluded from the calculation of Adjusted EBITDA, is the income statement recognition of capitalized costs related to commissions and other costs related to securing the new customer

4 Includes stock-based compensation of $23 million

5 Other non-recurring includes $(96) million of property insurance proceeds

YTD Third Quarter 2023 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/

Services/

Other

Vivint

Smart

Home1

Corp/Elim

Total

Revenue2

$

8,235

 

$

9,485

 

$

3,164

 

$

1,070

$

(10

)

$

21,944

 

Cost of fuel, purchased power and other cost

of sales3

 

5,613

 

 

8,193

 

 

2,771

 

 

102

 

(6

)

 

16,673

 

Economic gross margin

 

2,622

 

 

1,292

 

 

393

 

 

968

 

(4

)

 

5,271

 

Operations & maintenance and other cost of

operations4

 

785

 

 

330

 

 

185

 

 

127

 

(3

)

 

1,424

 

Selling, general and administrative costs5

 

530

 

 

401

 

 

165

 

 

326

 

15

 

 

1,437

 

Other

 

(3

)

 

(1

)

 

(25

)

 

 

1

 

 

(28

)

Adjusted EBITDA

$

1,310

 

$

562

 

$

68

 

$

515

$

(17

)

$

2,438

 

1 Vivint Smart Home acquired in March 2023

2 Excludes MtM gain of $(96) million and contract amortization of $24 million

3 Includes TDSP expense, capacity and emission credits

4 Excludes other non-recurring charges of $(93) million, deactivation costs of $27 million, ARO expense of $14 million, stock-based compensation of $5 million and amortization of customer acquisition costs of $4 million

5 Excludes amortization of customer acquisition costs of $85 million, stock-based compensation of $60 million and acquisition and divestiture integration and transaction costs of $4 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

$

22,016

 

$

24

 

$

(96

)

$

 

$

 

$

21,944

 

Cost of operations (excluding depreciation

and amortization shown below)1

 

18,780

 

 

(78

)

 

(2,029

)

 

 

 

 

 

16,673

 

Depreciation and amortization

 

813

 

 

(813

)

 

 

 

 

 

 

 

 

Gross margin

 

2,423

 

 

915

 

 

1,933

 

 

 

 

 

 

5,271

 

Operations & maintenance and other cost of

operations

 

1,381

 

 

 

 

 

 

(27

)

 

70

 

 

1,424

 

Selling, general and administrative costs

 

1,586

 

 

 

 

 

 

 

 

(149

)

 

1,437

 

Other

 

140

 

 

(242

)

 

 

 

 

 

74

 

 

(28

)

Net (Loss)/Income

$

(684

)

$

1,157

 

$

1,933

 

$

27

 

$

5

 

$

2,438

 

1 Excludes Operations & maintenance and other cost of operations of $1,381 million

2 Includes acquisition and divestiture integration and transaction costs of $115 million, amortization of customer acquisition costs of $89 million, stock-based compensation of $65 million, ARO expense of $14 million, NRG share of adjusted EBITDA in unconsolidated affiliates of $11 million, gain on sale of assets $(202) million and other non-recurring charges of $(87) million

Appendix Table A-4: YTD Third 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)1:

($ in millions)

Texas

East

West/

Services/

Other

Corp/Elim

Total

Net Income/(Loss)

$

1,052

 

$

2,083

 

$

246

 

$

(1,065

)

$

2,316

 

Plus:

 

 

 

 

 

Interest expense, net

 

 

 

(4

)

 

22

 

 

261

 

 

279

 

Income tax

 

 

 

(1

)

 

28

 

 

712

 

 

739

 

Depreciation and amortization

 

233

 

 

164

 

 

65

 

 

23

 

 

485

 

ARO expense

 

8

 

 

9

 

 

3

 

 

 

 

20

 

Contract and emission credit amortization, net

 

 

 

103

 

 

12

 

 

 

 

115

 

EBITDA

 

1,293

 

 

2,354

 

 

376

 

 

(69

)

 

3,954

 

Stock-based compensation

 

11

 

 

4

 

 

6

 

 

 

 

21

 

Amortization of customer acquisition costs2

 

38

 

 

22

 

 

2

 

 

 

 

62

 

Adjustment to reflect NRG share of adjusted EBITDA in

unconsolidated affiliates

 

 

 

 

 

48

 

 

 

 

48

 

Acquisition and divestiture integration and transaction costs

 

 

 

 

 

 

 

32

 

 

32

 

Deactivation costs

 

 

 

16

 

 

1

 

 

 

 

17

 

(Gain)/loss on sale of assets

 

(10

)

 

 

 

(43

)

 

2

 

 

(51

)

Other non-recurring charges

 

1

 

 

26

 

 

(10

)

 

11

 

 

28

 

Impairments

 

 

 

198

 

 

 

 

 

 

198

 

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

 

(663

)

 

(2,037

)

 

(207

)

 

 

 

(2,907

)

Adjusted EBITDA

$

670

 

$

583

 

$

173

 

$

(24

)

$

1,402

 

1 In 2022, Stock-based compensation and Amortization of customer acquisition costs were not excluded from Adjusted EBITDA. This schedule reflects 2022 results under the harmonization of the Adjusted EBITDA definition.

2 Amortization of customer acquisition costs, which are excluded from the calculation of Adjusted EBITDA, is the income statement recognition of capitalized costs related to commissions and other costs related to securing the new customer

YTD Third Quarter 2022 condensed financial information by Operating Segment:

($ in millions)

Texas

East

West/

Services/

Other

Corp/Elim

Total

Revenue1

$

7,856

 

$

12,641

 

$

3,456

 

$

11

 

$

23,964

 

Cost of fuel, purchased power and other cost of sales2

 

5,997

 

 

11,355

 

 

2,995

 

 

13

 

 

20,360

 

Economic gross margin

 

1,859

 

 

1,286

 

 

461

 

 

(2

)

 

3,604

 

Operations & maintenance and other cost of operations3

 

738

 

 

369

 

 

166

 

 

(2

)

 

1,271

 

Selling, marketing, general & administrative4

 

455

 

 

337

 

 

173

 

 

28

 

 

993

 

Other

 

(4

)

 

(3

)

 

(51

)

 

(4

)

 

(62

)

Adjusted EBITDA

$

670

 

$

583

 

$

173

 

$

(24

)

$

1,402

 

1 Excludes MtM loss of $248 million and contract amortization of $28 million

2 Includes TDSP expenses, capacity and emissions credits

3 Excludes ARO expense of $20 million, deactivation expense of $16 million, other non-recurring charges of $16 million, amortization of customer acquisition costs of $2 million and stock-based compensation costs of $2 million

4 Excludes amortization of customer acquisition costs of $60 million, stock-based compensation costs of $19 million and acquisition and divestiture integration and transaction costs of $4 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

$

23,688

$

28

 

$

248

 

$

 

$

 

$

23,964

 

Cost of operations (excluding depreciation

and amortization shown below)1

 

17,292

 

(87

)

 

3,155

 

 

 

 

 

 

20,360

 

Depreciation and amortization

 

485

 

(485

)

 

 

 

 

 

 

 

 

Gross margin

 

5,911

 

600

 

 

(2,907

)

 

 

 

 

 

3,604

 

Operations & maintenance and Other cost of

operations

 

1,327

 

 

 

 

 

(17

)

 

(39

)

 

1,271

 

Selling, marketing, general & administrative

 

1,076

 

 

 

 

 

 

 

(83

)

 

993

 

Other

 

1,192

 

(1,018

)

 

 

 

 

 

(236

)

 

(62

)

Net Income/(Loss)

$

2,316

$

1,618

 

$

(2,907

)

$

17

 

$

358

 

$

1,402

 

1 Excludes Operations & maintenance and other cost of operations of $1,327 million

2 Other adj. includes adjustment to reflect impairments of $198 million, amortization of customer acquisition costs of $62 million, NRG share of adjusted EBITDA in unconsolidated affiliates of $48 million, acquisition and divestiture integration and transaction costs of $32 million, other non-recurring charges of $28 million, stock-based compensation costs of $21 million, ARO expense of $20 million and gain on sale of assets of $(51) million

Appendix Table A-5: Three Months Ended September 30, 2023 and 2022 Free Cash Flow before Growth Investments (FCFbG)

The following table summarizes the calculation of FCFbG, providing a reconciliation to Cash provided by operating activities:

 

 

Three Months Ended

($ in millions)

 

September 30, 2023

 

September 30, 2022

Adjusted EBITDA

 

$

973

 

 

$

480

 

Interest payments, net

 

 

(191

)

 

 

(76

)

Income tax

 

 

(8

)

 

 

(11

)

Net deferred revenue1

 

 

62

 

 

 

22

 

Amortization of customer fulfillment costs2

 

 

14

 

 

 

 

Gross capitalized contract costs3

 

 

(265

)

 

 

1

 

Collateral / working capital / other assets and liabilities

 

 

(19

)

 

 

(1,847

)

Cash provided/(used) by operating activities

 

 

566

 

 

 

(1,431

)

Winter Storm Uri securitization, C&I credits, and remaining open

accounts receivables

 

 

 

 

 

16

 

Net receipts from settlement of acquired derivatives that include

financing elements

 

 

14

 

 

 

646

 

Acquisition and divestiture integration and transaction costs

 

 

20

 

 

 

8

 

Encina site improvement

 

 

 

 

 

2

 

Adjustment for change in collateral

 

 

(167

)

 

 

800

 

Nuclear decommissioning trust liability

 

 

(8

)

 

 

(5

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(3

)

 

 

(5

)

Adjusted cash provided by operating activities

 

 

422

 

 

 

31

 

Maintenance capital expenditures, net4

 

 

(102

)

 

 

(73

)

Environmental capital expenditures

 

 

(1

)

 

 

 

Net cash for growth initiatives

 

 

36

 

 

 

 

Free Cash Flow before Growth Investments (FCFbG)

 

$

355

 

 

$

(42

)

1 The cash impact of deferred revenue is the net change in the balance sheet from capitalizing proceeds received from installation and equipment sales and then recognizing those proceeds as revenue on a straight-line basis over the expected period of benefit.

2 Amortization of customer fulfillment costs, which are included in the calculation of Adjusted EBITDA, are the income statement recognition of capitalized contract costs related to the sale and installation of equipment necessary for a customer to receive the Vivint Smart Home service.

3 Gross capitalized contract costs represent the costs directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related subscriber contracts; these costs include installed products, commissions, other compensation and cost of installation of new or upgraded customer contracts; these costs are amortized on a straight-line basis over the expected period of benefit.

4 Includes W.A. Parish Unit 8 and Limestone Unit 1 insurance recoveries related to property, plant and equipment.

Appendix Table A-6: Nine Months Ended September 30, 2023 and 2022 Free Cash Flow before Growth Investments (FCFbG)

The following table summarizes the calculation of FCFbG, providing a reconciliation to Cash (used)/provided by operating activities:

 

Nine Months Ended

($ in millions)

 

September 30, 2023

 

September 30, 2022

Adjusted EBITDA

 

$

2,438

 

 

$

1,402

 

Interest payments, net

 

 

(396

)

 

 

(254

)

Income tax

 

 

(40

)

 

 

(47

)

Net deferred revenue1

 

 

179

 

 

 

(14

)

Amortization of customer fulfillment costs2

 

 

20

 

 

 

 

Gross capitalized contract costs3

 

 

(622

)

 

 

(10

)

Collateral / working capital / other assets and liabilities

 

 

(2,041

)

 

 

681

 

Cash (used)/provided by operating activities

 

 

(462

)

 

 

1,758

 

Winter Storm Uri securitization, C&I credits and remaining open

receivables

 

 

 

 

 

(608

)

Net receipts from settlement of acquired derivatives that include

financing elements

 

 

332

 

 

 

1,596

 

Acquisition and divestiture integration and transaction costs4

 

 

95

 

 

 

32

 

Astoria fees

 

 

3

 

 

 

 

Encina site improvement

 

 

7

 

 

 

11

 

GenOn settlement

 

 

 

 

 

4

 

Adjustment for change in collateral

 

 

1,188

 

 

 

(2,321

)

Nuclear decommissioning trust liability

 

 

(13

)

 

 

2

 

Effect of exchange rate changes on cash and cash equivalents

 

 

 

 

 

(5

)

Adjusted cash provided by operating activities

 

 

1,150

 

 

 

469

 

Maintenance capital expenditures, net5

 

 

(256

)

 

 

(174

)

Environmental capital expenditures

 

 

(1

)

 

 

(1

)

Net cash for growth initiatives

 

 

90

 

 

 

 

Free Cash Flow before Growth Investments (FCFbG)

 

 

983

 

 

$

294

 

1 The cash impact of deferred revenue is the net change in the balance sheet from capitalizing proceeds received from installation and equipment sales and then recognizing those proceeds as revenue on a straight-line basis over the expected period of benefit.

2 Amortization of customer fulfillment costs, which are included in the calculation of Adjusted EBITDA, are the income statement recognition of capitalized contract costs related to the sale and installation of equipment necessary for a customer to receive the Vivint Smart Home service.

3 Gross capitalized contract costs represent the costs directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related subscriber contracts; these costs include installed products, commissions, other compensation and cost of installation of new or upgraded customer contracts; these costs are amortized on a straight-line basis over the expected period of benefit.

4 Nine months ended September 30, 2023 excludes $20 million non-cash stock-based compensation.

5 Includes W.A. Parish Unit 8 and Limestone Unit 1 insurance recoveries related to property, plant and equipment.

Appendix Table A-7: Nine Months Ended September 30, 2023 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity for the nine months ended September 30, 2023:

($ in millions)

Nine months ended

September 30, 2023

Sources:

 

Adjusted cash provided by operating activities

 

1,150

 

Change in availability under revolving credit facility and collective collateral facilities

 

1,399

 

Proceeds of revolving credit facility and receivables securitization facilities

 

300

 

Proceeds from issuance of long-term debt

 

731

 

Proceeds from issuance of preferred stock, net of fees

 

635

 

Return of cash collateral paid in support of energy risk management activities

 

258

 

Proceeds from sale of assets, net of cash disposed

 

229

 

Uses:

 

Payments for acquisitions of businesses and assets, net of cash acquired

 

(2,502

)

Payments of dividends to preferred and common stockholders

 

(295

)

Maintenance capital expenditures, net

 

(257

)

Investments and integration capital expenditures

 

(63

)

Acquisition and divestiture integration and transaction costs1

 

(95

)

Payments for share repurchase activity

 

(69

)

Payments of debt issuance costs

 

(29

)

Net purchases of emission allowances

 

(25

)

Encina site improvement

 

(7

)

Other investing and financing

 

(19

)

Change in Total Liquidity

$

1,341

 

1 Excludes $20 million non-cash stock-based compensation.

Appendix Table A-8: 2023 and 2024 Guidance Reconciliations

The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to Net Income, and the calculation of FCFbG providing a reconciliation to Cash provided by operating activities:

 

2023 Original

2023 Revised

2024

($ in millions)

 

Guidance

Guidance

Guidance

Net Income1,5

 

$ 805 - 1,045

$ 1,900 - 2,050

$ 750 - 1,000

Interest expense, net

 

580

 

580

 

640

 

Income tax5

 

310

 

705

 

345

 

Depreciation and amortization

 

1,110

 

1,190

 

1,075

 

ARO expense

 

20

 

20

 

25

 

Amortization of customer acquisition costs2

 

120

 

125

 

215

 

Stock-based compensation3

 

75

 

90

 

100

 

Acquisition and divestiture integration and transaction costs

 

180

 

160

 

55

 

Other costs4,5

 

(190

)

(1,620

)

95

 

Adjusted EBITDA6

 

3,010 - 3,250

3,150 - 3,300

3,300 - 3,550

Interest payments, net

 

(560

)

(530

)

(600

)

Income tax

 

(95

)

(60

)

(160

)

Net deferred revenue7

 

215

 

185

 

190

 

Amortization of customer fulfillment costs8

 

35

 

35

 

130

 

Capitalized contract costs9

 

(690

)

(675

)

(830

)

Working capital / other assets and liabilities10

 

(305

)

(355

)

(205

)

Cash provided by operating activities11

 

1,610-1,850

1,750 - 1,900

1,825 - 2,075

Acquisition and other costs10

 

210

 

152

 

124

 

Adjusted cash provided by operating activities

 

1,820 - 2,060

1,902 - 2,052

1,949 - 2,199

Maintenance capital expenditures, net12

 

(270) - (290

)

(270) - (290

)

(240) - (260

)

Environmental capital expenditures

 

(10) - (15

)

(5) - (10

)

(20) - (30

)

Net cash for growth initiatives

 

90

 

105

 

145

 

Free Cash Flow before Growth Investments (FCFbG)

 

$ 1,620 - 1,860

$ 1,725 - 1,875

$ 1,825 - 2,075

1 For purposes of guidance, fair value adjustments related to derivatives are assumed to be zero.

2 Amortization of customer acquisition costs is the income statement recognition of capitalized costs related to commissions and other costs related to securing new customers. Prior to 1Q23, NRG did not exclude these costs in the calculation of Adjusted EBITDA, however, Vivint did. The Adjusted EBITDA calculation excludes the impact of customer acquisition costs for both NRG and Vivint. NRG amortization of customer acquisition costs, excluding Vivint, is expected to be $95 million in 2023 and $135 million in 2024. Vivint is expected to be $30 million in 2023 and $80 million in 2024.

3 Prior to 1Q23, NRG did not exclude the impact of stock-based compensation in its calculation of Adjusted EBITDA, however, Vivint did. The Adjusted EBITDA calculation excludes the impact of stock-based compensation for both NRG and Vivint. NRG stock-based compensation, excluding Vivint, is expected to be $30 million in 2023 and $40 million in 2024. Vivint is expected to be $60 million in 2023 and 2024.

4 Includes adjustments for sale of assets, adjustments to reflect NRG share of Adjusted EBITDA in unconsolidated affiliates, deactivation costs, and other non-recurring expenses.

5 Revised 2023 for impacts of gain on sale of STP.

6 Prior to 1Q23, Vivint excluded the amortization of customer fulfillment costs (primarily related to the sale and installation of equipment) in its calculation of Adjusted EBITDA. The Adjusted EBITDA calculation does not exclude the impact of customer fulfillment costs. Vivint’s customer fulfillment costs are expected to be $35 million in 2023 and $130 million in 2024. The 2023 net impact of the harmonization of Adjusted EBITDA is $90 million.

7 The cash impact of deferred revenue is the net change in the balance sheet from capitalizing proceeds received from installation and equipment and then recognizing those proceeds as revenue on a straight-line basis over the expected period of benefit.

8 Amortization of customer fulfillment costs, which are included in the calculation of Adjusted EBITDA, is the income statement recognition of capitalized contract costs related to the sale and installation of equipment necessary for a customer to receive the Vivint Smart Home service.

9 Capitalized contract costs represent the gross costs directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related subscriber contracts; these costs include installed products, commissions, other compensation, and cost of installation of new or upgraded customer contracts; these costs are amortized on a straight-line basis over the expected period of benefit.

10 Working capital / other assets and liabilities includes payments for acquisition and divestiture integration and transition costs, which is adjusted in Acquisition and other costs.

11 Excludes fair value adjustments related to derivatives and changes in collateral deposits in support of risk management activities.

12 Includes W.A. Parish Unit 8 and Limestone Unit 1 expected insurance recoveries related to property, plant and equipment.

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 expense (including loss on debt extinguishment), income taxes, depreciation and amortization, asset retirement obligation expenses, contract amortization consisting of amortization of power and fuel contracts and amortization of emission allowances. 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 the impact of stock-based compensation, amortization of customer acquisition costs (primarily amortized commissions), impairment losses, deactivation costs, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from forward position of economic hedges, 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 provided by operating activities is a non-GAAP measure NRG provides to show cash provided/(used) by operating activities 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, changes in the nuclear decommissioning trust liability, and the impact of extraordinary, unusual or non-recurring items. The Company provides the reader with this alternative view of Cash provided/(used) by operating activities 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 Flows from Operating Activities 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 Flows from Investing Activities.

Free Cash Flow before Growth Investments is Adjusted Cash provided by operating activities less maintenance and environmental capital expenditures, net of funding and insurance recoveries related to property, plant and equipment, dividends from preferred instruments treated as debt by ratings agencies, 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 Investments as a measure of cash available for discretionary expenditures.

Free Cash Flow before Growth Investments is utilized by Management in making decisions regarding the allocation of capital. Free Cash Flow before Growth Investments 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 Investments is a performance measure and is not intended to represent Net Income/(Loss), Cash provided/(used) by operating activities (the most directly comparable U.S. GAAP measure), or liquidity and is not necessarily comparable to similarly titled measures reported by other companies.

Contacts

Media

Chevalier Gray

832.331.8126

Investors

Brendan Mulhern

609.524.4767

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