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NRG Energy, Inc. (NYSE: NRG) today reported third quarter 2012 adjusted EBITDA of $657 million with Wholesale contributing $449 million, Retail contributing $173 million and Solar projects contributing $35 million. The Company reported third quarter 2012 net loss of $1 million, or ($0.01) per diluted common share compared, to a net loss of $55 million, or ($0.24) per diluted common share, for the third quarter of 2011.
Adjusted EBITDA for the nine months ended September 30, 2012, was $1,496 million and adjusted cash flow from operations was $993 million. Adjusted cash flow from operations improved $386 million as compared to the nine months ended September 30, 2011, due to improved operational results, reduced interest expense and reductions in collateral postings. Wholesale contributed $928 million of adjusted EBITDA, Retail contributed $504 million of adjusted EBITDA and Solar projects contributed $64 million. Year-to-date 2012 FCF before growth investments was $806 million. Net income for the first nine months of 2012 was $43 million, or $0.16 per diluted common share, compared to net income of $306 million, or $1.22 per diluted common share, for the first nine months of 2011.
“The twin focus of NRG management this quarter has been on achieving in a timely manner all of the milestones, including integration planning, towards closing the GenOn transaction and on delivering a solid third quarter 2012 financial performance. I am pleased to say that we have achieved both,” commented David Crane, NRG’s President and Chief Executive Officer. “As we move to realize the substantial EBITDA and cash flow synergies directly created by this powerful merger, we are also preparing to capture the ‘knock on’ benefits of the combination in terms of operational cost synergies, retail expansion and the like.”
Table 1: Adjusted EBITDA
($ in millions)
Three Months Ended
Nine Months Ended
Alternative Energy (1)
(1) Alternative Energy includes the results of the Company’s Solar projects(2) Detailed adjustments by region are shown in Appendix A
Table 2: Net (Loss)/Income
($ in millions)
Three Months Ended
Nine Months Ended
Retail: Adjusted EBITDA for the third quarter of 2012 was $173 million; $28 million higher than in 2011. Gross margin was favorable by $87 million driven by the acquisition of Energy Plus which added $41 million, with the remaining difference due to increased customer count and usage, lower supply costs and favorable year over year weather impacts. Partially offsetting the higher margin realized in 2012 was an increase in operating costs which were the result of the acquisition of Energy Plus and continued efforts to drive market expansion and customer growth, resulting in an approximate 124,000 increase in customer count since December 31, 2011.
Texas (Generation): Adjusted EBITDA for the third quarter of 2012 was $324 million; $136 million higher compared to the third quarter of 2011. Gross Margin increased $150 million, driven by a combination of 21% higher realized energy margin and improved bi-lateral capacity contracts which together added $194 million. The substantial year-over-year increase in third quarter realized energy margin is largely attributable to the impact of the unprecedented hot weather and resulting ERCOT power price spikes in August of 2011. Partially offsetting the increase was a 13% decline in coal generation due to longer plant outages in 2012.
Northeast: Adjusted EBITDA for the third quarter of 2012 was $58 million; $15 million higher compared to the third quarter of 2011. The increase was driven by higher gross margin of $16 million as the Northeast benefited from additional energy sales to the Company’s retail providers as a result of efforts to expand its retail presence in the region. Also contributing to the positive results were more favorable capacity pricing in the PJM markets and increased revenues resulting from the Reliability Support Services Agreement in Western New York.
South Central: Adjusted EBITDA for the third quarter of 2012 was $31 million; $11 million lower than the third quarter 2011. Gross margin in 2012 decreased by $10 million versus the third quarter of 2011 due to 12% lower average realized prices. The region experienced a 5% decline in coal generation that was partially offset by a 10% increase in generation at Cottonwood as compared to the third quarter of 2011.
West: Adjusted EBITDA for the third quarter of 2012 was $31 million; $3 million lower than the third quarter 2011 due to a decrease in capacity revenues partially offset by an increase in unrealized trading activity.
Alternative Energy: Adjusted EBITDA for the third quarter of 2012 was $24 million; up $29 million from 2011. Gross margin was $55 million, a $45 million increase driven by the addition of the Roadrunner facility, which began commercial operations in late 2011 and the addition of the Company’s Agua Caliente solar facility, which as of September 30, 2012 had reached commercial operations on 230 MWs. Offsetting the improved margin were NRG’s continued development efforts in our other new businesses.
Liquidity and Capital Resources
Table 3: Corporate Liquidity
($ in millions)
Cash and Cash Equivalents
Funds deposited by counterparties
Total Cash and Funds Deposited
Less: Funds deposited as collateral by hedge counterparties
Total Current Liquidity
Less: Reserve for 2017 bond redemption (1)
Total Current Liquidity, adjusted
(1) On October 24th, NRG redeemed the remaining $270 million outstanding of the 2017 Senior Notes
Total liquidity, adjusted as of September 30, 2012, was $2,710 million, an increase of $640 million from December 31, 2011 driven largely by a $460 million increase in Revolver availability primarily due to the sell-down of the Agua Caliente project. The $55 million decrease in restricted cash is primarily due to reduced collateral requirements for the Company’s solar projects as NRG continues to contribute equity to these projects. Finally, cash and cash equivalents increased by $235 million due to the following items:
$993 million of adjusted cash flow from operations;
$174 million in proceeds from the sale of Schkopau;
$122 million in proceeds from the sell down of the Agua Caliente project;
Partially offset by $1,013 million of cash outflows consisting of the following items:
$180 million of cash paid for maintenance and environmental capital expenditures (net of financing of $9 million);
$527 million for solar and conventional growth investments (net of debt and third party funding of $1,704 million);
$172 million net paydown of Senior Unsecured Notes and $46 million of scheduled debt amortization; and
$47 million of changes in dividends, restricted cash and other investing and financing activities
Growth Initiatives and Developments
NRG continued to advance its leadership position in sustainable energy including: