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NRG Energy, Inc. Reports Full-Year And Fourth Quarter Results; Increases Merger Synergies; Increases Dividend And Announces Share Buyback Program

Solar

  • Agua Caliente – As of December 31, 2012, 253 MW of generation capacity have achieved commercial operation making Agua Caliente the largest operating solar photovoltaic (PV) project in the United States. Overall, construction at Agua Caliente is several months ahead of schedule and currently is expected to reach completion in early 2014. Power generated by Agua Caliente is being sold under a 25-year PPA with Pacific Gas and Electric Co (PG&E).
  • CVSR – Construction of the California Valley Solar Ranch project is ahead of schedule with 127 MW having achieved operation by December 31, 2012, with the remaining 123 MW expected to come on line by the fourth quarter of 2013. Power from this project is being sold to PG&E under a 25-year PPA.
  • Ivanpah – Unit 1 (124 MW) is expected to reach commercial operations in August 2013. The remaining two units (each at 127 MW) currently are expected to be completed in the third and fourth quarter of 2013. Power from Units 1 and 3 will be sold to Pacific Gas & Electric via two 25-year PPAs, and power from Unit 2 will be sold to Southern California Edison under a 20-year PPA.
  • Other Solar – Avra Valley (25 MW under a 20-year PPA with Tucson Electric Power) reached commercial operation in December 2012. The Borrego project (26 MW under a 25-year PPA with San Diego Gas & Electric) and Alpine (66 MW under a 20 year PPA with Pacific Gas & Electric) reached commercial operation in the first quarter of 2013. Our Distributed Generation scale installations continued with Gillette Stadium achieving commercial operation in December 2012 and Lincoln Financial Field achieving commercial operation in February 2013.

Conventional
  • Marsh Landing –The Company is continuing construction of the Marsh Landing project, a 720 MW natural gas-fueled peaking facility adjacent to the Company's Contra Costa generating facility near Antioch, California. The facility is being constructed pursuant to a 10 year PPA with PG&E. The Company expects to achieve commercial operation in the second quarter of 2013.
  • El Segundo –The Company is continuing construction, at its El Segundo Power Generating Station, of a 550 MW fast-start, combined-cycle plant. The plant is being constructed pursuant to a 10 year, 550 MW PPA with Southern California Edison. The Company expects a commercial operation date in the third quarter of 2013.
  • Petra Nova –Petra Nova continues with the development of its peaking unit at NRG’s WA Parish Generating Station and on August 14, 2012, signed a $24 million lump-sum, turnkey EPC contract. Petra Nova is targeting a second quarter 2013 commercial operation date and it is anticipated that the unit will eventually be used as a cogeneration facility dedicated to a Carbon Capture Utilization and Storage Project, funded in part by the U.S. Department of Energy, at the Parish facility. The peaking unit is being financed, largely with the proceeds of a $54 million tax-exempt bond financing that was completed on May 3, 2012, of which NRG has drawn $23 million through December 31, 2012.

Outlook for 2013 and 2014

NRG is reaffirming the guidance announced by the Company on January 22, 2013 for both adjusted EBITDA and FCF before growth investments for 2013 and 2014.
                   

Table 4: 2013 and 2014 Adjusted EBITDA and Free Cash Flow before growth investment Guidance (Current)

 
          2013 Guidance           2014 Guidance
(dollars in millions)           2/27/2013           2/27/2013
Adjusted EBITDA 2,535 – 2,735 2,700 – 2,900
Interest payments (920) (1,000)
Income tax (30) 40
Collateral/working capital/other changes           (50)           (200)
Cash flow from operations 1,525 – 1,725 1,550 – 1,750
Maintenance capital expenditures, net (420)-(440) (390)-(410)
Environmental capital expenditures, net (175)-(195) (230)-(250)
Preferred dividends           (9)           (9)
Free cash flow – before growth investments           900 – 1,100           900 – 1,100

Notes:
  • Current guidance, including all components thereof, is identical to the guidance provided on January 22, 2013.
  • Subtotals and totals are rounded

Change in Methodology for Adjusted EBITDA and Free Cash Flow before growth investments

Beginning in 2013, NRG will modify the calculation of both Adjusted EBITDA and FCF before growth investments primarily to provide greater clarity for partially owned investments, including solar projects such as Agua Caliente and Ivanpah:
  • Adjusted EBITDA (Revised)
    • Increase adjusted EBITDA to reflect pro rata portion of Adjusted EBITDA from NRG’s equity investments in unconsolidated subsidiaries (previously adjusted EBITDA included only GAAP equity earnings attributed to such investments);
    • Discontinue deduction of non-controlling interest (GAAP earnings) and disclose non-controlling pro rata EBITDA (and debt) for such investments separately;
    • Exclude plant deactivation costs; and
    • Exclude interest income (now included as a reduction to interest expense)
  • Free Cash Flow Before Growth (Revised)
    • Reduce FCF Before Growth Investments by distributions to non-controlling interests

The following tables reflect the change in our guidance ranges as we implement our new methodology of calculating adjusted EBITDA (Revised) and FCF before growth investments (Revised):
           

Table 5: 2013 Adjusted EBITDA and Free Cash Flow before growth Guidance – Revised vs. Current
($ in millions)       Revised (1)       Current
Adjusted EBITDA 2,615– 2,815 2,535– 2,735
Free cash flow – before growth investments       900 – 1,100       900 – 1,100
 

Table 6: 2014 Reconciliation of Adjusted EBITDA Guidance – Revised vs. Current
($ in millions)           Revised (1)           Current
Adjusted EBITDA           2,760– 2,960           2,700– 2,900
Free cash flow – before growth investments           900 – 1,100           900 – 1,100

(1) The pro-rata amount of Adjusted EBITDA associated with non-controlling interests is $60 million and $105 million in 2013 and 2014, respectively. A detailed reconciliation is shown in Appendix A

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