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NRG Energy, Inc. Reports Second Quarter Results; Modifies Guidance And Announces Successful IPO Of NRG Yield (NYLD)

NRG Energy, Inc. (NYSE: NRG) today reported second quarter 2013 Adjusted EBITDA of $594 million with Wholesale contributing $393 million, Retail contributing $140 million and NRG Yield contributing $61 million. Year-to-date adjusted cash flow from operations totaled $331 million. Net loss for the first six months of 2013 was ($198) million, or ($0.63) per diluted common share compared to net income of $44 million, or $0.17 per diluted common share, for the first six months of 2012.

“While our current results have been impacted by a continuation of extraordinarily mild weather into the critical summer air conditioning season, particularly in Texas, we remain intensely focused across our Company on achieving the best possible results for 2013 under the circumstances while positioning the Company to realize the full financial potential of the GenOn combination in 2014,” said David Crane, NRG President and Chief Executive Officer. “We also are pleased that the strategic positioning of the Company has been considerably enhanced going forward as a result of the successful IPO of NRG Yield as the continued commodity weakness afflicting the merchant sector has made the long term contracted portion of our business a key component of our growth platform.”

Segment Results


Table 1: Adjusted EBITDA
($ in millions)       Three Months Ended     Six Months Ended
Segment       6/30/13     6/30/12 (2)     6/30/13     6/30/12 (2)
Retail 140     219 243     331
Gulf Coast

- Texas
117 228 189 367

- South Central
18 28 9 52
East 163 17 321 17
West 50 23 54 38
Other 3 14 11 27
NRG Yield 61 25 95 50
Alternative Energy 23 10 34 8
Corporate       19     (9)     11     (19)
Adjusted EBITDA (1)       594     555     967     871

(1) Detailed adjustments by region are shown in Appendix A

(2) Revised to reflect new EBITDA methodology

Table 2: Net Income/(Loss)
($ in millions)       Three Months Ended     Six Months Ended
Segment       6/30/13     6/30/12     6/30/13     6/30/12
Retail (82)     797 287     804
Gulf Coast

- Texas
169 (427) (257) (501)

- South Central
6 11 (1) (19)

142 (13) (17) (61)
West 37 21 30 7
Other (3) 7 - 13
NRG Yield 33 (1) 40 4
Alternative Energy (29) (14) (55) (29)
Corporate       (143)     (130)     (225)     (174)
Net Income/(Loss)       130     251     (198)     44

Retail: Second quarter Adjusted EBITDA was $140 million; $79 million lower than second quarter 2012. Gross margin was lower by $67 million primarily due to a reduction in Mass and C&I load as a result of persistently mild summer weather and increased supply costs not fully recovered as a result of competitive renewal and acquisition pricing, partially offset by additional margin from higher customer count. Operating expenses increased $12 million primarily due to expenses associated with increased revenues as well as timing of other expenses.

Gulf Coast - Texas: Second quarter Adjusted EBITDA was $117 million; $111 million lower than the second quarter 2012 driven by lower gross margin of $108 million. The decline in gross margin was driven by lower average realized energy prices and the roll-off of higher priced hedges. Meanwhile, a reduction in generation within the gas fleet resulted in a decline of $23 million as milder quarter-over-quarter weather and the coal-to-gas switching experienced in the second quarter of 2012 did not continue in 2013.

Gulf Coast - South Central: Second quarter Adjusted EBITDA was $18 million, $10 million lower than the second quarter of 2012. Gross margins declined $10 million, notwithstanding a 4% increase in average realized energy margins, as a result of a combination of lower sales volumes and higher natural gas prices as compared to the prior year.

East: Second quarter Adjusted EBITDA was $163 million; $146 million higher than the second quarter 2012 driven by the addition of the GenOn assets which contributed $141 million. The balance of the quarter-over-quarter improvement in Adjusted EBITDA was driven by higher capacity revenue from the Dunkirk reliability support services agreement in western New York, an increase in New York and PJM hedged capacity prices of 31% and a 58% increase in realized energy prices at the coal plants.

West: Second quarter Adjusted EBITDA was $50 million; $27 million higher than the second quarter 2012. This is a result of the acquisition of the GenOn assets which increased gross margin in the region by $64 million. Partially offsetting the higher gross margin were higher operating costs totaling $27 million from the addition of the GenOn assets as well as maintenance work that was delayed in 2012 due to the San Onofre nuclear outage.

NRG Yield: Second quarter Adjusted EBITDA was $61 million; $36 million higher than second quarter 2012. The improvement was driven by assets that achieved commercial operations in 2013 which included the Marsh Landing natural gas-fired facility, and the Borrego, Alpine and Avra Valley solar facilities. Marsh Landing achieved commercial operations in May 2013, with Borrego, Alpine and Avra Valley achieving commercial operations in February 2013, January 2013 and December 2012, respectively.

Alternative Energy: Second quarter Adjusted EBITDA was $23 million; $13 million higher than the second quarter 2012. Solar gross margin was $27 million, a $13 million increase from the prior year driven by the addition of new phases to the Company’s Agua Caliente solar facility, and certain portion of the California Valley Solar Ranch (CVSR) facility. Partially offsetting the improved margin were NRG’s continued solar and new business development efforts.

Liquidity and Capital Resources


Table 3: Corporate Liquidity
($ in millions)       6/30/13     3/31/13     12/31/12
Cash and Cash Equivalents       1,368     1,707     2,087
Restricted cash       267     221     217
Total       1,635     1,928     2,304
Total Credit Facility Availability       1,181     1,157     1,058
Total Liquidity       2,816     3,085     3,362

Total current liquidity, as of June 30, 2013, was $2,816 million, a decrease of $546 million from December 31, 2012. Increases of $50 million in restricted cash and $123 million in total credit facility availability were more than offset by a $719 million decrease in cash and cash equivalents consisting of the following items:
  • $1,050 million of cash outflows, through the first half of 2013, consisting of the following items:
    • $394 million net financing activities consisting of: $775 million to repurchase senior notes along with $28 million refinancing fees, $41 million scheduled debt amortization; partially offset by $450 million increase in Term Loan B proceeds;
    • $203 million of maintenance and environmental capital expenditures, net;
    • $158 million of collateral deposits;
    • $90 million of merger related payments;
    • $73 million of dividends to common and preferred shareholders;
    • $72 million of solar and conventional growth investments, net of debt proceeds, third party funding and cash grant proceeds;
    • $25 million of share repurchases; and
    • $35 million of other investing and financing activities
  • Offset, in part, by $331 million of adjusted cash flow from operations

Growth Initiatives and Strategic Developments

NRG continued to enhance its competitiveness and strategic positioning through a wide range of growth initiatives, including:

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