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Share Name | Share Symbol | Market | Type |
---|---|---|---|
NRG Energy Inc | NYSE:NRG | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
1.87 | 2.49% | 77.00 | 77.68 | 74.95 | 75.50 | 4,253,129 | 01:00:00 |
Key Highlights
NRG Energy, Inc. (NYSE:NRG):
Financial Results
Three Months Ended Nine Months Ended ($ in millions) 9/30/16 9/30/15 9/30/16 9/30/15 Net Income/(Loss) $ 393 $ 67 $ 164 $ (78 ) Cash From Operations $ 860 $ 934 $ 1,733 $ 1,392Adjusted EBITDA
$ 1,173 $ 1,103 $ 2,765 $ 2,585 Free Cash Flow (FCF) Before Growth Investments $ 911 $ 861 $ 1,131 $ 1,135NRG Energy, Inc. (NYSE:NRG) today reported third quarter net income of $393 million. The net income for the first nine months of 2016 was $164 million, or $0.91 per diluted common share compared to a net loss of $78 million, or $(0.25) per diluted common share for the first nine months of 2015. Adjusted EBITDA for the three and nine months ended September 30, 2016, was $1,173 million and $2,765 million, respectively. Year-to-date cash from operations totaled $1,733 million.
“Our unique integrated platform delivered another strong quarter despite a subdued price environment,” said Mauricio Gutierrez, NRG's President and Chief Executive Officer. “We remain focused on capital discipline with the retirement of $1 billion of corporate debt, while opportunistically deploying capital for growth, as evidenced by the SunEdison transaction. It is the consistent performance of our generation-retail model that drives our 2016 performance and our 2017 guidance announced today.”
1 Represents $1.312 billion of corporate debt retired, net of $1.25 billion of 2027 Senior Notes issuance, in third quarter 2016, and completed repurchases of $186 million of Senior Notes due 2018 and $193 million of Senior Notes due 2021, on October 18, 2016 and November 3, 2016, respectively. 2 Net of refinanced term loan interest cost of $16 million. 3 1,384 MW acquired as of November 4, 2016; acquisition of 154 MW construction-ready solar facility in Texas expected to close in November 2016. 4For comparability, 2015 results have been restated to include the negative contribution from residential solar of $42 million and $129 million for the three and nine months ended September 30, 2015.Segment Results
Table 1: Net Income/(Loss)
($ in millions) Three Months Ended Nine Months Ended Segment 9/30/16 9/30/15 9/30/16 9/30/15 Generation $ 630 $ 164 $ 418 $ 213 Retail Mass 2 197 644 523 Renewables 1 11 (16 ) (102 ) (74 ) NRG Yield 1 47 32 111 53 Corporate 2 (297 ) (310 ) (907 ) (793 ) Net Income/(Loss) 3 $ 393 $ 67 $ 164 $ (78 ) 1 In accordance with GAAP, 2015 results have been restated to include full impact of the assets in the NRG Yield Drop Down transactions which closed on November 3, 2015, and September 1, 2016. 2 Includes residential solar. 3 Includes mark-to-market gains and losses of economic hedges.Table 2: Adjusted EBITDA
($ in millions) Three Months Ended Nine Months Ended Segment 9/30/16 9/30/15 9/30/16 9/30/15 Generation 1 $ 605 $ 674 $ 1,340 $ 1,525 Retail Mass 266 225 629 606 Renewables 2 84 60 161 132 NRG Yield 2 246 221 692 569 Corporate 3 (28 ) (77 ) (57 ) (247 ) Adjusted EBITDA 4 $ 1,173 $ 1,103 $ 2,765 $ 2,585 1 See Appendices A-6 through A-9 for Generation regional Reg G reconciliations. 2 In accordance with GAAP, 2015 results have been restated to include full impact of the assets in the NRG Yield Drop Down transactions which closed on November 3, 2015, and September 1, 2016. 3 2016 includes residential solar. 2015 results have been restated to include negative contribution of $42 million and $129 million for the three and nine months ended September 30, 2015, respectively. 4 See Appendices A-1 through A-4 for Operating Segment Reg G reconciliations.Generation: Third quarter Adjusted EBITDA was $605 million, $69 million lower than third quarter 2015 primarily driven by:
Retail Mass: Third quarter Adjusted EBITDA was $266 million, $41 million higher than third quarter 2015 driven by operating cost efficiencies, lower supply costs and favorable weather in 2016 compared to 2015.
Renewables: Third quarter Adjusted EBITDA was $84 million, $24 million higher than third quarter 2015 due primarily to increased generation at Ivanpah.
NRG Yield: Third quarter Adjusted EBITDA was $246 million, $25 million higher than third quarter 2015 primarily due to higher generation across the wind portfolio.
Corporate: Third quarter Adjusted EBITDA was $(28) million, $49 million favorable to third quarter 2015 due to reduced operating expenses at residential solar and favorable trading results at BETM.
Liquidity and Capital Resources
Table 3: Corporate Liquidity
($ in millions) 9/30/16 12/31/15 Cash at NRG-Level 1 $ 941 $ 693 Revolver 1,374 1,373 NRG-Level Liquidity $ 2,315 $ 2,066 Restricted cash 480 414 Cash at Non-Guarantor Subsidiaries 1,494 825 Total Liquidity $ 4,289 $ 3,305
1 September 30, 2016, balance includes $250 million of unrestricted cash held at Midwest Generation (a non-guarantor subsidiary) which can be distributed to NRG without limitation.
NRG-Level cash as of September 30, 2016, was $941 million, an increase of $248 million from the end of 2015, and $1.4 billion was available under the Company’s credit facilities at the end of the third quarter 2016. Total liquidity was $4.3 billion, including restricted cash and cash at non-guarantor subsidiaries (primarily GenOn and NRG Yield).
NRG Strategic Developments
University of Pittsburgh Medical Center (UPMC) Thermal Project
On October 31, 2016, subsidiaries of NRG and NRG Yield, Inc., entered into an Engineering, Procurement and Construction (EPC) agreement for the construction of a 73 MWt district energy system for NRG Yield to provide approximately 150 kpph of steam, 6,750 tons of chilled water and 7.5 MW of emergency backup power service to UPMC. The initial term of the energy services agreement (under fixed capacity payments) with UPMC Mercy will be for a period of twenty years from the service commencement date. Pursuant to the terms of the EPC agreement, NRG Yield will pay NRG $79 million, subject to adjustment based upon certain conditions in the EPC agreement, upon substantial completion of the project. The project is expected to achieve commercial operations in the first quarter of 2018.
SunEdison Utility-Scale Solar and Wind Acquisition
On September 15, 2016, the Company entered into an agreement with SunEdison to acquire (i) an equity interest in a tax-equity portfolio of 530 MW mechanically-complete solar assets of which NRG’s net interest based on cash to be distributed will be 265 MW, and an additional 937 MW of solar and wind assets in development, (ii) a 154 MW construction-ready solar facility in Texas and (iii) a 182 MW portfolio of construction-ready and development solar assets in Hawaii. The acquisition of the portfolio of solar assets in Hawaii was completed on October 7, 2016, for upfront cash consideration of $2 million and the acquisition of the 530 MW tax-equity portfolio and 937 MW of development assets was completed on November 2, 2016, for upfront cash consideration of $111 million. The Company expects to pay total upfront cash consideration for the three acquisitions of $129 million, with an estimated $59 million in additional payments contingent upon future development milestones.
SunEdison Solar Distributed Generation Acquisition
On October 3, 2016, the Company acquired a 29 MW portfolio of mechanically-complete and construction-ready distributed generation solar assets from SunEdison for cash consideration of approximately $68 million, subject to post-closing adjustments. The Company expects to sell these assets into a tax-equity financed portfolio within the distributed generation partnership with NRG Yield.
Drop Down to NRG Yield
On September 1, 2016, NRG completed the previously announced sale of its 51.05% interest in the CVSR facility to NRG Yield Operating LLC for total cash consideration of approximately $78.5 million plus assumed debt.
Outlook for 2016 and Initiation of 2017 Guidance
NRG has increased and narrowed the range of its Adjusted EBITDA and narrowed FCF before growth investments guidance for 2016 and is also initiating guidance for fiscal year 2017 as set forth below.
Table 4: 2016 and 2017 Adjusted EBITDA and FCF before Growth Investments Guidance
2016 2017 ($ in millions) Prior GuidanceNarrowed Guidance
Guidance Adjusted EBITDA1 $3,000 – 3,200 $3,250 – 3,350 $2,700 - $2,900 Cash From Operations $2,055 – 2,255 $1,975 – 2,075 $1,355 - $1,555 Free Cash Flow – before Growth Investments $1,000 – 1,200 $1,100 – 1,200 $800 - $1,0001 Non-GAAP financial measure; see Appendix Table A-11 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
In October 2016, the Company redeemed $186 million of its 7.625% 2018 Senior Notes through a tender offer, at an average early redemption percentage of 107.75%. On November 3, 2016, the Company redeemed $193 million of its 7.875% 2021 Senior Notes, at a redemption price of 103.94%.
Year-to-date through November 4, 2016, NRG has reduced corporate debt by $777 million. Combined with the debt repurchases in 2015 and the extension of debt maturities at a lower average coupon rate, NRG has retired $1.0 billion of corporate debt resulting in an annual interest savings of approximately $78 million, plus an additional $10 million in dividend savings from the repurchase of 100% of its outstanding $345 million, 2.822% convertible perpetual preferred stock for $226 million.
On October 19, 2016, NRG declared a quarterly dividend on the company's common stock of $0.03 per share, payable November 15, 2016, to stockholders of record as of November 1, 2016, representing $0.12 on an annualized basis.
The Company’s common stock dividend, debt reduction and share repurchases are subject to available capital, market conditions and compliance with associated laws and regulations.
Earnings Conference Call
On November 4, 2016, NRG will host a conference call at 8:00 a.m. Eastern 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.” The webcast will be archived on the site for those unable to listen in real time.
About NRG
NRG is the leading integrated power company in the U.S., built on the strength of the nation’s largest and most diverse competitive electric generation portfolio and leading retail electricity platform. A Fortune 200 company, NRG creates value through best in class operations, reliable and efficient electric generation, and a retail platform serving residential and commercial customers. Working with electricity customers, large and small, we continually innovate, embrace and implement sustainable solutions for producing and managing energy. We aim to be pioneers in developing smarter energy choices and delivering exceptional service as our retail electricity providers serve almost 3 million residential and commercial customers throughout the country. More information is available at www.nrg.com. Connect with NRG Energy on Facebook and follow us on Twitter @nrgenergy.
Safe Harbor Disclosure
In addition to historical information, the information presented in this communication 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 above include, among others, general economic conditions, hazards customary in the power industry, weather conditions, including wind and solar performance, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets, changes in government regulation of markets and of environmental emissions, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify or successfully implement acquisitions and repowerings, our ability to implement value enhancing improvements to plant operations and companywide processes, the ability for GenOn to continue as a going concern, our ability to obtain federal loan guarantees, the inability to maintain or create successful partnering relationships with NRG Yield and other third parties, our ability to operate our businesses efficiently including NRG Yield, our ability to retain retail customers, our ability to realize value through our commercial operations strategy and the creation of NRG Yield, the ability to successfully integrate the businesses of acquired companies, the ability to realize anticipated benefits of acquisitions (including expected cost savings and other synergies) and the ability to sell assets to NRG Yield, Inc. or the risk that anticipated benefits may take longer to realize than expected and our ability to pay dividends and initiate share or debt repurchases under our capital allocation plan, which 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 or debt repurchases are 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 and free cash flow guidance are estimates as of November 4, 2016. 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 Earnings 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 September 30,
Nine months ended September 30,
(In millions, except for per share amounts)
2016 2015 2016 2015 Operating Revenues Total operating revenues $ 3,952 $ 4,434 $ 9,819 $ 11,663 Operating Costs and Expenses Cost of operations 2,793 3,042 6,738 8,551 Depreciation and amortization 357 382 979 1,173 Impairment losses 8 263 123 263 Selling, general and administrative 282 327 802 878 Acquisition-related transaction and integration costs — 3 7 16 Development activity expenses 23 38 67 109 Total operating costs and expenses 3,463 4,055 8,716 10,990 Gain on sale of assets and postretirement benefits curtailment, net 266 — 215 14 Operating Income 755 379 1,318 687 Other Income/(Expense) Equity in earnings of unconsolidated affiliates 16 24 13 29 Impairment loss on investment (8 ) — (147 ) — Other income, net 9 4 35 27 Loss on debt extinguishment, net (50 ) (2 ) (119 ) (9 ) Interest expense (280 ) (291 ) (841 ) (855 ) Total other expense (313 ) (265 ) (1,059 ) (808 ) Income/(Loss) Before Income Taxes 442 114 259 (121 ) Income tax expense/(benefit) 49 47 95 (43 ) Net Income/(Loss) 393 67 164 (78 ) Less: Net (loss)/income attributable to noncontrolling interest and redeemable noncontrolling interests (9 ) 1 (49 ) (10 ) Net Income/(Loss) Attributable to NRG Energy, Inc. 402 66 213 (68 ) Gain on redemption, net of dividends for preferred shares — 5 (73 ) 15 Income/(Loss) Available for Common Stockholders $ 402 $ 61 $ 286 $ (83 ) Earnings/(Loss) per Share Attributable to NRG Energy, Inc. Common Stockholders Weighted average number of common shares outstanding — basic 316 331 315 334 Earnings/(Loss) per Weighted Average Common Share — Basic $ 1.27 $ 0.18 $ 0.91 $ (0.25 ) Weighted average number of common shares outstanding — diluted 317 332 316 334 Earnings/(Loss) per Weighted Average Common Share — Diluted $ 1.27 $ 0.18 $ 0.91 $ (0.25 ) Dividends Per Common Share $ 0.03 $ 0.15 $ 0.21 $ 0.44NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
Three months ended September 30,
Nine months ended September 30,
2016 2015 2016 2015 (In millions) Net Income/(Loss) $ 393 $ 67 $ 164 $ (78 ) Other Comprehensive Income/(Loss), net of tax Unrealized gains/(losses) on derivatives, net of income tax (benefit)/expense of $(1), $(12), $1 and $(6) 27 (6 ) (8 ) (2 ) Foreign currency translation adjustments, net of income tax benefit of $0 , $5, $0 and $6 3 (8 ) 6 (10 ) Available-for-sale securities, net of income tax expense of $0, $6, $0 and $1 — (7 ) 1 (11 ) Defined benefit plans, net of tax expense of $0, $2, $0 and $6 31 3 32 9 Other comprehensive income/(loss) 61 (18 ) 31 (14 ) Comprehensive Income/(Loss) 454 49 195 (92 ) Less: Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interests (2 ) (17 ) (70 ) (34 ) Comprehensive Income/(Loss) Attributable to NRG Energy, Inc. 456 66 265 (58 ) Gain on redemption, net of dividends for preferred shares — 5 (73 ) 15 Comprehensive Income/(Loss) Available for Common Stockholders $ 456 $ 61 $ 338 $ (73 )NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2016
December 31, 2015
(In millions, except shares)
(unaudited) ASSETS Current Assets Cash and cash equivalents $ 2,435 $ 1,518 Funds deposited by counterparties 16 106 Restricted cash 480 414 Accounts receivable, net 1,362 1,157 Inventory 1,017 1,252 Derivative instruments 964 1,915 Cash collateral paid in support of energy risk management activities 337 568 Renewable energy grant receivable, net 34 13 Current assets held-for-sale — 6 Prepayments and other current assets 369 442 Total current assets 7,014 7,391 Property, plant and equipment, net 18,203 18,732 Other Assets Equity investments in affiliates 900 1,045 Notes receivable, less current portion 21 53 Goodwill 999 999Intangible assets, net
2,106 2,310 Nuclear decommissioning trust fund 605 561 Derivative instruments 256 305 Deferred income taxes 189 167 Non-current assets held-for-sale — 105 Other non-current assets 1,198 1,214 Total other assets 6,274 6,759 Total Assets $ 31,491 $ 32,882 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Current portion of long-term debt and capital leases $ 1,221 $ 481 Accounts payable 945 869 Derivative instruments 969 1,721 Cash collateral received in support of energy risk management activities 16 106 Current liabilities held-for-sale — 2 Accrued expenses and other current liabilities 1,150 1,196 Total current liabilities 4,301 4,375 Other Liabilities Long-term debt and capital leases 18,018 18,983 Nuclear decommissioning reserve 284 326 Nuclear decommissioning trust liability 309 283 Deferred income taxes 47 19 Derivative instruments 475 493 Out-of-market contracts, net 1,065 1,146 Non-current liabilities held-for-sale — 4 Other non-current liabilities 1,480 1,488 Total non-current liabilities 21,678 22,742 Total Liabilities 25,979 27,117 2.822% convertible perpetual preferred stock — 302 Redeemable noncontrolling interest in subsidiaries 19 29 Commitments and Contingencies Stockholders’ Equity Common stock 4 4 Additional paid-in capital 8,370 8,296 Retained deficit (2,791 ) (3,007 ) Less treasury stock, at cost — 102,140,814 and 102,749,908 shares, respectively (2,399 ) (2,413 ) Accumulated other comprehensive loss (142 ) (173 ) Noncontrolling interest 2,451 2,727 Total Stockholders’ Equity 5,493 5,434 Total Liabilities and Stockholders’ Equity $ 31,491 $ 32,882NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
2016 2015 (In millions) Cash Flows from Operating Activities Net Income/(Loss) $ 164 $ (78 ) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Distributions and equity in earnings of unconsolidated affiliates 44 28 Depreciation and amortization 979 1,173 Provision for bad debts 36 49 Amortization of nuclear fuel 39 36 Amortization of financing costs and debt discount/premiums 3 (9 ) Adjustment to loss on debt extinguishment 21 9 Amortization of intangibles and out-of-market contracts 73 68 Amortization of unearned equity compensation 23 37 Impairment losses 270 263 Changes in deferred income taxes and liability for uncertain tax benefits 29 (72 ) Changes in nuclear decommissioning trust liability 24 1 Changes in derivative instruments 82 180 Changes in collateral deposits supporting energy risk management activities 231 (180 ) Proceeds from sale of emission allowances 47 (6 ) Gain on sale of assets and equity method investments, net and postretirement benefits curtailment (224 ) (14 ) Cash used by changes in other working capital (108 ) (93 ) Net Cash Provided by Operating Activities 1,733 1,392 Cash Flows from Investing Activities Acquisitions of businesses, net of cash acquired (18 ) (31 ) Capital expenditures (898 ) (889 ) Increase in restricted cash, net (30 ) (41 ) (Increase)/decrease in restricted cash to support equity requirements for U.S. DOE funded projects (36 ) 1 Decrease in notes receivable 2 10 Purchases of emission allowances (32 ) (40 ) Proceeds from sale of emission allowances 47 45 Investments in nuclear decommissioning trust fund securities (378 ) (500 ) Proceeds from the sale of nuclear decommissioning trust fund securities 354 499 Proceeds from renewable energy grants and state rebates 11 62 Proceeds from sale of assets, net of cash disposed of 636 1 Investments in unconsolidated affiliates (23 ) (357 ) Other 44 8 Net Cash Used by Investing Activities (321 ) (1,232 ) Cash Flows from Financing Activities Payment of dividends to common and preferred stockholders (66 ) (152 ) Payment for treasury stock — (353 ) Payment for preferred shares (226 ) — Net receipts from settlement of acquired derivatives that include financing elements 129 138 Proceeds from issuance of long-term debt 5,237 679 Payments for short and long-term debt (5,357 ) (954 ) Distributions from, net of contributions to, noncontrolling interest in subsidiaries (127 ) 651 Proceeds from issuance of common stock 1 1 Payment of debt issuance costs (70 ) (14 ) Other - contingent consideration (10 ) (22 ) Net Cash Used by Financing Activities (489 ) (26 ) Effect of exchange rate changes on cash and cash equivalents (6 ) 15 Net Increase in Cash and Cash Equivalents 917 149 Cash and Cash Equivalents at Beginning of Period 1,518 2,116 Cash and Cash Equivalents at End of Period $ 2,435 $ 2,265Appendix Table A-1: Third Quarter 2016 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to net income/(loss):
($ in millions) Retail Mass Generation Renewables Yield Corp/Elim Total Net income/(loss) 2 630 11 47 (297 ) 393 Plus: Interest expense, net — 14 34 70 157 275 Income tax — (2 ) (3 ) 13 41 49 Loss on debt extinguishment — — — — 50 50 Depreciation, amortization and ARO expense 25 198 48 76 16 363 Amortization of contracts (1 ) (15 ) — 17 — 1 EBITDA 26 825 90 223 (33 ) 1,131 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates — 7 2 23 (2 ) 30 Reorganization costs — — — — 6 6 Deactivation costs — 3 — — 1 4 Gain on sale of business — (194 ) — — (4 ) (198 ) Other non recurring charges — 6 (6 ) — — — Impairments — 13 (1 ) — 4 16 Mark to market (MtM) (gains)/losses on economic hedges 240 (55 ) (1 ) — — 184 Adjusted EBITDA 266 605 84 246 (28 ) 1,173Third Quarter 2016 condensed financial information by Operating Segment:
($ in millions) Retail Mass Generation Renewables Yield Corp/Elim Total Operating revenues 1,618 2,322 139 289 (325 ) 4,043 Cost of sales 1,156 1,276 1 18 (341 ) 2,110 Economic gross margin 462 1,046 138 271 16 1,933 Operations & maintenance (a) 54 369 19 36 3 481 Selling, marketing, general and administrative(b) 118 101 12 4 41 276 Other income/(expense) 24 (29 ) 23 (15 ) — 3 Adjusted EBITDA 266 605 84 246 (28 ) 1,173 (a) Excludes deactivation costs of $4 million. (b) Excludes reorganization costs of $6 million.The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions)Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other adj.AdjustedEBITDA
Operating revenues 3,952 12 79 — — 4,043 Cost of operations 2,218 (3 ) (105 ) — — 2,110 Gross margin 1,734 15 184 — — 1,933 Operations & maintenance 485 — — (4 ) — 481 Selling, marketing, general & administrative (a) 282 — — — (6 ) 276 Other expense/(income) (b) 574 (723 ) — — 152 3 Net income 393 738 184 4 (146 ) 1,173 (a) Other adj. includes reorganization costs of $6 million. (b) Other adj. includes impairments, loss on sale of business, and acquisition-related transaction & integration costs.Appendix Table A-2: Third Quarter 2015 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss):
($ in millions) Retail Mass Generation Renewables Yield Corp/Elim Total Net income/(loss) 197 164 (16 ) 32 (310 ) 67 Plus: Interest expense, net — 17 22 70 177 286 Income tax — 2 (4 ) 8 41 47 Loss on debt extinguishment — — — 2 — 2 Depreciation amortization and ARO expense 30 231 46 71 17 395 Amortization of contracts (1 ) (11 ) — 14 — 2 EBITDA 226 403 48 197 (75 ) 799 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates — 10 3 20 (4 ) 29 Acquisition-related transaction & integration costs — — — 1 2 3 Deactivation costs — 2 — — 2 Gain on sale of business — — (2 ) — — (2 ) Other non recurring charges (13 ) 8 6 1 — 2 Impairments 36 222 5 — — 263 MtM (gains)/losses on economic hedges (24 ) 29 — 2 — 7 Adjusted EBITDA 225 674 60 221 (77 ) 1,103Third Quarter 2015 condensed financial information by Operating Segment:
($ in millions) Retail Mass Generation Renewables Yield Corp/Elim Total Operating revenues 1,698 2,692 123 272 (378 ) 4,407 Cost of sales 1,255 1,449 — 20 (364 ) 2,360 Economic gross margin 443 1,243 123 252 (14 ) 2,047 Operations & maintenance (a) 50 384 39 38 (3 ) 508 Selling, marketing, general & administrative 116 127 16 3 65 327 Other income/(expense) (b) 52 58 8 (10 ) 1 109 Adjusted EBITDA 225 674 60 221 (77 ) 1,103 (a) Excludes deactivation costs of $2 million. (b) Excludes acquisition-related transaction & integration costs of $3 million.The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions)Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other adj.AdjustedEBITDA
Operating revenues 4,434 8 (35 ) — — 4,407 Cost of operations 2,409 (7 ) (42 ) — — 2,360 Gross margin 2,025 15 7 — — 2,047 Operations & maintenance 510 — — (2 ) — 508 Selling, marketing, general & administrative 327 — — — — 327 Other expense/(income) (a) 1,121 (718 ) — — (294 ) 109 Net income 67 733 7 2 294 1,103 (a) Other adj. includes impairments and acquisition-related transaction & integration costs.Appendix Table A-3: YTD Third Quarter 2016 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to net income/(loss):
($ in millions) Retail Mass Generation Renewables Yield Corp/Elim Total Net income/(loss) 644 418 (102 ) 111 (907 ) 164 Plus: Interest expense, net — 56 84 212 478 830 Income tax — (1 ) (14 ) 25 85 95 Loss on debt extinguishment — — — — 119 119 Depreciation, amortization and ARO expense 80 506 144 226 50 1,006 Amortization of contracts — (46 ) — 57 (3 ) 8 EBITDA 724 933 112 631 (178 ) 2,222 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates — 23 16 58 (4 ) 93 Acquisition-related transaction & integration costs — — — — 7 7 Reorganization costs 5 1 3 — 17 26 Deactivation costs — 15 — — 1 16 (Gain)/loss on sale of business — (223 ) — — 79 (144 ) Other non recurring charges — 17 5 3 2 27 Impairments — 226 25 — 19 270 Market to market (MtM) (gains)/losses on economic hedges (100 ) 348 — — — 248 Adjusted EBITDA 629 1,340 161 692 (57 ) 2,765YTD Third Quarter 2016 condensed financial information by Operating Segment:
($ in millions) Retail Mass Generation Renewables Yield Corp/Elim Total Operating revenues 3,868 6,131 336 840 (723 ) 10,452 Cost of sales 2,711 3,166 3 48 (796 ) 5,132 Economic gross margin 1,157 2,965 333 792 73 5,320 Operations & maintenance (a) 164 1,239 96 118 9 1,626 Selling, marketing, general & administrative (b) 299 311 40 10 116 776 Other expense/(income) (c) 65 75 36 (28 ) 5 153 Adjusted EBITDA 629 1,340 161 692 (57 ) 2,765 (a) Excludes deactivation costs of $16 million. (b) Excludes reorganization costs of $26 million. (c) Excludes acquisition-related transaction & integration costs of $7 million.The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions)Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other adj.AdjustedEBITDA
Operating revenues 9,819 41 592 — — 10,452 Cost of operations 4,794 (6 ) 344 — — 5,132 Gross margin 5,025 47 248 — — 5,320 Operations & maintenance 1,642 — — (16 ) — 1,626 Selling, marketing, general & administrative(a) 802 — — — (26 ) 776 Other expense/(income) (b) 2,417 (2,011 ) — — (253 ) 153 Net income 164 2,058 248 16 279 2,765 (a) Other adj. includes reorganization costs of $26 million. (b) Other adj. includes impairments, gain/(loss) on sale of business and acquisition-related transaction & integration costs.Appendix Table A-4: YTD Third Quarter 2015 Adjusted EBITDA Reconciliation by Operating Segment
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss):
($ in millions) Retail Mass Generation Renewables Yield Corp/Elim Total Net income/(loss) 523 213 (74 ) 53 (793 ) (78 ) Plus: Interest expense, net — 52 61 199 532 844 Income tax — 3 (13 ) 8 (41 ) (43 ) Loss on debt extinguishment — — — 9 — 9 Depreciation amortization and ARO expense 94 706 134 224 43 1,201 Amortization of contracts — (41 ) 1 40 1 1 EBITDA 617 933 109 533 (258 ) 1,934 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates — 22 13 34 (2 ) 67 Acquisition-related transaction & integration costs 1 — — 2 13 16 Deactivation costs — 8 — — — 8 Gain on sale of business — — (2 ) — — (2 ) Other non recurring charges (14 ) 19 5 1 — 11 Impairments 36 222 5 — — 263 MtM (gains)/losses on economic hedges (34 ) 321 2 (1 ) — 288 Adjusted EBITDA 606 1,525 132 569 (247 ) 2,585YTD Third Quarter 2015 condensed financial information by Operating Segment:
($ in millions) Retail Mass Generation Renewables Yield Corp/Elim Total Operating revenues 4,308 7,442 307 768 (969 ) 11,856 Cost of sales 3,136 4,023 6 58 (941 ) 6,282 Economic gross margin 1,172 3,419 301 710 (28 ) 5,574 Operations & maintenance (a) 165 1,384 96 120 9 1,774 Selling, marketing, general & administrative 306 343 37 9 183 878 Other expense/(income) (b) 95 167 36 12 27 337 Adjusted EBITDA 606 1,525 132 569 (247 ) 2,585 (a) Excludes deactivation costs of $8 million. (b) Excludes acquisition-related transaction & integration costs of $16 million.The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions)Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other adj.AdjustedEBITDA
Operating revenues 11,663 28 165 — — 11,856 Cost of operations 6,416 (11 ) (123 ) — — 6,282 Gross margin 5,247 39 288 — — 5,574 Operations & maintenance 1,782 — — (8 ) — 1,774 Selling, marketing, general & administrative 878 — — — — 878 Other expense/(income) (a) 2,665 (1,974 ) — — (354 ) 337 Net loss (78 ) 2,013 288 8 354 2,585 (a) Other adj. includes impairments and acquisition-related transaction & integration costs.Appendix Table A-5: 2016 and 2015 QTD and YTD Third Quarter Adjusted Cash Flow from Operations Reconciliations
The following table summarizes the calculation of adjusted cash flow operating activities providing a reconciliation to net cash provided by operating activities:
Three Months Ended ($ in millions) September 30, 2016 September 30, 2015 Net Cash Provided by Operating Activities 860 934 Reclassifying of net receipts for settlement of acquired derivatives that include financing elements 26 47 Sale of Potrero Land 74 — Merger, integration and cost-to-achieve expenses (1) 22 1 Return of capital from equity investments (5 ) — Adjustment for change in collateral 119 68 Adjusted Cash Flow from Operating Activities 1,096 1,050 Maintenance CapEx, net (2) (103 ) (125 ) Environmental CapEx, net (48 ) (30 ) Preferred dividends — (2 ) Distributions to non-controlling interests (34 ) (32 ) Free Cash Flow - before Growth Investments 911 861 (1) Cost-to-achieve expenses associated with the $150 million savings announced on September 2015 call. (2) Includes insurance proceeds of $2 million in 2016; excludes merger and integration capex of $2 million in 2015. Nine Months Ended ($ in millions) September 30, 2016 September 30, 2015 Net Cash Provided by Operating Activities 1,733 1,392 Reclassifying of net receipts for settlement of acquired derivatives that include financing elements 129 138 Sale of Potrero Land 74 — Merger, integration and cost-to-achieve expenses (1) 47 18 Return of capital from equity investments 6 — Adjustment for change in collateral (231) 180 Adjusted Cash Flow from Operating Activities 1,758 1,728 Maintenance CapEx, net (2) (272) (314 ) Environmental CapEx, net (237) (157 ) Preferred dividends (2) (7 ) Distributions to non-controlling interests (116) (115 ) Free Cash Flow - before Growth Investments 1,131 1,135 (1) Cost-to-achieve expenses associated with the $150 million savings announced on September 2015 call. (2) Includes insurance proceeds of $33 million in 2016; excludes merger and integration capex of $11 million in 2015.Appendix Table A-6: Third Quarter 2016 Regional Adjusted EBITDA Reconciliation for Generation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net (loss)/income:
($ in millions) East Gulf Coast WestBusinessSolutions
Total Net income/(loss) 385 216 110 (81 ) 630 Plus: Interest expense, net 14 — — — 14 Income tax — (2 ) — — (2 ) Depreciation, amortization and ARO expense 50 127 20 1 198 Amortization of contracts (17 ) 1 — 1 (15 ) EBITDA 432 342 130 (79 ) 825 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates — — 2 5 7 Deactivation costs 2 — 1 — 3 Gain on sale of assets (188 ) — (6 ) — (194 ) Other non recurring charges — 6 — — 6 Impairments 1 13 (1 ) — 13 Market to market (MtM) losses/(gains) on economic hedges 38 (207 ) (3 ) 117 (55 ) Adjusted EBITDA 285 154 123 43 605Third Quarter 2016 condensed financial information for Generation:
($ in millions) East Gulf Coast WestBusinessSolutions
Elims. Total Operating revenues 1,002 804 147 394 (25 ) 2,322 Cost of sales 452 454 60 331 (21 ) 1,276 Economic gross margin 550 350 87 63 (4 ) 1,046 Operations & maintenance (a) 188 143 33 5 — 369 Selling, marketing, general & administrative 43 31 7 20 — 101 Other expense/(income) 34 22 (76 ) (5 ) (4 ) (29 ) Adjusted EBITDA 285 154 123 43 — 605 (a) Excludes deactivation costs of $3 million.The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions)Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other adj.AdjustedEBITDA
Operating revenues 2,390 (4 ) (64 ) — — 2,322 Cost of operations 1,287 (2 ) (9 ) — — 1,276 Gross margin 1,103 (2 ) (55 ) — — 1,046 Operations & maintenance 372 — — (3 ) — 369 Selling, marketing, general & administrative 101 — — — — 101 Other expense/(income) (a) - (197 ) — — 168 (29 ) Net income 630 195 (55 ) 3 (168 ) 605 (a) Other adj. includes impairments and acquisition-related transaction & integration costs.Appendix Table A-7: Third Quarter 2015 Regional Adjusted EBITDA Reconciliation for Generation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss):
($ in millions) East Gulf Coast WestBusinessSolutions
Total Net (loss)/income (12 ) 124 63 (11 ) 164 Plus: Interest expense, net 17 — — — 17 Income tax — — — 2 2 Depreciation amortization and ARO expense 68 143 17 3 231 Amortization of contracts (18 ) 1 4 2 (11 ) EBITDA 55 268 84 (4 ) 403 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates — 4 3 3 10 Deactivation costs 2 — — — 2 Other non recurring charges 1 7 — — 8 Impairments 222 — — — 222 MtM (gains)/losses on economic hedges 31 (31 ) (8 ) 37 29 Adjusted EBITDA 311 248 79 36 674Third Quarter 2015 condensed financial information for Generation:
($ in millions) East Gulf Coast WestBusinessSolutions
Elims. Total Operating revenues 1,143 905 201 446 (3 ) 2,692 Cost of sales 515 465 90 379 — 1,449 Economic gross margin 628 440 111 67 (3 ) 1,243 Operations & maintenance (a) 221 128 29 6 — 384 Selling, marketing, general & administrative 53 41 11 22 — 127 Other expense/(income) 43 23 (8 ) 3 (3 ) 58 Adjusted EBITDA 311 248 79 36 — 674 (a) Excludes deactivation costs of $2 million.The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions)Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other adj.AdjustedEBITDA
Operating revenues 2,695 (4 ) 1 — — 2,692 Cost of operations 1,484 (7 ) (28 ) — — 1,449 Gross margin 1,211 3 29 — — 1,243 Operations & maintenance 386 — — (2 ) — 384 Selling, marketing, general & administrative 127 — — — — 127 Other expense/(income) (a) 534 (236 ) — — (240 ) 58 Net income 164 239 29 2 240 674 (a) Other adj. includes impairments.Appendix Table A-8: YTD Third Quarter 2016 Regional Adjusted EBITDA Reconciliation for Generation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss)
($ in millions) East Gulf Coast WestBusinessSolutions
Total Net income/(loss) 493 (246 ) 73 98 418 Plus: Interest expense, net 56 1 — (1 ) 56 Income tax — (2 ) — 1 (1 ) Depreciation, amortization and ARO expense 162 281 55 8 506 Amortization of contracts (52 ) 4 (3 ) 5 (46 ) EBITDA 659 38 125 111 933 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates — 5 7 11 23 Reorganization costs — — — 1 1 Deactivation costs 15 — — — 15 Gain on sale of assets (217 ) — (6 ) — (223 ) Other non recurring charges 3 14 — — 17 Impairments 17 151 58 — 226 Market to market (MtM) losses/(gains) on economic hedges 175 208 15 (50 ) 348 Adjusted EBITDA 652 416 199 73 1,340Third YTD Quarter 2016 condensed financial information for Generation:
($ in millions) East Gulf Coast WestBusinessSolutions
Elims. Total Operating revenues 2,662 2,089 358 1,055 (33 ) 6,131 Cost of sales 1,070 1,082 111 924 (21 ) 3,166 Economic gross margin 1,592 1,007 247 131 (12 ) 2,965 Operations & maintenance (a) 698 429 95 17 — 1,239 Selling, marketing, general & administrative (b) 133 98 24 56 — 311 Other expense/(income) 109 64 (71 ) (15 ) (12 ) 75 Adjusted EBITDA 652 416 199 73 — 1,340 (a) Excludes deactivation costs of $15 million. (b) Excludes reorganization costs of $1 million.The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions)Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other adj.AdjustedEBITDA
Operating revenues 5,599 (11 ) 543 — — 6,131 Cost of operations 2,973 (2 ) 195 — — 3,166 Gross Margin 2,626 (9 ) 348 — — 2,965 Operations & maintenance 1,254 — — (15 ) — 1,239 Selling, marketing, general & administrative 312 — — — (1 ) 311 Other expense/(income) (a) 642 (524 ) — — (43 ) 75 Net loss 418 515 348 15 44 1,340 (a) Other adj. includes impairments and acquisition-related transaction & integration costs.Appendix Table A-9: YTD Third Quarter 2015 Regional Adjusted EBITDA Reconciliation for Generation
The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/(loss)
($ in millions) East Gulf Coast WestBusinessSolutions
Total Net income/(loss) 181 49 30 (47 ) 213 Plus: Interest expense, net 52 — — — 52 Income tax — — — 3 3 Depreciation amortization and ARO expense 220 431 46 9 706 Amortization of contracts (50 ) 3 1 5 (41 ) EBITDA 403 483 77 (30 ) 933 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates — 5 6 11 22 Deactivation costs 5 — 3 — 8 Other non recurring charges 2 17 — — 19 Impairments 222 — — — 222 MtM losses on economic hedges 253 (20 ) 5 83 321 Adjusted EBITDA 885 485 91 64 1,525Third YTD Quarter 2015 condensed financial information for Generation:
($ in millions) East Gulf Coast WestBusinessSolutions
Elims. Total Operating revenues 3,518 2,386 366 1,182 (10 ) 7,442 Cost of sales 1,601 1,236 142 1,044 — 4,023 Economic gross margin 1,917 1,150 224 138 (10 ) 3,419 Operations & maintenance (a) 776 488 102 18 — 1,384 Selling, marketing, general & administrative 141 114 30 58 — 343 Other expense/(income) 115 63 1 (2 ) (10 ) 167 Adjusted EBITDA 885 485 91 64 — 1,525 (a) Excludes deactivation costs of $8 million.The following table reconciles the condensed financial information to Adjusted EBITDA:
($ in millions)Condensedfinancialinformation
Interest, tax,depr., amort.
MtM Deactivation Other adj.AdjustedEBITDA
Operating revenues 7,325 (12 ) 129 — — 7,442 Cost of operations 4,225 (10 ) (192 ) — — 4,023 Gross margin 3,100 (2 ) 321 — — 3,419 Operations & maintenance 1,392 — — (8 ) — 1,384 Selling, marketing, general & administrative 343 — — — — 343 Other expense/(income) (a) 1,152 (721 ) — — (264 ) 167 Net income 213 719 321 8 264 1,525 (a) Other adj. includes impairments and acquisition-related transaction & integration costs.Appendix Table A-10: YTD Third Quarter 2016 Sources and Uses of Liquidity
The following table summarizes the sources and uses of liquidity in the first nine months of 2016:
($ in millions) Nine Months EndedSeptember 30, 2016
Sources: Adjusted cash flow from operations 1,758 Asset sales 562 Issuance of NRG Yield Senior Notes due 2026 350 Monetization of capacity revenues at Midwest Gen 253 Collateral 231 Issuance of CVSR HoldCo debt 200 Capistrano debt proceeds, net of debt repayment 108 Tax Equity Proceeds 11 Increase in credit facility 1 Uses: Maintenance and environmental capex, net (1) (509 ) Debt repayments, discretionary, net of proceeds (corporate-level) (380 ) Debt repayments, non-discretionary (363 ) Growth investments and acquisitions, net (312 ) Proceeds from NRG Yield revolver, net of payments (306 ) Redemption of convertible preferred stock (226 ) Distributions to non-controlling interests (116 ) Capistrano distribution of debt proceeds to non-controlling interests (87 ) Debt Issuance Costs (70 ) Common and Preferred Stock Dividends (66 ) Merger, integration and cost-to-achieve expenses (2) (47 ) Other Investing and Financing (8 ) Change in Total Liquidity 984 (1) Includes insurance proceeds of $33 million. (2) Cost-to-achieve expenses associated with the $150 million savings announced on September 2015 call.Appendix Table A-11: 2016 and 2017 Adjusted EBITDA Guidance Reconciliation
The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income:
2016 Adjusted EBITDAPrior Guidance
($ in millions) Low High GAAP Net Income 1 180 380 Income Tax 100 100 Interest Expense & Debt Extinguishment Costs 1,185 1,185 Depreciation, Amortization, Contract Amortization and ARO Expense 1,445 1,445 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates 45 45 Other Costs 2 45 45 Adjusted EBITDA 3,000 3,200 2016 Adjusted EBITDARevised Guidance
($ in millions) Low High GAAP Net Income 1 235 335 Income Tax 100 100 Interest Expense & Debt Extinguishment Costs 1,228 1,228 Depreciation, Amortization, Contract Amortization and ARO Expense 1,352 1,352 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates 115 115 Other Costs 2 220 220 Adjusted EBITDA 3,250 3,350 2017 Adjusted EBITDA ($ in millions) Low High GAAP Net Income 1 60 260 Income Tax 80 80 Interest Expense & Debt Extinguishment Costs 1,155 1,155 Depreciation, Amortization, Contract Amortization and ARO Expense 1,235 1,235 Adjustment to reflect NRG share of adjusted EBITDA in unconsolidated affiliates 110 110 Other Costs 2 60 60 Adjusted EBITDA 2,700 2,900 (1) For purposes of guidance, fair value adjustments related to derivatives are assumed to be zero. (2) Includes deactivation costs, gain on sale of businesses, reorganization costs, asset write-offs, impairments and other non-recurring chargesAppendix Table A-12: 2016 and 2017 FCFbG Guidance Reconciliation
The following table summarizes the calculation of Free Cash Flow before Growth providing reconciliation to Cash from Operations:
2016 2017 ($ in millions) Prior Guidance
Narrowed Guidance
Guidance Adjusted EBITDA $3,000 – 3,200 $3,250 – 3,350 $2,700 - $2,900 Cash Interest payments (1,090) (1,115) (1,065) Debt Extinguishment Cash Cost (100) (120) 0 Cash Income tax (40) (40) (40) Collateral / working capital / other 285 0 (240) Cash From Operations $2,055 – 2,255 $1,975 – 2,075 $1,355 - $1,555 Adjustments: Acquired Derivatives, Cost-to-Achieve, Return of Capital Dividends, Collateral and Other (210) 25 0 Adjusted Cash flow from operations $1,845 – 2,045 $2,000 – 2,100 $1,355 - $1,555 Maintenance capital expenditures, net (435) – (465) (435) – (450) (310) - (340) Environmental capital expenditures, net (285) – (315) (280) – (290) (10) - (30) Preferred dividends (2) (2) 0 Distributions to non-controlling interests (170) – (180) (160) – (170) (185) - (205) Free Cash Flow – before Growth Investments $1,000 – 1,200 $1,100 – 1,200 $800 - $1,000EBITDA 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 (including loss on debt extinguishment), taxes, depreciation and amortization. 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:
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 impairment losses, gains or losses on sales, dispositions or retirements of assets, any mark-to-market gains or losses from accounting for derivatives, 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 flow from operating activities is a non-GAAP measure NRG provides to show cash from operations 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 and related restructuring costs. The Company provides the reader with this alternative view of operating cash flow 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 from operations and they are fully disclosed to investors.
Free cash flow (before Growth investments) is adjusted cash flow from operations less maintenance and environmental capital expenditures, net of funding, preferred stock dividends 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 Investment is utilized by Management in making decisions regarding the allocation of capital. Free Cash Flow before Growth Investment 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 Investment is a performance measure and is not intended to represent net income (loss), cash from operations (the most directly comparable U.S. GAAP measure), or liquidity and is not necessarily comparable to similarly titled measures reported by other companies.
View source version on businesswire.com: http://www.businesswire.com/news/home/20161104005309/en/
NRG Energy, Inc.Media:Karen Cleeve, 609-524-4608orMarijke Shugrue, 609-524-5262orInvestors:Kevin L. Cole, , 609-524-4526CFAorLindsey Puchyr, 609-524-4527
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