01—Abstract
Summary
Summary of the 10-K filed March 16, 2004. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. filed its annual report for 2003 after emerging from chapter 11 bankruptcy on December 5, 2003.
The company, a wholesale power generator with 72 projects in seven countries totaling approximately 18,200 MW, eliminated approximately $5.2 billiona of corporate bank and bond debt and approximately $1.3 billion of additional claims through a combination of new equity and up to $1.04 billion in cash to unsecured creditors. Xcel Energy, its former parent, relinquished ownership and agreed to a settlement contribution of up to $640 million, of which $288 million was paid on February 20, 2004 and $352 million is due April 30, 2004. The company reported net income of $2.77 billion for the predecessor period from January 1 to December 5, 2003, driven largely by a $3.9 billion gain from fresh start adjustments, and net income of $11.0 million for the reorganized period from December 6 to December 31, 2003.
Revenues from majority-owned operations were $1.97 billionb for the predecessor period and $152.1 million for the reorganized period. Comparability is limited because fresh start accounting was adopted. Reorganized NRG carries $1.25 billion of 8% Second Priority Senior Secured Notes due 2013, plus an additional $475 million issued in January 2004, along with a $950 million term loan that was reduced to $446.5 million.
Dividends are prohibited under the credit agreements. Investors should weigh substantial remaining risks: exposure to merchant power prices with limited long-term contracts, a significant concentration of revenue from NYISO (24.1% in the reorganized period), pending regulatory and environmental matters, several California market manipulation lawsuits and investigations in which West Coast Power is a party, and some subsidiaries still in chapter 11. The stock trades over the counter under NRGE.OB, with a range of $18.10 to $23.05c from December 5, 2003 through March 9, 2004.
02—Key points
Key Highlights
- Emerged from chapter 11 on December 5, 2003, eliminating approximately $5.2 billion of corporate bank and bond debt and approximately $1.3 billion of additional claims.
- Xcel Energy relinquished ownership and agreed to contribute up to $640 million, with $288 million paid February 20, 2004 and $352 million due April 30, 2004.
- Predecessor-period net income of $2.77 billion, driven by a $3.9 billion Fresh Start gain, versus reorganized-period net income of $11.0 million ($0.11 per share).
- Portfolio of 72 projects in seven countries totaling approximately 18,200 MW, including about 7,900 MW of Northeast merchant plants.
- Reorganized capital structure includes $1.25 billion of 8% Second Priority Senior Secured Notes due 2013 plus $475 million issued January 2004, and a $950 million term loan reduced to $446.5 million.
- NYISO accounted for 24.1% of reorganized-period revenue from majority-owned operations, with ISO New England at 11.4%.
- Common stock is traded over the counter under NRGE.OB; no dividends have been declared, and payment is prohibited by the credit agreements.
03—Questions
Frequently Asked Questions
What did the reorganization do to NRG's debt and equity?
The NRG plan of reorganization eliminated approximately $5.2 billion of corporate bank and bond debt and approximately $1.3 billion of additional claims and disputes. Unsecured creditors received new common stock (100,000,000 shares) and up to $1.04 billion in cash, of which $500 million was paid from Refinancing Transactions proceeds.
Why are the predecessor and reorganized periods reported separately?
NRG adopted Fresh Start reporting on December 5, 2003, creating a new reporting entity. The filing states that results are not comparable across the two periods. The predecessor period includes a $3.9 billion net gain from Fresh Start adjustments, so the reorganized-period figures should be read on their own.
How much of the company's revenue depends on a single customer?
In the predecessor period January 1 to December 5, 2003, NYISO accounted for 30.5% of revenues from majority-owned operations. In the reorganized period December 6 to December 31, 2003, NYISO and ISO New England together accounted for 35.5% (NYISO 24.1%, ISO New England 11.4%).
What are the main remaining legal and regulatory risks?
The filing describes several California wholesale electricity lawsuits and investigations involving West Coast Power, a 50% affiliate in which Dynegy is a co-owner. It also cites an NYISO-related complaint, pending FERC proceedings in Connecticut, New York environmental enforcement actions, and claims from General Electric and Siemens over turbine purchase contracts. The filing states that the outcomes cannot be predicted at this time.
Who controls the company after emergence from bankruptcy?
Certain prepetition creditors received NRG common stock. MatlinPatterson owns 21.5% of outstanding common stock, and prepetition noteholders and lenders collectively received more than 80% of the stock. Those creditors designated ten of the eleven board members, and David Crane was appointed President and Chief Executive Officer effective December 1, 2003.
04—Continue