01—Abstract
Summary
Summary of the 10-K filed March 30, 2005. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. is a wholesale power generation company that owns and operates generation facilities and trades energy, capacity and fuel, with a diversified fleet of natural gas-, coal- and oil-fired plants.
As of December 31, 2004, it owned interests in 52 power projects in five countries with an aggregate net generation capacity of approximately 15,400 MW, including about 7,900 MW of merchant Northeast capacity. The company emerged from chapter 11 on December 5, 2003 after eliminating approximately $5.2 billiona of corporate-level bank and bond debt, and 2004 was its first full year under Fresh Start reporting. For the year ended December 31, 2004, revenues from majority-owned operations were $2.36 billion and operating income was $399.1 million.
Net income was $185.6 millionb, or $1.85 per diluted share, which the filing attributes to a challenging market environment with unseasonably mild weather and weak spot power prices, partly offset by $57.3 million of unrealized gains on forward sales and $159.8 million of equity earnings from unconsolidated affiliates. Impairment charges of $44.7 million were recorded, including $26.5 million on the Kendall asset. Total assets were $7.83 billion and long-term debt including current maturities was $3.77 billion at year end.
During the period, the company bought back 13 million shares from MatlinPatterson for $405.3 millionc, issued $420 million of 4% convertible perpetual preferred stock, and redeemed $375 million of its 8% second priority senior secured notes in February 2005. Significant contingencies include California wholesale electricity litigation, FERC proceedings, New York environmental enforcement settled in January 2005, and pending proceedings over Big Cajun II and disputed claims reserves.
02—Key points
Key Highlights
- Net income of $185.6 million, or $1.85 per diluted share, for 2004 on revenues from majority-owned operations of $2.36 billion
- Operating income of $399.1 million; Northeast segment operating income of $318.3 million was the largest contributor
- Equity in earnings of unconsolidated affiliates of $159.8 million, including $68.9 million from West Coast Power LLC
- Total assets of $7.83 billion and long-term debt including current maturities of $3.77 billion at December 31, 2004
- Recapitalization steps in late 2004 and early 2005: $405.3 million share repurchase from MatlinPatterson and $420 million convertible preferred issuance, with $375 million of 8% notes redeemed February 4, 2005
- Environmental settlement with New York State on January 11, 2005 requires SO2 reductions of over 86% and NOX reductions of over 80% at Huntley and Dunkirk
- Significant pending matters include California wholesale electricity litigation and a Notice of Violation at Big Cajun II received February 15, 2005
03—Questions
Frequently Asked Questions
How large is NRG's generation portfolio and where is it concentrated?
As of December 31, 2004, NRG owned interests in 52 power projects in five countries with approximately 15,400 MW of aggregate net generation capacity. About 7,900 MW was merchant Northeast capacity, and the company also held about 2,500 MW in the South Central region and about 1,300 MW in the West Coast region, with additional capacity in other North American regions and internationally.
What drove 2004 results?
The filing attributes 2004 results to a challenging market environment, including unseasonably mild weather and disappointing spot power prices. Net income was supported by $57.3 million of unrealized gains on forward power sales, $159.8 million of equity earnings from affiliates, and a $38.4 million CL&P settlement, while impairment charges of $44.7 million reduced results.
How did NRG change its capital structure in 2004 and early 2005?
NRG repurchased 13 million common shares from MatlinPatterson for $405.3 million in December 2004, issued $420 million of 4% convertible perpetual preferred stock, and used $375 million of the proceeds along with cash to redeem 8% second priority senior secured notes on February 4, 2005. The company also amended its credit facility to a $950 million secured facility in December 2004.
What are the main legal and regulatory risks disclosed?
The filing describes numerous California wholesale electricity lawsuits involving West Coast Power, a FERC settlement approved October 25, 2004, a New York Department of Environmental Conservation settlement reached January 11, 2005, a Notice of Violation at Big Cajun II alleging New Source Review violations, and a disputed claims reserve under the plan of reorganization. The company states it cannot predict the outcome of several of these matters.
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