01—Abstract
Summary
Summary of the 10-K filed February 28, 2008. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. is a wholesale power generation company with approximately 24,115 MW of global generation capacity across 49 plants as of December 31, 2007, including about 22,880 MW in the United States.
Its domestic portfolio is concentrated in Texas (approximately 10,805 MW), the Northeast (approximately 6,980 MW), South Central (approximately 2,850 MW) and West (approximately 2,130 MW). The company reported 2007 total operating revenues of $5,989 milliona, up from $5,585 million in 2006, and net income of $586 million, down from $621 million. Operating income rose to $1,560 million from $1,418 million, while interest expense increased to $689 million from $590 million.
Net cash provided by operating activities was $1,517 millionb, compared with $408 million in 2006. Total liquidity was approximately $2.7 billion at year-end 2007. The company's key strategic initiatives include FORNRG, which attained its $220 million target in 2007; RepoweringNRG, a multi-billion dollar plan to build new baseload capacity, including the 2,700 MW (gross) STP units 3 and 4 nuclear project and 150 MW Sherbino wind project; and econrg, which covers carbon capture work, including a demonstration project at W.A.
Parish. Management estimates environmental capital expenditures of $1.0 billion to $1.4 billionc from 2008 through 2012. The filing also describes the sale of ITISA (Brazil) to Brookfield for approximately $288 million plus about $60 million of debt assumed, expected to close in the first half of 2008.
Risks highlighted include exposure to natural gas and power price movements, a large share of baseload capacity sold forward, South Central cooperative contracts that become unprofitable as load grows, federal and state greenhouse gas regulation (68 million tonnes of CO2 emitted in 2007), and litigation such as the CDWR refund case at FERC, for which a reconsideration could have a material adverse impact. The company has not paid common stock dividends and is restricted by its debt agreements, and it repurchased 9,044,400 shares in 2007 for about $353 milliond.
02—Key points
Key Highlights
- 2007 total operating revenues of $5,989 million, up from $5,585 million in 2006; net income of $586 million, down from $621 million.
- Operating income rose to $1,560 million from $1,418 million; interest expense increased to $689 million from $590 million.
- Approximately 24,115 MW of global generation capacity at 49 plants; about 22,880 MW in the U.S., with 10,805 MW in Texas.
- Net cash provided by operating activities was $1,517 million in 2007, versus $408 million in 2006; liquidity was about $2.7 billion at year-end.
- Roughly 54% of baseload capacity is sold forward for 2008 to 2013, and about 59% of expected baseload coal fuel requirements from 2008 to 2013 were purchased forward.
- RepoweringNRG and econrg programs include the STP units 3 and 4 nuclear project (2,700 MW or more gross), the Sherbino wind farm, and a W.A. Parish carbon capture demonstration.
- Share repurchases totaled 9,044,400 shares for about $353 million in 2007; the company has not declared or paid common dividends.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2007, NRG Energy kept $0.10.
- Revenue$5.99B100.0%
- Cost of revenue−$3.38B56.4%
- Gross profit$2.61B43.6%
- Operating costs−$1.05B17.5%
- Operating income$1.56B26.0%
- Interest, other & tax−$987.0M16.5%
- Net income$573.0M9.6%
Where FY2007 revenue went
$5.99B- Cost of revenue: $3.38B, 56% of revenue
- Interest, other & tax: $987.0M, 16% of revenue
- Other operating costs: $742.0M, 12% of revenue
- Net income: $573.0M, 9.6% of revenue
- SG&A: $309.0M, 5.2% of revenue
Kept 9.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2007filed February 28, 2008Financial Statements
| Revenue | $5.99B |
| Cost of Revenue | $3.38B |
| Gross Profit | $2.61B |
| SG&A Expenses | $309.00M |
| Operating Expenses | $4.45B |
| Operating Income | $1.56B |
| Interest Expense | $702.00M |
| Net Income | $573.00M |
| EPS (Basic) | $2.16 |
| EPS (Diluted) | $1.96 |
| Shares Outstanding (Basic) | 240.00M |
| Shares Outstanding (Diluted) | 288.00M |
05—Questions
Frequently Asked Questions
What drove the change in NRG's 2007 earnings?
Operating income increased to $1,560 million from $1,418 million, reflecting higher revenues and new capacity market revenues. Net income declined to $586 million from $621 million, largely because interest expense rose to $689 million and refinancing expenses were recognized. The filing attributes the revenue increase partly to the Hedge Reset transaction, which added $449 million to energy revenue.
How much capital will NRG spend on environmental compliance?
The filing estimates environmental capital expenditures from 2008 through 2012 of between $1.0 billion and $1.4 billion, relating to CAIR, CAMR and Phase II 316(b) requirements. The upper end of the range totals $1,371 million, with $359 million planned for 2008 and $408 million for 2009. The range reflects alternative strategies for the Indian River plant.
What are the main risks from carbon regulation?
NRG states that federal, state or regional greenhouse gas regulation could have a material impact on its financial performance. It emitted 68 million tonnes of CO2 in 2007, including about 12 million tonnes from units expected to be subject to RGGI in 2009, and it expects direct financial impact from RGGI to be negative. The company expects Lieberman-Warner-style legislation to have minimal impact through the next decade.
What pending litigation could materially affect NRG?
The CDWR contract case at FERC could lead to significant refunds for WCP if FERC reconsiders the contract, and the U.S. Supreme Court decision is expected by the end of 2008. The filing says a loss could have a material adverse impact on financial condition and cash flows. Other matters include the Spring Creek Coal Company complaint seeking about $18 million and the Kivalina climate complaint seeking up to $400 million.
06—Continue