01—Abstract
Summary
Summary of the 10-K filed February 22, 2011. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. is primarily a wholesale power generation company with a significant presence in major competitive power markets in the United States, and it also supplies electricity to retail customers through Reliant Energy and Green Mountain Energy.
As of December 31, 2010, NRG reported a generation portfolio of 193 active operating fossil fuel and nuclear units at 45 plants, with aggregate capacity of approximately 24,570 MW, plus 470 MW of renewable interests. The company served approximately 1.9 million retail customers and reported total operating revenues of $8.85 billiona for 2010, versus $8.95 billion in 2009. Net income attributable to NRG fell to $477 million from $942 million, reflecting lower gross margin at Reliant Energy and lower wholesale hedge prices, with the filing citing increased fuel and transportation costs.
The balance sheet and liquidity picture improved during the year. Cash and cash equivalents rose to $2.95 billionb, and total liquidity was $4.66 billion. Operating activities provided $1.6 billion, offset by $706 million of capital expenditures, $758 million of debt payments, $180 million of share repurchases, and $1.0 billion for business acquisitions, including Green Mountain Energy and Cottonwood.
Total debt and capital leases stood at $9.2 billionc on the balance sheet, and the company issued $1.1 billion of 8.25% Senior Notes due 2020 during the year. Credit ratings were BB- (S&P), Ba3 (Moody's) and B+ (Fitch) at the corporate level. The key forward-looking items for investors are the company's growth and development commitments and their contingencies.
NRG plans a 2011 capital allocation program of $180 milliond in share buybacks and about $3.0 billion for solar and other Repowering NRG projects, with the large solar projects conditional on U.S. DOE loan guarantees. The STP Units 3 and 4 nuclear project faces a third-quarter 2011 viability assessment, and the filing states that a negative assessment would likely lead to cessation of project funding.
Environmental capital expenditures of approximately $721 million are estimated for 2011 through 2015, and the filing notes pending risks including a possible up to $50 million impairment of SO2 allowances under the proposed CATR rule. Litigation includes the CDWR refund matter, where the filing says refunds could have a material adverse impact, and the U.S. DOJ Clean Air Act lawsuit over Big Cajun II.
02—Key points
Key Highlights
- Net income attributable to NRG Energy, Inc. was $477 million in 2010, down from $942 million in 2009, with the filing attributing the decline to lower Reliant Energy gross margin and lower wholesale hedge prices.
- Total operating revenues were $8.85 billion in 2010 versus $8.95 billion in 2009, with retail revenue rising to $5.28 billion from $4.44 billion, largely reflecting the first full year of Reliant Energy.
- Generation portfolio of about 24,570 MW across 193 operating fossil and nuclear units at 45 plants, plus 470 MW of renewable interests, as of December 31, 2010.
- Total liquidity was $4.66 billion at year end, with cash and cash equivalents of $2.95 billion, and operating cash flow of $1.62 billion.
- Acquisitions totaling about $1.0 billion net of cash acquired in 2010, including Green Mountain Energy ($357 million net), Cottonwood ($507 million) and Northwind Phoenix ($100 million).
- Planned 2011 capital allocation of $180 million in share repurchases and approximately $3.0 billion in solar and other Repowering NRG investments, with the large solar projects conditional on U.S. DOE loan guarantees.
- STP Units 3 and 4 nuclear project faces a viability assessment in the third quarter of 2011, and the filing states that a negative assessment would likely lead to cessation of ongoing project funding.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, NRG Energy kept $0.05.
- Revenue$8.85B100.0%
- Cost of revenue−$6.07B68.6%
- Gross profit$2.78B31.4%
- Operating costs−$1.47B16.6%
- Operating income$1.31B14.8%
- Interest, other & tax−$831.0M9.4%
- Net income$477.0M5.4%
Where FY2010 revenue went
$8.85B- Cost of revenue: $6.07B, 69% of revenue
- Net income: $477.0M, 5.4% of revenue
- SG&A: $598.0M, 6.8% of revenue
- Other operating costs: $870.0M, 9.8% of revenue
- Interest, other & tax: $831.0M, 9.4% of revenue
Kept 5.4% as net incomeNet income $477.0M · 5.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 22, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $8.85B$8.95B | −1.2% |
| Cost of Revenue | $6.07B$5.32B | +14.1% |
| Gross Profit | $2.78B$3.63B | −23.5% |
| SG&A Expenses | $598.00M$550.00M | +8.7% |
| Operating Expenses | $7.56B$6.79B | +11.3% |
| Operating Income | $1.31B$2.16B | −39.4% |
| Interest Expense | $630.00M$634.00M | −0.6% |
| Net Income | $477.00M$942.00M | −49.4% |
| EPS (Basic) | $1.86$3.70 | −49.7% |
| EPS (Diluted) | $1.84$3.44 | −46.5% |
| Shares Outstanding (Basic) | 252.00M246.00M | +2.4% |
| Shares Outstanding (Diluted) | 254.00M271.00M | −6.3% |
05—Questions
Frequently Asked Questions
Why did NRG's net income decline sharply in 2010?
The filing attributes the decline to lower gross margin at Reliant Energy, driven by fewer customers and price reductions, and to lower wholesale results from lower hedge prices and higher fuel and transportation costs. Net income attributable to NRG fell to $477 million from $942 million, and income tax expense dropped to $277 million from $728 million.
How is NRG funding its planned growth and share repurchases?
The filing says NRG expects to fund about $1.1 billion of its estimated 2011 capital expenditures from operating cash flows and existing cash balances. The remaining solar and other project investments are expected to be funded through third-party partners, U.S. DOE loan guarantees and NRG equity contributions, and the filing conditions the large solar investments on obtaining those loan guarantees.
What are the main risks to the STP Units 3 and 4 nuclear project?
The filing states that the U.S. DOE loan guarantee is still pending and that NRG cannot predict its timing or terms. NRG plans a viability assessment in the third quarter of 2011, which will depend on the loan guarantee and on the status of long-term PPAs. A negative assessment would likely lead to cessation of NRG's project funding, and the filing notes a potential impairment of capitalized assets, which stood at $791 million of construction-in-progress at NINA.
What significant litigation and regulatory exposures does the filing disclose?
The filing describes the CDWR matter at FERC, where a reconsideration with significant refunds could have a material adverse impact on NRG's financial position, and the U.S. DOJ Clean Air Act lawsuit over the Big Cajun II plant, where the government seeks civil penalties and injunctive relief. It also notes that the proposed CATR rule could result in up to a $50 million future impairment of SO2 emission allowances, and that environmental capital expenditures are estimated at about $721 million for 2011 through 2015.
06—Continue