01—Abstract
Summary
Summary of the 10-K filed February 27, 2013. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. closed its acquisition of GenOn Energy, Inc. on December 14, 2012, issuing 93.9 million shares of NRG common stock (0.1216 NRG shares per GenOn share), which made NRG the largest competitive power generation company in the United States with approximately 45,940 MW of fossil fuel, nuclear, solar and wind capacity.
The combined company reported 2012 net income of $579 milliona ($559 million attributable to NRG), up from $197 million in 2011, though that improvement was driven largely by a $560 million bargain purchase gain on the GenOn acquisition and a $327 million income tax benefit, while operating income fell to $350 million from $635 million. Total operating revenues declined to $8.42 billion from $9.08 billion, reflecting lower energy and capacity revenues and a $450 million negative mark-to-market result for economic hedging, partly offset by Retail Business growth to about 2.2 million customers. Debt rose sharply as the company increased non-recourse debt by approximately $6.3 billion, largely for the GenOn acquisition and solar construction; total long-term debt and capital leases stood at $15.88 billion at year-end, and the ratio of debt to total capitalization rose to 56.13% from 52.43%.
Solar build-out drove growth capital spending, with $3.1 billionb invested in solar projects and $213 million for El Segundo during 2012, and estimated 2013 capital expenditures of $2.5 billion before financings. Liquidity, excluding collateral received, was about $3.4 billion at year-end, up from $2.1 billion.
On February 27, 2013, the company announced a 33% increase in its annual common dividend to $0.48 per share and authorized up to $200 millionc of share repurchases, while disclosing a wide range of legal, environmental and regulatory exposures, including MATS compliance, Maryland fly ash litigation, and the Big Cajun II consent decree. Management expects environmental capital expenditures of about $630 million for 2013 through 2017.
02—Key points
Key Highlights
- GenOn acquisition completed December 14, 2012, with 93.9 million NRG shares issued, representing 29% of common shares outstanding after closing
- Net income rose to $579 million from $197 million, but included a $560 million bargain purchase gain and a $327 million income tax benefit
- Operating income fell 45% to $350 million from $635 million, and total operating revenues declined to $8.42 billion from $9.08 billion
- Total long-term debt and capital leases reached $15.88 billion; non-recourse debt increased by approximately $6.3 billion during 2012
- Retail Business served approximately 2.2 million customers and delivered over 59 TWh in 2012, with customer count up approximately 142,000 since year-end 2011
- Liquidity excluding collateral received was approximately $3.4 billion at December 31, 2012, up from $2.1 billion
- Board approved a 33% dividend increase to $0.48 per share annually and authorized up to $200 million in share repurchases on February 27, 2013
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, NRG Energy kept $0.04.
- Revenue$8.42B100.0%
- Cost of revenue−$6.14B72.9%
- Gross profit$2.28B27.1%
- Operating costs−$1.93B22.9%
- Operating income$350.0M4.2%
- Interest, other & tax−$55.0M0.7%
- Net income$295.0M3.5%
Where FY2012 revenue went
$8.42B- Cost of revenue: $6.14B, 73% of revenue
- Other operating costs: $1.06B, 13% of revenue
- Net income: $295.0M, 3.5% of revenue
- R&D: $68.0M, 0.8% of revenue
- SG&A: $807.0M, 9.6% of revenue
- Interest, other & tax: $55.0M, 0.7% of revenue
Kept 3.5% as net incomeR&D $68.0M · 0.8%Interest, other & tax $55.0M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 27, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $8.42B$9.08B | −7.2% |
| Cost of Revenue | $6.14B$6.75B | −9.0% |
| Gross Profit | $2.28B$2.33B | −2.2% |
| R&D Expenses | $68.00M— | — |
| SG&A Expenses | $807.00M$586.00M | +37.7% |
| Operating Expenses | $8.07B$8.44B | −4.4% |
| Operating Income | $350.00M$635.00M | −44.9% |
| Interest Expense | $661.00M$665.00M | −0.6% |
| Net Income | $295.00M$197.00M | +49.7% |
| EPS (Basic) | $1.23$0.78 | +57.7% |
| EPS (Diluted) | $1.22$0.78 | +56.4% |
| Shares Outstanding (Basic) | 232.00M240.00M | −3.3% |
| Shares Outstanding (Diluted) | 234.00M241.00M | −2.9% |
05—Questions
Frequently Asked Questions
Why did net income increase so much in 2012 when operating income declined?
Net income rose to $579 million from $197 million mainly because of non-operating items: a $560 million bargain purchase gain on the GenOn acquisition and an income tax benefit of $327 million, which included a $196 million benefit tied to the bargain purchase gain and $158 million of investment tax credits from the Agua Caliente solar project. Operating income fell to $350 million from $635 million, reflecting a $450 million negative mark-to-market result for economic hedging and $107 million of acquisition-related transaction and integration costs.
How much debt did NRG take on and how did it change leverage?
Total long-term debt and capital leases were $15.88 billion at December 31, 2012, compared with $9.83 billion a year earlier. The company increased non-recourse debt by approximately $6.3 billion, primarily for the GenOn acquisition, solar project financing and El Segundo construction. The ratio of debt to total capitalization increased to 56.13% from 52.43%.
What is NRG's capital return policy after the announcement?
On February 27, 2013, NRG announced its intention to raise its annual common dividend by 33% to $0.48 per share, starting with the next quarterly payment, and authorized repurchases of up to $200 million of common stock. The filing states these are subject to available capital, market conditions and applicable laws. Under a December 2012 agreement, the company could repurchase up to $200 million of its Senior Notes by February 27, 2013, and had paid $226 million for such repurchases through that date.
What are the main growth investments and their expected timing?
In 2012 NRG invested $3.1 billion in solar and other projects under development, including Ivanpah, Agua Caliente, CVSR, Alpine, Borrego and Avra Valley. Ivanpah's first unit is expected to produce power in July 2013, and El Segundo Energy Center (550 MW) and Marsh Landing (720 MW) are expected to reach commercial operation in August 2013 and mid-2013, respectively. The company estimated 2013 capital expenditures of $2.5 billion before financings.
What major environmental and legal exposures should investors watch?
NRG estimates environmental capital expenditures of about $630 million from 2013 through 2017 to comply with MATS and other rules, primarily at Big Cajun II, W.A. Parish, Limestone and Conemaugh. Legal matters include the Louisiana Generating (Big Cajun II) consent decree with a $3.5 million civil penalty and $10.5 million of mitigation projects, Maryland fly ash litigation with an estimated $47 million reserved for synthetic caps, and a New Source Review case at Portland scheduled for a liability trial on April 22, 2013. The company states it cannot predict the outcome of all proceedings.
06—Continue