01—Abstract
Summary
Summary of the 10-K filed February 28, 2014. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. reported a 2013 net loss attributable to NRG Energy of $386 milliona, compared with net income of $295 million in 2012, on total operating revenues of $11.30 billion (versus $8.42 billion in 2012).
The filing attributes the swing primarily to a $459 millionb impairment on the Indian River facility, a $99 million impairment on investments (mainly the Gladstone equity investment), and higher interest expense of $848 million, offset in part by a gross margin increase of $1,599 million, driven largely by the GenOn acquisition completed December 14, 2012. Cash flow from operations was $1.27 billion, and total liquidity excluding collateral was $3.7 billion at year-end 2013. Long-term debt including current maturities and capital leases stood at $16.82 billion, and debt-to-total-capitalization was 57.60%.
The company is pursuing growth through renewables and its subsidiary NRG Yield, Inc., which completed its IPO in July 2013 at $22c per share and in which NRG retains a controlling interest. A pending acquisition of Edison Mission Energy for an aggregate purchase price of $2.6 billion, expected to close by the end of the first quarter of 2014, is a major item for investors; it is partly funded by the $1.1 billion 6.25% Senior Notes due 2022 issued in January 2014.
Management also raised the annual common dividend by 17%, from $0.48 to $0.56d per share, and the 2013 share repurchase program was halted at $25 million of the authorized $200 million because of the EME transaction. Key risks cited in the filing include merchant exposure to natural gas and power price volatility, reliance on regulated capacity markets and pending FERC and state proceedings, potential goodwill impairment of up to $1.7 billion tied to the NRG Texas reporting unit if long-term gas prices remain depressed, and uncertain timing of 1603 cash grant receipts for solar projects, of which $539 million was outstanding at year-end.
02—Key points
Key Highlights
- Net loss attributable to NRG Energy, Inc. of $386 million in 2013, versus net income of $295 million in 2012; total operating revenues rose to $11.30 billion from $8.42 billion.
- Impairment losses of $459 million on the Indian River facility and $99 million on investments, primarily the Gladstone equity investment, drove the 2013 loss.
- Pending acquisition of Edison Mission Energy for an aggregate purchase price of $2.6 billion, expected to close by the end of Q1 2014, with about $1.5 billion of project debt to be assumed.
- Quarterly dividend increased to $0.12 per share in 2013; on February 28, 2014, NRG announced an annual dividend increase of 17% to $0.56 per share.
- NRG Yield, Inc. IPO closed July 2013 at $22 per share, raising net proceeds of about $468 million; NRG retains a controlling interest and a 65.5% stake in NRG Yield LLC.
- Year-end liquidity excluding collateral was $3.70 billion; cash flow from operations was $1.27 billion; debt-to-total-capitalization was 57.60%.
- Potential goodwill impairment of up to $1.7 billion for the NRG Texas reporting unit if long-term natural gas prices remain depressed.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2013, NRG Energy lost $0.03.
- Revenue$11.29B100.0%
- Cost of revenue−$8.13B72.0%
- Gross profit$3.17B28.0%
- Operating costs−$2.82B25.0%
- Operating income$343.0M3.0%
- Interest, other & tax−$729.0M6.5%
- Net income−$386.0M3.4%
Where FY2013 revenue went
$11.29B- Cost of revenue: $8.13B, 72% of revenue
- Other operating costs: $1.84B, 16% of revenue
- Operating income: $343.0M, 3.0% of revenue
- R&D: $84.0M, 0.7% of revenue
- SG&A: $895.0M, 7.9% of revenue
Kept 3.0% as operating incomeOperating income $343.0M · 3.0%R&D $84.0M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 28, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $11.29B$8.42B | +34.1% |
| Cost of Revenue | $8.13B$6.14B | +32.4% |
| Gross Profit | $3.17B$2.28B | +38.7% |
| R&D Expenses | $84.00M$68.00M | +23.5% |
| SG&A Expenses | $895.00M$807.00M | +10.9% |
| Operating Expenses | $10.95B$8.07B | +35.7% |
| Operating Income | $343.00M$350.00M | −2.0% |
| Interest Expense | $848.00M$661.00M | +28.3% |
| Net Income | -$386.00M$295.00M | −230.8% |
| EPS (Basic) | $-1.22$1.23 | −199.2% |
| EPS (Diluted) | $-1.22$1.22 | −200.0% |
| Shares Outstanding (Basic) | 323.00M232.00M | +39.2% |
| Shares Outstanding (Diluted) | 323.00M234.00M | +38.0% |
05—Questions
Frequently Asked Questions
Why did NRG swing from net income in 2012 to a net loss in 2013?
The filing attributes the swing mainly to a $459 million impairment on the Indian River facility, a $99 million impairment on investments (primarily Gladstone), and a $187 million increase in interest expense, partly offset by a $1,599 million increase in gross margin, largely from the GenOn acquisition. The prior year also included a $296 million bargain purchase gain that did not recur.
What is the status of the proposed Edison Mission Energy acquisition?
NRG agreed on October 18, 2013 to acquire substantially all of EME's assets for an aggregate purchase price of $2.6 billion, consisting of 12,671,977 NRG shares valued at $350 million and the balance in cash. The deal requires U.S. Bankruptcy Court and regulatory approvals and is expected to close by the end of the first quarter of 2014. The filing notes there are no assurances it will be completed on the agreed terms.
How is NRG funding its growth and shareholder returns?
NRG issued $1.1 billion of 6.25% Senior Notes due 2022 in January 2014, with part of the proceeds used to redeem $400 million of existing senior notes and about $700 million expected to fund the EME acquisition. The company also created NRG Yield, Inc., which raised net proceeds of about $468 million in its IPO, and expects to offer NRG Yield the right to acquire certain assets such as El Segundo Energy Center, High Desert and Kansas South in 2014. The 2013 share repurchase program was reduced to $25 million of a $200 million authorization because of the EME transaction.
What are the main risks to NRG's earnings outlook?
The filing highlights volatility in natural gas and power prices, which affects merchant and coal and nuclear margins; uncertain outcomes of PJM, ISO-NE, NYISO and ERCOT market rule proceedings; environmental regulation including MATS, CO2 rules and RGGI allowance costs; and the possibility of goodwill impairment of up to $1.7 billion for NRG Texas if long-term gas prices stay depressed. It also notes uncertainty around $539 million of outstanding 1603 cash grant applications.
What is NRG's exposure to its retail business and customer base?
The Retail Business served approximately 2.3 million customers as of December 31, 2013, and sold about 60 TWh of electricity during 2013. Retail revenues were $6.30 billion in 2013 and retail gross margin was $1.34 billion, down from $1.38 billion in 2012, reflecting higher supply costs and milder weather. The filing notes that retail margins can be affected by competition and changes in natural gas prices.
06—Continue