01—Abstract
Summary
Summary of the 10-K filed February 29, 2016. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. reported a net loss attributable to NRG of $6.38 billiona for 2015 (loss per share of $19.46), driven primarily by impairment losses of $5.03 billion recorded across Texas coal and gas plants, Huntley, Dunkirk, Seward, Gregory, Home Solar goodwill and other assets, along with a $1.34 billion income tax expense that reflects a valuation allowance recorded in the fourth quarter.
Total operating revenues were $14.67 billionb, down from $15.87 billion in 2014, and total stockholders' equity fell to $5.43 billion from $11.68 billion at year-end 2014. Cash flow from operations was $1.31 billion, and total liquidity excluding counterparty collateral was $3.3 billion at December 31, 2015. Management is responding to the depressed commodity environment with a 2016 Capital Allocation Program that directs about 75% of capital available for allocation to additional debt repurchases, and on February 29, 2016 the company announced a reduction in its common stock dividend to $0.12 per share on an annualized basis from $0.58.
The company also cited cost reduction initiatives totaling roughly $250 millionc annually in 2016 and a planned capex reduction of about $100 million. Net debt and capital leases stood at $19.64 billion, and the ratio of debt to total capitalization was 75.95%. The filing notes that S&P lowered GenOn's ratings to CCC+ in October 2015, and that GenOn Mid-Atlantic and REMA did not satisfy restricted payment tests, limiting cash distributions to the parent.
The company's portfolio is large, with approximately 50,000 MW of owned or operated generation, and it remains the largest competitive retail energy provider in the U.S. and Texas, serving about 2.77 million recurring customers. Key forward-looking risks include the Supreme Court's pending review of state-mandated generator contracts, PJM Capacity Performance penalties, and the Clean Power Plan, which the U.S. Supreme Court stayed on February 9, 2016.
02—Key points
Key Highlights
- Net loss attributable to NRG Energy, Inc. of $6.38 billion in 2015 versus net income of $134 million in 2014, with loss per share of $19.46.
- Impairment losses of $5.03 billion in 2015, including $1.51 billion for Limestone, $1.30 billion for W.A. Parish, $176 million for Gregory, $160 million for Dunkirk, $132 million for Huntley and $134 million for Seward.
- Income tax expense of $1.34 billion in 2015, reflecting a valuation allowance on federal and certain state net deferred tax assets; total valuation allowance of $3.58 billion at year-end.
- Total operating revenues of $14.67 billion in 2015, down from $15.87 billion in 2014; economic gross margin of $7.12 billion.
- Common dividend reduced on February 29, 2016 to $0.12 per share annualized from $0.58; 2016 capital allocation directs about 75% of capital available to debt repurchases.
- Total liquidity of $3.3 billion excluding collateral funds at December 31, 2015, versus $3.9 billion a year earlier; cash flow from operations of $1.31 billion.
- Long-term debt and capital leases of $19.64 billion; ratio of debt to total capitalization of 75.95% at year-end 2015.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2015, NRG Energy lost $0.52.
- Revenue$12.33B100.0%
- Cost of revenue−$9.00B73.0%
- Gross profit$3.33B27.0%
- Operating costs−$7.38B59.9%
- Operating income−$4.05B32.9%
- Interest, other & tax−$2.33B18.9%
- Net income−$6.38B51.8%
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 29, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $12.33B$15.87B | −22.3% |
| Cost of Revenue | $9.00B$11.81B | −23.8% |
| Gross Profit | $3.33B$4.06B | −18.0% |
| R&D Expenses | $154.00M$88.00M | +75.0% |
| SG&A Expenses | $1.23B$1.02B | +20.9% |
| Operating Expenses | $16.59B$14.62B | +13.5% |
| Operating Income | -$4.05B$1.27B | −418.7% |
| Interest Expense | $937.00M$1.12B | −16.3% |
| Net Income | -$6.38B$134.00M | −4862.7% |
| EPS (Basic) | $-19.46$0.23 | −8560.9% |
| EPS (Diluted) | $-19.46$0.23 | −8560.9% |
| Shares Outstanding (Basic) | 329.00M334.00M | −1.5% |
| Shares Outstanding (Diluted) | 329.00M339.00M | −2.9% |
05—Questions
Frequently Asked Questions
Why did NRG report such a large net loss in 2015?
The loss was primarily driven by $5.03 billion of impairment losses on generation facilities and goodwill, particularly in Texas, along with a $1.34 billion income tax expense that reflects a valuation allowance recorded in the fourth quarter. The filing attributes the impairments to declining power prices as commodity costs continued to fall.
What is management doing to address the company's financial position?
The company is directing about 75% of its 2016 capital available for allocation to debt repurchases, reduced its common dividend to $0.12 per share annualized, and is executing cost reduction initiatives including $150 million of planned annual savings from streamlining administrative, marketing and development functions and $100 million of lower operations and maintenance spend in 2016.
How exposed is the company to GenOn's financial condition?
GenOn's debt is non-recourse to NRG. S&P lowered GenOn's corporate credit rating to CCC+ in October 2015, and GenOn Mid-Atlantic and REMA did not satisfy restricted payment tests, so they cannot currently distribute cash to GenOn or the parent. GenOn has senior notes maturing in 2017 and 2018 that it may be unable to refinance on satisfactory terms.
What are the main regulatory and legal risks highlighted in the filing?
Key items include the U.S. Supreme Court's review of Maryland's state-directed generator contracts, argued February 24, 2016; PJM's Capacity Performance penalty framework; the Clean Power Plan, which the Supreme Court stayed on February 9, 2016; and a request from the New York governor for an investigation of NRG's Dunkirk activities, which the company disputes.
What is NRG's position in the retail and generation markets?
NRG operates approximately 50,000 MW of generation and reports the largest competitive retail energy business in the U.S. and Texas, with about 2.77 million recurring customers and roughly 624,000 discrete customers as of December 31, 2015. Its retail business delivered about 43 TWh in 2015, and the company describes its generation and retail combination as a natural hedge.
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