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NRG Energy Annual Report, Year Ended Dec 31, 2018

Filing Date
Filed February 28, 2019
Period End
December 31, 2018
Security
NRG
One revenue dollarkept$0.03
In the record · 2016–202610-K1110-Q328-K163

NRG filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 163 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · May ’18May ’18
  2. Deal closed8-K · Jan ’21Jan ’21
  3. Material agreement8-K · Aug ’22Aug ’22
  4. Leadership change8-K · May ’26May ’26

01—Abstract

Summary

Summary of the 10-K filed February 28, 2019. Cited figures are marked; the original filing is the authoritative source.

NRG Energy, Inc. reported its 2018 results in this Form 10-K filed February 28, 2019.

Total operating revenues were $9.48 billiona in 2018, up from $9.07 billion in 2017, and operating income was $982 million versus an operating loss of $741 million in 2017. Net income attributable to NRG was $268 million ($0.87 diluted per share), compared with a net loss of $2.15 billion in 2017, which included $1.53 billion of impairment losses. The company describes a three-year Transformation Plan targeting $1,065 million of recurring cost savings and margin enhancement, of which $532 million of annual cost savings and $32 million of margin enhancements were realized in 2018, and a plan to be fully implemented by the end of 2020.

Portfolio simplification was a major theme in 2018 and early 2019. The sale of NRG Yield, Inc. and its Renewables Platform to Global Infrastructure Partners closed for approximately $1.348 billionb in cash on August 31, 2018. The South Central Portfolio was sold to Cleco on February 4, 2019 for $1 billion, and the Carlsbad project was sold on February 27, 2019 for $387 million.

The company reports that it reached its target of 3.0x net debt to adjusted EBITDA on a pro forma basis, has completed $1.5 billionc of share repurchases through February 28, 2019, and the board authorized an additional $1.0 billion repurchase program for 2019. Liquidity excluding counterparty collateral was $1.98 billion at December 31, 2018, down from $2.76 billion a year earlier, and total stockholders' equity was a deficit of $1.23 billion. Retail remains the largest contributor.

Retail delivered approximately 67 TWh of electricity in 2018 and served about 3.1 million customers, and the XOOM Energy acquisition for about $213 milliond closed June 1, 2018. Generation's operating revenues were $3.43 billion, and the company reports approximately 23,000 MW of generation capacity excluding discontinued operations and assets held for sale. Key risks noted in the filing include commodity price volatility, the PG&E Chapter 11 filing on January 29, 2019 affecting Agua Caliente and Ivanpah PPAs, state out-of-market subsidies for nuclear plants, PJM and ISO-NE capacity market reforms, and the sizable federal net operating loss position of $10.7 billion.

02—Key points

Key Highlights

  1. Operating income of $982 million in 2018 compared with an operating loss of $741 million in 2017, which included impairment losses of $1.53 billion.
  2. Net income attributable to NRG Energy, Inc. of $268 million, or $0.87 per diluted share, versus a net loss of $2.15 billion in 2017.
  3. Transformation Plan: $532 million of annual cost savings and $32 million of margin enhancements realized in 2018, with $590 million of cost savings and $135 million of margin enhancements targeted for 2019.
  4. Portfolio sales: $1.348 billion from NRG Yield and the Renewables Platform (August 31, 2018), $1 billion for the South Central Portfolio (February 4, 2019), and $387 million for Carlsbad (February 27, 2019).
  5. Achieved the 3.0x net debt to adjusted EBITDA target on a pro forma basis; completed $1.5 billion of 2018 share repurchases by February 28, 2019 and authorized an additional $1.0 billion for 2019.
  6. Liquidity excluding counterparty collateral was $1.98 billion at December 31, 2018, down from $2.76 billion, and total stockholders' equity was a deficit of $1.23 billion.
  7. Retail delivered approximately 67 TWh and served about 3.1 million customers; XOOM Energy was acquired June 1, 2018 for approximately $213 million.

03—One dollar

Follow one dollar

Of each $1.00 of revenue in FY2018, NRG Energy kept $0.03.

  1. Revenue$9.48B100.0%
  2. Cost of revenue−$7.11B75.0%
  3. Gross profit$2.37B25.0%
  4. Operating costs−$1.39B14.6%
  5. Operating income$982.0M10.4%
  6. Interest, other & tax−$714.0M7.5%
  7. Net income$268.0M2.8%
Computed from 10-KFY2018filed February 28, 2019Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

Where FY2018 revenue went

$9.48B
  • Cost of revenue: $7.11B, 75% of revenue
  • Net income: $268.0M, 2.8% of revenue
  • R&D: $11.0M, 0.1% of revenue
  • SG&A: $799.0M, 8.4% of revenue
  • Other operating costs: $578.0M, 6.1% of revenue
  • Interest, other & tax: $714.0M, 7.5% of revenue

Kept 2.8% as net incomeNet income $268.0M · 2.8%R&D $11.0M · 0.1%

Full revenue history →

04—Financials

Financial Highlights

Figures from 10-KFY2018filed February 28, 2019
Revenue$9.48B25.0% Gross MarginNet Income$268.00M2.8% Net MarginEPS (Diluted)$0.87Total Assets$10.63BCash & Equivalents$563.00MFree Cash Flow$989.00M

Financial Statements

FY2018 against FY2017

Line itemFY2018FY2017Change
Revenue$9.48B$9.07B+4.5%
Cost of Revenue$7.11B$6.89B+3.2%
Gross Profit$2.37B$2.19B+8.3%
R&D Expenses$11.00M$22.00M−50.0%
SG&A Expenses$799.00M$836.00M−4.4%
Operating Expenses$8.53B$9.92B−14.0%
Operating Income$982.00M-$741.00M+232.5%
Interest Expense$483.00M$557.00M−13.3%
Net Income$268.00M-$2.15B+112.4%
EPS (Basic)$0.88$-6.79+113.0%
EPS (Diluted)$0.87$-6.79+112.8%
Shares Outstanding (Basic)304.00M317.00M−4.1%
Shares Outstanding (Diluted)308.00M317.00M−2.8%

05—Questions

Frequently Asked Questions

  1. Why did NRG move from a large 2017 loss to positive net income in 2018?

    The 2017 results included impairment losses of $1.534 billion and a loss from discontinued operations of $992 million, largely related to GenOn's deconsolidation. In 2018, impairment losses were $99 million, and the loss from discontinued operations was $192 million, so net income attributable to NRG was $268 million.

  2. What is the status of the Transformation Plan?

    The company says it expects to fully implement the three-year plan by the end of 2020. Through year-end 2018 it had realized $333 million of non-recurring working capital improvements and $194 million of one-time costs to achieve, and it expects about $95 million of one-time costs in 2019.

  3. How could the PG&E bankruptcy affect NRG?

    PG&E filed for Chapter 11 on January 29, 2019. NRG's Agua Caliente and Ivanpah projects have PPAs with PG&E, and both have issued notices of events of default under their loan agreements. NRG's maximum exposure is limited to its equity investment, which was $200 million for Agua Caliente and $37 million for Ivanpah.

  4. What capital returns did NRG make and plan?

    NRG repurchased 35,234,664 shares for $1.25 billion in 2018, with the remaining $250 million completed by February 28, 2019, at an average price of $36.24 for the full $1.5 billion program. The board authorized an additional $1.0 billion program in February 2019, and the quarterly dividend was $0.03 per share.

  5. What drives the retail business and its sensitivity to power prices?

    Retail gross margin rose $277 million in 2018 to $2.06 billion, and economic gross margin rose to $1.80 billion. Retail results depend on the spread between supply costs and customer rates, and the company notes that higher ERCOT power prices increased supply costs by about $150 million in 2018.

06—Continue

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