01—Abstract
Summary
Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. reported 2019 total operating revenues of $9.82 billiona, up from $9.48 billion in 2018, and operating income of $1.29 billion versus $982 million.
Net income attributable to NRG Energy, Inc. was $4.44 billionb, driven primarily by a non-cash income tax benefit of $3.3 billion, which reflects a release of approximately $3.5 billion of the valuation allowance against U.S. federal and state deferred tax assets. Income from continuing operations before income taxes was $786 million. Cash flow from operations was $1.41 billion, and total liquidity excluding counterparty collateral funds was $2.15 billion at year-end.
The company states it has substantially completed its three-year Transformation Plan, with margin enhancement activities continuing into 2020. Key 2019 portfolio actions included the sale of the South Central Portfolio for $1.0 billionc, the sale of the Carlsbad project for $385 million, and the acquisition of Stream Energy for $329 million. NRG repurchased $1.44 billion of stock in 2019 under its authorizations and announced that the annual dividend will rise to $1.20 per share from $0.12 beginning in the first quarter of 2020, with a targeted annual dividend growth rate of 7-9% thereafter.
Total debt was $6.04 billiond at year-end, and the company's stated target is net debt to adjusted EBITDA of 2.5x to 2.75x. Investors should note that the filing highlights ongoing risks from wholesale power price volatility, PJM and ISO-NE capacity market reforms, state out-of-market subsidies for nuclear plants, New York retail energy market restrictions, and the PG&E bankruptcy affecting the Agua Caliente and Ivanpah projects. The company reports roughly 23,000 MW of generation and approximately 3.7 million retail customers as of December 31, 2019.
02—Key points
Key Highlights
- Total operating revenues of $9.82 billion in 2019, up from $9.48 billion in 2018; operating income of $1.29 billion versus $982 million.
- Net income attributable to NRG Energy, Inc. of $4.44 billion, boosted by a $3.3 billion income tax benefit, including a release of roughly $3.5 billion of the valuation allowance on deferred tax assets.
- Dividend increased to $1.20 per share annualized from $0.12 beginning Q1 2020, with a targeted 7-9% annual dividend growth rate thereafter.
- Repurchased $1.44 billion of common stock in 2019; the $1.25 billion 2019 authorization was completed as of February 27, 2020.
- Completed portfolio actions in 2019 including the $1.0 billion sale of the South Central Portfolio, the $385 million sale of Carlsbad, and the $329 million acquisition of Stream Energy (about 450,000 customers).
- Cash flow from operations of $1.41 billion; year-end liquidity excluding counterparty collateral of $2.15 billion; total debt of $6.04 billion.
- Moody's upgraded NRG's corporate family rating to Ba1 on December 13, 2019; senior unsecured rating raised to Ba2.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, NRG Energy kept $0.45.
- Revenue$9.82B100.0%
- Cost of revenue−$7.30B74.4%
- Gross profit$2.52B25.6%
- Operating costs−$1.23B12.5%
- Operating income$1.29B13.1%
- Interest, other & tax$3.15B32.1%
- Net income$4.44B45.2%
Where FY2019 revenue went
$9.82B- Cost of revenue: $7.30B, 74% of revenue
- Operating income: $1.29B, 13% of revenue
- R&D: $7.0M, 0.1% of revenue
- SG&A: $760.0M, 7.7% of revenue
- Other operating costs: $461.0M, 4.7% of revenue
Kept 13% as operating incomeR&D $7.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $9.82B$9.48B | +3.6% |
| Cost of Revenue | $7.30B$7.11B | +2.7% |
| Gross Profit | $2.52B$2.37B | +6.2% |
| R&D Expenses | $7.00M$11.00M | −36.4% |
| SG&A Expenses | $760.00M$799.00M | −4.9% |
| Operating Expenses | $8.54B$8.53B | +0.1% |
| Operating Income | $1.29B$982.00M | +31.4% |
| Interest Expense | $413.00M$483.00M | −14.5% |
| Net Income | $4.44B$268.00M | +1557.1% |
| EPS (Basic) | $16.94$0.88 | +1825.0% |
| EPS (Diluted) | $16.81$0.87 | +1832.2% |
| Shares Outstanding (Basic) | 262.00M304.00M | −13.8% |
| Shares Outstanding (Diluted) | 264.00M308.00M | −14.3% |
05—Questions
Frequently Asked Questions
What drove the large increase in 2019 net income?
Net income attributable to NRG Energy, Inc. was $4.44 billion in 2019 compared with $268 million in 2018. The filing attributes the difference mainly to an income tax benefit of $3.3 billion, which reflects the release of approximately $3.5 billion of the valuation allowance against U.S. federal and state deferred tax assets. Income from continuing operations before taxes was $786 million.
What is NRG's capital return plan going forward?
Beginning in the first quarter of 2020, the annual dividend increases to $1.20 per share from $0.12, and the company expects to target 7-9% annual dividend growth in subsequent years. The company also adopted a long-term capital allocation policy targeting 50% of cash available for allocation to growth investments and 50% returned to shareholders, supplemented by share repurchases.
What are the main regulatory risks highlighted in the filing?
The filing cites PJM capacity market reforms, including FERC's December 19, 2019 order applying a Minimum Offer Price Rule to subsidized resources; out-of-market subsidies for nuclear generators in several states; New York Public Service Commission limits on retail energy offers, with compliance extended to May 11, 2020; and the PG&E bankruptcy, which affects the Agua Caliente and Ivanpah projects. Hearings on the PG&E plan are expected in May 2020.
How is the Transformation Plan progressing?
NRG states it has substantially completed its three-year Transformation Plan and expects to complete the remaining margin enhancement activities by the end of 2020. The company reports realizing $590 million of cost savings and $135 million of margin enhancements during 2019 against its stated targets, along with $3.0 billion of asset sale cash proceeds received through December 31, 2019.
What is the company's leverage target and debt position?
NRG revised its credit metrics target in the first quarter of 2019 to 2.5x to 2.75x net debt to adjusted EBITDA, down from the 3.0x level it had achieved as of December 31, 2018. Total debt was $6.04 billion at December 31, 2019, and the company repaid its $1.7 billion 2023 Term Loan Facility in May 2019 using new senior secured first lien notes and cash on hand.
06—Continue