01—Abstract
Summary
Summary of the 10-K filed March 1, 2021. Cited figures are marked; the original filing is the authoritative source.
NRG Energy, Inc. reported 2020 total operating revenues of $9.09 billiona, down from $9.82 billion in 2019, and net income attributable to NRG Energy, Inc. of $510 million, compared with $4.44 billion in 2019, which included a $3.5 billion release of the valuation allowance.
Operating income was $1.105 billionb versus $1.290 billion. The company completed its three-year Transformation Plan as of December 31, 2020, reporting $1,065 million of recurring cost savings and margin enhancement and $3.0 billion of completed asset sales. Total liquidity excluding counterparty collateral was $7.04 billion at year-end 2020, up from $2.15 billion, driven largely by debt issuance and expanded collateral facilities to fund the acquisition of Direct Energy.
Subsequent to year-end, NRG closed the $3.625 billionc cash acquisition of Direct Energy, a North American subsidiary of Centrica plc, on January 5, 2021, adding over 3 million retail customers and operations in all 50 U.S. states and 8 Canadian provinces. On February 28, 2021, NRG agreed to sell approximately 4,850 MW of fossil generation to Generation Bridge (an ArcLight Capital Partners affiliate) for $760 million, with closing expected in the fourth quarter of 2021.
Management stated that Winter Storm Uri's financial impact was not expected to be adverse to results, with a stress-test range of plus or minus $100 milliond to 2021 income from continuing operations. The quarterly dividend was raised to $1.30 per share annualized beginning in 2021, and the company targets 7-9% annual dividend growth thereafter under its long-term capital allocation policy, which allocates 50% of cash available for allocation to growth investments and 50% to shareholder returns.
02—Key points
Key Highlights
- Total operating revenues were $9.09 billion in 2020 versus $9.82 billion in 2019; operating income was $1.105 billion versus $1.290 billion.
- Net income attributable to NRG Energy, Inc. was $510 million in 2020, compared with $4.44 billion in 2019, which benefited from a $3.5 billion valuation allowance release.
- Completed the three-year Transformation Plan: $1,065 million of recurring cost savings and margin enhancement, and $3.0 billion of asset sales.
- Acquired Direct Energy for $3.625 billion in cash on January 5, 2021, adding over 3 million retail customers and expanding into the Northeast and Canada.
- Agreed on February 28, 2021 to sell about 4,850 MW of fossil generation for $760 million, expected to close in Q4 2021.
- Total liquidity excluding counterparty collateral was $7.04 billion at December 31, 2020, versus $2.15 billion a year earlier.
- Annual dividend increased to $1.20 per share in 2020 and to $1.30 per share beginning in 2021, with a 7-9% target annual growth rate thereafter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, NRG Energy kept $0.06.
- Revenue$9.09B100.0%
- Cost of revenue−$6.54B71.9%
- Gross profit$2.55B28.1%
- Operating costs−$1.45B15.9%
- Operating income$1.10B12.2%
- Interest, other & tax−$595.0M6.5%
- Net income$510.0M5.6%
Where FY2020 revenue went
$9.09B- Cost of revenue: $6.54B, 72% of revenue
- Net income: $510.0M, 5.6% of revenue
- R&D: $8.0M, 0.1% of revenue
- SG&A: $810.0M, 8.9% of revenue
- Other operating costs: $630.0M, 6.9% of revenue
- Interest, other & tax: $595.0M, 6.5% of revenue
Kept 5.6% as net incomeNet income $510.0M · 5.6%R&D $8.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 1, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $9.09B$9.82B | −7.4% |
| Cost of Revenue | $6.54B$7.30B | −10.4% |
| Gross Profit | $2.55B$2.52B | +1.4% |
| R&D Expenses | $8.00M$7.00M | +14.3% |
| SG&A Expenses | $810.00M$760.00M | +6.6% |
| Operating Expenses | $7.99B$8.54B | −6.4% |
| Operating Income | $1.10B$1.29B | −14.3% |
| Interest Expense | $401.00M$413.00M | −2.9% |
| Net Income | $510.00M$4.44B | −88.5% |
| EPS (Basic) | $2.08$16.94 | −87.7% |
| EPS (Diluted) | $2.07$16.81 | −87.7% |
| Shares Outstanding (Basic) | 245.00M262.00M | −6.5% |
| Shares Outstanding (Diluted) | 246.00M264.00M | −6.8% |
05—Questions
Frequently Asked Questions
How did the Direct Energy acquisition affect NRG's financing and liquidity?
NRG paid $3.625 billion in cash, subject to a $77 million purchase price adjustment, funded with $715 million of cash on hand, a $166 million Revolving Credit Facility draw, and approximately $2.9 billion of secured and unsecured corporate debt issued in December 2020. The company also increased collateral and liquidity facilities by $3.4 billion.
What was the effect of the February 2021 Texas winter storm on NRG?
The estimated financial impact is still preliminary. Based on preliminary analysis, Winter Storm Uri's financial impact is not expected to be adverse to NRG's financial results. A separate stress test indicated a potential plus or minus $100 million to 2021 income from continuing operations, at a lower probability.
Why did net income fall so sharply in 2020?
In 2019, NRG recorded an income tax benefit of $3.3 billion, driven by a $3.5 billion release of its valuation allowance. In 2020, income tax expense was $251 million on pre-tax income of $761 million, giving an effective tax rate of 33.0%, so net income of $510 million compared with $4.44 billion in 2019.
What is the status of the pending sale of fossil generation assets?
On February 28, 2021, NRG agreed to sell about 4,850 MW of East and West fossil assets to Generation Bridge for $760 million in base purchase price, with NRG entering a tolling agreement for its 866 MW Arthur Kill plant through April 2025. Closing is expected in the fourth quarter of 2021, subject to FERC, NYSPSC and Hart-Scott-Rodino approvals.
What is NRG's dividend policy going forward?
NRG increased its annual dividend to $1.20 per share in 2020 from $0.12 and to $1.30 per share beginning in 2021. Under its long-term capital allocation policy, it targets allocating 50% of cash available for allocation to growth investments and 50% to shareholders, with an annual dividend growth target of 7-9% per share in years after 2020.
06—Continue