Nrg Energy, Inc. · NYSE:NRG
Nrg Energy — Q4 2023 Earnings Presentation
34 slides from Nrg Energy's earnings presentation, Feb 28, 2024
Slide 1: Fourth Quarter and Full Year 2023 Earnings Presentation
NRG Energy Inc. Fourth Quarter and Full Year 2023 Earnings Presentation February 28, 2024 1 | NRG 4Q23 Earnings
Slide 2: Safe Harbor
Safe Harbor Forward-Looking Statements In addition to historical information, the information presented in this presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These statements involve estimates, ex
Slide 3: Agenda
Agenda Business Review Dr. Larry Coben Chair and Interim President & CEO Financial Review Bruce Chung CFO Closing Remarks Dr. Larry Coben Chair and Interim President & CEO Q&A Management 3 | NRG 4Q23 Earnings
Slide 4: Value Proposition
Value Proposition Leading Consumer Platform Serving 7.9 Million Customers Uniquely Positioned to 1 Capitalize on Electrification and Convergence of Electricity and Smart Technologies Strong Core Energy Business with Diversified Supply and Leading Retail Energy 2 Brands for Homes and Businesses Compl
Slide 5: Key Messages
3 Key Messages Exceeds Expectations on 2023 Adj EBITDA and FCFbG; Reaffirming 2024 Guidance Advancing Long-Term Energy Transition and Electrification Strategy Executing Balance Sheet and 80% Return of Capital Allocation Strategy 5 | NRG 4Q23 Earnings Business Review | Financial Review | Closing Rema
Slide 6: 2023 Business Highlights
2023 Business Highlights ($ millions) 2023 Financial Results 2023 Priorities Scorecard High End of Increased Financial, Operational and ESG Objectives Adjusted EBITDA Guidance • Top decile safety performance +76% Cost Initiatives $3,282 • ‘21-23 $300 MM Direct Energy synergies: fully completed I
Slide 7: 2024 Outlook
2024 Outlook Reaffirming 2024 Guidance Well-Positioned for 2024 Home and Business (millions) 2024E • Continued load growth through diversified sales channels Adjusted EBITDA $3,300 – $3,550 • Durable margins with customer life of 6 years for Home and 7-9 years for Business Free Cash Flow before Grow
Slide 8: Advancing Energy Transition, Electrification and Continuous Improvement Strategy
Advancing Energy Transition, Electrification and Continuous Improvement Strategy ($millions) Compelling Growth Opportunities Continuous Cost Improvements (Recurring) (Recurring) $300 $250 $200 $101 2025+ $105 2025+ Upside beyond Continued focus on investor day plan $37 cost excellence Original Targe
Slide 9: Financial Review
Financial Review 9 | NRG 4Q23 Earnings
Slide 10: 2023 Financial Results
2023 Financial Results ($ millions) Full Year Results Reaffirming 2023 2022 2024 Guidance Texas $1,692 $886 $1,665–$1,785 East/West/Services/Other1 837 979 810–890 Vivint Smart Home2 753 - 825–875 Adjusted EBITDA3 $3,282 $1,865 $3,300–$3,550 Free Cash Flow before Growth (“FCFbG”) $1,925 $568 $1,825–
Slide 11: 2023 Review
2023 Review Energy & Smart Home Performance Resilient Energy Performance through Superb Smart Home Performance: Volatile Market Conditions Improving Unit Economics Texas Degree Days (HDDs & CDDs) Monthly Recurring Service Margin per Subscriber4 Weather vs Normal1 900 Extreme Summer2 +18% 10 Year Ran
Slide 12: 2024 Capital Allocation
2024 Capital Allocation ($ millions) No change from Previously Disclosed $2,183 Indicates change from Previously Disclosed ~80% Return of Capital ~20% Growth Investments 612 $1,950 FCFbG 825 (mid-point) 330 145 33 74 $233 2023 197 $41 Remaining CAFA 2024 Debt Share Common Growth Plan Other 2024 Rema
Slide 13: Closing Remarks
Closing Remarks 13 | NRG 4Q23 Earnings
Slide 14: 2024 Priorities
2024 Priorities Deliver Financial, Operational, Safety and ESG Objectives Deliver on Cost Initiatives $250 MM 2023-2025 program: $68 MM incremental in 2024 ($105 MM ’23-24) – On Track Optimize and Grow from Core $300 MM 2023-2025 growth plan: incremental $99 MM in 2024 ($200 MM ’23-24) – O
Slide 15: Appendix
Appendix 15 | NRG 4Q23 Earnings
Slide 16: Committed to Sustainability
Committed to Sustainability US CO2e Emissions (MMtCO2e)2 Progress Highlights1 NRG Targets3 Carbon Reduction Target: 50% by 20251 58% Net-Zero by 2050 58 Reduction in CO2e emissions 24 29 (2023) Net-Zero 2014 2023 2025 2050 63% Reduction in SO2 Social & Governance Leadership: emissions • Diversity, E
Slide 17: Growth & Cost Initiative Scorecard
Growth & Cost Initiative Scorecard As of 12/31/2023 ($ millions) Scorecard 2023 2023 2024 2025 As of 12/31/2023 Realized Target Target Run-Rate Growth Plan: FCFbG Growth $101 $75 $200 $300 (recurring) Orig. $30 Cost-to-Achieve $129 $105 $145 $475 (one-time) Cumulative Cost Initiatives1: FCFbG Growth
Slide 18: Mature Risk Strategy
Mature Risk Strategy Managing Through-Cycle Stability 1 Forecast & Price 2 Retail Sale & Hedge 3 Optimize • Proprietary forecasting • Fully hedge priced load to firm • Perfect hedge profile to program models expected gross margin incorporate additional data load and variability (i.e. weather) • Part
Slide 19: Retail Supply Procurement
Retail Supply Procurement Net Home Position1 Supply Position Highlights (Avg. On-Peak MWh) ERCOT East/Other ✓ Balance net generation and market Total Expected Load2 (normal weather) purchases against priced load 88% 83% ✓ Manage current financial exposure while planning for physical delivery Load Su
Slide 20: Corporate Credit Profile
Corporate Credit Profile ($ millions) 2024 Guidance Corporate Debt1 $10,940 Debt Reduction (500) Minimum Cash Balance (750) Corporate Net Debt 9,690 Adjusted EBITDA (midpoint) $3,425 Amortization of Customer Fulfillment Costs and Other2 130 Corporate Adjusted EBITDA 3,555 Net Debt to Corporate Adjus
Slide 21: Debt Maturity Schedule
Debt Maturity Schedule Balance as of 12/31/2023 ($ millions) Recourse Debt Principal Non-Recourse Debt Principal 6.625% Senior Notes, due 2027 $375 6.75% Vivint Senior Secured Notes, due 2027 $600 5.75% Senior Notes, due 2028 $821 5.75% Vivint Senior Notes, due 2029 $800 5.25% Senior Notes, due 2029
Slide 22: Energy Modeling Aid: 2024E
Energy Modeling Aid Applying 2024 Metrics 2024E East/West/ Texas Other (EWO2) Operational Statistics Additional Commentary Retail Energy Sales1: Home Power Expected Load (TWh) ~40 ~17 Home Load served primarily by owned generation and supplemented with Business Power Expected Load (TWh) ~40 ~60 thir
Slide 23: Energy Modeling Aid: 2023A Quarterly KPIs
Energy Modeling Aid 2023A Quarterly KPIs Home & Business Operational KPIs1 Q1 2023 Q2 2023 Q3 2023 4Q 2023 2023A Texas EWO2 Texas EWO Texas EWO Texas EWO Texas EWO Home Power Load (TWh) 8 4 10 3 15 4 8 4 40 15 Business Power Load (TWh) 9 13 10 14 12 16 10 14 40 57 Total Power Load (TWh) 17 17 20 17
Slide 24: Smart Home KPIs and Modeling Data
Smart Home KPIs and Modeling Data Key Metrics1 4Q23 4Q22 Change FY23 FY22 Change Portfolio Subscribers (MM)2 2.04 1.92 +6% 2.04 1.92 +6% Customer Lifetime (years)2 ~9 ~9 -- ~9 ~9 -- Retention (%)3 89% 89% -- 89% 89% -- Bad Debt as % of revenue ~3% ~3% -- ~2% ~2% -- Per Subscriber1 Monthly Recurring
Slide 25: Appendix: Reg. G Schedules
Appendix: Reg. G Schedules 25 | NRG 4Q23 Earnings
Slide 26: Reg. G: 2023 and 2024 Guidance Adjusted EBITDA
Reg. G ($ millions) Appendix Table A-1: 2023 and 2024 Guidance The following table summarizes the calculation of Adjusted EBITDA providing a reconciliation to Net Income 2023 2024 Guidance Guidance Net Income1 $1,900 - $2,050 $750 - $1,000 Interest expense, net 580 640 Income tax 705 345 Depreciatio
Slide 27: Reg. G: 2023 and 2024 Guidance FCFbG
Reg. G ($ millions) Appendix Table A-2: 2023 and 2024 Guidance The following table summarizes the calculation of FCFbG providing a reconciliation to Cash provided by operating activities 2023 2024 Guidance Guidance Adjusted EBITDA $3,150 - $3,300 $3,300 - $3,550 Interest payments, net (530) (600) In
Slide 28: Reg. G: Q4 Adjusted EBITDA by Segment
Reg. G ($ millions) Appendix Table A-3: Three months ended 12/31/23 and 12/31/22 Adjusted EBITDA Reconciliation by Operating Segment The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net Income: Three Months ended 12/31/231 Three Months ended 12/31/22
Slide 29: Reg. G: Full Year Adjusted EBITDA by Segment
Reg. G ($ millions) Appendix Table A-4: Twelve months ended 12/31/23 and 12/31/22 Adjusted EBITDA Reconciliation by Operating Segment The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Net Income: Twelve Months ended 12/31/231 Twelve Months ended 12/31
Slide 30: Reg. G: Q4 Free Cash Flow before Growth
Reg. G ($ millions) Appendix Table A-5: Three months ended 12/31/23 and 12/31/22 Free Cash Flow before Growth The following table summarizes the calculation of FCFbG and provides a reconciliation to Cash provided/(used) by operating activities Three Months Ended Three Months Ended 12/31/23 12/31/22
Slide 31: Reg. G: Full Year Free Cash Flow before Growth
Reg. G ($ millions) Appendix Table A-6: Twelve months ended 12/31/23 and 12/31/22 Free Cash Flow before Growth The following table summarizes the calculation of FCFbG and provides a reconciliation to Cash (used)/provided by operating activities Twelve Months Twelve Months Ended 12/31/23 Ended 12/31/
Slide 32: Reg. G
Reg. G EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that NRG’s future r
Slide 33: Reg. G
Reg. G Adjusted Cash provided by operating activities is a non-GAAP measure NRG provides to show Cash provided / (used) by operating activities with the reclassification of net payments of derivative contracts acquired in business combinations from financing to operating cash flow, as well as the ad
Slide 34: Smart Home Performance Metrics
Smart Home Performance Metrics Definitions • New Subscribers is the aggregate number of net new smart home and security subscribers originated during a given period. This metric excludes new subscribers acquired by a transfer of a service contract from one subscriber to another. • Average Monthly Su