Nrg Energy, Inc. · NYSE:NRG
Nrg Energy — FY2018 Earnings Presentation
48 slides from Nrg Energy's earnings presentation, Feb 28, 2019
Slide 1: Fourth Quarter and Full Year 2018 Earnings Presentation
NRG Energy Inc. Fourth Quarter and Full Year 2018 Earnings Presentation February 28, 2019 © [year] NRG Energy, Inc. All rights reserved. / Proprietary and Confidential Information
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 Mauricio Gutierrez, President and CEO Financial Review Kirk Andrews, EVP and CFO Closing Remarks Mauricio Gutierrez, President and CEO Q&A © [year] NRG Energy, Inc. All rights reserved. / Proprietary and Confidential Information 2
Slide 4: Key Messages
NRG 4Q18 Earnings Key Messages Business Review Financial Review Closing Remarks Appendix Integrated Platform Delivers Strong and Predictable Results in 2018; Reaffirming 2019 Guidance Well-Positioned for ERCOT Summer through Balanced Portfolio and Enhanced Summer Readiness and Plant Reliability Prog
Slide 5: Business Highlights
NRG 4Q18 Earnings Business Highlights Business Review Financial Review Closing Remarks Appendix 2018 Scorecard Financial Update ($ millions) Deliver on Financial and Operational Objectives Adj. EBITDA FCFbG Top decile safety performance; best year in history Financial results upper half of gui
Slide 6: Market Update - ERCOT
NRG 4Q18 Earnings Market Update - ERCOT Business Review Financial Review Closing Remarks Appendix Tightening Reserve Margins Require NRG is Well-Positioned for Summer Significant New Builds Reserve Margin Composition1 15% • Prepared Retail for varying price conditions 13.75%2 • Customer outreach and
Slide 7: Market Update - East
NRG 4Q18 Earnings Market Update - East Business Review Financial Review Closing Remarks Appendix NRG’s Diverse Footprint Mitigates Exposure Key Regulatory Topics to ISO-NE Disappointing Auction Results PJM Capacity Market Reforms: 350 • Expect FERC to order strong MOPR with 300 Capacity Revenue ($
Slide 8: Portfolio Update
NRG 4Q18 Earnings Portfolio Update Business Review Financial Review Closing Remarks Appendix 2015 2019 Pro Forma TWh TWh 123 1 70 65 Streamlined and 62 47% Rebalanced Decrease in Our Portfolio Generation Retail Load Generation Retail Load Generation 2 Strengthened 69% Balance Sheet $19.5 Bn1 $6 Bn2
Slide 9: 2019 Capital Allocation Plan
NRG 4Q18 Earnings 2019 Capital Allocation Plan Business Review Financial Review Closing Remarks Appendix Stabilize Right-Size Redefine Capital Allocation Priorities $3.0 Bn $3.1 Bn $3.0 Bn Maintain top decile safety and operational excellence 11% $872 MM 26% 29% Continue to strengthen balance sheet
Slide 10: Financial Review
Financial Review © [year] NRG Energy, Inc. All rights reserved. / Proprietary and Confidential Information 9
Slide 11: 2018 Financial Summary Maintaining 2019 Guidance
2018 Financial Summary NRG 4Q18 Earnings Business Review Maintaining 2019 Guidance Financial Review Closing Remarks Appendix ($ millions) 2018 2019 Full Year Guidance Results Retail $ 952 $1,000 – $1,100 Generation1 825 850 – 950 Adjusted EBITDA $1,777 $1,850 - $2,050 Free Cash Flow before Growth $1
Slide 12: 2018 Capital Allocation
NRG 4Q18 Earnings 2018 Capital Allocation Business Review Financial Review Closing Remarks Appendix ($ millions) No change from Prior Quarter Indicates change from Prior Quarter South Central Release of to 2019 cash reserve $3,141 $816 $1,581 $1,250 Closed Asset Sales1 $37 $101 $1,120 $150 2018 FCFb
Slide 13: Corporate Credit Profile/New Targets
NRG 4Q18 Earnings Corporate Credit Profile/New Targets Business Review Financial Review Closing Remarks Appendix ($ millions) 2018 2019 Guidance Illustrative NRG Credit Profile Corporate Debt1 $6,524 $6,524 0.9999 Strong 2019 Term Loan Amortization - (17) Rating Corporate Debt $6,524 $6,507 Investme
Slide 14: 2019 Capital Allocation
NRG 4Q18 Earnings 2019 Capital Allocation Business Review Financial Review Closing Remarks Appendix ($ millions) No change from Prior Quarter Indicates change from Prior Quarter $120 Aqua Caliente $2,983 $665 $600 Reserve $1,2831 Sale of South $1,250 Central & $250 Carlsbad From 2018 $1,000 New Allo
Slide 15: Closing Remarks
Closing Remarks © [year] NRG Energy, Inc. All rights reserved. / Proprietary and Confidential Information 14
Slide 16: 2019 Priorities
NRG 4Q18 Earnings 2019 Priorities Business Review Financial Review Closing Remarks Appendix Deliver on Financial and Operational Objectives Execute on NRG Transformation Plan 2019 Objectives $590 MM cumulative EBITDA-accretive cost savings $135 MM cumulative EBITDA-accretive margin enhanceme
Slide 17: Appendix
Appendix © [year] NRG Energy, Inc. All rights reserved. / Proprietary and Confidential Information 16
Slide 18: Transformation Plan
Transformation Plan NRG 4Q18 Earnings Business Review Financial Review Scorecard Update Closing Remarks Appendix Scorecard as of 12/31/2018 Transformation Plan Progress 2018 2018 % 2018 2017 2018 2019 2020 / ($ millions) Realized Achieved Target ($ millions) Realized Realized Target Run Rate Accreti
Slide 19: Committed to Sustainability
NRG 4Q18 Earnings Committed to Sustainability Business Review Financial Review Closing Remarks Appendix NRG Sustainability Framework Sustainable Sustainable Sustainable Sustainable Sustainable Business Operations Customers Suppliers Workplace Industry-Leading Disclosure Environmental Leadership1 U.S
Slide 20: Appendix: Operations
Appendix: Operations © [year] NRG Energy, Inc. All rights reserved. / Proprietary and Confidential Information 19
Slide 21: Retail: Operational Metrics
NRG 4Q18 Earnings Retail: Operational Metrics Business Review Financial Review Closing Remarks Appendix 2018 Highlights Retail Earnings Adj. EBITDA ($ millions) • Delivered 5th year in a row of earnings growth with $952 MM of Adjusted EBITDA in 2018 • Delivered another year of customer growth driven
Slide 22: Generation: Operational Metrics
NRG 4Q18 Earnings Generation: Operational Metrics Business Review Financial Review Closing Remarks Appendix 2018 Highlights Safety1 (TCIR)2 • Delivered another year of top decile safety; best performance in company history • Delivered strong earnings with $825 MM1 of Adjusted EBITDA in 2018; up 28%
Slide 23: Components of Gross Margin
NRG 4Q18 Earnings Components of Gross Margin Business Review Financial Review Closing Remarks Appendix Open Energy Gross Margin • Forecasted energy revenue at current market prices, net of fuel and emissions expense • Excludes ancillary revenue • Excludes equity interest projects, international and
Slide 24: Wholesale Total Gross Margin
NRG 4Q18 Earnings Wholesale Total Gross Margin Business Review Financial Review Closing Remarks Appendix Total Wholesale Generation Portfolio1 ERCOT East/West2 2019 2020 2019 2020 Total Capacity (MW)3 10,022 10,022 11,548 11,548 Estimated Generation (GWh)4 43,137 43,214 21,874 21,311 5 Percentage He
Slide 25: Commodity Prices
NRG 4Q18 Earnings Commodity Prices Business Review Financial Review Closing Remarks Appendix 2019 2020 Reference Market Reference Market Reference Prices 1/31/2019 Price Heat Rate Price Heat Rate Natural Gas Henry Hub ($/MMBtu) $2.93 -- $2.72 -- PRB 8800 Coal ($/Ton) $12.37 -- $12.35 -- $/MWh MMBtu/
Slide 26: Capacity Clears & Unsold
NRG 4Q18 Earnings Capacity Clears & Unsold Business Review Financial Review Closing Remarks Appendix Capacity Revenue by Calendar Year ($ MM) Market 2019 2020 PJM $317 $282 ISO-NE $149 $110 Illustrative: NYISO1 $105 $141 Assumes uncleared capacity clears at current CAISO1 $30 $30 market levels Estim
Slide 27: PJM Capacity Clears
NRG 4Q18 Earnings PJM Capacity Clears Business Review Financial Review Closing Remarks Appendix Capacity Revenue by Calendar Year ($ MM) Capacity Revenue by Delivery Year ($ MM) Market 2019 2020 2021 Market 18/19 19/20 20/21 21/22 PJM $317 $282 $299 PJM $334 $305 $265 $322 Base Product Capacity Perf
Slide 28: Q4 2018 Generation & Operational Performance Metrics
Q4 2018 Generation & Operational NRG 4Q18 Earnings Business Review Performance Metrics Financial Review Closing Remarks Appendix 2018 2017 2018 2017 MWh (MWh 000’s) Generation1 Generation1 Change % Change EAF2 NCF3 EAF2 NCF3 Texas 9,136 9,394 (258) (3%) 86% 43% 92% 43% East/West4 3,867 4,953 (1,087)
Slide 29: YTD 2018 Generation & Operational Performance Metrics
YTD 2018 Generation & Operational NRG 4Q18 Earnings Business Review Performance Metrics Financial Review Closing Remarks Appendix 2018 2017 2018 2017 MWh (MWh 000’s) Generation1 Generation1 Change % Change EAF2 NCF3 EAF2 NCF3 Texas 38,214 38,694 (480) (1%) 85% 45% 90% 45% East/West4 21,089 21,338 (2
Slide 30: Asset List
NRG 4Q18 Earnings Asset List1 Business Review Financial Review Closing Remarks Appendix ERCOT PJM ISO-NE ERCOT (10,041 MW, Net) ComEd (4,328 MW, Net) Connecticut (1,528 MW, Net) Name Capacity Ownership Name Capacity Ownership Name Capacity Ownership Cedar Bayou 1,494 100% Fisk 171 100% CT Jets 142 1
Slide 31: Appendix: Finance
Appendix: Finance © [year] NRG Energy, Inc. All rights reserved. / Proprietary and Confidential Information 30
Slide 32: Q4 2018 YTD Net Capital Expenditures
NRG 4Q18 Earnings Q4 2018 YTD Net Capital Expenditures Business Review Financial Review Closing Remarks Appendix ($ millions) Maintenance Environmental Growth1 Total Retail $19 - $71 $90 Generation Gulf Coast 77 - - 77 East/West2 54 1 135 190 Corporate 9 - 22 31 Total Cash Capital Expenditures $159
Slide 33: Recourse / Non-Recourse Debt
NRG 4Q18 Earnings Recourse / Non-Recourse Debt Business Review Financial Review Closing Remarks Appendix ($ millions) 12/31/2018 9/30/2018 6/30/2018 3/31/2018 Recourse Debt Term Loan Facility $ 1,698 $ 1,857 $ 1,862 $ 1,867 Senior Notes 3,784 4,269 4,801 4,845 Convertible Notes 575 575 575 - Tax Exe
Slide 34: Announced Asset Sales
NRG 4Q18 Earnings Announced Asset Sales Business Review Financial Review Closing Remarks Appendix ($ millions) Status 2017 2018 2019 Total Transformation Plan Asset Sales1: Asset Sales in 2H172 Closed $150 $- $- $150 Renewables / NRG Yield Interest Closed - 1,348 - 1,348 Buckthorn Solar Closed - 42
Slide 35: Incremental Transformation Plan
NRG 4Q18 Earnings Incremental Transformation Plan Business Review Financial Review Closing Remarks Appendix ($ millions) 2017A 2018A 2019E 2020E Cost Savings $150 $532 $590 $590 Margin Enhancements - 32 135 215 EBITDA Impact $150 $564 $725 $805 Maintenance Capex - 47 50 50 Working Capital 221 112 37
Slide 36: Appendix: Reg. G Schedules
Appendix: Reg. G Schedules © [year] NRG Energy, Inc. All rights reserved. / Proprietary and Confidential Information 35
Slide 37: Reg. G: 2018 Free Cash Flow before Growth
Reg. G: 2018 Free Cash Flow NRG 4Q18 Earnings Business Review before Growth Financial Review Closing Remarks Appendix Full Year ($ millions) 2018 Adjusted EBITDAR $ 1,799 Less: EME operating lease expense (22) Adjusted EBITDA $ 1,777 Interest payments (448) Income tax (9) Collateral / working capita
Slide 38: Reg. G: 2018 and 2019 Guidance
NRG 4Q18 Earnings Reg. G: 2018 and 2019 Guidance Business Review Financial Review Closing Remarks Appendix Appendix Table A-1: 2018 and 2019 Guidance The following table summarizes the calculation of Free Cash Flow before Growth and provides a reconciliation to Adjusted EBITDA 2018 2019 ($ millions)
Slide 39: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Appendix Table A-2: Fourth Quarter 2018 Adjusted EBITDA Reconciliation by Operating Segment The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Income/(Loss) from Continu
Slide 40: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Appendix Table A-3: Fourth Quarter YTD 2018 Adjusted EBITDA Reconciliation by Operating Segment The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Income/(Loss) from Con
Slide 41: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Appendix Table A-4: Quarterly 2018 Adjusted EBITDA Reconciliation by Operating Segment The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Income/(Loss) from Continuing O
Slide 42: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Appendix Table A-5: Fourth Quarter 2017 Adjusted EBITDA Reconciliation by Operating Segment The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Income/(Loss) from Continu
Slide 43: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Appendix Table A-6: Fourth Quarter YTD 2017 Adjusted EBITDA Reconciliation by Operating Segment The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Income/(Loss) from Con
Slide 44: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Appendix Table A-7: 2018 and 2019 Adjusted EBITDA Guidance Reconciliation: The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income: 2019 2018 Adjusted Adjusted EBITDA E
Slide 45: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Appendix Table A-8: Retail 2016 Adjusted EBITDA Reconciliation The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to Income/(Loss) from Continuing Operations ($ millions) 2
Slide 46: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Appendix Table A-9: Full Year 2018 and 2019 Adjusted EBITDA Reconciliation for Midwest Gen The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net (loss)/income ($ millio
Slide 47: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix 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
Slide 48: Reg. G
NRG 4Q18 Earnings Reg. G Business Review Financial Review Closing Remarks Appendix Adjusted cash flow from operating activities is a non-GAAP measure NRG provides to show cash from operations with the reclassification of net payments of derivative contracts acquired in business combinations from fin