NRG Says ERCOT Weather Event Impact Within Current Guidance Range

In reporting fourth quarter and full year 2020 earnings today, NRG Energy said that the estimated impact from the ERCOT winter weather event is expected to be within NRG’s current guidance range

"The estimated financial impact is still preliminary, due to customer meter and settlement data not being finalized, as well as potential customer and counterparty risk and expected ERCOT default allocations. Based on a preliminary analysis, Winter Storm Uri’s financial impact is expected to be within NRG’s current guidance range. The Company separately stress-tested assumptions and although at a lower probability, this stress-test analysis indicated a potential plus or minus $100 million to guidance ranges. NRG’s integrated platform continues to deliver stable results through unprecedented events," NRG said

As of February 26, 2021, NRG had $3.8 billion of liquidity available to continue to support its operations.

As of December 31, 2020, NRG cash was at $3.9 billion, and $3.1 billion was available under the Company’s credit facilities. Total liquidity was $7.0 billion, including restricted cash. Overall liquidity as of year-end 2020 was approximately $4.9 billion higher than at the end of 2019, driven by $2.9 billion in financings and a $1.5 billion increase in credit facilities to fund the Direct Energy acquisition of which $1.4 billion was issued in the fourth quarter. The increases in credit facility and Put Option Agreement facility became available coincident with the closing of the Direct Energy acquisition.

NRG announced the sale of 4.8GW of fossil generation assets in East and West regions

Specifically, on February 28, 2021 NRG entered into a definitive purchase agreement with Generation Bridge, an affiliate of ArcLight Capital Partners, to sell approximately 4,850 MWs of fossil generating assets from its East and West regions of operations for total proceeds of $760 million, subject to standard purchase price adjustments and certain other indemnifications.

The assets being sold are:

New York

• Arthur Kill,: 866 MW Natural Gas

• Oswego: 1,617 MW Oil

New England

• Montville: 491 MW Oil

• Middletown: 762 MW Oil

• Devon: 133 MW Oil

• CT Jets: 142 MW Oil

California

• Sunrise: 586 MW Natural Gas

• Long Beach: 252 MW Natural Gas

As part of the transaction, NRG is entering into a tolling agreement for its 866 MW Arthur Kill plant in New York City through April 2025

In providing its capital allocation for 2021, NRG listed $15 million as allocated to small book acquisitions, which is the same allocation that was provided in a November 2020 update. For 2020, $22 million was used for small book acquisitions

As previously reported, on January 5, 2021, NRG closed on the Direct Energy acquisition, paying an aggregate purchase price of $3.625 billion in cash, subject to a purchase price adjustment of $77 million. As part of the acquisition, Direct Energy had cash and margin collateral totaling $385 million. NRG funded the acquisition using $715 million of cash on hand, $166 million draw on its corporate revolver and approximately $2.9 billion in newly issued secured and unsecured corporate debt. In addition, NRG completed the expansion of its liquidity facilities by $3.4 billion.

Following the closing of the Direct Energy acquisition, NRG updated 2021 guidance to reflect the combination of NRG and Direct Energy based on NRG’s previously disclosed guidance. NRG is maintaining its Adjusted EBITDA, Adjusted Cash from Operations and Free Cash Flow before Growth Investments (FCFbG) guidance for 2021, as follows:

2021 Adjusted EBITDA, Adjusted Cash from Operations, and FCFbG Guidance

(In millions)

2021 Guidance

Adjusted EBITDA: $2,400-$2,600

Adjusted Cash From Operations: $1,630-$1,830

FCFbG: $1,440-$1,640

NRG Energy, reported full year 2020 income from continuing operations of $510 million, versus $4.1 billion a year ago. Adjusted EBITDA for the full year of 2020 was $2.0 billion (essentially flat versus the year ago), cash from continuing operations was $1.8 billion and Free Cash Flow Before Growth (FCFbG) was $1.5 billion.

As previously reported, NRG no longer reports specific Retail segment results

For NRG's Texas segment, fourth quarter Adjusted EBITDA was $231 million, $20 million lower than fourth quarter of 2019. This decrease is driven by a reduction of load primarily due to weather, increase in bad debt expenses related to COVID-19; partially offset by lower supply costs.