NRG Yield, Inc. Reports Third Quarter Results

NRG Yield, Inc. (NYSE:NYLD):

Business and Financial Highlights

• $83 million of Adjusted EBITDA in the third quarter and $178 million for the first nine months of 2013
• $56 million of Cash Available for Distribution (CAFD) in the third quarter and $83 million for the first nine months of 2013
• $272 million in total liquidity as of September 30, 2013
• Declared pro-rated initial quarterly dividend of $0.23 per share of Class A common stock (based on initial quarterly dividend of $0.30 or $1.20 on an annual basis), to be paid on December 16, 2013, for shareholders of record on December 2, 2013

2013 and 2014 Guidance

• Revising 2013 Guidance as follows:
  • Adjusted EBITDA guidance confirmed at $240 million
  • CAFD increases from $72 million to $81 million
• Maintaining 2014 Guidance as follows:
  • Adjusted EBITDA guidance at $285 million without taking into account any of the NRG ROFO assets
  • CAFD at $103 million

NRG Yield Inc. closed on its initial public offering (IPO) on July 22, 2013. Results for periods prior to the IPO are attributable to its predecessor.

NRG Yield, Inc. (NYSE: NYLD) today reported third quarter 2013 Adjusted EBITDA of $83 million and $178 million for the nine months ended September 30, 2013. Net income for the nine months ended September 30, 2013, was $85 million, while net income attributable to NRG Yield, Inc. subsequent to the IPO was $9 million, or $0.39 per diluted Class A common share.

“As we anticipated, NRG Yield’s stable portfolio of operating assets have produced strong and steady financial results for the third quarter,” said NRG Yield’s Chairman and Chief Executive Officer David Crane. “Importantly, we are pleased to have declared our first quarterly dividend, further establishing NRG Yield as the leading dividend growth investment vehicle in the power industry.”

Overview of Financial and Operating Results

Segment Results

Table 3: Adjusted EBITDA

Table 4: Net Income

Third quarter Adjusted EBITDA was $83 million; $54 million higher than third quarter 2012 resulting from the achievement of commercial operations of assets in both the Renewable and Conventional segments.

Operational Performance

For the three months ended September 30, 2013, total generation for the Company’s renewable assets was 263 MWh, which was 141% higher than during the same period in 2012 driven primarily by the recent completion of certain of the Company’s solar assets. On October 31, 2013, the Company’s partially-owned (48.95%) California Valley Solar Ranch 250 MW facility achieved full commercial operations. Equivalent Availability Factor (EAF) for the Company’s conventional assets for the three months ended September 30, 2013, was 98.9% compared to 62.8% during the same period in 2012. This increase was primarily attributable to operations at the GenConn Middletown facility, which experienced a forced outage in 2012 due to the replacement of certain transmission equipment.

Liquidity and Capital Resources

Table 5: Liquidity

Total liquidity as of September 30, 2013, was $272 million, an increase of $230 million from December 31, 2012. This increase includes $60 million in availability under the Company’s revolving credit facility and net cash inflows of $170 million, consisting of the following items:

• $1,170 million of cash inflows through September 2013, consisting of the following items:
  • $468 million of proceeds from the IPO;
  • $420 million of proceeds from the issuance of long-term debt;
  • $150 million in capital contributions from NRG Energy, Inc. (NYSE: NRG);
  • $103 million in cash flows from operations;
  • $24 million from cash grant proceeds; and
  • $5 million in reimbursement from transmission operators for interconnection upgrades.
• Partially offset by $1,000 million of cash outflows through September 2013, consisting of the following items:
  • $707 million of distributions and return of capital to NRG Energy, Inc. of which $395 million related to the purchase of 19,011,250 Class A Units in NRG Yield LLC;
  • $232 million in capital expenditures;
  • $42 million in debt payments and debt issuance costs; and
  • $19 million in investment in unconsolidated affiliates primarily related to our investment in CVSR.

Initial Quarterly Dividend

On October 31, 2013, the Company’s board of directors declared its pro-rated initial quarterly dividend of $0.23 per Class A common share (based on initial quarterly dividend of $0.30 or $1.20 per share on an annualized basis). The dividend is payable December 16, 2013, to shareholders of record as of December 2, 2013.

Dividend Policy

NRG Yield has adopted a policy of growing its dividend from the current $1.20/share to $1.45/share by the third quarter of 2014; thereafter, the Company expects to increase the dividend quarterly by 1%. These regular dividend increases will be augmented by NRG ROFO assets, financing and third party acquisition activities that the Company expects will lead to sustainable increases in the Company’s CAFD. NRG Yield targets a 10-15% dividend per Class A common share compound annual growth rate over the next five years while maintaining a prudent payout ratio.

Potential Drop-Down Assets from NRG Energy

NRG Energy, Inc. has announced its intention to offer NRG Yield the following NRG ROFO assets through 2014:

• TA High Desert – 20 MW solar facility located in LA County, CA
• RE Kansas South – 20 MW solar facility located in Kings County, CA
• El Segundo Energy Center – 550 MW fast start natural gas-fired facility located in LA County, CA
• CVSR – Remaining NRG interest in this 250 MW solar facility located in San Luis Obispo County, CA

Guidance

NRG Yield is maintaining Adjusted EBITDA guidance for full year 2013 and 2014, at $240 million and $285 million, respectively. The Company is increasing CAFD guidance for 2013 to $81 million as a result of lower maintenance capital expenditure and maintaining CAFD guidance for 2014 at $103 million.

Table 6: Adjusted EBITDA and Cash Available for Distribution Guidance

Seasonality

NRG Yield’s quarterly operating results and CAFD are significantly impacted by seasonal factors. The majority of NRG Yield’s revenues are generated during the months of May through September, as contracted pricing and renewable resources are at their highest levels in the Company’s core markets. The factors driving the fluctuation in Adjusted EBITDA and CAFD include the following:

• Higher summer capacity prices from conventional assets
• Higher solar intensity during the summer months
• Debt service payments which are disbursed either quarterly or semi-annually

In deriving the dividend payout ratio, the Company takes into consideration the timing of such revenues and costs to ensure sufficient funds are available for distribution on a quarterly basis.

Earnings Conference Call

On November 12, 2013, NRG Yield will host a conference call at 10:30 am Eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG Yield’s website at http://www.nrgyield.com and clicking on “Investors.” The webcast will be archived on the site for those unable to listen in real time.

About NRG Yield

NRG Yield owns a diversified portfolio of contracted renewable and conventional generation and thermal infrastructure assets in the U.S., including fossil fuel, solar and wind power generation facilities that provide the capacity to support more than 1 million American homes and businesses. Our thermal infrastructure assets provide steam, hot water and/or chilled water, and in some instances electricity, to commercial businesses, universities, hospitals and governmental units in ten locations. NRG Yield is traded on the New York Stock Exchange under the symbol NYLD. Visit nrgyield.com for more information.

Safe Harbor Disclosure

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks, uncertainties and assumptions and include our Adjusted EBITDA, cash available for distribution, expected earnings, future growth and financial performance, and typically can be identified by the use of words such as “expect,” “estimate,” “anticipate,” “forecast,” “plan,” “believe” and similar terms. Although NRG Yield believes that its expectations are reasonable, it can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated above include, among others, general economic conditions, hazards customary in the power industry, weather conditions, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets, changes in government regulation of markets and of environmental emissions, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify or successfully implement acquisitions (including receipt of third party consents and regulatory approvals), our ability to enter into new contracts as existing contracts expire, our ability to obtain anticipated Section 1603 Cash Grants and our ability to maintain and grow our quarterly dividends. Furthermore, any dividends are subject to available capital, market conditions, and compliance with associated laws and regulations.

NRG Yield undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The Adjusted EBITDA and cash available for distribution are estimates as of today’s date, November 12, 2013, and are based on assumptions believed to be reasonable as of this date. NRG Yield expressly disclaims any current intention to update such guidance. The foregoing review of factors that could cause NRG Yield’s actual results to differ materially from those contemplated in the forward-looking statements included in this news release should be considered in connection with information regarding risks and uncertainties that may affect NRG Yield’s future results included in NRG Yield’s filings with the Securities and Exchange Commission at www.sec.gov. In addition, NRG Yield makes available free of charge at www.nrgyield.com, copies of materials it files with, or furnish to, the SEC.

Appendix Table A-1: Third Quarter 2013 Segment Adjusted EBITDA Reconciliation

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss):

Appendix Table A-2: Third Quarter 2012 Segment Adjusted EBITDA Reconciliation

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss):

Appendix Table A-3: YTD September 30, 2013 Segment Adjusted EBITDA Reconciliation

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss):

Appendix Table A-4: YTD September 30, 2012 Segment Adjusted EBITDA Reconciliation

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income/ (loss):

Appendix A-5: Cash Available for Distribution Reconciliation

The following table summarizes the calculation of cash available for distribution and provides a reconciliation to adjusted EBITDA:

Appendix Table A-6: Adjusted EBITDA Guidance Reconciliation

The following table summarizes the calculation of Adjusted EBITDA and provides a reconciliation to net income:

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 results will be unaffected by unusual or non-recurring items.

EBITDA represents net income before interest (including loss on debt extinguishment), taxes, depreciation and amortization. EBITDA is presented because NRG Yield considers it an important supplemental measure of its performance and believes debt-holders frequently use EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:

• EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
• EBITDA does not reflect changes in, or cash requirements for, working capital needs;
• EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
• Other companies in this industry may calculate EBITDA differently than NRG Yield does, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the growth of NRG Yield’s business. NRG Yield compensates for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only as supplements. See the statements of cash flow included in the financial statements that are a part of this news release.

Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for mark-to-market gains or losses, asset write offs and impairments; and factors which we do not consider indicative of future operating performance. The reader is encouraged to evaluate each adjustment and the reasons NRG Yield considers it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, the reader should be aware that in the future NRG Yield may incur expenses similar to the adjustments in this news release.

Cash available for distribution is adjusted EBITDA plus cash dividends from unconsolidated affiliates, less maintenance capital expenditures, pro-rata adjusted EBITDA from unconsolidated affiliates, cash interest paid, income taxes paid, principal amortization of indebtedness and changes in others assets. Management believes cash available for distribution is a relevant supplemental measure of the Company’s ability to earn and distribute cash returns to investors.