NRG Energy, Inc. Reports Full Year 2017 Results, Reaffirms 2018 Financial Guidance

NRG Energy, Inc. Reports Full Year 2017 Results, Reaffirms 2018 Financial Guidance

• Significant progress on Asset Sales:
  • Announcing sale of Boston Energy Trading and Marketing LLC (BETM)
  • Announced sale of NRG's interest in NRG Yield, Renewables platform, ROFO assets and South Central business for $2.8 billion ¹ on February 7, 2018
• Exceeded Transformation Plan targets for cost reductions and working capital improvement in 2017
• Reduced corporate debt by $604 million in 2017 and refinanced senior notes, resulting in approximately $55 million of recurring interest savings
• Authorized $1 billion in share repurchases; first $500 million program to be launched immediately
• Recorded $1.8 billion non-cash asset and goodwill impairment charge

NRG Energy, Inc. (NYSE: NRG) today reported a full year 2017 net loss of $1,548 million, or $6.79 per diluted common share. Adjusted EBITDA for the full year 2017 was $2.4 billion, cash from operations was $1.4 billion and FCFbG was $1.3 billion. The net loss and loss per share were driven by a $1.8 billion impairment of fixed assets, goodwill, and investments of which $1.2 billion was related to the South Texas Project (STP) nuclear generation facility, primarily due to the revised outlook of future commodity prices.

“Our business continued its strong performance in a year when we announced our Transformation Plan aimed at simplifying and enhancing the business to deliver increased shareholder value,” said Mauricio Gutierrez, NRG President and Chief Executive Officer. “With this announcement, we are demonstrating measurable success towards achieving the goals of cost excellence, portfolio optimization and capital structure enhancements. I’m also proud to report that we did this while realizing our second best safety year in company history.”

Consolidated Financial Results

Segment Results

Table 1: Income/(Loss) from Continuing Operations

_{a. In accordance with GAAP, 2016 and 2017 results have been restated to include full impact of the assets in the NRG Yield Drop Down transactions which closed on September 1, 2016, March 27, 2017, and August 1, 2017}

The net loss from continuing operations for the 12 months of 2017 was driven by a $1.8 billion impairment of fixed assets, goodwill, and investments of which $1.2 billion was related to the South Texas Project (STP) nuclear generation facility, primarily due to the revised outlook of future commodity prices. The net loss from continuing operations for the 12 months of 2016 includes a $970 million impairment of fixed assets and goodwill.

Table 2: Adjusted EBITDA

_{a. 2016 and 2017 results have been restated to include full impact of the assets in the NRG Yield Drop Down transactions, which closed on September 1, 2016, March 27, 2017, and August 1, 2017}

_{b. See Appendices A-1 through A-4 for Operating Segment Reg G reconciliations}

Generation: Full year 2017 Adjusted EBITDA was $535 million, $334 million lower than 2016 driven by:

• Gulf Coast: $276 million decrease due to lower realized energy prices despite slightly higher generation, partially offset by lower operating expenses, net of outages due to flooding
• East/West²: $58 million decrease due to lower dispatch, realized energy prices and capacity revenues, partially offset by lower operating costs, property tax and overhead expenses

Fourth quarter Adjusted EBITDA was $104 million, $13 million lower than the fourth quarter 2016 driven by:

• Gulf Coast: $51 million decrease due to lower realized energy prices, partially offset by lower operating expenses
• East/West²: $38 million increase due to higher capacity revenues, higher trading results at BETM and lower operating expenses

Retail: Full year 2017 Adjusted EBITDA was $825 million, $14 million higher than 2016 due to lower operating costs, partially offset by lower unit margins due to customer mix, milder weather and the impact of Hurricane Harvey.

Fourth quarter Adjusted EBITDA was $214 million, $80 million higher than the fourth quarter 2016 due to improved performance, customer growth and lower operating costs.

Renewables: Full year 2017 Adjusted EBITDA was $153 million, $2 million higher than 2016 due to increased generation and insurance recovery at Ivanpah, partially offset by lost margin from the sale of assets, a transmission outage at Agua Caliente, and increased development expenditures.

Fourth quarter Adjusted EBITDA was $14 million, $5 million lower than the fourth quarter 2016 due to lost margin from certain asset sales and plant outages, partially offset by lower operating and overhead expenses.

NRG Yield: Full year 2017 Adjusted EBITDA was $933 million, $1 million higher than 2016 due to contribution from Utah Solar assets acquired by NRG in the fourth quarter of 2016 and growth in distributed generation partnerships, partially offset by lower renewable production in 2017 driven by lower wind resources.

Fourth quarter Adjusted EBITDA was $204 million, $10 million lower than the fourth quarter 2016 due to lower wind production driven by lower wind resources, partially offset by growth in distributed generation partnerships.

Corporate: Full year 2017 Adjusted EBITDA was $(73) million, $16 million lower than 2016 due to the reduction in shared services income from GenOn, higher advisory fees, partially offset by lower corporate marketing expenses and the elimination of operating losses at Residential Solar and eVgo following their wind down of operations.

Fourth quarter Adjusted EBITDA was $(39) million, $26 million lower than the fourth quarter 2016 due to the reduction in shared services income from GenOn, partially offset by lower corporate marketing expenses and the elimination of operating losses at Residential Solar following its wind down of operations.

Liquidity and Capital Resources

Table 3: Corporate Liquidity

_{a. December 31, 2017 balance includes unrestricted cash held at Midwest Generation (a non-guarantor subsidiary) which can be distributed to NRG without limitation}

NRG-Level cash as of December 31, 2017, was $769 million, an increase of $199 million from the end of 2016, and $1.7 billion was available under the Company’s credit facilities at the end of 2017. Total liquidity was $3.2 billion, including restricted cash and cash at non-guarantor subsidiaries (primarily NRG Yield).

NRG Transformation Plan Update

Cost Reductions

As of the end of the fourth quarter of 2017, NRG realized $150 million, or 231%, of its 2017 cost savings target as part of the previously announced Transformation Plan.

Asset Sales Program

To date, NRG has announced or closed approximately $3 billion in asset sales towards its revised Transformation Plan target of $3.2 billion.

Sale of BETM

Announced today, a subsidiary of NRG has entered into a purchase and sale agreement with a subsidiary of Diamond Generating Corporation, a subsidiary of Mitsubishi Corporation, to sell Boston Energy Trading and Marketing LLC (BETM). The transaction is expected to close in the second half of 2018 and is subject to closing conditions, approvals and consents including Federal Energy Regulatory Commission (FERC) and the Committee on Foreign Investment in the United States (CFIUS).

Sale of NRG Yield and Renewables Platform

On February 6, 2018, NRG and Global Infrastructure Partners, or GIP, entered into a purchase and sale agreement to sell NRG's ownership in NRG Yield, Inc. and NRG's renewable energy development and operations platform for cash of $1.375 billion, subject to certain adjustments, and upon closing, removal of approximately $6.7 billion of consolidated debt as of 12/31/2017. The transaction is expected to close in the second half of 2018 and is subject to various customary closing conditions, approvals and consents.

Sale of South Central Business

On February 7, 2018, NRG and Cleco Corporate Holdings LLC, or Cleco, entered into a purchase and sale agreement to sell NRG's South Central business for a total cash purchase price of $1.0 billion, subject to certain adjustments. The transaction is expected to close in the second half of 2018 and is subject to various customary closing conditions, approvals and consents. Also, as part of the transaction, NRG will enter into a sale leaseback agreement for the Cottonwood plant through May of 2025.

Accelerated Drop Down Agreements

On January 24, 2018, the Company entered into an agreement with NRG Yield, Inc. to sell 100% of its ownership interest in Buckthorn Solar for cash consideration of $42 million, subject to other adjustments.

On February 6, 2018, the Company entered into an agreement with NRG Yield, Inc. to sell 100% of the membership interests in Carlsbad Energy Holdings LLC, which indirectly owns the Carlsbad project, a 527 MW natural gas fired project in Carlsbad, CA, pursuant to the ROFO Agreement. The purchase price for the transaction is $365 million in cash consideration, subject to customary working capital and other adjustments.

2018 Guidance

NRG is reaffirming its guidance range for 2018 with respect to Consolidated Adjusted EBITDA, Cash From Operations and FCFbG as set forth below.

Table 4: 2018 Adjusted EBITDA and FCF before Growth Guidance

_{a. Non-GAAP financial measure; see Appendix Tables A-1 through A-5 for GAAP Reconciliation to Net Income that excludes fair value adjustments related to derivatives. The Company is unable to provide guidance for Net Income due to the impact of such fair value adjustments related to derivatives in a given year}

Capital Allocation Update

In 2017, NRG reduced corporate debt by $604 million³ and refinanced and extended its 2023 senior notes realizing annual interest savings of approximately $55 million. Following the announced sale of NRG Yield and Renewables and the South Central businesses, NRG is also announcing corporate debt reduction of $640 million in 2018 and is temporarily reserving $1,200 million of additional cash to achieve it's 3.0x corporate net debt to Adjusted EBITDA ratio as part of the previously announced capital allocation guidance under the Transformation Plan.

The NRG Board of Directors has authorized $1 billion for share repurchases, with the first $500 million program to begin immediately. Following the completion of the initial program, and as NRG progress towards the closing of the announced asset sales, NRG expects to execute the remaining $500 million of the $1 billion share repurchase program.

On January 18, 2018, NRG declared a quarterly dividend on the Company's common stock of $0.03 per share, payable February 15, 2018, to stockholders of record as of February 1, 2018, representing $0.12 on an annualized basis.

The Company’s common stock dividend, corporate level debt reduction and share repurchases are subject to available capital, market conditions and compliance with associated laws and regulations.

Earnings Conference Call

On March 1, 2018, NRG will host a conference call at 8:00 a.m. 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’s website at http://www.nrg.com and clicking on “Investors.” The webcast will be archived on the site for those unable to listen in real time.

About NRG

NRG is a leading integrated power company built on the strength of a diverse competitive electric generation portfolio and leading retail electricity platform. NRG aims to create a sustainable energy future by producing, selling and delivering electricity and related products and services in major competitive power markets in the U.S. in a manner that delivers value to all of NRG's stakeholders. The Company owns and operates approximately 30,000 MW of generation; engages in the trading of wholesale energy, capacity and related products; transacts in and trades fuel and transportation services; and directly sells energy, services, and innovative, sustainable products and services to retail customers under the names “NRG”, "Reliant" and other retail brand names owned by NRG. More information is available at www.nrg.com. Connect with NRG Energy on Facebook and follow us on Twitter @nrgenergy.

Safe Harbor Disclosure

In addition to historical information, the information presented in this communication 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, expectations, projections, goals, assumptions, known and unknown risks and uncertainties and can typically be identified by terminology such as “may,” “should,” “could,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “expect,” “intend,” “seek,” “plan,” “think,” “anticipate,” “estimate,” “predict,” “target,” “potential” or “continue,” or the negative of these terms or other comparable terminology. Such forward-looking statements include, but are not limited to, statements about the Company’s future revenues, income, indebtedness, capital structure, plans, expectations, objectives, projected financial performance and/or business results and other future events, and views of economic and market conditions.

Although NRG believes that its expectations are reasonable, it can give no assurance that these expectations will prove to be correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated herein 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 regulations, 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, execute or successfully implement acquisitions, repowerings or asset sales, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to implement and execute on our publicly announced transformation plan, including any cost savings, margin enhancement, asset sale, and net debt targets, our ability to proceed with projects under development or the inability to complete the construction of such projects on schedule or within budget, risks related to project siting, financing, construction, permitting, government approvals and the negotiation of project development agreements, our ability to progress development pipeline projects, the timing or completion of GenOn's emergence from bankruptcy, the inability to maintain or create successful partnering relationships, our ability to operate our businesses efficiently, our ability to retain retail customers, our ability to realize value through our commercial operations strategy, the ability to successfully integrate businesses of acquired companies, our ability to realize anticipated benefits of transactions (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, our ability to close the Drop Down transactions with NRG Yield, and our ability to execute our Capital Allocation Plan. Debt and share repurchases may be made from time to time subject to market conditions and other factors, including as permitted by United States securities laws. Furthermore, any common stock dividend is subject to available capital and market conditions.

NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The adjusted EBITDA and free cash flow guidance are estimates as of March 1, 2018. These estimates are based on assumptions the company believed to be reasonable as of that date. NRG disclaims any current intention to update such guidance, except as required by law. The foregoing review of factors that could cause NRG’s actual results to differ materially from those contemplated in the forward-looking statements included in this Earnings press release should be considered in connection with information regarding risks and uncertainties that may affect NRG’s future results included in NRG’s filings with the Securities and Exchange Commission at www.sec.gov.

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)

NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW

Appendix Table A-1: Fourth Quarter 2017 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to income/(loss) from continuing operations:

¹ _{Includes International, BETM and generation eliminations}

Fourth Quarter 2017 condensed financial information by Operating Segment:

¹ _{Includes International, BETM and generation eliminations}

² _{Excludes deactivation costs of $11 million}

³ _{Excludes a legal settlement of $(1) million}

⁴ _{Excludes impairments of $1,711 million, gain on sale of business of $16 million, acquisition-related transaction & integration costs of $2 million, reorganization costs of $26 million and loss on debt extinguishment of $50 million}

The following table reconciles the condensed financial information to Adjusted EBITDA:

¹ _{Other adj. includes a legal settlement of $(1) million}

² _{Other adj, includes impairments of $1,711 million, gain on sale of business of $16 million, acquisition-related transaction & integration costs of $2 million, reorganization costs of $26 million and loss on debt extinguishment of $50 million}

Appendix Table A-2: Fourth Quarter 2016 Adjusted EBITDA Reconciliation by Operating Segment

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

¹ _{Includes International, BETM and generation eliminations}

Fourth Quarter 2016 condensed financial information by Operating Segment:

¹ _{Includes International, BETM and generation eliminations}

² _{Excludes deactivation costs of $3 million}

³ _{Excludes impairments of $758 million, acquisition-related transaction & integration costs of $1 million and loss on debt extinguishment of $23 million}

The following table reconciles the condensed financial information to Adjusted EBITDA:

¹ _{Other adj. includes impairments of $758 million, acquisition-related transaction & integration costs of $1 million and loss on debt extinguishment of $23 million}

Appendix Table A-3: Full Year 2017 Adjusted EBITDA Reconciliation by Operating Segment

The following table summarizes the calculation of Adj. EBITDA and provides a reconciliation to income/(loss) from continuing operations:

¹ _{Includes International, BETM and generation eliminations}

Full Year 2017 condensed financial information by Operating Segment:

¹ _{Includes International, BETM and generation eliminations}

² _{Excludes deactivation costs of $21 million}

³ _{Excludes a legal settlement of $(1) million}

⁴ _{Excludes impairments of $1,788 million, gain on sale of assets of $16 million, reorganization costs of $44 million, acquisition-related transaction & integration costs of $4 million, and loss on debt extinguishment of $53 million}

The following table reconciles the condensed financial information to Adjusted EBITDA:

¹ _{Other adj. includes a legal settlement of $(1) million}

² _{Other adj. includes impairments of $1,788 million, gain on sale of assets of $16 million, reorganization costs of $44 million, acquisition-related transaction & integration costs of $4 million, and loss on debt extinguishment of $53 million}

Appendix Table A-4: Full Year 2016 Adjusted EBITDA Reconciliation by Operating Segment

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

¹ _{Includes International, BETM and generation eliminations}

Full Year 2016 condensed financial information by Operating Segment:

¹ _{Includes International, BETM and generation eliminations}

² _{Excludes deactivation costs of $17 million}

³ _{Excludes impairments of $970 million, loss on sale of assets of $80 million, acquisition-related transaction & integration costs of $8 million, and loss on debt extinguishment of $142 million}

The following table reconciles the condensed financial information to Adjusted EBITDA:

¹ _{Other adj. includes impairments of $970 million, loss on sale of assets of $80 million, acquisition-related transaction & integration costs of $8 million, and loss on debt extinguishment of $142 million}

Appendix Table A-5: 2017 and 2016 Three Months Ended December 31 and Full Year Adjusted Cash Flow from Operations Reconciliations

The following table summarizes the calculation of adjusted cash flow operating activities providing a reconciliation to net cash provided by operating activities:

1. _{2017 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call; 2016 includes cost-to achieve expenses associated with the $150 million savings announced on September 2015 call.}

2. _{Reflects change in NRG’s cash collateral balance as of 4Q2017 including $79 million of collateral postings from our deconsolidated affiliate (GenOn)}

3. _{Includes insurance proceeds of $7 million and $4 million in 2017 and 2016, respectively}

^1. _{2017 includes cost-to-achieve expenses associated with the Transformation Plan announced on July 2017 call; 2016 includes cost-to achieve expenses associated with the $150 million savings announced on September 2015 call.}

^2. _{Reflects cash contribution related to Legacy GenOn pension liability retained by NRG}

^3. _{Reflects change in NRG’s cash collateral balance as of 4Q2017 including $79 million of collateral postings from our deconsolidated affiliate (GenOn)}

^4. _{Includes insurance proceeds of $29 million and $35 million in 2017 and 2016, respectively}

Appendix Table A-6: Full Year 2017 Sources and Uses of Liquidity

The following table summarizes the sources and uses of liquidity for the full year 2017: