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NRG Energy Inc. Reports Operating Results (10-Q)

November 02, 2012 | About:

10qk

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NRG Energy Inc. (NRG) filed Quarterly Report for the period ended 2012-09-30.

Nrg Energy Inc has a market cap of $5 billion; its shares were traded at around $21.46 with a P/E ratio of 199.5 and P/S ratio of 0.6. The dividend yield of Nrg Energy Inc stocks is 1.6%. Nrg Energy Inc had an annual average earning growth of 28.2% over the past 10 years.

Highlight of Business Operations:

In accordance with ASC 815, the following table represents the results of the Company's financial and physical trading of energy commodities for the three months ended September 30, 2012, and 2011. The realized and unrealized financial and physical trading results are included in operating revenue. The Company's trading activities are subject to limits within the Company's Risk Management Policy.

NRG's equity earnings from unconsolidated affiliates were $4 million for the three months ended September 30, 2012, compared to $16 million for the same period in 2011 primarily due to changes in the fair value of Sherbino's forward gas contract as well as additional equity losses from investments in emerging energy technology companies.

In addition, NRG has granted first liens to certain counterparties on substantially all of the Company's assets. NRG uses the first lien structure to reduce the amount of cash collateral and letters of credit that it would otherwise be required to post from time to time to support its obligations under out-of-the-money hedge agreements for forward sales of power or MWh equivalents. To the extent that the underlying hedge positions for a counterparty are in-the-money to NRG, the counterparty would have no claim under the lien program. The lien program limits the volume that can be hedged, not the value of underlying out-of-the-money positions. The first lien program does not require NRG to post collateral above any threshold amount of exposure. Within the first lien structure, the Company can hedge up to 80% of its baseload capacity and 10% of its non-baseload assets with these counterparties for the first 60 months and then declining thereafter. Net exposure to a counterparty on all trades must be positively correlated to the price of the relevant commodity for the first lien to be available to that counterparty. The first lien structure is not subject to unwind or termination upon a ratings downgrade of a counterparty and has no stated maturity date.

Agua Caliente — In 2011, NRG acquired 100% of the 290 MW Agua Caliente solar project, or Agua Caliente, in Yuma, AZ. On January 18, 2012, the Company completed the sale of a 49% interest in NRG Solar AC Holdings LLC, the indirect owner of Agua Caliente, to MidAmerican. Operations are scheduled to commence in phases through the first quarter of 2014, with 230 MW achieving commercial operations from January through September of 2012. On April 12, 2012, the Company received permission from the U.S. DOE to accelerate the block completion schedule. The impact of this decision has allowed the Company to bring blocks on-line sooner and shortens the commercial operations date of the entire project by three months to March 2014. The acceleration has resulted in greater earnings earlier than originally anticipated, along with acceleration of payments under the Engineering, Procurement and Construction, or EPC, agreement which has been funded with earlier draw downs under the Agua Caliente Financing Agreement, as well as equity support by the partners. Power generated from Agua Caliente is being sold to Pacific Gas and Electric under a 25 year PPA. While full commercial operations of the entire project will be achieved in early 2014, the maximum capacity deliverable under the PPA of 290 MWs will be on line by the third quarter of 2013.

The Company's Retail businesses continue to expand in both Texas and the Northeast through its innovative partnerships, channels, product lines and value propositions. Through the first nine months of 2012, NRG has grown customer count by 45,000 in Texas and by 79,000 in the Northeast markets. In addition, NRG launched sales to businesses, manufacturing facilities, government entities and institutions in Ohio and New York. NRG's Retail businesses are currently operating in 11 states including Texas, Connecticut, Delaware, Illinois, Maryland, Massachusetts, New Jersey, New York, Oregon, Ohio and Pennsylvania, as well as the District of Columbia.

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