NRG Energy Reports Heavy Loss in 4Q15 on Impairments



NRG’s 4Q15 earnings

NRG Energy (NRG) reported its fourth quarter results on February 29, 2016. It reported a net loss of $6.4 billion in 4Q15 against its net income of $97 million in 4Q14. The 4Q15 earnings include non-cash impairment charges of $4.8 billion from the impact of lower natural gas prices on NRG’s wholesale business in 4Q15. Also, it posted $1.4 billion in non-cash income tax expense during the quarter, which resulted in the huge fall in its earnings.

On a per share basis, NRG posted a net loss of $19.77 per share in the fourth quarter of 2015 against its net loss of $1.06 per share in the corresponding quarter last year.

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Earnings drivers

Earnings from NRG’s wholesale power (XLU) business took a steep fall in the quarter ended December 31, 2015, mainly due to the heavy impairment charges. The impairment charges were mainly triggered by the loss in value of its stressed Texas coal plants. NRG’s home retail and renewable (PBW) business posted fair growth in 4Q15 compared to the same quarter in the previous year.

NRG cuts dividend

NRG also announced a dividend cut of ~79% to $0.12 per share annually. The trimmed dividends are expected to save NRG Energy $145 million per year.

NRG Energy also announced that it’s going to recombine its renewable business back into NRG. The move highlights management’s confusion about its strategy last year.

Dynegy (DYN) and Calpine (CPN), leading merchant power players and peers of NRG Energy, also posted their quarterly earnings last month. Both the companies reported losses in 4Q15 due to weaker power prices in the wholesale markets.


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