Looking at NRG Energy’s Subdued Performance in 4Q16



NRG Energy: Earnings

NRG Energy (NRG) reported a loss of $0.16 per share for 4Q16, compared with a loss of $0.56 per share in 4Q15. NRG’s earnings for 4Q15 were adjusted for non-cash impairment charges of $4.8 billion and non-cash income tax expenses of $1.4 billion. Its impairment charges were primarily triggered by the loss in value of NRG’s stressed Texas coal plants.

For fiscal 2016, NRG Energy reported a net loss of $2.22 per share, led by non-cash and goodwill impairment charges of $1.2 billion.

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Earnings drivers

NRG Energy’s (NRG) total operating costs fell 6.4% during 4Q16, compared with its 4Q15 operating costs. The company reported adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] of $492 million in 4Q16, falling 15.5% from 4Q15.

NRG’s total earnings from its Generation and Retail segments fell in 4Q16. On the other hand, NRG’s Yield and Renewables segments boosted the company’s overall earnings for the quarter.

As one of NRG Energy’s principal operating territories, the Gulf Coast region experienced lower realized energy margins during the quarter. Earnings from the East region fell $128 million due to lower realized energy margins and lower capacity prices.

Valuable dropdowns for NRG Yield

In its 4Q16 earnings release, NRG Yield (NYLD) declared its agreement to acquire NRG Energy’s Agua Caliente and Utah solar projects, totaling 311 net megawatts, for $130 million. NRG Yield estimates that the deal may improve the cash available for distribution by nearly $13.3 million per year.

Southern Company (SO), which is one of the largest regulated utilities, reported its 4Q16 earnings on February 22, 2017. Please read Kemper County Power Plant Is a New Headache for Southern Company for more information.

In the next article, we’ll explore NRG Energy’s valuations.


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