NRG(US:NRG)2025-08-06 20:01PART I — FINANCIAL INFORMATION ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES The company reported a Q2 2025 net loss of $104 million and H1 2025 net income of $646 million, a decline from prior year, with total assets at $24.1 billion, alongside strategic acquisitions and capital returns Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights | (In millions, except per share amounts) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $6,740 | $6,659 | $15,325 | $14,088 | | Operating Income | $0 | $1,410 | $1,134 | $2,282 | | Net (Loss)/Income | $(104) | $738 | $646 | $1,249 | | Net (Loss)/Income Available for Common Stockholders | $(121) | $721 | $612 | $1,215 | | (Loss)/Income per Weighted Average Common Share — Basic | $(0.62) | $3.47 | $3.11 | $5.81 | | (Loss)/Income per Weighted Average Common Share — Diluted | $(0.62) | $3.37 | $3.01 | $5.68 | Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights | (In millions) | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | | :--- | :--- | :--- | | Total current assets | $8,195 | $8,964 | | Property, plant and equipment, net | $3,192 | $2,021 | | Total Assets | $24,088 | $24,022 | | Total current liabilities | $8,781 | $8,813 | | Long-term debt and finance leases | $9,812 | $9,812 | | Total Liabilities | $21,800 | $21,544 | | Total Stockholders' Equity | $2,288 | $2,478 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights | (In millions) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $1,306 | $1,323 | | Cash used by investing activities | $(1,082) | $(201) | | Cash used by financing activities | $(755) | $(691) | | Net (Decrease)/Increase in Cash and Cash Equivalents | $(530) | $431 | Note 1 — Nature of Business and Basis of Presentation - NRG is an energy and smart home company serving approximately 8 million residential customers (6 million retail energy, 2 million smart home) and various commercial customers across the U.S. and Canada30 - The company's business is segmented geographically and by service type: Texas, East, West/Services/Other, Vivint Smart Home, and Corporate activities3631 Note 3 — Revenue Recognition Disaggregated Revenue by Segment (Three months ended June 30) | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Texas | $2,847 | $2,763 | | East | $2,737 | $2,532 | | West/Services/Other | $675 | $910 | | Vivint Smart Home | $504 | $467 | | Total Revenue | $6,740 | $6,659 | Disaggregated Revenue by Segment (Six months ended June 30) | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Texas | $5,282 | $4,996 | | East | $7,314 | $6,047 | | West/Services/Other | $1,774 | $2,129 | | Vivint Smart Home | $998 | $935 | | Total Revenue | $15,325 | $14,088 | - As of June 30, 2025, the company has estimated future fixed fee performance obligations of $856 million for the remainder of 2025 and $1.5 billion for fiscal year 202649 Note 4 — Acquisitions - On May 12, 2025, NRG agreed to acquire a 13 GW natural gas generation portfolio and a 6 GW virtual power plant platform from LS Power, a deal consisting of 24.25 million NRG shares, $6.4 billion in cash, and assumption of $3.2 billion in debt, expected to close in Q1 202656 - On April 10, 2025, NRG acquired six natural gas-fired power generation facilities (738 MW) in Texas from Rockland Capital, LLC for $560 million in cash59 Note 7 — Long-term Debt and Finance Leases - Total long-term debt and finance leases (including current portion) was $11.0 billion as of June 30, 2025102 - On May 15, 2025, the company issued a notice of redemption for its Convertible Senior Notes, and on July 8, 2025, redeemed the remaining notes, settling the principal amount primarily in cash ($220 million) and the conversion premium in shares (3,986,335)110 - In May 2025, the company increased its Revolving Credit Facility by $390 million to a total of $4.6 billion, and in July 2025, added a new incremental Term Loan B of $1.0 billion106105 Note 9 — Changes in Capital Structure - During the six months ended June 30, 2025, the company repurchased 5.6 million shares for $600 million through open market repurchases, with $857 million remaining under the $3.7 billion authorization as of July 31, 2025118 - In Q1 2025, NRG increased its annual dividend to $1.76 per share from $1.63, an 8% increase, with a quarterly dividend of $0.44 per share paid in Q2 2025120 Note 11 — Segment Reporting Net Income/(Loss) by Segment (Six months ended June 30) | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Texas | $719 | $1,316 | | East | $358 | $1,029 | | West/Services/Other | $209 | $(65) | | Vivint Smart Home | $(62) | $65 | | Corporate | $(578) | $(1,096) | | Total Net Income | $646 | $1,249 | Total Assets by Segment (as of June 30, 2025) | (In millions) | Total Assets | | :--- | :--- | | Texas | $8,646 | | East | $8,932 | | West/Services/Other | $2,228 | | Vivint Smart Home | $6,731 | | Corporate | $16,364 | | Eliminations | $(18,813) | | Total | $24,088 | Note 14 — Commitments and Contingencies - In the CPI Security Systems v. Vivint Smart Home case, a jury verdict of $50 million in compensatory and $140 million in punitive damages was upheld by the Fourth Circuit Court of Appeals on July 22, 2025, leading the company to increase its accrual to the full judgment amount plus interest150 - The patent infringement lawsuit by SB IP Holdings LLC against Vivint Smart Home, which had a $45 million jury verdict, was settled and dismissed during the second quarter of 2025151 - The company is involved in multi-district litigation related to Winter Storm Uri in its capacity as a power generator, with claims ranging from wrongful death to property damage, and intends to vigorously defend these matters152153 ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management attributes the significant decline in Q2 and H1 2025 operating and net income primarily to unfavorable mark-to-market adjustments on economic hedges, while pursuing strategic acquisitions and actively returning capital to shareholders, maintaining strong liquidity Executive Summary - NRG's strategy focuses on maximizing shareholder value by leading the convergence of energy and smart home automation, offering differentiated products, ensuring operational excellence, and maintaining disciplined capital allocation169170 - Significant events in 2025 include the agreement to acquire LS Power's portfolio, the acquisition of a 738 MW Texas generation portfolio, and continued capital allocation through $600 million in share repurchases and an 8% dividend increase205206207208 - The company is advancing its Texas development priorities, securing a $216 million low-interest loan from the Texas Energy Fund (TEF) for its T.H. Wharton facility and advancing two other projects through the TEF due diligence process210 Consolidated Results of Operations Consolidated Results Summary (Three months ended June 30) | (In millions) | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total revenue | $6,740 | $6,659 | $81 | | Operating Income | $0 | $1,410 | $(1,410) | | Net (Loss)/Income | $(104) | $738 | $(842) | Consolidated Results Summary (Six months ended June 30) | (In millions) | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Total revenue | $15,325 | $14,088 | $1,237 | | Operating Income | $1,134 | $2,282 | $(1,148) | | Net Income | $646 | $1,249 | $(603) | - For Q2 2025, economic gross margin decreased by $9 million to $1.95 billion, while GAAP gross margin fell by $1.2 billion, with the large discrepancy due to a $1.2 billion negative swing in mark-to-market results on economic hedges225221222 - For H1 2025, economic gross margin increased by $257 million to $4.04 billion, while GAAP gross margin decreased by $989 million, driven by a $1.3 billion negative swing in mark-to-market results on economic hedges254250251 Liquidity and Capital Resources Liquidity Position | (In millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $180 | $966 | | Restricted cash | $17 | $8 | | Availability under Revolving Credit Facility | $5,058 | $4,469 | | Total liquidity | $5,255 | $5,443 | 2025 Capital Expenditures and Investments | (In millions) | H1 2025 Actual | H2 2025 Estimate | Full Year 2025 Estimate | | :--- | :--- | :--- | | Maintenance | $152 | $204 | $356 | | Environmental | $19 | $6 | $25 | | Investments and Integration | $562 | $334 | $896 | | Total | $733 | $544 | $1,277 | - Cash flow from operations was $1,306 million for the first six months of 2025, a slight decrease from $1,323 million in the prior year period, mainly due to changes in cash collateral requirements300301 ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company actively manages market risks including commodity price, credit, liquidity, interest rate, and currency exchange, reporting a $60 million one-day VaR for its commodity portfolio and $1.1 billion net counterparty credit exposure as of June 30, 2025 - The company's one-day Value at Risk (VaR) at a 95% confidence interval for its commodity portfolio was $60 million as of June 30, 2025, compared to $57 million a year prior329 - As of June 30, 2025, net counterparty credit exposure was $1.1 billion, against which NRG held $585 million in collateral, with 64% of this exposure with investment-grade counterparties331333 - A hypothetical $0.50 per MMBtu decrease in natural gas prices would require an increase in margin collateral posted of approximately $893 million as of June 30, 2025340 - A 1% decrease in market interest rates would have increased the fair value of the company's long-term debt by $441 million as of June 30, 2025342 ITEM 4 — CONTROLS AND PROCEDURES Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the period covered by the report345 - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal controls346 PART II — OTHER INFORMATION ITEM 1A — RISK FACTORS New material risks related to the anticipated LSP Portfolio acquisition include challenges in obtaining regulatory approvals, potential termination fees, integration difficulties, and adverse impacts on stock price from new share issuance - The consummation of the LSP Portfolio acquisition is subject to significant closing conditions, including regulatory approvals from the DOJ, FERC, and state commissions, with failure to obtain these approvals potentially delaying or preventing the acquisition350351 - If the purchase agreement is terminated under certain circumstances, such as failure to obtain regulatory approvals, NRG would be required to pay LS Power a termination fee of $400 million352 - There is a risk that NRG may not realize all expected benefits from the acquisition, such as enhanced generation capabilities, due to potential difficulties in integrating the assets and businesses efficiently354 ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During Q2 2025, NRG repurchased 2,384,237 shares of its common stock at an average price of $117.39 per share as part of its publicly announced share repurchase program Share Repurchases for the Quarter Ended June 30, 2025 | Month | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 1,355,371 | $92.77 | | May 2025 | 138,902 | $117.29 | | June 2025 | 889,964 | $154.91 | | Total | 2,384,237 | $117.39 |