Energy generation company NRG Energy Inc. (NRG) announced an operating loss of 7 cents per share for the fourth-quarter 2010 versus year-ago loss of 11 cents per share. However, results in the relevant quarter were way below the Zacks Consensus Estimate of operating earnings of 39 cents a share.
NRG Energy’s 2010 operating earnings were $1.84 per share compared with $3.44 per share reported in 2009. Fiscal 2010 earnings thoroughly missed the Zacks Consensus Estimate of $2.62 as provided by 6 covering analysts.
Total Revenue
Total revenue during the fourth quarter decreased 15.2% year over year to $1.8 billion from $2.1 billion in the year-ago quarter.
Quarterly revenue was lower than the Zacks Consensus Estimate of $3.4 billion.
The company generated total revenue of $8.8 billion in 2010, down from $8.9 billion reported in 2009.
Total 2010 revenue was also lower than the Zacks Consensus Estimate of $10.1 billion.
Quarterly Highlights
Total operating cost and expenses during the fourth quarter 2010 declined 8.9% over the prior-year period while, as a percentage of revenue, increased 630 basis points.
The combination of the above factors impacted the operating results of the company. Operating income decreased by a sharp 51.6% to $152 million from $314 million in the comparable quarter last year.
Annual Highlights
For fiscal year 2010, total operating cost and expenses were $7.5 billion versus $6.8 billion recorded in 2009.
During the year the company developed its solar projects by adding a noteworthy 900 megawatt (MW) of generating capacity in its portfolio.
Interest expenses of the company in 2010 were $632 million. We expect the interest burden of the company to go up in 2011 as it issued $1.2 billion 7.625% senior notes due 2018, in January 11, 2011.
Financial Update
The company continues to have a strong cash balance, with total cash and cash equivalents as of December 31, 2010, of $2.95 billion versus $2.30 billion as of December 31, 2009.
Long-term debts and capital leases of the company as of December 31, 2010 were $8.78 billion versus $7.84 billion as of December 31, 2009.
Cash provided by operating activities at the end of 2010 was $1.62 billion versus $2.1 billion provided in 2009. The shortfall mainly emanated from NRG’s lower net income.
Guidance for 2011
NRG Energy retained its 2011 EBITDA expectation in the range of $1,750 million to $1,950 million with Reliant Energy contributing $480 million to $570 million, Wholesale $1,200 million to $1,300 million and Green Mountain $70 million to $80 million.
The company also maintained its estimate for free cash flow before growth investment in the range of $825 million to $1,025 million and free cash flow after growth investment in the range of $150 million to $350 million.
NRG Energy will invest $190 million in maintenance capital expenditures, $108 million in net environmental expenditures in its existing assets, and $640 million, net, in growth investments and projects under Repowering NRG.
Peer Comparison
Calpine Corp. (CPN) competes directly with NRG Energy. The former announced operating earnings for the fourth quarter 2010 of 10 cents per share versus an operating loss of 7 cents per share in the year-ago quarter.
Fiscal 2010 ongoing earnings came in at 18 cents per share, in line with 2009 levels.
Our View
It is encouraging to see that the company has consistently maintained a healthy cash balance and is using the same to increase shareholder value through share repurchase. The board of directors has authorized $180 million of share repurchase in 2011.
We appreciate the move taken by the company during the fourth quarter to enhance its solar power production capacity. The company entered into a joint venture with SunPower Corporation (SPWRA) to work on the 250 MW California Valley Solar Ranch in San Luis Obispo County.
The company further bolstered its solar power generation capacity through the acquisition of a 290 MW solar project from First Solar Inc. (FSLR).
NRG Energy currently retains a Zacks #3 Rank (short-term Hold rating).
Based in Princeton, New Jersey, NRG Energy Inc. operates as a wholesale power generation company. The company is also involved in trade of fuel and transportation services, and trade of energy, capacity, and related products in the United States and internationally.
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