For the Alternative
Consent Payment, consents will provide a new exception to the
limitation on restricted payments in the indentures for the Notes
which will permit restricted payments, including dividends and/or
stock repurchases, of up to $300 million per year, with any of this
additional restricted payment capacity not used during a year being
carried over to the next year on a cumulative basis and without
reducing the amounts otherwise available to make restricted payments.
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Moody's changes NRG Energy's outlook to negative; affirms ratings
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following the announcement that the company had entered into a
series of transactions with counterparties to reset and extend existing
power and gas hedges at market prices, requiring a payment to counterparties
of around $1.35 billion. -
the negative outlook considers
the $1.1 billion of permanent indebtedness added to the
capital structure, at a time when share repurchases and future capital
requirements have increased and are expected to stay at an elevated level
11Expand
[11-May-2007] Summary: NRG Energy Inc.
Tags: nrg, snp, work-related on 2007-11-15 -All Annotations (0) -About
more fromwww.ratingsdirect.com
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Although the institution of a common dividend is a credit negative, ratings are supported by the stability of cash flows created by NRG's substantial hedging program, with more than 80% of baseload energy now hedged through 2009 and more than 60% through 2011.
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As of Dec. 31, 2006, NRG owned 24,175 MW of generating capacity and had about $8.7 billion in debt.
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Under NRG's financial projections, about 13% of its EBITDA is exposed to merchant capacity markets in the Northeast. These are uncertain and we view them as speculative cash flow due to and difficulty to forecast.
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Under our low-price case scenario, which incorporates $4.50/million BTU (mmBTU) natural gas price beginning in 2009, coverages remain consistent with the rating level.
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NRG has substantially hedged its merchant exposure for the next three years, with at least 80% hedged and over 60% through 2011. Some gas generation is also hedge in Texas but is not included in these figures.
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The capacity market in New York City, which constitutes over 50% on NRG's merchant capacity exposure continues to be strong.
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While NRG has hedged in excess of 80% of its gross margin for the next three years, it is still exposed to operational risk. The hedges are structured as liquidated damage contracts, so NRG would have to perform even if the plants were down for operational problems
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The retail load obligation at Louisiana Generating, one of NRG's major subsidiaries, may not, during certain high demand periods, be 100% supplied by the coal-fired plants in the South Central region. As a result, NRG must purchase higher priced power in the market while remaining obligated to supply power at fixed prices.
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NRG has substantially hedged its merchant exposure for the next three years, with at least 80% hedged and over 60% through 2011.
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For the next three years, NRG is expected to have financial ratios sufficient for the rating even under our low gas price assumptions.
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If commodity prices remain high, and NRG deleverages its capital structure as it has presented in its base case, an outlook change to positive or a raised rating could occur. On the other hand, if the company continues a growth strategy financed with debt and cash flows deteriorate, an outlook change to negative or a lowered rating could result.
3Expand
Moody's affirms NRG's ratings; outlook remains negative
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NRG's negative rating outlook reflects, in Moody's opinion,
a trend by management to steadily implement shareholder friendly initiatives
within the past year. Since August 2006, NRG has amended
financing documents and has executed financings to return more capital
to the shareholders either by increasing the restricted payments basket
or by structuring financings that allow capital to flow to shareholders
outside of the restricted payments basket. -
the rating outlook could stabilize if the company makes
meaningful progress towards using free cash flow to permanently reduce
debt over the next several years, and/or if the company finances
its anticipated large capital investment program in a relatively conservative
manner resulting in a adjusted cash flow (CFO pre-W/C) to total
adjusted debt rising to the mid-teens level on a sustainable basis. -
The rating could be downgraded if the degree of shareholder initiatives
further accelerates over the next twelve to eighteen months without meaningful
progress towards reducing consolidated debt or if the company chooses
to finance its capital investment program with higher than anticipated
levels of debt. Additionally, should margins compress across
NRG's existing generation fleet or should additional leverage be incurred
to finance shareholder rewards causing adjusted cash flow (CFO pre-W/C)
to total adjusted debt to fall below 10% for an extended period,
the rating could be downgraded.
7Expand
NRG Energy, Inc. Reports Second Quarter 2007 Results
Tags: 2q07, earnings, nrg, work-related on 2007-08-02 -All Annotations (0) -About
more fromwww.snl.com
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On May 2, 2007, the Company announced its intention to form NRG
Holdings, Inc., or Holdco to support and facilitate its Comprehensive
Capital Allocation Plan. The financing on June 8, 2007, provided the
Company with the right to call and convert $1 billion of the Term B
loan and place it at Holdco. Doing so would increase the restricted
payments (RP) capacity under the Senior Note indentures by a like
amount and thereby provide sufficient RP capacity for the Company to
initiate a common share annual dividend in the future. The formation
of Holdco requires the approval of three regulatory bodies, two of
which have since granted approval, with the final approval expected
during the second half of 2007.The Company's announced plan was to form and fund Holdco during
the fourth quarter of 2007 and initiate the common dividend in the
first quarter of 2008. If Holdco is formed, it will constitute a
change in control under the Senior Note indentures and provide the
right for bondholders to put the bonds back to the Company at 101% of
par. If the current weakness in the credit markets persists into the
fourth quarter and NRG's Senior Notes trade at levels below par, the
Company will likely postpone implementation of the Holdco structure or
allow the Holdco credit facility to expire on December 28, 2007. If
this occurs, the Company will delay the introduction of an annual
dividend and will in all likelihood increase common share repurchases
in 2008 from previously stated targets. -
Raising adjusted EBITDA guidance to $2.2 billion and cash flow
from operations to $1.42 billion. -
$533 million of adjusted EBITDA, excluding mark-to-market
(MtM) adjustments; -
Net income from
continuing operations for the first half of this year was $214 million
or $0.71 per common share, compared to $217 million or $0.72 per
diluted common share, for the same period last year. -
three months ended June 30, 2007 of $149 million or
$0.51 per diluted common share, as compared to $202 million or $0.63
per diluted common share for the same period last year. These results
include a $35 million non-cash, pre-tax charge related to the
completion of the $4.4 billion refinancing of the Company's Senior
Credit Facility in conjunction with our Comprehensive Capital
Allocation Plan announced on May 2, 2007, while the 2006 period
benefited from $15 million in pre-tax settlement agreements. -
Long-term debt and capital leases 8,609 8,647
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Current portion of long-term debt and
capital leases $ 126 $ 130
4Expand
Moody's changes NRG Energy's outlook to negative; affirms ratings
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"While the rating affirmation incorporates the increase in near-term
cash flow and the reduction in cash flow volatility following the reset
and extension of power and gas hedges, the negative outlook considers
the $1.1 billion of permanent indebtedness added to the
capital structure, at a time when share repurchases and future capital
requirements have increased and are expected to stay at an elevated level," -
To that
end, Moody's also notes that NRG intends to modify the terms
of its secured credit agreement in a manner that will increase the restricted
payments basket, increase the amount of permitted indebtedness,
allow greater flexibility for the company to make capital investments,
and reduce the existing cash sweep mechanism. -
n light of the negative rating outlook as well as the company's
capital investment plan and announced share repurchases, limited
near-term prospects exist for the rating to be upgraded.
However, the rating outlook could be stabilized if the company's
credit if the company makes meaningful progress towards using free cash
flow to permanently reduce debt by more than $1.0 billion
over the next several years, and if the company finances its anticipated
large capital investment program in a relatively conservative manner resulting
in a adjusted FFO to total adjusted debt of 16% on a sustainable
basis. -
The rating could be downgraded if the level of share repurchases continues
to increase materially over the next eighteen months without meaningful
progress towards reducing consolidated debt or if the company chooses
to finance its capital investment program with higher than anticipated
levels of debt.
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