NRG Yield, Inc. Reports Second Quarter 2014 Financial Results, Completes First ROFO Acquisition, Closes Green Bond and Equity Offerings, and Raises Quarterly Dividend by 4.3%

NRG Yield, Inc. (NYSE:NYLD) today reported second quarter 2014 Adjusted EBITDA of $109 million. Net income for the second quarter was $34 million, or $0.26 per diluted Class A common share.

“Through successful dropdowns, direct acquisitions, increased dividends, strong operational performance, and continued close alignment with our parent, NRG, we have fulfilled the promise of our IPO roadshow one year ago,” said NRG Yield’s Chairman and Chief Executive Officer David Crane. “Furthermore, NRG Yield’s strong liquidity position, bolstered by the latest equity offering, provides the flexibility to continue to acquire assets which fit our growth profile.”

Overview of Financial and Operating Results

Note 1: NRG Yield closed on its initial public offering (IPO) on July 22, 2013. Results for periods prior to the IPO are attributable to its predecessor.

Note 2: In accordance with GAAP, 2014 and 2013 results have been restated to include full impact of the assets in the ROFO drop down transaction which closed on June 30, 2014

NRG Yield reported Net Income of approximately $34 million for the quarter ended June 30, 2014. Adjusted EBITDA was $109 million and CAFD was $38 million. Adjusted EBITDA was higher by $44 million, or 68%, when compared to the same quarter of 2013 as new assets came online during the second and third quarter of 2013.

Operational Performance

For the second quarter of 2014, generation for the Company’s renewable assets was 29% higher than during the same period in 2013, primarily driven by CVSR and Kansas South reaching commercial operations in 2013. Overall reliability improvement was driven by improved year on year performance from the GenConn Middletown and GenConn Devon facilities. Additionally, improved availability and favorable generation for the conventional assets were driven by full quarter operation of Marsh Landing and El Segundo Energy Center in second quarter 2014.

Liquidity and Capital Resources

1 Includes convertible debt issued in Q1 for purpose of ROFO acquisition (closed in Q2)
2 Represents excess proceeds from the debt and equity offerings, net of Alta acquisition

Total pro forma liquidity as of June 30, 2014 was $718 million, an increase of $532 million from December 31, 2013. This reflects an increase in revolver availability of $390 million, the excess cash of $188 million from the recent debt and equity offerings related to the Alta acquisition, partially offset by $30 million of LCs to be posted for Alta Wind Assets, as well as changes in cash driven by the following items:

• $602 million of cash outflows, consisting of the following items:
  • $357 million payment to NRG for purchase of ROFO assets
  • $105 million payments for cash grant bridge loans
  • $44 million of dividends and distributions to NRG Yield shareholders and NRG
  • $43 million for payments for long-term debt
  • $29 million in capital expenditures
  • $24 million in dividends and returns of capital

• Partially offset by $586 million of cash inflows, consisting of the following items:
  • $373 million proceeds from the issuance of the convertible notes and project financings, net of debt issuance costs
  • $137 million of proceeds from renewable energy grants
  • $73 million of net cash provided by operating activities
  • $3 million of other cash inflows

Agreement to Purchase Alta Wind facility

On June 3, 2014, NRG Yield entered into an agreement to acquire the Alta Wind facility located in Tehachapi, CA, from Terra-Gen Power LLC for $870 million plus the assumption of $1.6 billion of non-recourse project financings and subject to customary working capital adjustments. The acquisition is expected to close in the third quarter of 2014. The acquisition, which totals 947 megawatts (MW) of operating wind capacity, also includes a portfolio of land leases associated with the Alta Wind facility. NRG Yield plans to fund the purchase price through a combination of the net proceeds of $492 million from the recently issued green unsecured notes and proceeds totaling $442 million from the recently completed common stock offering. The acquisition will increase the annual run-rate EBITDA by approximately $220 million and CAFD by approximately $70 million (before debt service associated with acquisition financing) by 2016.

NRG Yield Operating LLC Issuance of $500 million of “Green” Unsecured Notes

On August 5, 2014, NRG Yield Operating LLC issued $500 million of unsecured notes due 2024 at a coupon rate of 5.375%. The notes are senior unsecured obligations of NRG Yield Operating LLC and are guaranteed by certain of its subsidiaries and its direct parent, NRG Yield LLC. Furthermore, these unsecured notes are pari passu to the company’s corporate credit facility and convertible notes.

Closed on offering of Class A Common Stock

On July 29, 2014, the Company raised $630 million (net of issuance costs) in its latest public offering with the sale of 12,075,000 shares of Class A common stock at a price of $54 per share. Proceeds totaling $442 million from this issuance will be used to fund the acquisition of the Alta Wind facility while the remaining funds will be used for general corporate purposes, including future acquisitions.

Drop-Down of Assets from NRG Energy, Inc.

NRG Energy, Inc. announced intention to offer a second set of assets to NRG Yield, Inc. representing approximately $35 million in annual CAFD and $120 million of annual Adjusted EBITDA. The assets include:

• Walnut Creek – 500 MW natural gas facility located in City of Industry, CA
• Tapestry – three wind facilities totaling 204 MW; including Buffalo Bear 19 MW in Oklahoma, Taloga 130 MW in Oklahoma, and Pinnacle 55 MW in Pennsylvania
• Laredo Ridge – 81 MW wind facility located in Petersburg, NE

Quarterly Dividend

On May 5, 2014, the Company’s Board of Directors declared a quarterly dividend on Class A common stock of $0.35 per share ($1.40 per share annualized) which was paid on June 16, 2014 to shareholders of record as of June 2, 2014.

On July 29, 2014, the Company’s Board of Directors declared a quarterly dividend on Class A common stock of $0.365 per share ($1.46 per share annualized) payable on September 15, 2014 to shareholders of record as of September 2, 2014. This equates to a 4.3% increase over the prior quarter.

Guidance

As initiated last quarter, NRG Yield is providing guidance for the prompt quarter. For the third quarter of 2014, the Company expects Adjusted EBITDA of $120 million and CAFD of $74 million.

Earnings Conference Call

On August 7, 2014, NRG Yield will host a conference call at 10:30 am Eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG Yield’s website at http://www.nrgyield.com. The webcast will be archived on the site for those unable to listen in real time.

About NRG Yield

NRG Yield owns a diversified portfolio of contracted renewable and conventional generation and thermal infrastructure assets in the U.S., including fossil fuel, solar and wind power generation facilities that provide the capacity to support more than 1.5 million American homes and businesses. Our thermal infrastructure assets provide steam, hot water and/or chilled water, and in some instances electricity, to commercial businesses, universities, hospitals and governmental units in multiple locations. NRG Yield is traded on the New York Stock Exchange under the symbol NYLD. Visit nrgyield.com for more information.

Safe Harbor Disclosure

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks, uncertainties and assumptions and include our Adjusted EBITDA, cash available for distribution, expected earnings, future growth and financial performance, and typically can be identified by the use of words such as “expect,” “estimate,” “anticipate,” “forecast,” “plan,” “believe” and similar terms. Although NRG Yield believes that its expectations are reasonable, it can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated above include, among others, general economic conditions, hazards customary in the power industry, weather conditions, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets, changes in government regulation of markets and of environmental emissions, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify or successfully implement acquisitions, our ability to enter into new contracts as existing contracts expire, our ability to acquire assets from NRG Energy, Inc. or third parties, failure to successfully close the Alta Wind acquisition (including receipt of third-party consents and regulatory approvals), and our ability to maintain and grow our quarterly dividends. Furthermore, any dividends are subject to available capital, market conditions, and compliance with associated laws and regulations.

NRG Yield undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The Adjusted EBITDA and cash available for distribution are estimates as of today’s date, August 7, 2014, and are based on assumptions believed to be reasonable as of this date. NRG Yield expressly disclaims any current intention to update such guidance. The foregoing review of factors that could cause NRG Yield’s actual results to differ materially from those contemplated in the forward-looking statements included in this news release should be considered in connection with information regarding risks and uncertainties that may affect NRG Yield’s future results included in NRG Yield’s filings with the Securities and Exchange Commission at www.sec.gov. In addition, NRG Yield makes available free of charge at www.nrgyield.com, copies of materials it files with, or furnish to, the SEC.

(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.
(b) The calculation of income attributable to NRG excludes pre-acquisition net income of the Acquired ROFO Assets.

(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.

(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.

(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.

(a) Retrospectively adjusted as discussed in Note 1, Nature of Business.

EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that NRG’s future results will be unaffected by unusual or non-recurring items.

EBITDA represents net income before interest (including loss on debt extinguishment), taxes, depreciation and amortization. EBITDA is presented because NRG Yield considers it an important supplemental measure of its performance and believes debt-holders frequently use EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:

• EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
• EBITDA does not reflect changes in, or cash requirements for, working capital needs;
• EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
• Other companies in this industry may calculate EBITDA differently than NRG Yield does, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the growth of NRG Yield’s business. NRG Yield compensates for these limitations by relying primarily on our GAAP results and using EBITDA and Adjusted EBITDA only supplementally. See the statements of cash flow included in the financial statements that are a part of this news release.

Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for mark-to-market gains or losses, asset write offs and impairments; and factors which we do not consider indicative of future operating performance. The reader is encouraged to evaluate each adjustment and the reasons NRG Yield considers it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, the reader should be aware that in the future NRG Yield may incur expenses similar to the adjustments in this news release.

Cash available for distribution is adjusted EBITDA plus cash dividends from unconsolidated affiliates, less maintenance capital expenditures, pro-rata adjusted EBITDA from unconsolidated affiliates, cash interest paid, income taxes paid, principal amortization of indebtedness and changes in others assets. Management believes cash available for distribution is a relevant supplemental measure of the Company’s ability to earn and distribute cash returns to investors.