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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

     
x
  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
    
o
  Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
     
For the Quarter Ended: June 30, 2004
  Commission File Number: 001-15891

NRG Energy, Inc.

(Exact name of Registrant as specified in its charter)
     
Delaware
(State or other jurisdiction
of incorporation or organization) 		  41-1724239
(I.R.S. Employer
Identification No.)
     
901 Marquette Avenue, Suite 2300    
Minneapolis, Minnesota   55402
(Address of principal executive offices)   (Zip Code)

(612) 373-5300
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12 b-2 of the Exchange Act).

Yes x No o

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Securities and Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes x No o

     As of August 2, 2004, there were 100,006,798 shares of common stock outstanding.

 

TABLE OF CONTENTS

Index

         
    Page No.
Part I — FINANCIAL INFORMATION
        
Item 1 Consolidated Financial Statements and Notes
        
    3  
    4 - 5  
    6 - 7  
    8  
    9 - 41  
    42 - 58  
    59 - 60  
    60 - 61  
       
    61  
    61  
    61  
    61 - 62  
    62 - 64  
    65  
    66  
 Amended and Restated By-Laws
 Code of Conduct
 Certification of CEO Pursuant to Section 302
 Certification of CFO Pursuant to Section 302
 Certification of Controller Pursuant to Section 302
 Certification of CEO, CFO and Controller

2

Table of Contents

NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
                                 
    Reorganized   Predecessor   Reorganized   Predecessor
    NRG
   Company
   NRG
   Company
    Three Months   Six Months
    Ended
   Ended
    June 30,   June 30,   June 30,   June 30,
    2004
   2003
   2004
   2003
    (In thousands, except for per share amounts)
Operating Revenues
                                
Revenues from majority-owned operations
   $ 573,674     $ 441,599     $ 1,173,992     $ 936,609  
 
    
 		      
 		      
 		      
 		  
Operating Costs and Expenses
                                
Cost of majority-owned operations
     353,750       381,845       735,801       759,432  
Depreciation and amortization
     53,168       63,768       108,174       122,906  
General, administrative and development
     45,837       39,147       82,329       87,663  
Corporate relocation charges
     5,645       —       6,761       —  
Reorganization items
     (2,661 )     6,334       3,589       6,334  
Restructuring and impairment charges
     1,676       269,631       1,676       291,767  
 
    
 		      
 		      
 		      
 		  
Total operating costs and expenses
     457,415       760,725       938,330       1,268,102  
 
    
 		      
 		      
 		      
 		  
Operating Income/(Loss)
     116,259       (319,126 )     235,662       (331,493 )
 
    
 		      
 		      
 		      
 		  
Other Income (Expense)
                                
Minority interest in earnings of consolidated subsidiaries
     (201 )     —       (709 )     —  
Equity in earnings of unconsolidated affiliates
     46,101       46,857       63,814       92,486  
Write downs and gains/(losses) on sales of equity method investments
     1,205       (132,436 )     (533 )     (149,027 )
Other income, net
     8,052       (7,953 )     11,708       3,542  
Interest expense
     (66,225 )     (92,087 )     (159,371 )     (260,761 )
 
    
 		      
 		      
 		      
 		  
Total other expense
     (11,068 )     (185,619 )     (85,091 )     (313,760 )
 
    
 		      
 		      
 		      
 		  
Income/(Loss) From Continuing Operations Before Income Taxes
     105,191       (504,745 )     150,571       (645,253 )
Income Tax Expense
     36,322       4,305       50,602       37,342  
 
    
 		      
 		      
 		      
 		  
Income/(Loss) From Continuing Operations
     68,869       (509,050 )     99,969       (682,595 )
Income/(Loss) on Discontinued Operations, net of Income Taxes
     14,155       (99,351 )     13,290       61,562  
 
    
 		      
 		      
 		      
 		  
Net Income/(Loss)
   $ 83,024     $ (608,401 )   $ 113,259     $ (621,033 )
 
    
 		      
 		      
 		      
 		  
Weighted Average Number of Common Shares Outstanding — Basic
     100,080               100,051          
Income From Continuing Operations per Weighted Average Common Share — Basic
   $ 0.69             $ 1.00          
Income From Discontinued Operations per Weighted Average Common Share — Basic
     0.14               0.13          
 
    
 		              
 		          
Net Income per Weighted Average Common Share — Basic
   $ 0.83             $ 1.13          
 
    
 		              
 		          
Weighted Average Number of Common Shares Outstanding — Diluted
     100,478               100,214          
Income From Continuing Operations per Weighted Average Common Share — Diluted
   $ 0.69             $ 1.00          
Income From Discontinued Operations per Weighted Average Common Share — Diluted
     0.14               0.13          
 
    
 		              
 		          
Net Income per Weighted Average Common Share — Diluted
   $ 0.83             $ 1.13          
 
    
 		              
 		          

See notes to consolidated financial statements.

3

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NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (REORGANIZED COMPANY)

(Unaudited)
                 
    June 30,   December 31,
    2004
   2003
    (In thousands)
ASSETS
                
Current Assets
                
Cash and cash equivalents
   $ 820,876     $ 551,223  
Restricted cash
     151,673       116,067  
Accounts receivable — trade, less allowance for doubtful accounts of $322 and $0
     313,649       201,908  
Xcel Energy settlement receivable
     —       640,000  
Current portion of notes receivable — affiliates
     1,917       200  
Current portion of notes receivable
     123,060       65,141  
Taxes receivable
     14,824       —  
Inventory
     203,672       194,926  
Derivative instruments valuation
     11,670       772  
Prepayments and other current assets
     229,961       222,178  
Current deferred income taxes
     961       1,850  
Current assets — discontinued operations
     56,955       119,574  
 
    
 		      
 		  
Total current assets
     1,929,218       2,113,839  
 
    
 		      
 		  
Property, Plant and Equipment
                
In service
     3,935,915       3,885,465  
Under construction
     104,794       139,171  
 
    
 		      
 		  
Total property, plant and equipment
     4,040,709       4,024,636  
Less accumulated depreciation
     (119,487 )     (11,800 )
 
    
 		      
 		  
Net property, plant and equipment
     3,921,222       4,012,836  
 
    
 		      
 		  
Other Assets
                
Equity investments in affiliates
     677,684       737,998  
Notes receivable, less current portion — affiliates
     122,539       130,152  
Notes receivable, less current portion
     612,118       691,444  
Intangible assets, net of accumulated amortization of $34,404 and $5,212
     356,068       432,361  
Debt issuance costs, net of accumulated amortization of $4,992 and $454
     63,038       74,337  
Derivative instruments valuation
     53,474       59,907  
Funded letter of credit
     250,000       250,000  
Other assets
     116,129       123,145  
Non-current assets — discontinued operations
     451,785       618,968  
 
    
 		      
 		  
Total other assets
     2,702,835       3,118,312  
 
    
 		      
 		  
Total Assets
   $ 8,553,275     $ 9,244,987  
 
    
 		      
 		  

See notes to consolidated financial statements.

4

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NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (REORGANIZED COMPANY)
(Unaudited)

                 
    June 30,   December 31,
    2004
   2003
    (In thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current Liabilities
                
Current portion of long-term debt and capital leases
   $ 96,385     $ 801,229  
Short-term debt
     17,826       19,019  
Accounts payable — trade
     137,033       158,683  
Accounts payable — affiliates
     6,372       7,040  
Accrued taxes
     —       16,095  
Accrued property, sales and other taxes
     16,136       22,322  
Accrued salaries, benefits and related costs
     33,072       19,331  
Accrued interest
     20,038       8,982  
Derivative instruments valuation
     20,979       429  
Creditor pool obligation
     25,000       540,000  
Other bankruptcy settlement
     221,283       220,000  
Other current liabilities
     113,773       102,861  
Current liabilities — discontinued operations
     23,121       110,190  
 
    
 		      
 		  
Total current liabilities
     731,018       2,026,181  
 
    
 		      
 		  
Other Liabilities
                
Long-term debt and capital leases
     3,922,417       3,327,782  
Deferred income taxes
     144,522       149,493  
Postretirement and other benefit obligations
     110,842       105,946  
Derivative instruments valuation
     159,567       153,503  
Other long-term obligations
     473,247       480,938  
Non-current liabilities — discontinued operations
     469,911       558,884  
 
    
 		      
 		  
Total non-current liabilities
     5,280,506       4,776,546  
 
    
 		      
 		  
Total Liabilities
     6,011,524       6,802,727  
 
    
 		      
 		  
Minority Interest
     5,673       5,004  
Commitments and Contingencies
                
Stockholders’ Equity
                
Serial Preferred Stock; 10,000,000 shares authorized, none issued and outstanding at June 30, 2004 and December 31, 2003
     —       —  
Common stock; $.01 par value; 500,000,000 shares authorized; 100,006,798 shares at June 30, 2004 and 100,000,000 shares at December 31, 2003 issued and outstanding
     1,000       1,000  
Additional paid-in capital
     2,410,751       2,403,429  
Retained earnings
     124,284       11,025  
Accumulated other comprehensive income
     43       21,802  
 
    
 		      
 		  
Total stockholders’ equity
     2,536,078       2,437,256  
 
    
 		      
 		  
Total Liabilities and Stockholders’ Equity
   $ 8,553,275     $ 9,244,987  
 
    
 		      
 		  

See notes to consolidated financial statements.

5

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NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)

Three Months Ended June 30, 2004 and June 30, 2003
(Unaudited)
                                                 
                                    Accumulated    
    Common   Additional           Other   Total
   
  Paid-in   Retained Earnings/   Comprehensive   Stockholders’
(In thousands)
   Stock
   Shares
   Capital
   (Accumulated Deficit)
   Income/(Loss)
   Equity/(Deficit)
Balances at March 31, 2003 (Predecessor Company)
   $ —       —     $ 2,227,692     $ (2,841,565 )   $ (139,004 )   $ (752,877 )
Net loss
                             (608,401 )             (608,401 )
Foreign currency translation adjustments and other
                                     77,777       77,777  
Deferred unrealized gain on derivatives, net
                                     5,155       5,155  
 
                                            
 		  
Comprehensive loss for the three months ended June 30, 2003
                                             (525,469 )
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balances at June 30, 2003 (Predecessor Company)
   $ —       —     $ 2,227,692     $ (3,449,966 )   $ (56,072 )   $ (1,278,346 )
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balances at March 31, 2004 (Reorganized NRG)
   $ 1,000       100,000     $ 2,406,771     $ 41,260     $ (3,176 )   $ 2,445,855  
Net income
                             83,024               83,024  
Foreign currency translation adjustments and other
                                     (33,520 )     (33,520 )
Deferred unrealized gain on derivatives, net
                                     36,739       36,739  
 
                                            
 		  
Comprehensive income for the three months ended June 30, 2004
                                             86,243  
Equity based compensation
             7       3,980                       3,980  
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balances at June 30, 2004 (Reorganized NRG)
   $ 1,000       100,007     $ 2,410,751     $ 124,284     $ 43     $ 2,536,078  
 
    
 		      
 		      
 		      
 		      
 		      
 		  

See notes to consolidated financial statements.

6

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NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)
Six Months Ended June 30, 2004 and June 30, 2003
(Unaudited)

                                                 
                                    Accumulated    
    Common   Additional           Other   Total
   
  Paid-in   Retained Earnings/   Comprehensive   Stockholders’
(In thousands)
   Stock
   Shares
   Capital
   (Accumulated Deficit)
   Income/(Loss)
   Equity/(Deficit)
Balances at December 31, 2002 (Predecessor Company)
   $ —       —     $ 2,227,692     $ (2,828,933 )   $ (94,958 )   $ (696,199 )
Net loss
                             (621,033 )             (621,033 )
Foreign currency translation adjustments and other
                                     90,867       90,867  
Deferred unrealized loss on derivatives, net
                                     (51,981 )     (51,981 )
 
                                            
 		  
Comprehensive loss for the six months ended June 30, 2003
                                             (582,147 )
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balances at June 30, 2003 (Predecessor Company)
   $ —       —     $ 2,227,692     $ (3,449,966 )   $ (56,072 )   $ (1,278,346 )
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balances at December 31, 2003 (Reorganized NRG)
   $ 1,000       100,000     $ 2,403,429     $ 11,025     $ 21,802     $ 2,437,256  
Net income
                             113,259               113,259  
Foreign currency translation adjustments and other
                                     (35,933 )     (35,933 )
Deferred unrealized gain on derivatives, net
                                     14,174       14,174  
 
                                            
 		  
Comprehensive income for the six months ended June 30, 2004
                                             91,500  
Equity based compensation
             7       7,322                       7,322  
 
    
 		      
 		      
 		      
 		      
 		      
 		  
Balances at June 30, 2004 (Reorganized NRG)
   $ 1,000       100,007     $ 2,410,751     $ 124,284     $ 43     $ 2,536,078  
 
    
 		      
 		      
 		      
 		      
 		      
 		  

See notes to consolidated financial statements.

7

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NRG ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
                 
    Reorganized   Predecessor
    NRG
   Company
    Six Months Ended
    June 30,
(In thousands)
   2004
   2003
Cash Flows from Operating Activities
                
Net income/(loss)
   $ 113,259     $ (621,033 )
Adjustments to reconcile net income/(loss) to net cash provided (used) by operating activities
                
Distributions in excess of (less than) equity in earnings of unconsolidated affiliates
     4,751       (23,943 )
Depreciation and amortization
     113,499       145,221  
Amortization of debt issuance costs
     20,060       11,090  
Amortization of debt discount
     11,795       —  
Deferred income taxes
     49,384       36,525  
Minority interest
     2,089       466  
Unrealized (gains)/losses on derivatives
     (21,458 )     17,796  
Asset impairment
     1,676       347,913  
Write downs and losses on sales of equity method investments
     533       148,841  
Gain on sale of discontinued operations
     (13,012 )     (218,536 )
Amortization of power contracts and emission credits
     34,517       —  
Cash provided (used) by changes in certain working capital items, net of acquisition affects
                
Accounts receivable
     (111,054 )     (43,608 )
Xcel Energy settlement receivable
     640,000       —  
Accrued taxes
     (29,285 )     (18,603 )
Inventory
     (8,439 )     13,550  
Prepayments and other current assets
     (2,065 )     (74,262 )
Accounts payable
     (27,626 )     264,106  
Accounts payable — affiliates
     213       4,788  
Accrued property, sales and other taxes
     (7,065 )     5,398  
Accrued salaries, benefits and related costs
     20,192       (3,769 )
Accrued interest
     14,883       126,578  
Other current liabilities
     (506,368 )     (117,355 )
Cash used by changes in other assets and liabilities
     16,878       22,869  
 
    
 		      
 		  
Net Cash Provided by Operating Activities
     317,357       24,032  
 
    
 		      
 		  
Cash Flows from Investing Activities
                
Proceeds on sale of equity method investments
     29,693       89,223  
Proceeds on sale of discontinued operations
     59,190       —  
Investments in equity method investments and projects
     (566 )     (369 )
Decrease in notes receivable, net
     15,208       9,405  
Capital expenditures
     (64,676 )     (56,605 )
Increase in restricted cash and trust funds
     (37,291 )     (14,137 )
 
    
 		      
 		  
Net Cash Provided by Investing Activities
     1,558       27,517  
 
    
 		      
 		  
Cash Flows from Financing Activities
               
Proceeds from issuance of long-term debt, net
     490,631       5,342