þ | 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 |
Delaware | 76-0655566 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
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Exhibit 3.2 | ||||||||
Exhibit 10.1 | ||||||||
Exhibit 10.2 | ||||||||
Exhibit 10.3 | ||||||||
Exhibit 10.4 | ||||||||
Exhibit 10.5 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
i
| Demand and market prices for electricity, purchased power and fuel and emission allowances; |
| Limitations on our ability to set rates at market prices; |
| Legislative, regulatory and/or market developments; |
| Our ability to obtain adequate fuel supply and/or transmission and distribution services; |
| Interruption or breakdown of our generating equipment and processes; |
| Failure of third parties to perform contractual obligations; |
| Changes in environmental regulations that constrain our operations or increase our compliance costs; |
| Failure by transmission system operators to communicate operating and system information properly and timely; |
| Failure to meet our debt service, restrictive covenants or collateral postings; |
| Ineffective hedging and other risk management activities; |
| Changes in the wholesale energy market or in our evaluation of our generation assets; |
| The outcome of pending or threatened lawsuits, regulatory proceedings, tax proceedings and investigations; |
| Weather-related events or other events beyond our control; |
| The timing and extent of changes in commodity prices or interest rates; and |
| Financial and economic market conditions and our access to capital. |
ii
ITEM 1. | FINANCIAL STATEMENTS |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(thousands of dollars, except per share amounts) | ||||||||||||||||
Revenues: |
||||||||||||||||
Revenues (including $(21,842), $5,465,
$(26,130) and $(6,737) unrealized gains
(losses)) (including $0, $145,592, $0
and $253,001 from affiliates) |
$ | 389,777 | $ | 1,013,564 | $ | 855,961 | $ | 1,893,362 | ||||||||
Expenses: |
||||||||||||||||
Cost of sales (including $28,486,
$62,051, $(10,969) and $105,053
unrealized gains (losses)) (including
$0, $34,593, $0 and $70,306 from
affiliates) |
280,067 | 568,876 | 604,741 | 1,077,715 | ||||||||||||
Operation and maintenance |
156,964 | 165,733 | 314,110 | 321,178 | ||||||||||||
General and administrative |
27,645 | 32,627 | 56,659 | 61,841 | ||||||||||||
Western states litigation and similar
settlements |
| | | 34,000 | ||||||||||||
Gains on sales of assets and emission
and exchange allowances, net |
(1,241 | ) | (22,312 | ) | (20,171 | ) | (22,923 | ) | ||||||||
Depreciation and amortization |
67,646 | 82,909 | 135,504 | 165,706 | ||||||||||||
Total operating expense |
531,081 | 827,833 | 1,090,843 | 1,637,517 | ||||||||||||
Operating Income (Loss) |
(141,304 | ) | 185,731 | (234,882 | ) | 255,845 | ||||||||||
Other Income (Expense): |
||||||||||||||||
Income (loss) of equity investment, net |
(690 | ) | 988 | (149 | ) | 1,195 | ||||||||||
Debt extinguishments gains (losses) |
844 | | 844 | (1,353 | ) | |||||||||||
Other, net |
160 | 90 | 211 | 26 | ||||||||||||
Interest expense |
(45,067 | ) | (51,094 | ) | (91,986 | ) | (102,510 | ) | ||||||||
Interest income |
721 | 8,226 | 969 | 14,651 | ||||||||||||
Total other expense |
(44,032 | ) | (41,790 | ) | (90,111 | ) | (87,991 | ) | ||||||||
Income (Loss) from Continuing Operations
Before Income Taxes |
(185,336 | ) | 143,941 | (324,993 | ) | 167,854 | ||||||||||
Income tax expense (benefit) |
(81,644 | ) | 61,963 | (115,520 | ) | 72,940 | ||||||||||
Income (Loss) from Continuing Operations |
(103,692 | ) | 81,978 | (209,473 | ) | 94,914 | ||||||||||
Income from discontinued operations |
907,258 | 276,710 | 861,626 | 640,986 | ||||||||||||
Net Income |
$ | 803,566 | $ | 358,688 | $ | 652,153 | $ | 735,900 | ||||||||
Basic Earnings (Loss) per Share: |
||||||||||||||||
Income (loss) from continuing operations |
$ | (0.30 | ) | $ | 0.24 | $ | (0.60 | ) | $ | 0.27 | ||||||
Income from discontinued operations |
2.59 | 0.79 | 2.46 | 1.86 | ||||||||||||
Net income |
$ | 2.29 | $ | 1.03 | $ | 1.86 | $ | 2.13 | ||||||||
Diluted Earnings (Loss) per Share: |
||||||||||||||||
Income (loss) from continuing operations |
$ | (0.30 | ) | $ | 0.23 | $ | (0.60 | ) | $ | 0.27 | ||||||
Income from discontinued operations |
2.59 | 0.78 | 2.46 | 1.81 | ||||||||||||
Net income |
$ | 2.29 | $ | 1.01 | $ | 1.86 | $ | 2.08 | ||||||||
1
June 30, 2009 | December 31, 2008 | |||||||
(thousands of dollars, except per share amounts) | ||||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 1,486,965 | $ | 1,004,367 | ||||
Restricted cash |
2,778 | 2,721 | ||||||
Accounts and notes receivable, principally customer |
127,479 | 249,871 | ||||||
Inventory |
303,984 | 314,999 | ||||||
Derivative assets |
157,023 | 161,340 | ||||||
Margin deposits |
18,078 | 32,676 | ||||||
Investment in and receivables from Channelview, net |
24,569 | 58,703 | ||||||
Prepayments and other current assets |
105,146 | 124,449 | ||||||
Current assets of discontinued operations ($152,000 and $295,477 of margin
deposits) |
271,538 | 2,506,340 | ||||||
Total current assets |
2,497,560 | 4,455,466 | ||||||
Property, plant and equipment, gross |
6,510,780 | 6,417,268 | ||||||
Accumulated depreciation |
(1,722,634 | ) | (1,597,479 | ) | ||||
Property, Plant and Equipment, net |
4,788,146 | 4,819,789 | ||||||
Other Assets: |
||||||||
Other intangibles, net |
373,773 | 380,554 | ||||||
Derivative assets |
84,004 | 78,879 | ||||||
Prepaid lease |
264,893 | 273,374 | ||||||
Other ($31,888 and $29,012 accounted for at fair value) |
238,142 | 219,552 | ||||||
Long-term assets of discontinued operations |
25,717 | 494,781 | ||||||
Total other assets |
986,529 | 1,447,140 | ||||||
Total Assets |
$ | 8,272,235 | $ | 10,722,395 | ||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities: |
||||||||
Current portion of long-term debt and short-term borrowings |
$ | 410,799 | $ | 12,517 | ||||
Accounts payable, principally trade |
137,239 | 156,604 | ||||||
Derivative liabilities |
234,906 | 202,206 | ||||||
Margin deposits |
28,000 | 93,000 | ||||||
Other |
206,698 | 199,026 | ||||||
Current liabilities of discontinued operations ($42,250 and $0 of margin
deposits) |
187,391 | 2,375,895 | ||||||
Total current liabilities |
1,205,033 | 3,039,248 | ||||||
Other Liabilities: |
||||||||
Derivative liabilities |
115,596 | 140,493 | ||||||
Other |
305,407 | 272,079 | ||||||
Long-term liabilities of discontinued operations |
29,872 | 873,190 | ||||||
Total other liabilities |
450,875 | 1,285,762 | ||||||
Long-term Debt |
2,160,501 | 2,610,737 | ||||||
Commitments and Contingencies |
||||||||
Temporary Equity Stock-based Compensation |
4,934 | 9,004 | ||||||
Stockholders Equity: |
||||||||
Preferred stock; par value $0.001 per share (125,000,000 shares authorized;
none outstanding) |
| | ||||||
Common stock; par value $0.001 per share (2,000,000,000 shares authorized;
350,711,802 and 349,812,537 issued) |
112 | 111 | ||||||
Additional paid-in capital |
6,248,060 | 6,238,639 | ||||||
Accumulated deficit |
(1,723,048 | ) | (2,375,201 | ) | ||||
Accumulated other comprehensive loss |
(74,232 | ) | (85,905 | ) | ||||
Total stockholders equity |
4,450,892 | 3,777,644 | ||||||
Total Liabilities and Equity |
$ | 8,272,235 | $ | 10,722,395 | ||||
2
Six Months Ended June 30, | ||||||||
2009 | 2008 | |||||||
(thousands of dollars) | ||||||||
Cash Flows from Operating Activities: |
||||||||
Net income |
$ | 652,153 | $ | 735,900 | ||||
Income from discontinued operations |
(861,626 | ) | (640,986 | ) | ||||
Net income (loss) from continuing operations |
(209,473 | ) | 94,914 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
135,504 | 165,706 | ||||||
Deferred income taxes |
(115,850 | ) | 71,419 | |||||
Net changes in energy derivatives |
37,099 | (98,316 | ) | |||||
Amortization of deferred financing costs |
4,292 | 4,206 | ||||||
Gains on sales of assets and emission and exchange allowances, net |
(20,171 | ) | (22,923 | ) | ||||
Western states litigation and similar settlements |
| 34,000 | ||||||
Other, net |
7,450 | (1,268 | ) | |||||
Changes in other assets and liabilities: |
||||||||
Accounts and notes receivable, net |
126,059 | (158,758 | ) | |||||
Changes in notes, receivables and payables with affiliate, net |
(1,230 | ) | (5,440 | ) | ||||
Inventory |
12,610 | (42,445 | ) | |||||
Margin deposits, net |
(50,402 | ) | (54,644 | ) | ||||
Net derivative assets and liabilities |
(21,965 | ) | (9,519 | ) | ||||
Accounts payable |
(7,453 | ) | 88,399 | |||||
Other current assets |
3,759 | (6,819 | ) | |||||
Other assets |
9,073 | 19,190 | ||||||
Taxes payable/receivable |
(4,936 | ) | 19,971 | |||||
Other current liabilities |
(4,207 | ) | (8,100 | ) | ||||
Other liabilities |
3,322 | (1,242 | ) | |||||
Net cash provided by (used in) continuing operations from operating
activities |
(96,519 | ) | 88,331 | |||||
Net cash provided by discontinued operations from operating activities |
508,602 | 102,531 | ||||||
Net cash provided by operating activities |
412,083 | 190,862 | ||||||
Cash Flows from Investing Activities: |
||||||||
Capital expenditures |
(114,964 | ) | (102,930 | ) | ||||
Proceeds from sales of assets, net |
35,931 | | ||||||
Proceeds from sales of emission and exchange allowances |
19,175 | 28,420 | ||||||
Purchases of emission allowances |
(5,662 | ) | (17,644 | ) | ||||
Restricted cash |
(57 | ) | (3,835 | ) | ||||
Other, net |
1,500 | 1,435 | ||||||
Net cash used in continuing operations from investing activities |
(64,077 | ) | (94,554 | ) | ||||
Net cash provided by (used in) discontinued operations from investing
activities |
299,004 | (14,200 | ) | |||||
Net cash provided by (used in) investing activities |
234,927 | (108,754 | ) | |||||
Cash Flows from Financing Activities: |
||||||||
Payments of long-term debt |
(44,780 | ) | (45,193 | ) | ||||
Payments of debt extinguishments expenses |
| (423 | ) | |||||
Proceeds from issuances of stock |
2,309 | 5,769 | ||||||
Net cash used in continuing operations from financing activities |
(42,471 | ) | (39,847 | ) | ||||
Net cash used in discontinued operations from financing activities |
(225,300 | ) | | |||||
Net cash used in financing activities |
(267,771 | ) | (39,847 | ) | ||||
Net Change in Cash and Cash Equivalents, Total Operations |
379,239 | 42,261 | ||||||
Less: Net Change in Cash and Cash Equivalents, Discontinued Operations |
(103,359 | ) | (325 | ) | ||||
Cash and Cash Equivalents at Beginning of Period, Continuing Operations |
1,004,367 | 524,070 | ||||||
Cash and Cash Equivalents at End of Period, Continuing Operations |
$ | 1,486,965 | $ | 566,656 | ||||
Supplemental Disclosure of Cash Flow Information: |
||||||||
Cash Payments: |
||||||||
Interest paid (net of amounts capitalized) for continuing operations |
$ | 95,105 | $ | 104,797 | ||||
Income taxes paid (net of income tax refunds) for continuing operations |
3,582 | (13,449 | ) |
3
| the reported amounts of assets, liabilities and equity; |
| the reported amounts of revenues and expenses; and |
| our disclosure of contingent assets and liabilities at the date of the financial statements. |
4
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Stock-based
incentive plans
compensation expense
(pre-tax)(1) |
$ | 1 | $ | 4 | $ | 4 | $ | 8 | ||||||||
(1) | See note 10(a) to our consolidated financial statements in our Form 10-K for information about our stock-based incentive plans compensation expense. |
Level 1:
|
Level 1 represents unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. This category primarily includes our energy derivative instruments that are exchange-traded or that are cleared and settled through the exchange. It also includes our available-for-sale and trading securities. | |
Level 2:
|
Level 2 represents quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data. This category includes emission allowances futures that are exchange-traded and over-the-counter (OTC) derivative instruments such as generic swaps, forwards and options. |
5
Level 3:
|
This category includes our energy derivative instruments whose fair value is estimated based on internally developed models and methodologies utilizing significant inputs that are generally less readily observable from objective sources (such as implied volatilities and correlations). Our OTC, complex or structured derivative instruments that are transacted in less liquid markets with limited pricing information are included in Level 3. Examples are coal contracts, longer term natural gas contracts and options valued using implied or internally-developed inputs. |
June 30, 2009 | ||||||||||||||||||||
Total | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Reclassification | Fair Value | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Total derivative assets |
$ | 172 | $ | 68 | $ | 1 | $ | | (1) | $ | 241 | |||||||||
Total derivative liabilities |
53 | 179 | 118 | | (1) | 350 | ||||||||||||||
Other assets(2) |
32 | | | | 32 |
(1) | Reclassifications are required to reconcile to our consolidated balance sheet presentation. Amounts are insignificant as of June 30, 2009. | |
(2) | Includes $12 million in available-for-sale securities (shares in a public exchange) and $20 million in trading securities (rabbi trust investments (which is comprised of mutual funds) associated with our non-qualified deferred compensation plans for key and highly compensated employees). |
December 31, 2008 | ||||||||||||||||||||
Total | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Reclassifications | Fair Value | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Total derivative assets |
$ | 125 | $ | 111 | $ | 7 | $ | (3 | )(1) | $ | 240 | |||||||||
Total derivative liabilities |
17 | 208 | 121 | (3 | )(1) | 343 | ||||||||||||||
Other assets(2) |
29 | | | | 29 |
(1) | Reclassifications are required to reconcile to our consolidated balance sheet presentation. | |
(2) | Includes $8 million in available-for-sale securities (shares in a public exchange) and $21 million in trading securities (rabbi trust investments (which is comprised of mutual funds) associated with our non-qualified deferred compensation plans for key and highly compensated employees). |
6
June 30, 2009 | December 31, 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value(1) | Value | Value(1) | |||||||||||||
(in millions) | ||||||||||||||||
Fixed rate debt |
$ | 2,572 | $ | 2,421 | $ | 2,623 | $ | 2,168 | ||||||||
Total debt |
$ | 2,572 | $ | 2,421 | $ | 2,623 | $ | 2,168 | ||||||||
(1) | We based the fair values of our fixed rate debt on market prices and quotes from an investment bank. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net Derivatives (Level 3) | Net Derivatives (Level 3) | |||||||||||||||
(in millions) | ||||||||||||||||
Balance, beginning of period |
$ | (153 | ) | $ | 85 | $ | (114 | ) | $ | 21 | ||||||
Total gains (losses) realized/unrealized: |
||||||||||||||||
Included in earnings |
(12 | )(1) | 127 | (1) | (79 | )(1) | 141 | (1) | ||||||||
Purchases, issuances and settlements
(net) |
48 | (36 | ) | 76 | 14 | |||||||||||
Transfers in and/or out of Level 3 (net) |
| (2) | | (3) | | (4) | | (5) | ||||||||
Balance, end of period |
$ | (117 | ) | $ | 176 | $ | (117 | ) | $ | 176 | ||||||
Changes in unrealized gains (losses)
relating to derivative assets and
liabilities still held at June 30, 2009
and 2008: |
||||||||||||||||
Revenues |
$ | | $ | (2 | ) | $ | (2 | ) | $ | (1 | ) | |||||
Cost of sales |
(5 | ) | 124 | (54 | ) | 102 | ||||||||||
Total |
$ | (5 | ) | $ | 122 | $ | (56 | ) | $ | 101 | ||||||
(1) | Recorded in revenues and cost of sales. | |
(2) | Represents fair value as of March 31, 2009. | |
(3) | Represents fair value as of March 31, 2008. | |
(4) | Represents fair value as of December 31, 2008. | |
(5) | Represents fair value as of December 31, 2007. |
7
Primary | Transactions that | |||||||
Risk | Purpose for Holding or | Physically | Transactions that | |||||
Instrument | Exposure | Issuing Instrument(1) | Flow/Settle | Financially Settle(2) | ||||
Power futures, forward, swap and option contracts
|
Price risk | Power sales to customers | Revenues | Revenues | ||||
Power purchases related to operations | Cost of sales | Revenues | ||||||
Power purchases/sales related to legacy trading and non-core asset management positions(3) | Revenues | Revenues | ||||||
Natural gas and fuel futures, forward, swap and
option contracts
|
Price risk | Natural gas and fuel sales related to operations | Revenues/Cost of sales | Cost of sales | ||||
Natural gas sales related to power generation(4) | N/A(5) | Revenues | ||||||
Natural gas and fuel purchases related to operations | Cost of sales | Cost of sales | ||||||
Natural gas and fuel purchases/sales related to legacy trading and non-core asset management positions(3) | Cost of sales | Cost of sales | ||||||
Emission and exchange allowances futures(6)
|
Price risk | Purchases/sales of emission and exchange allowances | N/A(5) | Revenues/Cost of sales |
(1) | The purpose for holding or issuing does not impact the accounting method elected for each instrument. | |
(2) | Includes classification for mark-to-market derivatives and amounts reclassified from accumulated other comprehensive income (loss) related to cash flow hedges. | |
(3) | See discussion below regarding trading activities. | |
(4) | Natural gas financial swaps and options transacted to economically hedge generation in the PJM region. | |
(5) | N/A is not applicable. | |
(6) | Includes emission and exchange allowances futures for sulfur dioxide (SO2), nitrogen oxide (NOX) and carbon dioxide (CO2). |
8
Derivative Assets | Derivative Liabilities | Net Derivative | ||||||||||||||||||
Current | Long-Term | Current | Long-Term | Assets (Liabilities) | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Non-trading |
$ | 95 | $ | 64 | $ | (194 | ) | $ | (102 | ) | $ | (137 | ) | |||||||
Trading |
62 | 20 | (41 | ) | (13 | ) | 28 | |||||||||||||
Total derivatives |
$ | 157 | $ | 84 | $ | (235 | ) | $ | (115 | ) | $ | (109 | ) | |||||||
Notional Volumes | ||||||||||||
Commodity | Unit | Current | Long-term | |||||||||
(in millions) | ||||||||||||
Power |
MWh(1) | (3 | )(2) | (5 | )(2) | |||||||
Natural gas |
MMBTU(3) | 7 | 25 | |||||||||
Natural gas basis |
MMBTU(3) | | 1 | |||||||||
Coal |
MMBTU(3) | 109 | 235 |
(1) | MWh is megawatt hours. | |
(2) | Negative amounts indicate net forward sales. | |
(3) | MMBTU is million British thermal units. |
9
Three Months Ended June 30, 2009 | ||||||||
Derivatives Not Designated as Hedging Instruments Under SFAS No. 133(1) | Revenues | Cost of Sales | ||||||
(in millions) | ||||||||
Non-Trading Commodity Contracts: |
||||||||
Unrealized(2) |
$ | (22 | ) | $ | 31 | |||
Realized(3)(4)(5) |
81 | (66 | ) | |||||
Total non-trading |
$ | 59 | $ | (35 | ) | |||
Trading Commodity Contracts: |
||||||||
Unrealized |
$ | | $ | (2 | ) | |||
Realized(3) |
| 1 | ||||||
Total trading |
$ | | $ | (1 | ) | |||
Six Months Ended June 30, 2009 | ||||||||
Derivatives Not Designated as Hedging Instruments Under SFAS No. 133(1) | Revenues | Cost of Sales | ||||||
(in millions) | ||||||||
Non-Trading Commodity Contracts: |
||||||||
Unrealized(2) |
$ | (26 | ) | $ | (9 | ) | ||
Realized(3)(4)(5) |
187 | (74 | ) | |||||
Total non-trading |
$ | 161 | $ | (83 | ) | |||
Trading Commodity Contracts: |
||||||||
Unrealized |
$ | | $ | (2 | ) | |||
Realized(3) |
| 20 | ||||||
Total trading |
$ | | $ | 18 | ||||
(1) | Interest rate swap instruments were liquidated in 2002 and the related deferred losses in accumulated other comprehensive loss are being amortized into interest expense through 2012. An immaterial amount was amortized during the three and six months ended June 30, 2009 and 2008, which was included in interest expense under other operations. | |
(2) | During 2007, we de-designated our remaining cash flow hedges. During the three and six months ended June 30, 2009, previously measured ineffectiveness gains (losses) reversing due to settlement of the derivative contracts was insignificant. | |
(3) | Does not include realized gains or losses associated with cash month transactions, non-derivative transactions or derivative transactions that qualify for the normal purchase/normal sale exception. | |
(4) | Excludes settlement value of fuel contracts classified as inventory upon settlement. | |
(5) | Includes gains or losses from de-designated cash flow hedges reclassified from accumulated other comprehensive loss due to settlement of the derivative contracts. See note 6. |
June 30, 2009 | ||||||||
Expected to be | ||||||||
Reclassified into | ||||||||
Results of | ||||||||
At the End of the | Operations | |||||||
Period | in Next 12 Months | |||||||
(in millions) | ||||||||
De-designated cash flow hedges(1)(2)(3) |
$ | 41 | $ | 15 | ||||
(1) | No component of the derivatives gain or loss was excluded from the assessment of effectiveness. | |
(2) | During the three and six months ended June 30, 2008, previously measured ineffectiveness gains (losses) in revenues of $1 million and $0, respectively, reversed due to settlement of the derivative contracts. | |
(3) | During the three and six months ended June 30, 2009 and 2008, $0 was recognized in our results of operations as a result of the discontinuance of cash flow hedges because it was probable that the forecasted transaction would not occur. |
10
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Revenues |
$ | | $ | | $ | | $ | | ||||||||
Cost of sales |
5 | (13 | ) | 16 | (17 | ) | ||||||||||
Total(1) |
$ | 5 | $ | (13 | ) | $ | 16 | $ | (17 | ) | ||||||
(1) | Includes realized and unrealized gains and losses on both derivative instruments and non-derivative instruments. |
(5) | Credit Risk |
Exposure | Credit | Number of | Net Exposure of | |||||||||||||||||
Before | Collateral | Exposure | Counterparties | Counterparties | ||||||||||||||||
Credit Rating Equivalent | Collateral(1) (2) | Held(3) | Net of Collateral | >10% | >10% | |||||||||||||||
(dollars in millions) | ||||||||||||||||||||
Investment grade |
$ | 224 | $ | 45 | $ | 179 | 2 | (4) | $ | 145 | ||||||||||
Non-investment grade |
2 | | 2 | | | |||||||||||||||
No external ratings: |
||||||||||||||||||||
Internally rated Investment grade |
66 | | 66 | 1 | (5) | 65 | ||||||||||||||
Internally rated Non-investment
grade |
7 | 6 | 1 | | | |||||||||||||||
Total |
$ | 299 | $ | 51 | $ | 248 | 3 | $ | 210 | |||||||||||
(1) | The table includes amounts related to certain contracts classified as discontinued operations in our consolidated balance sheets. These contracts settle through the expiration date in 2010. | |
(2) | The table excludes amounts related to contracts classified as normal purchase/normal sale and non-derivative contractual commitments that are not recorded in our consolidated balance sheets, except for any related accounts receivable. Such contractual commitments contain credit and economic risk if a counterparty does not perform. Nonperformance could have a material adverse impact on our future results of operations, financial condition and cash flows. | |
(3) | Collateral consists of cash, standby letters of credit and other forms approved by management. | |
(4) | These counterparties are a power grid operator and an energy merchant. | |
(5) | This counterparty is a financial institution. |
11
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Net income |
$ | 803 | $ | 359 | $ | 652 | $ | 736 | ||||||||
Other comprehensive income, net of tax: |
||||||||||||||||
Reclassification of net deferred
loss from cash flow hedges realized
into net income/loss (net of tax) |
3 | 6 | 8 | 16 | ||||||||||||
Unrealized gain on
available-for-sale securities (net
of tax)(1) |
2 | | 3 | | ||||||||||||
Reclassification of benefits
actuarial net loss into net
income/loss (net of tax) |
1 | | 1 | | ||||||||||||
Comprehensive income |
$ | 809 | $ | 365 | $ | 664 | $ | 752 | ||||||||
(1) | As of June 30, 2009 and December 31, 2008, $12 million and $8 million, respectively, of unrealized net gains (excluding taxes) are included in accumulated other comprehensive loss for available-for-sale securities. |
(7) | Debt |
June 30, 2009 | December 31, 2008 | |||||||||||||||||||||||
Weighted | Weighted | |||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||
Stated | Stated | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Rate(1) | Long-term | Current | Rate(1) | Long-term | Current | |||||||||||||||||||
(in millions, except interest rates) | ||||||||||||||||||||||||
Facilities, Bonds and Notes: |
||||||||||||||||||||||||
RRI Energy: |
||||||||||||||||||||||||
Senior secured revolver due 2012 |
2.35 | % | $ | | $ | | 3.18 | % | $ | | $ | | ||||||||||||
Senior secured notes due 2014(2)(3) |
6.75 | 453 | | 6.75 | 498 | | ||||||||||||||||||
Senior unsecured notes due 2014 |
7.625 | 575 | | 7.625 | 575 | | ||||||||||||||||||
Senior unsecured notes due 2017 |
7.875 | 725 | | 7.875 | 725 | | ||||||||||||||||||
Subsidiary Obligations: |
||||||||||||||||||||||||
Orion Power Holdings, Inc. senior notes due 2010
(unsecured) |
12.00 | | 400 | 12.00 | 400 | | ||||||||||||||||||
PEDFA(4) fixed-rate bonds due 2036(5) |
6.75 | 408 | | 6.75 | 408 | | ||||||||||||||||||
Total facilities, bonds and notes |
2,161 | 400 | 2,606 | | ||||||||||||||||||||
Other: |
||||||||||||||||||||||||
Adjustment to fair value of debt(6) |
| 11 | 4 | 13 | ||||||||||||||||||||
Total other debt |
| 11 | 4 | 13 | ||||||||||||||||||||
Total debt(7) |
$ | 2,161 | $ | 411 | $ | 2,610 | $ | 13 | ||||||||||||||||
(1) | The weighted average stated interest rates are as of June 30, 2009 or December 31, 2008. | |
(2) | We repurchased $45 million during the three months ended June 30, 2009. See note 15. | |
(3) | Excludes $22 million and $169 million classified as discontinued operations as of June 30, 2009 and December 31, 2008, respectively. See note 15. | |
(4) | PEDFA is the Pennsylvania Economic Development Financing Authority. These bonds were issued for our Seward plant. | |
(5) | Excludes $14 million and $92 million classified as discontinued operations as of June 30, 2009 and December 31, 2008, respectively. See note 15. | |
(6) | Debt acquired in the Orion Power acquisition was adjusted to fair value as of the acquisition date. Included in interest expense is amortization of $3 million and $3 million for valuation adjustments for debt during the three months ended June 30, 2009 and 2008, respectively, and $6 million and $6 million during the six months ended June 30, 2009 and 2008, respectively. | |
(7) | Excludes $36 million and $261 million classified as discontinued operations as of June 30, 2009 and December 31, 2008, respectively. See note 15. |
12
Total Committed | Drawn | Letters | Unused | |||||||||||||
Credit | Amount | of Credit | Amount | |||||||||||||
(in millions) | ||||||||||||||||
RRI Energy senior secured revolver due 2012 |
$ | 500 | $ | | $ | 39 | $ | 461 | ||||||||
RRI Energy letter of credit facility due 2014 |
250 | | 250 | | ||||||||||||
Total |
$ | 750 | $ | | $ | 289 | $ | 461 | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Income (loss)
from continuing
operations (basic
and diluted) |
$ | (103 | ) | $ | 82 | $ | (209 | ) | $ | 95 | ||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(shares in thousands) | ||||||||||||||||
Diluted Weighted Average
Shares Calculation: |
||||||||||||||||
Weighted average shares
outstanding (basic) |
350,665 | 346,616 | 350,577 | 346,017 | ||||||||||||
Plus: Incremental shares from
assumed conversions: |
||||||||||||||||
Stock options |
| (1) | 4,317 | | (1) | 4,285 | ||||||||||
Restricted stock |
| (1) | 575 | | (1) | 559 | ||||||||||
Employee stock purchase plan |
| (1) | 47 | | (1) | 23 | ||||||||||
5.00% convertible senior
subordinated notes |
N/A | (2) | 18 | N/A | (2) | 115 | ||||||||||
Warrants |
N/A | (3) | 2,481 | N/A | (3) | 3,079 | ||||||||||
Weighted average shares
outstanding assuming
conversion (diluted) |
350,665 | 354,054 | 350,577 | 354,078 | ||||||||||||
(1) | As we incurred a loss from continuing operations for this period, diluted loss per share is calculated the same as basic loss per share. | |
(2) | In December 2006, we converted 99.2% of our convertible senior subordinated notes to common stock. During 2008, the remaining outstanding notes were converted to common stock. | |
(3) | All unexercised warrants expired in August 2008. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(shares in thousands, dollars in millions) | ||||||||||||||||
Shares
excluded from the
calculation of
diluted earnings
(loss) per share |
438 | (1) | N/A | (2) | 442 | (1) | N/A | (2) | ||||||||
Shares excluded
from the
calculation of
diluted earnings
(loss) per share
because the
exercise price
exceeded the
average market
price |
6,217 | (3) | 1,833 | (3) | 7,086 | (3) | 1,849 | (3) |
(1) | Potential shares excluded consist of stock options, restricted stock and shares related to the employee stock purchase plan. | |
(2) | Not applicable as we included the item in the calculation of diluted earnings/loss per share. | |
(3) | Includes stock options. |
13
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Federal statutory rate |
(35 | )% | 35 | % | (35 | )% | 35 | % | ||||||||
Additions (reductions) resulting from: |
||||||||||||||||
Federal valuation allowance |
(8 | ) | | | | |||||||||||
State income taxes, net of federal
income taxes |
(1 | )(1) | 5 | (2) | (1 | )(3) | 6 | (4) | ||||||||
Other |
| 3 | | 2 | ||||||||||||
Effective rate |
(44 | )% | 43 | % | (36 | )% | 43 | % | ||||||||
(1) | Of this percentage, $9 million relates to additional valuation allowance. | |
(2) | Of this percentage, $3 million relates to additional valuation allowance. | |
(3) | Of this percentage, $15 million relates to additional valuation allowance. | |
(4) | Of this percentage, $4 million relates to additional valuation allowance. |
Capital, Foreign | ||||||||||||
Federal | State | and Other, Net | ||||||||||
(in millions) | ||||||||||||
As of December 31, 2008 |
$ | 49 | $ | 103 | $ | 14 | ||||||
Changes in valuation allowance |
16 | 6 | | |||||||||
As of March 31, 2009 |
65 | 109 | 14 | |||||||||
Changes in valuation allowance |
(16 | ) | 9 | 1 | ||||||||
As of June 30, 2009 |
$ | 49 | $ | 118 | $ | 15 | ||||||
14
| $177 million payment to CenterPoint during 2004 related to our residential customers; |
| $351 million charge during 2005 to settle certain civil litigation and claims relating to the Western states energy crisis; and |
| the timing of tax deductions as a result of negotiations with respect to California-related revenue, depreciation, emission allowances and certain employee benefits. |
15
| In January 2009, we reached an agreement to settle the five California-related cases pending in federal court in Nevada. The settlement is subject to approval of the court. The charges anticipated to be incurred in connection with the settlement were expensed in the third quarter of 2008. This settlement will resolve all of the remaining California gas cases. |
| In January 2009, the Circuit Court of Jackson County, Missouri dismissed the case filed by the Missouri Public Service Commission for lack of standing to bring the action. An appeal was filed in February 2009. |
16
17
18
Three Months Ended June 30, 2009 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments (1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues |
$ | | $ | 385 | $ | 186 | $ | (181 | ) | $ | 390 | |||||||||
Cost of sales |
| 318 | 142 | (179 | ) | 281 | ||||||||||||||
Operation and maintenance |
| 47 | 112 | (2 | ) | 157 | ||||||||||||||
General and administrative |
| 1 | 27 | | 28 | |||||||||||||||
Gains on sales of assets and emission and
exchange allowances, net |
| (2 | ) | | | (2 | ) | |||||||||||||
Depreciation and amortization |
| 32 | 35 | | 67 | |||||||||||||||
Total |
| 396 | 316 | (181 | ) | 531 | ||||||||||||||
Operating loss |
| (11 | ) | (130 | ) | | (141 | ) | ||||||||||||
Loss of equity investment, net |
| (1 | ) | | | (1 | ) | |||||||||||||
Loss of equity investments of
consolidated subsidiaries |
(70 | ) | (37 | ) | | 107 | | |||||||||||||
Debt extinguishments gain |
1 | | | | 1 | |||||||||||||||
Interest expense |
(36 | ) | (7 | ) | (2 | ) | | (45 | ) | |||||||||||
Interest income |
1 | | | | 1 | |||||||||||||||
Interest income (expense) affiliated
companies, net |
18 | (3 | ) | (15 | ) | | | |||||||||||||
Total other expense |
(86 | ) | (48 | ) | (17 | ) | 107 | (44 | ) | |||||||||||
Loss from continuing operations before
income taxes |
(86 | ) | (59 | ) | (147 | ) | 107 | (185 | ) | |||||||||||
Income tax benefit |
(18 | ) | (11 | ) | (54 | ) | 1 | (82 | ) | |||||||||||
Loss from continuing operations |
(68 | ) | (48 | ) | (93 | ) | 106 | (103 | ) | |||||||||||
Income (loss) from discontinued operations |
871 | (2 | ) | 37 | | 906 | ||||||||||||||
Net income (loss) |
$ | 803 | $ | (50 | ) | $ | (56 | ) | $ | 106 | $ | 803 | ||||||||
Three Months Ended June 30, 2008 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments (1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues |
$ | | $ | 990 | $ | 415 | $ | (391 | ) | $ | 1,014 | |||||||||
Cost of sales |
| 825 | 132 | (388 | ) | 569 | ||||||||||||||
Operation and maintenance |
| 51 | 116 | (2 | ) | 165 | ||||||||||||||
General and administrative |
| 6 | 28 | (1 | ) | 33 | ||||||||||||||
Gains on sales of assets and emission and
exchange allowances, net |
| (20 | ) | (2 | ) | | (22 | ) | ||||||||||||
Depreciation and amortization |
| 33 | 50 | | 83 | |||||||||||||||
Total |
| 895 | 324 | (391 | ) | 828 | ||||||||||||||
Operating income |
| 95 | 91 | | 186 | |||||||||||||||
Income of equity investment, net |
| 1 | | | 1 | |||||||||||||||
Income of equity investments of
consolidated subsidiaries |
353 | 35 | | (388 | ) | | ||||||||||||||
Interest expense |
(38 | ) | (7 | ) | (6 | ) | | (51 | ) | |||||||||||
Interest income |
4 | 4 | | | 8 | |||||||||||||||
Interest income (expense) affiliated
companies, net |
44 | (28 | ) | (16 | ) | | | |||||||||||||
Total other income (expense) |
363 | 5 | (22 | ) | (388 | ) | (42 | ) | ||||||||||||
Income from continuing operations before
income taxes |
363 | 100 | 69 | (388 | ) | 144 | ||||||||||||||
Income tax expense |
4 | 27 | 28 | 3 | 62 | |||||||||||||||
Income from continuing operations |
359 | 73 | 41 | (391 | ) | 82 | ||||||||||||||
Income (loss) from discontinued operations |
| (15 | ) | 291 | 1 | 277 | ||||||||||||||
Net income |
$ | 359 | $ | 58 | $ | 332 | $ | (390 | ) | $ | 359 | |||||||||
19
Six Months Ended June 30, 2009 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments (1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues |
$ | | $ | 836 | $ | 443 | $ | (423 | ) | $ | 856 | |||||||||
Cost of sales |
| 660 | 365 | (420 | ) | 605 | ||||||||||||||
Operation and maintenance |
| 109 | 208 | (3 | ) | 314 | ||||||||||||||
General and administrative |
| 4 | 53 | | 57 | |||||||||||||||
Gains on sales of assets and emission and
exchange allowances, net |
| (17 | ) | (3 | ) | | (20 | ) | ||||||||||||
Depreciation and amortization |
| 64 | 71 | | 135 | |||||||||||||||
Total |
| 820 | 694 | (423 | ) | 1,091 | ||||||||||||||
Operating income (loss) |
| 16 | (251 | ) | | (235 | ) | |||||||||||||
Loss of equity investments of
consolidated subsidiaries |
(177 | ) | (59 | ) | | 236 | | |||||||||||||
Debt extinguishments gain |
1 | | | | 1 | |||||||||||||||
Interest expense |
(74 | ) | (14 | ) | (4 | ) | | (92 | ) | |||||||||||
Interest income |
1 | | | | 1 | |||||||||||||||
Interest income (expense) affiliated
companies, net |
35 | (6 | ) | (29 | ) | | | |||||||||||||
Total other expense |
(214 | ) | (79 | ) | (33 | ) | 236 | (90 | ) | |||||||||||
Loss from continuing operations
before income taxes |
(214 | ) | (63 | ) | (284 | ) | 236 | (325 | ) | |||||||||||
Income tax benefit |
(11 | ) | (2 | ) | (106 | ) | 3 | (116 | ) | |||||||||||
Loss from continuing operations |
(203 | ) | (61 | ) | (178 | ) | 233 | (209 | ) | |||||||||||
Income (loss) from discontinued operations |
855 | 7 | (1 | ) | | 861 | ||||||||||||||
Net income (loss) |
$ | 652 | $ | (54 | ) | $ | (179 | ) | $ | 233 | $ | 652 | ||||||||
Six Months Ended June 30, 2008 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments (1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues |
$ | | $ | 1,851 | $ | 832 | $ | (789 | ) | $ | 1,894 | |||||||||
Cost of sales |
| 1,597 | 266 | (785 | ) | 1,078 | ||||||||||||||
Operation and maintenance |
| 112 | 211 | (2 | ) | 321 | ||||||||||||||
General and administrative |
| 13 | 51 | (2 | ) | 62 | ||||||||||||||
Western states litigation and similar
settlements |
34 | | | | 34 | |||||||||||||||
Gains on sales of assets and emission and
exchange allowances, net |
| (21 | ) | (2 | ) | | (23 | ) | ||||||||||||
Depreciation and amortization |
| 69 | 97 | | 166 | |||||||||||||||
Total |
34 | 1,770 | 623 | (789 | ) | 1,638 | ||||||||||||||
Operating income (loss) |
(34 | ) | 81 | 209 | | 256 | ||||||||||||||
Income of equity investment, net |
| 1 | | | 1 | |||||||||||||||
Income of equity investments of
consolidated subsidiaries |
739 | 79 | | (818 | ) | | ||||||||||||||
Debt extinguishment loss |
(1 | ) | | | | (1 | ) | |||||||||||||
Interest expense |
(76 | ) | (14 | ) | (12 | ) | | (102 | ) | |||||||||||
Interest income |
10 | 4 | | | 14 | |||||||||||||||
Interest income (expense) affiliated
companies, net |
98 | (65 | ) | (33 | ) | | | |||||||||||||
Total other income (expense) |
770 | 5 | (45 | ) | (818 | ) | (88 | ) | ||||||||||||
Income from continuing operations
before income taxes |
736 | 86 | 164 | (818 | ) | 168 | ||||||||||||||
Income tax expense (benefit) |
(1 | ) | 8 | 66 | | 73 | ||||||||||||||
Income from continuing operations |
737 | 78 | 98 | (818 | ) | 95 | ||||||||||||||
Income (loss) from discontinued operations |
(1 | ) | (16 | ) | 661 | (3 | ) | 641 | ||||||||||||
Net income |
$ | 736 | $ | 62 | $ | 759 | $ | (821 | ) | $ | 736 | |||||||||
(1) | These amounts relate to either (a) eliminations and adjustments recorded in the normal consolidation process or (b) reclassifications recorded due to differences in classifications at the subsidiary levels compared to the consolidated level. |
20
June 30, 2009 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments (1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
ASSETS |
||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 1,477 | $ | 1 | $ | 9 | $ | | $ | 1,487 | ||||||||||
Restricted cash |
| | 3 | | 3 | |||||||||||||||
Accounts and notes receivable, principally
customer |
8 | 110 | 17 | (8 | ) | 127 | ||||||||||||||
Accounts and notes receivable affiliated
companies |
983 | 310 | 148 | (1,441 | ) | | ||||||||||||||
Inventory |
| 141 | 163 | | 304 | |||||||||||||||
Derivative assets |
| 123 | 34 | | 157 | |||||||||||||||
Investment in and receivables from
Channelview, net |
1 | 24 | | | 25 | |||||||||||||||
Other current assets |
72 | 34 | 97 | (81 | ) | 122 | ||||||||||||||
Current assets of discontinued operations |
135 | 262 | 5 | (130 | ) | 272 | ||||||||||||||
Total current assets |
2,676 | 1,005 | 476 | (1,660 | ) | 2,497 | ||||||||||||||
Property, Plant and Equipment, net |
| 2,304 | 2,484 | | 4,788 | |||||||||||||||
Other Assets: |
||||||||||||||||||||
Other intangibles, net |
| 114 | 260 | | 374 | |||||||||||||||
Notes receivable affiliated companies |
2,383 | 604 | 1 | (2,988 | ) | | ||||||||||||||
Equity investments of consolidated
subsidiaries |
1,787 | 273 | | (2,060 | ) | | ||||||||||||||
Derivative assets |
| 61 | 23 | | 84 | |||||||||||||||
Other long-term assets |
42 | 800 | 348 | (687 | ) | 503 | ||||||||||||||
Long-term assets of discontinued operations |
| 25 | 1 | | 26 | |||||||||||||||
Total other assets |
4,212 | 1,877 | 633 | (5,735 | ) | 987 | ||||||||||||||
Total Assets |
$ | 6,888 | $ | 5,186 | $ | 3,593 | $ | (7,395 | ) | $ | 8,272 | |||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||
Current Liabilities: |
||||||||||||||||||||
Current portion of long-term debt and
short-term borrowings |
$ | | $ | | $ | 411 | $ | | $ | 411 | ||||||||||
Accounts payable, principally trade |
| 22 | 117 | (2 | ) | 137 | ||||||||||||||
Accounts and notes payable affiliated
companies |
| 1,117 | 324 | (1,441 | ) | | ||||||||||||||
Derivative liabilities |
| 62 | 173 | | 235 | |||||||||||||||
Other current liabilities |
79 | 244 | 35 | (123 | ) | 235 | ||||||||||||||
Current liabilities of discontinued operations |
48 | 258 | 11 | (130 | ) | 187 | ||||||||||||||
Total current liabilities |
127 | 1,703 | 1,071 | (1,696 | ) | 1,205 | ||||||||||||||
Other Liabilities: |
||||||||||||||||||||
Notes payable affiliated companies |
| 2,227 | 761 | (2,988 | ) | | ||||||||||||||
Derivative liabilities |
| 19 | 96 | | 115 | |||||||||||||||
Other long-term liabilities |
549 | 147 | 257 | (648 | ) | 305 | ||||||||||||||
Long-term liabilities of discontinued
operations |
3 | 23 | 4 | | 30 | |||||||||||||||
Total other liabilities |
552 | 2,416 | 1,118 | (3,636 | ) | 450 | ||||||||||||||
Long-term Debt |
1,753 | 408 | | | 2,161 | |||||||||||||||
Commitments and Contingencies |
||||||||||||||||||||
Temporary Equity Stock-based Compensation |
5 | | | | 5 | |||||||||||||||
Total Stockholders Equity |
4,451 | 659 | 1,404 | (2,063 | ) | 4,451 | ||||||||||||||
Total Liabilities and Equity |
$ | 6,888 | $ | 5,186 | $ | 3,593 | $ | (7,395 | ) | $ | 8,272 | |||||||||
21
December 31, 2008 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments (1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
ASSETS |
||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 970 | $ | | $ | 34 | $ | | $ | 1,004 | ||||||||||
Restricted cash |
| 1 | 2 | | 3 | |||||||||||||||
Accounts and notes receivable, principally
customer |
15 | 216 | 33 | (14 | ) | 250 | ||||||||||||||
Accounts and notes receivable affiliated
companies |
1,100 | 268 | 183 | (1,551 | ) | | ||||||||||||||
Inventory |
| 153 | 162 | | 315 | |||||||||||||||
Derivative assets |
| 127 | 34 | | 161 | |||||||||||||||
Investment in and receivables from
Channelview, net |
1 | 58 | | | 59 | |||||||||||||||
Other current assets |
5 | 56 | 126 | (30 | ) | 157 | ||||||||||||||
Current assets of discontinued operations |
272 | 211 | 2,661 | (638 | ) | 2,506 | ||||||||||||||
Total current assets |
2,363 | 1,090 | 3,235 | (2,233 | ) | 4,455 | ||||||||||||||
Property, Plant and Equipment, net |
| 2,369 | 2,451 | | 4,820 | |||||||||||||||
Other Assets: |
||||||||||||||||||||
Other intangibles, net |
| 150 | 264 | (34 | ) | 380 | ||||||||||||||
Notes receivable affiliated companies |
2,260 | 578 | 54 | (2,892 | ) | | ||||||||||||||
Equity investments of consolidated
subsidiaries |
1,731 | 332 | | (2,063 | ) | | ||||||||||||||
Derivative assets |
| 37 | 42 | | 79 | |||||||||||||||
Other long-term assets |
45 | 749 | 344 | (645 | ) | 493 | ||||||||||||||
Long-term assets of discontinued operations |
2 | 12 | 686 | (205 | ) | 495 | ||||||||||||||
Total other assets |
4,038 | 1,858 | 1,390 | (5,839 | ) | 1,447 | ||||||||||||||
Total Assets |
$ | 6,401 | $ | 5,317 | $ | 7,076 | $ | (8,072 | ) | $ | 10,722 | |||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||
Current Liabilities: |
||||||||||||||||||||
Current portion of long-term debt and
short-term borrowings |
$ | | $ | | $ | 13 | $ | | $ | 13 | ||||||||||
Accounts payable, principally trade |
| 31 | 132 | (6 | ) | 157 | ||||||||||||||
Accounts and notes payable affiliated
companies |
| 1,307 | 244 | (1,551 | ) | | ||||||||||||||
Derivative liabilities |
| 29 | 173 | | 202 | |||||||||||||||
Other current liabilities |
10 | 306 | 47 | (72 | ) | 291 | ||||||||||||||
Current liabilities of discontinued operations |
61 | 147 | 2,805 | (637 | ) | 2,376 | ||||||||||||||
Total current liabilities |
71 | 1,820 | 3,414 | (2,266 | ) | 3,039 | ||||||||||||||
Other Liabilities: |
||||||||||||||||||||
Notes payable affiliated companies |
| 2,132 | 760 | (2,892 | ) | | ||||||||||||||
Derivative liabilities |
| 4 | 137 | | 141 | |||||||||||||||
Other long-term liabilities |
547 | 119 | 251 | (645 | ) | 272 | ||||||||||||||
Long-term liabilities of discontinued
operations |
198 | 103 | 778 | (206 | ) | 873 | ||||||||||||||
Total other liabilities |
745 | 2,358 | 1,926 | (3,743 | ) | 1,286 | ||||||||||||||
Long-term Debt |
1,798 | 408 | 404 | | 2,610 | |||||||||||||||
Commitments and Contingencies |
||||||||||||||||||||
Temporary Equity Stock-based
Compensation |
9 | | | | 9 | |||||||||||||||
Total Stockholders Equity |
3,778 | 731 | 1,332 | (2,063 | ) | 3,778 | ||||||||||||||
Total Liabilities and Equity |
$ | 6,401 | $ | 5,317 | $ | 7,076 | $ | (8,072 | ) | $ | 10,722 | |||||||||
(1) | These amounts relate to either (a) eliminations and adjustments recorded in the normal consolidation process or (b) reclassifications recorded due to differences in classifications at the subsidiary levels compared to the consolidated level. |
22
Six Months Ended June 30, 2009 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Cash Flows from Operating Activities: |
||||||||||||||||||||
Net cash provided by (used in) continuing
operations from operating activities |
$ | (75 | ) | $ | 88 | $ | (109 | ) | $ | | $ | (96 | ) | |||||||
Net cash provided by discontinued
operations from operating activities |
135 | 22 | 351 | | 508 | |||||||||||||||
Net cash provided by operating activities |
60 | 110 | 242 | | 412 | |||||||||||||||
Cash Flows from Investing Activities: |
||||||||||||||||||||
Capital expenditures |
| (11 | ) | (104 | ) | | (115 | ) | ||||||||||||
Investments in, advances to and from and
distributions from subsidiaries,
net(2) |
(64 | ) | | | 64 | | ||||||||||||||
Proceeds from sales of assets, net |
| 36 | | | 36 | |||||||||||||||
Proceeds from sales (purchases) of
emission allowances |
| 46 | (32 | ) | | 14 | ||||||||||||||
Other, net |
| 1 | | | 1 | |||||||||||||||
Net cash provided by (used in)
continuing operations from investing
activities |
(64 | ) | 72 | (136 | ) | 64 | (64 | ) | ||||||||||||
Net cash provided by (used in)
discontinued operations from
investing activities |
701 | 4 | (418 | ) | 12 | 299 | ||||||||||||||
Net cash provided by (used in)
investing activities |
637 | 76 | (554 | ) | 76 | 235 | ||||||||||||||
Cash Flows from Financing Activities: |
||||||||||||||||||||
Payments of long-term debt |
(45 | ) | | | | (45 | ) | |||||||||||||
Changes in notes with affiliated companies,
net(3) |
| (122 | ) | 186 | (64 | ) | | |||||||||||||
Proceeds from issuances of stock |
2 | | | | 2 | |||||||||||||||
Net cash provided by (used in)
continuing operations from financing
activities |
(43 | ) | (122 | ) | 186 | (64 | ) | (43 | ) | |||||||||||
Net cash used in discontinued
operations from financing activities |
(147 | ) | (63 | ) | (3 | ) | (12 | ) | (225 | ) | ||||||||||
Net cash provided by (used in)
financing activities |
(190 | ) | (185 | ) | 183 | (76 | ) | (268 | ) | |||||||||||
Net Change in Cash and Cash Equivalents,
Total Operations |
507 | 1 | (129 | ) | | 379 | ||||||||||||||
Less: Net Change in Cash and Cash
Equivalents, Discontinued Operations |
| | (104 | ) | | (104 | ) | |||||||||||||
Cash and Cash Equivalents at Beginning of
Period, Continuing Operations |
970 | | 34 | | 1,004 | |||||||||||||||
Cash and Cash Equivalents at End of Period,
Continuing Operations |
$ | 1,477 | $ | 1 | $ | 9 | $ | | $ | 1,487 | ||||||||||
23
Six Months Ended June 30, 2008 | ||||||||||||||||||||
RRI Energy | Guarantors | Non-Guarantors | Adjustments(1) | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Cash Flows from Operating Activities: |
||||||||||||||||||||
Net cash provided by (used in) continuing
operations from operating activities |
$ | 43 | $ | (172 | ) | $ | 217 | $ | | $ | 88 | |||||||||
Net cash provided by (used in)
discontinued operations from operating
activities |
(4 | ) | 39 | 68 | | 103 | ||||||||||||||
Net cash provided by (used in) operating
activities |
39 | (133 | ) | 285 | | 191 | ||||||||||||||
Cash Flows from Investing Activities: |
||||||||||||||||||||
Capital expenditures |
| (13 | ) | (90 | ) | | (103 | ) | ||||||||||||
Investments in, advances to and from and
distributions from subsidiaries,
net(2) |
(40 | ) | 8 | (8 | ) | 40 | | |||||||||||||
Proceeds from sales (purchases) of
emission allowances |
| 59 | (48 | ) | | 11 | ||||||||||||||
Restricted cash |
| | (4 | ) | | (4 | ) | |||||||||||||
Other, net |
| 1 | | | 1 | |||||||||||||||
Net cash provided by (used in)
continuing operations from investing
activities |
(40 | ) | 55 | (150 | ) | 40 | (95 | ) | ||||||||||||
Net cash provided by (used in)
discontinued operations from
investing activities |
70 | | (89 | ) | 5 | (14 | ) | |||||||||||||
Net cash provided by (used in)
investing activities |
30 | 55 | (239 | ) | 45 | (109 | ) | |||||||||||||
Cash Flows from Financing Activities: |
||||||||||||||||||||
Payments of long-term debt |
(45 | ) | | | | (45 | ) | |||||||||||||
Changes in notes with affiliated companies,
net(3) |
| 94 | (54 | ) | (40 | ) | | |||||||||||||
Proceeds from issuances of stock |
6 | | | | 6 | |||||||||||||||
Net cash provided by (used in)
continuing operations from financing
activities |
(39 | ) | 94 | (54 | ) | (40 | ) | (39 | ) | |||||||||||
Net cash provided by (used in)
discontinued operations from
financing activities |
| (17 | ) | 22 | (5 | ) | | |||||||||||||
Net cash provided by (used in)
financing activities |
(39 | ) | 77 | (32 | ) | (45 | ) | (39 | ) | |||||||||||
Net Change in Cash and Cash Equivalents,
Total Operations |
30 | (1 | ) | 14 | | 43 | ||||||||||||||
Less: Net Change in Cash and Cash
Equivalents, Discontinued Operations |
| | | | | |||||||||||||||
Cash and Cash Equivalents at Beginning of
Period, Continuing Operations |
490 | 1 | 33 | | 524 | |||||||||||||||
Cash and Cash Equivalents at End of Period,
Continuing Operations |
$ | 520 | $ | | $ | 47 | $ | | $ | 567 | ||||||||||
(1) | These amounts relate to either (a) eliminations and adjustments recorded in the normal consolidation process or (b) reclassifications recorded due to differences in classifications at the subsidiary levels compared to the consolidated level. | |
(2) | Net investments in, advances to and from and distributions from subsidiaries are classified as investing activities. | |
(3) | Net changes in notes with affiliated companies are classified as financing activities for subsidiaries of RRI Energy and as investing activities for RRI Energy. |
24
Wholesale | Other | Discontinued | ||||||||||||||||||
Energy | Operations | Operations | Eliminations | Consolidated | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Three months ended June 30, 2009: |
||||||||||||||||||||
Revenues from external customers |
$ | 389 | (1) | $ | 1 | $ | | $ | | $ | 390 | |||||||||
Contribution margin, including
wholesale hedges and unrealized
gains/losses on energy
derivatives(2) |
(48 | )(3) (4) | | | | (48 | )(3) | |||||||||||||
Three months ended June 30, 2008: |
||||||||||||||||||||
Revenues from external customers |
$ | 1,014 | (5) | $ | | $ | | $ | | $ | 1,014 | |||||||||
Intersegment revenues |
| 1 | | (1 | ) | | ||||||||||||||
Contribution margin, including
wholesale hedges and unrealized
gains/losses on energy
derivatives(2) |
279 | (6) (7) | 1 | | (1 | ) | 279 | (6) | ||||||||||||
Six months ended June 30, 2009 (except as denoted): |
||||||||||||||||||||
Revenues from external customers |
$ | 854 | (8) | $ | 2 | $ | | $ | | $ | 856 | |||||||||
Intersegment revenues |
| 1 | | (1 | ) | | ||||||||||||||
Contribution margin, including
wholesale hedges and unrealized
gains/losses on energy
derivatives(2) |
(63 | )(9) (10) | 2 | | (1 | ) | (62 | )(9) | ||||||||||||
Total assets as of June 30, 2009 |
7,152 | 862 | 298 | (40 | ) | 8,272 | ||||||||||||||
Six months ended June 30, 2008 (except as denoted): |
||||||||||||||||||||
Revenues from external customers |
$ | 1,893 | (11) | $ | 1 | $ | | $ | | $ | 1,894 | |||||||||
Intersegment revenues |
| 2 | | (2 | ) | | ||||||||||||||
Contribution margin, including
wholesale hedges and unrealized
gains/losses on energy
derivatives(2) |
496 | (12) (13) | 2 | | (2 | ) | 496 | (12) | ||||||||||||
Total assets as of December 31,
2008 |
7,458 | 397 | 3,001 | (134 | ) | 10,722 |
(1) | Includes $44 million in revenues from a single counterparty, which represented 11% of our consolidated and wholesale energy segments revenues. As of June 30, 2009, $4 million was outstanding from this counterparty. | |
(2) | Revenues less (a) cost of sales, (b) operation and maintenance and (c) bad debt expense. | |
(3) | Includes $7 million in wholesale energy and consolidated results relating to unrealized gains on energy derivatives, which is a non-cash item. | |
(4) | Includes $(70) million relating to wholesale hedges. | |
(5) | Includes $146 million from affiliates. | |
(6) | Includes $68 million in wholesale energy and consolidated results relating to unrealized gains on energy derivatives, which is a non-cash item. | |
(7) | Includes $44 million relating to wholesale hedges. | |
(8) | Includes $99 million in revenues from a single counterparty, which represented 12% of our consolidated and wholesale energy segments revenues. | |
(9) | Includes $(37) million in wholesale energy and consolidated results relating to unrealized losses on energy derivatives, which is a non-cash item. | |
(10) | Includes $(74) million relating to wholesale hedges. | |
(11) | Includes $253 million from affiliates. | |
(12) | Includes $98 million in wholesale energy and consolidated results relating to unrealized gains on energy derivatives, which is a non-cash item. | |
(13) | Includes $79 million relating to wholesale hedges. |
25
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Contribution margin, including wholesale hedges
and unrealized gains/losses on energy derivatives |
$ | (48 | ) | $ | 279 | $ | (62 | ) | $ | 496 | ||||||
Operation and maintenance |
| (1 | ) | 1 | 2 | |||||||||||
General and administrative |
28 | 33 | 57 | 61 | ||||||||||||
Western states litigation and similar settlements |
| | | 34 | ||||||||||||
Gains on sales of assets and emission allowances, net |
(2 | ) | (22 | ) | (20 | ) | (23 | ) | ||||||||
Depreciation |
60 | 63 | 119 | 125 | ||||||||||||
Amortization |
7 | 20 | 16 | 41 | ||||||||||||
Operating income (loss) |
(141 | ) | 186 | (235 | ) | 256 | ||||||||||
Income (loss) of equity investment, net |
(1 | ) | 1 | | 1 | |||||||||||
Debt extinguishments gains (losses) |
1 | | 1 | (1 | ) | |||||||||||
Interest expense |
(45 | ) | (51 | ) | (92 | ) | (102 | ) | ||||||||
Interest income |
1 | 8 | 1 | 14 | ||||||||||||
Income (loss) from continuing operations before
income taxes |
(185 | ) | 144 | (325 | ) | 168 | ||||||||||
Income tax expense (benefit) |
(82 | ) | 62 | (116 | ) | 73 | ||||||||||
Income (loss) from continuing operations |
(103 | ) | 82 | (209 | ) | 95 | ||||||||||
Income from discontinued operations |
906 | 277 | 861 | 641 | ||||||||||||
Net income |
$ | 803 | $ | 359 | $ | 652 | $ | 736 | ||||||||
June 30, 2009 | ||||
(in millions) | ||||
Cash |
$ | 7 | ||
Deferred tax assets relating to federal and state net operating loss carryforwards |
18 |
26
27
Retail Energy | New York | |||||||||||||||
Segment | Plants | European Energy | Total | |||||||||||||
(in millions) | ||||||||||||||||
Three Months Ended June 30, 2009 |
||||||||||||||||
Revenues |
$ | 499 | (1) | $ | | $ | | $ | 499 | |||||||
Income before income tax
expense/benefit |
1,314 | (2)(3) | | 9 | 1,323 | |||||||||||
Three Months Ended June 30, 2008 |
||||||||||||||||
Revenues |
$ | 2,410 | (4) | $ | | $ | | $ | 2,410 | |||||||
Income (loss) before income tax
expense/benefit |
438 | (5) | (3 | ) | 1 | 436 | ||||||||||
Six Months Ended June 30, 2009 |
||||||||||||||||
Revenues |
$ | 2,014 | (6) | $ | 2 | $ | | $ | 2,016 | |||||||
Income before income tax
expense/benefit |
1,257 | (3)(7) | 3 | 9 | 1,269 | |||||||||||
Six Months Ended June 30, 2008 |
||||||||||||||||
Revenues |
$ | 4,346 | (8) | $ | | $ | | $ | 4,346 | |||||||
Income (loss) before income tax
expense/benefit |
1,014 | (9) | (3 | ) | 7 | 1,018 |
(1) | Includes $13 million related to our Illinois C&I activity. | |
(2) | Includes $35 million of unrealized gains on energy derivatives. | |
(3) | Includes $1.2 billion gain on sale (of which $1.1 billion relates to derivatives). | |
(4) | Includes $14 million related to our Illinois C&I activity. | |
(5) | Includes $502 million of unrealized gains on energy derivatives. | |
(6) | Includes $38 million related to our Illinois C&I activity. | |
(7) | Includes $189 million of unrealized losses on energy derivatives. | |
(8) | Includes $20 million related to our Illinois C&I activity. | |
(9) | Includes $1.0 billion of unrealized gains on energy derivatives. |
28
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 2 | $ | 105 | ||||
Accounts receivable, principally customer, net |
31 | 870 | ||||||
Derivative assets |
86 | 1,010 | ||||||
Margin deposits |
152 | 295 | ||||||
Accumulated deferred income taxes |
| 217 | ||||||
Other current assets |
1 | 9 | ||||||
Total current assets |
272 | 2,506 | ||||||
Property, Plant and Equipment, net |
| 57 | ||||||
Other Assets: |
||||||||
Goodwill and other intangibles, net |
| 59 | ||||||
Derivative assets |
14 | 324 | ||||||
Accumulated deferred income taxes |
11 | 48 | ||||||
Other |
1 | 7 | ||||||
Total long-term assets |
26 | 495 | ||||||
Total Assets |
$ | 298 | $ | 3,001 | ||||
Current Liabilities: |
||||||||
Current portion of long-term debt |
$ | 36 | $ | | ||||
Accounts payable, principally trade |
1 | 480 | ||||||
Derivative liabilities |
94 | 1,637 | ||||||
Margin deposits |
42 | | ||||||
Other current liabilities |
14 | 259 | ||||||
Total current liabilities |
187 | 2,376 | ||||||
Other Liabilities: |
||||||||
Derivative liabilities |
21 | 612 | ||||||
Other liabilities |
9 | | ||||||
Total other liabilities |
30 | 612 | ||||||
Long-term Debt |
| 261 | ||||||
Total long-term liabilities |
30 | 873 | ||||||
Total Liabilities |
$ | 217 | $ | 3,249 | ||||
29
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
| Maintain a capital structure that positions us to manage through the cycles |
| Intensely focus on operational excellence |
| Employ a flexible operating model through the cycle |
| Utilize a disciplined capital investment approach |
| Create value from industry consolidation |
| Selling the Texas retail business |
| Implementing a modest hedging program to achieve a high probability of achieving free cash flow breakeven or better even if market conditions deteriorate further |
| Intensely focusing on operating efficiency and effectiveness |
| Implementing flexible plant-specific operating models |
| Realigning corporate support costs |
| Supply and demand fundamentals |
| Generation asset fuel type and efficiency |
| Absolute and relative cost of fuels used in power generation |
| Operations excellence effectiveness |
| Maintenance practices |
| Planned and unplanned outages |
30
| Supply and demand fundamentals |
| Commodity prices and spreads |
| Generation asset fuel type and efficiency |
| Capacity prices and payments |
| Power purchase agreements sold to others |
| Ancillary services |
| Equipment performance |
| Operating efficiency |
| Maintenance practices |
| Generation asset fuel type |
| Planned and unplanned outages |
| Hedging strategy |
| Volumes |
| Commodity prices |
| Effectiveness |
| Long-term value This part of our fleet is well positioned to generate revenue for the forseeable future, and we would expect that little environmental investments will be needed in future years. We plan to invest and manage these plants, representing approximately 2,500 MW, for current and long-term profitability for both capacity and energy revenues. |
| Long-term capacity resource These plants, representing approximately 4,400 MW, are also well positioned to generate revenue for the forseeable future, and we expect little future environmental investment. We plan to invest in this part of our fleet for long-term profitability from capacity and/or power purchase and sale agreements. |
| Near-term profit/controls These plants, representing approximately 5,400 MW, are well positioned to generate revenue in the current environment but do not have S02, NOx or mercury emission controls. We expect to maintain near-term profitability and preserve the option for supply/demand recovery and/or improved gas-coal spreads in this group of plants. We may install emission controls in the future depending on environmental regulations and market conditions. See “—Recent Events.” |
| Restore profit This part of our fleet, representing approximately 1,600 MW, faces lower levels of profitability in the current environment. We will minimize spending, improve profitability and preserve our options for supply/demand recovery and/or improved gas-coal spreads in these plants. |
31
| eliminated the need for approximately $2.0 billion of credit support and removed capital requirements associated with contingent collateral requirements, which lowered our overall risk profile; and |
| enhanced our consolidated balance sheet and improved our liquidity position. |
32
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Wholesale energy contribution margin, including
wholesale hedges and unrealized gains/losses on
energy derivatives |
$ | (48 | ) | $ | 279 | $ | (327 | ) | ||||
Operation and maintenance(1) |
| 1 | (1 | ) | ||||||||
General and administrative |
(28 | ) | (33 | ) | 5 | |||||||
Gains on sales of assets and emission allowances, net |
2 | 22 | (20 | ) | ||||||||
Depreciation and amortization |
(67 | ) | (83 | ) | 16 | |||||||
Income (loss) of equity investment, net |
(1 | ) | 1 | (2 | ) | |||||||
Debt extinguishments gains |
1 | | 1 | |||||||||
Interest expense |
(45 | ) | (51 | ) | 6 | |||||||
Interest income |
1 | 8 | (7 | ) | ||||||||
Income tax (expense) benefit |
82 | (62 | ) | 144 | ||||||||
Income (loss) from continuing operations |
(103 | ) | 82 | (185 | ) | |||||||
Income from discontinued operations |
906 | 277 | 629 | |||||||||
Net income |
$ | 803 | $ | 359 | $ | 444 | ||||||
(1) | Relates primarily to general costs, which historically were allocated to our discontinued retail energy segment. |
33
34
Three Months Ended June 30, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
GWh | % Economic(1) | GWh | % Economic(1) | |||||||||||||
Economic Generation(2)(3): |
||||||||||||||||
PJM Coal |
4,890.4 | 68 | % | 5,316.6 | 73 | % | ||||||||||
MISO Coal |
1,263.5 | 46 | % | 1,359.3 | 49 | % | ||||||||||
PJM/MISO Gas |
509.0 | 6 | % | 352.0 | 5 | % | ||||||||||
West |
139.4 | 2 | % | 308.6 | 4 | % | ||||||||||
Other |
63.1 | 3 | % | 7.0 | 1 | % | ||||||||||
Total |
6,865.4 | 26 | % | 7,343.5 | 29 | % | ||||||||||
Commercial Capacity Factor(4): |
||||||||||||||||
PJM Coal |
73.5 | % | 83.7 | % | ||||||||||||
MISO Coal |
85.9 | % | 90.8 | % | ||||||||||||
PJM/MISO Gas |
93.9 | % | 91.6 | % | ||||||||||||
West |
69.6 | % | 94.1 | % | ||||||||||||
Other |
98.7 | % | 81.4 | % | ||||||||||||
Total |
77.5 | % | 85.9 | % | ||||||||||||
Generation (3): |
||||||||||||||||
PJM Coal |
3,596.5 | 4,452.3 | ||||||||||||||
MISO Coal |
1,085.8 | 1,233.9 | ||||||||||||||
PJM/MISO Gas |
477.8 | 322.6 | ||||||||||||||
West |
97.0 | 290.4 | ||||||||||||||
Other |
62.3 | 5.7 | ||||||||||||||
Total |
5,319.4 | 6,304.9 | ||||||||||||||
Open Energy Unit Margin
($/MWh)(5): |
||||||||||||||||
PJM Coal |
$ | 8.90 | $ | 40.88 | ||||||||||||
MISO Coal |
10.13 | 23.50 | ||||||||||||||
PJM/MISO Gas |
10.46 | 46.50 | ||||||||||||||
West |
82.47 | NM(6) | ||||||||||||||
Total weighted average |
$ | 10.53 | $ | 35.37 | ||||||||||||
(1) | Represents economic generation (hours) divided by maximum generation hours (maximum plant capacity multiplied by 8,760 hours). | |
(2) | Estimated generation at 100% plant availability based on an hourly analysis of when it is economical to generate based on the price of power, fuel, emission allowances and variable operating costs. | |
(3) | Excludes generation related to power purchase agreements, including tolling agreements. | |
(4) | Generation divided by economic generation. | |
(5) | Represents open energy gross margin divided by generation. | |
(6) | NM is not meaningful. |
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Wholesale energy third-party revenues |
$ | 411 | $ | 862 | $ | (451 | )(1) | |||||
Revenues affiliates |
| 146 | (2) | (146 | ) | |||||||
Unrealized gains (losses) on energy derivatives |
(22 | ) | 6 | (28 | )(3) | |||||||
Total wholesale energy revenues |
$ | 389 | $ | 1,014 | $ | (625 | ) | |||||
(1) | Decrease primarily due to (a) lower power and natural gas sales prices and (b) lower power sales volumes. | |
(2) | We deconsolidated Channelview on August 20, 2007. These revenues represent sales of fuel to Channelview prior to the assets being sold. | |
(3) | See footnote 10 under Wholesale Energy Margins. |
35
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Wholesale energy third-party costs |
$ | 310 | $ | 597 | $ | (287 | )(1) | |||||
Cost of sales affiliates |
| 34 | (2) | (34 | ) | |||||||
Unrealized gains on energy derivatives |
(29 | ) | (62 | ) | 33 | (3) | ||||||
Total wholesale energy cost of sales |
$ | 281 | $ | 569 | $ | (288 | ) | |||||
(1) | Decrease primarily due to (a) lower prices paid for natural gas and (b) lower natural gas volumes purchased. | |
(2) | We deconsolidated Channelview on August 20, 2007. These cost of sales represent purchases of power from Channelview prior to the assets being sold. | |
(3) | See footnote 10 under Wholesale Energy Margins. |
36
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Open energy gross margin(1): |
||||||||||||
PJM Coal |
$ | 32 | $ | 182 | $ | (150 | )(2) | |||||
MISO Coal |
11 | 29 | (18 | )(2) | ||||||||
PJM/MISO Gas |
5 | 15 | (10 | ) | ||||||||
West |
8 | (3 | ) | 11 | (3) | |||||||
Other |
| | | |||||||||
Total |
56 | 223 | (167 | ) | ||||||||
Other margin(4): |
||||||||||||
PJM Coal |
38 | 26 | 12 | (5) | ||||||||
MISO Coal |
3 | 3 | | |||||||||
PJM/MISO Gas |
44 | 33 | 11 | (6) | ||||||||
West |
17 | 34 | (17 | )(7) | ||||||||
Other |
13 | 14 | (1 | ) | ||||||||
Total |
115 | 110 | 5 | |||||||||
Open wholesale gross margin |
171 | 333 | (162 | ) | ||||||||
Operation and maintenance, excluding severance |
(153 | ) | (166 | ) | 13 | (8) | ||||||
Other |
| | | |||||||||
Open wholesale contribution margin |
18 | 167 | (149 | ) | ||||||||
Wholesale hedges |
(70 | ) | 44 | (114 | )(9) | |||||||
Unrealized gains on energy derivatives |
7 | 68 | (61 | )(10) | ||||||||
Operation and maintenance severance |
(3 | ) | | (3 | ) | |||||||
Total wholesale energy contribution
margin, including wholesale hedges and
unrealized gains/losses on energy
derivatives(11) |
$ | (48 | ) | $ | 279 | $ | (327 | ) | ||||
(1) | Open energy gross margin is calculated using the power sales prices received by the plants less delivered spot fuel prices. This figure excludes the effects of other margin, our wholesale hedges and unrealized gains/losses on energy derivatives. | |
(2) | Decrease primarily due to lower unit margins (lower power prices partially offset by lower fuel costs). | |
(3) | Increase primarily due to higher unit margins (lower fuel expense and higher power prices). This increase was partially offset by a decrease in economic generation. | |
(4) | Other margin represents power purchase agreements, capacity payments, ancillary services revenues and selective commercial hedge strategies. | |
(5) | Increase primarily due to higher RPM capacity payments. This increase was partially offset by lower ancillary payments. RPM is the model utilized by the PJM Interconnection, LLC to meet load serving entities forecasted capacity obligations via a forward-looking commitment of capacity resources. | |
(6) | Increase primarily due to higher RPM capacity payments. | |
(7) | Decrease primarily due to reduced selective commercial hedge activities. | |
(8) | Decrease primarily due to (a) $5 million decrease in planned outages and maintenance spending, (b) $5 million decrease in services and support, (c) $4 million decrease from reduced operations activity and (d) $4 million decrease due to the sale of Bighorn in October 2008. | |
(9) | Decrease primarily due to (a) $100 million decline on fuel hedges and (b) $35 million loss on market adjustments to inventory. These decreases were partially offset by (a) $28 million gain on a hedge of generation. | |
(10) | Decrease primarily due to $100 million in losses from changes in prices on our energy derivatives marked to market partially offset by $39 million in gains due to reversal of previously recognized unrealized losses on energy derivatives which settled during the period. | |
(11) | Wholesale energy segment profit and loss measure. |
37
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Salaries and benefits |
$ | 15 | $ | 19 | $ | (4 | ) | |||||
Professional fees, contract
services and information
systems maintenance |
6 | 8 | (2 | ) | ||||||||
Rent and utilities |
3 | 3 | | |||||||||
Legal costs |
1 | 2 | (1 | ) | ||||||||
Other, net |
3 | 1 | 2 | |||||||||
General and administrative |
$ | 28 | $ | 33 | $ | (5 | ) | |||||
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Bighorn plant |
$ | 1 | $ | | $ | 1 | ||||||
CO2 exchange allowances |
| 26 | (26 | ) | ||||||||
SO2 and NOx emission allowances |
| 1 | (1 | ) | ||||||||
Investments in and receivables from Channelview |
| (5 | ) | 5 | ||||||||
Other, net |
1 | | 1 | |||||||||
Gains on sales of assets and emission and
exchange allowances, net |
$ | 2 | $ | 22 | $ | (20 | ) | |||||
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Depreciation on plants |
$ | 56 | $ | 59 | $ | (3 | ) | |||||
Other, net depreciation |
4 | 4 | | |||||||||
Depreciation |
60 | 63 | (3 | ) | ||||||||
Amortization of emission allowances |
6 | 19 | (13 | )(1) | ||||||||
Other, net amortization |
1 | 1 | | |||||||||
Amortization |
7 | 20 | (13 | ) | ||||||||
Depreciation and amortization |
$ | 67 | $ | 83 | $ | (16 | ) | |||||
(1) | Decrease primarily due to (a) lower weighted average cost of SO2 allowances and (b) decrease in SO2 allowances used. |
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Senior secured notes debt extinguishments gains |
$ | 2 | $ | | $ | 2 | ||||||
Deferred financing costs accelerated amortization
due to extinguishments |
(1 | ) | | (1 | ) | |||||||
Debt extinguishments gains |
$ | 1 | $ | | $ | 1 | ||||||
38
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Fixed-rate debt |
$ | 52 | $ | 53 | $ | (1 | ) | |||||
Deferred financing costs |
1 | 1 | | |||||||||
Financing fees expensed |
1 | 2 | (1 | ) | ||||||||
Amortization of fair value
adjustment of acquired debt |
(3 | ) | (3 | ) | | |||||||
Capitalized interest(1) |
(7 | ) | (4 | ) | (3 | ) | ||||||
Other, net |
1 | 2 | (1 | ) | ||||||||
Interest expense |
$ | 45 | (2) | $ | 51 | (2) | $ | (6 | ) | |||
(1) | Relates primarily to scrubber projects at our Cheswick and Keystone plants. | |
(2) | See notes 7 and 15 to our interim financial statements regarding certain debt and related interest expense classified in discontinued operations. |
Three Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Interest on temporary cash investments |
$ | 1 | $ | 5 | $ | (4 | ) | |||||
Net margin deposits |
| 3 | (3 | ) | ||||||||
Interest income |
$ | 1 | $ | 8 | $ | (7 | ) | |||||
Six Months Ended June 30, | |||||||||||||
2009 | 2008 | Change | |||||||||||
(in millions) | |||||||||||||
Wholesale energy contribution margin, including
wholesale hedges and unrealized gains/losses on
energy derivatives |
$ | (63 | ) | $ | 496 | $ | (559 | ) | |||||
Other contribution margin |
1 | | 1 | ||||||||||
Operation and maintenance(1) |
(1 | ) | (2 | ) | 1 | ||||||||
General and administrative |
(57 | ) | (61 | ) | 4 | ||||||||
Western states litigation and similar settlements |
| (34 | ) | 34 | |||||||||
Gains on sales of assets and emission allowances, net |
20 | 23 | (3 | ) | |||||||||
Depreciation and amortization |
(135 | ) | (166 | ) | 31 | ||||||||
Income of equity investment, net |
| 1 | (1 | ) | |||||||||
Debt extinguishments gains (losses) |
1 | (1 | ) | 2 | |||||||||
Interest expense |
(92 | ) | (102 | ) | 10 | ||||||||
Interest income |
1 | 14 | (13 | ) | |||||||||
Income tax (expense) benefit |
116 | (73 | ) | 189 | |||||||||
Income (loss) from continuing operations |
(209 | ) | 95 | (304 | ) | ||||||||
Income from discontinued operations |
861 | 641 | 220 | ||||||||||
Net income |
$ | 652 | $ | 736 | $ | (84 | ) | ||||||
(1) | Relates primarily to general costs, which historically were allocated to our discontinued retail energy segment. |
39
Six Months Ended June 30, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
GWh | % Economic | GWh | % Economic | |||||||||||||
Economic Generation: |
||||||||||||||||
PJM Coal |
9,950.3 | 69 | % | 11,280.8 | 77 | % | ||||||||||
MISO Coal |
2,411.5 | 44 | % | 3,407.7 | 62 | % | ||||||||||
PJM/MISO Gas |
673.1 | 4 | % | 412.7 | 3 | % | ||||||||||
West |
288.2 | 3 | % | 547.0 | 4 | % | ||||||||||
Other |
63.1 | 2 | % | 7.0 | 1 | % | ||||||||||
Total |
13,386.2 | 26 | % | 15,655.2 | 31 | % | ||||||||||
Commercial Capacity Factor: |
||||||||||||||||
PJM Coal |
77.6 | % | 84.3 | % | ||||||||||||
MISO Coal |
85.0 | % | 81.5 | % | ||||||||||||
PJM/MISO Gas |
94.2 | % | 92.0 | % | ||||||||||||
West |
78.1 | % | 86.3 | % | ||||||||||||
Other |
98.7 | % | 81.4 | % | ||||||||||||
Total |
79.9 | % | 84.0 | % | ||||||||||||
Generation: |
||||||||||||||||
PJM Coal |
7,719.4 | 9,515.1 | ||||||||||||||
MISO Coal |
2,048.6 | 2,776.1 | ||||||||||||||
PJM/MISO Gas |
634.1 | 379.5 | ||||||||||||||
West |
225.1 | 472.2 | ||||||||||||||
Other |
62.3 | 5.7 | ||||||||||||||
Total |
10,689.5 | 13,148.6 | ||||||||||||||
Open Energy Unit Margin ($/MWh): |
||||||||||||||||
PJM Coal |
$ | 14.64 | $ | 38.04 | ||||||||||||
MISO Coal |
10.74 | 27.02 | ||||||||||||||
PJM/MISO Gas |
9.46 | 52.70 | ||||||||||||||
West |
39.98 | NM | (1) | |||||||||||||
Total weighted average |
$ | 14.03 | $ | 34.15 | ||||||||||||
(1) | NM is not meaningful. |
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Wholesale energy third-party revenues |
$ | 880 | $ | 1,647 | $ | (767 | )(1) | |||||
Revenues affiliates |
| 253 | (2) | (253 | ) | |||||||
Unrealized losses on energy derivatives |
(26 | ) | (7 | ) | (19 | )(3) | ||||||
Total wholesale energy revenues |
$ | 854 | $ | 1,893 | $ | (1,039 | ) | |||||
(1) | Decrease primarily due to (a) lower power and natural gas sales prices and (b) lower power sales volumes. | |
(2) | We deconsolidated Channelview on August 20, 2007. These revenues represent sales of fuel to Channelview prior to the assets being sold. | |
(3) | See footnote 8 under Wholesale Energy Margins. |
40
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Wholesale energy third-party costs |
$ | 594 | $ | 1,113 | $ | (519 | )(1) | |||||
Cost of sales affiliates |
| 70 | (2) | (70 | ) | |||||||
Unrealized (gains) losses on energy derivatives |
11 | (105 | ) | 116 | (3) | |||||||
Total wholesale energy cost of sales |
$ | 605 | $ | 1,078 | $ | (473 | ) | |||||
(1) | Decrease primarily due to (a) lower prices paid for natural gas and (b) lower natural gas volumes purchased. | |
(2) | We deconsolidated Channelview on August 20, 2007. These cost of sales represent purchases of power from Channelview prior to the assets being sold. | |
(3) | See footnote 8 under Wholesale Energy Margins. |
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Open energy gross margin: |
||||||||||||
PJM Coal |
$ | 113 | $ | 362 | $ | (249 | )(1) | |||||
MISO Coal |
22 | 75 | (53 | )(1) | ||||||||
PJM/MISO Gas |
6 | 20 | (14 | )(1) | ||||||||
West |
9 | (8 | ) | 17 | (2) | |||||||
Total |
150 | 449 | (299 | ) | ||||||||
Other margin: |
||||||||||||
PJM Coal |
72 | 44 | 28 | (3) | ||||||||
MISO Coal |
5 | 5 | | |||||||||
PJM/MISO Gas |
82 | 60 | 22 | (4) | ||||||||
West |
24 | 56 | (32 | )(5) | ||||||||
Other |
27 | 24 | 3 | |||||||||
Total |
210 | 189 | 21 | |||||||||
Open wholesale gross margin |
360 | 638 | (278 | ) | ||||||||
Operation and maintenance, excluding severance |
(308 | ) | (318 | ) | 10 | (6) | ||||||
Other |
| (1 | ) | 1 | ||||||||
Open wholesale contribution margin |
52 | 319 | (267 | ) | ||||||||
Wholesale hedges |
(74 | ) | 79 | (153 | )(7) | |||||||
Unrealized gains (losses) on energy derivatives |
(37 | ) | 98 | (135 | )(8) | |||||||
Operation and maintenance severance |
(4 | ) | | (4 | ) | |||||||
Total wholesale energy contribution
margin, including wholesale hedges and
unrealized gains/losses on energy
derivatives |
$ | (63 | ) | $ | 496 | $ | (559 | ) | ||||
(1) | Decrease primarily due to lower unit margins (lower power prices partially offset by lower fuel costs). | |
(2) | Increase primarily due to higher unit margins (lower fuel expense and higher power prices). | |
(3) | Increase primarily due to higher RPM capacity payments. This increase was partially offset by lower ancillary payments. | |
(4) | Increase primarily due to higher RPM capacity payments. | |
(5) | Decrease primarily due to (a) reduced selective commercial hedge activities and (b) lower capacity payments. | |
(6) | Decrease primarily due to (a) $7 million decrease due to the sale of Bighorn in October 2008, (b) $5 million decrease from reduced operations activity and (c) $5 million decrease in services and support. These decreases were partially offset by a $5 million increase in primarily employee-related costs. | |
(7) | Decrease primarily due to (a) $149 million decline on fuel hedges, (b) $59 million loss on market adjustments to inventory and (c) $26 million loss primarily related to payments to reduce fixed price coal commitments for future periods. These decreases were partially offset by (a) $51 million gain on a hedge of generation and (b) $15 million decrease of losses on closed hedges. | |
(8) | Decrease primarily due to $142 million in losses from changes in prices on our energy derivatives marked to market partially offset by $7 million in gains due to reversal of previously recognized unrealized losses on energy derivatives which settled during the period. |
41
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Salaries and benefits |
$ | 32 | $ | 33 | $ | (1 | ) | |||||
Professional fees, contract
services and information
systems maintenance |
12 | 15 | (3 | ) | ||||||||
Rent and utilities |
7 | 7 | | |||||||||
Legal costs |
2 | 3 | (1 | ) | ||||||||
Other, net |
4 | 3 | 1 | |||||||||
General and administrative |
$ | 57 | $ | 61 | $ | (4 | ) | |||||
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
CO2 exchange allowances |
$ | 10 | $ | 26 | $ | (16 | ) | |||||
SO2 and NOx emission allowances |
7 | 1 | 6 | |||||||||
Bighorn Plant |
3 | | 3 | |||||||||
Investments in and receivables from Channelview |
| (5 | ) | 5 | ||||||||
Other, net |
| 1 | (1 | ) | ||||||||
Gains on sales of assets and emission and
exchange allowances, net |
$ | 20 | $ | 23 | $ | (3 | ) | |||||
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Depreciation on plants |
$ | 111 | $ | 117 | $ | (6 | ) | |||||
Other, net depreciation |
8 | 8 | | |||||||||
Depreciation |
119 | 125 | (6 | ) | ||||||||
Amortization of emission allowances |
14 | 39 | (25 | )(1) | ||||||||
Other, net amortization |
2 | 2 | | |||||||||
Amortization |
16 | 41 | (25 | ) | ||||||||
Depreciation and amortization |
$ | 135 | $ | 166 | $ | (31 | ) | |||||
(1) | Decrease primarily due to (a) lower weighted average cost of SO2 allowances and (b) decrease in SO2 allowances used. |
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Senior secured notes debt extinguishments gains |
$ | 2 | $ | | $ | 2 | ||||||
Deferred financing costs accelerated amortization
due to extinguishments |
(1 | ) | (1 | ) | | |||||||
Debt extinguishments gains (losses) |
$ | 1 | $ | (1 | ) | $ | 2 | |||||
42
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Fixed-rate debt |
$ | 105 | $ | 106 | $ | (1 | ) | |||||
Deferred financing costs |
3 | 3 | | |||||||||
Financing fees expensed |
3 | 4 | (1 | ) | ||||||||
Amortization of fair value
adjustment of acquired debt |
(6 | ) | (6 | ) | | |||||||
Capitalized interest(1) |
(14 | ) | (7 | ) | (7 | ) | ||||||
Other, net |
1 | 2 | (1 | ) | ||||||||
Interest expense |
$ | 92 | (2) | $ | 102 | (2) | $ | (10 | ) | |||
(1) | Relates primarily to scrubber projects at our Cheswick and Keystone plants. | |
(2) | See notes 7 and 15 to our interim financial statements regarding certain debt and related interest expense classified in discontinued operations. |
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Interest on temporary cash investments |
$ | 2 | $ | 10 | $ | (8 | ) | |||||
Net margin deposits |
| 4 | (4 | ) | ||||||||
Other, net |
(1 | ) | | (1 | ) | |||||||
Interest income |
$ | 1 | $ | 14 | $ | (13 | ) | |||||
43
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Operating income (loss) |
$ | (235 | ) | $ | 256 | $ | (491 | ) | ||||
Depreciation and amortization |
135 | 166 | (31 | ) | ||||||||
Gains on sales of assets and emission allowances, net |
(20 | ) | (23 | ) | 3 | |||||||
Net changes in energy derivatives |
37 | (1) | (98 | )(2) | 135 | |||||||
Western states litigation and similar settlements |
| 34 | (34 | ) | ||||||||
Margin deposits, net |
(50 | ) | (55 | ) | 5 | |||||||
Change in accounts and notes receivable and accounts
payable, net |
119 | (70 | ) | 189 | ||||||||
Change in inventory |
13 | (42 | ) | 55 | ||||||||
Net option premiums purchased |
(24 | ) | (1 | ) | (23 | ) | ||||||
Interest payments, net of capitalized interest |
(95 | ) | (105 | ) | 10 | |||||||
Income tax payments, net of refunds |
(4 | ) | 13 | (17 | ) | |||||||
Prepaid lease obligation |
8 | 8 | | |||||||||
Construction deposit refund |
15 | | 15 | |||||||||
Other, net |
5 | 5 | | |||||||||
Net cash provided by (used in) continuing
operations from operating activities |
(96 | ) | 88 | (184 | ) | |||||||
Net cash provided by discontinued operations from
operating activities |
508 | 103 | 405 | |||||||||
Net cash provided by operating activities |
$ | 412 | $ | 191 | $ | 221 | ||||||
(1) | Includes unrealized losses on energy derivatives of $37 million. | |
(2) | Includes unrealized gains on energy derivatives of $98 million. |
44
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Capital expenditures |
$ | (115 | ) | $ | (103 | ) | $ | (12 | ) | |||
Proceeds from sales of assets |
36 | (1) | | 36 | ||||||||
Proceeds from sales of emission allowances |
19 | 29 | (10 | ) | ||||||||
Purchases of emission allowances |
(5 | ) | (18 | ) | 13 | |||||||
Restricted cash |
| (4 | ) | 4 | ||||||||
Other, net |
1 | 1 | | |||||||||
Net cash used in continuing operations from
investing activities |
(64 | ) | (95 | ) | 31 | |||||||
Net cash provided by (used in) discontinued
operations from investing activities |
299 | (14 | ) | 313 | ||||||||
Net cash provided by (used in) investing activities |
$ | 235 | $ | (109 | ) | $ | 344 | |||||
(1) | Includes $35 million previously held in escrow and released to us relating to the sale of the Channelview plant in July 2008. |
Six Months Ended June 30, | ||||||||||||
2009 | 2008 | Change | ||||||||||
(in millions) | ||||||||||||
Purchases of senior secured notes |
$ | (45 | ) | $ | (45 | ) | $ | | ||||
Proceeds from issuance of stock |
2 | 6 | (4 | ) | ||||||||
Net cash used in continuing
operations from financing activities |
(43 | ) | (39 | ) | (4 | ) | ||||||
Net cash used in discontinued
operations from financing activities |
(225 | ) | | (225 | ) | |||||||
Net cash used in financing activities |
$ | (268 | ) | $ | (39 | ) | $ | (229 | ) | |||
45
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Twelve | ||||||||||||||||||||||||||||
Months | ||||||||||||||||||||||||||||
Ending | ||||||||||||||||||||||||||||
June 30, | Remainder | 2014 and | Total fair | |||||||||||||||||||||||||
Source of Fair Value | 2010 | of 2010 | 2011 | 2012 | 2013 | thereafter | value | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Prices actively
quoted (Level 1) |
$ | 55 | $ | 5 | $ | 27 | $ | | $ | | $ | | $ | 87 | ||||||||||||||
Prices provided by
other external sources
(Level 2) |
(44 | ) | (18 | ) | (37 | ) | (13 | ) | | | (112 | ) | ||||||||||||||||
Prices based on models
and other valuation
methods (Level 3) |
(110 | ) | (2 | ) | | | | | (112 | ) | ||||||||||||||||||
Total
mark-to-market
non-trading
derivatives |
$ | (99 | ) | $ | (15 | ) | $ | (10 | ) | $ | (13 | ) | $ | | $ | | $ | (137 | ) | |||||||||
As of | Market Prices | Earnings Impact | Fair Value Impact | |||||||||
(in millions) | ||||||||||||
June 30, 2009 |
10% increase | $ | (45 | ) | $ | (45 | ) | |||||
December 31, 2008 |
10% decrease | (5 | ) | (5 | ) |
46
Twelve | ||||||||||||||||||||||||||||
Months | ||||||||||||||||||||||||||||
Ending | ||||||||||||||||||||||||||||
June 30, | Remainder | 2014 and | Total fair | |||||||||||||||||||||||||
Source of Fair Value | 2010 | of 2010 | 2011 | 2012 | 2013 | thereafter | value | |||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Prices actively
quoted (Level 1) |
$ | 24 | $ | 8 | $ | | $ | | $ | | $ | | $ | 32 | ||||||||||||||
Prices provided by
other external sources
(Level 2) |
1 | | | | | | 1 | |||||||||||||||||||||
Prices based on models
and other valuation
methods (Level 3) |
(4 | ) | (1 | ) | | | | | (5 | ) | ||||||||||||||||||
Total |
$ | 21 | $ | 7 | $ | | $ | | $ | | $ | | $ | 28 | ||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in millions) | ||||||||||||||||
Realized |
$ | 7 | $ | 2 | $ | 18 | $ | 9 | ||||||||
Unrealized |
(2 | ) | (15 | ) | (2 | ) | (26 | ) | ||||||||
Total |
$ | 5 | $ | (13 | ) | $ | 16 | $ | (17 | ) | ||||||
Six Months Ended June 30, | ||||||||
2009 | 2008 | |||||||
(in millions) | ||||||||
Fair value of contracts outstanding, beginning of period |
$ | 30 | $ | 19 | ||||
Contracts realized or settled |
(18 | )(1) | (15 | )(2) | ||||
Changes in fair values attributable to market price and other market
changes |
16 | (6 | ) | |||||
Fair value of contracts outstanding, end of period |
$ | 28 | $ | (2 | ) | |||
(1) | Amount includes realized gain of $18 million. | |
(2) | Amount includes realized gain of $10 million and deferred settlements of $5 million. |
47
2009(1) | 2008 | |||||||
(in millions) | ||||||||
As of June 30 |
$ | 1 | $ | 11 | ||||
Three months ended June 30: |
||||||||
Average |
2 | 5 | ||||||
High |
2 | 13 | ||||||
Low |
1 | 1 | ||||||
Six months ended June 30: |
||||||||
Average |
2 | 3 | ||||||
High |
4 | 13 | ||||||
Low |
1 | |
(1) | The major parameters for calculating daily value-at-risk remain the same during 2009 as disclosed in Quantitative and Qualitative Disclosures About Market Risk in Item 7A of our Form 10-K. |
48
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
1. | To elect the five directors nominated by our Nominating & Governance Committee to our Board of Directors to serve until the next annual meeting of stockholders; and |
2. | To ratify the Audit Committees selection of KPMG LLP as our independent auditors for fiscal year 2009. |
For | Against | Abstain | ||
267,014,517
|
26,030,276 | 879,019 |
For | Against | Abstain | ||
266,634,744 | 26,269,718 | 1,019,349 |
For | Against | Abstain | ||
262,503,102 | 30,520,129 | 900,580 |
For | Against | Abstain | ||
267,217,045 | 25,730,457 | 976,310 |
For | Against | Abstain | ||
273,366,731 | 19,616,453 | 940,627 |
49
For | Against | Abstain | ||
288,939,553 | 4,073,259 | 911,000 |
ITEM 6. | EXHIBITS |
50
RRI ENERGY, INC. | ||||||
(Registrant) | ||||||
August 3, 2009
|
By: | /s/ Thomas C. Livengood
|
||||
Senior Vice President and Controller | ||||||
(Duly Authorized Officer and Chief Accounting Officer) |
SEC File or | ||||||||||||
Report or Registration | Registration | Exhibit | ||||||||||
Exhibit Number | Document Description | Statement | Number | Reference | ||||||||
3.1 | Third Restated Certificate of Incorporation
|
RRI Energy, Inc.s Quarterly Report on Form 10-Q for the period ended June 30, 2007 | 1-16455 | 3.1 | ||||||||
+3.2 | Sixth Amended and Restated Bylaws |
|||||||||||
3.3 | Certificate of Ownership and Merger
merging a wholly-owned subsidiary into
registrant pursuant to Section 253 of the
General Corporation Law of the State of
Delaware, effective as of May 2, 2009
|
RRI Energy, Inc.s Quarterly Report on Form 10-Q for the period ended March 31, 2009 | 1-16455 | 3.3 | ||||||||
4.1 | Registrant has omitted instruments with
respect to long-term debt in an amount
that does not exceed 10% of the
registrants total assets and its
subsidiaries on a consolidated basis and
hereby undertakes to furnish a copy of any
such agreement to the Securities and
Exchange Commission upon request |
|||||||||||
*+10.1 | 2009 Long Term Incentive Award Program for
Officers and Form of Award Agreement |
|||||||||||
*+10.2 | 2002 Long Term Incentive Plan Director
Common Stock Award for Evan J. Silverstein |
|||||||||||
*+10.3 | 2002 Long Term Incentive Plan Form of
Director Annual Award Agreement |
|||||||||||
*+10.4 | 2002 Long Term Incentive Plan Form of
Quarterly Common Stock and Premium
Restricted Stock Award for Directors |
|||||||||||
*+10.5 | Non-Employee Directors Compensation
Program, effective as of June 19, 2009 |
|||||||||||
+31.1 | Certification of the Chief Executive
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 |
|||||||||||
+31.2 | Certification of the Chief Financial
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 |
|||||||||||
+32.1 | Certification of Chief Executive Officer
and Chief Financial Officer pursuant to
Subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
|||||||||||
+101.1 | Interactive Data File |