NRG Energy Inc (NRG) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2010 NRG Energy earnings conference call.

My name is Lamera and I will be your operator for today.

(Operator Instructions).

I would now like to turn the conference over to your host for today's call, Ms.

Nahla Azmy, SVP of Investor Relations.

Please proceed.

Good morning and welcome to our third-quarter 2010 earnings call.

This call is being broadcast live over the phone and from our website at www.NRGEnergy.com.

You can access the call presentation and press release through a link on the Investor Relations page of our website.

A replay of the call will be available on our website.

This call, including the formal presentation and question-and-answer session, will be limited to one hour.

In the interest of time we ask that you please limit yourself to one question with just one follow-up.

And now for the obligatory Safe Harbor statement.

During the course of this morning's presentation management will reiterate forward-looking statements made in today's press release regarding future events and financial performance.

These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.

We caution you to consider the important risk factors contained in our press release and other filings with the SEC that could cause actual results to differ materially from those in the forward-looking statements in the press release and this conference call.

In addition, please note that the date of this conference call is November 4, 2010.

Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date.

We undertake no obligation to update these statements as a result of future events, except as required by law.

During this morning's call we will refer to both GAAP and non-GAAP financial measures of the Company's operating financial results.

For complete information regarding our non-GAAP financial information from our directly comparable GAAP measures and quantitative reconciliation of those figures, please refer to today's press release and this presentation.

Now with that, I would like to turn the call over to David Crane, NRG's President and Chief Executive Officer.

Good morning everyone.

Let me start by introducing my colleagues here participating in this presentation.

I am joined by Mauricio Gutierrez, our Chief Operating Officer, and by Chris Schade, our Chief Financial Officer.

Also available to answer your questions will be Jason Few, who runs our -- the Reliant retail business on our behalf, and Chris Moser, who is responsible for Commercial Operations at NRG.

So to begin, as we know, the equity markets are relentlessly forward-looking, so I'm going to spend most of my time looking forward as well.

But I do want to dwell for a moment, and you should be looking at slide three if you are following along in the presentation, on what this Company accomplished in the third quarter of 2010 and what we are in the process of accomplishing year to date.

We had another exceptionally strong performance with our second best ever quarter from an EBITDA perspective.

With an able assist from favorable weather, but most importantly thanks to our exceptional operating performance and robust hedge position, we largely mitigated the impact of gas prices trending relentlessly downward and heat rates moving sideways to post $777 million of adjusted EBITDA and $536 million of cash from operations.

Certainly our already strong current liquidity position was enhanced during the quarter by the bond financing that we did in August.

But our liquidity was also strengthened, as it has been for many quarters in a row, by a very substantial contribution of free cash flow from the Company's operating assets and businesses.

Our strong performance year-to-date allows us to narrow our full-year 2010 guidance to the top end of the present range.

And while I had in my aspiration from the beginning of the year to reach the $2.6 billion level, which would have put us flat against our record shattering performance in 2009, I am nonetheless very proud given the gravitational pull of near-term gas prices that we are on our way to a performance in the $2.5 billion range.

Indeed, you may recall that 12 months ago in the course of announcing an initial EBITDA guidance for 2010 of $2.2 billion, I conveyed to you that as a management team we were not satisfied with that number, and we made a commitment to you, our shareholders, that we would not rest until we had improved substantially on that number.

I feel that under the circumstances we have delivered on that commitment.

Today I'm here to make another such commitment.

As Chris will outline for you, we are initiating guidance for 2011 in the $2 billion range.

Our financial prospects in this, the third year of commodity price recession, once again being subjected to the downward pressure of a significantly lower gas curve, our commitment to our shareholders again this year is that we will not rest until we have substantially improved our performance against the standard of this initial guidance.

I can't promise you anything specific today with respect to our next fiscal year, which obviously doesn't begin for another two months, but if you check our record over the past six years I think you'll find that we have been pretty successful in exceeding expectations regarding our current operating and financial performance.

I want to devote the remainder of my time to comment on a few important components of our strategic positioning of this Company.

Many of these areas of our business figure prominently in the thoughts of our investors since they have been in the news recently or will be in the near future.

The Company's strategic approach is in general terms depicted on slide four, five conventional priorities and five transformational green energy priorities.

I feel that we have made significant progress against all 10 of these priorities year-to-date.

And during Q&A I would be happy to talk about any or all of them, but due to time constraints I am going to limit my prepared remarks to the four Rs, reactors, renewables, retail and CCP acquisitions at a significant discount to replacement costs.

Our goal in respect of our conventional business, as shown on slide five, is to build our business on the foundation of a multifuel across the merit order geographically advantaged generation portfolio at scale in each of our core markets.

And in our principal market, which of course is Texas, matching up that diversified generation portfolio with a retail electricity business also at scale.

As such, in this area the four Rs are where much of our opportunity lay.

In the case of the new advanced nuclear power there are two more Rs which are important.

The first R is replacement power.

Our nation's solid fuel baseload fleet is very old and rapidly getting older as little to no new baseload generation is being built.

The oldest quartile of baseload generation this country needs to be replaced over the next decade, and given the development lead times for solid fuel generation, our view is that those of us who get started now will be advantaged.

The final R stands for renaissance, and it is not yet clear how robust the nuclear renaissance will be here in the United States.

But it is very clear that the world at large is well down the path towards a global nuclear renaissance worth hundreds of billions of dollars, if not trillions.

And the owners and developers of the first new nuclear plants in the United States are going to have a very beneficial first mover advantage in that nuclear renaissance.

But of course, to secure first mover advantage of the nuclear renaissance you actually have to have a first mover project.

The status of STP 3 and 4 have not changed significantly since our previous quarterly call.

The lack of visible progress was expected since the gating item for most meaningful steps forward on the project, such as additional equity partners, has been and continues to be the DOE loan guarantee process and the related issue of funding appropriations.

Since Congress has been in recess for most of the last three months, it is not surprising that there has been no development on the additional appropriation.

Nonetheless, significant progress continues to be made on all key fronts below the surface.

From the perspective of NRG's shareholders we believe you should evaluate the present arrangement with respect to STP as illustrated on slide six as follows.

NRG has a limited obligation currently at $1.5 million a month, an obligation to our partners to contribute to ongoing development spend until the loan guarantee is received and accepted.

Nonetheless, recognizing NRG's very substantial financial contribution to the project development to date of approximately $315 million, including a significant amount which was funded during the first half of this year as a result of NRG assuming CPS' share of the overall development spend, the project remains fully on schedule.

This is due to the much appreciated stepped-up contribution of our partner, Toshiba Corp.

And we remain very much in contention for the valuable nuclear loan guarantee from the Department of Energy.

As such, during this phase the STP 3 and 4 development should be perceived by NRG shareholders as a low-cost option on a very large benefit opportunity with clearly defined exit ramps.

Of course, the news affecting nuclear development in the United States during the past several weeks has had little to do with STP and much to do with the Calvert Cliffs project and the loan guarantee fee issues cited by Constellation as their reason for withdrawing from the project.

What I would tell you is that, notwithstanding the superficial similarities between the two projects, and this is shown on the left side of slide seven, the two projects actually are structured very differently.

Obviously, they are in different markets with different rates of projected baseload growth, but also they involve different risk allocation with respect to technology, completion risk and merchant offtake.

We do not yet know precisely how these differences will play into the government's analysis of the loan guarantee fee for STP, but the government is well aware of these structural differences because they have been discussed at length by us with the DOE.

As I have tried to depict on the right side of this page, we believe we are in the midst of final stages of the government's determination of this issue, and so hopefully we will be in a position to advise our investors within a few weeks of the outcome.

Moving on, on slide eight, we have transactions pending to purchase high-efficiency, load following CCGTs in three of our four core regions.

We continue to push towards a prompt closing of these transactions.

We are highly confident that Cottonwood will close in the very near future.

And that while Cottonwood in and of itself will be fairly unspectacular in its near-term contribution to EBITDA, given the subdued commodity price environment, Cottonwood will play an essential role in enabling us to renew the portfolio long-term offtake of arrangements that South Central has with its key co-op customers, recognizing that a significant number of these contracts are up for renewal in 2014.

As to the Dynegy assets, we remain very comfortable with the bargain we stuck back in August, and we want the transaction to proceed on its present terms.

With the commodity price curve for natural gas bumping along at cyclical bottom, it is a good time to acquire generation assets.

We are highly confident if we get the opportunity to close the Dynegy transaction that over the entire commodity price cycle our investment will be money well spent, and that this portfolio, headlined by the strategically and geographically advantaged Moss Landing 1 and 2, will be a successful investment on behalf of NRG shareholders.

If the Blackstone acquisition does not proceed and the opportunity to buy this set of CCGTs disappears, we are equally confident that we have very attractive alternative uses for the liquidity that will be freed up.

Not only is it a good time to invest in well-located CCGTs at prices well below replacement cost, it is a good time to invest in low risk, high return solar projects, and that is something I am about to talk about.

And it is always a good time, particularly at the current depressed price levels to buy NRG stock.

Of course, our stock price performance seems to be constrained by the drop in gas prices and the flattening of the gas curve more generally; however, that fundamental connection between natural gas prices and the financial prospects of IPPs tends to overlook the fact that our Reliant retail business is countercyclical to natural gas, and the $600 million of year-to-date EBITDA that we are reporting today demonstrates the resilience of that countercyclicality.

We have previously guided the market to think of Reliant in our hands as a $300 million a year "midcycle business".

But of course that concept is very broad brush, and indeed somewhat meaningless outside of financial modeling, since in my 20 years experience in this industry the midcycle never seems to last for more than a millisecond, either in the natural gas or the heat rate market.

What we have tried to depict on slide nine is a slightly more nuanced and hopefully a significantly more accurate view of the earnings power of Reliant as a function of the natural gas price cycle.

The upshot of this analysis is that rather than thinking about Reliant as a $300 million a year EBITDA midcycle business, we believe the market should think about Reliant as a $400 million to $500 million a year EBITDA business in all flat to moderately sloping gas price environments.

When natural gas prices are sharply decreasing, Reliant's earnings power can spike about $600 million a year.

When natural gas prices are sharply increasing, Reliant's earnings power will dip below $400 million a year, with $300 million being more of a baseline, absent some extraordinary event.

Moving onto our green initiatives on slide 10.

Our purchase of Green Mountain Energy has received all necessary approvals and is ready to be closed in the very near future.

As a general comment, I want to emphasize how important I think Green Mountain and the Green Mountain brand is going to be in transforming NRG's alternative energy future by tying together our various renewable generation businesses and initiatives and tying them to Green Mountain's own substantial and growing green energy customers.

In the fast-growing world of green energy, as depicted on slide 11, there is no brand that comes within a country mile of Green Mountain.

As a stand-alone business divorced from any association with NRG's renewables projects or any support from NRG's commercial operations team, Green Mountain is a solid business with a healthy EBITDA contribution relative to the purchase price.

As such, even on its own it is a welcome addition to the portfolio.

But beyond that, Green Mountain will allow NRG to offer matched green wholesale green retail products to green energy consumers that is truly unique.

And this is important, because while the idea of top-down imposition of a carbon regime on the American public is dead on arrival in the new Washington, the American consumer trend toward sustainability is going to continue, and indeed in my opinion accelerate, led by thought leaders of the next generation.

Success with Green Mountain for us starts with the successful integration.

At NRG our track record of quick, efficient and effective integration of new acquisitions is one of the things I'm proudest of at this Company.

Both in the case of Texas Genco and Reliant retail, we demonstrated that complex businesses could be brought into the NRG camp in a manner that not only was nondisruptive, but which enabled the newly acquired businesses to equal or exceed their business objectives virtually from the very beginning.

The single key to our success in this regard is our emphasis on enabling the new businesses to continue to focus on what they do best, while letting us take care of the rest.

In the weeks ahead we will be working closely with Green Mountain on the integration of their business enterprise into NRG, focusing on the priorities listed on slide 12.

We intend to protect, preserve and extend their green identity to secure their core financial performance and to prioritize their opportunities for profitable expansion into new regions and products, but particularly in respect to new market segments.

We believe NRG can ably assist Green Mountain move further up the C&I ladder to sell to bigger and more extensive retail organizations, which themselves want to shore up their own sustainability credentials with their own customer base.

In short, I am extremely excited on what Green Mountain and NRG can accomplish working together, so you should, as they say, stay tuned.

Turning to the wholesale side of our green equation on slide 13.

We have talked about the immense opportunity we see in the solar space, but so far has been mainly anticipatory.

What you already have begun to see over the past couple of weeks with the announcement of construction at Avenal and Ivanpah is that our development effort is beginning to bear fruit.

If all of goes according to plan, you should expect to hear significantly more in the weeks to come, as conservatively more solar projects in our development pipelines complete the usual development process and proceed into the construction phase.

As we have stated previously and repeat on slide 14, we feel that our solar investment strategy, being a validly multi-technology, multi-vendor and initially focused on the utility-sized projects with very long-term PPAs, is the precisely right strategy to capitalize on the opportunities and incentives currently available to the solar industry.

The equity return on these projects, particularly when you consider the lack of merchant risk, the complete absence of environmental risk, and the minimal completion risk in construction time, are as attractive on a risk-adjusted basis as any that I have seen over the course of my 20 years in this industry.

Finally, before handing over to Mauricio, let me emphasize that we are mindful that our solid financial performance year-to-date in 2010, and our successful positioning of the Company to take advantage of a very attractive growth opportunities that will arise as our industry transforms itself in response to society's demand for a sustainability, have not yet translated into improvement in our share price, and as a consequence, our shareholders have suffered.

We will do everything within our power to bring about that improvement.

And we believe that the main thing we can do is execute on our plan as effectively and as quickly as possible.

As listed on slide 15, we have a great deal on our plate over the next six to nine months, and we hope that successful execution against these priorities will serve as a springboard for share price appreciation.

Mauricio.

Thank you, David, and good morning everyone.

As you all know, the third-quarter is critical to both our generation and retail segments.

This summer we experienced some of the warmest weather on record across our Northeast, South Central and Texas regions.

I am very pleased to report that we had another strong quarter from both an operational and financial perspective.

Slide 17 highlights a few of the accomplishments achieved during the third quarter.

As always, we remain focused on safety across the organization, and for the third quarter we posted an OSHA recordable rate of 0.88, a significant improvement from last summer and just shy of top decile level.

Our plant performance improved across our entire fleet for the third quarter.

Starting with our coal plant performance, the equivalent availability factor, or EAF, increased to 94.9% in the third quarter from 92.3% for the same period in 2009.

This improvement was led by our Limestone and Big Cajun II facilities.

Looking at generation, STP had another outstanding quarter with 99% availability.

And our oil and gas portfolio responded to the significancy of experience in Texas, South Central and the Northeast by starting over 2,500 times with a 99% reliability during this critical summer months.

With respect to our construction projects, the Indian River environmental control project continues to be on track and within budget to begin operations in January 2012.

Our Middletown repowering project to build 200 megawatts of peaking capacity is on scheduled to be operational by the summer of 2011.

This is the second repowering project in our New England fleet.

Our first project at Devon has been running successfully since it began operations this past summer.

The PPA for El Segundo Energy Complex in California received CPUC approval in October.

Demolition work has started to make room for the construction of the new units, which are expected to be in service by the summer of 2013.

Our FORNRG energy program stands at $83 million year-to-date, and is on track to achieve the $98 million free cash flow goal for the year.

Also, we have already identified projects and cost savings that will bring this program to completion by achieving the full goal of $150 million ahead of our 2012 original date.

Finally, our Commercial Operations Group took advantage of some market opportunities during this summer to increase our hedge profile in 2011, which I will discuss in more detail later in the presentation.

In addition, they have successfully managed our retail supply under volatile market conditions, delivering strong financial results for two consecutive summers.

Moving on to our plant operations on slide 18, net generation increased by 8% this quarter over last year.

This increase came primarily from our Northeast plants, which benefited from warmer than normal weather, and the decrease in coal to gas switching, which was most prevalent in 2009.

Also, nuclear generation was higher due to much improved availability compared to the third quarter of last year.

Our baseload portfolio, which includes both our coal and nuclear assets, experienced significant reliability improvements during the third quarter compared to last year.

Limestone and Indian River led the coal fleet with equivalent forced outage rate of 2.6% and 4%, respectively.

Turning to our retail operations on slide 19, we experienced another solid performance during the third quarter.

Record weather in August and September across Texas created an opportunity to deliver higher volumes and stronger margins from our Mass segment.

The Mass segment drove significant improvements in net customer attrition with the launch of new advertising campaigns and innovative products.

In addition, we maintained our low customer complaint rate through strong performance in retail operations.

We continue to balance customer accounts and pricing to deliver higher than run rate margins that are more sustainable in the long term.

In the C&I segment we continued to improve win rates during the third quarter, and extended the term and diversity of our portfolio.

Reliant remains the largest C&I provider in Texas, and we continue to leverage the strength of NRG to provide innovative products and services for our business customers.

In summary, we are optimizing margin and customer accounts by delivering innovative products and excellent customer service.

Turning to our hedge profile and commodity sensitivities on slide 20.

As illustrated in the charts on the upper left, we have increased our hedge profile for 2011 to 96% from 86% last quarter.

This is consistent with our view that that the gas market continues to be under pressure, given the high and resilient domestic production levels despite the low gas prices.

With gas producers beginning to show some drilling restraints, hedge positions rolling off, and indications that drilling to [fault] acreage may be ending, we have chosen to remain relatively open beyond 2011 to benefit from an expected recovery in gas markets.

If we decide to add additional hedges in the outer years, we will likely lean towards using auction structures that allow us to participate in some upside, while protecting the portfolio from further decreases in gas prices.

With respect to retail, we have increased our price load to 57% in 2011 from 50% in the second quarter.

We continue to match as much generation and load as possible to strike maximum synergies between our retail and wholesale portfolio.

In order to match our incremental power hedges, our coal hedges increased over 2011 from 78% last quarter to 88%, as illustrated on the upper right chart.

We also remain well-hedged in terms of coal transportation for some time.

We continued to limit our commodity price sensitivity in 2011, as illustrated in the lower left chart, with 2012 through 2013 through 2015 largely unchanged.

Moving on to slide 21, the quarter-on-quarter demand growth for ERCOT continues the positive trend in a weather-normalized load growth for the year at around 2%.

In August ERCOT set multiple consecutive new peak loads and achieved a new all-time record peak load of 65.7 kilowatts, an increase of almost 4% from the previous record set in July of last year.

In PJM the weather-normalized load growth continues to be fairly stagnant.

However, the warmer than normal weather drove significant load increases across the Northeast, and total loads was up 7% to 9% higher as compared to third quarter of 2009.

In Texas forward heat rates have remained to be well-supported during the first half of the year due to continued robust demand, higher supply, plant retirement and the continued lack of capital for merchant projects.

We expect the Texas market to continue showing robust fundamentals.

Moving on to the environmental front.

2011 will provide a lot more clarity around environmental rules and requirements for our facilities.

As we have mentioned in previous presentations, we currently have a plan to invest approximately $700 million over the next four years in environmental projects tailored to comply with these future regulations.

[By indicator], the proposed rule does not require additional capital for compliance.

With respect to MACT, our plan considers mercury controls on all coal units.

While a worst-case scenario to control acid gases could result in additional environmental capital for 1,900 megawatts at Parish and 1,500 megawatts at Big Cajun, we don't expect this to be the likely scenario.

In terms of once-through cooling, heat rate qualifications on repowering are expected to achieve these higher results.

For example, we are meeting targets today with pre-modifications at our Arthur Kill plant in New York.

Finally, NRG does not face the challenges of converting from wet surface impoundments to landfills, as we have dry fly ash disposal on all our coal facilities.

Our near-term operational priorities are listed on slide 22.

As we move into 2011 we remain focused on excellence in safety and operational performance.

We will continue to constantly evaluate the impact of various environmental regulations in our current maintenance and capital spend, particularly in the face of the challenging commodity price environment, and determine the best cost benefit position for each of our assets.

With that, I will turn it over to Chris, who will discuss our financial results.

Good morning and thank you all for joining our discussion of NRG's third-quarter and year-to-date financial results.

Beginning with slide 24, our financial results remain strong with $777 million of adjusted EBITDA for the third quarter and $2.071 billion of adjusted EBITDA year-to-date.

During the quarter Reliant Energy contributed $209 million of adjusted EBITDA to our results compared to $306 million in EBITDA for the third quarter of '09.

This difference is largely explained by lower margins on newly acquired customers and existing customer renewals, as well as lower customer counts.

Meanwhile, the wholesale business contributed $568 million of adjusted EBITDA during Q3.

The $32 million decline compared to Q3 2009 wholesale performance can be largely attributed to the following.

In the Northeast region lower baseload hedges were partially offset by a 37% increase in generation due to warmer than expected weather during the quarter.

In Texas a 5% increase in generation and the benefits of lower operation and maintenance costs were offset by a 20% increase in fuel cost, driven by a new coal transportation contract at our Parish facility.

Meanwhile the South Central region benefited from the addition of a new contract with a regional municipality, leading to a 17% increase in megawatt hours sold and a 23% increase in the average realized energy price per megawatt hour.

Also, contributing to the results in the South Central region was a 8% increase in load due in part to warmer weather.

Turning to year-to-date results, Reliant Energy contributed $594 million of EBITDA, $58 million greater than 2009 EBITDA of $536 million.

Excluding the $227 million of EBITDA generated in the first four months of 2010 for comparative year-to-date analysis since the acquisition was completed in May of 09, EBITDA results were lower by $169 million.

This decline is driven by a 19% decline in Mass margins, which are the result of price reductions enacted following the acquisition and lower margins on customer renewal and acquisitions, reflective of the current competitive marketplace.

The wholesale business year-to-date generated $1.477 billion in adjusted EBITDA, $116 million lower as compared to the first three quarters of 2009.

The comparative year-to-date decline is largely explained by lower baseload hedges in the Northeast, lower margins in Texas caused by higher transportation costs, offset somewhat by better contributions from the South Central region.

At September 30, the Company's liquidity position stood at approximately $4.8 billion.

Impacting this liquidity position during the third quarter were the following items.

We repurchased $130 million of NRG shares at a volume weighted average cost of $20.80 per share.

These shares, combined with the $50 million repurchased in the second quarter, brings the 2010 share repurchase program to a close at $180 million, or 8.4 million shares, purchased at a volume weighted average cost of $21.26 per share.

On August 20, the Company issued $1.1 billion of 8.25% senior notes due 2020, with the proceeds to be used for general corporate purposes, including the funding of the recently announced acquisitions.

And on October 12, NRG completed a $190 million tax-exempt financing in relation to the environmental work to be completed at our Indian River facility, which is not yet reflected in current liquidity.

The Company closed the third quarter in a strong financial position to complete the three recently announced acquisitions of Dynegy assets, Cottonwood and Green Mountain Energy, totaling $2.238 billion.

Now turning to slide 25, as I mentioned a moment ago, total liquidity, excluding funds deposited by hedge counterparties remained strong at nearly $4.8 billion, an increase of nearly $1 billion from the year-end 2009.

The increase is principally driven by $1.1 billion increase in total cash, and largely explained by continued strong cash flow from operations, and proceeds from capital market transactions of about $1.3 billion.

During the first three quarters of 2010 we also made debt repayment of $529 million, which include a reduction of the Term Loan B debt of $247 million and the early settlement of the common stock finance fund of $190 million, and completed capital expenditures, excluding those in NINA, of $274 million consisting largely of $119 million of normal maintenance and $132 million of environmental CapEx.

Finally, before turning to the next slide, as you can see in the lower right, we continue to have ample capacity under our first lien to execute hedges on our baseload business when appropriate.

The first lien remains a very useful tool to both execute such hedges and preserve other sources of liquidity necessary to assist future growth.

Now turning to our 2010 full-year guidance update on slide 26.

As a result of the strong performance of the business in the third quarter, we have narrowed our guidance to the upper end of the original range to $2.5 billion to $2.55 billion.

At the same time because of the increase in EBITDA expectations, lower than anticipated income tax of $50 million, $92 million of debt funding for the Indian River environmental work, all offset by an increase in collateral postings during the third quarter of $86 million, we have increased guidance for free cash flow before growth investments to about $1.2 billion to 1.25 billion.

Meanwhile we are lowering our free cash flow guidance for the full year to about $700 million to $750 million.

The decrease is a result of increased growth investments of $225 million in the fourth quarter, which includes our El Segundo repowering project, and the majority of the balance for solar projects both previously announced and currently planned.

Based on Wednesday's closing stock price of $20.04 our updated outlook -- and our updated outlook, the free cash flow before growth yield currently stands at between 24% to 25%, or $4.77 to $4.97 per share.

Now turning to preliminary guidance on slide 27.

As you can see, we currently expect our full-year 2011 consolidated EBITDA guidance to be in a range of $1.9 billion to $2.1 billion.

Included in this guide range are wholesale expectations of $1.35 billion to $1.45 billion, which includes our announced acquisitions.

In comparison to the current 2010 wholesale EBITDA forecast, our wholesale guidance for 2011 is largely impacted by low overall hedge prices, lower expected capacity prices in the Northeast, and normalized weather.

Somewhat offsetting these decreases are reductions in our anticipated O&M and G&A spend across the Company, which is expected to come in 6% lower in 2011 than in 2010.

As Mauricio discussed earlier, we are nearly 100% hedged for 2011, and are thus confident of our forecasted results.

As we look forward to our wholesale business in 2012, we are currently in excess of 50% hedged, but at significantly higher prices than 2011, as indicated in our current SEC filings.

Due to this position, coupled with the current commodity market conditions, we expect flat to marginally lower year-on-year wholesale results in 2012 from 2011.

For our retail business in 2011 our current expectations, assuming normal weather, are an EBITDA range of between $480 million to $570 million.

The decrease in 2011 guidance compared to current 2010 forecast is largely explained by lower unit margin Reliant's Mass business.

Reliant's C&I business margins are also expected to decline, but be partially offset by higher terawatt hours served, reflecting our continued dedication to this growing client base.

Finally, we expect Green Mountain Energy to contribute between $70 million and $80 million of EBITDA.

As David discussed earlier, we are very excited about enhancing the growth prospects for our new green energy retail business.

We are similarly excited by our solar development prospects, and on slide 28 this illustrates this potential.

This slide represents our four-year net equity commitment to 500 megawatts of solar projects, both announced and planned over the coming months, as well as their respective EBITDA contribution of $175 million by 2014.

We are committed to investing in this financially value-enhancing promising pipeline of projects, and look forward to sharing with you both our current progress and future opportunities as we have identified to expand our solar footprint.

On slide 29 we have provided our projected year-end cash position for 2011 of approximately $1.5 billion.

Assumed in this calculation are cash flow investments from guidance, the completion of outstanding acquisitions of $2.238 billion dollars, and expected debt repayment under our Term Loan B agreements.

As such, when reviewing our capital allocation plans, we usually maintained a minimum cash balance of $700 million, largely for working capital margin -- largely for working capital, margin requirements, the timing of cash payments of interest, property taxes and the like, as well as equity for the projects we have under construction throughout the year.

Thus in 2011 we estimate a balance of about $785 million to allocate between share buybacks and further investments in high-growth opportunities.

The decision to deploy these funds in 2011 will be dependent on another -- a number of factors, such as the size of our restricted payment basket and continued availability of attractive projects to invest in.

We would hope to update this allocation with improved precision at our 2010 year-end results call.

In closing, we are very proud of our ability to continue to deliver solid results despite the current commodity market climate.

As we move forward we remain committed to a prudent allocation of capital to create further opportunity for business growth and to return value to our shareholders.

Now I will pass it back to David for final comments.

Thank you, Chris.

Before we open the line for questions, let me just make three quick points for you to keep in mind.

The first is, I think that we are demonstrating, as I said, even three years into the commodity price downcycle we are showing that even in these circumstances the Company is demonstrating substantial free cash flow generation.

Secondly, we do have investment opportunities led by solar, which are very attractive in absolute terms and from a risk perspective, and also are much shorter in terms of how soon they contribute to EBITDA because of the shorter construction cycle.

Finally, to follow on Chris' last point, we do have substantial liquidity to deploy.

And I think our track record over the last six years has indicated our ability to allocate and deploy capital in a manner that enhances the value of the Company over the medium to long term.

So we hope and expect to continue to do that for the benefit of NRG shareholders.

So with that, so Lamera we would be happy to take any questions that you have on the line.

(Operator Instructions).

Jon Cohen, Morgan Stanley.

Can you comment on how Constellation's exit from UniStar might have impacted the timing of your DOE loan guarantee process?

And also whether there has been any progress on how the additional capital from Toshiba is going to be structured in the interim?

I can't actually answer the first question.

I mean, our process with the DOE has gone on in accordance with the schedule we have had with them.

If it has affected the way the government looks at these loan guarantees internally, we are just not in a position to -- I don't know.

I don't know.

It is like the old iceberg, we don't see what happens beneath the surface.

So we have not picked up any sort of like meaningful visible, tangible change in the way the government's approach to us as a result of the Constellation Calvert Cliffs situation.

If you have another question on that, I don't like to not be able to answer a question.

No, that's okay.

The second question was whether Toshiba had come to any agreement on how the capital contributions were going to be structured?

If the answer to that is no as well, I have a third question.

Well, right now the arrangement with Toshiba is that they have been -- their capital contributions have been put into the project through credit facilities to NINA.

But we will probably be able to give you more final details on that on the next quarterly call.

Okay, and then finally, the $600 million of equity that is going to lead to $180 million of EBITDA for the solar projects, how much of that is from projects that are either -- have been completed or have been announced?

It is -- I would say that half of that is from projects that have been either in the ground or announced, and the rest are ones that we would expect to announce very soon to qualify for the cash grant.

Okay, thanks very much.

Lasan Johong, RBC Capital.

Nice quarter.

David, if you believe in what you said, i.e., power pricing bouncing along the bottom of the short cycle, and you think there is significant potential upside in '12, and you already have massive coal exposure anyway, can you give us an idea as to why you didn't go after the entire company and just picked off the California CCGT?

Okay, well, first of all, the significant upside in '12, we could not -- first of all, I think that what I said was that we are bouncing along the bottom of the trough.

I am not sure that I predicted a full recovery in the year 2012, but maybe I got a little hung up on that.

Why did we not go after the full company of Dynegy, I would say that we didn't feel that with the exposure that the company had in terms of their coal assets -- and I think you would know from the SEC filings that Dynegy is listed in terms of the description of the discussions that occurred was that we made it very clear from the beginning that we were not interested in owning the Midwest coal assets.

That was really a factor -- two factors that caused us to feel that way.

One, as you yourself mentioned, we have a significant amount of that in own portfolio already.

The second thing, and we have been consistent about this ever since the response to the Exelon situation, as we consider the Midwest -- in my seven years in this Company we have never been attracted to the Midwest as a place where we really wanted to be very active.

I would say that lack of interest in the Midwest has gotten greater over those years, because we find the prospects for demand growth in the Midwest -- in the Midwest of the country are more challenging than on the coast.

And we also think that the Midwest market, being coal on coal competition for the most part, that is not very attractive to begin with, but also we think it is subject to risks from a buildout of wind capacity coming out of the Dakotas.

So that just wasn't our cup of tea.

And obviously that is a big part of the overall value of Dynegy.

I see.

I think I might have to follow off-line on that one.

The other question is the line [ROI energy], I should say, they have saw very big increases in heat rates relative to the demand change.

Did you see something similar in your key regions, Northeast, Texas?

And you can you tell us what impact you saw from demand increases on heat rates?

Yes, let me ask Chris Moser to answer that question.

And on your previous comments feel free to call me if you want to discuss.

Well, certainly in the Northeast, and in PGM we saw heat rates clearing at fairly high levels.

And certainly in Texas as well we saw good heat rate expansion both in the prompt and in the future quarters.

Can you give us some magnitude of scale versus like what you saw in let's say third quarter of '09 versus the demand change?

In other words, if demand went up 5%, how much did the rates go up?

I don't have that in front of me right now, but we can follow off-line.

We will get you something on that too.

That is it for me.

Thank you so much.

Anthony Crowdell, Jefferies.

Hopefully, just two quick ones.

One is the wholesale guidance of $1.35 billion to $1.45 billion, what are you assuming is the contribution from the Dynegy assets in the number?

And my second question is related to the Reliant retail guidance.

It seems that you're still going to a long-term run rate of $300 million.

But when I look at the options here from $300 million on a rapid increase in gas to $700 million at the top, it would make more so the midpoint there would be closer to the $500 million.

And even the graph below seemed like more of the time it is in that $400 million to $500 million timeframe.

Thanks for your two questions.

I am going to ask Chris to answer the second question, but I'm going to throw my body in front of him on the first question.

With where the Dynegy transaction is right now, in terms of the shareholder vote coming up, we would rather not talk at all about what we see as the earnings power of Dynegy next year or the year after or anything like that.

We would give you more information about that probably the next time we talk, assuming the next time we talk is after November 17 or whatever the day is.

But we would really not get into that right now.

But, Chris, on the Reliant question.

We view the steady-state Reliant business to be a $400 million to $500 million business.

So I think given our experience on the business we view that that that would be the base case.

With the upsides to improvement in that would be -- and that would assume normalized weather.

The upside here would be that the weather as it has been for the last couple years, which favors the results, also is that there is a lower than forecast decline in volumes and our ability to hold customers at higher margins.

So given our experience over the last two years with Reliant, I think I would take exception to your $300 million baseline and say that we are certainly targeting $400 million to $500 million at a steady state.

Okay, great.

Thank you.

Ameet Thakkar, Banc of America.

Maurizio, when you -- I guess, when Mauricio outlined some of the worst case scenarios for initial environmental capital spending, I guess one of the things that I didn't hear, and I was just -- would be curious to get your thoughts on, how do you guys see the EPA's approach to burning of lignite fuels such as you utilize at limestone?

Could you be more -- I mean more specific.

Are you guys going to be able to burn lignite there?

With some of the proposals on mercury -- some of the more stringent proposals on mercury, is there any risk that you will have to shift to burning PRB there?

As you know, we are ready blend PRB at Limestone.

It is too early to tell how stringent EPA is going to be on [MACT II].

I would rather wait for the first quarter of 2011 to adjust our planning if we need to adjust it.

What I will say is I was pleased it is primarily PRB-based.

PRB-based, as you know, has low hydrochlorine acid.

And we believe that our current plan already takes into consideration mercury controls.

And that the fact that our baseload fleet is primarily PRB is that we are not going to need any incremental capital, but at least that will be -- that is to be seen as the rules come out next quarter.

Okay, great.

Fair enough.

Then just real quick, as far as thinking about the 2011 capital allocation plan, is that something we should look forward to in the next call?

That would be the plan, yes, at our year-end call in, I would assume, February.

Great, thanks guys.

Julien Dumoulin-Smith, UBS.

I am going to try to keep this to one quick question here.

I have noticed in the past that you guys have typically hedged yourself with gas, but given the expansion in heat rates year-to-date, especially for 2011 in Texas, can you perhaps comment to what extent that has helped bolster the '11 outlook?

Certainly, heat rates have been pretty well-supported, and the warmer than normal weather that we have experienced in Texas over the past two summers have helped boost them up.

What we have been trying to do is match as much generation as we can from load.

And this matching comes in the form of not only ancillaries and options between generation and load, but also heat rates.

So as our retail business is pricing -- are fixed pricing their loading for 2011, we have been selling more from the generation to the retail business, and at prices that reflect current markets.

All right, great.

Thank you.

Gregg Orrill, Barclays Capital.

I was wondering if you would consider a question about the implications of the Dynegy transaction getting voted down, if that were to happen, and how you would think about the change in value of the assets?

You had agreed to purchase them, and maybe if that didn't happen, what you might do with the cash?

Well, I can only comment -- I think what I'm going to tell you is something that if you avidly followed the trade press you know would have already seen in the press, so I am not sure it is going to be that illuminating.

But if the Dynegy transaction was defeated, A., obviously we would have no idea why it was defeated or what the plan of Dynegy would be going forward, and whether the assets that we had contracted to sell would be available for sale from someone else.

If someone offered those assets to us, and we were free of our obligation -- when we were free from our obligation to Blackstone to consider, we obviously would consider it.

And to me it is a blinding glimpse of the obvious, but given the change in the gas curve since August, we would be offering a lower price.

I'm not going to talk about how much of a lower price.

But there is another factor is that we would have to be certain that whoever we were buying the assets from, the transaction was structured in a way that it was bankruptcy remote.

That we were not subject to a potential unwinding of the transaction due to fraudulent conveyance.

So that would be an obstacle -- a potential obstacle as well.

So that -- the potential permutations of what might happen are so great that is about all I can tell you right now.

On the alternative uses of the liquidity, I would just repeat what we said.

We have a lot of investment opportunities.

The Dynegy assets were particularly attractive to us, but they are not the only combined cycle power plants in the United States that are on the market today.

And I previously stated in many meetings that I actually thought that the absolute best time to be buying combined cycle power plants was probably to be in the first part of 2012.

Then, of course, there is the possibility of redeploying the capital in terms of return of capital to the stakeholders.

Obviously, there is a possible per share buyback.

But as we did borrow money in August in order to finance the Dynegy transaction, there is also the possibility of paying down some debt.

So, Chris, did you want to --?

Certainly, we have some calls coming up, particularly in the near maturities, like the 2004 maturities, which look attractive, or are beginning to look attractive come the February call dates, which I think are about [101 7/8].

So if there was no other use for the cash, as David said, then certainly we would look to pay down and/or redeem those bonds.

Okay, thanks.

Brandon Blossman, Tudor Pickering.

Nice quarter, guys.

I guess following on '11 capital allocation, assuming all these transactions do close, $1.5 billion of cash left over on the balance sheet at the end of '11, is that a balance that you're comfortable with, or does that leave any room for incremental asset purchases or stock buybacks, etc.?

Yes, it certainly is a comfortable cash balance for us.

As I said during the prepared remarks, of the $1.5 billion we typically like to keep at about $700 million for working capital and margin calls and the like.

And the rest of that, so the other $785 million odd, are available for both share repurchases and investments in other opportunities -- repowering assets, other solar opportunities or other green opportunities.

So we think we've got ample firepower both to look at the opportunities that David thinks will be available, as well as return to shareholders as well.

Thanks.

And then, real quick, moving to retail.

It looks like customer count quarter-over-quarter was just slightly down.

Does that represent maybe a change in strategy towards keeping customers and saving margin a little bit?

Jason Few is going to answer your question.

If you look at the third-quarter results we were about 20,000 down on Mass, that certainly over the last couple of years reflects quite an improvement.

We have been very aggressively on a strategy to stabilize our customer base.

We still maintain a pretty aggressive balance between margin and count, and we will continue to do that.

But I think with our new product introductions and particularly our cap and shade plan, we had very solid customer reaction to that plan, which is unique in the market; no one else operating that type of product.

And that certainly helped us stabilize the customer base, as well as what we are doing in terms of our smart energy, what we call our smart energy initiatives and set of products that we have rolled out against our customer groups there that are helping us reduce attrition -- beyond just things that we have done from a pricing standpoint.

Nice color.

Thank you, Jason.

We only have time for two more questions.

Brian Russo, Ladenburg Thalmann.

Thanks for taking my question.

I am just curious, David, you mentioned earlier the 2011 guidance that you look to improve upon it.

And I think historically you had -- the Company has a tendency to exceed the preliminary 2011 guidance.

Just that you are already 96% hedged on the baseload generation side, I am just wondering what are the potential drivers for upside?

Is it greater utilization of gas plants just tied to weather, or maybe you can give us a little bit more color on that?

Well, you hit two.

To me there is those two.

There is the fact that we tend to be a little bit cautious in everything we do, so there could be a little bit of cushion built-in.

There is the fact that one thing we have never understood about the way the outside world looks at this industry, it is not like we as a management team are sitting on our hands just sort of clipping coupons.

We are a pretty active Company in terms of reshaping the portfolio and improving upon it.

So there is the fact that we as a management team may actually do things to improve it, which, of course, we like to improve our own value-add.

Chris, what else from your perspective?

Sure, just to look at the wholesale business first, as you said, we are nearly 100% hedged, but however, if there is an upturn in gas then we would expect to see an increase in results of around $60 million during the year.

There is also some variability in our gas fleet results.

So with an increase in both gas prices and heat rates, there could be an upwards revision of $15 million for them.

Also, as we said during the presentation, we have built in a 6% decrease in cost across our O&M and G&A.

With about $1 billion of cost if there are additional 1% to 2% decrease in cost then that can obviously add to our result as well.

And as David said, as a management team we are very much focused on any improvements we can squeeze out of the business.

In retail, the range that we have in there contemplates certain load variability due to weather.

And then also if we see lower than expected attrition rates than we had previously forecast that would increase results.

Also if there is a decline in gas, and this speaks to the hedge against our wholesale business, then that would most likely improve results for Reliant.

Finally, it is very clear that we guided $500 million of EBITDA for 2010 and we have exceeded that by nearly $200 million -- or we expect to for the year.

So changes in weather and other changes to the exogenous market obviously you have a very large influence on those results.

Okay, and then just on Green Mountain.

Can you give us a sense of what is the market penetration there?

And I guess on your $70 million of EBITDA what kind of growth potential is available for Green Mountain going forward?

Well, I think that their growth -- in the last four or five years they have averaged a compound annual growth in the 20% to 25% range.

So, again, being cautious people, as we project forward we don't reject that type of increase, because, again, we are cautious people.

But they have demonstrated that over each of the last four or five years.

And certainly we think that, as I mentioned in my comments, that Green Mountain under us can penetrate into markets that they haven't been.

They have been moving outside of Texas.

Their principal area of expansion to date has been in New York City.

And we want to do things in a methodical way, but certainly we think there are other markets in the Northeast that they can move into.

But I think the most obvious thing is that as a small company in the C&I business, Green Mountain has focused on very, very small commercial customers.

Our sense, and I think there are a lot of anecdotes and data points on this -- I will spare you my Philadelphia cream cheese example -- but it seems that a growing number of businesses in the United States that are facing the American consumer are seeing the benefit of sending a green energy message.

We thank that is a trend that is going to accelerate, and we expect Green Mountain to be a big part of that trend.

So we think there are multiple avenues for growth with Green Mountain.

And really the most challenging one is which ones are we going to prioritize and focus on so we don't spread too thin.

Great, thank you very much.

Jay Dobson, Wunderlich.

David, most of my questions have been answered, and I did drop off the Q&A, so apologies if this was asked.

And thanks for the detailed on page 6.

But you mentioned the fish or cut bait on nuclear, and I was trying to get an idea what exactly what you're talking about.

Is that loan guarantee-driven?

Because, obviously, you wouldn't have a PPA by then or some of the other off ramps you mentioned.

Well, to me there is -- we have that one slide in the presentation, slide six, that talks about five exits.

But really to me it comes down to basically two interconnected exits.

One is the loan guarantee, the other is the PPA obligation.

And they are tied together, because the PPA obligation is a condition of the loan guarantee.

What I can say is it is always hard to predict the development business.

And we could get subject to a complete impasse if Washington were -- there is just no money is appropriated for nuclear loan guarantees, even though I think President Obama yesterday said that when -- I am told; I didn't see this -- but when he was asked which areas is there room for cooperation with Republicans, I think -- I was told nuclear was the first or the second thing that he said.

So in a sense we should think this is an area where the election results is beneficial.

But nuclear needs the loan guarantee appropriation, and if that doesn't happen, obviously, that is a very, very clear exit ramp.

The slightly less clear exit ramp is, okay, we get the loan guarantee, but it is conditional on offtake.

And what I would tell you about that is that our sense, because we are working the offtake question very hard right now, is that within a few months of getting the loan guarantee we will know whether or not the offtake is going to happen.

And if we don't get that within a few months, the fact -- we have always said to our shareholders that we would ill not go forward with STP 3 and 4 as a fully merchant plan.

And the amount of offtake that is being required by the DOE is pretty much the same as that we were going to insist upon anyway.

So the exact timing is uncertain, but I certainly expect that by the summer of 2011, assuming we got the loan guarantee well before that, we should know whether or not the offtake is going to happen or not going to happen.

That's great.

Then the last question is on share repurchases.

I know there is some uncertainty given the RP basket calculation at year-end and the like, but assuming there is cash, you have historically bought back stock, David, and just want to understand in 2011 would there be reason to expect there has been any change on that front?

Well, the RP basket is the main pacing item, and so apart from that, I wouldn't expect any huge change in the Company's policy to date.

But, Chris, do you have --?

Yes, the basket currently stands at about $150 million.

As I said, we completed the 2010 plan, and there are obviously -- at this time when we look out into 2011 would appear there is liquidity for us to execute a share repurchase program.

And we will get to that announcement with some precision when we do our year-end call in February.

Great, thanks very much, and congrats on the quarter.

Thank you.

Well, Lamera, thank you very much, and thank you all.

I know there are other earnings calls that are actually already going on, so we appreciate you taking time to listen to the NRG story.

Thank you very much.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.