NRG Energy Inc (NRG) 2010 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to the fourth quarter and full year 2010 NRG Energy earnings conference call.

My name is Deanna and I will be your Operator for today.

At this time, all participants are in a listen-only mode.

Later we will conduct a question and answer session.

(Operator Instructions).

As a reminder, today's conference is being recorded.

I would now like to turn the call over to your host for today, Nahla Azmy, Senior Vice President of Investor Relations.

Please proceed.

Thank you Deanna.

Good morning and welcome to our fourth quarter and full year 2010 earnings call.

This call is being broadcast live and 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 also be available on our website.

This call, including the formal presentation and the 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 on the conference call.

In addition, please note that the date of this conference call is February 22, 2011, and any forward-looking statements that we made 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, the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's press release and this presentation.

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

Thank you, Nahla.

And good morning everyone and welcome to our year-end 2010 earnings call.

Today with me and participating in the presentation is Mauricio Gutierrez, the Company's Chief Operating Officer, and Chris Schade, the Company's Chief Financial Officer.

Also with me today and available to answer questions are Jason Few, who runs NRG's retail company Reliant, and Chris Moser, who runs the commercial operations function for this Company.

So without further ado, to begin.

So ladies and gentlemen, current and prospective shareholders of NRG, as we speak today it has now been 32 months since natural gas prices began their relentless fall.

And the economy at large entered into a great recession, the likes of which I'm sure none of us wish to experience again in our lifetimes.

Yet the financial performance of NRG during this period has been superb.

And that financial performance has been built on the foundation of an equally exceptional operating performance across all phases of our operations and across all our regions.

In 2010, the second full year of the Great Recession, our financial performance surpassed all previous years of Company results, save for fiscal year 2009, which was of course the first year of the Great Recession.

A year in which we performed spectacularly, achieving both record financial performance and the acquisition of Reliant.

While I am, for the most part, extremely pleased with both the Company's financial and its operating performance during 2010, I am acutely mindful of the fact that NRG shareholders did not see any of the benefits of our exceptional performance in share price appreciation during that year.

As a management team, we recognize that we have a long way to go in presenting NRG's present value and future potential to the market.

In this presentation and in subsequent presentations that Mauricio, Chris and I will be making during the spring investor relations season, we intend to make a concerted effort to explain the NRG value proposition.

From the competitive strengths of our core businesses even in a low commodity price environment to the meaningful and measurable value of our growth opportunities, as well as our effective for risk mitigation in areas which we believe to be of concern to the investment community.

But starting with 2010 as summarized on slide three, the Company continued to generate a very high level of EBITDA in excess of $2.5 billion, and also throw off a substantial amount of free cash flow.

Indeed, in regard with what should perhaps be the most important metric to shareholders, free cash flow yield, our free cash flow yield for 2010 was a robust 29%, making our seven-year average exceed 23%.

And in response to some people who have said that we should measure free cash flow for [these purposes] after both maintenance and environmental CapEx, we have done it in that way but before growth CapEx.

A substantial amount of that free cash flow yield was redeployed back to stakeholders in the form of debt repayment and through our 2010 share buyback program, and also into various growth initiatives which we will discuss in a minute.

But over $650 million of excess free cash flow was returned as cash into the Company's coffers with the resulting that our liquidity position at the end of 2010, $4.3 billion of total liquidity with $3 billion of cash on hand is stronger than it has ever been.

It has always been my position that, next to safety, the most important thing we do as executive management at NRG is capital allocation.

And given the amount that we're investing on an annual basis, and the record amount that we currently have available either to invest in growth or to return to our equity debt stakeholders, capital allocation has never been more important than it is now.

As such, I'm going to focus the greater part of my remaining remarks on capital which we expect to invest in our growth initiatives in the months and years to come.

Chris will focus a good deal of his comments on capital to be returned to stakeholders.

In terms of the allocation of capital to our growth initiatives, it is important to start with the obvious point that we want to invest the Company's capital in assets and initiatives that not only are likely to yield a return significantly in excess of our risk adjusted weighted average cost of capital, but also in businesses and initiatives which advance the Company's strategy.

As depicted on slide four, the Company's long-term strategy for some time has been [twin tracked].

First, to strengthen and enhance our generation to retail business in our core markets through superior operating performance, continued implementation of our first lien-enabled, long-term hedging program.

And pursuit of both select acquisitions and the repowering of our older facilities with advantaged locations inside load pockets in our core markets.

This component of our strategy, which we have pursued with relentless consistency and a high degree of effectiveness for the past five years, was joined a couple of years ago with a supplemental strategy that is overtly green and designed to take advantage of the societal trend toward sustainability.

This sustainability trend is, in our opinion, about to accelerate as a result of the emergence of various consumer-oriented disruptive technologies which will make clean energy at the consumer level the focal point of sustainability.

We made considerable progress on both strategic fronts during 2010, with substantial advances across every facet of our sustainability initiative.

From our rollout of our eVgo network in Houston, which is centered around an innovative fueling package and approach to electric vehicle infrastructure that is already being replicated in other locations, to the smart meter e-Sense applications now being sold by Reliant in quantity, to our unique approach to CCS/EOR being funded in collaboration with the DOE at our Parish facility in Texas, all of these initiatives are exciting and off to a good start.

All will, I am confident, return considerable value to NRG shareholders in the medium term.

You will hear more about these initiatives in the future.

But not today, because today, consistent with my theme, I want to concentrate my comments on the growth initiatives which are more immediate and which are key priorities for deployment of your investment capital during 2011.

This is shown on slide six.

By way of background, in 2010 we committed substantial growth capital in four general areas -- zero carbon renewables with an emphasis on solar, new advanced nuclear development, conventional gas fired acquisitions and repowerings and green retail acquisitions in the form of Green Mountain Energy.

All four are likely to be areas of additional capital expenditure in 2011, but with very different investment profiles from 2010.

First, we expect an acceleration in significant expansion in our equity capital invested in high growth, high return solar projects [as the] greater part of our utility scale solar portfolio should achieve financial close and enter the construction phase during 2011.

Second, investment in conventional generation assets should be relatively flat year on year as spending on GenConn and Cottonwood should give way to spending on El Segundo.

But conventional CapEx could increase depending on our development success at Astoria, [Swaharo] or Encina and also whether we find any strategic assets that could be acquired at value.

Third, capital invested in Green retail should drop precipitously as obviously the big expenditure in this area in 2010 was the acquisition of Green Mountain.

The amount of capital that we will be investing in and around Green Mountain's business in 2011 or to expand into new geographic markets, bigger customer segments and new complementary green product offerings is fairly minimal.

And finally and similarly, and perhaps contrary to popular investor belief, even if the STP nuclear development project stays on course, the development capital projected to be required of NRG in 2011 will be far less than half of what we invested in 2010, and will be a mere fraction of what we will be investing in solar projects and other capital allocation alternatives.

So this was a lot to digest, so let's go through it a little bit more slowly starting on slide seven with Green Mountain.

Four months ago we paid $357 million for a business that we expect to contribute $70 million, $80 million of EBITDA in 2011.

Plus, we expect Green Mountain to continue to deliver on the 20%-plus compound annual growth rate trajectory that they have delivered for the past decade.

But we did not acquire Green Mountain just to continue with business as usual.

We wanted to take advantage and we wanted them to take advantage of what we believe are very substantial synergies between Green Mountain and NRG.

Essentially, we want Green Mountain to accelerate the depth and breadth of their growth in close cooperation with us on the same path that they were following on their own, which means expansion into high retail price Northeast markets where they start with a natural green-leaning constituency.

Also expansion into the larger commercial segment of the C&I market than they have previously sought to access, and finally expansion of their value-added product offerings to include distributed green generation.

It's early days yet.

But at least on the first two of these, they are already beginning to bear fruit.

Green Mountain has established a small but fast-growing footprint in New York Zone J.

And in terms of larger C&I customers, they have won landmark business like the Empire State building.

We expect to be reporting on these and many more successes from and with Green Mountain as the year progresses.

Turning to conventional generation on slide eight, 2010 was an uneven year with the successful acquisition of Cottonwood and the repowering of Devon and Middletown, balanced by the missed opportunities surrounding Dynegy's California assets.

Cottonwood and Devon have been smoothly integrated into our South Central and [knee pull] lineups respectively, and we're very pleased with the results today.

Looking forward to 2011 we're very focused on the successful repowering of El Segundo and the benefits which we hope to derive from having a modern, fast start, low heat rate, combined cycle plant inside the Los Angeles Basin load pocket.

Beyond El Segundo we hope to make progress on similar repowering efforts at Astoria in New York City and Encina in San Diego County.

Beyond our own repowering pipeline, the capital we deploy in the acquisition of conventional power plants obviously will depend on market conditions and asset availability in our core regions.

While the acquisition market is lumpy, generalities are difficult, predictions are often proved wrong, the optimism I once held that the first half of 2011 would be a buyer's market for CCGTs in the United States has largely dissipated.

I see no signs of a flood of assets on the market.

And the combined cycle transactions which have been announced recently have been priced at levels significantly above what we could justify to ourselves or explain to our shareholders.

With respect to our nuclear project, while important steps forward have occurred in several areas since our last earnings call, very little of it can be seen with the naked eye.

As before, really all critical aspects of the STP 3 and 4 project run off of our receipt of an acceptable conditional loan guarantee from the government.

Certainly it is a challenge for us to complete meaningful discussions about PPAs with potential offtakers while the loan guarantee application remains pending.

So our exit ramp analysis, which is set forth on slide nine, remains largely unchanged from the previous quarter.

Likewise our viewpoint with respect to NRG's continued participation in the project remains that the most challenging of these hurdles, which is the long-term offtake requirement, effectively needs to be addressed no later than the third quarter 2011 before the project enters the substantial pre-construction phase.

As such, we reiterate the view, which is clearly articulated in both our 10-K and in today's earnings release, that NRG will be in a position by late this summer to make a final decision on our continued financial participation in this project.

At that point the market should have substantially greater clarity about the prospects of this project and NRG's role in it.

While we understand that there is skepticism among some investors that the project can go forward in the current low gas price environment, we nonetheless believe that might be helpful to you for us to outline as shown on slide ten the future capital commitment of NRG in respect to this project, should it stay on track with NRG continuing to support it financially.

The overall message is that due to a combination of, first, the very substantial sum that NRG has previously committed to the project development particularly during the first half of 2010 after the settlement with CPS.

Second, taking into account our expectation of an optimal hold amount in the project for NRG of approximately 40%, which is down from the 67% that we will own if and when TEPCO invests in the project post loan guarantee award.

And third, due to the value ascribed to our NRG for its contribution of this site, NRG's cash commitment to the project on forward is less than would otherwise be suggested by our projected ownership level.

In summary, should the project proceed to financial closing, the total cash commitment for NRG at our 40% hold level should be something just short of $800 million in aggregate including cash invested to date.

Beyond that we're likely to have an LC commitment to a standby equity cost overrun facility that will be fixed.

And while that number has not yet been finally fixed, you should be thinking in the range of a few hundred million dollars maximum.

In exchange for this size investment in STP 3 and 4, we expect cash flow from dividends and tax benefits in the range of $500 million a year for the first several years of operations.

Obviously this is a very attractive return, but one which we believe is well justified given the extraordinary challenges of the undertaking.

Now, pulling it back from where we hope the project will be in 2016 or 2017 to where we are here in the first quarter 2011, you should be focused on what happens after announcements of acceptance of the loan guarantee.

As the loan guarantee acceptance announcement will trigger certain funding obligations from our partners, NRG's share of cash development spend for the remainder of the development phase should approximate $50 million for all of 2011 and half of that for 2012.

While our prospective 2011/2012 development spend is perhaps substantially less than many in the market we're anticipating, it remains a lot of money to us.

And we're taking very seriously our commitment to retain our financial discipline around this project and prevent exposure of our balance sheet beyond the specific commitments that I've outlined in this presentation.

Now turning to slide 11, last but certainly not least there is the solar pipeline.

I've said many times and I will repeat here that in my 20 years in this business, I've never seen investment opportunities in the sector that offer a more attractive combination of high returns, low construction risk, long-term PPAs and repeatable business opportunities than the utility sized solar projects that we currently have in our advanced development portfolio.

As such, we intend to do as much of this business which we can get our hands on.

With the result being that, by the end of this year, we may well have a total initial equity investment in our solar portfolio that exceeds the total amount that we may ever invest in STP 3 and 4, and at very attractive near term returns.

The limiting item for us in terms of these solar investments is our ability on our own to make optimal use of the considerable tax benefits which will be generated by these projects.

This is a topic that Chris Schade will discuss in a few minutes.

What I will end by saying is that this extraordinary pipeline of utility sized solar projects, which our colleagues at NRG Solar have managed to develop or acquire, provides us with a truly unique opportunity to develop over the next few years a solar portfolio of true scale and significant benefit, even in the context of the larger portfolio of NRG.

Ultimately, however, we fully recognize that the current generation of utility sized solar and wind projects in the United States is largely enabled by favorable government policies and financial assistance.

It seems likely that much of that special assistance is going to be phased out over the next few years, leaving renewable technologies to fend for themselves in the open market.

We do not believe that this will be the end of the flourishing market for solar generation.

We do believe it will lead to a stronger and more accelerated transition from an industry that is currently biased towards utility sized solar plants, to one that is focused more on distributing even residential solar solutions on rooftops and in parking lots.

We already planning for this transition now within NRG, so that any potential decline in either the availability of utility sized solar projects, or in the attractiveness of the returns being realized on these projects will be exceeded in aggregate by the increase in the business we are doing on smaller distributed and residential solar projects through our Green Mountain and even our Reliant sales channel.

With that, I will turn it over to Mauricio.

Thank you David and good morning everyone.

NRG continued its strong operating and commercial performance during the fourth quarter, making 2010 one of NRG's best years.

Slide 13 highlights a few of these key accomplishments achieved in 2010.

Starting with safety, we're particularly pleased with our record performance this year.

Our OSHA recordable rate improved 26% over 2009.

Our [fleet] performance remains strong with 90% availability of our baseload fleet, just shy of our 2009 level.

This performance was achieved despite the forced outage of our STP nuclear plant in November which I will cover in more detail in the next slide.

On the environmental front we delivered our second best year and our [4 NRG] program far exceeded our 2010 goal.

As I mentioned to you on our last call, controlling our costs is a priority given the challenging economic environment our industry is facing.

Our commercial operations group increased our hedge levels in 2011 and continues to look for opportunities to catch the out years of favorable prices.

We successfully transitioned to the (inaudible) marketing (inaudible) and began integrating Green Mountain Energy and the Cottonwood combined cycle plant into our portfolio.

In respect to our projects under construction, the Indian River Unit 4 environment backend control project continues to be on track and on budget to be operational by January 2012.

Our Middletown project in Connecticut received all major equipment in the fourth quarter and continues to be on schedule for operation this summer.

Finally, El Segundo Energy Center completed aboveground demolition of two existing units and secured major equipment orders.

El Segundo is on track to be operational by the summer of 2013.

Turning to our plan performance metrics on slide 14, safety continues to be our number one priority.

We're very proud to report that we achieved top deciles in the industry, making 2010 our best OSHA recordable year.

We have 25 sites with no injuries and nine sites certified or recertified as OSHA DTP Star Award sites.

Net generation decreased by 6% in the fourth quarter due to mild weather across Texas and a 22-day unplanned outage at STP Unit 2 during the month of November.

The forced outage event was a result of a breaker major failure during routine testing and was extended to repair a reactor cooling pump seal.

In order to prevent recurrence, similar electrical components were checked in both units.

Unit 2 has operated without any issue since it was brought back to service on November 26.

For the full year, net generation was flat from 2009 levels.

Increased duration in the Northeast and South Central regions, driven by the strong summer weather and the addition of Cottonwood, were offset by lower generation in California and Texas.

For 2010 our coal fleet availability finished the year above the top quartile performance levels in the industry.

WA Parish led the fleet with 92.6% availability factor.

And Limestone had the best reliability for the year with a 1.6% forced outage rate.

Our four NRG 2.0 programs exceeded the 2010 goal by $49 million and it is on track to achieve our goal of $150 million by 2011, one year earlier than planned.

Savings were achieved through a combination of reliability, capacity and efficiency improvements at generating assets and cost savings across our corporate and regional groups.

Turning to our retail operations on slide 15, we closed out the year with another strong quarter.

Volumes and energy margins were consistent with our forecast while operations delivered better than expected asset management and lower operational costs.

The Mass segment continues to drive significant improvement in net customer attrition with a 57% reduction in the fourth quarter versus 2009.

This result was driven by marketing, sales and introduction of innovative products to meet our customer needs.

In 2010 we led Texas in innovation, enrolling over 175,000 customers on our Reliant e-Sense product and services that utilize Smart Grid technology.

We also introduced new unique offers like (inaudible) and home protection products, adding not only incremental EBITDA but increased customer stickiness.

We continued to maintain the lowest PUC customer complaint rate while balancing customer count and pricing.

Throughout 2010 Reliant successfully demonstrated that it has stabilized customer attrition and expects to achieve zero net attrition in 2011.

In the C&I segment both renewal and new deal win rates continue to improve.

We have expanded our business in several Northeast states where we can leverage existing NRG assets and increase product offerings to include products such as backup generation.

This provides a solid platform to grow our business in 2011.

Business continues to show some fundamentals as you can see on slide 16.

Weather-normalized demand grew by 2% year on year, and ERCOT set a new winter peak load of 57 GW in February.

An increase of almost 2.5% from the previous record.

I would like to take this opportunity to address the events in Texas on February 2.

The men and women of NRG Texas worked very hard to help meet the high demand for electricity due to the extreme cold conditions, increasing our generation by more than 60% [from] the previous day.

Although we had some operational issues, of the approximately 9500 MW of power we had available in Texas during the [load share] event, we maintained between 97% and 91% of that capacity online.

I want to thank all our employees in Texas for their dedication and extraordinary efforts during these events.

Now moving on to reserve margins and ERCOT, we see a positive picture of our generation portfolio with reserve margins tightening faster than expected.

This is to some extent reflected in the forward heat rates, as you can see in the chart in the lower right-hand corner.

We believe this trend will continue given the robust load growth and the expectation that asset retirement will outpace new build.

We have not seen as much [auto gas] switching in Texas as we have in the Northeast and Southeast regions.

In fact, gas generation was down year-on-year due to increases in [new pull and regeneration] in Texas.

In the Northeast, capacity markets continue to make some news.

In New York the recent FERC order to increase cost of new entry should provide a boost to capacity prices in New York City and rest of the state, benefiting our New York portfolio.

In PJM prices remain uncertain until more clarity is given around the minimum offer price rule, the subsidized generation in New Jersey and Maryland, and [review] demand outlook.

Moving onto slide 17, you can see our detailed plans to control air emissions for each of our coal plants.

As stated in our last earnings call, our plan is to invest approximately $720 million through 2015 in environmental projects [stated] to comply with future regulations.

Just to remind everyone the proposed [failure rule] does not require additional capital for compliance.

The hazmat proposed rule should be released in mid-March.

And as you can see in the table our [plant considers] mercury controls on all our coal units.

Intake qualifications and repowering are expected to meet (inaudible) [cooling] requirements.

We only have dry fly ash disposal at our [all-coal] facilities.

And finally, in most of our facilities we burn low sulfur, low chlorine TRV coal.

Moving onto our hedge profile and commodity sensitivities on slide 18, our baseload portfolio is now 100% hedged in 2011 and 50% hedged in 2012, providing good protection in the short term where gas prices continue to be weaker given the oversupply situation.

Beyond 2012 we choose to remain significantly open.

After two years of low gas prices we believe the downside risk is limited.

Our combination of incremental demand from the power sector, particularly in light of possible coal plant retirements, some signs of [drilling restraint] by producers, indications that drilling (inaudible) acreage may be ending, and a move from dry to wet gas production will provide better opportunities to hedge our baseload portfolio in the future.

With respect to retail, we have increased our [pipe] load to 66% in 2011 from 57% in the third quarter.

We continue to match as much generation load as possible to strike maximum synergies between our retail and (inaudible) portfolios.

Our power and coal hedges continue to be well managed in 2011 and 2012.

Given the shape of the coal curve and steep contango, we have not added any additional hedges since last quarter.

We also remain well hedged in terms of [cost transportation] now for some time.

Our sensitivity to commodity prices is negligible for 2011, with 2012 to 2015 largely unchanged from last quarter.

Let me remind you that this sensitivity is around our baseload portfolio.

If heat rates expand, our portfolio is well-positioned to benefit, particularly in the Texas and South Central regions.

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

Thank you Mauricio and good morning.

Beginning with the financial summary on slide 20, full year 2010 adjusted EBITDA was $2.514 billion, just shy of the record 2009 adjusted EBITDA of $2.618 billion, and within our previously stated guidance of $2.5 billion to $2.55 billion.

As a result of our continued strong operating performance, adjusted cash flow from operations for 2010 was robust at $1.76 billion.

The Company's liquidity position at year-end, excluding funds deposited by a counterparty, stood at nearly $4.3 billion -- a $458 million increase from December 31, 2009 liquidity of approximately $3.8 billion.

Our cash balance at year-end 2010, available for both working capital as well as our 2011 capital allocation program, was approximately $2.9 billion.

Now, turning to a summary of our 2011 guidance and capital allocation plan.

First, we reaffirmed the preliminary 2011 EBITDA guidance range of $1.75 billion to $1.95 billion.

Second, and as part of our 2011 capital allocation program, we are planning to repurchase $180 million of common stock and complete $240 million of term loan debt repayments and $39 million for additional facilities, all of which is consistent with NRG's commitment to return excess capital to its stakeholders.

Third, in 2011, in addition to the amounts deferred from 2010 as a result of extending the cash grant availability, we're currently planning to commit an additional $640 million of net investment to advance our repowering and renewable development program, particularly utility scale solar.

Now turning to a more detailed review of 2010 adjusted EBITDA results on slide 21.

The Company reported near record results of $2.514 billion adjusted EBITDA, only $104 million lower than the 2009 adjusted EBITDA of $2.618 billion.

These results were achieved despite the decline in forward prices across all of our regions, and clearly benefited from our wholesale generation hedging program and the continued strong performance of Reliant Energy.

During the year, Reliant Energy contributed $711 million of adjusted EBITDA.

Comparatively, these results are lower by $158 million from 2009 as we [override] for only eight months of that year.

The year-on-year decline was driven by an 18% decline in Mass margins, which were the direct result of price reductions enacted following the acquisition, as well as lower margins on customer renewals and new customer acquisitions reflective of the competitive market.

All told, for 2010 Reliant saw net customer attrition rates improve to 0.4% from 0.7% in 2009, with total customers at year-end steady at 1.5 million.

The wholesale business, meanwhile, generated $1.8 billion in adjusted EBITDA, $173 million lower as compared to a record 2009 EBITDA of $1.976 billion.

The comparative year-to-date decline is largely explained by a 32% drop in baseload hedge prices in the Northeast, as well as lower margins in Texas caused by a 16% increase in fuel costs due largely to higher coal transportation costs at our WA Parish facility.

These results were partially offset by an increase in adjusted EBITDA of $28 million from the South Central region due to increases in generation and contracted sales.

Also increasing adjusted EBITDA were newly acquired assets including Green Mountain Energy, Cottonwood, Northwind Phoenix, South Trent Wind Farm as well as a full year of operations from the Blythe Solar project.

For the fourth quarter the Company reported adjusted EBITDA results of $444 million, a $45 million decline versus 2009.

Reliant Energy contributed $117 million of adjusted EBITDA compared to $104 million for the fourth quarter of 2009.

Reliant's quarterly results were favorable $13 million driven by an improvement in operating costs, primarily due to better customer payment habits as related to a decrease in bad debt expense.

In the fourth quarter 2010, our wholesale generation business contributed $327 million of adjusted EBITDA, a $58 million decline compared to fourth quarter 2009.

The change in results can largely be attributed to the following items.

In the Northeast region 35% lower hedge prices and a 25% decrease in generation resulted in a $57 million decline in energy margins quarter over quarter.

The decrease in generation was largely a result of coal bed natural gas switching.

And offsetting this decline in energy margins were favorable year-on-year operating and maintenance expenses of $13 million.

In Texas, the 10% decline in generation at the Limestone and WA Parish facilities due to lower power prices and reduced demand led to a 6% decline in overall generation for the region.

Offsetting this decline were favorable year-on-year operating expenses of $17 million that included gain on land sales of $6 million in 2010.

Now turning to slide 22, as I mentioned a moment ago, total liquidity at year-end 2010 excluding funds deposited by hedged counterparts remained strong at nearly $4.252 billion.

Total cash stood at $2.959 billion, an increase of $653 million as compared to the 2009 year-end cash balance of $2.3 billion.

The drivers of the cash increase included adjusted cash from operations of $1.76 billion and debt proceeds of $1.317 billion.

These increases were offset by several items.

First, five completed acquisitions totaling about $1 billion which included $507 million for Cottonwood generation station, $357 million for Green Mountain, $100 million for Northwind Phoenix, $32 million for South Trent Wind Farm and for the US solar portfolio 720 MW of development projects in nine states, and California and Arizona.

Second, debt and fee payments totaling $813 million, including term loan B payments of $453 million and a repayment of the common stock fund or CSF of $190 million.

And third, capital expenditures excluding [NINA] of $445 million, including $199 million of maintenance, $184 million of environmental primarily rated to the Indian River air quality control system project, and $62 million of growth investments.

For the full year we made cash contributions to NINA totaling $170 million primarily in the first half of 2010.

And finally we completed share repurchases of 8.5 million shares totaling $180 million.

Now turning to 2011 guidance on slide 23.

Our EBITDA guidance remains unchanged from the November 24 range of $1.75 billion to $1.95 billion.

Included in this guidance range are wholesale expectations of $1.2 billion to $1.3 billion, retail expectations of $480 million to $570 million and Green Mountain of $70 million to $80 million.

As Mauricio discussed earlier, we are about 100% hedged on our baseload generation for 2011 and are thus comfortable with our forecasted results.

As we look forward to our wholesale business in 2012, we're currently [in excess of] 50% hedged but at a higher average price than 2011, as indicated in our SEC filings.

Due to this position and based on the current forward curves, we expect flat to marginally lower year on year wholesale results in 2012 from 2011.

These results will be supplemented with adjusted EBITDA of $85 million from our repowering and solar investments in 2012 that are not subject to market fluctuations.

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

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

Reliant C&I margins are also expected to decline slightly, but be directly offset by higher terawatt hours served, reflecting our continued dedication to this growing client base in both Texas and PJM.

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

We're very excited about enhancing the growth prospects for our green energy retail business and are in the process of integrating the business with our growing renewables portfolio to enhance these future growth prospects.

During our Q3 earnings call we discussed the 2011 free cash flow guidance of $425 million to $625 million.

And we now currently anticipate free cash flow for 2011 to be in the range of $150 million $350 million.

The difference in guidance is largely explained by certain timing of solar projects due to Congress extending the availability of cash grant for renewable projects through 2011.

NRG postponed its large investments of solar projects from 2010 to 2011, resulting in $267 million of solar expenditures pushed into 2011 and relates primarily to our Agua Caliente, Ivanpah, and CVSR solar projects.

As we often like to emphasize, we're in a strong cash flow position.

And based on Friday's closing stock price of $20.89 and our affirmed outlook, free cash flow before growth yield currently stands at between 16% to 20%, or $3.36 to $4.17 per share.

Slide 24 shows the Company's projected 2011 year-end cash position which we project to be about $2.5 billion.

Beginning with a portion of the capital allocation plan that includes share repurchases and debt repayments in 2011, the Company intends to repurchase $180 million of common stock, which is within the constraints of the restricted payments basket.

Repay $240 million of debt related to our term loan B agreement and approximately $39 million at other facilities.

It is important to note that the Company made a term loan B prepayment in November that totaled $200 million.

And finally, complete $907 million of capital allocation in the following projects.

$50 million in NINA, $219 million for other repowering back investments including El Segundo, GenConn Middletown, eVgo, Texas Reliability and Princeton Hospital, and $638 million for solar projects net of cash grant proceeds and including the $267 million of deferred payments from 2010.

During the third quarter conference call I also mentioned that we usually maintain a minimum cash balance of $700 million, largely for working capital, margin requirements and timing of cash payments of interest, property taxes as well as equity for projects we have under construction throughout the year.

Thus in 2011 we estimate a balance of just over $1.8 billion to allocate between perhaps additional share repurchases contingent on the restricted payments basket expansion, further investments of high growth opportunities and continued opportunistic management of our debt structure.

On January 11, the Company issued $1.2 billion of 7-5/8 senior notes due 2018 and announced the simultaneous cash tender for $1.2 billion of the outstanding 7.25 senior notes due 2014.

As of January 25, nearly $945 million bonds had tendered and the remaining $250 million will be redeemed by the end of February pursuant to the embedded call price.

As a result we've improved our debt maturity profile.

All of our public debt matures after 2016 and replaced a restricted covenant package with one permitting greater efficiency and flexibility to return value to all NRG stakeholders.

On a go forward basis, we will continue to monitor the embedded calls in the 2016 and 2017 maturities, and be opportunistic about replacing those bonds with less restrictive covenant packages, similarly to how we handled the 2014 maturity.

Looking at NRG's combined repowering and solar portfolio and our EBITDA contribution on slide 25, you can clearly see the benefit of the program with nearly $550 million of recurring contributions by 2015.

During the fourth quarter our El Segundo repowering project received final approval from the California Public Utilities Commission for a 10 year power purchase agreement with Southern California Edison.

Commercial operation is expected in the summer of 2013.

Our large utility scale solar projects will also begin to reach commercial operations between the summer of 2013 and the first quarter of 2014.

And these projects collectively are driving this EBITDA growth.

These solar investments are attractive for these high teens returns, very low construction risk, and offtake agreements of 20-plus years with highly rated counterparties.

We will continue to provide updates on the progress of these projects as they move into construction and operations.

As we continue to invest and grow our solar portfolio, it is important to highlight the cumulative economic benefits created with these projects.

Slide 26 shows how the combination of cash grant, [matrix] depreciation and strong cash flows from the PPAs for our projects result in a payback for our investment, in some cases by 2014, and retain stable cash flows for the remaining term of the PPAs.

Though we believe there will be a turnaround in the commodity markets, we're mindful of our ability to create enough taxable income for us to fully absorb tax benefits created by these solar investments.

There is clearly a limit of how much tax efficiency we can absorb in any one year before reducing the total project returns.

As such, to both minimize the tax leakage and enhance our returns, in 2011 we will pursue new equity investors for our solar portfolio who have both the appetite for tax benefits and seek investment to one of the largest utility scale solar portfolios in the world.

New equity investors would not only optimize our existing tax position, but allow us to continue to invest in future projects with higher returns.

We expect to launch this initiative soon and look forward to sharing the progress in the future.

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

Thank you Chris and thank you Mauricio.

So in conclusion, on slide 28 we put what we think are some of the value drivers around the investment proposition at NRG.

It starts with the fact that 2.5 years into the commodity price downcycle, it appears to us that the end is in sight.

The bottom of the trough has been reached and the only way to go is up.

When and how quickly gas prices will recover remains open to conjecture.

But the case for rising heat rates in our core market of Texas is clear and compelling.

And we have positioned our portfolio and our hedge book to benefit from that upturn.

Second, even in a political environment that has turned more conservative in the past year, market mandates for renewable generation -- and for solar power in particular -- remain well supported in both red and blue states.

And the result for us has been a fast-growing portfolio project that will contribute substantially to shareholder value creation over the short to medium term.

Finally, there's the inherent value unique amongst our peer group of wholesale generation combined with a leading retail position.

While we've executed to such great success in Texas together with Reliant, we're now in a position to replicate with Green Mountain in the fast-growing green and retail energy sector.

It is a bright future indeed.

And for all of us at NRG, we will strive to realize its (inaudible) on behalf of the shareholders of NRG.

So, Deanna with that, we would be happy to take some questions.

(Operator Instructions) Daniel Eggers, Credit Suisse.

Good morning.

David, I was just trying to marry off some of the comments you made about some of the solar investment opportunities.

If I look at slides 25 and 26, the cash investment and then the earnings contribution you guys showed there, is that based on the things that are in hand right now?

Or is there a -- assumption of the amount of incremental projects you would have to get signed this year to help get to those numbers?

I think what we're showing, Chris, correct me if I'm wrong, the Tier 1 -- which are projects which, my personal estimation, are ones that have 90%-plus chance of achieving financial closure.

Yes, that's actually correct.

Okay.

So these are things that are going to be in place.

And this will be less contribution than what you said in your comments earlier, David, about having equity investment in solar greater than what you would see in South Texas ultimately?

I'm sorry, Dan.

Say again.

This earnings contribution represents an investment less than what you think you could get too, from a solar perspective, based on your comments earlier in the presentation.

(inaudible) Well, there are more projects behind this portfolio.

I'm sorry.

Okay.

When do you see the opportunity this year to announce off projects?

And how would you see this sell down of equity go as far as changing the earnings contribution profile from these projects?

How much could you sell down do you think?

We're going to get down to how much we can sell down as we move through the process.

But very clearly any the amount we sell down will sort of be a pro-rata reduction in EBITDA.

So depending on how much we do, we will certainly let you know.

But we do believe that the sell down will allow us to provide incremental more equity into other projects we have yet to announce.

But which, as David said, are on the bubble given the benefits that -- from the government largess, which we think still exists but perhaps will run out in the next couple of years.

Okay.

Got it.

And those projects will also be assumed to have returns consistent with what we have seen to date.

Okay.

And I guess just one last question on South Texas.

David, if you could maybe just re-go through the numbers as far as how much cash you expect to throw off in the project.

And to clarify that contribution is based on kind of the pricing you would need to be able to receive in order to earn an economic return on that project.

Well, the -- so you're saying your (multiple speakers) you are actually looking forward to 2016 and 2017?

The -- yes, looking at page 10, through the first few years when we talk about receiving $500 million of cash, that is based on our view on where gas prices go.

Which is obviously some way up from where they are now, sort of in the $6 to $7 range.

Having said that, Dan, we have stressed the returns on a nuclear project from an IRR perspective sort of for $4.00 a gas perpetuity model.

And the IRR on the project would still be in double digits.

But obviously the higher gas prices, the better it would do.

But it works, the numbers work even in a $4.00 gas environment.

The reason that is the case is because obviously the tax benefits associated with the nuclear project, particularly the production tax credits, mean that through the first several years the nuclear project the economics are more driven actually by the tax benefits than they are by the price of electricity.

Do you see your IRRs working in $4.00 gas to the equivalent of a mid-30s power price, you would see the plant being economic?

In a $4.00 gas the plant is -- yes.

Again, it's a low teen return.

I'm not sure that you -- it is not the return we're seeking.

But it's not a single digit return or a negative return.

So --

Okay.

Got it.

Thank you David.

I appreciate the questions.

Ameet Thakkar, BofA Merrill Lynch.

Just Mauricio, you had kind of indicated that you kind of stood pat with hedging despite, I guess, some uptick in heat rates in Texas.

And you also didn't do much in the way of coal as well.

Is your expectation that PRB prices should follow gas down?

Or are you guys a little bit more neutral on gas at this point?

If you look at our hedge profile, the next two years we're pretty well hedged on both sides -- power and coal.

We [can't] justify the contango that exists on the coal curve.

And given the inventories that we have and the hedge profile, we think we can weigh -- you know, to be more opportunistic about when to hedge the coal prices.

With respect to gas, we continue to see further declines in the front part of the curve -- which we have been pretty well insulated.

But as I mentioned in my remarks, I think when you look at 2012 and beyond and where those price levels are, we see very little downside risk from that.

And we think that there are several factors that are converging that could potentially move gas prices significantly higher than where they are today.

And then David, real quick on STP.

I just want to make sure I understood, I guess, some of your answers to the previous question.

So, you see the returns in kind of the teens area even at $4.00 gas for STP?

Yes, so the returns would be in the teens area in a $4.00 in perpetuity model.

Again, this is based on the idea that we're running a model where there is roughly 1000 MW of power sold by long-term contract and the rest is taken into the merchant market.

So the $4.00 gas would apply to the [2000] in the merchant market.

And yes, you're right.

What it shows is a return in the teens in that sensitivity.

I would also tell you, both in response to your question and I should have said to Dan.

Also, we run this with no value associated to the zero carbon aspect of it.

So a price on carbon directly or indirectly would be on top of this.

Okay.

And then -- so is like the 1000 MW of PPA cover, I guess, under that analysis -- is that really kind of the goal to kind of continue to move forward and not exit ramp [4] on slide nine?

Well, almost as a -- from the beginning I think that we have said to our investors that we, at least, would not proceed with the project unless there was a significant amount of long-term offtake associated with the project.

And so roughly 1000 MW has been something we've talked about from the beginning.

On top of that, the conditional loan guarantee, if and when it is announced, it's called a conditional loan guarantee because there are conditions associated with it.

And probably the most substantive condition -- the condition we would be focused on -- is that the government would require us to have approximately that same amount of long-term offtake agreement contracted.

Which was a condition, again, that we were happy to agree with the government on since we had said that we wouldn't go forward with it either.

So, that is why we would be doing that.

Thank you guys.

Ted Durbin, Goldman Sachs.

Good morning.

If I could just ask a little bit about the capital allocation.

You're actually coming out of 2010 here with a high cash balance.

I'm just trying to understand a little bit better the allocation of the capital towards the renewables and what not, maybe expanding that relative to returning cash to stakeholders.

Maybe if you just talk a little bit more about that?

Sure.

And as we've said we're committing to a $180 million stock repurchase.

And that is what is in the confines of our restricted payment basket.

We're also going to be making required debt repayments under our term loan program, term loan B program.

We've also earmarked a substantial investment in our solar projects.

These are projects which we had -- some of which were announced late last year and early this year and would be subject to the cash grant program as under the government.

So all of those projects, and repowering projects from El Segundo and GenConn Middletown.

But those are the programs, at least, that are part of the capital allocation program for this year.

That is what we have announced.

We've also -- we have $1.8 billion after which we would be able to deploy into additional repowering should they be available, and new solar projects that we see on the horizon.

As I said before, all of which offer us the opportunity for very attractive returns.

And just to add, Ted, I think you phrased the question almost as if it was an either/or, and I guess that maybe a little bit different.

Given that Company's free cash flow generation and the cash we have on hand, we haven't really seen it as either/or.

In terms of returning capital to shareholders through the share buyback, we do as much as we can under the restricted payment basket.

Over the past few years we have constantly evaluated whether or not we could negotiate a way to have more room to do more, but the expense of doing that has always made that impractical.

So, from our perspective, it has not been an either/or decision.

It's been -- do both.

That's helpful.

That's kind of what I was getting at, is kind of that cost of getting the ability to do more of a buyback.

You're still seeing that as not worth the expense of getting that.

That's right.

We think the expense to negotiate with the bondholders is being punitive.

As I said in prepared remarks, the approach that we took on the 2014 maturity to wait for the calls to come due, then to call away and refinance was, we felt, an attractive and cost beneficial way to do it.

We have calls coming up in February for the 2016 maturity which we will keep an eye on.

2017 are not yet callable; will be so within a year.

The high yield market remains very attractive from a financing perspective, so we will continue to look at that closely.

But just to further what David said, with the excess cash in addition to the $180 million as we said, we'll certainly consider future stock repurchases if they can fall within the confines of any expansion we see in our restricted payments basket throughout the year as well.

That's helpful.

If I could just follow-up and I appreciate the commentary on the asset side, it sounds like you're not seeing the values on the CCGT side that you were before.

But you did do the Cottonwood transaction.

Are there other holes in your portfolio where you say, we would clearly like to add some mid-merit assets.

Whether it is more in South Central or whatnot, kind of talk about where you would like to build up the portfolio.

I think the place would like to build up the portfolio -- and again we've been fairly -- well, it took us six years to execute on the idea that we needed a low following plant in South Central.

So just because I say this, I don't want to think any sort of announcement is around the corner because I'm actually skeptical that we can achieve anything.

But we would definitely like to have some more base to load following capability in PJM, particularly eastern PJM.

Having said that, we don't have any optimism about anything coming available in that footprint that we would find probably at a reasonable price.

But we keep our ear to the ground.

I would say that has been our [single] greatest priority, second to backing up Big Cajun, which we have now achieved with Cotton.

Okay, I appreciate the time.

Thanks.

Jonathan Arnold, Deutsche Bank.

My question is -- on STP you believe the option for the second 10% that TEPCO would take had a May expiration date on it.

We recall from the original 8-K.

Is there a similar date around the base 10% investment that is contingent on the loan guarantee acceptance?

(multiple speakers)

Is May a kind of drop dead date for that whole arrangement with TEPCO?

I don't believe there's a drop dead date.

And, John, Tokyo Electric well understands the pace of development.

I think their enthusiasm for -- I don't want to speak for them, but I think their enthusiasm for participating in this project is unchanged from when we announced the deal a year ago.

So, I don't remember any [sense of] date.

But I have a very high level of confidence that if the loan guarantee comes that Tokyo Electric will participate in the project.

Okay, thank you.

Can you also give us a sense of what is -- obviously your contribution is relatively small over this '11, '12 period.

What would the $25 million in '12 be, absent additional sell downs?

And maybe some sense of how much is actually being spent at the project itself during this next couple of years?

Well, the -- what it would be without the sell down, I will have to get back to you on that.

The amount of money that has to be invested towards notice to proceed is several hundred million dollars.

But Jonathan, it is really hard to put it in those terms because a good portion of it is long lead time materials in Japan, which are actually funded with the credit facilities from Toshiba.

So, maybe we can breakout and provide to you or do it next quarter, just the development spend from now to notice to proceed against the sources of capital.

Because it is really not useful to look at it as one lump sum because various things are paid for with different buckets of money.

Okay, if I might just on one other topic, what indications are you getting from DOE in these discussions of a level of hedging through PPAs that would be acceptable to them on the project?

I think the condition is very specific.

And I think back, it's the same as I answered to Ameet.

It's something just less than 1000 MW.

Okay.

Thanks very much David.

Jay Dobson, Wunderlich Securities.

Good morning, David.

There was hoping you could give us some insight into the offtake discussions.

The local media has covered some interesting transactions or at least proposals that you had.

I was wondering if you could give us some insight into sort of where things stand and what your level of optimism is currently.

It's a good question.

I think what I would say without -- I mean it's difficult to comment with discussions that are under way.

In fact, normally we don't comment on it.

But since, as you said, there's been discussions by the public, I guess I should say some things.

I would say first of all I think there's an openness, a willingness and interest on several load serving entities, large load serving entities in the Texas market to talk about long-term offtake.

I would also say that the events of early February in Texas, where part of the reason the state had brownouts or even blackouts is because people couldn't get gas to some power plants.

I think it has reinforced the idea that having fuel diversity in the state is something that load serving entities want to have.

So there is a fairly high level of interest from various parties.

But the big qualifier I always put on this question is, right now it is as you say; it is really a discussion.

The project isn't really real to offtakers until we have a loan guarantee.

So I would describe anything that we're doing with any counterparty at this point as being preliminary.

And so that is what I would tell you.

And based on what we're being told by the counterparties and their interest level, I'm guardedly optimistic.

But mainly, my main attitude towards all of this is -- let's wait and see what happens when the loan guarantee is announced, because that's when our sales and our counterparties are going to have to get down to business.

And people are going to have to make commitments on both sides.

So that is the main thing.

And what we're trying to emphasize here is that that phase, and hopefully that phase will begin within the coming weeks, is something that basically needs to be resolved by the summer so that we can all have clarity.

Us within the Company, you as investors and analysts as to where we stand vis-a-vis this project.

Thank you David, that's helpful.

As an unrelated follow-up, on the solar side, and I'm not sure this is good for you or Chris.

I assume in addition to selling an equity stake you would consider selling a tax equity there.

And how do you consider those two alternatives?

Yes, very much so.

I think equity stake that we're contemplating is tax equity.

It's a structuring issue.

But we are certainly looking to pass off the tax attributes that are generated from this portfolio to tax equity investors.

I think one thing, as a follow-up to a question before, is that we will certainly be looking to sell this equity at a premium.

The returns we are seeing perhaps from these investors are below the expected returns that we have seen in the high teens.

So that sort of premium or IRR arbitrage game will certainly benefit us in having a development premium for this.

So -- but our goal here both is to bring equity into these projects and also to lay off some of the tax that perhaps does not necessarily accrue to NRG.

Great.

And Chris, just last follow-up, the capacity of the RP basket at year-end?

It was about $160 million.

So the $180 million we announced today will be spread out for a couple of quarters.

Okay, great.

Thank you.

Brandon Blossman, Tudor Pickering Holt.

I guess just to follow-up on the tax equity question, probably for Chris.

Is this, just to be clear; is the tax equity partner or sell down required to optimize the tax benefits of the current solar portfolio?

Or is that something you need to do to increase the size of that portfolio?

I think it's not necessarily required.

I think it benefits the returns of the portfolio and allows us to continue to invest in the space.

As David said, we're seeing a lot of opportunities elsewhere.

And I think when we start to layer on other utility sized projects in addition to what we have, there is a limit to the capacity of tax attributes that we can assume.

So we think it is important.

We're seeing a lot of interest and opportunities to invest in this space by sort of non-traditional investors who want to get green.

And so we think it's a big opportunity for us -- who are certain taxpayers as well.

So it is for us to sort of check a lot of boxes along the way, first and foremost to optimize our tax position in appropriate years, as well as to allow us to continue to invest in this space.

And how does that dovetail with STP's tax attributes?

Is that far enough out so that there is no overlap here, or concerns about maximizing that value?

It is far enough out that were not perspiring about the tax attributes it generates.

But certainly is a topic that we will address in due time.

And it also would speak to our underlying business that we hope, and certainly think, will grow enough to (inaudible) through these NOLs and to continue to generate taxable appetite in those years.

So we're confident of that.

Thanks.

And David, as a follow-up, not that anyone wants this to happen, but if there is an exit ramp for STP, can you describe what that looks like?

Is there a project to be had at some point in the future given that this is a particularly attractive development project?

Well, what I would say on a few fronts.

It sort it depends on which exit ramp you're talking about.

And I'm just speculating on things which of course we don't hope to happen.

From my perspective, I think if something happens during this year that caused the entire project to go away, we would probably finish the licensing process -- which is a small fraction of the overall development spend.

But we are so far along with the NRC that to stop it this close to the end would not make sense.

But beyond that, would the project go forward?

I think it depends on which exit ramp it is.

Again, I don't mean to speak for the other partners because I want to emphasize to every NRG investor on the call, we do not have a right to kill the STP 3 and 4 project.

We just have the right to stop our own financial contribution to it.

But I would say if the exit ramp is that -- actually it turns out that there is no loan guarantee in the offing, I haven't actually asked this question directly.

But I think our partners in Japan and we would be aligned that there would be -- that the project would stop if there is no hope of a federal loan guarantee.

If, on the other hand, there was a federal loan guarantee but there was -- we were taking the exit ramp because we were unable to line up the offtake, I don't know what our partners would do in that circumstance.

Maybe they would continue with the project.

That would be their prerogative to do.

I just know that if we don't have that offtake arrangement, then we will stop funding.

And that would be -- not the 1000 MW, but isn't that predicated on the loan guarantee or the loan guarantee predicated on the 1000 MW?

It is.

But one of the reasons why I don't know -- I don't remember the exact terms, the exact words of the conditional loan guarantee.

But I know that we do not have the opportunity at NRG to solve for the offtake arrangement, because I think the condition is offtake agreements with investment grade offtakers.

Our Japanese partners who are investment grade would have that opportunity, should they so choose, to correct that on their own.

We don't have that type of power.

So that is not a question for us.

Got it.

Very useful.

Thank you guys.

Brian Chin, Citigroup.

Just a quick one, what is the rough range of construction cost estimates and dollar per KW for the solar PV facilities that you're seeing and also for the solar thermal side?

The range -- well, I think we would say the range right now is [3500 to 4000] per KW.

And I don't know that would be for the PV -- I can't tell you -- the solar thermal would probably be in the same range.

Okay.

And then would it be fair to say that $4.00 a sustained perpetual natural gas price environment that you would still see solar generating returns in the double digits as well?

And is it higher or lower than nuclear?

Well, we haven't compared them side-by-side.

But I think it is fair to say that like nuclear, the solar projects -- at this point the economics are very heavily driven by the tax benefits.

But beyond that, the real difference between the two is that every solar project we're doing is completely not merchant.

It's totally PPA.

So I don't think -- in fact, when we talk about taking the Company's financial performance and sort of de-linking it to natural gas prices, we put renewables together with retail in parts of our EBITDA stream that are not associated with natural gas prices, because of the fact that all of the economics are derived from long-term PPAs.

Right, right.

And then one related unrelated follow-up, can you just talk a little bit about -- from your perspective -- what the FERC's order in the New York ISO and the capacity market situation up there, kind of what has changed longer-term?

And how much of a positive is that for you guys or is it even material?

It is definitely material.

It is difficult to say what is the ultimate impact because I think the variables are still being flushed out.

But the three main changes was -- that FERC did was a reclamation of state taxes in the cost of new entry calculation, interconnection costs and then the energy offset.

So when you put those three together, you basically have higher cost of new entry, which will push capacity prices for both New York City and rest of state.

This will benefit our New York portfolio.

But at this point in time I can't give you the specific (inaudible).

Thank you very much.

Anthony Crowdell, Jefferies & Co.

Just a quick question on I guess the cold spell that hit Texas earlier this month.

It seemed like there wasn't much of an impact on the generation side.

But was there any impact to the margins that Reliant expected or anything on the quarter?

Hi Anthony.

This is Jason.

From the retail side we actually fared fairly well through this event.

Our hedging strategy and risk policies served us well during the event.

We did not see material impact to our business.

Great, thank you.

In the interest of time we have time for two more callers.

Charles Fishman, Pritchard Capital Partners.

Good morning.

Your five-year environmental capital plan, page 17, I want to make sure I understand this.

The $720 million includes your view of what the MACT might be, which is less than worse case, number one.

And number two is -- there no dollars in the $720 million to address once through cooling.

Is that correct?

No.

Actually there is some dollars for 316(b) through the installation of screens.

We've been very successful in New York and (inaudible) Dunkirk to address these issues.

So while it addresses the mercury and has mercury controls across all our coal assets but also addresses the 316(b).

If we do end up with a worst-case MACT, would this -- could this number increase 50%?

Or do you have any feel for that?

Well, we actually disclosed that from our last earnings call.

And I believe it is about $1 billion -- just shy of $1 billion if it was the worst-case scenario.

In terms of unit specific control, no averaging and we just don't believe the EPA will go that route.

But the rule is going to come out.

The proposal is going to come out in about a month and I think it is just prudent to wait before we make any changes.

Thank you.

So, operator, I think you said there was one more call.

There are no more questions in queue at this time.

Okay, well, good.

Thank you all very much and we look forward to talking to you in the next quarter.

Thank you operator.

Ladies and gentlemen that concludes today's presentation.

Thank you very much for your participation.

You may now disconnect and have a great day.