NRG Energy Inc (NRG) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to NRG's first quarter 2011 earnings conference call.

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

(Operator Instructions).

I would now like to turn the conference over to your host for today Nahla Azmy, SVP, Investor Relations.

Nahla, please proceed.

Thank you, Laura.

Good morning and welcome to our first quarter 2011 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 the link on the investor relation's page of our website.

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

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

In addition, please note that the date of this conference call is May 5, 2011, and 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 information and the most directly comparable GAAP measures and a 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.

Thank you, Nahla, and let me add my good morning and welcome to Nahla's.

Today, I am joined here by Mauricio Gutierrez, the Company's Chief Operating Officer and Chris Schade, the Company's Chief Financial Officer, and they will also be giving part of the presentation.

We are also joined by Chris Mosier who runs the Company's Commercial Operations and Jason Few who runs Reliant Energy, and both will be available to answer any specific questions that you have in their area.

As all of us here are cognizant of the fact that we took up a good deal of your time just a couple weeks ago discussing the STP 3 & 4 situation in light of the events in Japan, our prepared remarks are going to be unusually brief.

I am also going to be referring to a slide deck which I think is available on the website.

So as illustrated on slide three, to put it quite simply, we had a very good result in the first quarter of 2011.

$455 million of adjusted EBITDA ahead of our expectations, and even when adjusted for seasonality, a good start in our objective of achieving or even exceeding our full-year guidance range.

Our better than expected financial performance was underpinned by a very robust operational and commercial performance by both our core generation business and our two retail energy providers, Reliant Energy and Green Mountain Energy.

This robust performance was achieved notwithstanding long bouts of extreme winter weather experienced across our geographic footprint.

While I know that the conventional wisdom is that wholesale generators are expected to do well financially during periods of extreme weather, what we found during the weather events that gripped the Texas market in early February is that there is often a divide between that expectation and reality.

Reality depends on the dedication of hard working employees and on their successful execution, and I am very pleased to report that this winter, our plants and our people performed exceptionally.

Our retail load requirements were in aggregate properly hedged, and as a result, the Company and its shareholders did very well.

The first quarter was generally marked by weak natural gas prices and wholesale electricity prices which were unexceptional, but our results benefited substantially by the strong operating and financial performance of Reliant which delivered $151 million of adjusted EBITDA for the quarter.

I noted previously that wholesale generation usually does well during extreme weather events, conversely retail load providers often can do poorly.

In this regard, Reliant defied the conventional wisdom.

It performed very well operationally and financially during the February weather events, and that is a testament not only to the exceptional operating performance of Reliant's management and staff, but to the intrinsic benefit of NRG's combined wholesale/ retail business model.

Time and time again over the past few years, but perhaps never more vividly than this quarter, we have demonstrated the advantages of the integrative business model of matching retail to generation both in terms of commercial risk management and in terms of optimizing earnings and cash flow.

And from a cash perspective, the first quarter of 2011 was another in a long string of highly cash generative quarters for the Company.

This is important to us because, as we often say, this is how we manage NRG, and have managed through our seven years as a company; to maximize cash generation and to allocate efficiently and effectively.

The Company since the first quarter ended, executed $130 million out of our $180 million 2011 capital allocation program for share buybacks and repaid another $161 million of our outstanding debt as a result of the functioning of our mandatory cash suite.

Finally, on slide three, the first quarter also was an eventful time in terms of the future shape of our industry, not only the events at Fukushima, but the promulgation of the new EPA rules impacting coal plants, the enactment into law of the 33% renewable portfolio standard in California, the unexpected extension of certain federal tax credits for renewable generation and even the seemingly inexorable rise in the price of crude oil and gasoline, are all likely to have a profound impact on the future shape of our industry.

In part because Fukushima has impacted us quite directly, we have spent a considerable amount of time over the past months reflecting on these events, and considering their impact on our businesses and our opportunities.

Our conclusion is that apart from the actions we already have announced and implemented with respect to our nuclear development program, the rest of our strategy is more compelling than ever.

We are on the right tract both in terms of focusing on our solar focus renewable strategy, and in putting more time and effort into our conventional gas-fired repowering efforts in high-value locations within our core market.

And I am very pleased with the progress we have made in these two areas during the quarter.

With respect to our industry leading solar portfolio, we now have a clear line of site into the financing of nearly 900-megawatts of solar projects, all which will begin construction by the end of this year.

Most of these utility-scale solar projects are solar PV projects and all of them are being built with the benefit of long-term PPAs from either Pacific Gas and Electric or Southern California Edison.

Finally our big three solar projects, Ivanpah, California Valley Solar Ranch and Agua Caliente, have all but received, either a conditional loan guarantee commitment from the Department of Energy, or in the case of Ivanpah, already have begun to draw down their DOE loan.

With respect to conventional power generation, we now have 1,400-megawatts of gas plants either under construction, or with long-term contracts at Middletown in Connecticut, El Segundo in California and Old Bridge in New Jersey.

We have another 1,580-megawatts permitted at Astoria in New York City and Encino in California which are seeking long-term offtake arrangements in order to move forward.

In short, both with respect to renewables and conventional repowerings, we have an attractive growth pipeline with limited risk and strong double digit returns, and we see more opportunity in this area as a result of the pressure rising on incumbent base load generation as a result of the events of the past few months, and we are in a good position to capitalize on these opportunities.

We expect to provide more detail around both our solar and are conventional growth pipeline on our second quarter call.

Turning to slide four, I have often said the most important thing that we are directly responsible for as the executive management of NRG is capital allocation.

As depicted on this slide for the past seven years, we have deployed a lot of capital both from the substantial cash flow regularly generated by the Company, and from the external financing done in connection with the Texas Genco transaction.

We have been quite consistent in our approach to capital allocation, our focus having been on being balanced, prudent and disciplined while maintaining the ability to act quickly when attractive opportunities arise as we demonstrated both with the Texas Genco and with the Reliant acquisitions.

For the most part our approach has worked to the benefit of our shareholders.

Indeed in the first quarter of 2011, around 90% of the Company's EBITDA was generated by assets in businesses which we did not own when we started seven years ago.

Further, we have taken the occasion of the STP 3& 4 write-down to reassess our approach to capital allocation in light of the current circumstances and the risks and the opportunities of our industry.

While they are certainly are aspects of our approach which we are going to modify as a result of lessons learned, we are going to continue to emphasize, balance, discipline and prudency with a dose of opportunism when attractive situations arise.

What is missing and what has been missing is capital flexibility.

The restrictive covenants in our loan agreement simply make it impossible for us to allocate capital in the most efficient manner possible.

Of course, we and all of you on the phone have known this for a long time.

And indeed, we have attempted several times over the past years in various ways, and with varying degrees of success to ease the constraints on our freedom of action with respect to the Company's capital, but we have done so always guided by the fact that we need to gain that freedom of action in an economically rational way.

Today we have announced that we are already pursuing a debt refinancing package that is designed ultimately to give us much greater freedom of action with respect to the deployment of the Company's capital.

Chris Schade is going to speak in much greater detail about our approach to this refinancing and the overall plan.

So I simply want to point out, as shown on slide five, that the ultimate goal of this program is to put us in a position where we have the opportunity to use a good chunk of the Company's excess liquidity to increase the stake of the Company's existing shareholders and the extraordinary cash flow generation machine which is NRG.

Even in the currently subdued commodity price cycle, the Company is demonstrating a high teen free cash flow yield.

As we go forward, we want to have the able to protect and enhance that yield, not only by increasing free cash flow, but also by significantly reducing the number of shares outstanding.

This is one of the quickest and most certain ways in which we can clearly and demonstrably create incremental value for NRG's shareholders.

Over the next several months, we will provide you with regular reports on our progress in implementing that financial plan.

So now, I will turn it over to Mauricio.

Thank you, David, and good morning, everyone.

Turning to slide seven, we are off to a positive start in 2011 with both our wholesale and retail businesses delivering strong operating performances during the first quarter.

As David mentioned, the EPA provided much awaited clarity around environmental rules affecting our generation portfolio.

I will discuss those proposed rules in more detail in a moment, but the key takeaway is that we do not expect at this time any additional environmental CapEx beyond what we have previously announced.

With respect to our projects under construction, the Middletown project is in the final commissioning phase and we expect these units to reach commercial operation in June.

The Indian River back-end control project and the El Segundo Energy Center repowering project are progressing according to schedule.

Finally, the Ivanpah concentrated solar power project in California has started construction work and is expected to be fully operational in 2013.

As we have said in the past, the strong commitment to safety is a foundation to achieve superior operating results and the first quarter of this year is a clear example of that.

Starting with safety on slide eight, our OSHA recordable rate of .66 was well within top decile in our industry, making it one of our best quarters ever.

We had 35 sites out of 39 without a recordable injury in this first quarter.

Our overall net generation increased by 1.2-terrawatt hours driven primarily by higher generation in Texas led by STP, and the addition of Cottonwood to our South Central portfolio.

Generation in the Northeast was adversely impacted by lower coal dispatch in February and March.

Our basal plants performed exceptionally well improving on last year's availability and reliability metrics,particularly when needed the most during the severe weather event that struck Texas in early February.

The basal ability factor was over 90% and reliability, measured by forced outage rate, significantly improved compared to Q1 of 2010.

Our gas and oil fleet maintained their superior start reliability of 97% while increasing the overall number of starts from prior year.

Returning to our retail operation of slide nine, we delivered another quarter of strong financial results.

As we indicated on our last call, we anticipated bringing our customer count to net zero losses by the end of the year.

In fact this quarter, our net residential customer account grew by 11,000 since the end of 2010.

Reliant also delivered lower bad debt expenses, and our hedging strategy during the weather event in February was effective avoiding any negative financial impact.

On the residential segment, we continue to lead the market in Texas with innovative products and services that take advantage of smart meter capabilities, and we now have over 220,000 customers using at least one e-Sense product.

We are also well along in the process to launch a residential retail provider in the Northeast with intent to fully leverage the integrated energy Reliant model we have successfully executed in Texas.

The C&I segment delivered its strongest performance since the acquisition, and tripled high load compared to Q1 of 2010.

The C&I expansion into PJM has also proceeded well, and by the end of the first quarter the team had signed nearly 1-terrawatt hours of term business.

Finally, the last two years we have chosen to hedge the retail portfolio exposure to a hurricane via structured transactions.

This year we have made the decision not to ensure for a few reasons.

The distribution system has been strengthened by the [C&D companies] after Hurricane Ike.

The risk of selling back high-price supply at much lower prices has been reduced, and the cost of insurance has increased compared to last year.

Moving on to our market update on slide ten.

Texas continues to show strong fundamentals with demand growing by healthy 1.8% on a weather normalized basis in the first quarter.

ERCOT ended up setting a new winter peak low of 57-kilowatts in February.

On the supply side, we see little in terms of new generation and thus tightening our reserve margins should lead to high forward heat rates in Texas.

We have also seen several positive elements for competitive capacity markets in the Northeast.

In New York, FERC ordered an IESO to include property taxes and interconnection costs in its calculation of cost of new entry.

In PJM, FERC pulled the minimum offer price rule amendments and requires new generation to bid no lower than 90% of [net co].

Finally New England, FERC extended the price flow through 2016 and instructed the IESO to develop and minimum offer price mechanism similar to those used in PJM in New York.

All positive elements for our assets.

With respect to natural gas, prices have turned up, especially in the back end of the curve.

I believe there are many factors, particularly demand driven, that starting to change long-term market sentiments such as the prospects for nuclear power post-Fukushima, the incremental power demand from coal retirements and the possibility to export gas from the US.

As you can see on slide 11, we have taken this opportunity to increase our hedging in 2012 from 52% to 60% providing some downside protection where fundamentals continue to be vulnerable.

Beyond 2012, we remain on the sidelines given our fundamental view.

Retail increased their price load obligations by 13% in 2011 and 8% in 2012.

One of the benefits of our wholesale/retail combination is that we control when to vertically integrate the business and achieve maximum synergies, and when to decouple it and go-to-market.

This ongoing optimization translates into higher margins for our portfolio.

Our commercial group continues to focus on supporting our retail expansion in the Northeast and wholesale origination activities.

Just this quarter, we began serving two Arkansas cities, totalling 350-megawatts of peak load on our South Central region.

We will continue to build on our successes and the strength of our physical assets.

As I said in my opening remarks, March was a busy month for EPA.

It released a proposed utility MACT and 316b rules.

These rules combined with the Transport Rule issued last July bring much needed clarity and certainty for the electric industry's planning process.

I will just cover some of the highlights which are on slide 12 that allow energy to reaffirm its compliance strategy.

As you recall, the Transport Rule is the new cap and trade program for SO2 and NOx.

Important to our planning will be allocations, restriction on trading, and limited requirements in Texas.

The proposed MACT rule provides flexibility in that compliance can be achieved through facility averaging and Company-selected control technology.

It also recognizes the inherent differences in mercury emissions from lignite coal.

Finally, the 316b rule which addresses water useage does not mandate cooling towers.

These rules while providing some flexibility for compliance will have a significant impact in the power markets.

We continue to expect between 30-gigawatts to 40-gigawatts of capacity to be retired in the next few years.

So in terms of Energy's generation portfolio, in the past we have discussed that potential implications of the worst-case regulatory scenario with an incremental cost from our base plan of $900 million to $1 billion given that all three proposed EPA rules came within our expectations.

While we await the final rules we don't expect to incur any incremental CapEx and we are reaffirming our base capital investment of $720 million for compliance with current regulations.

Now I will turn it over to Chris for the financial review.

Thanks, Mauricio.

Beginning with the financial summary on slide 14, we are pleased with our strong first quarter results of adjusted EBITDA of $455 million and cash from operations of $216 million.

Reliant Energy continued to perform well and contribute $151 million of adjusted EBITDA in the first quarter.

Compared to the first quarter of 2010, Reliant's Q1 2011 results were approximately $40 million less, and largely explained by a combination of lower volume sold and lower unit margins on both newly acquired and customer renewals.

As Mauricio also discussed, since acquiring Reliant a primary goal has been to limit customer attrition and create new customer growth through a strategy of enhanced services and offerings.

During the first quarter and as a direct result of these efforts, Reliant experienced favorable mass customer growth with the addition of 11,000 new customers since year-end 2010.

During Q1, our wholesale generation business contributed $304 million of adjusted EBITDA and approximate $100 million decline compared to Q1.

Texas wholesale generation contributed $235 million of adjusted EBITDA, a strong performance in light of the challenging commodity markets, but weaker than Q1 2010.

The quarter on quarter decrease was caused by a combination of lower realized energy prices based on lower head prices and higher fuel transportation costs which drove a 15% decline in realized margins per megawatt hour.

Offsetting these declines were favorable quarter on quarter operating expenses of $14 million.

In the Northeast region, adjusted EBITDA declined $66 million due to a lower gross margin driven by a 25% decline in coal generation, lower hedge prices and a decrease in capacity revenues due to the expiration of RMR contracts in certain of our Connecticut plants as well as lower realized LFRM prices and volumes.

These decreases were partially offset by lower operating costs of $28 million, as we look to reduce regional costs across the board, but particularly at lower performing (inaudible)(technical difficulty).

The West and South Central regions benefited from higher capacity revenue and increased merchant activity and together contributed $42 million of EBITDA during the first quarter of 2011, a 17% greater number than Q1 2010 performance.

At this time, we are maintaining 2011 EBITDA guidance range of $1.75 billion to $1.95 billion, an increase in free cash flow before growth guidance by $175 million to a range of $1 billion to $1.2 billion.

Before turning to the next slide, I would like briefly to provide an update to our 2011 capital allocation plan.

We recently purchased $130 million of NRG shares, or 6.2 million shares at an average price of $20.87.

This leaves $50 million for additional purchases under the announced 2011 plan which will be completed before year-end.

We will also continue to consider the possibility of further share repurchases within the confines of our existing restricted payment baskets in our high-yield notes.

Turning to slide 15, total liquidity, excluding funds deposited by hedge counterparts remain strong during Q1 at about $4 billion which included total cash of $2.7 billion.

This healthy liquidity position permits ample room for us to continue to execute on our near-term solar development program as well as consider future capital allocation commitments.

Now turning to 2011 guidance on slide 16.

Although NRG has begun the year on a strong note, we are currently maintaining the 2011 EBITDA guidance, as I previously said, at $1.75 billion to $1.95 billion.

However, we were raising free cash flow growth by $175 million.

The increase in free cash flow guidance is directly a result of the increase in margin collateral received during the first quarter as well as a reduction of environmental CapEx caused by the issuance of tax exempt bonds associated with the Indian River air quality control system project.

It is our goal to provide greater clarity and performance by narrowing EBITDA guidance range throughout the year after Q1 since the summer weather conditions can meaningfully affect our performance.

Slide 17, I would like to explain our goals to simplify our existing capital structure, as David has previously stated.

This will undertaking will involve a 2-stage process and encompass our existing first lien facilities as well as those senior notes containing certain restrictive covenants.

Stage one is focused on our first lien debt and is expected to be completed around the end of Q2, early Q3 of 2011.

Our goal during Stage 1 is to issue a single $2.3 billion revolver to replace an existing $1 billion revolver and $1.3 billion letter of credit facility.

We also intend to issue a new 7-year $1.6 billion term loan B facility to replace two outstanding existing term loan B traunches.

Our primarily goal in this process will be to eliminate investment basket restrictions, cash flow sweep restrictions and mirror the covenant packages currently in the indentures governing our most recent bond issuances, and specifically, those in 2018, 2019 and 2020.

Second in Stage two, it is our goal to refinance the $3.5 billion of 2016 and 2017 notes over the coming 6 to 9 months.

The completion of this stage is consistent with our strategy of refinancing these bonds at respective call dates similar to the transaction we completed in January of this year in our 2014 maturity.

As part of this refinancing, we expect to replace restrictive covenant packages with a more flexible structure allowing us to return value to shareholders.

Furthermore, upon completion of the final refinancing, NRG will have a common covenant package across all debt maturities.

As a reminder, those common covenants of which I am referring to are governed by cash flow metrics rather than income which we believe is better aligned and more suited with how NRG runs its business.

The long-term benefits to NRG and it's stakeholders through successful execution of this debt restructuring are numerous.

First, there is an immediate improvement in the debt maturity profile that the nearest maturity of either our first lien debt or bonds no sooner 2016.

Second, the common covenant package will be aligned across the NRG capital structure permitting greater flexibility and a creation of a long range approach to capital allocation, both for a more efficient approach to the reinvestment in our business and/or return to shareholders.

We look forward to sharing our long-range and more predictable planning goals with you in the future as we complete this refinancing process, and work through future growth plans and capital requirements.

Now I'll turn it over to David for questions.

Thank you, Chris, and before we open the floor to questions, Laura, just one summary remark.

We have been asked many times over the past few weeks whether we plan any new strategic initiatives to take the place of nuclear development, and the short and simple answer to that question is, no.

Our strategy was and still is a multi-pronged growth strategy incorporating many initiatives which are designed to capitalize on what we see as being very attractive opportunities open to the 21st century power companies.

We think if we successfully execute on these initiatives, we will substantially enhance shareholder value in the years to come.

The dimmed prospects for the nuclear renaissance in the United States either have not affected our other initiatives, or in some cases they have actually enhanced the attractiveness of these other opportunities.

So our plan quite simply is to redeploy the time, energy and resources we were putting in to new nuclear development into -- and here people at NRG know that I am a big fan of alliteration, into the four Rs of renewables, repowering, repowerings retail and repurchases.

So with that, Laura, we would be happy to answer any questions that people have.

(Operator Instructions).

Your first question comes from the line of Brandon Blossman from Tudor, Pickering, Holt & Co.

Brandon, please proceed.

Good morning, everybody.

Good morning, Brad.

I know you have covered this in your prepared comments, but more detail (inaudible) (technical difficulty) on growth plans in conventional and renewable (inaudible) (technical difficulty).

I'm sorry, Brandon, the questions are what are growth plans are and conventional and renewables?

Yes.

You noted more details in second quarter, you also noted that the STP being off of the table doesn't change any plans, but at least reviewing your Brownfield Opportunities.

Well Brandon, the main thing on the renewables front is we don't have any new initiatives in terms of on-shore wind.

We have NRG Blue Water that's pursuing offshore, but that's a long process still.

I think it's overwhelmingly focused on solar, and we have this pipeline that we think will go into construction.

We will use the benefits of the cash ITC program that's available through the remainder of this year.

As I mentioned, that's close to 1,000-megawatts.

Beyond that we have a development pipeline.

It's earlier stage and so things can come and go.

But that could be another 2,000-megawatts over the next few years, so we are going to have a lot of focus on that area.

To date that has been out in the Southwest United States.

We are looking to get more involved in solar further east.

I mean certainly in Texas, but also actually in the East, but that's still a work in progress.

On the conventional side, one of the things that we think is going to come about, obviously, is that we have had a reversal in terms of solid fuel base load while clearly the prospects for nuclear development in the country outside of the Deep South have dimmed substantially.

And now that we have much greater clarity about coal fire generation because of the promulgation of the EPA rules, we at least have a sense of what's going to happen in that market and you can actually price opportunities and you can price gas as an alternative.

We have a lot of great sites around the country in the Northeast, in Texas and the West Coast.

The transmission system depends upon power from a lot of our sites, so we have mainly a Brownfield redevelopment effort at many different sites around the country and I think we are going to be reevaluating that and see if we can get more plants permitted.

But I think with where our market prices are, we are currently operating on the assumption that anything we do is going to benefit one way or another from a long-term offtake arrangement.

Okay.

And that color's good.

And we will try and be more specific on the second quarter call because there is -- yes, there are a lot of projects that we think will have greater certainty by that time.

Okay.

Looking forward to that and then just as a follow-on, any incremental updates on either, I guess, just equity sell down in the larger solar projects?

Chris?

Yes.

Brandon it's a process we just recently started and kicked off.

So there is really no update.

It's ongoing.

The responses we received from the initial potential investors we have seen has been very positive.

But we expect it's going to go on through the rest of this quarter into the early part of the third quarter and we will update it then.

Great.

Nice quarter, guys.

Thanks.

Thank you.

Your next question comes from the line of Angie Storozynski from Macquarie Capital.

Angie, please proceed.

Thank you very much.

I wanted to ask about your environmental CapEx.

So your assessment is that you will still see 30-gigawatts to 40-gigawatts of coal plant retirements on the back of those new EPA regulations, and yet you no longer see any additional CapEx that is required for your coal plants.

Could you comment in particular with regards to your Northeastern assets?

Yes.

Good morning, Angie.

This is Mauricio.

As you know, Huntley and Dunkirk and Indian River, they have been under constant decree.

We have made significant investments on those facilities.

We believe that the back-end controls that we have installed in Huntley, Dunkirk and they were installing in Indian river will be sufficient to comply with those rules.

When we say 30-gigawatts and 40-gigawatts, we really think that Eastern coal generators will have to install either significant environmental control equipment or retire.

So, where do we see that happening?

Midwest, Southeast and Mid-Atlantic.

We think that's where the majority of the impact is going to be felt.

So I think on our environmental CapEx, we really are focusing on controlling mercury through ACIs and for big [cage] you need fabric filters to control mercury and SO2.

We think with that we will be able to comply with the rules.

Angie, I wanted to emphasize because I know you are aware of this but maybe not everyone on the call is as familiar as you are with this industry.

But I just want to reiterate Mauricio's assessment that the rules that came down -- I mean you hear a lot of different noises from the industry about the EPA rules.

Some people say they are extremely harsh, others say that they are workable, and it really comes down to a Western coal versus an Eastern coal situation.

And I would like to take credit for it, but even before I was here seven years ago the decision to move the coal plants of NRG from Eastern coal to Western coal it seems to have paid off in this situation.

So it is all about these Eastern coal plants.

Mauricio, we are in a situation here with our fleet where we're not using much Eastern coal at all.

Is that right?

Right.

What is left is Indian River 4 and that is less than 5% of the total coal that we consume now in our Fleet.

Thank you.

Okay.

Now given the drop-off in earnings in the Northeast, I understand the RMR contract that's by there and that was the biggest yearly driver.

Is there anything that you can actually do to either renew these contracts, or is it just to retire the facilities?

Well, Angie, I mean two things.

One, we had a warmer than normal February and March that really impacted the generational power of coal fleet in West New York.

We are constantly evaluating the profitability of our plants.

We think that the market is starting to rebound.

We are going to go in the second quarter and third quarter where higher capacity prices and going into the summer will increase the profitability of our plants.

Okay.

Thank you.

Angie, could I just add though, because you make a very good point which I think is one of the most interesting areas of the country in terms of the future of power generation mix is the Northeast.

Because if you look at it we actually perform pretty well.

The fact that our EBITDA result in the Northeast went from $70 million-something last year to $10 million is not because of a weak performance of our units.

It's because that's what we got out of the marketplace in the quarter.

The Northeast Fleet is older than the rest of the country's Fleet, and I think there is just a lot of question about what's going to be the power generation in the future.

But if someone like us with several thousand megawatts manages to extract $10 million in EBITDA, it's not a sustainable situation long-term.

Great.

Thank you very much.

(Operator Instructions).

Your next question comes from the line of Greg Orrill from Barclay's Capital.

Greg, please proceed.

Thanks a lot.

Good morning.

Good morning, Greg.

I know you talked about the refinancing you are looking to do and how that would help you to allocate capital more efficiently.

Is there anything, specifically within your strategy, that you feel that the way things are now is preventing you from doing?

And may be also within the context of the big cash balance that you have.

Thanks.

Well, Greg, I may be misunderstanding your question, but I mean, there is nothing that I know of in the covenant package that's really been unduly restrictive in terms of reinvesting in the business.

It's all because I feel that in the scheme of things, we have been very disciplined in that approach.

The Company has accumulated this large cash balance, and as a high-cost of capital Company it's clearly inefficient for us to be holding that amount of cash on our balance sheet.

So really, the only constraint that we are trying to relieve right now is our ability to return that capital to shareholders at this share price through a share buyback, but if we were at a more reasonable share price, there are other ways of returning capital to shareholders.

Chris?

That's correct.

And until we relieve the restrictions in two of the outstanding indentures governing the 2016 and 2017 maturities, we are going to be prohibited from returning much more than the $180 million that we have currently announced for this year, perhaps maybe more on the margin.

But the relief that we are going to get in the new maturities which will mirror the indentures that we have in the other outstanding and newerly issued bonds, is quite significant and allow us to look quite holistically at capital allocation across the board.

And then maybe as a quick follow-up.

How much would Step B of the refinancing cost you in terms of calling the senior notes?

Well the call premium is 103 and 5/8ths roughly on the 2016, so on $2.4 billion that would be the call premium there, which is roughly $85 million of call premium that we would pay.

The 2017s are yet callable.

There was a macro call which is -- depending upon the day -- you choose treasuries about 110 versus the call that comes due in January of 2012, about 103 and 5/8ths.

So there is a significant difference between getting at the 2017s now and waiting for the call period and 9 months from now which we expect to do.

And that issue in 2017 is $1.1 billion.

Thanks.

Your next question comes from the line of J.

Dobson from Wunderlich Securities.

J., please proceed.

Good morning.

Good morning, J.

I was wondering if maybe Mauricio could talk in a little more detail about the Texas impact on both retail and wholesale from February 4.

Sure.

I am sure he would love to.

Jay, Mauricio?

Good morning, J.

Well, I mean, I think we have been quite public about the performance, the excellent performance of our Fleet during those days.

And the price spikes that happened, which basically demonstrates how competitive marks work.

On the retail side, the convention is that during this events, retail providers tend to be hurt.

In our case, through the hedge profile that we have provided to Reliant, they were not only insulated on February 2, but to some extent benefited by the sudden decrease of power prices following these events with higher loads that were maintained because of our caller prices.

So I think exactly on the days that happened our generation portfolio was ready to be deployed, and in the aftermath where power prices decreased significantly, the retail portfolio out performed.

But keep in mind that the results that we're presenting, yes, the February 2 events held, but this is the entire quarter result.

Okay.

Fair enough.

So I'm trying to get my head around a dollar impact of either in retail and wholesale, or aggregating the two together.

You're suggesting the positive impact would be small.

Well, let me just answer that by saying I don't even know a specific dollar impact of that event, and so if I don't know we are not going to tell you what exactly it is.

But in the scheme of the quarter, I don't think it was a significant number.

It's always better on any given day to make more money than you lose, so we are pleased with the outcome on that day.

But no, we don't have a specific number from the Ice event itself that we can give you.

Okay.

Great.

And then just on Green Mountain though it's not the biggest piece of your business, but you lumped it into corporate, just what the adjusted EBITDA contribution was?

Yes.

We've said that Green Mountain would contribute $70 million to $80 million of EBITDA for the full year.

Their performance during the first quarter was good, and there is no reason to think we will not be within that range at the end of the year.

Okay.

Fair enough .

And then lastly, Chris, just the capacity under the RP basket at the quarter

About $50 million.

I see.

So we completed the $130 million.

We said $180 million, so we have the $50 million remaining which we will get to in short order.

Great.

Thanks very much.

In the interest of time, we can take two more callers.

Our next question comes from the line of Julien Dumoulian-Smith from UBS.

Please proceed.

Hi, good morning.

Good morning.

I wanted to find out with respect to the Ivanpah project.

There has been some headlines out there about the BLM decision to partially suspend construction of the project at least on, I believe, two of the three units or sites.

Do you mind commenting with respect to how that might shift the in-service of the total project?

Well, Julian, there is no shift yet.

I mean the important thing, as you say, is on two of the three sites and that the most active -- I mean, like most good developments, Ivanpah was being built in a staggered approach.

Ivanpah 1, first and then 2 and 3.

And most of the activity -- not all of the activity, but most of the activity is around Ivanpah 1 which was not affected by the BLM action.

And we believe and hope that action is just going to have a short-term impact on the day-to-day schedule.

And at this point, there is no reason to think that the overall schedule is going to change at all.

Great.

Exactly what I thought.

And then secondly, with regards to NRG's decision to join MISO.

I would be very curious if you have any kind of read on what that would do for your own portfolio in the region, specifically as it relates to potential capacity payments, et cetera.

Well I am not sure that we are in a position yet to talk about specific capacity payments.

I will hand the floor over to Mauricio, and I am pretty sure he won't answer the question either.

But I would say that overall, the decision for NRG to enter MISO, we think, is a significantly positive decision for our portfolio.

But we are not getting excited about it too early because we have seen in the past that this can take several years to actually happen.

So really anything that we said would be pretty speculative and pretty far out in the future.

Mauricio, do you want to obfuscate around that further?

I would say it's too early to tell and in general, we like organized markets where there is clear transparency on transmission and dispatch, and clearly eventually moving to MISO is a positive development for our portfolio.

You already mentioned the capacity markets.

I think it shows the characteristics of a proven, organized market are going to be positive for our South Central Region.

Great.

Very quick last question.

You have a substantial cash balance, talked about refinancing, the senior notes here.

Is there any financial that you would use cash on the balance sheet as part of the -- call it the refinancing plan, if you will?

Yes

Or would you anticipate the refinance?

The dollar-for-dollar.

Both the 2016 and 2017?

No, I think we will certainly look to putting some cash toward the refinancing, I think, to accomplish two things.

One, perhaps just to reduce overall leverage and maintain our prudent balance sheet managed target.

And second, to relieve any potential friction costs on refinancing lumpy traunches to try to remove some of the market risk that might exist around very largely-sized traunches in any given maturity.

Excellent.

Well, thank you very much.

Thank you.

Operator, I think one more question?

Yes.

Your final question come from the line Ameet Thakkar from Bank of America, Merrill Lynch.

Please proceed.

Thanks for taking my question, guys.

It looks like you guys highlighted the Old Bridge project as a potential opportunity, and then I guess in your presentation today, you referred to it for a FERC ruling on the MOPR provision.

I guess how do you guys view the project given the recent ruling by the FERC supporting the MOPR?

Again, I will ask Mauricio if he wants to amplify anything I say, but I think essentially that we way we look at it is, first, we support the FERC ruling.

We think it's good for capacity markets throughout the Northeast.

It's a positive precedent in terms of the impact on Old Bridge.

Obviously, there is a lot more water that's going to flow down the river on that with the disputes between the State and FERC, and the litigation and all.

But from our perspective we feel a low-cost option to proceed with the Old Bridge award, if it makes sense to do so, and we'll just see how it plays out over the next year.

Mauricio, do you want to add to that?

I think that's --

But it's very hard for us to predict specifically the way it's all going to pan out, but the burn rate in terms of the development of that project is quite low relative to other things that we are doing and have done in the past.

So we are very pleased with where we sit, and I think as we have said many times, to the extent that there are weaknesses in our portfolio we would like to have more based intermediate load generation in PJM, particularly in Eastern PJM.

So it was an attractive opportunity for us.

Understood.

Thank you, guys.

Thank you.

Operator with that I think we will call it a day.

We appreciate everyone taking the time to participate in this call.

We look forward to talking to you on the second quarter call, if not before.

Thank you very much.

That concludes today's conference.

You may now disconnect.

Thank you for your participation.