NRG Energy Inc (NRG) 2011 Q3 法說會逐字稿

Good day ladies and gentlemen, and welcome to the Third-Quarter 2011 NRG Energy Earnings Conference Call.

My name is Lacy, and I'll be your coordinator for today.

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

Later, we will facilitate a question-and-answer session towards the end of the presentation.

(Operator Instructions)

As a reminder, this conference is being recorded for replay purposes.

I would not like to turn the presentation over to your host for today's call, Nahla Azmy, Senior Vice President of Investor Relations.

Please proceed.

Thank you, Lacy.

Good morning and welcome to our third-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 a link on the Investor Relations page of our website.

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

This call, including the formal presentation and the question-and-answer session will be limited to 1 hour.

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

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 November 3, 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 (technical difficulties) 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.

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

Thank you Nahla.

Good morning, everyone, and thank you for joining us on this our third-quarter call.

I'm joined by Mauricio Gutierrez, our Chief Operating Officer, and Kirk Andrews, our Chief Financial Officer, both of whom will also be participating in the presentation.

Also joining us are Jason Few, who runs Reliant, our principal retail company at NRG, and Chris Moser, who runs the commercial operations group.

Both Jason and Chris will be available to answer your questions.

I'm going to get right into my presentation.

I'm going to be referring to a slide presentation which you can refer to on our website.

Kicking off with slide 3.

During this call we want to look back at the results for the quarter that just concluded, but even more so we want to look ahead at where the Company is headed over the months and quarters to come.

As we look forward, and I want to tell you this up front so you're not surprised, my goal is to convince you that the Company is extremely well-positioned to take advantage of and benefit from the opportunities available to it in this market environment and under current commodity prices.

During 2011, we have committed a substantial amount of the Company's growth capital in a series of value-enhancing investments in areas where the Company has both special competence and competitive advantage.

Importantly, given the commodity price environment that we live in, all of these projects and businesses offer revenue streams that either do not rise and fall in correlation with the short-term fluctuations in natural gas prices, or in the case of retail, actually are negatively correlated with natural gas prices.

3 of these growth areas are highlighted on slide 3.

With the 400-megawatt GenConn peaker projects, which came online this summer, the 660-megawatt Old Bridge CCGT, which secured a long-term capacity off-take agreement in the New Jersey state solicitation earlier this year, and the 550-megawatt El Segundo re-powering project that achieved financial closing this quarter, we have almost 1,500 net megawatts of advanced gas-fired projects, with long-term off-take agreements which are going to contribute steady streams of earnings and cash flows to the Company for decades to come.

With respect to renewables, we have previously signaled to the market over the past several quarters that, as a result of the expiration of the Section 1705 federal loan guarantee program at the end of the third quarter, and the expected expiration of the 1603 cash grant ITC at the end of the fourth quarter, there would be a surge of renewable projects that would begin construction before the end of this year.

I'm quite pleased to report to you that our big 3 solar projects -- Ivanpah, Agua Caliente and CBSR successfully navigated the very challenging DOE loan guarantee application process, and are now being constructed at full speed.

Led by these 3 projects, we now have a total of 881 net megawatts of utility scale solar projects in operation, under construction, or in the final stages of advanced development -- all 881 megawatts with long-term off-take agreements with highly credit worthy, load-serving entities.

Finally, there's the acquisition of Energy Plus Holdings, a young but very fast-growing retail electricity provider concentrated in the northeast United States.

Energy Plus's unique approach to the retail electricity market is based on it exclusive partnership relationships with a long list of airlines, hotel chains, and affinity organizations that enable Energy Plus, as part of its home electricity supply offer, to offer frequent flyer miles, frequent guest points, and other targeted benefits to customer classes with a pre-existing relationship or loyalty to the airlines, hotel chains, and other groups with whom Energy Plus have partners.

These 3 areas -- gas-fired, conventional generation, large-scale solar, both with off-take agreements and expanded retail are going to provide significant growth to the Company's bottom line over the next couple of years, and they're going to do it in a way that does not depend upon a recovery in natural gas prices.

In addition to where we stand in terms of the deployment of our growth capital, I am also very pleased to report on where the Company stands in terms of our buy-back program.

Since our announcement of an additional buy-back on our second quarter call, we have aggressively executed against that plan, such that year-to-date we have deployed $378 million, and bought back from the market 17.5 million shares of NRG stock, which at an average price above $21 per share, is a price far below what we, the Company's Management and Board of Directors believe to be the intrinsic value of the Company.

We believe this action will yield great dividends for all NRG remaining shareholders, as we resume our EBITDA growth in 2012, with the financial benefit to be spread more generously across the substantially reduced share count.

That leads to my final point on this slide, looking ahead to 2012.

With 2011 adjusted EBITDA projected to come in between $1.8 billion and $1.85 billion, we are initiating EBITDA guidance for 2012 with an up-tick to a range of $1.825 billion to $2 billion, and with free cash flow before growth of $800 million to $1 billion.

This up-swing in annual guidance is important because we are projecting this increase, not as a result of higher price gas hedges entered into long ago, and not because of a higher gas market price.

In both cases, the truth is quite to the contrary.

But because the Company expects greater contribution from contracted assets, because we will benefit from the first really significant contribution of EBITDA from our new business areas, and most importantly, because of the bullish prospects for the other key component of our wholesale pricing equation, namely, Texas heat rates.

Our plan for 2012, key elements of which are shown in a little more detail on slide 4, is focused on making sure that we benefit from both the rising heat rate environment in Texas and any market design changes that will be implemented to incent more production in that state.

While it's impossible to predict what type of weather Texas will experience in 2012, we believe the supply-demand equation is very tight, and we expect substantial volatility.

Forward heat rates still have a ways to go before they incent any new power generation, so the burden is on the incumbent fleet to stand and deliver flawlessly, and our Texas operations team is hard at work preparing to do that.

On the retail side, with Reliant leading the charge towards another banner year for retail at NRG, we are seeking more of the same -- healthy and sustainable margins, low bad debt write-offs and a customer count that, between Reliant, Green Mountain, and Energy Plus, is growing at a healthy pace.

In terms of our conventional brown field re-powering program, the challenges faced by various incumbent coal and nuclear generation assets in our core regions has created greater opportunity for new projects at our existing sites.

Beyond GenConn, Old Bridge, and El Segundo, the nearly 1,500 net megawatts of projects with off-take agreements that I previously mentioned, we have another 1,500 megawatts of permitted gas-fired CCGTs within load pockets in New York City and California, and other CCGT projects earlier in the development pipeline.

We will be moving forward on these projects so long as we can secure long-term off-take agreements.

To give you a sense of how we are setting our Management priorities for 2012, please turn to slide 5.

Mauricio will be providing you more detail in these areas, but I wanted to give you my personal assurance that our Management focus in 2012 will be squarely on forceful implementation of what we started in 2010 and 2011.

First and foremost, we need to deliver on the full promise of our combined generation and retail potential in Texas in the same way that we have done for 8 of the first 9 months of 2011 in Texas, in a way which we regrettably did not do in August.

Secondly, we are focused on making sure that both El Segundo and our big solar projects are constructed on time and under budget.

On the solar projects, we have a very high level of confidence in our technology partners, Bright Source, Sun Power and First Solar.

We have a high degree of confidence in [Beckfield], which is involved in 2 of the big 3 projects, and we have a high degree of confidence in our own project management personnel, who are providing oversight to these massive construction projects.

So far, our experience in solar construction has been very highly positive, but given the sheer scale of the projects that we now have under construction, we are taking nothing for granted.

Finally and as we have discussed on previous calls, the date is fast approaching when we can look to refinance our 2017 bonds and be free to allocate our excess capital in the manner that maximizes value to our shareholders.

As we prepare to enter this new era of reduced adult supervision from our bondholders, I want to emphasize a few points.

First, we continue to believe in a balanced approach to capital deployment.

Second, we continue to subscribe in the overriding principal of prudent balance sheet management.

Finally, we believe our capital deployment program in 2011 adhered to these fundamental principles, and we fully intend to adhere to these principles in 2012.

Having said that, at this share price level, we see enormous value to be had in investing in NRG stock.

Beyond these 3 top near-term priorities, we will continue to push our efforts to position NRG into first-mover status in key areas that we believe have the potential to transform the energy business over the next several years.

Time constraints preclude me from going into all these areas in too much detail right now, but I do want to expand the discussion a little bit more about our solar strategy.

I do this in part because of the significant capital commitment that we have made to our solar program, depicted on slide 6, during 2011.

I do this in part because it is inevitable that in the highly politicized post-Solyndra world that we live in, you have probably already heard or read in the popular media a great deal about solar power that is distorted, misinterpreted, or just flat out wrong.

Let me start with some basic facts that underpin our fast-moving and generally successful effort to be a leader in solar power generation in the United States.

Fact number 1 -- solar generation is a domestic energy resource, installed locally by American workers, built on the strength of American technological innovation, and tapping into America's abundant solar resource, which for all practical purposes is inexhaustible.

Fact number 2 -- solar generation, and particularly solar photovoltaic, puts less strain on other scarce commodities that any other form of power generation, particularly when it comes to what I like to call the big 3 of sustainability -- fresh water, arable land, and clean air.

Fact number 3 -- while solar is an intermittent resource, the sun is more reliable and predictable than the wind, and solar energy's availability is more coincident with the all-important peak summer load than the wind is.

Fact number 4 -- while large-scale solar power development in the United States has been very substantially assisted by a variety of federal government programs, beginning with the Energy Policy Act of 2005, passed by a Republican-controlled Congress and signed by President George Bush, the primary driver for the US solar industry has, in fact, been renewable energy portfolio standards enacted at the state level by red and blue states alike, led by California with its 33% renewable portfolio standard, passed into law and signed by Republican Governor Arnold Schwarzenegger.

Which leads me to my fifth and last fact about solar, and this is the one that's by far the most important to us as a Company.

The price of solar panels in particular, and of solar installations, more generally, is dropping like a stone.

And for NRG, as probably the single largest consumer of solar panels in the United States, that is a very good thing.

Moreover, we are convinced that the cost of solar installations is going to continue to drop precipitously, both in absolute terms and relative to other forms of power generation.

Most forms of power generation, including wind, depend on brute force, in the form of thermal energy or kinetic energy, to make electricity.

Increased size equals increased scale.

Certainly, the wind industry has followed this approach.

But solar photovoltaic is different.

Solar PV is, in essence, a nanotechnology.

As such, we believe some offshoot of Moore's law applies to solar photovoltaic technology.

Call it, if you will, Crane's Solar Corollary to Moore's law, but we believe that delivered cost of energy from Solar PV, which has been cut in half in the last 24 months, will be cut in half again in the next 24 months.

The ramifications of this price trend will be far-reaching.

We will be in a situation where, within 2 years, the price of delivered power from solar installations will be able to undercut the retail price of grid power in roughly 20 states.

Many of these high-priced retail states are in our core regions.

This low-cost solar power installed in ever-increasing volumes on a distributed and semi-distributed basis, in a way that obviates the need for a lot of very long, high-voltage transmission lines, has the potential to revolutionize the hub-and-spoke power system which currently makes up the American power industry.

There is a perception of Wall Street investors that the solar industry is completely a creature of government financial largess and market support.

That perception is largely true, but it's only true if you're looking backwards.

As I stated previously, our big 3 utility scale solar projects could not have occurred without the federal loan guarantee program and the California state renewable portfolio standard.

And as all of us have seen over the years, when government rubs up against business, that the blessing of government support for any particular industry is inevitably followed by a curse when the government yanks away that support, usually without warning, without reason, and at a time when the industry can least afford it.

But If we look forward, we see a solar industry that's going to trend strongly towards a distributed and residential installation.

While market penetration for distributed and residential solar can and should be enhanced by enlightened government policies, the fact is that distributed and residential solar is a free market construct.

And solar energy at its present, and certainly at its future price point, will achieve explosive growth and substantial market share as a matter of consumer choice.

NRG is positioning itself competitively through NRG's solar warehouse rooftop program with Prologis, B of A, and the DOE, and through its 3 retail electricity providers, to lead this transformation and to secure the benefit of it for our shareholders.

With that, I'll turn it over to Mauricio.

Thank you, David, and good morning, everyone.

Beginning with a few highlights for the third quarter on slide 9.

Our available portfolio performed exceptionally well during the quarter, improving in both availability and reliability metrics as compared to the third quarter of 2010.

On the commercial front, we increased our hedges in 2012, given the weak fundamentals we continue to see in the gas market.

In October, the EPA released an update to the CSAPR Rule, increasing the allocation of allowances to the state where we operate.

These changes provide us with greater flexibility for compliance as we continue to prepare for a 2012 start date.

Also on the compliance front, we're in the process of integrating back-end controls at Indian River during the current fall outage, and are on track to be fully operational by January 1, 2012.

With respect to our growth projects, we began commercial operations for the 21 megawatt, Roadrunner solar PV project this summer, ahead of schedule and under budget.

The El Segundo combined cycle re-firing project began construction and is on track to be in service by the summer of 2013.

Last, our EPC organization continues to focus on supporting the solar build-out, which I will cover in more detail later in the presentation.

Starting with safety on slide 10, we maintained our top decile performance with an OSHA-recordable rate of 0.75, with 38 out of 45 sites without a recordable injury this quarter.

This is quite remarkable given the extreme weather conditions that our operators experienced at many of our sites and further demonstrates our safety culture.

Net generation increased by 11% during the third quarter compared to 2010.

This increase was driven primarily by high generation in Texas due to the record heat and the addition of the Cottonwood plant into our South Central portfolio.

This was partially offset by lower generation in the northeast, affected by lower power prices, higher coal-to-gas switching, and milder weather in August.

As I mentioned, our baseload fleet performed exceptionally well during the quarter, with an availability factor of 95%, and a forced outage rate of just 2%.

FTP in Parish led the fleet with over 98% availability.

Our gas fleet saw a significant increase in generation and number of starts.

Overall, it performed well, with some specific exceptions due to age and heavier cycling imposed on them this summer.

Moving on to our retail operations on slide 11.

Despite August extreme weather and volatile market prices, we're still on track to finish the year comfortably within our regional 2011 EBITDA guidance range.

We continue to grow our residential segment, with 34,000 additional customers [since the end of 2010], demonstrating our ability to leverage our brand strength while balancing margin and customer count.

Reliant also delivered another quarter with lower bad debt expense, and our mass segment illustrating the power of scale, back-office capabilities, and the strength of the Texas economy.

On the residential segment, Reliant continues to differentiate itself through innovative solutions and deliver real consumer value through applications and services based on the Smart Meter infrastructure.

As a result, Reliant has increase customer count 3 quarters in a row, with our e-Sense enrollment now exceeding 400,000 customers.

Reliant will leverage this innovation, along with its strong customer service platform, still expanding to the northeast and midwest, where we are now serving customers in 5 states.

Our CNI segment remains the largest provider to business accounts in Texas, and our expansion to the northeast is on target, where we serve over 2 terawatt hours.

If the pricing dynamics in this sector remain very competitive, we will continue to be selective on transactions that deliver attractive margins which are reflected in our business results for the quarter.

This strong performance has enabled Reliant to be the largest retail provider in Texas by delivering strong customer satisfaction and achieving results that exceeded our steady-state natural gas commitment of $400 million to $500 million.

Turning to our hedge profile on slide 12, our baseload portfolio is now mostly hedged for 2012, consistent with our view that natural gas fundamentals remain weak in the short-term.

For quite some time, our hedging philosophy has been to hedge the output of our baseload portfolio with natural gas as (inaudible) power and keep the heat rate open given our bullish view, particularly in the ERCOT market.

We have benefited from the recent run-up in heat rates and believe that, based on market fundamentals, there is more upside remaining.

As we discussed in our last call, we have made some adjustments to our hedging strategy around the gas portfolio in Texas.

We will maintain a portion of the peaking fleet unhedged to ensure we have a long biased position as we head into next year and to mitigate some of the operational risk embedded in our portfolio.

As for the other side of our (inaudible) spread, we secured most of our 2012 full requirements ahead of the CSAPR rules at attractive levels.

We will continue to be opportunistic about adding incremental coal hedges, given our significant open power position beyond 2012.

Moving on to our market update on slide 13, Texas fundamentals remained strong during the third quarter.

The [bag] grew by a healthy 2%, and as you all know, ERCOT set a new record peak load of 68.3 gigawatts in August, implying a 4% actual operating reserve, well below ERCOT's target level of 13.75%

On the supply side, the pipeline of new-generation projects in ERCOT is almost empty.

While forward heat refab moved up recently, they still don't incentivize new generation and irrespective of gas prices there needs to be significant upside from current levels, as indicated in the upper-right chart.

Recent proposed changes by ERCOT and the PUCT to support resource adequacy are a step in the right direction, but we believe more is required to incentivize new generation.

As you can see in the bottom right chart, PRB coal prices have retraced to pre-CSAPR levels after a short-lived rally.

We continue to believe that the (inaudible) in the market is not justified given the current gas price environment and the more stringent environmental rules.

Last, in the northeast we saw increasing coal-to-gas switching given low-gas prices and relatively mild weather in August, as you can see in the bottom left chart, where we show quarterly changes in generation from last year.

We expect these dynamics to continue through 2012 and believe economic (inaudible) in the northeast will continue to be challenged.

Turning to slide 14, our EPC organization, who has been successful in managing over $1.4 billion of re-powering and environmental retrofit projects, has been transitioning to support or solar efforts over the past 2 years.

We are engaged with major contractors, solar suppliers, and developers, providing construction management and oversight services to our projects.

Starting with Agua Caliente, the solar field is over 40% complete and the third connection is now constructed and moving into the startup phase.

CVSR is off to a good start, and Ivanpah is well underway on Unit 1, where erection of the first solar receiver tower is progressing as planned, and Unit 2 has initiated work on the foundations of major equipment.

We will continue to focus on supporting the development efforts of new projects like Borrego, Alpine, and Avra Valley.

In closing, our base business portfolio is well-positioned to benefit from tighter fundamentals in the market, particularly in Texas.

August gave us a glimpse of the potential market prices that we can expect, and as David mentioned, we are all focused in making the necessary adjustments to ensure we deliver the full potential of our integrated wholesale retail model going forward.

That, combined with our re-powering opportunities, solar growth plans, and retail expansion, is expected to deliver healthy incremental value in our core regions.

With that, I will turn it over to Kirk for the financial review.

Thank you, Mauricio.

Beginning with the financial summary on slide 16, NRG is reporting third-quarter and year-to-date adjusted EBITDA results of $458 million, and $1.43 billion, respectively.

Reliant Energy, which contributed $135 million of adjusted EBITDA for the quarter, reported its first year-over-year improvement in mass customers since our acquisition.

Reliant's customer expansion, however, was partially offset by lower unit margins resulting to some degree from competitive offerings, but in larger part as the result of increased energy costs.

Meanwhile, NRG's wholesale business earned $323 million of adjusted EBITDA during the third quarter.

$183 million of this adjusted EBITDA came from our Texas region, which benefited from a 1.2-terawatt-hour increase in generation versus the third quarter of 2010.

Year-over-year adjusted EBITDA decreased $205 million, however, as increased baseload availability was eclipsed by a combination of lower baseload hedges and the August impact.

In the northeast region, adjusted EBITDA for the quarter was $47 million.

The approximately $58 million decline versus the third quarter of 2010 was driven by lower hedge prices, decreased coal generation, and a substantial decline in capacity revenues.

These decreases were offset by lower operating costs and favorable equity earnings from GenConn Middletown, which came on line in June of this year.

The west assets had a very strong quarter, contributing $35 million of adjusted EBITDA, which is an increase of $10 million from the prior-year quarter, as the region is continuing to realize increased volumes and favorable capacity prices in California.

The south central region delivered $44 million of adjusted EBITDA in the third quarter of 2011, which is a $5 million increase over the third quarter of 2010.

Year-to-date 2011, adjusted EBITDA totaled $1.43 billion.

That was split between $462 million from Reliant and $968 million from wholesale.

Reliant remains on track to exceed $550 million in EBITDA this year, and meanwhile the wholesale business benefited from a 10% -- excuse me -- year-on-year increase in generation sold, or 5.8 terawatt hours, due in part to the acquired assets, including Cottonwood, South Trent, and solar projects, which contributed 3.7 terawatt hours.

The results were offset by lower energy prices, higher fuel and transport costs and lower capacity revenues.

As we turn to capital allocation in 2011, during our second-quarter conference call, as an advance on the 2012 capital allocation, we announced a $250 million increase to the 2011 share repurchase program, bringing the total planned 2011 repurchases to $430 million.

To-date, we have completed share re-purchases of $378 million, or 17.5 million shares, and we anticipate completing the balance of $52 million of authorized share repurchases during the fourth quarter.

During the year, we also reduced corporate debt by $577 million, better aligning our prudent balance sheet management objectives with 2011 financial performance.

Now turning to the 2011 guidance on slide 17, as David mentioned earlier, we are raising the lower end of our adjusted EBITDA guidance range by $25 million to $1.8 billion, with the upper end of the range remaining at $1.85 billion.

This improvement is largely a result of a strong September, and healthy expectations for our retail businesses.

In turning to free cash flow, we have revised our guidance for free cash flow before growth to a range of $800 million to $850 million.

The decline in free cash flow guidance is due to an increase in cash collateral postings.

Turning to 2011 growth investments on slide 18.

We now expect a total of $806 million in growth investments for 2011, which represents a $238 million increase over our August 4, 2011, guidance of $568 million.

This increase was attributable almost exclusively to an acceleration of the timing of previously identified projects, in particular, our solar projects.

The $80 million increase in our expected conventional investments was driven by an acceleration of our investment in our El Segundo re-powering project by $63 million, and that was in order to remain on schedule with construction, despite a delay on the closing of the $540 million facility that I mentioned earlier.

This will now result in the project being completed in 2013 without additional contributions from NRG.

The $158 million increase in our solar investments is also the result of an acceleration of spend at our Agua Caliente and CVSR projects.

We've made significant strides over the last quarter in deploying capital to invest in NRG's future, while maintaining a solid liquidity position as our total current liquidity is $1.9 billion, which you will see on slide 19.

As we anticipated, the net reduction in our revolver availability is primarily due to the required posting of letters of credit to support our equity commitments to our 3 largest solar projects.

As we make these equity investments over time, which I'll review with you shortly, these LC postings will then be released to us dollar for dollar.

In essence, as we have now closed on the bulk of our tier one solar portfolio, our liquidity position now reflects the full effect of our equity commitment for these important projects.

Turning to projected year-end cash and cash equivalents, which will form the basis of our 2012 capital allocation program.

Our projected year-end cash position is approximately $1.3 billion.

Our projected year-end balance of $1.3 billion compares to approximately $1.9 billion, which was projected on our second-quarter earnings call.

The $600 million reduction in that expected cash is largely due to the $250 million acceleration of conventional and solar investments that I discussed on the prior slide, as well as the acquisition of Energy Plus for $193 million, which was closed on September 30 of this year.

As we focus on capital allocation, the currently projected cash balance at the end of 2011, after deducting $700 million minimum cash we target for working capital, will then form a key component of our 2012 capital allocation plan.

Turning to slide 20, as David mentioned earlier, we initiated 2012 guidance with a range representing an increase over our 2011 outlook, with consolidated 2012 adjusted EBITDA guidance of $1.825 billion to $2 billion.

We expect an up-swing in our wholesale business to $1.2 billion to $1.3 billion, thanks to the contribution from new assets, some of which include Agua Caliente, CBSR, Alpine, Roadrunner, as well as the anticipated expansion in heat rates in the ERCOT market.

Also contributing to the uplift is an improvement in overall hedge prices across the portfolio, which is partially offset by lower natural gas prices, and a continuation of lower capacity prices in the northeast.

Our retail outlook, which for 2012 now reflects our 3 distinct platforms, Reliant, Green Mountain Energy, and the newly acquired Energy Plus, is for EBITDA in the range of $625 million to $700 million as we look to drive EBITDA growth by leveraging our 3 distinct retail companies.

Our 2012 free cash flow before growth, which reflects components of operating cash flow not included in EBITDA, as well as the impact of our expected 2012 maintenance and environmental capital expenditures, remains strong, with a range of between $800 million, to $1 billion.

These details are included in the Appendix as a part of our Reg G disclosures.

Our free cash flow yield continues to demonstrate the attractiveness of our share price, which we will take advantage of as we re-purchase another $52 million of shares in the fourth quarter.

I've chosen to devote a separate slide to our 2012 growth investment in order to provide a bit more detail regarding this important component of our capital allocation strategy.

On slide 21, our committed growth investments are broken down into conventional and solar, as I discussed earlier.

Importantly, we have termed these committed growth investments to reflect the projects to which we are either contractually committed, which represents the bulk of the items on slide 21, or strategically committed for 2012.

In addition, for those investments to which we have commitments beyond 2012, I've also provided details regarding our expected investments in these future periods, as we move closer to having all of these important projects on line and contributing their full EBITDA potential.

Our total 2012 expected growth investments are $825 million, which consists primarily of the big 3 solar projects.

Beyond 2012, we have approximately $380 million of committed investments, largely devoted to our tier 1 solar portfolio.

Aqua Caliente now represents a significant portion of that amount, in that it does not reflect the benefit of a cash grant, as this project currently requires DOE consent to apply for that grant.

These growth investments should be offset by proceeds from our ongoing efforts to monetize a portion of these projects, as we are now able to more fully focus attention and shift resources towards this initiative, now that the important, but time-consuming, DOE process is behind us.

Turning to capital allocation on slide 22, our 2017 bond refinancing, which we expect to complete by the first quarter of 2012, represents the final step in creating significantly greater flexibility to allocate capital in an optimal manner.

Our expected excess cash at year end of $600 million, which is net of target cash for working capital, combined with our 2012 free cash flow guidance of $800 million to $1 billion implies $1.4 billion to $1.6 billion of expected cash available for committed growth in capital allocation in 2012.

We expect to allocate $825 of this cash towards committed growth investments in 2012, as you'll recall from the prior slide.

This amount is largely comprised of continued equity funding for our big 3 solar projects.

The $575 million to $775 million, which remains, is the amount of cash we expect to have available to allocate among share repurchases, debt pay-downs, and future growth initiatives, including the potential opportunity to accelerate perhaps a small portion of our currently committed growth investments from 2013 into 2012, if we are able to achieve higher returns and earlier commercial operation dates as a result.

We expect to provide greater details regarding the 2012 capital allocation program on our February earnings call.

With that I will turn it back to David for his closing remarks.

Thank you, Kirk and, Lacy, I think we have taken up a good part of the hour already, so we will open the floor to questions right away.

Thank you.

(Operator Instructions)

Our first question will come from the line of Ted Durbin with Goldman Sachs.

Thanks.

I appreciate the comments on the solar.

I'm just wondering is your appetite now -- it sounds like it's shifting more towards the distributed investments, and maybe away from the large-scale solar, or would you say you're going to continue to go after both?

I think, Ted, thanks for the question, it's a good question.

First of all, I tell you the easier part for us to do is the big projects.

We're geared up to do that.

That's the type of Company we are, so we're not walking away from that part of the industry.

What I would say to you is, I think for a large, very large utility-size solar, I'm sure there will come a day when we see another wave of 300-plus megawatt large solar projects, but these projects are more than a billion dollar projects.

Without federal loan guarantees there is not that much Wall Street money to provide the debt on that.

I think that the utility scale solar world is going to sort of drop back to 20- to 100-megawatt-size deals and we're going to pursue that aggressively.

I just -- what I'm trying to signal is that I think that's not the only solar world.

I think over time the distributed residential is going to end up sort of swapping the big-scale project.

So we'll stay in the utility-size space, but I just wanted the market to know that we're positioning ourselves hard to take advantage of the opportunity we see on the distributed and the residential side.

I got it.

That makes sense.

That's helpful.

If I could -- on the guidance for next year, you've got interest payments down from the $800 million this year to about $650 million.

Can you walk through the details of how you get there?

Is it the refis, is it actually debt pay-downs?

What's the drivers there?

In that future year, that number, that reduction in the future guidance represents premiums as well as reductions in interest expense as we move forward.

Is there an actual dollar amount of debt pay-downs that you're actually forecasting in that number?

I don't know if you can go there.

The only amount of debt pay-downs that are foreseeable in that number currently is the amount of amortization on our existing term loan facility through 2012, as well as a small amount of amortization on some of the non-recourse debt of the subsidiaries.

That's great.

Those are my questions, thank you.

Our next question will come from the line of John Cohen with ISI Group.

Please proceed.

Thank you.

David, I know that you can't comment on M&A opportunities, but given your commitment to solar and sustainability, how willing or enthusiastic would you be to look at coal plants in PJM.

There seem to be like three that I can think of that most people think you're in the pole position to pick up.

There might even be an entire company out there that you can get for not much money down.

How much -- I guess the question is, how much risk are you willing the take on the environmental side of the equation?

How much upside to current market prices and current capacity prices would you be willing to sort of work into your evaluation?

John, I'm not sure I can answer the question too specifically, I would say that, and we have this communication internally all the time is that, because I end up talking a lot about these new business areas, doesn't mean that we're going to ignore the conventional business.

In fact, I've said for years and years, long before NRG got involved in the renewables business, that I thought the natural people to be in the renewables business were people who are actually in the conventional business.

We're not afraid of owning conventional generation, we are very proud of our coal plants, the way they're operated, environmentally and everything.

What I would tell you is a couple of things.

One is, we would definitely like to own more generation in the northeast.

We've said that for years now.

We have not been successful at being able to acquire generation at prices that we thought made sense.

We would not shy away, we already own coal plants both in the northeast and Texas, so whether we own more or not, we don't think that really changes what the Company is about.

Put the main thing I would tell you right now is the economics of coal plants in the northeast are just phenomenally challenged right now.

I don't know -- we are being as assertive with asset management as one can be with our own coal plants, and it's not a pretty picture.

So if we were to buy coal plants in the northeast, I'm pretty confident that other people are looking at the same sort of numbers that we're looking at.

To be frank, most of those numbers have parentheticals around them.

I would say that we would be interested in looking at coal plants in the northeast, but the price would have to reflect the value.

I think we've referred to -- it's almost an option value play.

I guess that's what I would tell you.

Thanks, and then just one other quick question.

I know the customer numbers seem to be picking up now in Reliant.

Is that associated with a corresponding decrease in average margins, or what's the driver behind the growth in the customer numbers, and also what does that represent in terms of market share?

Are you picking up market share or is that just growth in the entire market?

John, Jason is going to answer that question.

John, how are you?

Hi, Jason.

What you're seeing is a couple of things, one is we've always talked about, we make trade-offs between the margin that we drive in customer count and in 2011 we committed to showing a net zero attrition against our customer base.

The growth that you're seeing does include some margin compression in terms of acquisition pricing, not against our core base of customers.

The other thing that you're seeing is that we're seeing growth through the innovation that we are delivering on the product side as well as value-added services.

What we've done is we've fundamentally shifted our focus in 2011 more around customers, and I think you'll see us continue to deliver against that.

Thanks very much.

Our next question will come from the line of Ameet Thakkar with Bank of America Merrill Lynch.

Looking at the strategic priorities for 2012, I guess one, I didn't see, and I don't know if this is still a strategic priority for 2011, was the equity sell-down the solar business.

Could you provide us an update on where that process stands?

Ameet, let me talk about that.

We did start that process in the first part of the year, but what we found is, I mean, if you look at our 8 projects or whatever, obviously by far the most capital is going into the 3 DOE projects.

For a variety of reasons, some of which I'd be willing to elaborate on, if want, and some which I wouldn't.

What we found is in the final stages of the loan guarantee process with the DOE, it was not practical to both be negotiating with the DOE and trying to arrange a sell-down.

Basically, pencils went down on the sell-down on the sell-down efforts at the beginning to mid-summer, and we just focused on getting these projects across the line with the DOE.

So that ended, obviously close to midnight on September 30, and now we're at the beginning of November, so we've restarted that process, and I think we'll have more to talk about in the weeks or months to come.

Kirk, do you have anything to add to that?

I think that's true.

Certainly focusing on the 3 big projects, now that we are fully through the DOE process.

I think that removes a significant amount of time that we'd focused on that, and also, it gives us greater clarity around those projects so we can focus on the sell-down.

So we'd expect that to move at a greater pace now, correct.

Turning to the 2012 guidance, the $625 million to $700 million of EBITDA contribution from the retail business, I'm just trying to get a little more granularity on that.

Is it fair to say that Energy Plus accounts for $30 million to $35 million of that, and then Green Mountain's another $70 million to $80 million of that?

We don't get in to that level of detail, but I think you're not embarrassing yourself, Ameet, if you are in those time zones.

That's good to know, thank you very much.

Our next question will come from the line of Jay Dobson with Wonderlic Securities.

Hoping to follow up actually on a question or two ago.

The guidance for retail in 2012, Jason, was hoping you could give us a little ZIP code around margins.

You indicated you gave up some margin to get customers this year.

Are those margins flat in 2012, improving, or is there a continued focus on customers?

I think you should look at 2012 margins and assume that they'll be relatively flat to what you have seen in 2011.

From a customer perspective, we will continue to focus on the right balance between customers and margins and growing share like we've done in 2011.

Okay, That's great.

Kirk, to Texas wholesale, down $205 million, year-over-year.

If I go back to the October 3 conference call, you indicated that the cut in guidance was about $55 million, associated with sort of Texas weather.

Is that $55 million comparable to the $205, such that I would say, take $55 million out, $150 million was all other elements associated with Texas retail, away from weather?

I think Jay, the way to think about that is that $55 million of guidance certainly included the components of that.

Well it was also based on an overall revision in our outlook at the time that we revised guidance on October 3.

I think the best place to focus your attention in getting greater clarity on the components around the August event, versus the $205 million, versus the $55 million change in guidance, is in the third quarter Q, in some of the footnotes you will find a breakout of a reconciliation of how those changes took place in the quarter, around what we had referred to, or generally referred to, as the August event.

Got you.

You're suggesting those notes would be better.

So I should not, that's apples-oranges, $55 million to $205 million.

Yes, and again, within the $55 million is that $205 million impact.

Within the $205 million, one component one component of that is what took place in August.

Again, there are -- it is apples and oranges in terms of saying those are both absolutes.

That's correct.

Okay, great.

Thanks for the clarity.

Our next question will come from the line of Julien Dumoulin-Smith with UBS.

Good morning.

Quick question first on the access-deployable cash guidance, $575 million to $775 million.

Just wanted to be specific, what's the total amortization across all of the required debt pay-down for next year?

That number in 2012, you can expect to be lower than what we've seen historically as the new term loan facilities don't have the magnitude of cash sweep that the old ones did.

I think the right way to circle in on that number around an aggregate of magnitude for 2012 is think about is as being about $70 million of, if you will, mandatory amortization on that (inaudible).

Great.

With regards to the -- call it the 2012 acceleration on the repurchase front into 2011.

Should we think about that as the taking away from some of the cash deployable next year, or is that sort of a number available to next year, if you will?

The better way to characterize that is if you look at what is now the revised 2012 and beyond plan, in terms of equity investments that I showed you on that slide.

Those numbers reflect a net reduction that is consistent with the increases or the accelerations we showed you for 2011.

Great.

Moving over to retail, you've made a number of acquisitions, clearly, this year.

Wanted to get a sense, call it looking one year forward, how much load, how many customers would you anticipate having, not just in Texas, but perhaps in other geographies, specifically the northeast.

Maybe to be specific here, do you anticipate lining that up against your underlying generation portfolio, or do you feel comfortable -- call it getting ahead of yourself there?

I think -- essentially on the last part of the question, then I'm going to turn it over to Jason to answer the first part of the question.

We do want to line up the generation with retail.

We feel that the model that we're pursuing in Texas with -- over the last couple of years, between the GenCo and Reliant has been overwhelmingly successful, notwithstanding August of this year.

We would like to essentially do the same thing in the northeast, and we have 7,000 megawatts in the northeast.

We start being very long on the generation side.

I don't know that Jason is going to give you specific targets on customers and things like that and all, but I'm looking forward to hearing what he says about an answer to the first part of your question.

In the -- Julian, the way you should maybe think about customer count is that we'll be in the probably 2.1 to 2.2 range in terms of millions of customers between the three retail companies.

In terms of terawatt hours for 2012, you should probably be thinking in the range of mid-60-terawatt-hour type numbers.

Great, thank you very much for the clarity there.

Maybe just a quick clarification as it comes to the solar CapEx, if you will, or the net equity investment.

Should we think also about the excess deployable cash as you sell down that solar business, that becoming incrementally available next year?

Just wanted to be explicit there?

Yes.

It's Kirk.

On the pie chart that on the last slide of my section, that excess deployable cash reflects the full load, if you will, moving forward of our solar CapEx.

Obviously, the extent to which we begin to realize greater clarity around the sell-down and the magnitude of those numbers, that would increase that portion of the pie, if you will, for capital allocation on a dollar-for-dollar basis.

Great, well thank you very much for the time.

Our next question will come from the line of Steven Beard with Morgan Stanley, please proceed.

Good morning.

Just following up on the excess deployable cash in 2012, you mentioned the potential to accelerate some of your growth initiatives, can you talk a little bit more about the extent to which you could accelerate, and what criteria you would use for making that decision?

Sure.

On the first part of that question, in part, I'm simply acknowledging a little bit of the phenomenon that obviously occurred during the third quarter, which represented an acceleration of those.

We would evaluate those on an ongoing basis.

I do not expect those opportunities to be of a significant magnitude.

However, if there is an opportunity to accelerate a project like Agua Caliente, for example, that the acceleration of our equity capital results in a commensurate and compelling increase or move-forward, if you will, in the COD of that project.

We'd evaluate that incremental return as we would evaluate any capital investment.

We take an individual point of view about that, and make a decision at the time.

But again, I don't expect the magnitude of those acceleration opportunities to be significant.

I'm simply acknowledging the possibility that the timing may change, as we saw in the third quarter.

Perfect, understood.

Just on Agua Caliente, there was a brief reference to the DOE consent for applications for the grant.

Can you talk perhaps a little bit more about the timing and the process for the cash grant on Agua Caliente.

Yes, I mean, I would be happy to talk about it.

I think I'm understanding your question correctly.

Agua Caliente is the one project in here that is not currently entitled to apply for the cash grant.

That happened as part of the DOE loan guarantee process, where it was made clear to us, that it did not, if we tried to apply for the cash grant, then we wouldn't get the loan guarantee before the loan guarantee program expired.

So that's the state of Agua Caliente at this point.

Thanks, David.

Thank you.

Operator, I think we have time for one other question.

We know everyone has a lot of other calls today, so we want to stay on time.

(Operator Instructions)

At this time, I show that we have no questions in queue.

Okay, well thank you, Lacy, and thank you all for joining us on this call.

We look forward to talk to you next quarter for our year-end results.

Thank you very much.

Thank you for your participation in today's conference.

This concludes your presentation.

You may now disconnect.

Good day, everyone.