NRG Energy, Inc. (NRG)

NRG 
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NRG Energy, Inc. (NRG)

Q1 2009 Earnings Call

April 30, 2009 9:00 am ET

Executives

Nahla Azmy - VP of IR

David Crane - President and CEO

John Ragan - COO

Bob Flexon - CFO

Mauricio Gutierrez - SVP of Commercial Operations

Analysts

Lasan Johong - RBC Capital Markets

Anthony Crowdell - Jefferies & Company

Amit Thakar - Deutsche Bank

Neel Mitra - Simmons & Company

Leslie Rich - Columbia Management

Gregg Orrill - Barclays Capital

Presentation

Operator

Welcome to the NRG Energy First Quarter 2009 Earnings Conference Call. (Operator Instructions).

It is now my pleasure to introduce your host Nahla Azmy, Vice President of Investor Relations for NRG Energy.

Nahla Azmy

Good morning and welcome to our first quarter 2009 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 furnished with the SEC through a link on the Investor Relations page of our website. A replay and podcast of the call will be posted on our website. This call, including the formal presentation and question-and-answer session, will be limited to one hour. In the interest of time we ask that you please limit yourself to one question with just one follow-up.

During the course of this morning's presentation, management will reiterate forward-looking statements made in today's press release regarding future events and financial performance. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important risk factors contained in our press release and other filings with the SEC that could cause actual results to differ materially from those in the forward-looking statements, in the press release and this conference call.

In addition, please note that the date of this conference call is April 30, 2009, 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 and financial results. For complete information regarding our non-GAAP financial 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.

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

David Crane

Today, I am joined here by John Ragan, our Chief Operating Officer; and Bob Flexon, our Chief Financial Officer. Both will be giving part of today's presentation, and also by Mauricio Gutierrez, who runs our commercial operations and will be available. He may or may not answer your questions depending on their level of commercial sensitivity.

I'm going to be referring to the slide deck with slide five by providing a summary of what I consider to be the highlights for the quarter and to put in the context of the philosophy of our business. As those of you who have followed NRG for the past five years are well aware, our business model, and of course, the way we manage the business always has been based on the fundamental facts that the competitive power generation business is a long lead time, capital intensive, highly cyclical commodity-driven business.

Operating in an industry with these basic characteristics, a well positioned company like NRG normally is aiming to tread water during the down cycles in order that it may surf the up cycles. In a sense, that's what we are doing in this mother of all down cycles and that we are treading water in a sense that we are posting healthy financial results off a strong operating performance.

My sense is that due to the very severity of this down cycle combined with our particularly robust liquidity and forward hedge position, we are doing much more than just treading water through the down cycle. By being nimble and proactive, we are putting ourselves in a position to thrive during the downturn so that we can thrive even more during the upswing, which inevitably will follow.

In the first quarter we began to do just that. We demonstrated that the key to thriving during the down cycle is to deliver on a core business plan, which has been purposely structured to withstand the down cycle while deploying the relative strength of our business to take advantage of the best and brightest opportunities in the marketplace.

This slide five illustrates that intrinsic, extrinsic one, two approach. During the first quarter, first of all, we got the most out of our assets. We achieved the best economic return available on our assets through significant improvement in our year-over-year reliability.

Second, we successfully matched our baseload hedge position and the first link collateral structure that supports it in order that they might deliver on their core promise, which is ensuring the base case profitability of the company. At the same time, we continue to pursue the down cycle portion of our forward hedge strategy by adding significantly to our coal purchases, while staying out of the forward market for power and gas hedges.

Third, we accessed the debt markets at the project company levels to raise over $500 million of reasonably priced non-recourse debt instead in support of the PPA-based GenConn projects.

Fourth, while executing successfully on our intrinsic business plan, we transacted successfully extrinsically as well, acquiring the development rights to eSolar's big solar thermal projects in the West, taking advantage of the relatively strong market conditions in Europe to contract for the sale of our ownership interest in MIBRAG for approximately $259 million and purchasing Reliant Energy's retail business for $287.5 million.

Read the rest of this transcript for free on seekingalpha.com