NRG Energy, Inc. (NRG)

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NRG Energy, Inc. (NRG)

Q4 2009 Earnings Call Transcript

February 23, 2010 9:00 am ET

Executives

Nahla Azmy – SVP, IR

David Crane – President and CEO

John Ragan – EVP and COO

Gerry Luterman – Interim CFO

Mauricio Gutierrez – EVP, Commercial Operations

Analysts

Ameet Thakkar – Bank of America

Anthony Crowdell – Jefferies

Dan Eggers – Credit Suisse

Lasan Johong – RBC Capital Markets

Neel Mitra – Simmons & Company International

Jonathan Arnold – Deutsche Bank

Michael Lapides – Goldman Sachs

Angie Storozynski – Macquarie Research Equities

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the NRG Energy quarter four and year end 2009 earnings conference call. My name is Geena, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the presentation over to your host for today's call, Nahla Azmy, Senior Vice President, Investor Relations. Please proceed.

Nahla Azmy

Thank you, Geena. Good morning. And welcome to our fourth quarter and year-end 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 through a link on the Investor Relations page of our website. A replay of the call will also be available on our website.

This call, including the formal presentation and 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.

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

In addition, please note that the date of this conference call is February 23, 2010 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 to most directly comparable GAAP measures and a quantitative reconciliation of these figures, please refer to today's press release and this presentation.

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

David Crane

Thank you, Nahla and good morning, everyone. With me today is and delivering part of the presentation are John Ragan, our Chief Operating Officer; and Gerry Luterman, our Chief Financial officer. Also available today to answer any questions that you might have in their respective areas are Mauricio Gutierrez, who runs Commercial operations for the company; and Jason Few, who runs Reliant.

So today on the 25th quarterly earnings call in the history of the new NRG, we are pleased to report on a financial result for 2009 that was truly historic in its dimension. The professionals who constitute NRG turned in an extraordinary year in 2009 even though it was the second year of a severe recession, it was a year in which national electricity demand decreased year-on-year for an unprecedented second year in a row, it was a year in which we faced relentlessly declining prices for our key commodities and it was a year in which the capital markets were still in very early stages of recovery from their near-death experience the previous fall.

And in all of that -- and all of that was 2009, NRG delivered top quartile performance in safety and plant operations not withstanding that certain of our coal units were called upon to cycle more frequently, a baseload hedging strategy that insulated the company's financial performance, making the record financial year possible, effective and efficient integration of Reliant retail into NRG in all phases of business culture and management and most importantly in mitigating the risk around Reliant's wholesale supply and savvy and proactive execution across all phases of our balance sheet program, notwithstanding the challenging capital market environment, including completion of a sizable share buyback equating to between 8% and 9% of our market, significant pay down of our current corporate debt and the sale of two subsidiaries at significant cash gain for the company.

And finally, in 2009, we achieved significant enhancements to the company's asset platform, enhancements like Reliant that made sense financially and presented investors with a business profile for the overall company that is significantly different and better than the profile of other competitive power generators, enhancements like Bluewater Wind, the leading offshore wind developer in the United States, Blythe the largest operating photovoltaic plant in the United States and the eSolar development projects. These are among the first and most visible steps we have taken in preparing our company for success in the new energy economy.

What it all adds up to, as you look at slide five, is a year that was just phenomenal financially, indeed we shattered records on both adjusted EBITDA and cash from operations. It was a year that also positioned us for further success because as we move assertively to point our business at the plethora of opportunities we see open to us in the new energy economy, we do so with a $3.8 billion war chest, $2.3 billion of which represents cash on hand.

Now, Gerry is going to talk to you about the 2010 capital allocation plan being launched today. But even with the considerable funds being deployed to pay down debt and return capital to shareholders, we retain a lot of firepower to deploy against these new opportunities. We are actively looking to deploy that capital where it makes sense economically as well as strategically. As we have been in the past, we will be transactionally opportunistic but economically disciplined.

So to talk about how we achieved such an impressive result in 2009, I want to turn it over to John Ragan.

John Ragan

Thank you, David. Good morning, everyone. NRG operations ended the year with strong fourth quarter performance and concluded 2009 on very solid footing. By most performance measures, 2009 was one of our best years even as NRG faced some of the most challenging operating and commercial conditions since 2004.

Our relenting focus on safety helped NRG achieve the second-safest year in our history with a 1.16 OSHA incident rate, better than the industry's top quartile level of 1.32.

As we exited the first quarter of 2009 with a recordable rate of 1.47, we increased our focus on daily safety activities and were successful improving our performance during the remaining nine months of the year. We believe a disciplined approach and emphasis on safety sets our cultural foundation at NRG and provides the catalyst to achieve superior operating results.

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