NRG Energy, Inc. (NRG)

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NRG Energy (NRG)

Q3 2010 Earnings Call

November 04, 2010 9:00 am ET

Executives

David Crane - Chief Executive Officer, President, Executive Director and Member of Nuclear Oversight Committee

Christian Schade - Chief Financial Officer and Executive Vice President

Mauricio Gutierrez - Chief Operating Officer and Executive Vice President

Nahla Azmy - Vice President of Investor Relations

Jason Few - SVP of Mass Markets and Operations, Reliant Energy, Inc.

Analysts

Anthony Crowdell - Jefferies & Co

Brian Russo - Ladenburg Thalmann & Co. Inc.

Lasan Johong - RBC Capital Markets Corporation

Brandon Blossman - Tudor, Pickering & Co. Securities, Inc.

Jonathan Cohen - Morgan Stanley

Julien Dumoulin-Smith - UBS Investment Bank

James Dobson - Wunderlich Securities Inc.

Gregg Orrill - Barclays Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2010 NRG Energy Earnings Conference Call. My name is Zumira, and I'll be your operator for today. [Operator Instructions] I would now like to turn this conference over to your host for today's call, Ms. Nahla Azmy, SVP of Investor Relations. Please proceed.

Nahla Azmy

Thank you, Zumira. Good morning, and welcome to our third quarter 2010 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 question-and-answer session, will be limited to one hour. In the interest of time, we ask that you please limit yourself to one question with just one follow up.

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

In addition, please note that the date of this conference call is November 4, 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 the 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, the most directly comparable GAAP measures and quantitative reconciliation of those figures, please refer to today's press release and this presentation.

And 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. Let me start by introducing my colleagues here participating in this presentation joined by Mauricio Gutierrez, our Chief Corporate Officer; and by Chris Schade, our Chief Financial Officer. Also available to answer your questions will be Jason Few, who runs the Reliant Retail Business on our behalf; and Chris Mose, who is responsible for commercial operations at NRG.

So to begin, as we know, the Equity Markets, relentlessly forward-looking to some, I spent most of my time looking for it as well. I do want to pause for a moment, and you should be looking at Slide 3, if you're following along in the presentation on what this company accomplished in the third quarter of 2010 and what we are in the process of accomplishing here today.

We had another exceptionally strong performance with our second best-ever quarter from an EBITDA perspective with an able assist from favorable weather and most importantly, thanks to our exceptional operating performance in robust hedged position. We largely mitigate the impact of gas prices trending relentlessly downward and keep rates moving sideways to post $777 million of adjusted EBITDA and $536 million of cash from operations. Certainly, our already strong current liquidity position was enhanced during the quarter by the bond financing that we did in August, but our liquidity was also strengthened as it has been for many course in a row by a very substantial contribution of free cash flow from the company's operating assets and businesses.

Our strong performance year-to-date allows us to narrow our full year 2010 guidance to the top end of the present range. And while I had in my exploration from the beginning of the year to reach the $2.6 billion level, which would've put us flat against our record-shattering performance in 2009, I am nonetheless very proud given the gravitational pull of near-term gas prices that we are on our way to a performance in the $2.5 billion range.

Indeed, as you may recall that 12 months ago in the course of announcing an initial EBITDA guidance for 2010 of $2.2 billion, I convey to you that as a management team, we were not satisfied with that number. And we made a commitment to you, our shareholders, that we would not rest until we had improved substantially on that number. I feel that under the circumstances, we have delivered on that commitment.

Today, I'm here to make another set of commitment. As Chris will outline for you, we are initiating guidance for 2011 in the $2 billion range. Our financial prospects in the third year of commodity price recession, once again being subjected to the downward pressure of the significantly lower gas curve, our commitment to our shareholders again this year is that we will not rest until we have substantially improved our performance against the standard of this initial guidance. I can't promise you anything specific today with respect to our next fiscal year, which obviously doesn't begin for another two months. But if you check our record over the past six years, I think you will find that we have been pretty successful in exceeding expectations regarding our current operating and financial performance.

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