NRG Energy, Inc. (NRG)

NRG 
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NRG Energy (NRG)

Q1 2011 Earnings Call

May 05, 2011 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

Analysts

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

Angie Storozynski - Macquarie Research

Julien Dumoulin-Smith - UBS Investment Bank

James Dobson - Wunderlich Securities Inc.

Gregg Orrill - Barclays Capital

Unknown Analyst -

Presentation

Operator

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.

Nahla Azmy

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 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.

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 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.

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 let me add my good morning, and welcome to Nahla. Today, I'm 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 to the presentation.

We're also joined by Chris Moser, who runs the company's Commercial Operations; and Jason Few, who runs the 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 of weeks ago discussing the STP 3&4 situation in light of the event in Japan, our prepared remarks today are going to be unusually brief. I'm also going to be referring to a slide deck, which I think is available on the website.

So as illustrated on Slide 3, 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 2 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 net 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 using 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.

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