NRG Energy, Inc. (NRG)

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NRG Energy (NRG)

Q2 2011 Earnings Call

August 04, 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

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

Analysts

Keith Stanley - Deutsche Bank AG

Paul Fremont - Jefferies & Company, Inc.

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

Angie Storozynski - Macquarie Research

Ameet Thakkar - BofA Merrill Lynch

Theodore Durbin - Goldman Sachs Group Inc.

James Dobson - Wunderlich Securities Inc.

Gregg Orrill - Barclays Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 NRG Energy, Inc. Earnings Conference Call. My name is Kiara, and I'll be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Ms. Nahla Azmy, Senior Vice President, Investor Relations. Please proceed.

Nahla Azmy

Thank you, Kiara. Good morning, and welcome to our second 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 also available on our website.

This call, including the formal presentation and the question-and-answer session, will be limited to one hour. [Operator Instructions]

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 August 4, 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 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.

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

David Crane

Thank you, Nahla, and good morning, ladies and gentlemen. For this quarterly earnings call, which is the 30th such call in the history of the new NRG, we come to you for the first time from Houston, Texas where the temperature forecast for today is hot, followed by periods of hotter. The humidity is about as thick as New York cheesecake, and the air conditioners are working overtime. With ERCOT shuttering, it slowed record everyday this week. Hopefully, this will be a good day to be in the electricity business in Texas.

For this call, I'm joined by our COO, Mauricio Gutierrez; and our CFO, Chris Schade, both who will be joining me in delivering prepared remarks.

I'm also joined here today by Jason Few, the Head of high-flying Reliant; and Tom Doyle, the President of scorching hot NRG Solar, both of whom will be available to answer any questions you may have regarding their respective areas of responsibility.

Now turning to the presentation. We have a lot of very positive things to talk about today. So let's go straight to the highlight page, which is Slide 3, of the presentation. As Chris will elaborate on a little later, the financial results speak for themselves. Void by Reliant's continued exceptional performance, we not only posted a very healthy $517 million of adjusted EBITDA for the quarter, we also earned a position to narrow the range and revise upward our full year 2011 adjusted EBITDA guidance to $1.9 billion to $2 billion. What is particularly positive about this result is that while we certainly had benefited from a very warm summer today, we also benefited substantially from the immense progress Reliant has made in slowing and ultimately reversing the long-term decline in its customer account. And Reliant has achieved this positive reversal, not by eroding margins excessively but rather through its best-in-class customer care, its effective use of multiple sales channels and its expanded product offering.

Reliant's exceptional financial and operating performance was replicated during the quarter by Green Mountain which performed well, and also across our wholesale generation fleet where we realized a baseload fleet availability around the critical 90% mark and achieved a very high level of reliability in peaker startups, which is obviously a very important operating metric, particularly during the hot and high-priced summer peak hours.

As it has been for the past 7.5 years, the strong operating performance achieved by our plant operations group, together with the 4 hedging program implemented by our commercial operations team, achieved a substantially cash generative result, which in turn feeds our very strong liquidity and our strategic capital allocation efforts.

This quarter and year-to-date, our financial team has gone from success to success in the steps it has taken to simplify our capital structure and to enable us to allocate our shareholders' capital with maximum efficiency. Now only our 2,017 bonds remain in our way, and they become redeemable in just 5 months time. But NRG's commitment to efficient capital allocation stands still for no man, nor will it will be frustrated by the obstacles placed in its path by any individual bond issue. So I'm very pleased today to announce an additional $250 million share buyback program, which together with the $50 million of shares which remain to be repurchased under our previously announced 2011 program, means that we have $300 million of NRG shares to be purchased before the end of 2011.

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