NRG - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the NRG Energy Incorporated Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Investor of Head Cole, Relations. Kevin begin. Sir, you may

Kevin L. Cole

statements, webcast, of to Thank in that required discussion quarter we third being this section materially. the live and of that on result as forward-looking SEC believe undertake welcome obligation the at may future our may located morning's and you, to Good morning broadcast reasonable Webcasts. via as based filings. phone the except well under in Actual Joelle. to our NRG law. differ a no over can date. XXXX of events, assumptions to Investors We today's are which review is be by be in results the today's Energy's call and which www.nrg.com, earnings as Presentations website This everyone these urge update factors call. note as as Please We Safe risk Harbor presentation, statements contain

we will In and measures. refer financial GAAP addition, to both non-GAAP

For reconciliations President comparable to Mauricio now call NRG's information to that, to refer CEO. I'll the measures presentation. with today's over and financial measures, please directly turn GAAP Gutierrez, most the our and non-GAAP regarding And

Mauricio Gutierrez

interest everyone, morning, thank you, and Kevin, Thank good you in for and your NRG.

morning three Operations. Head on by on key call Head this of Moser, Retail to Kirk the me our the questions, X. Chris is Financial have like today's also Chief of Killinger, Elizabeth messages Joining Business start presentation call Andrews, highlighting for Officer and our slide we and available I'd Mass for the and

platform. earnings the demonstrate of to integrated our continue we First, predictability

and XXXX forma. upper our guidance our half financial narrowing XXXX to transformation are earnings plan of the the range initiating We pro above guidance

NRG significant Second, and right-size our Yield the milestone Renewables. of sale our business we to by closing on achieved efforts a in

to now With cost plan, nearly the in pivoting behind us, sales asset enhancement margin savings transformational we're and XXXX.

announced earlier addition repurchase XXXX completes brings This our in program are our billion capital the $XXX the repurchase million and total to an plan. $X incremental Finally, billion share share year. allocation announcing in we $X.X to

realized during Moving X, of side am while driven volatility. was by during very and higher of on higher accretive slide and EBITDA results. of to we execution $XXX power year. than million you or safety on performance our a continued slide, third prices the quarter last the extreme of XX% primarily can business third the I delivered with savings see top adjusted period price on update integrated pleased financial platform cost our quarter, left-hand the quartile achieving initiatives as This operational

we in exactly high the the of As Generation have our during of this that margin past, benefits compression. environment price It our discussed business business our the with platform in benefits model. Retail demonstrates you while periods some integrated experiences prices, is

quarter that at now asset simplified the to for model. range our result a billion the billion, guidance range our at increase half XXXX previous year, is is $X.XX to year-to-date our first from narrow also statements when $X.X This reflecting billion Our which XX% last $X.X our sales. new adjusted stand allowing of start upper financial us to business

in Our This total quarter. million number previous includes at $X.X is almost months. XX% deleveraging than of lower billion corporate debt or now completed $XXX last the the two

of reflect the return continue the stock and to opportunity our fundamental this we by time. our completed NRG does million quarter the best which presents the share expect third be to the year. repurchase, business price value current $XXX second for of also transactions, Yield and launched of end Renewables the the our I capital that believe During following we not close at

example achieving and of adjusted to on This provide fundamentals range of additional XXXX. our excess allocated have our billion. reflects close will $X.X to ranges. Later This our in platform, the billion core transformation both initiating we're $X.XX cash markets in goals. stability guidance of provide XXXX, and yet into Kirk in another the be billion strong details confidence will $X.XX ahead EBITDA strength Looking guidance integrated in to is which of we the the call,

Turning reductions million to to targets. full-year we on initiatives enhancement. slide to update; execute remain million savings, in the maintenance the our have X $XX September with cost plan plan in million achieve we transformation margin XX, $XXX and our during track $X and in realized quarter CapEx XXXX continue on Through

year, margin will focus our programs, continue to CapEx savings while initiatives. executing maintenance the Over ramping the remainder of enhancement and up we on our cost

in including for avenues, and closed systems more margin We With analytics. for during place put continue asset on the customer foundation we realizing expanding of and Renewables. sales products, channels enhancing IT to sophisticated multiple the quarter, and to transactions respect sale improvement sales, NRG Yield through the streamlining

and close and FERC, by to fourth it the quarter in reach Central with first expect is to XXXX. process South approval expected moving quarter will We Carlsbad close year-end the through as is and of LPSC in COD the the

other to the proceeds Caliente $X.X narrowing remaining assets the close will the to are only line from asset time, as by We our remain billion. at $X.X of This in of improving Agua to conditions. also sight having given is billion portfolio year-end this XXXX. up assets sale the market with result All clear

X on the deleveraging our our target leverage net objectives. well XXXX, times having way EBITDA of to end Finally, of executed achieve to our debt after are by we

higher of XX,XXX you in led for set on to record peak as we demand, a markets, load megawatts. a weather turning across look warmer where slide, see summer; closer new the Now, at this X was Texas, which normal slide particularly core than can to our

A prices real-time of performance expectations. This July the mixed markets prices expectations. and can While compared summer. In across settling beginning prices robust, chart. prices with came of loads upper right-hand the resulted it due on combination in during milder to near to a temperatures was above in mainly were California deliverability. at lower was the well than heat ERCOT, August restricted generators was you wave gas In actual west, different story XX% expected significantly perfect in by as lower, the the were see

Looking ahead, cooling increases of really east, pretty recent once-through we the and community-choice were in market capacity Western retirements with in In expectations on unit that energy aggregators the prices emergence line capacity and the the reforms is much combination to have prices. both energy. of of resulted focus and observe

over justify unable starting investments. long-term load cancellations margins as builds delays Now market or slide driven year, looking as growth, or and for and outlook reserve our forward X seen continue past additional have to we new by on tighten, retirements, ERCOT; asset the to developers are with

future increases potential you is continue with margins several to significantly implying scarcity generation. sent entirely low prices, margins be forward left-hand higher, at These to prices the in combined ORDC where regulatory ERCOT's pushed positive On to the chart, see need to changes, the can has price the participants. the prices market been of the XXXX PUCT signals driven below This are in years, the almost the reserve that pricing mechanism, reserve Currently, X X changes between cap. considering particularly additional market have now top summer highlighting right for to for hours by target XXXX. ensure move and is

One even the renewable taken to is an earnings that reserve and of actually more up going our on forward. worth made XXXX margin this that levels area our hedge comes opportunity us increase predictability XXXX, most is of in as from noting have with capacity current We generation. providing

to generation in you available to actual capacity lead and this fluctuations is As the amount know, non-dispatchable therefore serve of potentially could load.

markets. Now moving the is East, changes and to energy regulatory on both the capacity focus for

FERC unjust the impact As you negative and due has existing capacity know, in of PJM market to stated that units. unreasonable, the subsidized is

generators lead current on-site for changes fuel additional fuel have and effective quo improve impact revenues that are way of capacity play, and status is to the strong New the at on which security, for England simplest capabilities. market. are we PJM Let most subsidies This should much harmful reduce designed very these me a focusing regulatory our reiterate but is also to to and the MOPR believe all positive the on are portfolio. that

Next month, a capital plan, afforded I philosophy talking the that minute spend record, we is our allocation in of capital provide years track few past it this CEO we will have not I where ourselves our be and since wanted light financial of the to and particularly allocation while three flexibility about the in company became quarter the years.

our Turning allocation to slide for you capital the can X, years. see three past

underperforming may XXXX focus in recall, you assets, focusing business selling stabilizing initially balance and our strengthening business core be This reduction resulted allocated closing our to or our and to on cash debt excess most integrated our As of sheet. by in XXXX. on we

excess capital in share we the our our rightsizing of announcement undervaluation of business, to our we significant given the our plan XXXX With and the stock. created own returned transformation through repurchases of shareholders that

to the business, following million principles have articulated with repurchase potential over Kirk capital be capital to that in you cash as will our summary. quarter As to have we earnings our incremental of close that, disciplined on we even providing I be this announced allocation financial done on can and turn $XXX the move XXXX given into I excess look our I With plan to our the will you which today, $X.X to that call past. share you slide. to fourth see after we the and billion reiterate forward want absolutely will that you it in XXXX for we allocation

Kirkland B. Andrews

Mauricio. Thanks,

third the now NRG these to Yield a nearly last million of adjusted results as sale EBITDA and EBITDA, longer cost in $XXX us the XX, the places to of $XXX savings on the million nine increase our with cost XXXX target now year-to-date approximately financial a on and the million. track billion slide treated quarter, Renewables XX% our discontinued of has from XXXX, achieving summary are for $X.X sale. successfully over $XXX include as first which in first August, NRG months which of quarterly contribution year. closed delivered businesses, Having delivered realized, of savings the no operations Turning in result Through NRG adjusted

us, and months our behind now With and guidance previous of XXXX the these which solid range, discuss our the greater shortly. results narrowing toward summer revising detail half also in we're upper I'll important

all removed in NRG's of are approximately NRG now in which million the sheet with balance debt target $XXX in With our I'm completed, XXXX and Yield we NRG's net combined the simplifies but of investors XXXX. transaction, of times balance debt-to-EBITDA not transparent. Renewables X announce, only discretionary our This $XX sheet from closing for debt more pleased billion have to makes now the achievement significantly redemptions

included following achieved the As we our achieve third in of you'll balance XXXX in our $XXX repayment, parts. ratio million recall, sheet which quarter debt to plan target part two in

eliminating our process. notes, redeemed maturity First, senior we the in in our October, the nearest million balance $XXX of remaining XXXX

Second, we term repaid $XXX million facility. loan our of

have through to We keeping the at balance amount a the this to of represents terms NRG the certain assets at facility are reduction and this financial par. under institution, capped for proceeds of the effectively arrangement the with required an our requirement, sales In with we $XXX this made from offer portion lenders to offer, is redemptions responsible XXXX. which which for million, target a required achieve debt of

have fully earlier, billion phase As buyback of the we now share Mauricio our $X program. second funded mentioned

is initially the completed or based program. Following end be base and Renewables, institution. the shares place of repurchase of stock under by will over number million to XXXX. put NRG with execute which financial program a the the continuing additional shares with share will ASR closing supplemented institution be average in on accelerated a The repurchases of ASR NRG financial Yield of price a we which share the $XXX our received

$XXX share $X.X XXXX. to XXXX executed authorization additional a an our allocated have XXXX will XX% excess billion nearly and to In capital which This be now brings total addition, now excess amount share or of new into million the we capital. purchases for in between of buybacks

XXXX moment XXXX deconsolidation, Turning you'll to our update revised next resulting our guidance. from significant some first slide of on and which asset a XXXX, results to an sales of our the provide like in find context you on impact to guidance I'd reported given take XX,

has at That of guidance, table our the since at which of the now a been expected including it those all XXXX moving and from have unchanged year the full-year our provided to remained guidance right, we about Looking ago. start first businesses, contribution from included the top slide which consulted we with left previous sold. for

business Yield, previous from Boston to closed the our included Renewables the recall quarters, South you NRG you as impact or XXXX our our BETM, As and asset have business. to-date from disclosed to guidance of may on midpoint sales as we these everything Trading full-year such well which we've Central as

the results EBITDA from we That the Central, and year, our retained for guidance you end of comparison our for Following This XXXX expect Based in the business of not column last the also updated will the will reference businesses the expectations toward adjusted treated which the the billion in sales. and results X.X shown to free $X.XX narrowed reflected this asset businesses remaining our billion billion see and million range $XXX column balance cash column continue of in cash XXXX, previous as and and $X.X in and the operations our billion be from billion businesses that should XXXX, to $X.XX South which the is cash our XXXX on on to of prior is these and appear for and free reflects these flow. discontinued guidance some for the on provide our prior to based free $X.X adjusted the guidance midpoint performance guidance right. entitled, to EBITDA of prior year. second closing for flow respectively. flow from in for contribution third Deducting you in revised guidance or guidance of context amounts allows EBITDA our

for upper range this asset reflects of previous adjusted the half guidance Importantly, revised guidance our sales.

when the at moments. a to some review which bottom there the are note guidance revised also our should respect XXXX in with to our slide, XXXX couple of financial Finally, items few provide context guidance, you of a I

our guidance our sell partial sold both the In approximately Clearway included during contribution in well two as Generation which Agua early First, to guidance. items BETM, consolidated we reflects as the within for these XXXX expect to in well segment, as NRG Caliente, from Yield revised the still or revised represent XXXX. million adjusted was which total, XXXX, from year as contribution $XXX EBITDA

early As Agua not contribute thus included in to will of guidance. Caliente expect our BETM two sold be has neither forward, going now we items are results our been sold these and in XXXX, to financial XXXX and

Second, as results. which our million contribute $XX closed on recall, in expect Energy we we to to approximately XOOM XXXX mid-XXXX, you

we we indicated reflects and announced the Day, the However, impact million be as $XX when transaction of full-year XOOM our we during to that. Analyst XOOM approximately expect guidance XXXX

to balance which first on our plan XXXX a XXXX you'll transformation I'd like and as will financial will backdrop, announced simplified XX. further that to with So, turn that we our the the since retained are find results strengthen guidance year sheet. slide be the reflect businesses and

In our our $X.XX guidance Our Generation, help XXXX $XXX understand upper guidance to based was guidance. this from from million $X.XX to XXXX to Retail. we $X EBITDA, $X.X for billion that slide, billion forma of to a XXXX in adjusted pro original provided on compared you million is and the walk XXXX right billion EBITDA to $XXX our billion with previous

found two our XXXX recently billion. was the to $X.X we $X.XX of items. which To bridge Our billion most guidance, second in was previous XXXX midpoint add EBITDA, presentation, forma pro quarter

First, impact initiatives totaled versus our incremental XXXX, of XXXX $XXX which reflects million. the transformation plan guidance

XXXX consists million As to XXXX, enhancement million $XXX you $XX million may to this and XXXX. the cost savings, run in rate $XXX recall, increases of in in increasing million $XXX XXXX which margin in

impact combined in add reflects the at we to XXXX of arrive the of million, which $XXX XXXX. prices power guidance, Second, midpoint increased

just costs Specifically, that represent prices partially benefit Retail. offset supply these for they EBITDA, increased Generation by higher

XXXX. higher to XXXX recoverable to modestly guidance, expect Retail we be supply While expect these impact we them costs beyond

allocation. slide on on a brief XX, I'd provide capital to update Next like XXXX

in previously versus blue. usual, the we the second update quarter, this in the to update find provided all As you'll highlighted changes

see, capital can increase reflects driven in $XXX allocated share As new by a reserve you to for a our which million buyback repurchases, primarily authorization.

Carlsbad are capital We have slide, upper last $XX buybacks. allocated targets the summarized and consists the XXXX the update shareholders, our through deleveraging allocated total and based following: the our COD the to early our First, XXXX this shifts $XXX asset approximately capital in now capital primarily since NRG on now returning with remaining or in close excess from The that Item fully to of changes as million in capital expect to toward right and which year, million of of primarily share about sale expected for shown in Clearway first A, of XXXX. Yield later the on with quarter, discussions we

by with needed on million redemptions based to Next, positively XXXX impacts ratio other activities $XXX This as year-to-date. offset to as we mentioned in earlier EBITDA, million. approximately liability about leverage and the increase is associated partially debt which million of $XXX premiums in by cash temporary well XXXX this in ratio, reserve $XX able our debt the reduce the I've are both achieve management fees

we now the of allocation next allocation, Finally, expected transformation million, as part reduced by on a which have we review to XX. cap achieve to $XX incur expect cost to plan I'll XXXX slide which

excess Turning plus our the capital which XX, guidance on cash of XXXX capital the comprised available XXXX with about is we to from of previous unallocated capital slide. of billion, free XXXX $X.X midpoint of million begin slide $XX flow

$XXX we for which sale approximately are $XXX Next, million first million expected Both quarter. for add of Agua Carlsbad XXXX to $XXX which in asset of the in consists close and million Caliente. proceeds,

our the cash X of million remaining full temporarily reserved the $XXX in ratio. release times is to Next XXXX ensure

excess our cash Our higher for midpoint net we of not any debt achieve $XXX further ratio. all this cash times review this year XXXX X EBITDA simply to our recall, – on that in for I'll balance still million may remaining as about was you making balance next capital or to cash previous XXXX walk unavailable as release capital million in would that minimum note detail to will allows cash important capital allocation, beyond us our EBITDA to reserve on fully require until for to we pro purposes, forma in $XXX XXXX. it's XXXX expectation, with need credit ratio our however previously this slide, based was next which in the

in robust the an repurchases, one more remains unchanged walk XXXX effectively year reflected at expected, Our although guidance capital share previous allocation previously now and earlier is through $XXX cumulative this excess from our toward that allows our reason for to EBITDA release additional million we've allocated billion. capital us $X.X than why XXXX

XXXX corporate updated allows an maintaining Finally, XXXX ratio our reflect to forma times our column one, EBITDA, to again slide pro credit XX. on which update our reserve our debt-to-EBITDA. calculation, us to reduce metrics turning cash In on increased revised net three we've while

XXXX forma $XXX reduced leads pro billion Our debt debt in in in million reserved $XXX redemptions in leading cash total additional at $XXX to XXXX million debt cash the after by deducting and quarter debt. balance corporate reflects $X.X year-end XXXX, which, third minimum of $X.X net temporarily XXXX our to of now million completed, billion

of added midpoint from $XXX $XX for For also purposes, million revised In guidance, our EBITDA full for leads million have billion our debt BETM. year total, for and still EBITDA ratio to guidance XXXX. this we sales asset the of effect forma net Caliente XOOM. XXXX reflect ratio And our purposes adjustment of the Agua to XXXX we've $X.XX of adjusted adjust to adjusted which of pro removal in range specifically remains

forward, XXXX we this adjust Midwest the is will count Gen the through be after we As continue necessary XXX% we've will of Gen the modernization capacity sold year prior only done of as which that towards of ratio. capacity ratio EBITDA which, for in final to purposes, EBITDA Midwest reflect to impact quarters,

EBITDA while net this three fully the further that million earlier allows in $XXX us cash Turning to of maintain reserve, us as the EBITDA, that times that to million allocation guidance on midpoint or XXXX, increased making important I XXXX for ratio. in to mentioned adjusted times permitting of available $XXX cash basically release remaining XXXX, based debt-to-EBITDA increase three

$XXX as the additional with in $XX enhancement reminder, which an million for $XXX million additional in Finally, a on margin in that, improve versus integrated capital additional increases still EBITDA can combined the XXXX platform, remarks. resiliency XXXX we upside, programs in our Generation credit strength I'll This back maintain XXXX. to XXXX. expect and turn million his and for that and closing to with it ensure metrics we our And Retail without of in Mauricio need helps for

Mauricio Gutierrez

scorecard A on Kirk. few you, Thank closing our XX. slide thoughts on XXXX

been am we and the has As you been our team pleased a priorities. have so far accomplish. can able across busy with I excellent tell, what to have quite on board it XXXX year very our made progress

three I As further key shifting to the I transformation we're business margin forward XXXX, finally, announced interest available. I for plan look about enhancement allocation we our in perfecting excited and that completing our of model; company. to sales; the disciplined your very focusing our redefining asset to efforts of focus the time excess into and our thank am areas, of integrated our have significant the by future capital and NRG. will want you

for Joelle, that, with open questions. to we're So, line ready the

Operator

you. Thank

comes Julien first Lynch. from Dumoulin-Smith America Our Merrill question with Bank of

is line open. Your now

Julien Dumoulin-Smith

Hey, team. you? How good morning, are

Mauricio Gutierrez

Julien. morning, Good

Julien Dumoulin-Smith

a wanted bit bit up the change little a to but weighted the little price seems if Hey, if It there Texas hedge There's bit per-megawatt-hour excellent. little could little intact, been here? average elaborate hedge a a you on kept basis. percentage as I a you've to on follow hedges here. a XXXX? on in largely in bit just going of Hey, understand on what's wanted the

Mauricio Gutierrez

discussing as move opportunity in has Sure. prices taken were you been the XXXX and actually know, seeing the I power and this increase we're we most to of – increase XXXX. We have summer. Well, around mean, hedges, our

then some I can dynamics seeing XXXX? in in particularly you our expect June Chris, So, more are you're really September But, the any anything – we of and details there through around have hedge hedges been else, the mean, that put that strategy around have the strip. place

Chris Moser

Yeah.

and Julien, load know, the options, rest the idea combination we're and generation some hedging, at trying numbers that outage insurance, options, probably you – of we're that. the expected buying to is still in What try with the a doing lower when against risk to what obviously off you later, number bit. can selling we'll dig in this summer. move good done with the down at and pieces, also little and looking variability, we and into we or operational a at weather were that's take looking Obviously – level. think you're probably off-peak not looking I'm at I Those lock just we April cover to dated as and XXXX, but in going leave is, longer around-the-clock, summers, are up especially

Julien Dumoulin-Smith

Got it.

to So, that from explains move the $XX? $XX

Chris Moser

Yeah.

Julien Dumoulin-Smith

The bulk of it.

And then I just respect Okay. but plan. I of commentary board, I secondly mean, here, this take Mauricio, of Excellent. on transformation think of with morning earlier the continued also folks changes note are note the some taking execution your to of the

do time for mean, board how announced composition be that You've you we've what's morning continuing How I board this about first on and the EBITDA, do XXXX think into read anything some you XXXX ultimately, – changes reflected about there the is of cost XXXX? your savings from here, too. here on in think the seen the full-year to

Mauricio Gutierrez

to and I member been and the shareholder. as from a down he's step read the anything and the a our having we transformation supported is done board Well, plan, excellent is myself. the composition. including executing and to I there committed don't progress, can insightful plan forward with have what think look board to you is I Management to him board tell on transformation long-term – decided board that entire continue John I think good The

are support all I that we know transformation think that a our that we're the – direction Julien? that I of I have plan, in the terms from was two answer shareholders or we going. question, our question. think three-part your – it So, Did

Julien Dumoulin-Smith

are or you – more Well, and from a the for board that to I I more incremental provide maybe cost little few that for transformation does savings you are to even about be Obviously within bit cost anticipated; evaluate a cost company at shaping perspective? up continuing originally savings the assets plans you're than XXXX? direct on this, further savings how a mean, to into yeah. – Well, your holding a

Mauricio Gutierrez

Yes.

with something in So, plan, start cost the to million. on to – and we're or of to savings going transformation executing line respect we this things that do is to the $XXX cost end a doing It that's process. on doesn't have savings, the our We're that always sight efficiently. transformation plan. a going is that looking in at continuous Obviously, doing with improvement more We're XXXX.

to assets mean, to reduce continue some the evaluating doing the that of cost going if believe there opportunity we we're we're I looking that retaining, already that. And on that. and are an me, So, then is at

very on improvement I we're that confident that that am feel I numbers I XXXX – we transformation we the our of by So, very also culture was NRG you before confident for am in to and achieve is and very going have plan all continuous that strongly. believe, this know, something

and So, I over. the think that, don't done basically expect you should you after know, transformation is plan this

Julien Dumoulin-Smith

it Excellent. Thank all. you All right. there. I'll leave

Mauricio Gutierrez

Thank you, Julien.

Operator

you. Thank

Greg from Gordon ISI. comes next Evercore with Our question

Your open. now is line

Phil Covello

actually It's Phil guys. here Greg. morning, Good for

Mauricio Gutierrez

Greg. Thank you,

Phil Covello

Phil. But...

Mauricio Gutierrez

getting here Phil. echo Phil, We're end. on I'm little our sorry. a

Phil Covello

Okay.

try the couple me Anyway, of clarify a items want Let on to headset. to quarter. congrats my I adjust discussed. just you

billion clear, into CAFA today, the XXXX. not that for allocating that's $X.X incremental be So, million to not the eating allocated, it's you're $XXX announced

Mauricio Gutierrez

correct. is That

Phil Covello

if billion that $X from use were allocate theoretically, here. all buybacks, for So, you to north you of can

Mauricio Gutierrez

I mean, billion, Yes. $XXX correct. $X.X yes, the million plus that's

Phil Covello

Got you. curves? the is In laid the that guidance end of XXXX you to marked out, quarter

Mauricio Gutierrez

Yes.

Phil Covello

Okay.

here that fresher are a still – bit what it we fair you seeing... today you sit on or how a is where to curves look mark-to-market that are So from better little say

Mauricio Gutierrez

that is in looking Number XXXX one but hedges say curves; we would two, tad have mean, better, into just are mind, that few a guidance, of they power I you're when Yes. at number you things level consideration. the to the I keep have. take a up

just and our So, Retail for I one, cost business. mean obviously it's not supply

you So, I just one-dimensional. it's there's take into so to not consideration, multiple mean, need things that

Phil Covello

future on wholesale to higher year, your through guess rates. going on prices Kirk, I can the move but you you be into won't Understood. XXXX, as time, capture And into the to side with commentary to yeah, you work X:X next I Retail mean, Retail start that that essentially point, able that

it's Am thinking kind So about correctly? a of that I lag. margin

Mauricio Gutierrez

I and is but let between prices in mean the profile I change different having an are our on in correct we that – bit for seen earnings keep mind, from a and integrated That's have focused stable and predictable Retail going we Generation platform. earnings, perspective, me what is just Yeah. the is distribution to as mean, I mean my little

it if other truly generation it's any than So, benefits perhaps more of business Retail part are increasing, the business power prices power and way.

are and of the integrated platform, of done of and platform, today, and but predictability know, with a we we're we think, XXXX I which this it's focused the the you what the demonstrate, day, – earnings have end reaffirmation stability providing that. guidance is the to our is of line in want total we at So what on the

Phil Covello

Sure. job relative any or for done good color floor. question, commentary a XXXX? Last sure. and cede that of then provide to so around I'll far And here, the the trajectory XXXX Can just from you've you

Mauricio Gutierrez

we XXXX not higher the and our in plan I also mean, – Obviously, I'm obviously, to incremental power what going business. I'm can is, Kirk you make prices, we're assumptions the which have call. the – for only that, something XXXX going not aside guidance but I not at the providing drivers in today, is I'm you you from the and an transformation of going that you I some in be not going than will be – are will inference should looking is, that to compression that tell if the targets obviously to you, mentioning, then in we power the of XXXX XXXX, of have XXXX, prices get that. know, by some Retail in same that hedges But XXXX since introducing guidance was

Phil Covello

Thanks, guys. Congrats. Understood.

Mauricio Gutierrez

you. Thank

Operator

Thank you.

comes question Abe Azar with Bank. Deutsche next Our from

is now line Your open.

Abe C. Azar

Good morning. Congratulations.

Mauricio Gutierrez

Abe. Good Thank you, morning.

Abe C. Azar

Thanks.

With that margin prices, absent positive you right is know, in program? the least us ones the can the backwardation at the enhancement prices, sensitivity lower Texas for now, are quoted what you remind Retail's

Mauricio Gutierrez

where not to mean, on is you debts. are, specific things Retail because Yeah. your the we come I margins play; there our business a it's at also have haven't that our mean, I attrition the sales, but provided bad your sensitivity into of cost of your just look number rates, –

direct I mean, or is So, lot taken CDC more say that it's – Generation to the variable needs correlated as be a that I wouldn't into business. directly in consideration. as as it's not there

the and is, we benefits our customers, tell be complementary our to I see one-to-one Retail of when the say to our it's more tends our that's what so, we're will I on that's power prices to business, I business ability business level increase, Generation why Retail one-to-one. that That's than the think providing. – business. of some – that's it that the that Generation So, not And comfortable to benefit think pass detail dynamic we the that have you of and nature we impacts but tends

Abe C. Azar

than Got it. in done Retail this and on prior there year guidance QX implied lower unique a is QX? And Generation then years; is have lot XXXX, the in the about something

Kirkland B. Andrews

you're again referencing, No. not overall Nothing same significant but I'm at included It's is & those perspective, and obvious from sure our to remember talk store guidance. from a if basically two Retail in there, the as about because Generation all. – component when past, everything. to Generation, parts the you that an we which kind difficult unique reason, being our Renewables of of and In for Retail reminder, used extrapolate performance Generation, call

fact significantly changed the context in my we I remain, overall a would accounting line So, I'm the remarks, that we've what streamlined the normally is assets used of the that or phrase makeup not for and of in with that term which but expect. in quarter is sure the portfolio, whether a fourth you're

of and out things in with quarter. moving a this noise Just lot

Abe C. Azar

Thank you. Understood.

Operator

Thank you.

question comes with Angie next Macquarie. from Our Storozynski

Thank Angie Inc. Macquarie (USA), now Storozynski open. Your you. Capital - is line

questions. two So,

put acquire past any wondering could one two the also, it that size cash books available, that that you've come only waiting you safe for retail the ways of have and is is, to of if there the only acquisition that on that Louisiana And in planning the be in Northeast. million are really some in you if $X.X were haven't given one I one to in mentioned say are here. you So, if so other is the it; to $XXX is context, about retail just maybe it allocated. be and there's announced factor cash anything to assets other allocate understand you billion could retail and spent to yet in buybacks, or that the from Well, businesses we're limiting Retail?

Mauricio Gutierrez

Good Angie. morning, Yes.

your tackle me let question. So, your – the part first of

been shareholders than also is buybacks, opportunities to we In are just know, have question in can our have something completely and our you times we evaluate, in can more but can that, be debt, cash it. today, business we available space the past portfolio two – in – second be looking and to can there that either But reduce and to something we're Generation consistent Retail, Retail meets Generation business. if that and is active, Just we're specific we're our our evaluate. said Both We model, or is so see can and your actually with the at has different and grow perfecting allocation clear, East, to us, that we rates, model. we but can hurdle then not we our going know capital that locked to our what or To one. perfect rebalancing ways our integrated achieve we I the are have our retail ways. very there finally, they given set different it's completely have excess X portfolio, around to are that another that in going are always as comfortable undervaluation three continue that then XXXX, we it Two, mean doesn't we can the are we paying One, can that we ways it's we we And while share with stock, would capital a we grow and and avenue, dividends. ways, our in we business, today and allocate do down the are with also say it preferred forget that open find future, one, return if to both what to it our of if it. I to compelling. one

that's would XXXX philosophy. Storozynski Inc. allocation for at Macquarie - the I Angie or characterize (USA), Capital So, capital what our least

far its on sound from leaning MOPAR reforming does out stripping of Gen, auction, rule. the towards their their as Illinois keeping capacity Gen unrelated the owns. And so, all coal be which that PJM payments, understand, like then Illinois be customers capacity It an payments neutral Midwest PJM the will from plants be nuclear that I would coming Okay. plants Midwest might as basically note, like ones the

earnings how see the going that do in forward? portfolio So, of context, this power you

Mauricio Gutierrez

to do Okay. want Chris, that? you take

Chris Moser

you happen, to things. to two that believe for different Angie, need Yeah.

hopefully And You is quintuple providing that subsidies XX,XXX, to is that crush set also you believe the state Illinois give then, believe opposition need of previous to already willing to the take and to have FERC – from which a nuclear a stretch. direct X,XXX number they're which particular three is written of what subsidize will past generation to prices, in to allow that one or in orders. wholesale they've

(USA), of I mean there's Angie that's I think to to I Inc. theoretical, Macquarie and think So, wood Capital from there. here Storozynski very chop a lot get to -

you. Okay. Thank

Mauricio Gutierrez

you, Angie. Thank

Operator

you. Thank

with from comes Praful question Citigroup. next Our Mehta

open. now is line Your

Praful Mehta

so Hi, much. Thanks guys.

Mauricio Gutierrez

Hey. Good Praful. morning,

Praful Mehta

Good morning.

talked curves I to curve the margins would get and XXXX, now hedge with to we are tight the right I be clearly keep the guess that that link in benefit know more reserve little to about open about, is it drop reserve margin, from given we the the I ERCOT; XXXX a preference backwardated. in So, prices would tightening your and prices. in and guess mainly in all the to wanted bit, tight you hedging that saw

ERCOT? So, the kind broader more policy in I broadly this the seeing of what prompted views, understand to clarity little a and guess, more kind XXXX, that of then if hedging wanted hedging bit drop almost $X more secondly, just of you're tightening in

Mauricio Gutierrez

Okay.

Chris Moser

again. Chris Praful,

page total heat rate, at XXXX at XX%, look to from portfolio, to you when the went and XX%. that Generation you on So look low pretty darn XX open see if from looking low back nuclear and you're you'll at went relatively

hedges a you included. which clock only in, when that what small hunk piece, of summers year have were is on-peak you here. was summer, we're are numbers is a they were the pieces you just you've got bigger that quantum, which Trust move the small then summer, is, first that with me, So was, have if and numbers. quantum going was there. kind around also mix selling you're a but full moving of get XXXX, and year, two of big have to What second full arguably know, went you than number a you lot that the not different that And the

locking in of in we're locking we're chunks – value. So big

Praful Mehta

Got you. That's helpful.

just is reflect just going policy view general, is that to so there And in or the you that want that opportunity, you go the a are keep you would XXXX wherever don't and today that more relatively and curves ERCOT and the more opportunistic lock to open do broadly, in feel is further hedging in there curves or understanding tighten further hedges? an and

Chris Moser

the thing portfolio, think if some mean, the XX% this chunk coal I we're basically room we're position so hedged. has think on of hedged look that to – where fair XX% I to you XX% run, saying which sitting, and at question. No, know, or that you only depending we're XX% total, I nuke

and plenty Now, nice since pushed rally I may that newbuilds a will of pricing make expectation either are today, being that later hopeful say PUCT, price and the that because changes off we've mechanics the ORDC there's we're to or some seen they the summer do cancelled.

action. we needs PUCT the something take and to I So, happen encourage – to

Mauricio Gutierrez

in Praful, and let me open. just XX% we are add; XXXX

think give an Texas view indication, market. you I our the that should in

laid We some to it, we're opportunistic, We pretty in in keep be is to still continue mind, to hedges, XX% increase but significant constructive, but saw prices. on XXXX we a reacted were see very out we We open. we want that prudent.

Praful Mehta

just see other look growth there you allocation will Retail shares. opportunity also buy hit back about, that From more helpful. to thresholds broadly, Got and a kind then That's is be potential return avenues growth you. that clearly perspective, that both or growth there capital direction And thinking on is a of only at? of are the you should your could we a

Mauricio Gutierrez

proposition put the the business mean, is is just where more mean have, our can that we Retail of we that clearly that see valuations avenues. has today, in headlines value Retail it is one we because Retail, that and is there implied – fact actually I the been scalable. the multiple getting I

principles. say will areas, limited, the significant But we customers, synergies. evaluating particularly business long-term – and to see we in So, of is them nature investments side, fact capital the the the we're I solutions other that we're is adhering Generation opportunities thing with one allocation on have that very business cost given our the working our perhaps can achieve we – and

it start characterize possible we're we we would that I looking way opportunities. So, more or informs – at where looking at where and are that less

Praful Mehta

Super Thank guys. you, helpful. you. Got

Mauricio Gutierrez

you. Thank

Operator

you. Thank

question last the Agha Ali SunTrust. of from with comes line Our

line now open. is Your

Ali Agha

morning. Good you. Thank

Mauricio Gutierrez

morning, Good Ali.

Ali Agha

morning. Good

actual up, the I us, slide as for just guess you First pro clarify to wanted XX to from forma the Kirk, gave guidance walked XXXX. numbers you the

$XX adjusted So, that million. read adding guidances about the EBITDA midpoint there's and in went BETM you're if I $XXX for of but only the and million two back forth, so of that the up right, so by on

that So, there what am in missing I math?

Kirkland B. Andrews

that outperformance, is why unpacked that reflected number same-store perhaps forma, your adjust $XXX $X.X I for That million elements, the like I that still $XX think this looks it in way you've Yeah, increase, elements, – is same-store you're apples-to-apples about our nonrecurring the is though part talk have why Ali. that of as was higher, about – about is it it you basis, about relative if thinking is of the way makes Trading significant to million going range talking on numbers Caliente, when asset right? sales, Agua sold on the right? the sort the about that billion even Energy summarized but but speaking, you've more think thinking the an about right that speaking, ignoring right? got sense, talking where I'm nonrecurring probably which basis I'm to you of a I upper – correct, a it the reason When previous characterize significant intra-year. – BETM, Boston which half because, pro – our nominally effectively Nominally was I about business, a and of the towards

Ali Agha

that your that before previous you in guidance adjustment – Kirk, you narrowed it column, up Yeah. that, gone moved that this take there? updated took have that guidance shouldn't by column, the know, if $XXX to But adding – that column next if number right, then, and the million shouldn't you column, you're and

Kirkland B. Andrews

opposite. the it's No,

Ali Agha

Okay. I'll guys come that. back you to on

Kirkland B. Andrews

try Yeah. to but happy I know clearer. to we'd get call, I'm that a make follow-up

Ali Agha

your Yeah. guys net targets question; but I just in that, know of A targets, separate XXXX obviously, here, you the debt those you're giving guidance the not XXXX hitting context are certainly EBITDA numbers, to us, on slightly enhancement lower even but XXXX directionally you've way I backwardation continues the if laid than is improvement, as this the margin with the in out mean the curve sense XXXX. is EBITDA forward

denominator allocation So, think about that to XXXX, about Is than us? XXXX you to dynamic? capital about you way EBITDA and debt fair lay you're a showing down XXXX if maybe use currently does debt calculations how might figure were into to in net think more that a thinking this your and versus

Kirkland B. Andrews

right. of I direction know you're of note, the couple A things coming from.

achieved at to EBITDA But to don't the the times. to having enhancements that that a that it got in I cushion think right? in X XXXX That's net of certainly, capacity $XXX that feel XXXX. I all As you we're $XXX maintain to take get of allocate we'll XXXX right comes X XXXX million mentioned, sort $XX that debt going going additional going but to provides to margin to margin enhancement significant number, from $XXX forward, capital XXXX, need there debt to That's I and pretty million times of million of ratio. million as in

said, continue as to reevaluate always move will As Mauricio the we three forward. we

as So, that in would of by would three just be better – additional opposed a if delevering, there any makes a if necessity bias be my lack maintaining of believe times, choice would is terms for the phrase, sense. it by our to,

Ali Agha

but are now but we excess that as you and are capital makes isn't sense, question, the growth private? as and Mauricio, limited, fairly just where keep there mean back is you keep and then? you capital, if buy scenario That Last take not you the makes Yes. we excess I'm that look going I opportunities XXXX, know, this all just down accumulating out with just there Retail; this much where buying talking said, end a stock at do sense. Retail company you right road, you longer-term, if

Mauricio Gutierrez

and the transformation how it's to strategy today, it's it I we a opportunity. call again, you, I capital. that does just and it Well right be to it's I where the value. our allocate our – excess plan on a of create out we compelling. we will to now, then shareholder board the – this as very – I've buying believe from the for and not most laid on that This it's is going past, as execute I and the in you valued where have, still capital can value long-term I said compelling mean back is for think tell will us, stock reflect is said our stock focus the and reiterate fundamental priority is maximum company, mentioned, we the like our the

and barometer we So, we alternatives, implied and XXXX, always through in at the progress returns see focused own if where this our look through we other as in we that to have see the of if is stock. them we're the have opportunities, we prism

pleased priorities, the I'm on the well, we're we're we track, the the we team that company executing just believe is where we right and right So, have very going. have right

Ali Agha

Thank you.

Operator

you. Thank Mauricio any the remarks. back to for over to like would Gutierrez now closing turn call I

Mauricio Gutierrez

for want to NRG. weekend. Look forward future. Well, Joelle. and thank you, Thank Thank I have in a in you interest the your great to all you to you talking

Operator

you and program thank have conference. in disconnect. gentlemen, all today's and Ladies day. today's may does for a Everyone, great you participating conclude This

Kevin L. Cole	NRG Energy, Inc.
Mauricio Gutierrez	NRG Energy, Inc.
Kirkland B. Andrews	NRG Energy, Inc.
Chris Moser	NRG Energy, Inc.
Julien Dumoulin-Smith	Bank of America Merrill Lynch
Phil Covello	Evercore Group LLC
Abe C. Azar	Deutsche Bank Securities, Inc.
Angie Storozynski	Macquarie Capital (NYSE:USA), Inc.
Praful Mehta	Citigroup Global Markets, Inc.
Ali Agha	SunTrust Robinson Humphrey, Inc.

NRG Energy (NRG) 8 Nov 182018 Q3 Earnings call transcript