NRG - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the NRG Energy’s Fourth Quarter and Full Year 2018 Earnings Call. [Operator Instructions] As a reminder, today’s program is being recorded. And now I’d like to introduce your host for today’s program, Mr. Kevin Cole, Head of Investor Relations. Please go ahead, sir.

Kevin Cole

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

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

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

Mauricio Gutierrez

Good Head Mass questions three Thank by key we like this on call joined and Also the highlighting on Elizabeth of and everyone, Business; by I to for for the start our today’s I’d Head Chief Officer. thank morning Moser, Killinger, Slide NRG. messages in your presentation Financial Operations. morning, have call you, for Chris the and of X. Retail Kevin. interest am Kirk our Andrews, you available

First, generation we between our reaffirming demonstrate results of in and retail value by integration continue to the and XXXX strong delivering XXXX guidance.

the Second, Texas the country. in our in attractive market coal most remains

us to allocation stated our predictable new our and and capital. repurchases $X our platform your demonstrate by XXXX summer more hedge stewards programs, which along total deliver XXXX well $X.X to balance a share positions And commitment enhanced billion adhering announcing Our billion. to capital will principles to program, and our excellent continue third, we’re with bring of being results. on share in discipline repurchase to we readiness Today

Moving to highlights. the X business with financial and Slide

many am this target, of to for laid plan started throughout We our environmental over be pleased on out will the financial savings credit sale bringing our this achieved XOOM Central of South the our recognize the transactions, delivered in we year can ever, deliver transformation execution XXXX the under on we GenOn fully the now plan. and emerged Energy these billion did total quarter assets in to plan, also of objective. see of adjusted earlier XX% identify bankruptcy acquisition transformation which EBITDA impact quarter. the month, we $X all the in and X our bringing have sales, successfully ratio of completed net the and our program, Outside total margin to target proceeds focus XXXX. times enhancement closed savings of fourth Carlsbad. a results from slide, our performance Also we I hand to second a I debt achieved great We We we closed repurchases. On see achieve and for entire upper them. not want completed did to our we focus that our We their goals. our share the of the safety guidance you team best best only our plan, ambitious performance, but half our $X.X in our exceeded cost very we persistence, the to With NRG and we left billion of on cases, in all to and commend side report scorecard. respect exceeded of year. We and goals,

power driven March, outline and a Analyst you strategy Day of our perfecting our diverse portfolio attended. of company, shareholder retail our last generation customer create many integrated significant hosted which leading on built value through long-term brands we to Finally, We assets.

update with for brief want to financial I slide, a you the of side hand right the XXXX. On provide

program. the reflection of our announcing new XXXX our share financial business, for outlook we First, are guidance reaffirming repurchase and confidence as a the $X in billion

up reserved will announcing his investment discuss for are these further grade sector. million, our in to we section. Kirk, to additional metrics Next, deleveraging for achieve $XXX

to update X. key an Slide with to want Turning on give I ERCOT. you our markets starting

As been many reserve on shows highlights from chart that and supply/demand margin The has tightest by it year in know, of is the reserve composed left you of it years. much the generation. ERCOT’s much all and how is new existing how generation of the balance is

because builds, new time you and As more on can it solar. on wind see, over particularly dependent

and from XXXX, a wind ERCOT XX% and projects new solar. from the example, margin, resources in coming coming reserve X.X% For existing rest

margins. system. aware it difficult to taken steps PUCT energy only year improve to reflect for of Just from scarcity XX and developers XX investments come next in an better online helping is in the reserve to will in impact of to situation new economics. Any ERCOT capacity the run. be us or and long the but necessary needs to are to of and equivalent nearly this take has the the are forward the long-term prices conditions that system us much justify market near-term, to deviation that remain in digit These prices months. to prices, XX clear, on the medium led below investments. in the increase have to these changes build gigawatts XX will dynamics lagging wholesale We single justify have long-term new back Making renewable still to believe the the Both reliability higher

side of Now to the right slide. the moving

readiness the For current well-positioned market ensure is I this have have feel to business about we summer, further conditions. taken we steps our that for our and good position enhanced programs. our

let First, talk about me retail.

also made we not retail generation load. purchases. practice Our is and hedges cross retail, fully cash through a to is where our but market have of only internal against position up price This

and our and them to by residential business customers providing also We’re tools to higher proactively bills. options manage energy working educate

manage been have capabilities conditions. load demand we Specifically, and our during successful in peak response to help expanding

hard For season withstand high spring given during ensure of working units to can times, increased generation, outage expectation our we’re the run the prices.

wholesale and generational maintain real-time plan retailers higher today is length loads. generators. to platform relative more and or the position best retail results predictable to our insurance Last, while outages outage further volatility, purchased platform to to provide from unplanned protect also We pure price

steps take to We further to measurable prudence our platform. continue enhance and

will the retail For of the in given grow supply the opportunities must we of and And generation volatility to higher market grow or scalable record our new at-value. it be lookout grows, to acquisition for opportunity And our example, our increase these our customers track and businesses, our it. acquire in integrating engine business in an with business as expectation order share. customer business market, creates with

or to This align position customers, We have an us opportunity better contracts to PPAs medium-term with serve allows is our our better physical and assets, it to which load short obligations. management improves that compliment strategy our capital-light. our

hedge continue prices us the to fleet take to we to XXXX. achieve beyond our hedge Lastly, to levels earnings. in increased attractive our of and at allow opportunities reliability increase predictability portfolio invest the Higher

move Slide on let’s the East X. Now, to

for state on remains markets, capacity markets. focus In PJM, energy clean protect that changes regulatory integrity confident of Our both while energy competitive remain we will initiatives. accommodating and the FERC

timeline for FERC action remains our Although, uncertain.

market. effective We to are harmful efforts. continue nuclear fuel of we believe the to the most is on MOPR subsidies impact simplest monitoring security New capacity England, In way a the reduce strong and

designed current exposure limited are maintain to Although for score the We and changes improve status these to that believe regulatory reforms positive fuel we are ISO. overall. security

we markets. the shows can is steady It chart. portfolio in a that resulting slide, you northeast the capacity in fairly as of northeast side across point the right revenues on chart the revenues out important to diversified have the the see On

our people remarkable in energy renewed to to today. provide we’re along past we flexibility bring As resulted financial and organizations, and progress the power far the of this enter sense snapshot which of in how XXXX strengthening business, on appropriate we’ve to three a seems years just with purpose our it just a has come you enjoying

run As on Slide were can successful the have approach you allocation. streamline in to three sector for to business, a focus our the X, an the our simplify appropriate areas structure and company be capital disciplined see capital of and for long

sold our First, to we our generation generation. strengths assets on core business. match or portfolio business retail underperforming better of our we and integrating and our size right refocus assets We retail non-core

today, offsetting earnings business Our but to businesses. cyclical integrate more predictable as provides we

of yield separation our of simplify the we the Second, with NRG capital sale structure GenOn. and

deleveraging sheet credit We sector. targeting and also our appropriate metrics strengthen for our by balance

it total For XX% years will our debt be than three ago. was lower XXXX,

Finally, that are three $X compared EBITDA we of close Today, have convert also we amount free the every significantly financial ago. free cash only flexibility to increased by improving to $X.XX flow. $X.XX years of cash our converted to flow to

clear capital these set allocating are using of transparent and a We principles.

surprises I there past, said have will it to when in As be allocation. the capital no comes

bottom line the is this. So

the yet me best it a ever has to been Our come. is is company today excited than still is that and what gets stronger

sustainable for the that create streamline now the cash flexibility and time We’re machine value. to significant financial flow a first have shareholder

on see allocation the Slide capital value line Continuing then can and capital with right is directly that about our our in size stabilize, talk creation location X. and now to our with roadmap redefine of now business. let’s theme, Now you

XXXX deleveraging. As we stabilized through the business in bar you chart, and XXXX on can see significant our

billion the recall, retail our that’s of excess shareholders. excess our three transaction years return capital to XX%. focus XOOM capital commitment doubt If available was first over to metrics either shareholders, where roughly ago $X.XX grow times in my you and business share our capital of to we to achieved strength to you reducing count revised leaving cash. significant our sheet we in our just XXXX, debt-to-EBITDA, and Then balance or executed net return our three leave no We accretive by credit

and company for to want reposition success. I XXXX, to the Turning the steps taking long redefined we’re to term highlight

First, million the we’re of allocating up to leveraging. $XXX

talk of ways, will believe given Again, times through of to sheet benefits. be our achieving our While his further our investment clear, in we can up have some about It achieve cost improve balance two and grade $XXX say equity out in But EBITDA be or evaluation. satisfies our million lower targeting debt. it more reducing Kirk, three that capital, savings we metrics leaving growing we’ll to section. these deleveraging, objective,

excess $X dividend. flow I return the today in adhering announcing and allocation per our way about our also shareholders. third with I capital billion the share page. $X.XX are capital, principles see them we compelling return saw absolutely regularly a company to to ours cash Last of like most committed, capital a remain the will shareholders, buybacks repurchase while we efficient program. on can are discipline share right should on to as believe Next, deploying the our new our and capital predictable maintaining capital current side a share you of to

it over to I’ll the that, review. Kirk for with So turn financial

Kirk Andrews

Thank you, Mauricio.

These adjusted driven primarily $XXX in $XXX summary higher In sold. for today’s growth. reported announced part sale Retail under both $X increase cash the before the South treated margin in reflect of plan $XXX Central cost higher sales by proceeds in and XXXX EBITDA in financial the initiatives, as assets NRG growth. enhancement, Under higher our acquisition ongoing cases, million, improvement and billion is $X.X XOOM usage, XXXX the operations in the is Generation million a with flow XX% contribution robust million $XXX free received the result for closing The on billion. and cash closed delivered financial Central XXXX with million over over businesses total Carlsbad our EBITDA a therefore XXXX, from closing free to reduction not South EBITDA, finished flow and and megawatt Slide a proceeds. results before February year, accounting, prices $X.XXX PJM. EBITDA, billion when XXXX. in which response the adjusted transaction was and South brings transformation our for exclude increased billion XX, Texas gross approximately of Turning $X capacity Central of increase to asset million early last gross discontinued impact over power GAAP of of combined prices demand $XXX adjusted for in

our as Turning reduction sheet. to part met of metrics achieved announced and plan. debt the balance transformation credit goals Having originally the XXXX target our

today announcing for and sheet beyond. are balance revision target to XXXX our We a metrics

align also potential I’ll which stock. stability We ratings. achieving grade the are cash these up in further valuation to to XXXX credit ranges, only with new ranges benefits million reinforced greater reserving XXXX investment based detail help balance our new our reduction. later metrics provide to a robust consistent review metrics will we’re with our ensure, Our sheet drive target but balance on sheet, for flows not sheet these of balance we for more of capital $XXX metrics metric To equity debt believe

$X of which In authorized addition, our earlier. now program, average share having billion our share, in newly share price allocating Mauricio mentioned an we’re billion which repurchase in buyback XXXX completed $XX.XX towards $X.X program, a was capital

update, on versus early credit of XXXX of highlighted cash the our in into reserve our shift final proceeds on ratio result release Changes XXXX. of in the the which Slide primarily XX. timing are South to last blue, XXXX slight purposes. capital allocation from report Turning was receipt Central these used for And which the

During $XXX was completed our million repurchase that billion billion completed of program, in we balance $X.XX early under $X.X while program the XXXX, of XXXX. in repurchases share

$XX the XXXX basis million payments. XXXX reduction, we debt XXXX received from allocation will with settlement, of few of With our update cents dollar XX. also XXXX but of which GenOn moments, ended form capital settlement which towards We Slide credit review net approximately capital offset our to allocated greater $X.XX a in in $XXX a new insurance approximately with to in the of targets, in or helped our an every which cash detail associated shareholder capital million turn on I’ll capital, previously in I’d you’ll portion capital metrics including return on excess the find allocation. unallocated of allocated like

XXXX, reflected at three within South our first inclusive net balance, transformation combined ratio with net our of you’ll South times target deconsolidation Central financial plan of us debt results, credit the place Looking our see of which debt-to-EBITDA. proceeds, Central that

to bottom X.X to target with X.X as the believe earlier, X.X at these of revised XXXX to we are net are Turning on credit indicated column grade from XXXX consistent to revising and coverage debt which interest ranges debt-to-EBITDA, and net cash adjusted XX.X% metrics. we Highlighted ranges to our the metrics X.XX operations target of all investment XX.X% are focus between times. of

affair, Although, targeting metrics. at Poor’s a helps in grade Standard on not slide rating we targets replaces current illustrate line our right this. investment business this rating The risk our revised credit based & the are the specific far with at of chart time,

is many on The business represents these and and grey here on axis variables, As key of the variables, yield credit point high approximate shown is are based credit two inflection you rating on investment function between horizontal shaded axis. two of metrics, which a know, our the vertical between objectives grade, the two-fold. area risk the relationship

into revised business risk our First, moving sheet these territory placing ratios investment on target grade our balance targets, from based previous our that metrics to rating.

our and to execute demonstrate combination our the solidly The Second, move earn footing should the on rating. cash grade risk integrated we order which reducing strong these to NOL us cash of reduced will us we course, will into abundant resiliency inherent In improves target interest, two accretive words, of well. is future. other future platform, as an our in continue flow also to that other actually of rating improved cash dollar to to should flow a position free BBB. conversion factor means in This, due to in for in flow place which term, business these EBITDA provide solid rating near benefits. investment In to over a time the new free tangible By the our dollar we metrics cash reduced debt, balance.

cash a In flow lower addition, we equity and merits cash our the we balance shrinking a believe yield. flows, metric sheet, also free further stability valuation which or robust by our of more further strengthen reinforced

our by for Finally, future in our a on via support generation. counterparty credit lieu which we collateral, further reduced may ratings strategy we or us as with of worthiness, stronger be PPAs asset-light also improve credit making enhanced increases, execute physical need

would and an place shown these near of additional million reduction in midpoint $XXX interest XXXX debt our the associated guidance ratios reducing by target the the XXXX As in ranges. expense column,

reserved $XXX new up these We million XXXX. targets to capital have we in in to XXXX ensure will achieve

million, currently superior so year, the is hypothetical, However, would we million in additional what we’ve example achieve the serve in acquisition not that increasing cash currently debt amount the as merely that for consistent the we a as in the capital turns these the means $XXX than EBITDA maybe flow strategically of dollar. we opportunity EBITDA that the or the investment investment paid way and event, we required $XXX actual and well, to in represent have EBITDA, – less alternative of to find By X.X require later turns first operating for of such would of reduction reserved. that an would represent an debt multiple, X.X pay targets reserved return for but dollar reduce rather reduction

having closing Turning capital, receipt $X.X cash million that billion $XXX to the in When the supplemented available net cash of guidance, of of in combined Carlsbad since XXXX with XXXX. XX Slide unallocated $X proceeds with XXXX update on approximately free allocation Central the our capital for in from through for in allocation and capital transactions. expect billion XXXX midpoint South we we’ve an approximately the ended flow

XXXX. allocation announcements debt of This allocated allocations combined and toward represents today, Our balance in committed $XXX of both capital to or the program XXXX new metrics in which million billion target reduction, today XXXX with share includes $XXX of XXXX, repurchase deleveraging we primarily a achieve $XXX in $X.XX our to approximately million remaining $X.X billion of billion in $X.X represent repurchases capital billion consists already we committed. share up program previously million our announced completed capital including plus repurchases. announced credit $X capital during

XXXX allocated, of to excess the over during cash free have particularly XXXX on of the months, side balance shown to available As $XXX capital our we the summer the of which be year, expect which bulk slide, the become the far million right of flow. contribute we

your well disclosures margin XXXX, few XXXX drivers and wholesale note, this the new future and as in we’ve in regional to effective of summarizing the revenue. presentation further some our Mauricio. new as open capacity appendix for of quarter reference, our will these enhance revised including please for We slides Back outlook. a included you, the slides Finally, understanding hope financial gross

Mauricio Gutierrez

year a our Kirk. the you, XX. remarks on Slide priorities final I for Thank have few on

to is our our our initiatives, to is transformation focused priority than we in stronger our operational ever XXXX. top said remain deliver on As always, I enhancement financial our on earlier, plan attention today on as direct executing company been. and objectives. Like We has it margin

financial more the the consistently strengthening first machine make a now sheet capital for continue platform and predictable, balance flexibility streamlined it our that are balance We to have our perfecting cash to shareholders. time continue to returning flow and

priorities, we that create questions. these of With the I lines in Jonathan, the shareholder long our am to progress, ready look you. very for And believe journey. have next significant phase with opportunity to and we forward to the an our Thank proud open in we’re term. value I

Operator

[Operator Instructions] question of ISI. Our comes from from first Evercore Gordon line the Greg

Your question, please.

Greg Gordon

Hey, good morning.

Mauricio Gutierrez

Greg. morning, Good

Greg Gordon

the consistent outlook So is results great with year the obviously, for your expectations. and the prior were still

therefore, value allocation hear overall because I’d allocate from think the answer, available the than actually understand Yes. more to come but that, conclusion guys? what it for is which But also buybacks? Gutierrez good. accretive more more cash further I think less, time is over on Mauricio like And I to bit - how for can available you talk you A being that about the I the higher decision you most capital expected, little to a debt margin people is just had reduction the to

are we but I’ll net Kirk we some the I for because, metrics the as of credit is into let you in run give area of grade why this debt-to-EBITDA, general Greg, as all we past, think you done and that metrics. perspective business know, not get this investment type of flow you have our well, specifics cash. also just we mean, So cash then providing the And I’ll represents a the

in of moving cost reduce us see One, lower In I the we a terms credit benefit access allows capital. to to also level, – terms It metric of interest our expense. it towards more outlined that we of have robust guess.

we the strategy of an that makes to physical And I collateral asset-light ultimately, our we into we these or need it reduces equity. complement PPAs. strategy enter assets, – Importantly, it, move capital-light long-term into think us to impacts as if post valuation the it our

where that risk move that like So of all profile we with It these from I times comfortable. of us three things – we feel of our consideration into said, level to we very business. was leaving the out took appropriate

evolve As valuation a stability the we and and to sheet, of our the direct an our basis. in can we continued business, on these it’s continue It’s perfecting capital guess, our we also the our terms stock, impact of three But have a demonstrate have look not to you predictability it, when in combination. shareholders these opportunity I at of just have then a, things and ranges? in but opportunity returning balance Kirk, consistent to all to platform specifically more

Kirk Andrews

been mean, kind focused I always But end maintain That’s can would earnings, with or the I’m growing XXXX what earnings, the but tangibly risk the also and by I of is can if we’re value. on certainly, increasing that command supercharge And it build And allocation. said how change at profile doing. the probably this list based is down, that going back profile valued value the capital a shareholder driving traditional the is of with But That’s time, in that more two increase the drive we Greg. you’re just to valuation value. focused the which we, on What that five in demonstrating That’s to opportunity today at obvious, is beyond. stock really of growing driving Part one plan stock state focus have, central reflected Sure, day. a in we investment. should reduced valuation driven have. more you you the why value inorganically. obviously, before. drive compelling credibility reason, that on to I of what growing the mindful which we’re robust as you on. in we’re obviously, a six, business as that to how ways, helps could owners use the continue bloody we’ve basis disciplined start metrics which the It’s focusing you investment first a three is, see our same and the we’re right? metric, of is, you compelling ways buying And sector. accretively, business in We value fact sea the on we’ve believe,

of side cash at compelling with a One to ways, debt. different between in derisk a that pretty it of levels is correlations financial yields and and I ratings, further a various the that there think two. the of balance probable some basically sheet to sectors the credit is We’ve the do strong across taken that’s leverage those different look free flow is obviously and correlation that evidence reducing indicated

as investing be driving in more robust balance if resilience that metrics you I if rating that’s we demonstration, used stock punch, we companies sheet. likely who up. can with And best the in non-traditional more those to the that get are the and believe means ultimately, to to stock, that’s combine successful up, driving said when so of flow, we will more And the in down second investors with that to drive continued cash the drive free our

we’re that’s a about interest talking And is results with looking I’m EBITDA, question growing our that the think our things is deleveraging, talk metrics. which part the or I to leading little which probably but value in – answer the change sheet about ratings a second savings like that, the bit to rather a metric the balance we’re happy basis this more at way equation, credit in valued. – First the driving side or equity strange of at on

Greg Gordon

me. to free that’s in still That free flow equity to an close trading XX% XX%. yield sense to an unlevered Yes. and makes yield approaching EV the cash flow mean, you’re I cash

is getting upside couple just cash $XX yield free another XXX to $XX price. so in the your improvement basis like share points of in And flow a

Thank – I’ll with So resonates I that you. me.

Mauricio Gutierrez

Greg. Thank you,

Greg. You got it,

it. got You

Greg Gordon

that. questions of lot beyond is There probably

go queue. to off jump at the the and I’ll So back

Mauricio Gutierrez

Thank you, Greg.

Operator

Thank you.

Our of Storozynski the from Macquarie. from comes next question line Angie

Your question, please.

Angie Storozynski

guys. morning, Good

both about your the on and So I have M&A. a growth, basis expansion organic question retail the margin

– tracking a sense, you acquisition has give just the or also, given And you acquisition, targets us M&A well. should business retail versus are going major it expansion gave an you’re forward? So that a Thank peer the that correctly, at in whole big margin think where and EBITDA Retail How that us component if Analyst announced suggesting those about of you we could I understand how the your your actually you. have Day? as

Mauricio Gutierrez

Yes, Good Angie. morning,

the think And a organic. laid Texas think but the particularly question of I our retail organically. in our we’ve of well. The way growing is One, growth also about lot in twofold. you had we success, out in East, business

although that And our we targeting strides and retail. look significant made rebalancing our the when our on business. the at X% We’re portfolio. rightsizing on than said we’ve In business annual bigger and our is second And is business, anywhere X% have East, between growth then one through M&A. in you our past, generation the

East. our trying side. allocation. been We’ve perhaps the our to retail in very, we’ve grow disciplined the focusing, on opportunity retail very in capital of terms most actionable the We So is believe in that today been business

We have established platform.

businesses. at us platform. we allows – that or most year we’re is one the last acquisitions – second complement So for enter view the these with the that two we have to our out will very But that. we on realistic we on can you. XOOM we’ve opportunities focus disciplined one When the investment the did very like to thresholds part, into marketing, multi-level of do thresholds, a that the that meeting that that things, and platform looking approach And expand we the that existing potential be going a to think is laid earnings is, all of in

deploying have that And in excellent we we expect in deliver capital. two, think record what this an disciplined in of business or will being valuations. on delivering I track have terms we our

and terms generation business, margin have What we last our we solutions around working and that is margin you is I of XX progress. really our bulk spent transform, of mean, the in although and residential the can Now, have good the I retail enhancement, these. made months tell enhancement business on

just to this. met it see our impact. where enhancement XXXX, bulk And our fruits expect identifying we We come the of majority then initiatives First, in, of is the in to That’s we’re target. of going the investing. in starting The million XXXX. $XX margin

turn you So our Elizabeth retail it over on update give efforts. mass I’ll Elizabeth? quick enhancement to where on we margin to just are a

Elizabeth Killinger

for you. summarize Sure. would Thank Angie, you, I a of thoughts couple Mauricio. Hey

on earnings First by from XX%, XXX,XXX that but our customers the growth have in from we earnings grew XOOM. side, XX,XXX only organically customer M&A that XX% of we was between our retail grew growth customers, most business. grew activity, on XXXX about X% and still was about business in of that And XXXX, we the

we a strong engine. So really have

plans. I’m far, enhancement on with progress really So our the pleased margin

You our may the our remember the two mass that’s from approaches, and primary more side expansion from retaining business one Analyst had Day, of in value was efforts both customers.

efforts as both with implemented customer to customers multiple better we’ve analytics customer improved using. us ones pressure tools pretty more both care and products compelling exciting. to costs. expanded reach, so us enhanced sales experience of and higher billing grow We’ve capabilities. our efforts and season growth both we’ve apps in our we acquisition had East. in services that tough We’ve match and efforts, a to efforts. high to That And during looks existing we’ve our channels connect they of and give So customers, and products customer face-to-face maximize a result customers value on our metrics, meet and can electricity double-digit points And is predictive key we growth in for that that been And that with insight had our are improvements where our at footprint and natural the that. then our supply competition and the portfolio, already to seen like gas really and from able been customer introducing

and to we’ve we’re XXXX. the made, So in excited looking continuing about we’re really deliver progress to forward

Angie Storozynski

do in increase out that we more in the the probably Thank laid a so as now to probably Analyst power cost-to-serve forward, been bit saw the wondering growth that on outlook given you. how short you to you going just Day there’s load I even was seem some be your compared in XXXX, targets Texas.

I again, embedded your this should that’s actually think projections? mean, forward? I retail that going margins driving in Or is your So

Mauricio Gutierrez

independent about enhancement, price think you to increases. that our if mean, is margin I commodity Yes.

track the margin can the of the can And think seeing characterize that platform enhancement prices, mean, I when we’re margin our we in it commodity way the about where the is, is enhancement I The yes, XXXX. enhancement. reality you independent perhaps impact I now. the in mass from commodity on the we we track enhancement margin are completely is combine so regardless think But – for cycle yes, the our with dynamics best makes – of margin just we’re underlying that on way you potentially are price. better,

Angie Storozynski

Thanks.

Operator

Thank you.

next line Our the comes Bank. question Abe Deutsche from of from Azar

please. question, Your

Abe Azar

Good Congratulations your on you. multiple Thank goals XXXX. achieving morning. for

Mauricio Gutierrez

you, Thank Abe.

Abe Azar

No problem.

your in Looking perfected forward, scorecard? business do XXXX you by customer-focus what mean model

Mauricio Gutierrez

Yes.

changes our great we integrated Then on – we retail through inside generation financial rightsize business. focus simplify it. our some We gone assets. or assets first, by we business portfolio. We So have non-core underperforming the taking rightsize

In bigger slightly generation So our business than our of regional than our fleet. And retail. generation But word. is bigger feel our a than portfolio better is in transform for lack generation balanced portfolio our is better our imbalances Texas, the much East, retail. retail we

right assets going be there opportunity. it. there is opportunity are grid of two, perfecting assets the customers I the load, the So us And right one ones I an to an customers help mean, I platform, need. physical it. I now XX% kind renewables, power. mean always right When mean mind that’s manage have. while better we Keep renewables, to think, balance customer-driven say, what going two, be that integrated I supply the then by are that to XX% to in those going number generation they the is determining Is want mix to are what there’s our what XXX% determine to of

So going perfect inform and to our to there’s portfolio, that’s off generation we an that. set opportunity how

by mean perfecting I what that’s So it.

where can business it today, to contracts, have. see risk opportunity manage And than residual We different opportunity side. I said, capital any the profile assets. that that’s and aligns to our through do is even strategy, actually standpoint, retail don’t use But asset-light practical growing terms contract value that when right I have or perhaps short-term these generation Now, we medium-term is and it better to meets a from better we continue investment we obligations developers the a because on of this comes in don’t low means what we we capital-light, M&A. and PPAs why have. initiated both it load as now the It’s capital-light have of organically our there thresholds an that perhaps have

physical we think position. asset what match I our mean so perfecting better a business. That’s by And us complement to the it’s help

Abe Azar

lot sense. have a makes That’s today. I of all That you. Thank

Mauricio Gutierrez

Abe. you, Thank

Operator

Thank you.

Our line of Steve from Wolfe next Research. question the from comes Fleishman

question, Your please.

Steve Fleishman

good Hi, Yes. morning.

stated investment Just long if metrics in a the on you sense agencies investment you metrics make and any as on Do you quick like… actually it execute rating how credit the take grade, just the on question you grade. to have XXXX, might

Mauricio Gutierrez

Kirk?

Kirk Andrews

Sure, Steve.

us I on probably beyond year. agencies think XXXX to to upgrade had. based that’s past in rating with enjoyed Certainly, of – certainly the to a dialog them we’ve we’ve probably recent be in the get the last success beyond lot the going

as be new risk come they like as little know, understandably, lagging, bit well the – they homework, So new you tend profile. the their both business as profile, the to to do new and to a financial more around

little So time. that’s a to going I – it’s think take

establishing said to that, in investment least that’s I before, we’re XX targeting before at to XX months why we the get think fine. there. as the part I It grade And probably is the platform reason there. that’s get take first can metrics of is step will months

and risk we a risk. a demonstrate completely fine it this to combination confident on the metrics I and them to equity strength going to catalyst really I’m going giving And think why the is to the realistically walking that’s business obviously, reason, then speaking, that’s that up. my be the necessary to delevering, continue to reduce alluded execute our get little resiliency need as business because platform to and in the time longer that delivering remarks, it’s I as timeline, because of, well which be over of investors that agencies the

so both a we’re investment that think You the to grade get here’s those to rating. of necessary going are conditions really

aware, place I’m the sitting As you’re another sure in region well level right be. is to at the not BBB minus

So that’s as take be another in step time. on I of that will reason, And right that metric we this drive at if But demonstrate range to run bit valuation to the to equity path. take we’re and side, little to a to that going actually target want same said, so get I and why on the the time solidly a to think But us puts on cash important it that soon flow that free continue also yield. back that it’s at resiliency. rating, that we tighter trying

So – months XX XX a minimum to I it get that through months at would to say, process.

Steve Fleishman

retail. one Okay. other kind it like question which opportunities, be And the would in just M&A just sounds on focused mainly of

limited out set a supposedly one one Or out obviously, a transaction there two or Is – there’s is that a to that opportunities? that’s – more is there? are broad of it there is there process. Just this competitor

Mauricio Gutierrez

the I large think, of limited Yes. sense Steve, in of limited opportunities. book. number there’s very a I just mean, retail

going of a participate So small that we just know of transactions, limit of say, because we be is done we – – as number going this. of opportunities. on these, to not necessarily past, to the normal books. lot business. the as slightly the on And we’re in a on the we large think I I like these day-to-day, let’s to we’re But a in like and course to in are the think Steve. books, acquire There’s be bigger are terms said, small these have them going want them we But there of evaluating

an these the have just going two meet We power of for and grow earnings very these of the that internal – our to way Very secondly, look these value on mean, businesses we’re are and we businesses; grow the two fronts, either M&A. those just, to And or option they disciplined. to and be disciplined organically to at through threshold. pay we the combination I have businesses going on on

two the expect be I think should And what are of those you for earnings value and this deliver. to this to everybody pay mean, things they’re going delivering What that on are about. I or realistic we businesses the a pretty disciplined and we’ve have from willing I business, business. do So you these we good side guess track record in tell you, been terms the very potential of being earnings that on the thinking

Steve Fleishman

Thank you.

Mauricio Gutierrez

Steve. Thank you,

Operator

you. Thank

of America Julien Dumoulin-Smith Merrill of Our line Bank next question comes the from from Lynch.

Your question, please.

Julien Dumoulin-Smith

me? Hey, hear good Can you morning.

Mauricio Gutierrez

Good morning, Julien.

Julien Dumoulin-Smith

Hey.

credit in you’re on side. So follow-up wanted the reduction clarify to talking this, quick million. about the just debt the that I $XXX

of numerator the Obviously, use do at of an here. bit set just of way it you two to you’re And this the in last apples-to-apples move the with allocation? the me and bit now let Just of new us looking but out more a forward what your you point disclosures, your in separately, can time get that changing reserved – the little little denominator looks versus disclosures? a terms the completely give capital decide then given sense secondly, you hedge your how quarter-over-quarter that

But how to the here comparison. fuzzy anything in I hedged? kind wanted the more thinking when or thinking incrementally much to So of of about how in shifts about you’re it’s all understand note it? And terms just competition you’re the

Mauricio Gutierrez

Yes.

Kirk and Moser me turn for about So let the talk it the hedge. can then credit metrics, to Chris

Kirk Andrews

Julien. Hey,

hay the down we’re the cans at a maturity perspective. I of the on successes given you while here, from So I I’m is second, had that’s making the time-to-time as and what is of far focused second, getting all shines continue side sort kicking sun largely for as to what going a a often at things. efficiently unsecured we’re from the I for refinance call, I think, we’ve capital if this, really refer our to look by road, mean, governed timing sort be to

nearest surprisingly, maturity be not window. also XXXX, Our is nearest happens it our to call

around XXX first So XXX, May coupon, have is the of for call – we roughly year. is call of so which spot this it call window next half window, that the or

unsecured if on direction That’s to will, to think think that’s to temporal you about there, XXX% certain. maturity. I standpoint governor to necessarily think is unsecured the go, is most of is that we Obviously, that you to at the price going going available a us By we best loan. – for efficient side, $XXX so sooner, know call satisfy the we’ve $XXX probably from way, which foot if actually XXXX so we’re question. in to a if there the term got want significant enough probably So it, attack, way matures a probably at go we million. we’re par. loan that’s well the about delever term capital on the the that I one The good That maturity can pretty million, that’s side and side. to not That implying got a but the

it or now would right a So a in my be things. head if of probably you put those two gun combination

of May terms buckets timing, the right and look But that most million is we $XXX closely of that now. two inflection about think the probably point that’s bulk So to. probably I in being after

Chris Moser

here. Chris morning. good Julien,

heard the lot base you at that the disclosures used do we and at a from of far were load As best disclosures worst to hedge we go, hedge confusing. insufficient revenue as listen,

So we to portfolio decided move gen gross margin. to and a regional full the

you well. think around been combination of we’ve in clock the a as and that sellers some some with apples-to-apples, should of In us XXXX summer scaling of terms as

Julien Dumoulin-Smith

the premium it. or when what or a it you of locked anything consider discount you’ve those – kind else exposure in, Do in in? have about already layering But think summer Got to context any your hedging. that of you versus or is disproportionate

Chris Moser

materially, to Yes. slightly between so now. the I XXXX, the if up wouldn’t mean, last disclosure say we’re summer and I speak. about been think I prices have talking that

It’s quick prepare a too I early trying to most early been little seasonal low to CWG, the remember. way from so it I’m I that’s in Texas. kind and according I whole a reserve of growth, some going the load to adjusting but X,XXX CDR And margins think a the that. down mean, mean, this Texas to you’ve Utilities rainy new another a of that there. got I of high soft little saw, needs growth ORDC been XXXX, the we’re the terms the for bearish to peak load like I year you There’s in recent weather that, outlook I call which, to seen it’s pretty out plenty Public far. they’ve forecast, of think taking GenOn generation. XX.X. a Texas get think, XXXX. A time in Texas commend Commission – I very in out, – actions for we’d got did from first I’ve load the It’s prices. was of year, had there mean, It summer, for and XX.X megawatts

down I we’ve in think ways. some bunch but that, help mean, work got we’re think added incent load which a that’s too changes reliability functioning a helpful. in not in helpful a market We’ve of that different I I And I plants is way responding think for and Texas. ORDC nothing, Obviously, response, to. we on there some and well-functioning management big investment a load working market. at support

Julien Dumoulin-Smith

very much. Thank hedges. you I updated Excellent. about the agree

Chris Moser

Thanks, Awesome. Julien.

Mauricio Gutierrez

Julien. Thank you,

Operator

Thank you.

comes line from question the of next Citigroup. Mehta from Our Praful

please. question, Your

Praful Mehta

much. Hi, Thanks so guys.

Mauricio Gutierrez

Hi, Praful.

Praful Mehta

Hi.

way, So helpful, on this just quickly Slide appreciate have the it is hedge to on XX, so that. disclosure. again I think It

the below fair have a because Just mark chart? XXXX, market. current for to wanted on to that is XX understand, a the way read you hedge curve does Is your that the negative chart then to million imply that pricing forward

Chris Moser

sellers of up. So to the XXXX, has as I that scaling been read that think continued market move to is we’ve the way

Praful Mehta

you. Got

to… points which day pricing you’re a time or peak. – is selling there you’re that peak locking the or fair hedge – or of that not Is you’re So is the you’re in price selling the way effectively, at – not

Chris Moser

off sold if And we No, no, think we the moved about peak numbers. has sold like peak it up don’t off Think up we – we’re it. against it. sold think relevant It’s that like the that. that. sold the since moved since if has about Don’t peak, peak, about we it marking it

Mauricio Gutierrez

Praful a mark-to-market, It’s Yes, calculation.

what of last the in marking time the it block or takes where consideration, we sold then, what, against, is. we where and or So expectation day, of where market is the market energy just – it into the forward

Chris Moser

peak what would It I commenting that compared on is is you’re it’s some And you but see chart. moving we up, sold market Yes. what where off up. mark to literally it’s make the not mean to that’s is seller on we it’s market see which – as losses, that not on sales the doesn’t now. peak, – market you scaling the

Mauricio Gutierrez

the this And want financials to we very can heard disclosures. think forward. loud if from a just you transparent going that in our because help comment I understand investors, is company provide We clear be and better I and to disclosures our want we our better a, make

these believe with earnings hedges, to margin we our better of – mark of market the helps into moving just just open power hedges, not potential So but hedges, our company. all the our understand that energy all potential the model you the

to So on this But step is we’re provide a move to additional think we continue now, disclosures. that the direction. going right right

Praful Mehta

us to it market read way the to for Yes, mark agreed. exactly easier think I describing it the And is right to make way through. the you’re

that a will as if basis timeframe? that question, much allow don’t fundamental profile, going need to true hand on you in percentages the So you’re with just or how reflect more curves believe you And to the forward? XXXX you hand flexibility more on now to XXXX second going fundamentals credit add the hedge hedge that stay in metrics do that open on appreciate to disclosure. you more quickly it. to the is the grade transitioning Appreciate go in, And investment

Mauricio Gutierrez

at Yes, the we I think the taking Praful that or steps look we’re – what you on don’t – on sheet we credit isolation. what balance the

combination I good it model a making is of pretty this think overview predictable. that and perfecting provided our business already more Kirk a

can just so So to just market. more we have the We now make in our generation balanced retail. earnings predictable. are you’re to retail, try the point Well, past, to able we describing which more on do used a to generation with to don’t was approach much rely what to we combine if then it

assessment priorities which you improve So predictable that the a will one know, the earnings. agencies of the is business, more our of risk and profile key rating of

The explained Kirk to shareholders. second all around benefits And consistently lastly balance and the capital thing the returning is that sheet already balance sheet. the is

think those for think and three to priorities, afforded we in years. tremendous to long-term months you create given – the If we have have and the shareholder shareholder rerate flexibility financial coming stock I about value opportunity the that a value ourselves

of So of are all it things combination is the a looking three that equity. we to enhance our valuation

I think they’re think that’s how it, all you should related. about

Praful Mehta

guys. it. much Appreciate enough. Fair you. Got Thanks so

Mauricio Gutierrez

you, Praful. Thank

Operator

Thank you.

Our next Lapides of from comes Michael the Sachs. question Goldman from line

Your question, please.

Michael Lapides

what – question on the high two flow investment mean follow-ups. sub to flow grade, quantify like one of grade from cash collateral grade, move the of, guys. to if that else. cash to investment put interest high terms free and got cash grade? Can then cost Hey, going yield an trying what you would value value just a a or bit One little or you’ve reduced of impact annual something either going from savings, flow just I’m high of to in

Kirk Andrews

All two right, let me take pieces. that in

[indiscernible] think it, way you’re I the about some me addressing Michael, So telling your when question.

cash incremental that there. is flow one that will step create delevering, some So

round flow. less about accretive the just go benefit I think, with all than right When about, maturities number On the So X, debt, coupon that rule it annualized thumb, and it X – time, of you’re because $XX markets the XXX basis, with million-plus you we’re interest relative the if you’re delay little nice secured Over free of an I are. strong to extending success of Kind talking a had to investment as of X% grade think, find we that want notes, time or we’ve rule now. to the tax. about obviously, reducing this some emphasize minus on X. a then that’s of fund BB thumb, talking which cash to with and to over that refinance depends of comes I where

is a points could basis comes the the that’s keep less, little mind could of And basis grade, if no to a right? probably have the you points if by be my offset along other unsecured that tends you’re of the you you’re to longer which cause a second lot less but to a the type covenants ratings also to really strong little decent taken there’s basis interest benefit probably be issuing callable reasons a more, yes, to investment to single Not on we successfully to plus this because it of that to our in about XX things investment that If target thumb. decide investment is answer, case points rule we maybe and the one. because way, grade volatile me again, back notes by of But one think be rate XX one understandable improvement, in bullets you covenants if minus. the You’re that if one of with about point. that is debt moving have treasuries closer ask part But go to or available, XX I of it, most grade environment. testing at can it’s on roughly going think

Michael Lapides

Got it.

just The back hedging. relatively kind revenue to trying the the of think but think to easy on side, question that, One trying into to back I fuel. Okay. – to it

the used? remind mix of versus for plants, similar of the X,XXX for question X,XXX plants? of Midwest you coal terms Texas can what’s lignite versus being in gen And kind the the So us

Kirk Andrews

broken can and lignite but and sets of we’ve mix both before, facilities. X,XXX a X,XXX think don’t I you the X,XXX generation assume for zero and X,XXX of So

Chris Moser

Texas. In

Kirk Andrews

No, Midwestern. in

Michael Lapides

X,XXX gen now now a of your mix before using and X,XXX. Midwest predominantly because using you’re acquisition X,XXX you’re was So X,XXX,

at curves kind where kind both of and some those the we should respective So between two? blend are trading of look use

Chris Moser

different it’s regions. But the all say lignite that different at out – that point fair is the mean the I this of question. blend Yes. is it’s to in PRB the

Michael Lapides

Texas it. plants. And coal thinking then the Got about

Texas off weak parish your little economics a just peak given is, bit those of forward thought coal of on wave both the there’s of curious, the of coal but whether move of another and given, retirements on the your views other curves, coal thoughts market plant Just we’ve coming? the how and viability the in seen limestone kind and plants process of plants viability in

Chris Moser

say well. that low forward what a as peaks value of to it’s the go is think concentration and to the – with I fair in the on off your of within you’re as value summer Well, seeing point, the peaks, peaks, you concentration then

bodes in well forward do and summer voice all scenario that certainly as the high And prices well. so coal plants that with

If that, something dated you curve you out a or the get things backward when look run out curve, that years XX relatively it’s obviously different like because far.

Michael Lapides

it. Got

Agua with et traps some actually Okay. the being cetera. Caliente, do Last how timing and think able you of given it, to just comments of about the anything item, window do cash

Mauricio Gutierrez

happen, that evaluating contracts. and the it’s long-term Caliente, know, We current we’re of our the going under to expected Yes. fits environment are when And profile monetize contract I not you platform. better sale Clearway be as necessarily waiting Agua for we mean, is to didn’t a asset. It’s

options. beyond XXXX to going to evaluate we’re the environment. a we’re mean challenging to But something So going look forced not out and think do I I in be

We’re think I mean, we better remember times. guidance. going of I our to just way just, mean, context, just Agua Caliente not a financial are And additional do as when it is XXXX in

really doesn’t another. have or one it So an impact way

Chris Moser

one have thought follow-up more on I Michael, Hey that.

If that like suggest XXXX you I that X% reserve get XXXX or that see reflect into XXXX X a you and Page reserve the range margins, our the version would does on have not you that of something at back you’re in there, look – that. it shape margin. we the XXXX in of as pricing X% And and

wrong. is right price in wrong is which reserve So is the the reserve case margin either the and margin the or price right, is

as to But And of it, so had cognitive things in two of right a one of state they’re those now, give. call dissonance.

Michael Lapides

it. Got appreciated. Thanks, guys. Much

Operator

Thank final Ali line comes of from our the you. Agha for And question today SunTrust. from

question, please. Your

Ali Agha

morning. Good

showing the XXXX a the XXXX quick plans, over on Just disclosure, have given ones. from top over margin of and couple and XXXX XXXX. enhancement at you’ve us you’re that that the a I One wholesale us perspective. big you If trends of load over then picture look

that’s a flattish think So about stand XXXX just the that probably we looking from today big as perspective, say is to way it with to picture EBITDA is pretty fair XXXX it?

Mauricio Gutierrez

it there’s takes. and are curves Yes. so I we puts mean you freedom consistent I looks retail. think the when think In Obviously, of margin always XXXX, impact XXXX, have your more of on pretty you have the XXXX. about with enhancement, backward dated, degrees

there side, pretty On and so, the some capacity are consistent mean under But I generation is it’s puts pressure. year-over-year. takes, but your

Ali Agha

I recently mentioned said, million XXXX Mauricio, of one is misread. the just Can Agua Got to thought then looking Agua that? in footnote? you in clarify you. But maybe it’s XX at Slide I also it about Caliente And think slides, your Caliente, and forecast $XX think clarify, I you included that not I XXXX? you that of

Kirk Andrews

Yes. Ali, making. it’s I Kirk. That’s that we’re think distinction

I referring what quarter. Caliente be early that is very to expectation the our would Agua call. existing on Mauricio was So sold our in At first our we time, quarter think established third is guidance which range,

the So forecasting not basis guidance or the budgeting that’s was year, into that that on established. did our which we for bake

Ali Agha

Okay.

Kirk Andrews

going know sold, Agua say results be included Now distinction we’ve right? in that’s is let be It will Caliente the why to two. got results its that going the be me the between is Now right. – footnote we our that to not financial there,

Ali Agha

are within but that assuming it’s didn’t guidance I But accretive? change, Okay. you it’s we mean, the range,

Kirk Andrews

what was Sorry, that Ali?

Ali Agha

I or is it it so just some additive doesn’t I make other $XX is thinking net-net any change, just was replacing that? am it million, clarifying really

Kirk Andrews

obviously Yes. EBITDA. range we’ve got $XXX Well, million on a

right. it take certainly evolve, the cetera, portfolio look we time, So another et at cetera. over et We reforecast,

certainly forward, look now going range. we as it’s in our at but included expectations it So the

Ali Agha

question. Got And you. last

complete that XXXX is billion does or $X to XXXX into this that buyback slip clarify in plan again to as calendar that the Just well? of sort

Mauricio Gutierrez

we’re XXXX. – it’s targeting No,

Ali Agha

I see.

Okay. Thank you.

Mauricio Gutierrez

Thank you, Agha.

Operator

to conclude program Thank the any you. This like remarks. I’d question-and-answer Mauricio for program. Gutierrez does of further today’s the session to hand over

Mauricio Gutierrez

continuing our to all It talking of Thank look good days forward you. you, to I in was Thank to the you. Jonathan. come. conversation

Operator

conference. This gentlemen program. Thank and in you, for participation does ladies conclude the today’s your

disconnect. You day. may Good now

NRG Energy (NRG) 28 Feb 192018 Q4 Earnings call transcript