Nrg Energy, Inc. · NYSE:NRG
Nrg Energy — Investor Day (March 2018)
128 slides from Nrg Energy's investor day presentation, Mar 27, 2018
Slide 1: NRG Analyst Day 2018
N R G A N A LY S T D AY 2 0 1 8 M A R C H 2 7 , 2 0 1 8
Slide 2: Safe Harbor
SAFE HARBOR In addition to historical information, the information presented in this presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These statements involve estimates, expectations, projections, go
Slide 3: NRG: Redefining Power
NRG: REDEFINING POWER MAURICIO GUTIERREZ P R E S I D E N T A N D C H I E F E X E C U T I V E O F F I C E R A N A L Y S T D A Y 2 0 1 8
Slide 4: NRG: Simplified and Transformed
N R G : S I M P L I F I E D A N D T RA N S F O R M E D 2015 Analyst Day 2018 Analyst Day 53 GW 2.8 MM ~100 23 GW 2.9 MM ~40 GENERATION RETAIL PLANTS GENERATION RETAIL PLANTS CAPACITY CUSTOMERS CAPACITY CUSTOMERS ● GAS ● SOLAR ● COAL ● WIND ● OIL ● NUCLEAR A N A L Y S T D A Y 2 0 1 8 | 2
Slide 5: Key Takeaways
1 Moving to a customer-driven integrated power model 2 K E Y TA K E AWAY S Generating robust and stable cash flows 3 Committed to disciplined, transparent capital allocation principles A N A L Y S T D A Y 2 0 1 8 3
Slide 6: The Improved NRG Business Platform
Highlights Strategy T H E I M P RO V E D N R G B U S I N ES S P L AT F O R M Execution Financial An Integrated Business Model… …With A Strong Financial Profile >$1.9 Bn1 > $1.3 Bn Adj. EBITDA FCFbG 2020+ Pro Forma 2020+ Pro Forma Customer 3.0x ~$8 Bn2 Net Debt/ Excess Cash Adj. EBITDA Through 2022 C
Slide 7: Strategy
S T R AT EG Y A N A L Y S T D A Y 2 0 1 8 | 5
Slide 8: Value in our industry moving from power plants to customers
Highlights V A LU E I N O U R I N D U ST RY M O V I N G F RO M Strategy Execution P O W E R P L A N TS … Financial PURE IPP INTEGRATED MODEL ? Low Gas Prices 70 More Renewables 60 Consumer-Driven US NEW BUILDS AND RETIREMENTS 50 Natural Gas Price1 40 30 20 (GW) 10 ADDITIONS 0 RETIREMENTS -10 -20 -30
Slide 9: Market trends are mixed today but favor retail in the long term
Highlights Strategy M A R K ET T R E N D S A R E M I X E D TO D AY … Execution Financial FUEL SUPPLY END-USER GENERATION RETAIL Trends Trends • Asset retirements • Consumer choice • Market reforms • Smart devices and digital technology • Low natural gas prices • On-site reliability • Renewables buil
Slide 10: NRG transformation consistent with market trends
Highlights N R G T RA N S F O R M AT I O N CO N S I ST E N T W I T H Strategy Execution M A R K ET T R E N D S … Financial REBALANCED AND BETTER-MATCHED PORTFOLIO RATIONALIZED 2015 2018 GENERATION TWh TWh (Pro Forma, Announced Sales) FLEET 123 STEADY GROWTH 62 63 53 IN RETAIL Retail Generation Retai
Slide 11: The winning platform provides stability and flexibility to grow
Highlights T H E W I N N I N G P L AT F O R M P RO V I D ES B OT H Strategy Execution STA B I L I T Y A N D F L E X I B I L I T Y TO G RO W … Financial NRG Vision Market Attractiveness High Retail-Only NRG 2018 IPP + Retail as a hedge (NRG 2015) Low Hybrid Pure IPP Regulated (NRG 2008) Low High Earn
Slide 12: Stable earnings with asymmetric upside
Highlights Strategy STA B L E E A R N I N GS W I T H ASY M M ET R I C U P S I D E Execution Financial Stable Unit Retail Margins Gross Margin vs Power Prices ($/MWh) Average Today Gross Margin 2014 2011 2012 2013 2014 2015 2016 2017 Portfolio Rising Power Prices in ERCOT Houston On-Peak Prices ($/MW
Slide 13: Attractive growth opportunities across retail and generation
Highlights AT T RA CT I V E G RO W T H O P P O RT U N I T I ES A C RO S S Strategy Execution R ETA I L A N D G E N E RAT I O N Financial Retail Generation • Generation assets located in attractive ERCOT market and Market Size: NRG Share Segment premium locations in the East Core Markets1 Today • ERC
Slide 14: Execution
E X EC U T I O N A N A L Y S T D A Y 2 0 1 8 | 12
Slide 15: Our roadmap has three distinct phases
Highlights Strategy O U R ROA D M A P H AS T H R E E D I ST I N CT P H AS ES Execution Financial 1 Stabilize 2 Right-Size 3 Redefine (2015-2016) (2017-2020) (2019+) $590 MM Recurring, EBITDA-Accretive Customer-Focused Savings $539 MM Cost Reduction $215 MM EBITDA-Margin Business Model Cost Sav
Slide 16: Executing on our transformation plan is our #1 priority
Highlights E X E C U T I N G O N O U R T RA N S F O R M AT I O N P L A N Strategy Execution IS OUR #1 PRIORITY Financial Transformation Plan Status Update • Announced over 90% of target proceeds Asset Sales • Balance to be announced by 2019 On Track Balance Sheet • 3.0x Net Debt/Adj. EBITDA by year
Slide 17: Cost savings details
Highlights Strategy CO ST S A V I N GS D ETA I L S Execution Financial Cost Savings ($ MM) Sources $ MM Target - Headcount (all businesses) through 590 590 Achieved streamlined processes, business 500 Labor simplification, reduction of spans/levels, 250 and further use of automation - Improved cost
Slide 18: Margin enhancement details
Highlights Strategy M A R G I N E N H A N C E M E N T D ETA I L S Execution Financial Margin Enhancement Targets ($ MM) Sources $ MM 215 Value Expansion Generation - Retention performance Business Solutions - Platform enhancements Retail - Product expansion Mass Retail 180 135 Customer Growth - Digi
Slide 19: Rebalancing our portfolio in the East with XOOM acquisition
Highlights R E B A L A N C I N G O U R P O RT F O L I O I N T H E E AST W I T H Strategy Execution CO M P E L L I N G R ETA I L O P P O RT U N I T Y Financial Rebalancing Fleet Compelling Investment with XOOM Acquisition Opportunity • Acquisition of XOOM Energy for $210 MM1 Investment return signi
Slide 20: Our next phase – redefining our business
Highlights Strategy O U R N E X T P H AS E – R E D E F I N I N G O U R B U S I N ES S Execution Financial 1. Continue to Rebalance the Portfolio Adapt fleet to match market opportunities Balance and optimize integrated (generation / retail) platform Better match East position: Announcing XOOM
Slide 21: Financials
FINANCIALS A N A L Y S T D A Y 2 0 1 8 | 19
Slide 22: Plan increases cash flow to $1.3 Bn by 2020
Highlights Strategy P L A N I N C R E AS ES C AS H F LO W TO $ 1 . 3 B N B Y 2 0 2 0 Execution Financial Free Cash Flow before Growth ($ MM) $100-$150 2020+ Growth Drivers: $1,309 • Mass Retail: ~3% annual organic growth $45 $264 • Business Solutions: Capitalize on $1,000 distributed generation oppo
Slide 23: Excess cash totals ~$8 Bn by 2022
Highlights Strategy E X C ES S C AS H TOTA L S ~ $ 8 B N 1 B Y 2 0 2 2 Execution Financial Cumulative Excess Cash ($ MM) Announced Buyback $7,821 Excess Cash $6,584 $5,347 $6,821 $6,821 $3,630 $5,584 $5,584 $4,347 $4,347 2021-2022 $2,630 $2,630 Potential Growth: $1,668 $50 - $75 MM/yr $668 $668 $1,0
Slide 24: Excess cash represents doubling of free cash or 80% of market cap
Highlights E X C ES S C AS H R E P R ES E N TS D O U B L I N G O F F R E E Strategy Execution C AS H O R 8 0 % O F M A R K ET C A P I TA L I Z AT I O N Financial Capital Allocation Plan 100% Reinvested2 Illustrative Pro Forma FCFbG 2,591 ~200% 2,335 Maintain Top Decile Safety and 2,030 Growth 1 Oper
Slide 25: A compelling value proposition for our stakeholders
Highlights A CO M P E L L I N G V A LU E P RO P O S I T I O N F O R Strategy Execution O U R S TA K E H O L D E R S Financial • Integrated power company focused on customers • Robust free cash flow of ~$1.3 Bn/year • ~$8 Bn excess cash in next five years • Strong balance sheet with 3.0x Net Debt/Adj
Slide 26: Retail Business
R E TA I L B U S I N E S S ELIZABETH KILLINGER A N A L Y S T D A Y 2 0 1 8
Slide 27: Key Takeaways
1 Retail’s foundation is strong 2 K E Y TA K E AWAY S Retail’s growth potential is robust and margins are stable 3 Retail will deliver on margin enhancement A N A L Y S T D A Y 2 0 1 8 2
Slide 28: Strong Foundation
S T R O N G F O U N D AT I O N A N A L Y S T D A Y 2 0 1 8 | 3
Slide 29: Committed to retail growth, over-delivered 2015-2017
Foundation L A S T T I M E W E TA L K E D ( A N A LY S T D AY 2 0 1 5 ) , Growth Potential Margins W E C O M M I T T E D TO R E TA I L G R O W T H … Transformation 1,400 Mass Retail - 2015 Plan vs Actuals/2018 Plan $1.2 Bn 1,200 >$1 Bn $1 Bn Adj. EBITDA ($ MM) 1,000 800 600 400 200 - 2015 2016 2017
Slide 30: Our mass retail business consistently delivers earnings and customer growth
Foundation Growth Potential O U R M A S S R E TA I L B U S I N E S S … Margins Transformation Mass Adj. EBITDA ($ MM) Mass Customer Count (000s) By the Numbers $785 MM Adj. EBITDA 2.9 MM customers 42 Annual TWh #1 Nationally 785 2,876 #1 in Texas 2,217 2,217 2,876 528 2013 2014 2015 2016 2017 2013 2
Slide 31: Our industry is seeing changes
Foundation Growth Potential O U R I N D U ST RY I S S E E I N G C H A N G ES … Margins Transformation FUEL SUPPLY END-USER GENERATION RETAIL Trends • Consumer choice • Smart devices and digital technology • On-site reliability • Distributed generation • New competitors … T H AT W I L L S H A P E O U
Slide 32: Our differentiated brands and products
Foundation O U R D I F F E R E N T I AT E D B R A N D S A N D Growth Potential Margins PRODUCTS… Transformation Our Brands Our Products And Services Products: Electricity Solar Natural Backup (all kinds) Gas Power Services: Security Energy Home Protection Services Management Services Plans … D E L I
Slide 33: The XOOM acquisition
Foundation Growth Potential THE XOOM ACQUISITION… Margins Transformation Expect a 2Q18 close Strategic Rationale • Materially grows East, including expansion of the natural gas business • Provides access to a new sales channel • Immediately accretive … A D D S S C A L E A N D A S T R AT E G I C C H
Slide 34: Our winning customer experience
Foundation Growth Potential O U R W I N N I N G C U S TO M E R E X P E R I E N C E … Margins Transformation The Most Trusted Brand in the Texas Retail Electric Provider Category 2018, #1 Experience Index … P R O V I D E S N R G A C O M P E T I T I V E A D V A N TA G E AA NN AA LL YY SS TT DD AA YY 2
Slide 35: Our leadership in communities
Foundation Growth Potential OUR LEADERSHIP IN COMMUNITIES… Margins Transformation … S H OWCASES O U R P EO P L E , O U R C O M M I T M E N T, A N D O U R C U S T O M E R F O C U S AA NN AA LL YY SS TT DD AA YY 22 00 1 8 | 10 10
Slide 36: Competitive residential customers among retailers
Foundation Growth Potential A M O N G R E S I D E N T I A L R E TA I L E R S … Margins Transformation Top North American Electricity Retailers 3,000 Competitive Residential 2,500 Customers (000s) 2,000 1,500 1,000 500 - NRG XOOM Next Largest Competitors …NRG IS THE L ARGEST COMPETITIVE Source: Compa
Slide 37: Robust Growth Potential & Stable Margins
R O B U S T G R O W T H P OT E N T I A L & S TA B L E M A R G I N S A N A L Y S T D A Y 2 0 1 8 | 12
Slide 38: Attractive markets
Foundation Growth Potential AT T R A C T I V E M A R K E T S … Margins Transformation MARKET SHARE REGULATORY GROWTH OPPORTUNITY LANDSCAPE …PROVIDE OPPORTUNITY FOR GROWTH AA NN AA LL YY SS TT DD AA YY 22 00 1 8 | 13 13
Slide 39: Texas is a robust market
Foundation Growth Potential TEXAS IS A ROBUST MARKET… Margins Transformation Texas Competitive Mass Market NRG Mass in Texas • 7.3 MM customers • 2.2 MM customers • 120 TWh served • 36 TWh served • $2.5+Bn Adj. EBITDA opportunity • 30% residential market share Retailer Resi Share NRG 30% Competitor
Slide 40: Overall growth in Texas
Foundation Growth Potential OVERALL GROWTH IN TEXAS… Margins Transformation “The Texas economy continues its broad “Texas will add over 10 million new expansion… the Dallas Fed forecasts 2018 residents over the 2010 census by 2030” Texas job growth of 2.8 percent.” Texas Demographic Center Federal R
Slide 41: NRG's leadership in East markets
Foundation Growth Potential NRG’S LEADERSHIP IN EAST MARKETS… Margins Transformation Market Size Competitive Market Share • 31 MM eligible meters Retailer Resi Share • 262 TWh served Incumbent Utilities 69% • 31% have switched providers Largest Competitor 4% • $6+Bn Adj. EBITDA NRG 2% opportunity Wh
Slide 42: Trends throughout the nation
Foundation Growth Potential T R E N D S T H R O U G H O U T T H E N AT I O N … Margins Transformation Competitive Market Landscape Emerging Markets Resi Load EBITDA Opportunity Market (TWh) from 5% Market Share California 88 $45 - $70 MM Nevada 13 $5 - $15 MM Virginia 45 $25 - $40 MM Florida 123 $60
Slide 43: Retail's history of margin stability
Foundation Growth Potential R E TA I L ’ S H I S TO R Y O F M A R G I N S TA B I L I T Y … Margins Transformation Stable Unit Margins in Various Supply Differentiation Environments Unit Margins ($/MWh) • Multi-Brand Strategy • Distinctive Offers = + Platform Advantage 2011 2012 2013 2014 2015 2016 2
Slide 44: Differentiated brands and products
Foundation Growth Potential D I F F E R E N T I AT E D B R A N D S & P R O D U C T S … Margins Transformation Brands Example Products $ SAT/SUN Full Service: Innovative solutions Airline Miles Speak & Save Flat Bill Free that power, protect, and simplify life Bundle Bundle Weekends Sustainability: C
Slide 45: Our national scalable platform
Foundation Growth Potential O U R N AT I O N A L S C A L A B L E P L AT F O R M … Margins Transformation Retail Energy Supply & Customer Operations Marketing & Sales Risk Management & Tools • Prospect targeting • Energy supply • Customer care and • Innovation • Risk management retention • Offer & ma
Slide 46: Margin Enhancement Plan
MARGIN ENHANCEMENT PLAN A N A L Y S T D A Y 2 0 1 8 | 21
Slide 47: Margin enhancement plan
Foundation Growth Potential MARGIN ENHANCEMENT PLAN… Margins Transformation Our Retail Plan has two major programs, each with three projects. They build up to the $180 MM in margin enhancement with increasing intensity through 2020. 2018 2019 2020 2021 2022 Value Expansion Program (VEP) + $105 MM Re
Slide 48: Our plan will deliver $180 MM margin enhancement
Foundation Growth Potential OUR PLAN WILL DELIVER… Margins Transformation 25 15 Digital Value Expansion - $105 MM Retention 30 Customer Growth - $75 MM Channel • Retention Performance Performance • Digital Enhancements Improvements $180 MM Adj. EBITDA • Channel Performance • Platform Enhancements 50
Slide 49: Value expansion - retention performance improvements
Foundation V A LU E E X P A N S I O N - Growth Potential Margins RETENTION PERFORMANCE IMPROVEMENTS… Transformation Retention Performance Improvements (RPI) Project Highlights: • Tools to identify and mitigate retention risks • Case Study – Bill Shock • Improved customer lifecycle communications • C
Slide 50: Value expansion - platform enhancements
Foundation V A LU E E X P A N S I O N - Growth Potential Margins P L AT F O R M E N H A N C E M E N T S … Transformation Platform Enhancements (PE) Project Highlights: • Improved data management of customer & campaign information • Case Study – Elements Available for Analytics • Artificial Intellige
Slide 51: Value expansion - secondary product penetration
Foundation V A LU E E X P A N S I O N - Growth Potential Margins S E C O N D A R Y P R O D U C T P E N E T R AT I O N … Transformation Secondary Product Penetration (SPP) Project Highlights: • Deepening the penetration of secondary products like natural gas, security, & services into current custome
Slide 52: Customer growth - digital enhancements
Foundation C U S TO M E R G R O W T H - Growth Potential Margins D I G I TA L E N H A N C E M E N T S … Transformation Digital Enhancements (DE) Project Highlights: • Enhanced digital tools • Case Study – Acquisition Enhancement • Improved online sales experience • Case Study – A/B Testing Project T
Slide 53: Customer growth - channel performance improvements
Foundation C U S TO M E R G R O W T H - Growth Potential Margins CHANNEL PERFORMANCE IMPROVEMENTS… Transformation Channel Performance Improvements (CPI) Project Highlights: • Agent level performance enhancements • Case Study – New Metrics • Increased close rates • Case Study – Improved Interface • I
Slide 54: Customer growth - channel expansion
Foundation C U S TO M E R G R O W T H - Growth Potential Margins CHANNEL EXPANSION… Transformation Channel Expansion (CE) Project Highlights: • Expanded direct sales channels • Case Study – More • Expanded online sales channels • Expanded alternative sales channels • Case Study – “Hub & Spoke” Sales
Slide 55: The transformation plan fuels additional growth
Foundation T H E T R A N S F O R M AT I O N P L A N F U E L S Growth Potential Margins ADDITIONAL GROWTH… Transformation Current Outlook – Mass Retail Adj. EBITDA ($ Bn) ~1.2 .785 2017 2018 2019 2020 2021 2022 … I N O U R L E A D I N G M A S S R E TA I L B U S I N E S S AA NN AA LL YY SS TT DD AA YY
Slide 56: Retail business value proposition
Foundation Growth Potential R E TA I L B U S I N E S S V A L U E P R O P O S I T I O N Margins Transformation NRG’s leading Retail business, which has demonstrated earnings growth for each of the last 4 years, will: • Continue to advance its strong foundation • Capture growth opportunities as Texas
Slide 57: Business Solutions
B U S I N ESS S O LU T I O N S ROBERT GAUDETTE A N A L Y S T D A Y 2 0 1 8
Slide 58: Key Takeaways
1 The commercial and industrial energy services market is strong today 2 K E Y TA K E AWAY S NRG is uniquely positioned to win in this market 3 Our competitive advantages enable us to reach growth targets at attractive rates A N A L Y S T D A Y 2 0 1 8 2
Slide 59: Market & Business Overview
MARKET & BUSINESS OVERVIEW A N A L Y S T D A Y 2 0 1 8 | 3
Slide 60: Business Solutions has a unique mix of products and services
Business B U S I N ESS S O LU T I O N S H AS A U N I Q U E M I X O F Services Financials PRODUCTS AND SERVICES Supply • ~59,000 meters • ~20 TWh load • ~11% of 2018 ERCOT market share • Across all competitive markets Distributed Energy Resources (DER) • ~4,900 customers • ~2,500 MWs demand response
Slide 61: The commercial and industrial energy services segment
Business T H E CO M M E R C I A L A N D I N D U ST R I A L E N E R GY Services Financials SERVICES SEGMENT... C&I Customer Market 20161 Customer Demands Increasing Nationwide Nationwide Growth 2,325 TWh 6.7% By 2022 More Sophistication EIA % of C&I Energy Consumption Increase vs 2017 Information and
Slide 62: Our business is best positioned to meet market needs
Business O U R B U S I N E S S I S B E S T P O S I T I O N E D TO M E E T Services Financials MARKET NEEDS… The Competition Pure Play Retailer Gentailer Portfolio of Companies DISTRIBUTED SERVICES SERVICES … W H I L E T H E C O M P E T I T I O N L A C K S T H E TO O L S N E E D E D TO S E R V E E M
Slide 63: Integration with the NRG platform
Business Services I N T E G R AT I O N W I T H T H E N R G P L AT F O R M … Financials Wholesale Business Solutions Retail • Market interface • Customer-focused organization • Leading retail platform • Product development • Commercial innovation • Customer-first culture & management • Unique platfor
Slide 64: Essential Product Lines and Services
ESSENTIAL PRODUCT LINES AND SERVICES A N A L Y S T D A Y 2 0 1 8 | 8
Slide 65: Supply market opportunity is evolving
Business S U P P LY M A R K E T O P P O R T U N I T Y I S E V O L V I N G Services Financials F R O M S I M P LY P R O V I D I N G M E G A W AT T S … Traditional Supply Structured Supply Characteristics Keys to Success Characteristics Keys to Success • Volume-based business • Speed of transaction •
Slide 66: Distributed energy resources
Business Services D I ST R I B U T E D E N E R GY R ES O U R C ES … Financials Product Characteristics • Portfolio management to market obligations • Risk management and automation • Individual customer curtailment plans • Generates multiple income streams • Provides resiliency when asset-backed Key
Slide 67: Asset-backed demand response (ABDR)
Business Services A S S E T- B A C K E D D E M A N D R E S P O N S E ( A B D R ) … Financials ABDR Partnership Case Study & Cummins Strong Partnership Innovative Solutions Compelling Value • Combined sales strategy • On-site, gas fired back-up generation • Returns significantly above capital • Cummi
Slide 68: Services portfolio strengthens the primary product offerings
Business S E R V I C E S P O R T F O L I O S T R E N GT H E N S T H E Services Financials P R I M A RY P RO D U CT O F F E R I N GS Digital Interface & Customer Advisory & Consulting Experience Data & Analytics Partnerships A N A L Y S T D A Y 2 0 1 8 | 12
Slide 69: Financials
FINANCIALS A N A L Y S T D A Y 2 0 1 8 | 13
Slide 70: Margin enhancement plan
Business Services MARGIN ENHANCEMENT PLAN… Financials Margin Enhancement Sources Action Plan Shorten sales cycle Improve close rates $2 Automation Grow deal size, advocacy & brand equity $6 Establish sustainable partnerships $4 Technology Next Generation Infrastructure Customer Modernize &
Slide 71: Financial outlook reflects $25 MM margin enhancement
Business F I N A N C I A L O U T LO O K R E F L E C T S $ 2 5 M M Services Financials MARGIN ENHANCEMENT… Adj. EBITDA Outlook ($ MM) $65 $25 $60 2018E Margin Enhancement Potential Upside Through 2020 Through 2022 … A N D O P P O R T U N I T I E S TO G R O W T H E B U S I N E S S A N A L Y S T D A Y
Slide 72: Business Solutions value proposition
Business Services B U S I N ESS S O LU T I O N S V A LU E P RO P O S I T I O N Financials • Leveraging the strengths of the NRG integrated platform to capitalize on market opportunities • Delivering customers essential products while executing partnerships to further enhance offering and customer ex
Slide 73: Generation
G E N E R AT I O N CHRIS MOSER A N A L Y S T D A Y 2 0 1 8
Slide 74: Key Takeaways
1 Streamlined and strengthened Generation business 2 K E Y TA K E AWAY S Market trends are mixed 3 Demonstrating benefits of an integrated platform A N A L Y S T D A Y 2 0 1 8 2
Slide 75: Streamlined and Strengthened
S T R E A M L I N E D A N D S T R E N GT H E N E D A N A L Y S T D A Y 2 0 1 8 | 3
Slide 76: Improved generation portfolio
Streamlining Market Trends I M P R O V E D G E N E R AT I O N P O R T F O L I O … Integration Beginning Beginning of of Northeast Northeast and and Streamlining and Integrated Integrated Portfolio Portfolio Renew Renew Expansion Expansion Consolidation 60,000 50% Reduction 60,000 50,000 50,000 Renew
Slide 77: Continued focus on best in class operational performance
Streamlining CONTINUED FOCUS ON BEST IN CL ASS Market Trends Integration O P E R AT I O N A L P E R F O R M A N C E … Strong Safety Record Driving Down Costs Top Quartile = 0.84 ($/KW) 0.69 Top Decile = 0.70 48.8 47.7 47.9 0.59 0.54 0.54 Total Op Ex TCIR1 43.3 2014 2015 2016 2017 2014 2015 2016 2017
Slide 78: Forward environmental capex much lower
Streamlining F O R WA R D E N V I RO N M E N TA L C A P E X Market Trends Integration M U C H LO W E R … Environmental and Streamlining and Optimization-Driven CapEx Consolidation $397 $303 Environmental CapEx $ MM1 $180 Maintenance CapEx $140 $121 $125 2014 2015 2016 2017 2018 2019 …FREEING UP SIGN
Slide 79: NRG portfolio post announced asset sales
Streamlining NRG PORTFOLIO – POST ANNOUNCED Market Trends Integration ASSET SALES ● SOLAR ● GAS ● COAL ● NUCLEAR East: Fuel Type (GW) ● OIL 9.7 GW Generation in load Nuclear Solar 5% 3% pockets. Capacity revenue driven Oil 15% Natural Gas 46% Coal 31% Merit Order (GW) Intermittent West: 3% 2.6 GW Re
Slide 80: Market Trends
MARKET TRENDS A N A L Y S T D A Y 2 0 1 8 | 8
Slide 81: Market trends are mixed
Streamlining Market Trends MARKET TRENDS ARE MIXED Integration FUEL SUPPLY END-USER GENERATION RETAIL Trends • Asset retirements • Market reforms • Low natural gas prices • Renewables build out • New disruptive technologies (e.g. batteries) AA NN AA LL YY SS TT DD AA YY 22 00 1 8 | 9
Slide 82: East – market provides strong capacity revenues
Streamlining EAST – MARKET PROVIDES STRONG Market Trends Integration CAPACITY REVENUES… COMED is a Premium Capacity Market1 Positive Regulatory Changes 300 $/MW-day 200 Type Description 100 • Price formation reform would allow inflexible units PJM to set price and could increase prices by $3- 0 $4/M
Slide 83: ERCOT – market fundamentals continue to improve
Streamlining E R C OT – M A R K E T F U N D A M E N TA L S Market Trends Integration C O N T I N U E TO I M P R O V E … Retirements Drive Lower Reserve Margins Summer Prices Respond2 20% $160 18% $140 2018 16% Target Reserve Margin 14% $120 Reserve Margin 12% 2019 $/MWh 10% $100 8% 2020 6% $80 4% $6
Slide 84: ERCOT – current market does not support new build
Streamlining E R C OT – C U R R E N T M A R K E T D O E S N OT Market Trends Integration SUPPORT NEW BUILD $30 Investment Decisions ERCOT On-Peak Spark Spread, $25 Houston Hub ($/MWh)1 Spark Spread needed for new CCGT2 $20 $15 $10 $5 2019 2020 2021 2022 2023 1 Spark spreads based on forward on-peak
Slide 85: ERCOT – new build economics across technologies
Streamlining E R C OT – N E W B U I L D E C O N O M I C S A C R O S S Market Trends Integration T E C H N O LO G I E S A R E C H A L L E N G I N G … Market Power Price Compared to Required Power Price1 $100 $90 2019-2022 average ($/MWh)2 $80 $70 $60 Houston Houston Houston West $50 On-Peak On-Peak O
Slide 86: Benefits of an Integrated Platform
B E N E F I T S O F A N I N T E G R AT E D P L AT F O R M A N A L Y S T D A Y 2 0 1 8 | 14
Slide 87: Portfolio assessment – East
Streamlining Market Trends PORTFOLIO ASSESSMENT – EAST Integration East Output Well Matched to East Gross Margin (2018-2022) Current Retail Sales Mainly Capacity Total 71 Potential1 Net Energy Position (TWh) Capacity +61 80% Energy & Actual Ancillary 10 20% 7 Retail Sales Generation E X C E S S G E
Slide 88: Portfolio assessment – ERCOT
Streamlining Market Trends P O R T F O L I O A S S E S S M E N T – E R C OT Integration Fleet Short Against Energy, Portfolio Spans Supply Stack but Can Flex Up All Market Supply Total Gas Peakers 75 NRG Units ERCOT Supply Stack ($/MWh)2 Net Energy Position (TWh) Cedar Bayou CC Potential1 W A Parish
Slide 89: Portfolio assessment – ERCOT: deeper dive
Streamlining P O R T F O L I O A S S E S S M E N T – E R C OT: Market Trends Integration DEEPER DIVE NRG Generation Capacity vs Retail Load Matching Retail As Retail grows, the ERCOT portfolio may require additional 14,000 capacity that is complementary to the retail load shape. Our options to match
Slide 90: Integrated model highly beneficial
Streamlining Market Trends I N T E G R AT E D M O D E L H I G H LY B E N E F I C I A L … Integration Market: Brokers, Banks, and Other Intermediaries High Cost Platform NRG NRG Generation Retail NRG Reduction in Cost of Doing Business, Increased Portfolio Transparency, NRG Wholesale Improved Risk Ma
Slide 91: Combining generation and retail reduces risk: generation
Streamlining C O M B I N I N G G E N E R AT I O N A N D R E TA I L Market Trends Integration REDUCES RISK… Generation Gross Margin Distribution1 (Illustrative, Generation Fully Open) 20% 15% Probability (%) 10% Wholesale Generation 5% 0% Gross Margin … AT L O W E N D O F C Y C L E , A S Y M M E T R
Slide 92: Combining generation and retail reduces risk: retail
Streamlining C O M B I N I N G G E N E R AT I O N A N D R E TA I L Market Trends Integration REDUCES RISK… Retail Gross Margin Distribution1 (Illustrative, Generation & Retail Fully Open) 20% 15% Probability (%) Generation Wholesale 10% Retail Retail 5% 0% Gross Margin … B R O A D R A N G E O F G R
Slide 93: Combining generation and retail reduces risk: integrated
Streamlining C O M B I N I N G G E N E R AT I O N A N D R E TA I L Market Trends Integration REDUCES RISK… Integrated Gross Margin Distribution1 (Illustrative, Generation & Retail Fully Open) 20% 15% Probability (%) Integrated Integrated 10% Wholesale Generation Retail Retail 5% 0% Gross Margin … S
Slide 94: Generation and retail are complementary
Streamlining G E N E R AT I O N A N D R E TA I L A R E Market Trends Integration C O M P L E M E N TA R Y … Today 2014 Gross Margin Portfolio Retail Generation Indicative Chart Power Prices … A N D P R O V I D E I N C R E A S E D S TA B I L I T Y W I T H ASYMMETRIC UPSIDE AA NN AA LL YY SS TT DD AA
Slide 95: Generation value proposition
Streamlining Market Trends G E N E R AT I O N V A L U E P R O P O S I T I O N Integration • Streamlined and strengthened generation fleet • Well-positioned in strong markets • Integrated platform produces benefits such as risk reduction and earnings stability AA NN AA LL YY SS TT DD AA YY 22 00 1 8
Slide 96: Finance
FINANCE KIRK ANDREWS A N A L Y S T D A Y 2 0 1 8
Slide 97: Key Takeaways
1 Integrated model drives robust and sustainable free cash flow 2 K E Y TA K E AWAY S 3x Net Debt / Adj. EBITDA appropriate for our business 3 GREATER of hurdle rate OR return implied by share price will govern allocation of excess capital A N A L Y S T D A Y 2 0 1 8 2
Slide 98: Reaffirming 2018 guidance
Guidance Capital Allocation REAFFIRMING 2018 GUIDANCE Long Term Credit Metrics ($ millions) 2018 Full Year Impact – Asset Sales Guidance Pro Forma2 Announced To be Completed Generation & Renewables1 $950 – $1,050 ($255) ($100) ~$650 Retail 900 – 1,000 – – ~950 NRG Yield 950 (950) – – Transformation
Slide 99: 2018 capital allocation - update
Guidance Capital Allocation 2 0 1 8 C A P I TA L A L LO C AT I O N - U P D AT E Long Term Credit Metrics ($ millions) Sale of No change from 4Q17 earnings call Indicates change from 4Q17 earnings call $4,362 Canal 3 $1,827 $130 $2,792 Asset Sales Announced $1,000 ($135) $500 Release of Cash In proce
Slide 100: Capital allocation at NRG
Guidance Capital Allocation C A P I TA L A L LO C AT I O N AT N R G Long Term Credit Metrics Capital Available for Allocation (“CAFA”) Principles of Capital Allocation “SOURCES” “USES” CAFA is… Achieve and Maintain 3x Net Debt / Adj. EBITDA target Cash and cash equivalents EXCESS AFTER 3x ACHIEVED A
Slide 101: Pro forma excess cash – 2018 to 2020
Guidance Capital Allocation P R O F O R M A E X C E S S C A S H – 2 0 1 8 TO 2 0 2 0 Long Term Credit Metrics ($ millions) 2019 2020 $480 $4,347 $1,309 $72 $585 $2,630 $205 $121 $1,293 $668 Year End Pro Forma Incremental Release of 2019 Year End Pro Forma Release of 2020 Year End 2018 FCFbG Asset Sa
Slide 102: Pro forma excess cash through 2022
Guidance Capital Allocation PRO FORMA EXCESS CASH THROUGH 2022 Long Term Credit Metrics ($ millions) 2021 – 2022 Pro Forma Potential Upside >80% of Market Capitalization $7,821 $2,618 $1,000 Share Repurchases ~$144 Retail Generation $4,347 $6,821 $6,821 • 2-4% mass retail • Well-positioned market gr
Slide 103: Capital structure & corporate credit metrics
Guidance C A P I TA L S T R U C T U R E & C O R P O R AT E Capital Allocation Long Term CREDIT METRICS Credit Metrics Target Credit Ratio: 3x Net Debt / Adj. EBITDA 2018 2020 Pro- MWG3 T. Plan Pro- $ in millions Forma Forma • First Priority for Excess Cash Corporate Debt1 $7,186 ~$6,530 • Consistent
Slide 104: Key Takeaways
K E Y TA K E A W AY S Integrated model drives robust and sustainable free cash flow Implied Cumulative Excess Cash >80% Market Cap by 2022 3x Net Debt / Adj. EBITDA appropriate for our business 2018/20 In Line, with 2018 Reserved Cash Released by 2020 GREATER of hurdle rate OR return implied by
Slide 105: Appendix
APPENDIX A N A L Y S T D A Y 2 0 1 8 | 1
Slide 106: Committed to sustainability
CO M M I T T E D TO S U STA I N A B I L I T Y NRG Sustainability Framework SUSTAINABILITY SUSTAINABILITY SUSTAINABILITY SUSTAINABILITY SUSTAINABILITY BUSINESS OPERATIONS CUSTOMERS SUPPLIERS WORKPLACE Award-Winning Disclosure Environmental Leadership Community Partner 70% of the way to 2030 Carbon go
Slide 107: Appendix: Finance
APPENDIX: FINANCE A N A L Y S T D A Y 2 0 1 8 | 3
Slide 108: Transformation plan
T R A N S F O R M AT I O N P L A N ($ MM) INCREMENTAL TRANSFORMATION PLAN 2018 2019 2020 Cost Savings $500 $590 $590 Margin Enhancements 30 135 215 EBITDA Impact $530 $725 $805 Maintenance Capex 30 50 50 Working Capital 85 64 0 FCFbG Impact $645 $839 $855 Annual EBITDA Change $195 $80 Annual FCFbG C
Slide 109: Debt maturity
D E B T M AT U R I T Y ($ MM) As of 12/31/17 Debt Balances as of 12/31/2017 Less: Impact of Less: Ivanpah/ Consolidated Asset Sales Pro-Forma MWG Recourse Debt $16,638 ($8,118) $8,520 ($1,334) $7,186 NYLD / Renewables (6,711) (1,182) Renewables (Ivanpah) Carlsbad (427) MWG (152) To be completed (980
Slide 110: Finance footnotes
F I N A N C E F O OT N OT E S Finance Section Slide 3 – Reaffirming 2018 Guidance 1 Includes Corporate Segment; 2 Based on midpoint of guidance range Finance Section Slide 4 – 2018 Capital Allocation - Update 1 2018 CAFA includes $4,232 MM of capital from existing cash, 2018 estimated NRG-Level FCFb
Slide 111: Appendix: Operations
A P P E N D I X : O P E R AT I O N S A N A L Y S T D A Y 2 0 1 8 | 7
Slide 112: Pro-forma portfolio managing commodity price risk
PRO-FORMA PORTFOLIO1 MANAGING COMMODITY PRICE RISK Total Portfolio Generation and Retail Hedge Position1,2 Coal and Nuclear Generation and Retail Hedge Position1,2,4 83% 80% 83% 63% 68% 70% 39% 39% 22% 23% 34% 23% 12% 11% 18% 17% 9% 5% 2018 2019 2020 2018 2019 2020 Hedged Gas (PWE) Open Gas (PWE) He
Slide 113: Hedge disclosure: coal and nuclear operations
H E D G E D I S C LO S U R E : C O A L A N D N U C L E A R O P E R AT I O N S Coal & Nuclear Portfolio 1 Texas East 2018 2019 2020 2018 2019 2020 2 Net Coal and Nuclear Capacity (MW) 5,329 5,329 5,329 3,267 3,267 3,267 Forecasted Coal and Nuclear Capacity (MW)3 4,112 3,925 3,954 1,426 1,171 1,027 4
Slide 114: Commodity prices
COMMODITY PRICES Annual Average Forward Prices1 2018 2019 2020 for 2018-2020 NG Henry Hub ($/Mmbtu) $2.83 $2.78 $2.75 $2.79 PRB 8800 ($/ton) $12.58 $12.41 $12.30 $12.43 ERCOT Houston On-peak ($/MWh) $53.22 $45.28 $41.21 $46.57 ERCOT Houston Off-peak ($/MWh) $23.20 $21.90 $21.11 $22.07 PJM West On-pe
Slide 115: Capacity clears: NRG standalone
C A P A C I T Y C L E A R S : N R G S TA N D A LO N E Capacity Revenue by Calendar Year ($ MM) Assumptions: Market 2018 2019 2020 Data as of 2/28/2018 PJM $326 $327 $286 NYISO 2018, 2019 & 2020 Excludes NRG Yield Assets has MWs that will be either Represents merchant wholesale generation NYISO
Slide 116: Capacity clears: NRG standalone (cont'd)
C A P A C I T Y C L E A R S : N R G S TA N D A LO N E (CONT’D) Capacity Performance Base Product Product Planning Average Price Average Price Market Region MWs Cleared MWs Cleared Year ($/MW-Day) ($/MW-Day) PJM ComEd 2017-2018 $145.51 539 $151.50 3,227 2018-2019 $25.36 225 $215.00 3,509 2019-2020 $1
Slide 117: Pro forma asset list: merchant wholesale generation
P RO F O R M A AS S E T L I ST 1: M E R C H A N T W H O L E S A L E G E N E R AT I O N ERCOT PJM NYISO ERCOT (10,159 MW, Net) ComEd (4,336 MW, Net) NYC (1,262 MW, Net) Name Location Capacity Entity Ownership % Name Location Capacity Entity Ownership % Name Location Capacity Entity Ownership % Fisk C
Slide 118: Appendix: Reg. G Schedules
A P P E N D I X : R EG . G S C H E D U L E S A N A L Y S T D A Y 2 0 1 8 | 14
Slide 119: 2018 FCFbG guidance
2018 FCFBG GUIDANCE Appendix Table : 2018 Guidance The following table summarizes the calculation of Free Cash Flow before Growth and provides a reconciliation to Adjusted EBITDA 2018 ($ millions) Guidance Adjusted EBITDA $2,800 - $3,000 Interest payments (785) Income tax (40) Working capital / othe
Slide 120: 2018 Adjusted EBITDA guidance
2018 ADJUSTED EBITDA GUIDANCE Appendix Table : 2018 Adjusted EBITDA Guidance Reconciliation The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income: 2018 Adjusted EBITDA Guidance ($ millions) Low High GAAP Net Income 1 410 610 Income tax 20 20 Interes
Slide 121: 2018 Adjusted EBITDA / FCFbG guidance for asset sales
2018 ADJUSTED EBITDA / FCFBG GUIDANCE FOR ASSET SALES Appendix Table : Adjusted EBITDA and FCFbG Guidance Reconciliation for Asset Sales The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income: Asset Divestitures Divestitures to be ($ millions) Announ
Slide 122: Retail Adjusted EBITDA
R E TA I L A D J U S T E D E B I T D A Appendix Table : Retail Adjusted EBITDA Reconciliation The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income: ($ millions) 2013 2017 2019 2022 Net income/(loss) 383 776 1,018 1,188 Plus: Income tax - (9) - - In
Slide 123: Business Solutions Adjusted EBITDA
B U S I N ESS S O LU T I O N S A D J U ST E D E B I T D A Appendix Table : Business Solutions Adjusted EBITDA Guidance The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income: ($ millions) 2018 Net income/(loss) 28 Plus: Income tax - Interest expense,
Slide 124: Midwest Gen Adjusted EBITDA
MIDWEST GEN ADJUSTED EBITDA Appendix Table : Midwest Gen (MWG) Adjusted EBITDA The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income: ($ millions) 2018 Net income/(loss) 69 Plus: Income tax - Interest expense, net - Depreciation, amortization, Amort
Slide 125: XOOM Adjusted EBITDA
XOOM ADJUSTED EBITDA Appendix Table : XOOM Adjusted EBITDA The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income: ($ millions) 2018 Net income/(loss) 44 Plus: Income tax - Interest expense, net - Depreciation, amortization, Amortization of Contracts
Slide 126: Midwest Gen and Ivanpah pro forma Adjusted EBITDA
MIDWEST GEN AND IVANPAH PRO FORMA ADJUSTED EBITDA ($ millions) Appendix Table : Midwest Gen and Ivanpah Pro Forma Adjusted EBITDA Guidance The following table summarizes the calculation of Adjusted EBITDA providing reconciliation to net income: ($ millions) 2018 Net income/(loss) 63 Plus: Income tax
Slide 127: Reg. G
REG. G EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that NRG’s future r
Slide 128: Reg. G
REG. G Adjusted cash flow from operating activities is a non-GAAP measure NRG provides to show cash from operations with the reclassification of net payments of derivative contracts acquired in business combinations from financing to operating cash flow, as well as the add back of merger, integratio