Nrg Energy, Inc. · NYSE:NRG
Nrg Energy — Investor Presentation (June 2006)
29 slides from Nrg Energy's investor presentation, Jun 21, 2006
Slide 1: Repowering America with NRG June 2006
Repowering America with NRG June 2006
Slide 2: Safe Harbor & Legend
Safe Harbor & Legend This investor presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks, uncertainties and assumptions and
Slide 3: Agenda
Agenda Section Presenter Repowering Overview David Crane, President and CEO Financial Overview Robert Flexon, Executive VP and CFO Closing Remarks and Q&A David Crane, President and CEO Appendix
Slide 4: NRG Strategy: Capitalizing on Multiple Growth Opportunities in Multiple Regions
NRG Strategy: Capitalizing on Multiple Growth Opportunities in Multiple Regions Reinvestment through repowering key assets (Today's Announcement) Acquisitions which enhance our existing regional lineups (Texas Genco) Extracting maximum value from existing fleet (FORNRG) Our Customer Focus... Load se
Slide 5: Scope of National Development Program
Scope of National Development Program Approximately $16.0 billion, before non-recourse financing and equity sell down 2007 - 2015 Nearly 10,500 MW (Gross), before retirements and equity sell down Long-term offtake targeted for approximately 70% of total net capacity Total Gross MW Total Estimated Co
Slide 6: Proposed Repowering Development Program
Proposed Repowering Development Program Nearly 10,500 MW (Gross) $16 billion (total investment) 12,200 construction jobs; 1,500 new jobs created $5 billion1 in cost savings over life of baseload plants 30 million tons in Carbon Emissions avoided annually Program Highlights Asset scale and diversity
Slide 7: Flagship Development Projects
Flagship Development Projects STP Expansion in Texas (2,700 MW - ~$5.2 billion) Intense interest from potential long term offtakers Best, most prepared, site in U.S. for nuclear development Based on proven ABWR technology and construction techniques successfully employed in Japan and Taiwan Design a
Slide 8: Proposed Development Philosophy
Proposed Development Philosophy Texas needs alternative to gas. Large advantage in pursuing nuclear in the near- term given benefits from Energy Policy Act California and RGGI states seek to address the carbon issue now Texas and Louisiana need to reduce dependence on gas-fired generation and provid
Slide 9: Net Capacity Now & Post Build Out
Net Capacity Now & Post Build Out Oil Coal Gas Nuclear Wind Post Brownfield 2768 10179 12119 2289 450 Gas 12,209MW 43.8% Coal 10,179MW 36.5% Baseload Intermediate Peaking Post Brownfield 12909 8320 6124 Intermediate 8,411MW 30.2% Baseload 13,366MW 47.9% Northeast South Central Western Texas Other Po
Slide 10: Projected CapEx Spend and Gross MW Added Timeline
Projected CapEx Spend Gross MW Added & CapEx Timeline Comprehensive Repowering Initiative does not impact NRG's near term capital allocation decisions Assumes 100% ownership interest in STP units 3 and 4 and 450MW of wind 2,174 MW 3,149 MW 4,670 MW 6,974 MW 7,726 MW 9,084 MW 10,442 MW 890 MW
Slide 11: Dynamics Driving the Need for Repowerings in all our Markets
All key factors in place to support power plant development and construction in the US, taking into account the lessons learned from the last construction cycle Time to Develop! Fuel Prices: High gas prices, in particular, encourage a fuel mismatch play in gas dominated power markets Reserve Margins
Slide 12: Reserve Margins in NRG Core Regions
* Does not include capacity additions Source: Energy Velocity Database 2006 2007 2008 2009 2010 2011 2012 2011 2012 ERCOT 0.169 0.144 0.11 0.081 0.052 0.03 0.007 0.096632636 0.079506688 CA -0.05 -0.07 -0.09 -0.1 -0.12 -0.13 -0.14 -0.066487111 -0.082351199 ENTERGY 0.56 0.53 0.49 0.45 0.43 0.4 0.38 0.
Slide 13: High gas prices drive the economics of solid-fuel new build
(1) Average monthly Henry Hub spot prices from January 1991 through May 2006 (2) NYMEX futures contract prices for May 2004 through December 2010, as of June 2006 (3) Volatilities quoted are historical monthly volatilities In single price auction systems, high gas prices drive the economics of solid
Slide 14: Solid Fuel Plant Economics in Texas
Fixed O&M of $30/kw-year, 85% capacity factor. Fixed O&M of $80/kw-year, 90% capacity factor. Includes impact of the EPACT production tax credit Carbon tax of $15/ton starting 2008. Emission rate for coal 0.95 tons/MWh. 4. Historical STP fuel costs Commodity Prices in ERCOT Solid Fuel Plant Economic
Slide 15: Potential Offtakers and Offtake Arrangement
Potential Offtakers and Offtake Arrangement TEXAS Energy market only Texas at "flexibility" risk - gas on margin incents baseload, but lack of capacity markets will slow gas builds Offtake arrangements may be more hedge-like and market-backed Offtakers likely to be cities, coops and heavy industry N
Slide 16: NRG Emissions Profile Post Redevelopment
NRG Emissions Profile Post Redevelopment It is all about carbon CO2 emissions dramatically decrease on per Mwh basis Note: includes impact of 2,700MW of nuclear, 2,250MW of IGCC, 1,800MW of coal, 3,100MW of gas and 1,000MW of wind. All MW are before any potential equity sell down. 1 Assumes full imp
Slide 17: NRG's Carbon Pentagon - Five Point Strategy
NRG's Carbon "PENTAGON" - Five Point Strategy Baseload Alternatives Carbon Hedge Increased Credibility Increased Credibility Carbon Hedge A program to address carbon's impact on all phases of NRG's business Policy Outreach Responsible Planning Phased, Certain Equal Treatment Carbon R&D "Test Bed" Se
Slide 18: Repowering Benefits: NRG Strengths and Repowering Advantage
An effectively implemented repowering program will enable NRG to leverage off its strengths while addressing the aging of our existing fleet Repowering Benefits NRG Size and diversity of fleet Substantial free cash flow Site locational advantage Repowering over greenfield Enhanced High quality, low
Slide 19: Recent Developments
Recent Developments Off to a good start but there is still much work to do before "we put metal in the ground" Agreed on bridge contract with Southern Mississippi Electric Power Association for 75 MW for 4.5 years Filed Letter of Intent with Nuclear Regulatory Commission on June 19 for STP Units 3 a
Slide 20: Financial Overview
Financial Overview
Slide 21: Growth Initiatives - Investment Requirements
Growth Initiatives - Investment Requirements Investment and Return Criteria: Signed PPA's and/or hedges for > 70% of capacity Tailored approach - type and duration of hedges differ by project Unlevered returns > cost of capital Baseload project payback of 8 -10 years Consolidated net debt/capital ma
Slide 22: Structure to Mitigate Risk
Structure to Mitigate Risk PPA/OFFTAKE NRG CO- OWNERS THIRD PARTY INVESTORS LENDERS RISK MITIGATED: INVESTMENT Power Purchaser (LSEs and other credit worthy entities) RISK MITIGATED: INVESTMENT Equity Investment 25-40% PROJECT COMPANY Turnkey Construction OEMs / A & E EPC FSA Fuel Supply & Transport
Slide 23: Project Financing Approach
Project Financing Approach Turnkey, fixed price EPC contracts Long term PPAs with creditworthy entities Medium term power hedges/swaps with financial institutions Fuel supply and/or hedges to match PPA term Package projects of similar technology (IGCCs, wind, etc.) into financing packages at commerc
Slide 24: Financing Growth
Financing Growth NRG will continue to apply rigorous financial criteria to development opportunities: Seek co-owners and third party investments from equity investors, offtakers or equipment suppliers whose participation is critical to the success of the project Project financing will be applied to
Slide 25: Closing Remarks and Q&A
Closing Remarks and Q&A
Slide 26: Conclusion: Strategic Principles
Conclusion: Strategic Principles Right technology for the right business environment Not a "one size fits all" 70% on average - but different by project Type of contract cover available specific to region "Efficient frontier" concept Extent of contract coverage inversely proportional to required ret
Slide 27: Appendix
NRG) Appendix
Slide 28: Summary of Repowering Projects
Summary of Repowering Projects
Slide 29: Technology Overview
Technology Overview BRIEF INTRODUCTION TO GENERATION BRIEF INTRODUCTION TO GENERATION BRIEF INTRODUCTION TO GENERATION Technology Fuel Description Conventional Coal pulverized coal (Super and Sub Critical) Coal Burn coal in a boiler - combustion heats water which drives steam turbine Retrofit techno