Slide 1: NRG Energy: Aligned with and Delivering Shareholder Value
NRG Energy: Aligned with and Delivering Shareholder Value June 30, 2010 Denise Wilson, Chief Administrative Officer Nahla Azmy, Senior Vice President, Investor Relations
Slide 2: Safe Harbor Statement
Safe Harbor Statement This 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. Forward-looking statements are subject to certain risks, uncertainties and assumptions and typically can
Slide 3: Agenda
Agenda I. Sector and Company Overview NRG in Supply Chain Industry Fundamentals NRG Board & Management 6-Year Track Record NRG Business & Financial Strategic and Beneficial Execution II. NRG vs. Peer Relative Performance: 2009 Year in Review 2009 NRG Record Performance Results Review and Comparison
Slide 4: I. Company Overview
NRG ) I. Company Overview
Slide 5: Company Overview: NRG in the Supply Chain
Reliant Energy retail(2): Serves nearly 1.6 mm customers Mass Market: 2nd largest in Texas with ~28% market share C&I: largest in Texas with over 35 TWh annual sales I. Company Overview Fuel Supply Fuel Transportation Power Generation Transmission Distribution Retail (Customer) Oil, gas, coal compan
Slide 6: Power Industry: Key Characteristics
I. Power Industry: Key Characteristics Fundamental Truths Strategic Consequences Capital intensive commodity cyclical business/not labor intensive Competitive generators cannot "rationalize staff" their way to success; need to increase margins Balance sheet management and continuous access to capita
Slide 7: NRG Board of Directors & Management: Committed to and Aligned with NRG Stockholders
I. NRG Board of Directors & Management: Committed to and Aligned with NRG Stockholders Composition of NRG Board of Directors A six-year track record of stockholder value creation and returns, before broad market dislocation swamped the energy sector Independence: Most members selected by the credito
Slide 8: Commercial Ops: Spot Price Volatility of Various Traded Commodities
I. Commercial Ops: Spot Price Volatility of Various Traded Commodities Chart represents annualized volatilities of spot price calculated as 60-day standard deviation of log returns of daily spot prices Source: LIM Volatility of power, gas and oil commodities can and must be managed Comparison of Spo
Slide 9: Prudent Risk Management of Commodity Price Exposure
($ In millions) I. Prudent Risk Management of Commodity Price Exposure Time Retail Margin Wholesale Margin Prices Low wholesale prices, high retail margins Now Countercyclical Businesses High wholesale prices, low retail margins Baseload Generation and Retail Hedge Position(1)(2)(5)(7) Baseload Gas
Slide 10: NRG Delivers Six Years of Consistent Financial Performance
2004 2005 2006 2007 2008 2009 Liquidity 1557 758 2227 2715 3364 3794 Cash 1214 570 839 1161 1504 2306 Liquidity 758 2227 2715 3364 I. NRG Delivers Six Years of Consistent Financial Performance (1) See Reg G's for detailed Adjusted EBITDA and Adjusted Recurring Free Cash Flow calculations (2) 2006 li
Slide 11: Past and Future Years of Consistent Balanced Capital Allocation
I. Financial Overview: Past and Future 6 Years of Consistent Balanced Capital Allocation A "balanced" and "value optimized" Capital Allocation Plan that is weighted towards that which provides greatest shareholder return Business Reinvestment $1.5B Debt Paydown $2.4B Share Repurchases $2.4B Repoweri
Slide 12: Equity Debt During his years as CFO, Bob Flexon assumed the position of COO
Equity Debt 1 During his 6 years as CFO, Bob Flexon assumed the position of COO from April 2008 to January 2009, at which time Clint Freeland assumed the position of CFO. Bob left the position of CFO at NRG effective November 2, 2009 to assume the position of President and Chief Executive Officer of
Slide 13: NRG Share Price Performance vs. Power Sector Peers and Indices
I. NRG Share Price Performance vs. Power Sector Peers and Indices Relative Price Performance1 NRG has meaningfully outperformed sector comparables as well as broader markets (SPX) 1) Data includes trading period from 12/2/2003 through 6/1/2010; Regulated average includes SO, AEP, DUK, XEL, PGN; Hybr
Slide 14: II. NRG vs. Peers Relative Performance: 2009 Year in Review
II. NRG vs. Peers Relative Performance: 2009 Year in Review
Slide 15: Record Financial Achievements in 2009
II. Record Financial Achievements in 2009 Record Adjusted EBITDA: $2,618 million Record Adjusted Cash from Operations: $1,862 million Record Adjusted Recurring Free Cash Flow: $1,734 million Record Liquidity: $3,794 million Record Cash: $2,306 million Completed 2009 Capital Allocation Plan Announced
Slide 16: NRG Priorities: Perfecting the Core and Transforming
5. Smart Grid Services 4. Move on cash accretive opportunistic acquisitions well below replacement cost 4. Electric Vehicle Ecosystems 3. Fast start, high efficiency gas-fired capacities in each region 3. Pursue traditional repowering of projects on existing sites in excess of WACC 2. Renewables...
Slide 17: Comparison of Coal-Based IPP Peer Strategies
IPPs: Brownfield/ Repowering DYN MIR RRI Stock Buyback Debt Reduction Cost Reductions Commodity Price Recovery Asset Sales Asset Acquisitions Renewable Development Energy Service Solutions (Eg. EV, Smart Grid/Smart Meter) Fossil Nuclear II. Comparison of Coal-Based IPP Peer Strategies Defensive Stra
Slide 18: NRG vs. Sector Peer and Indices Relative Performance
II. NRG vs. Sector Peer and Indices Relative Performance Mar. 2nd - Announces Retail Acquisition from RRI Apr. 30th - NRG announces Q1 results and close of Retail Acq. 1 month ahead of schedule May. 7th - DOE selects STP 3&4 as 1 of 4 for loan guaranty program Jul 21st -EXC withdraws unsolicited off
Slide 19: NRG Then, Now, and Future: Well Positioned vis-a-vis all Industry Uncertainties
II. NRG Then, Now, and Future: Well Positioned vis-a-vis all Industry Uncertainties A solid foundation to build on for the future Market Perceived "Industry Risks" NRG Position Details Prolonged slump in electricity demand High growth Texas is our core market 1500 people move to Texas every day Expe
Slide 20: III. Pay for Performance
NRG ) III. Pay for Performance
Slide 21: NRG: A Track Record of Financial Success
2004 2005 2006 2007 2008 2009 2010E Adjusted EBITDA (1) 0.912 0.731 1.476 2.24 2.291 2.618 2.2 Stock Price (2) 18.03 23.56 28.01 43.34 23.33 24.95 22.94 Adjusted CFO (1) 0.644 0.068 1.473 1.517 1.436 1.862 1.425 Financial performance focused on strong cash generation accretion, and yield with substa
Slide 22: NRG Share Performance vs. Coal-Based IPP Peers & Utilities GICS Group
Relative Total Shareholder Return (1- year)1 From strategic, financial and share performance, NRG leads other "pure merchant coal generator" space III. NRG Share Performance vs. Coal-Based IPP Peers & Utilities GICS Group Median FY2008 FY2009 YoY Change % Change Salary $1,098 $1,100 $ 2 0.2% Bonus $
Slide 23: CEO Compensation Plan Design
III. CEO Compensation Plan Design Annual Non-Equity Incentives Adj EBITDA 40% 80% of CEO's total incentive opportunity driven by financial performance (60% of target opportunity) Annual Non-Equity Incentives Adj FCF 40% 80% of CEO's total incentive opportunity driven by financial performance (60% of
Slide 24: CEO 2009 Compensation: Competitive, Fair & Results-Oriented
III. CEO 2009 Compensation: Competitive, Fair & Results-Oriented Adj EBITDA = $2,320m 40% $2,618m Adj FCF = $900m 40% $1,252m Safety = 1.28/ Environmental 5% 1.16 Strategic Development/Business Development 7.5% 6.0% Achieved II Magazine Investor Comment: "David Crane maintains a good business strate
Slide 25: NRG Investor Profile
III. NRG Investor Profile The majority of our shareholders are long-time holders and recognize NRG Board and management track record of execution and support future strategy and path for value creation David Crane voted Second Place - Best CEO in Electric Utilities by buy side and sell side in Insti
Slide 26: Financial Community & Industry Awards & Accolades
III. Financial Community & Industry Awards & Accolades S&P 500 Index- Added to the Index on January 28, 2010 Energy Central Magazine- David Crane recognized as EnergyBiz CEO of the year (2010) Institutional Investor Magazine- David Crane Ranked #2 Electric Utility CEO by Buyside Investors and Sell S
Slide 27: Appendix: Reg. G
NRG ) Appendix: Reg. G
Slide 28: Reg. G Appendix: Full Year 2004-2009 Free Cash Flow Reconciliation
Reg. G Appendix: Full Year 2004 - 2009 Free Cash Flow reconciliation The following table summarizes the calculation of free cash flow and provides a reconciliation to cash flow from (used by) operations 2004 2005 2006 2007 2008 2009 Cash Flow from Operations $645 $ 68 $408 $1,517 $1,479 $2,106 Hedge
Slide 29: Reg. G Appendix: Full Year 2004 EBITDA Reconciliation
Reg. G Appendix: Full Year 2004 EBITDA Reconciliation The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/(loss) (dollars in millions) Total Net Income (Loss) 186 Plus: Income Tax 65 Interest Expense 244 Amortization of Finance Costs 9 Amorti
Slide 30: Reg. G Appendix: Full Year 2005 EBITDA Reconciliation
Reg. G Appendix: Full Year 2005 EBITDA Reconciliation The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/(loss) (dollars in millions) Total Net Income (Loss) 84 Plus: Income Tax 47 Interest Expense 174 Amortization of Finance Costs 5 Amortiz
Slide 31: Appendix: 2006 EBITDA Reconciliation
Appendix: 2006 EBITDA Reconciliation The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/(loss) (dollars in millions) Total Net Income (Loss) 621 Plus: Income Tax 322 Interest Expense 560 Amortization of Finance Costs 24 Amortization of Debt
Slide 32: Reg. G Appendix: 2007 Adjusted EBITDA Reconciliation
Reg. G Appendix: 2007 Adjusted EBITDA Reconciliation The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income
Slide 33: Reg. G Appendix: 2008 Adjusted EBITDA Reconciliation
Reg. G Appendix: 2008 Adjusted EBITDA Reconciliation The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income
Slide 34: Reg. G Appendix: 2009 Adjusted EBITDA Reconciliation
Reg. G Appendix: 2009 Adjusted EBITDA Reconciliation The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income
Slide 35: Reg. G Appendix Table: Debt, Leverage and Coverage Ratios
Reg. G Appendix Table: The following table summarizes the calculation of the following: Debt to Adjusted EBITDA, Funds from Operations to Debt, Adjusted EBITDA to Interest and Net Debt to Capital 3.22 3.82 Debt/Adjusted EBITDA 2,618 912 Adjusted EBITDA 8,418 3,484 Gross debt Debt to Adjusted EBITDA
Slide 36: NRG )
a A NRG )