Nrg Energy, Inc. · NYSE:NRG
Nrg Energy — Merrill Lynch Global Power & Gas Leaders Conference 2006
24 slides from Nrg Energy's conference presentation, Sep 26, 2006
Slide 1: Capitalizing on Powerful Trends in Power: Texas and Beyond
Capitalizing on Powerful Trends in Power: Texas and Beyond Merrill Lynch, Global Power & Gas Leaders Conference New York, New York September 26, 2006
Slide 2: Safe Harbor Statement
Safe Harbor Statement 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. Forward-looking statements are subject to certain risks, uncertainties and assumptions and typi
Slide 3: Agenda
Agenda Industry Trend Highlights Review of Trends NRG vis-a-vis Trends Q&A
Slide 4: Notable Trends & Developments: 2006
Notable Trends & Developments: 2006 Industry Consolidation: Takes a Turn Credit Ratings: Capital Optimizing at Junk Locational Capacity Markets: When, Not If Reserve Margins: Ever Tighter NRG and TXU new builds: Avoiding the Sins of the Past Long term Off-Take: The Return of the PPA Summer Gas: No L
Slide 5: 1: Power Industry Consolidation in the Post Exelon/PSEG World
Trend 1: Power Industry Consolidation in the Post Exelon/PSEG World worse same better never Acquirer Target IOU Deregulated Genco Regulated T & D - - Non-regulated Sub-investment grade Growth - - Regulated Investment grade Yield Disaggregation of hybrid utilities to capture full generation value bec
Slide 6: 2: Merchant Generation Credit Ratings
Trend 2: Merchant Generation Credit Ratings "Double B" credit metrics results in most efficient WACC, but leaves open the question of credit support for commercial operations Investment grade credit rating is neither possible nor preferable for a merchant generation company [This is not a new trend]
Slide 7: rex
101% 100% 9x rex 1% 7 am 19% 1% 2006 2007 2008 2009 2010 20m 2
Slide 8: Sep-05 Dec-05 Mar-O6 Jun-06 Sep-06
300 250 200 160 2 2 = 2 100 60 Sep-05 Dec-05 Mar-O6 Jun-06 Sep-06 [SS Marginable Hedges aa Potentially Marginable Hedges tama Non Marginable Hedges—— Total Hedger (nclading Ral- Om) — Margin
Slide 9: 25.0% | ] | F I I vos 9405 2.06
75.0% 25.0% | ] | F I I 603 vos 9405 106 2.06
Slide 10: Maintaining commitment to BB metrics
Having maintained our commitment to BB metrics throughout, our second lien structure implemented in 2006 has dramatically reduced the cash intensivity of NRG’s commercial operations activities
Slide 11: 3: Locational Capacity Markets: When, Not If
Trend 3: Locational Capacity Markets: When, Not If New York Established NEPOOL Implementation PJM Awaiting Approval NEPOOL and PJM capacity markets trending towards more appropriate returns on existing asset values while incenting future repowering May 12, FERC approved the New England locational fo
Slide 12: 4: Reserve Margins Tightening; Market Heat Rates Rising
Trend 4: Reserve Margins Tightening; Market Heat Rates Rising Realized Heat Rate 1.5 point spread ERCOT - does not include mothball capacity expected to return to service ERCOT PJM West New Record Energy Demand Significant market tightness has resulted in gas on the margin with increased frequency a
Slide 13: 7: Domestic Natural Gas
Trend 7: Domestic Natural Gas Natural Gas Weekly Injection/Withdrawals US Lower 48 States First ever summer withdrawals No matter what the price of gas, when it comes to meeting incremental increases in power demand, it is the only game in town Source: Energy Information Administration
Slide 14: 5: NRG and TXU New Build Program
Trend 5: NRG and TXU New Build Program Please Attend/Listen To the Analyst Conference
Slide 15: 6: Long Term Offtake: Return of the PPA
Trend 6: Long Term Offtake: Return of the PPA Region Schedule of RFPs MW Amount Requested Term Of Contract Bid Due Date Award Date NRG Bid Response Northeast: Delaware Q4-06 TBD 10-25 yrs Q4 2006 Q1 2007 Indian River New York Q3-06 600 MW 10-20 yrs Q4 2006 Q4 2006 Huntley Connecticut Q3-06 600+ MW 1
Slide 16: 8: Back-End Compliance Costs: The Bubble Rises
Trend 8: Back-End Compliance Costs: The Bubble Rises Suppliers of back-end controls, with a full backlog, are seeking a premium for 2010 installation (see above); focus for NRG is on retro-fitting post the 2010 peak AEP: "Prices ... tell us that it is better to wait for the bow wave of people to get
Slide 17: 9: Carbon and the Power Industry
A program to reduce portfolio's carbon intensity and address carbon's impact on all phases of NRG's business Baseload Alternatives Carbon Hedge Increased Credibility Increased Credibility Carbon Hedge Policy Outreach Responsible Planning Phased, Certain Equal Treatment Carbon R&D "Test Bed" Sequestr
Slide 18: 10: Shareholder Activism
Trend 10: Shareholder Activism ....Touches the Competitive Power Generation Sector Non-Core Asset Sales removed debt of $1.4bn and provided cash of over $670mm NRG Shares Outstanding Sources: (1) MSCI Barra (2) Advantage Data Derailed certain merger proposals But has not acted as a catalyst to indus
Slide 19: 2006 Trends - Summary Impact to NRG
2006 Trends - Summary Impact to NRG 6. NRG/TXU new builds ? More attractive as target, more opportunities as partner Reduction in cash collateralization allows more efficient use of capital Direct and immediate positive financial impact across Northeast ISOs Direct impact on market clearing heat rat
Slide 20: NRG: Proven Ability to Execute Effectively on Multiple Fronts
NRG Execution NRG: Proven Ability to Execute Effectively on Multiple Fronts Simultaneously Doubled our domestic baseload generation capability through the acquisition of NRG Texas Increased our annual estimated economic EBITDA and FCF by more than double Recapitalized our balance sheet entirely Init
Slide 21: Questions and Answers
NRG ) Questions and Answers
Slide 22: Appendix: Reconciliations
a A NRG ) Appendix: Reconciliations
Slide 23: Reg. G Reconciliation: Net Debt to Total Capital
Reg. G Reconciliation Appendix Table A-1: Net Debt to Total Capital Reconciliation Appendix Table A-1: Net Debt to Total Capital Reconciliation Appendix Table A-1: Net Debt to Total Capital Reconciliation Appendix Table A-1: Net Debt to Total Capital Reconciliation 30-June-06 30-June-06 Numerator Gr
Slide 24: Reg. G Reconciliation: EBITDA and Adjusted EBITDA
Reg. G Reconciliation EBITDA and Adjusted EBITDA are nonGAAP 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
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