Transcript Slide 1

NRG Energy: Past, Present and Future
David Crane, President and Chief Executive Officer
Robert Flexon, EVP and Chief Financial Officer
Deutsche Bank Global
High-Yield Conference
October 6, 2004
Scottsdale, AZ
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 typically can be identified by the use of words
such as “expect,” “estimate,” “anticipate,” “forecast,” “plan,” “believe” and similar terms. Such forwardlooking statements include, but are not limited to, expected earnings, future growth and financial
performance, the sufficiency in the disputed claims reserve, the successful closing of announced
transactions, the successful closing of the coal transportation agreement, the successful implementation of
our acquisition and repowering strategy, the outcome of hearings on our RMR agreements and cost tracker
for scheduled expenses. Although NRG believes that its expectations are reasonable, it can give no assurance
that these expectations will prove to have been correct, and actual results may vary materially. Factors that
could cause actual results to differ materially from those contemplated above include, among others, general
economic conditions, hazards customary in the power industry, competition in wholesale power markets, the
volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale
power markets and related government regulation, the condition of capital markets generally, our ability to
access capital markets, unanticipated outages at generation facilities, our ability to convert facilities to
western coal, our substantial indebtedness and the possibility that we may incur additional indebtedness,
adverse results in current and future litigation, delays in or failure to meet closing conditions in announced
transactions, failure to identify or successfully implement acquisitions and repowerings, the amount of
proceeds from asset sales and adverse rulings on our RMR agreements and cost tracker for scheduled
expenses, resulting in us refunding certain payments received to date.
NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. The adjusted EBITDA guidance is an estimate as of August 5,
2004 and is based on assumptions believed to be reasonable as of that date. NRG disclaims any current
intention to update such guidance from August 5, 2004. The foregoing review of factors that could cause
NRG’s actual results to differ materially from those contemplated in the forward-looking statements included
in this Investor Presentation should be considered in connection with information regarding risks and
uncertainties that may affect NRG's future results included in NRG's filings with the Securities and Exchange
Commission at www.sec.gov.
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Agenda
 NRG in the Past
 NRG in the Present
 NRG in the Future
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NRG – A Merchant Generator
We are a nonutility electric generation company
providing value through competitive markets.
4
NRG History
New NRG
Old NRG
Xcel subsidiary, NRG
completes series of
domestic and international
acquisitions leading to
partial IPO in June 2000.
1991-2001
Xcel Energy
completes tender
offer to acquire
NRG’s
outstanding stock
2002
Confidence in
energy industry
falters post-Enron.
Energy prices fall.
NRG
emerges
from
Chapter 11
2003




Overpaid for acquisitions
Overleveraged balance sheet
Overextended via turbine orders
Over hyped market prospects
2004 Year to Date
$2.7 bn
Exit
Financing
Unable to serve debt
accumulated through
acquisitions, NRG
files under Chapter
11.
The “old” NRG committed the same blunders as the
rest of the wholesale power industry:
Relisted
on NYSE
With Kendall,
Total Asset
Sales: $1 bn+
New
CFO
’04 Adj.
EBITDA
Guidance
$850 mn
Emergence from Chapter 11 marks
the birth of the “new” NRG, a
very different company:




New balance sheet
New strategy
New management
No legacy issues
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New NRG – New Strategy
Leverage off the strength of the asset base
Northeast
West
Coal
Oil
2,407
MW
2,350 MW
30%
30%
Gas
Dual Fuel
693 MW 628 MW
56%
44%
South Central
Gas
980 MW
40%
Coal
1,489 MW
60%
Gas
842 MW
11%
Dual Fuel
2,284 MW
29%
Regional
concentrations
with fuel and
dispatch-level
diversity
Our Competitive Advantages
Sizeable asset base in the right markets
Long-term contracts / relationships with retail cooperatives in South Central
Locational advantage
* Other North America
Healthy balance sheet
includes 2,934 MW outside of
core regions
Flexibility to act in best interest of stakeholders
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The New NRG
New Management
No Legacy Issues
 New CEO and CFO
 California settled
 Best practices approach to
 CL&P contract expired
Corporate Governance
– Non-executive
Chairman
– Board of Directors are
independent*
– All Directors selected by
NRG Creditors
Committee
 McClain sold
 Turbine purchase
obligations resolved
*Excluding CEO
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New NRG – Post-emergence focus
 Objectives met
– Noncore assets continue
to be sold
– Strong liquidity
maintained
– Restructured corporate
organization
– 2004 financial guidance
provided
– Conversion of New York
coal-fired plants to PRB
and initial steps in
Delaware
 Focus remains
– Building regional
businesses with customer
focus
– Increasing operational
efficiencies in maintenance
and fuel procurement
– Solving for California
– Allocating capital among
shareholders, debt service
and growth
– Strengthening trading and
marketing platform
New NRG: Significant progress since
bankruptcy, but plenty of work still remains
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New NRG - Early Returns are Good
While we plan and organize for the future,
the Company has stayed focused on
delivering the present:
$ millions
Q2
YTD
Operating revenues
574
1,174
Gross margin
349
683
83
113
EBITDA
282
529
Adjusted EBITDA*
233
489
37
355
Net income
Free Cash Flow
*Full-year guidance for 2004 Adjusted EBITDA is $850 million
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Enterprise Value
How we look at equity value:
As of 6/30/04
$ in millions
Consolidated Debt
Total
$
4,037
Nonsupported
$
1
1,003
Supported
$
3,034
Unrestricted Cash
821
31
790
Restricted Cash
152
63
89
973
94
879
Total Cash
Net Debt
$
3,064
Equity Value
$
2,700
Enterprise Value
$
5,764
Forecasted Adjusted EBITDA
$
850
1) Includes expected asset sales
$
909
$
2,155
-
$
2,700
$
909
$
4,855
$
100
$
750
TEV / FY Adjusted EBITDA
6.47x
Net Debt / FY Adj. EBITDA
2.87x
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New NRG – Balance Sheet Management
Portfolio Management
Strengthening the Balance Sheet
A 2004 Priority
Targeted Unproductive Capital
Invested Capital
$7,000
$4,000
Net Debt
$6,000
$3,000
$5,000
$4,000
$2,000
$3,000
$2,000
$1,000
$1,000
$0
$0
12/03A
12/04E
Debt
EBITDA1
Leverage
Ratio
McClain
$156.5m
$10m
15.65x
Batesville
$289.1m
$39m
7.41x
Kendall
$447.4m
$43m
10.40x
Subtotal
$893.0m
$92m
9.71x
Other
$ 94.2m
N/A2
N/A
Asset Sale
1Full-year
2004 estimate
2Break-even
at time of sale
12/03A
12/04E
 Asset sales announced year-to-date
also generated close to $150mn of cash
proceeds
 Total liquidity now exceeds $1.6 billion
 Corporate maturities due over the next
five years are less than $50 million in
aggregate
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9/24/2004
9/10/2004
8/27/2004
8/13/2004
7/30/2004
7/16/2004
7/2/2004
6/18/2004
6/4/2004
5/21/2004
5/7/2004
4/23/2004
4/9/2004
3/26/2004
3/12/2004
2/27/2004
60.00%
2/13/2004
1/30/2004
1/16/2004
1/2/2004
NRG Performance
NRG versus Peer Group
160.00%
140.00%
120.00%
100.00%
80.00%
NRG %
DYN %
RRI %
AES %
CPN %
40.00%
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NRG Performance
Secondary Market Performance: NRG versus Peer Group
118.000
116.000
114.000
112.000
110.000
104.000
102.000
100.000
98.000
96.000
94.000
92.000
90.000
NRG 8% due '13 ($1,725MM)
88.000
86.000
Reliant Res. 9.5% due '13 ($550MM)
84.000
82.000
Calpine 8.75% due '13 ($900MM)
80.000
78.000
Dynegy 10.125% due '13 ($900MM)
AES 8.75% due '13 ($1,200MM)
CSFB High Yield Index
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04
(Price, % of Par)
108.000
106.000
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NRG: Working Towards a
Super-Regional Business Model
We are transitioning NRG from a loose collection of power plants into
three coherent regional businesses, each focused on developing as a
foundation to their businesses, commercial relationships with the inmarket retail load providers
Region
Northeast
South Central
West
Total MWs
180,000
50,000
60,000
Our MWs
7,884
2,469
1,321 (2,692 gross)
Market Share
4%
5%
2% (4% gross)
Principal Strength Base load coal
Base load coal /
long term contracts
Locational advantage
Principal
Vulnerability
Shortfall of our
generation relative
to load we serve
Lack of capacity
market
Reduction in
transmission
constraints
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NRG Strategy – Beyond Back to Basics
Extracting maximum
value from existing
fleet
West
Coast
Northeast
Reinvestment in
repowering of key
assets
South
Central
Selective acquisitions to fill out
regional lineups
Our Objective: to be a multi-regional, multi-fuel, scale generator with
assets across the merit order in each of our core regional businesses
and with the capability to procure, transport and trade all of the
commodities involved in our business.
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Supplemental information
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Adjusted EBITDA Reconciliation
NRG ENERGY, INC. AND SUBSIDIARIES
Reconciliation of NonGAAP Financial Measures
Adjusted EBITDA Reconciliation
Reorganized NRG
Predessor NRG
Reorganized NRG
YTD
(Dollars in thousands, except per share amounts)
6/30/04
6/30/03
3/31/04
6/30/04
Net Income / (Loss)
$83,024
($608,401)
$30,235
$113,259
36,322
4,305
14,280
50,602
60,210
88,168
71,989
132,199
53,168
63,768
55,006
108,174
30,638
-
30,968
61,606
Amortization of power contracts
8,614
-
16,965
25,579
Amortization of emission credits
3,648
-
6,270
9,918
Plus:
Income Tax Expense
Interest expense, excluding amortization of
debt issuance costs and debt discount/
(premium) noted below
Depreciation and amortization
WCP CDWR contract amortization (included in
equity in earnings of unconsolidated affiliates)
Amortization of debt issuance costs
and debt discount/(premium)
EBITDA
6,015
3,919
21,157
27,172
$281,639
($448,241)
$246,870
$528,509
(2,257)
97,285
865
(1,392)
Plus:
(Income) Loss from Discontinued Operations,
net of Income taxes
(Gain) Loss from Discontinued Operations
(11,898)
2,066
-
(11,898)
Corporate relocation charges
5,645
-
1,116
6,761
Reorganization items
(2,661)
6,334
6,250
3,589
Restructuring and impairment charges
1,676
269,631
-
1,676
-
(38,357)
FERC-authorized settlement with Connecticut Light
and Power
(38,357)
-
Write downs and (gains)/losses on sales of equity
method investments
Adjusted EBITDA
(1,205)
132,436
1,738
533
$232,582
$59,511
$256,839
$489,421
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2004 EBITDA and FCF Outlook
$ in millions
Reported
Adjustment
Outlook
EBITDA
Adjusted
Outlook
837
13
850
(278)
15
(263)
Income Tax
(36)
--
(36)
Other Cash Used by Operations
(50)
--
(50)
473
28
501
Working Capital Changes
(60)
--
(60)
Xcel Settlement, net
100
(100)
--
513
(72)
441
145
(145)
--
(130)
--
(130)
(7)
--
(7)
521
(217)
304
Interest Payments
FFO
CFO
Asset Divestitures
CapEx
Other Cash used by Investing
FCF
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GAAP Reconciliation (cont.)
EBITDA, Adjusted EBITDA and adjusted net income 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 and adjusted net income should not be construed as an
inference that NRG’s future results will be unaffected by unusual or nonrecurring items.
EBITDA represents net income before interest, taxes, depreciation and amortization. EBITDA is presented because
NRG considers it an important supplemental measure of its performance and believe debt-holders frequently use
EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool,
and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under
GAAP. Some of these limitations are:
• EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual
commitments;
• EBITDA does not reflect changes in, or cash requirements for, working capital needs;
• EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service
interest or principal payments, on debts;
• Although depreciation and amortization are noncash charges, the assets being depreciated and amortized will
often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such
replacements; and
• Other companies in this industry may calculate EBITDA differently than NRG does, limiting its usefulness as a
comparative measure.
Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use
to invest in the growth of NRG’s business. NRG compensates for these limitations by relying primarily on our GAAP
results and using EBITDA and Adjusted EBITDA only supplementally. See the statements of cash flow included in
the financial statements that are a part of this press release.
Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA
represents EBITDA adjusted for reorganization, restructuring, impairment and corporate relocation charges,
discontinued operations, and write downs and losses on the sales of equity method investments; factors which we
do not consider indicative of future operating performance. The reader is encouraged to evaluate each adjustment
and the reasons NRG considers it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is
subject to all of the limitations applicable to EBITDA. In addition, in evaluating Adjusted EBITDA, the reader should
be aware that in the future NRG may incur expenses similar to the adjustments in this presentation.
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