Welcome to the NRG Energy First Quarter 2009 Earnings Conference Call. (Operator Instructions). It is now my pleasure to introduce your host Nahla Azmy, Vice President of Investor Relations for NRG Energy.

Good morning and welcome to our first quarter 2009 earnings call. This call is being broadcast live over the phone and from our website, at www.nrgenergy.com. You can access the call presentation and press release furnished with the SEC through a link on the Investor Relations page of our website. A replay and podcast of the call will be posted on our website. This call, including the formal presentation and question-and-answer session, will be limited to one hour. In the interest of time we ask that you please limit yourself to one question with just one follow-up. During the course of this morning's presentation, management will reiterate forward-looking statements made in today's press release regarding future events and financial performance. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important risk factors contained in our press release and other filings with the SEC that could cause actual results to differ materially from those in the forward-looking statements, in the press release and this conference call. In addition, please note that the date of this conference call is April 30, 2009, and any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of future events, except as required by law. During this morning's call, we will refer to both GAAP and non-GAAP financial measures of the company's operating and financial results. For complete information regarding our non-GAAP financial information and the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's press release and this presentation. With that, I'd like to turn the call over to David Crane, NRG's President and Chief Executive Officer.

Today, I am joined here by John Ragan, our Chief Operating Officer; and Bob Flexon, our Chief Financial Officer. Both will be giving part of today's presentation, and also by Mauricio Gutierrez, who runs our commercial operations and will be available. He may or may not answer your questions depending on their level of commercial sensitivity. I'm going to be referring to the slide deck with slide five by providing a summary of what I consider to be the highlights for the quarter and to put in the context of the philosophy of our business. As those of you who have followed NRG for the past five years are well aware, our business model, and of course, the way we manage the business always has been based on the fundamental facts that the competitive power generation business is a long lead time, capital intensive, highly cyclical commodity-driven business. Operating in an industry with these basic characteristics, a well positioned company like NRG normally is aiming to tread water during the down cycles in order that it may surf the up cycles. In a sense, that's what we are doing in this mother of all down cycles and that we are treading water in a sense that we are posting healthy financial results off a strong operating performance. My sense is that due to the very severity of this down cycle combined with our particularly robust liquidity and forward hedge position, we are doing much more than just treading water through the down cycle. By being nimble and proactive, we are putting ourselves in a position to thrive during the downturn so that we can thrive even more during the upswing, which inevitably will follow. In the first quarter we began to do just that. We demonstrated that the key to…

NRG has continued its strong operating and commercial performance during the first quarter of 2009. Slide seven highlights a few of these accomplishments. First, NRG continued to have a strong safety performance during the quarter. The company posted an OSHA recordable rate of 1.47, which exceeds the top quartile benchmark for the industry. We had 27 facilities experience no recordable safety incidents. Some of the activities that we focused on during the quarter to reinforce safe work practices have included a national safety stand down with all of our operational employees and rolling out a new contractor safety work policy to strengthen our expectations with contractors, as we increase the amount of construction that will continue to occur on our sites over the next few years. I will cover plant and commercial operations in more detail on the next few slides. As you can see, our coal and nuclear operations performed very well during the quarter with outstanding availability and improved outage rates, all within the context of a more challenging operating environment for the baseload coal suite. Nuclear operations at STP continue to trend to flawless operations, achieving 100% operational availability during the quarter. Our engineering, procurement and construction group moved forward with many projects during Q1. Since the completion of Huntley 67 and 68 baghouse projects in December and January, we have had outstanding operational performance from these two units with availability exceeding 96% after these major outages were completed. This type of performance coming out of a major maintenance and construction outage is a true testament to the outstanding integration between our construction and plant operations groups, as these transitions can sometimes be a stumbling point from achieving solid execution in the completion phase of large complex projects. Although not highlighted on the slide, Dunkirk 3 and…

While the current declines in the power prices and commodity markets and overall power demand that John just referred to have all combined to create very difficult and challenging times for the power generators, as David mentioned in his opening comments, it's the business environment such as today's that our business model has been designed for in order to protect shareholder value along with other company stakeholders. Three key principles serving us well that have not changed since NRG's early days includes actively managing the portfolio to generate consistent free cash flow, maintaining ample and diverse liquidity sources to support commercial hedging and capital allocation and prudent balance sheet management. With the backdrop of these lower prices in demand, the first quarter results as highlighted on slide 12 clearly benefited from our hedge position, much like we expect the near to medium term will. In fact, our first quarter 10-Q disclosure will show that as of March 31, 2009, the fair value of all of our commercial hedges were nearly $1.6 billion in the money to NRG. In regards to the prudent balance sheet management when the Repowering growth program was launched back in 2006, we set a goal of protecting the corporate balance sheet as we pursued opportunities. Consistent with this goal, we added $500 million of credit capacity for long lead time materials and equipment for NINA, and just the other day we completed the $534 million GenConn financing to provide our equity contribution and construction funds. Add to that $58.5 million in tax exempt financing at an interest rate of 45 basis points with maturity not until 2042. Turning to the financial results on slide 13, adjusted EBITDA for the first quarter of 2009 was $477 million, a 9% reduction from the first quarter 2008 results of…

Moving on as we look forward, if any of you were to look up our core values on our website; safety, teamwork, respect, integrity, value creation and exemplary leadership; you will see that they spell out the acronym STRIVE. Last year at our Annual Internal Management Meeting we focused on bringing those values to bear on capturing the extraordinary value and growth opportunities that were emerging in our industry as a result of the twin overriding societal dynamics of our age, fostering sustainability and combating climate change. This led to our "Strive to Thrive" model which captures our intent to drive into renewables and other alternative energy solutions, and as the title suggests, solutions conceived for this century not for the last. Since that time, the horizon of opportunity in our sector has expanded immensely as the extraordinary growth opportunity in alternative energy has been enhanced by the arrival of the new administration in Washington, which is totally in sync with these twin societal goals, and furthermore, has armed itself through the stimulus with extraordinary capacity to invest in furtherance of its sustainability and climate change objectives. Even beyond alternative energy, the financial crisis has separated those like NRG who are in a strong liquidity and hedge position from those who are not, and has transformed the power generation business from a raging seller's market to the most significant buyer's market that I've seen in my 20 years in this industry. We are seeing attractive growth opportunities in alternative energy, in our fossil fuel-based generation business, and in assets and businesses closely related to our core generation business, both upstream and downstream. We are pursuing opportunities in all three areas and already have had significant success as demonstrated by the Reliant acquisition. In respect to that acquisition, we are following…

(Operator Instructions). Our first question today is coming from the line of Lasan Johong, RBC Capital Markets.

If you take a look at page nine of your presentation, it looks like you are taking a little bit of a bet on that for gas prices, at least in 2012 anyway. I'm not objecting to that, I think that's probably not a bad move. If you take that to the logical conclusion, one could suggest that at the bottom of the natural gas pricing formula you might want to monetize some of that $1.6 billion of in the money hedges, and then do a double benefit to shareholders by selling out that hedge and using to pay down debt potentially, and then riding the upside back again on the gas prices. Is this a strategy that you would consider doing?

Lasan, it's a strategy that we would consider doing, I guess I would say on the margin. It's a core part of our overall business model to be pretty heavily hedged with our baseload and we like the level of hedges that we have. You are right. We see the dynamic that you are talking about, and we never say never if you're talking about taking off hedges, and then ride it back up. That's something Mauricio and his team consider every day and he is looking at me in a very grouchy fashion. So I will just leave it at that.

How concerned are you about the Texas wind situation, since it's starting to have an impact on your numbers?

Obviously, for this year you mentioned that over the next couple of years the baseload is pretty well hedged out. So it shouldn't have really much effect on us over the next couple of years, and I guess the wind investment will start slowing down a little bit. So I think as we go forward, the main thing that's really going to drive us is gas prices in Texas. That's really is going to be the thing that moves the needle for us. The discussion we just had with the decline in rig count and what we think will be a falloff in production as well as a recovery of higher gas usage, we would think that prices get strong recovery and that around our baseload is what really drives the needle for us.

What Bob is saying and your question is, certainly our theme is renewables are a fact of life. They've been a fact of life in Texas for the last couple of years and I think that's going to spread into all of the markets in the United States. Our approach more generally rather than just be concerned and wring our hands over the renewable penetration, first we want to be a leader in renewables as we start to do. We also are looking at, of course, our gas plants from a firming perspective and making sure that market structures in the markets are properly structured, so that the fossil fuel generation that stands behind renewables is properly compensated. We have a multipart strategy, but I just want to emphasize that we recognize that that is going to be a much bigger part of the mix in all of the markets going forward than it's been in the past. The fact that Texas is first gives us a chance to work out what the optimal portfolio is going forward.

Our next question will be coming from the line of Anthony Crowdell of Jefferies & Company.

Just want to go over my understanding of the Annual Shareholder Meeting. I believe the one in 2008 was held like May 13. Is it a requirement that the shareholder meeting be held within 13 months of the previous one?

The NRG Board hasn't decided when this year's [shareholders] will be, but it will decide in the next few weeks. I think what the Board is trying to decide is balance between having it as soon as it can obviously, but also having it at a time when the shareholders are as fully informed as is realistically possible with information that's relative to the important decisions that have to be made. As to what exactly is required under Delaware law, my understanding is that the way that the law reads is that if a company does not have an annual shareholder meeting within 13 months, then a shareholder or a director can petition the Delaware court to set a date. There is no affirmative obligation on the board to have it within that time period off the top. You would have to check that with a Delaware lawyer, but that's my understanding.

Our next question will be coming from the line of Amit Thakar of Deutsche Bank.

I had a quick question on some of the credit development. Obviously, we have a little bit more visibility on who is going to be building the projects when the PCC announces at the end of March. I guess we have been hearing anecdotally that some of the priority is going to be given to some of the projects that are going to move load from the West zone to the South zone first, and given some of the initial coal plants that are planned for the South zone and some of the wind in Kennedy County and other coastal regions within the South zone. Have you guys been seeing forwards where we will see the South zone heat rates falling relative to the West zone, and has there been any kind of follow-through in the Eastern zone, which obviously impacts you guys more?

This quarter, as you know, the POCT announced the selection of the transmission service providers. What we are hearing is the transmission providers that were not selected are appealing the POCT orders. So, I think that's going to slow down probably the process. Also, the POCT laid out a more detailed timeline for the completion of these first projects a very aggressive timeline through 2013. The developments on what happens with these transmission providers were not selected. I think they're going to slow down the process. Now, with respect to wind penetration, we are seeing more megawatts in the South (inaudible) and Gulf wind farms along the West and the North zone. There is more wind going into all the regions in Texas. This is primarily affecting some of the hours in the off-peak, but definitely not affecting on-peak heat rates in the Houston zone or displacing gas. Keep in mind that most of the weak prices that we have seen in this first quarter in Texas and across the Eastern Interconnect have been driven primarily by the lower demand quarter-on-quarter, which have been around 3.5 to 5% on a weather normalized basis. So if I have to put an order of what is affecting heat rates, I would say first demand and then wind probably in Texas on some of the off-peak hours.

Our next question will be coming from the line of Neel Mitra of Simmons & Company.

I wanted to understand the earnings profile from South Central, the change between 2008 and 2009. First, you stated that earnings were adversely affected from the lower market prices. I just wanted to know how much of the load is either un-contracted or the pricing on the contract moved with current power prices. Second, from what I understand some of your load contracts began to roll-off in March. I wanted your thoughts on setting new contracts in this low gas price environment.

In terms of the results, the main thing on South Central is nothing has changed in the contracts this year. It's just that you have length in the off-peak periods. With merchant prices coming down and you sell that power into the merchant market, so that had an impact in terms of the pricing. The other part of that is the capacity factor year-over-year was down. So that, again, takes megawatts you typically can sell into the merchant market during the periods where you have length. You have less to sell and what you're selling had a lower price. So that was the real driver in terms of what was happening. You also had some power supply that we have in MISO that we bring, and then there was a transmission outage, so we lost a little bit on that as well. So that's really what drove it. Again, we're comparing against the first quarter last year where the South Central organization everything broke the right way and the output from the plant was at record levels and the pricing was strong. So, that's really the main difference when you look at the 2009 results.

On the Texas gas plants, I know historically you've guided between $100 million to $250 million with EBITDA. I was just wondering how this year would compare to that with the weak spark spread environment, but also with an offset from Cedar Bayou coming on in June.

I was just looking at that this morning and a good portion of our output for this year is hedged. When we take a look at where the gross margin on the gas plant in Texas will come in, we're still in the $100 million to $150 million range for this year all-in with Cedar Bayou.

Our next question is from the line of Leslie Rich, Columbia Management.

I wondered if you could walk through the working capital change year-over-year again. Again, you mentioned part of the reason was higher coal inventories. But what were some of the other components?

If you go to slide 14, you see the big inflow on the collateral and the big outflow on the working capital. You have to look at those two numbers net. What's creating a lot of noise in the working capital is last year we had those natural gas option trades. We had options and we had some swaps. Basically what happened is that on the collateral side, you have the big source coming in from the swaps where they were out of the money, and then when they settled this year, you had the decrease in the asset. We had kind of an asset of margin paid at the beginning of the year where we had posted collateral. When that position closed out this year that asset goes away. So, that's actually the source you're seeing showing up there. On the other side of it we had options where we had premiums that we had collected. So we were holding money at the end of the year that when the option position settled in the first quarter, we actually got to keep that money. So you actually had something that when you're holding the money, since it's someone else's at that time, it's a liability. When it gets settled, you get the decrease in the liability which is the used which is the big negative that you see there. So that's what is happening in those two line items. You have to look at those things net. If you collapse them down between the options and the swaps, it's a very small number, maybe in the order of magnitude of $30 million or so. Now take that aside and go to some of the other business reasons. Coal inventories are building for two reasons. Strategically, we're actually building the inventory at South Central because we got some outage work that we want to do later in the year where they unload the coal in the river cells. In Texas, we've been building the WA Parish coal inventories as well, and then in the Northeast with the reserve shutdowns that we've been experiencing, they've been building up. So they are really the two main drivers of the changes in the working capital and the collateral. Some of that was understandable. The options is a difficult one to explain, but you have to look at it net and the number is not as big as it shows on these line items.

As you look at the change over the past two months and you see 2010 come down, but the backend of the curve go up, to what would you attribute that, and really how much liquidity is out there or are we backing into that number based on the gas price?

So the question is if the outer end of that actually being traded or is it more theoretical? Is that the question, is there liquidity out there?

I think you pointed out one of the reasons why the market has moved off slightly. Liquidity is very thin on the back years, not only Texas but I would say across the power markets. The other two reasons is, one, I believe it's partly the recognition of a slowdown in absorption of new generation not only on wind but just across the merits of order, natural gas. I would say last is probably just the uncertainty around regulatory legislation, around carbon, climate change, et cetera. So when you combine those three things, I think they're just putting some upward pressure on the curve, but clearly liquidity is one of the factors.

We will take the last question from Greg Orrill of Barclays Capital.

If you do have time, I would be interested in the question on the effective tax rate, but otherwise I wanted to reconcile some of the statement on the Reliant retail contribution being 10% of adjusted EBITDA and the idea that if current conditions continue the yearly guidance for EBITDA might have to come down. Is the idea that the Reliant contribution would work up to 10% of EBITDA?

Before Bob gives you an accurate answer, first of all I would said approximately 10% may be the closest whole number compared to us adding to head count of a third, so I won't put the 10% in stone.

I think when you think of the contribution this year, when we put the guidance out before, again, we were admittedly on the low end. We're closing the transaction a month earlier than what we had previously thought when we had the last call. So the contributions this year will be greater than what we anticipated from Reliant retail. I think any weakness we have during the course of this year on the generation, I think to a large extent would be offset with retail performance and the additional month that we have. So, I'm not going to change the numbers that are out there at this point in time. We will do that in the second quarter. Again, I think the numbers that are out there are conservative.

Your comment would have contemplated the transaction closing.

Yes, but it is closing a month earlier than we had previously talked about.

Your comment on the trend in EBITDA?

Correct. When we had these options it created unrealized capital gain at the end of the year, which we were able to offset that with capital losses. Now when you go into 2009, you reverse that accrual and it creates a capital loss. We don't have any capital gains to offset that capital loss with, so it spikes the effective tax rate by 19%. Net-net, we are even on a cash basis, but you had a benefit last year that although it did not go through the rate it went through paid in capital, this year it goes through the effective tax rate so it spiked the rate on us. Economically, there's not an impact. Our cash taxes are the same. Our cash tax rate will be about 10%. It's just the way that the accruals and the ETR worked out. So while the effective tax rate is 60%, literally 19% of that is caused by this option transaction.

On that note I think we need to conclude. We know other people have calls. We appreciate everyone taking the interest in NRG and we look forward to speaking to you next quarter.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.