Good day, ladies and gentlemen, and welcome to the Q1 2013 NRG Energy Inc. Earnings Call. My name is Steve, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. Now I would like to turn the call over to Chad Plotkin, Vice President of Investor Relations. Please proceed, sir.

Thank you, Steve, and good morning, everyone. I'd like to welcome you to NRG's First Quarter 2013 Earnings Call. This morning's call is being broadcast live over the phone and via webcast, which can be located at our website at www.nrgenergy.com. You can access the call, associated presentation material, as well as the replay of the call, in the Investor Relations section of our website. [Operator Instructions] Before we begin, I urge everyone to review the Safe Harbor statement provided in today's presentation, which explains the risks and uncertainties associated with future events in the forward-looking statements made in today's press release and presentation material. 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 Tuesday, May 7, 2013, 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, the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's press release and this presentation. And with that, I'd like to turn the call over to David Crane, NRG's President and Chief Executive Officer.

And good morning, everyone, and thank you for joining us for this, our first quarter 2013 earnings call. Today, I'm joined here this morning by Mauricio Gutierrez, the company's Chief Operating Officer; and Kirk Andrews, the company's Chief Financial Officer, both of whom will be giving a portion of this presentation. As well, I'm joined by Chris Moser, who runs the company's trading and commercial operations activities; Elizabeth Killinger, who's responsible for the company's retail business in the ERCOT market; and Jim Steffes, who's responsible for the company's activities in the Northeast retail markets, and they will be available to answer any specific questions that you have in their area. So let's get right into it. I have dispensed with our customer and quarterly financial highlight section, which has been my tradition, because our first quarter, which, in recent years, has been one of our softest quarters, fulfilled those expectations again this year. The weather in our core regions did not provide us with much opportunity, and our own performance in the face of the near-term opportunities that were presented to us was pretty uneven. Having said that, we are entirely focused at NRG on succeeding across the short, medium and long term, and we are always working on all 3 levels simultaneously. This quarter, for reasons which should be obvious, our focus, in particular, has been on ensuring our success over the medium term, which I am defining for this purpose as the remainder of 2013 and full year 2014. In that regard, notwithstanding the lackluster first quarter that we are reporting today, I'm very pleased that, as a result of our successful actions over the past 3 months, we are in a position to reconfirm full year 2013 adjusted EBITDA guidance, increase full year 2013 free cash flow…

Thank you, David, and good morning, everyone. During this first quarter, our focus was and continues to be on integrating the new GenOn assets, while delivering solid operational results across the fleet. I am pleased to say that both remain on track for the year. From a market perspective, we saw the gas storage surplus return to more normalized levels and, with that, an increase in gas prices, which, in turn, significantly reduced the coal-to-gas switching we experienced in the winter and spring of 2012. As always, safety is our #1 priority, and we posted another quarter of top decile performance. Our coal fleet improved its availability metrics, and as prices increased, so did the generation from our coal fleet. One of our priorities is to optimize the overall spend of the combined fleet. To that end, today we're further reducing our estimated environmental capital plan by $100 million, from $630 million to $530 million over the planning period. This is a result of further testing and optimization of plant controls at our Big Cajun II plant, better equipment pricing at WA Parish and more efficient solutions at our Cheswick facility. This improvement, along with our previous announcement, now brings the total environmental capital reduction to approximately $200 million over the same time planning period. We will continue to focus on further optimizing our spend as part of our execution of operational synergies. As David mentioned, 2013 is a critical year for our construction program, as we have several large projects reaching commercial operation, which, when all complete, will bring nearly 2.2 gigawatts of new generation online since 2012. On the conventional front, and starting with Marsh Landing, we achieved commercial operations on May 1. We are proud of the engineering and construction team delivering the project on time and…

Thanks, Mauricio. Beginning with the financial summary on Slide 14, NRG is reporting first quarter 2013 adjusted EBITDA of $373 million, with $234 million from wholesale, $103 million from retail and $36 million from our solar projects. Our quarterly results include the impact of the GenOn transaction, which primarily contributed to $160 million in quarter-over-quarter adjusted EBITDA growth in our East region. First quarter results also reflect the impact of nonrecurring items, including higher coal cost, primarily in our South Central region, related to the need to secure alternative coal transport due to unusually low river levels, which have now returned to normal, and the outage of STP Unit 2, which, as Mauricio said, returned to service on April 22. These items, combined with unrealized losses from commercial optimization activities, reduced first quarter EBITDA by approximately $60 million. Looking ahead, we're affirming adjusted EBITDA guidance for 2013 and 2014, which will see a significant ramp-up in EBITDA from increasing synergy realizations and newly completed solar and conventional projects. Moving to free cash flow. We are increasing our 2013 guidance by $100 million, while maintaining our free cash flow guidance for 2014. Turning to capital allocation in 2013. As we have announced in February, NRG substantially achieved its $1 billion debt reduction objective in connection with the GenOn transaction, significantly strengthening our consolidated balance sheet. Having captured over 90% of the $100 million in annual free cash flow from balance sheet efficiencies announced in connection with the merger, we expect to achieve or exceed this target later in the year. We also increased our dividend by 1/3 and have begun our $200 million share buyback program, with $25 million of stock repurchased during the quarter at a weighted average price of $25.88. Turning briefly to the guidance overview on Slide 15.…

Thank you, Kirk, and thank you, Mauricio. Steve, I think we'll just take it straight to questions if you want to open the floor.

[Operator Instructions] First question coming from the line of Neil Mehta from Goldman Sachs.

Do you have a breakdown of the -- I think, the number your said was negative $60 million of EBITDA of nonrecurring items between STP, South Central and commercial optimization in the quarter. And specifically, can you explain in a bit more detail what happened with commercial optimization?

Kirk, why don't you start?

Sure. In terms of the breakdown, approximately $28 million was from commercial optimization activities. The STP outage during the quarter resulted in about $25 million and the remainder of that was from the coal transport costs.

Mauricio, do you want to -- or Chris, do you want to or not want to give more guidance?

Got it. Neil, apologies, but we haven't had a history, and we don't intend to now, of discussing any specific strategies or tools that we use on that side. So I'm going to leave it there.

Fair enough. And then my second question was around capital allocation. Are you more likely to grow organically or via acquisition, in your view, from here? Should we think of Gregory as the flavor of M&A from here, one-off acquisitions that are tactical and opportunistic, or are a fleet of assets still in the cards?

Well, Neil, just -- because I like to answer questions literally and accurately, your question sort of shifted from the beginning to the end. I mean, on the organic versus inorganic, one of the things that I always liked about this company is that we're constantly having our own opportunities to grow the business from within and those require capital. Historically, less capital less soon than, obviously, acquisitions, but it's nice to have an organic growth strategy, and we have that both on our conventional side and on our renewable side. In terms of acquisitions, I don't think that you can really sense a pattern from Gregory. I know that you know from previous comments, we've always said that we feel that we have more of a competitive advantage, in terms of acquisitions, on bigger transactions rather than fewer, in large part because there are just fewer buyers on the bigger stuff and we can get sort of more cost synergies out of the bigger things and, certainly, some of the financial buyers. So Gregory was -- I can't remember when was the last time we were successful on a one-asset acquisition, but we were pleased with the price we paid and we're very pleased with the asset. On the generation side, we're -- we are looking across the single-asset portfolio company side, but the only thing that would cause Gregory to be more the future than bigger deals is there are just fewer bigger things out there that may be available to us and may be appealing to us.

And your next question is from the line of Brandon Blossman from Tudor, Pickering, Holt & Co. Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: I'm going to try to rephrase this question and avoid commercially sensitive territory. But, Mauricio, on the extrinsic capture in Q1, was there a structural change in the market, or is this kind of normal quarter-to-quarter volatility in that capture ratio or rate?

No, Brandon, that's a -- I mean, that's a good observation. I mean, you can have quarter-on-quarter changes that not ultimately reflects the overall profitability of the position that we take. And I think that was -- that is the case in a lot of the optimization strategies that we utilize to fully extract the value of the portfolio. Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay, fair enough. And then, Mauricio, just following on that. 14 gas hedges, you did take some incremental down, perhaps it would be a wish that you took even more down. Is there any embedded gas view in how much it would be for GAAP for '14 on the gas side?

Yes. I mean, keep in mind that 2014, we actually layer in significant amount of hedges. But as you can appreciate with gas prices moving up, so are our economic generation. So the move from 59% last quarter to 66%, if everything else would have -- being constant, it would have been higher. Keep in mind that we just had more generation, I guess, in the money. And it is consistent with our strategic hedging program and our fundamental view. When we saw the price increase in the first quarter, we felt that it was a good opportunity to lock in additional hedges. And as I said, close the dark spread that we initiated early in the year, where we saw an opportunity to buy incremental coal, and we did it. And we believe that we're going to have additional opportunities to do that throughout the year.

Brandon, this is Chris Moser. And just to add to that, I would mention that if you're comparing how many -- how much it takes for us to move from 59% to 66% today versus this time last year, it's a much bigger -- we have to sell a lot more to get there, and now we're not quite double what we were before. So -- and not to mention the fact that gas is moving up and our deltas were moving up. The entire -- to move the portfolio 5% to 7% is also just a much bigger outright sale that has to happen. So just to give you that perspective as well.

And your next question is from the line of Julien Dumoulin-Smith from UBS.

So first quick question, just to clarify. This is on plan for the year, the first quarter. And perhaps could you speak to just layering of hedges throughout the year? Obviously, Texas is becoming a "peak year market." How do you think about that with respect to your hedging program? And then perhaps the second question here off the bat, is what's going on in California, just given the year-on-year trends? Is there anything else that we should be paying attention to?

Yes, well, let me just knock off the second one first because it's easy. I like to take the easy questions, Julien, and then give Mauricio a little more time for the slightly more challenging. On California, I don't think there's anything more you can read into it. I believe if you go back and look at actually GenOn's first quarter results from last year, you'll see a negative result for first quarter of 2012. And I know that's counterintuitive, given that the fleet has basically tripled in size in California. But the contracts that people have in California are extremely shaped towards summer revenue. So it looks unusual, but it's not something that we're overly worried about.

And with respect to the -- I guess, the hedging strategy around Texas, Julien, as you know, we try to look at the natural gas caging [ph] activity or the natural gas component of our portfolios, one, and the heat rates. So with respect to the natural gas component, we tried to lock in as much of the dark spread or baseload gross margin that we have in our portfolio. And certainly, with heat rates, we've been talking about increasing heat rates, given the regulatory changes in our -- to incentivize new-build economics. And that has paid out dividends for us over the past couple of years. Now with respect to the balance of the year, your point about the distribution of the gross margin of the portfolio is correct. I mean, we're seeing much peakier prices in the summer. Q3 is becoming more important relative to the other quarters, and we have taken the necessary steps to benefit from that. We are leaving a long-biased position on our portfolio. We have also increased the hedging on our retail portfolio to better manage or to increase the insurance around volumetric risk or weather risk. So we believe that the portfolio is well positioned to benefit from what we believe is going to be a very tight summer in Texas.

Great. And just entirely separately, quickly here, on solar, you alluded to solar monetizations, broadly speaking. How are you thinking about it? Obviously, we've seen some other peers of yours moving to spin their own businesses. Is that something you'd contemplate at some point?

Well, Julien, what I'd say is that we've contemplated everything. I mean, this has been an exhaustive process. We've looked at all the options. We're aware of everything that's going on in the marketplace, at least everything that's visible in the marketplace. And I just -- I alluded to it pretty directly and pretty explicitly, that we would be back to you on this topic before the end of second quarter. I just don't know what else I can tell you, other than just wait a few weeks and the long wait will be over.

And your next question is from the line of Keith Stanley from Deutsche Bank.

Can you talk to the level of retail margins and attrition you've seen year-to-date, specific to the existing residential customers in Texas, and how you expect this to evolve over the course of the year? It seems like you guys are still fairly confident with retail guidance for '13 and '14, reaffirmed despite higher gas prices now.

Keith, let -- I'm going to ask Elizabeth Killinger, who runs that business, to answer that question for you.

Yes. We've seen sustained margins, as Mauricio mentioned, in Texas. We've sustained our unit margins and believe we're well positioned, both from a selling perspective on acquiring new customers, as well as retaining others using the new channels that we have, as well as innovative products that we're launching to intrigue customers to recognize we're different, whether it's providing home services or providing just the standard commodity plan.

Okay. And one quick clarification on the operational merger synergies. Do you expect to provide an update before the end of Q2 as in June 30, or as part of the Q2 earnings call?

That's a good clarification, but -- before the end of -- before June 30, before the end of the quarter.

And your next question is from the line of Stephen Byrd with Morgan Stanley.

I wanted to touch on PJM and the outlook for heat rates in that market. There's quite a bit of debate about the impact of coal plant retirements over time to heat rate. As you look out at the market now, what's your view in terms of whether there is further heat rate movement likely or whether you see headwinds, be it from renewables, lack of demand growth or whatever the case may be?

Stephen, this as Mauricio. I think on the last quarter, we tried to, at least, quantify what would be the impact on heat rates and that potential upside, given the retirements that we're expecting due to MACT in 2015 and the New Jersey head. I think we said somewhere in the order of magnitude of $4 to $5 per megawatt hour, just to get to cost of new entry economics. Clearly, that's going to depend on the capacity revenues or the capacity auction results, that we will see later in the month, that will fill the gap to incentivize that -- the new generation that is expected to be required in the '16 to '17 timeframe. So our view hasn't changed dramatically from that. We are expecting somewhat more volatility and, potentially, some upside this summer, given that demand response will potentially set price going into effect this summer. So I would say that that's the short term and the longer-term view that we have in PJM.

Great. And just as a follow-up on a different matter. David, you talked about the solar and we'll stay tuned on that, but you have a number of other contracted conventional assets that are relatively bond-like in terms of their cash flows over time. Could you just talk to your general views as to appetite to monetize some of those, given that they are so bond-like and maybe there are fires do it [ph] effectively, put a higher multiple on that than what's reflected in your own stock?

Well, Steve, I mean, it's a good question. I'm not sure I ever heard to our contracted assets talk to as bond-like, but I can see your point. Yes -- no, I mean, it's something we're aware of that -- I mean, particularly with the new projects being brought online this year that are contracted, that the company's balance of -- on the wholesale side between assets that are -- what would be characterized as merchant versus contracted is moving more towards the contracted. And I think whether or not the market -- its volume and such is an open question. So certainly, it's something that we have under evaluation.

And that question is from the line of Angie Storozynski.

So let me ask the question that everybody is probably dying to ask. So we're waiting for the PJM capacity auction. We're hoping to hear about some of the changes to the recently acquired GenOn portfolio. You're suggesting that we're going to hear those -- about those changes or any updates in June, which sounds like after the auction. Should we -- does it -- I mean, should we imply that, basically, some of the CapEx that you might be talking about is contingent on clearing in this auction. And also, if you're willing at all to say what are your expectations for the auction, that would be great.

Well, Angie, I can't imagine that we're going to answer that question in any substantive way.

Well, I could -- I can touch the various...

Okay. Does anybody want to have anything to add to what Angie just said?

You got it. This is Chris. I think in the last earnings call, Mauricio mentioned that our outlook on the PJM auction, I think we covered that already. I think the one piece I'll throw out there is that, with Kirk just doing the MOPA ruling last week, I think that we've -- that was part of our calculations and kind of -- we're disappointed about it, but it was within our expectations. So I don't think it changes what we said in the last earnings call. That's about -- that's all I've got incrementally [ph].

Angie, do you want to ask a different question?

But is it fair to assume that you're waiting with any updates on coal CapEx or conversions of coal plants until that auction happens?

Angie, I can swear that, that question is identical to the question that you just asked 30 seconds before. And this isn't the Austin Powers movie. If you ask the same question 3 times, we're not going to answer it either the first, second or third time that you ask it. Is there a different question, Angie, that you'd like to ask?

How about maybe -- you mentioned the potential M&A target.

That's really a good path you're going down there. So what's your question there?

Can you tell us versus which region you would be focused on? Roughly speaking, is it more of Texas or is it more Northeast? Is it PJM?

It's interesting, Angie, that you asked that question, because I would say, compared to the past and the 10 years I've been here before, where we used to talk about the fact that we would like a bigger base portfolio in PJM and there was the time when we would talk about how we really needed a load-falling [ph] asset down in South Central. Pretty much in terms of the real needs of the generation portfolio, we like where we are. I mean, we bounced away from Texas a little bit. And obviously, you can tell in the first quarter this year that, that helped us already. So to us, we're -- one, as we consider things, it's very much look for value where there's value to be obtained. We have no intrinsic desire to expand our geographic footprint from where we are. But if we could do that at extraordinary value, we would consider that as well. But -- so I think there is nothing that you need to be concerned about that we're going to reach out to and sort of pay a big number for and then sort of try and justify it on the grounds that it was strategic. Boy, well, I thought that was a good answer. I mean, did you not like that answer? The disappointment in your voice is palpable, Angie. So I'm not sure that that's the best way to end the quarterly earnings call, but given that we have to hold you to the 2 questions protocol. Steve, operator, I think that's it. So, everyone, we very much appreciate you taking the time to be on this call. And as I've mentioned at least a couple of times now, we don't know exactly the forum that we're going to be speaking to you but we expect to speak to you on at least 2 topics before the end of the second quarter, which we defined as the last day in June. So thank you very much, and have a good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.