Good day, ladies and gentlemen, and welcome to the NRG Energy Inc. First Quarter 2014 Earnings Call. At this time all participants are in a listen-only mode. (Operator Instructions) As a reminder, today's call is being recorded. I would now like to turn the conference over to Chad Plotkin, Vice President, Investor Relations. Sir, you may begin.

Thank you, Shannon and good morning everyone. I’d like to welcome you to NRG’s first quarter 2014 earnings call. This morning’s call is being broadcast live over the phone and via webcast which can be located on our website at www.nrgenergy.com. You can access the call, associated presentation material, as well as a replay of the call on the Investor Relations section of our website. Because this call, including the presentation and Q&A session will be limited to one hour, we ask that you limit yourself to only one question with just one follow-up. In addition, as this is the earnings call for NRG Energy, any statements made on this call that may pertain to NRG Yield will be provided from NRG’s perspective. 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 and 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 5, 2014 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’ll 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’ll turn the call over to David Crane, NRG’s President and Chief Executive Officer.

Thank you, Chad. Good morning everyone and thank you for joining us. Joining me today are Mauricio Gutierrez, our Chief Operating Officer, and Kirk Andrews, our Chief Financial Officer, and both of them will be participating in the presentation. Also with me is Chris Moser who runs Commercial Operations for the company and will be available to answer any specific questions you have in that regard. So let's get right into it because as usual we have a lot to talk about today. So if you are following on the presentation, turning to Slide 3 I mean clearly we had a good first quarter. The strength of our financial performance which you anticipated has been commonly attributed to the severe weather which we experienced during the quarter no more by you out there than by we ourselves. Indeed, in the first draft of the quarterly press release I think the exceptional weather was mentioned at least eight times. But there are lessons to be learned from the different financial outcomes experienced by the power companies active in our core markets that operated their businesses under the very same weather conditions. First and foremost of these lessons is the reaffirmation of the point that we have been making about the merchant generation business for the past decade which is that the best way to out earn your cost of capital in the IPP business is to operate and trade a base load fleet that runs on multiple fuels. In other words, from a commodity perspective, NRG makes money by selling coal and uranium at natural gas prices. And that proposition worked very well for us in the first quarter of 2014. The atmospherics, if you will, around the first quarter weather also have tended to obscure the fact that it took…

David, thank you and good morning everyone. As you all know during the quarter we experienced extreme weather conditions and unprecedented price volatility in our core markets. But it was the diversity of our generation portfolio, our integrated business model, and most importantly the excellent performance from our plant operations and commercial operations teams that allowed us to deliver record financial results for the quarter. I want to thank all my colleagues for their outstanding performance. And while we are only now sharing this success with you, I want to assure you that everyone at NRG has already turned the page and we are now focused on getting ready for the summer. The events of this past quarter brought out the best of NRG but it also helped highlight some of the shortcomings of our electric system. It is clear to us that we need to improve the coordination between power and gas markets, recognize the value of fuel diversity through competitive market signals as David pointed out, and ensure a reliable transition as we implement new environmental regulations that could lead to significant capacity retirements. We are working closely with regulators and stakeholders to continue improving our competitive markets. Our integrated platform performed significantly well during the quarter with the wholesale business more than offsetting the challenges faced by retail, given the increased price volatility and higher loads. But the fact that we were able to sustain retail margins under these circumstances is an example of how robust our risk management capabilities are. With all the changes that we have made in our portfolio over the past 18 months and since I know many of you have asked about the recent ruling by the Supreme Court regarding CSAPR, it seems appropriate to provide you an update on our environmental…

Thank you, Mauricio. Turning to financial summary on Slide 17. NRG delivered record adjusted EBITDA of $816 million in the first quarter of 2014 or more than doubling our EBITDA performance of a year ago. The bulk of this increase was driven by outstanding results from our wholesales business which generated $639 million in adjusted EBITDA as NRG's expanded east fleet in particular delivered strong operational performance during the extreme cold weather and volatile power prices in the first quarter. Despite the colder weather and the resulting increase in supply costs, our retail businesses also performed well delivering EBITDA of $108 million for the quarter while NRG Yield delivered $69 million. For the quarter, NRG generated nearly $500 million in free cash flow before growth or nearly half of our previous guidance for the entire year. These strong quarterly results lead to increased expectations for 2014 financial performance which I will review in detail further. Our total liquidity after adjusting for the cash used to fund the EME acquisition which closed on April 1 now stands at approximately $3.2 billion. Continuing our focus on prudent balance sheet management, we took advantage of the continued strength in the debt markets and through April successfully executed two senior unsecured notes offerings, totaling $2.1 billion both at a 6.25% rate, a new low for us in terms of unsecured coupon. These financings not only provided the $700 million in cash funding from new corporate debt we have planned for the EME transaction, the remaining proceeds permitted us to fully refinance our 2019 senior notes, reducing annual cash interest by $26 million and further extending corporate maturities in the process. Finally, we have now executed a definitive agreement for the first drop-down of three right of first offer assets to NRG Yield for $349…

Thank you, Kirk. Shannon, I don’t have any closing remarks because we want to make sure we have about 15 minutes for questions. So please if you could open the lines we would be happy to take everyone's questions.

(Operator Instructions) Our first question is from Julien Dumoulin-Smith of UBS. You may begin.

Congrats on a great quarter. Following up on all the announcements here, I'd be curious, when you think about future capital deployment opportunities, how do you think about buybacks relative to further acquisitions to enable the DG renewable growth that you've been talking about? And in particular, how did you think about redeploying the cash that you're getting out of the NRG Yield sales of late?

Well, I am going to turn that to Kirk to answer or not answer the question as he sees fit. But Julien what I would tell you from my perspective is that, to your question, number one, it's actually a pretty good time right now to be a buyer in the market. I mean we see sort of opportunities to create value. I guess someone who did three acquisitions in the first quarter would say this, but we do see opportunities across our space. What I would say though is, to the extent that you know for a long time on the generation side we wanted to have a bigger and better core generation fleet in PJM and that was a big, strategic priority. But what I would say right now is, well, again to the point both on the generation side and on the retail side, where we have all the capabilities we need, we are in all the places where we need to be. And so it's a question of executing with what we have. And so I would say as a general rule, my view towards acquisitions right now is pretty opportunistic. If we can see something at a price that really makes sense, we will add to what we have. But we are really -- we are again at a point where we have a very limited number of gaps that we see to fill in terms of the capabilities we need to have. And even the gaps that we continue to perceive, which I am not going to tell you what they are because we don’t want people to see us coming. The amount of money that it would take us to fill those gaps from outside acquisition is not a huge number compared to the amount of cash that Kirk has amassed over there. So with that sort of set up, let me turn it over to Krik.

Well, I don’t have to add very much to that other than the fact that the capital that we amassed as I know you are aware Julien, both with the combination of the actual receipt of the drop-down proceeds as well as our free cash flow generation, tends to be disproportionately loaded towards the backend of the year. Which is why we are kind of deferring addressing the return of capital to shareholders question until we realize the bulk of that free cash flow and drop-down proceeds. And I think depending on how the opportunities that David spoke to play out over the course of the year, as well as where our share prices combined with realizing that capital later in the year, we take all that into consideration in terms of balancing between opportunistic deployment of capital on the M&A side or acquisition side with returning to share repurchases.

Great. And, Dave, just a quick follow up here. As you think about power, I just heard your comments about COMED. Where do you remain the most constructive on power upside, if you will?

Julien, I don’t want to give a wrong -- could you say the question -- where are we most constructive on the...

Yes. I suppose we have heard some comments from Exelon amongst others, saying we see x amount of upside in the market, etcetera. I suppose are you still as constructive on Texas or you're shifting towards PJM? And where do you see the most amount of upside or do you continue to see upside in power market?

Well, you know everything -- it's like going to a movie Julien. Everything sort of relative to your perception is going in. I mean we went to great pains when we bought the Edison Mission portfolio to say, don’t confuse this with us being bullish on the situation in the Midwest on the wholesale side. But as Mauricio said in his comments, there are signs of life in the COMED market. But I have to tell you, if you are just looking across our portfolio, clearly the east has been a pleasant surprise for us since the GenOn acquisition. But in terms of just basic fundamentals that you can sort of look at and reach out and feel and touch, we remain bullish on Texas. I mean the demand growth in Texas on a weather-adjusted basis was enormous. While it was 3% -- I mean 11% in non-weather adjusted, 3% weather adjusted. You know announcements like -- I was out in California last week on the day that Toyota announced that they were moving 5000 - you know they had 5000 people employed in North America and they are picking up shop, closing shop in California and moving to Texas, so if you look at fundamentals I would say that the part of the country we are most bullish on remains Texas.

Thank you. Our next question is from Jon Cohen of ISI Group. You may begin.

Congratulations, guys. I don't see how that quarter could have gone any better for you guys.

Okay. Thank you for your question, Jon.

I guess the first question maybe is for Mauricio. We've seen in the past couple of weeks or the last week particularly, a pretty huge move in the forward power markets. I was wondering if you had any color on what's going on there exactly? How much of this is real fundamental buying, how much of it is maybe some other technical factors?

Good morning, Jon. So I think I referred to it on my script but the move in power is actually, I would say there are two points. The first one is on the back of natural gas. And as you have seen natural gas has gone through a pretty significant rally and given the storage levels where we are, we think that if we get some early heat, we will see probably another leg off on natural gas. So that’s the first driver of power prices. And as you can appreciate that has helped significantly dark spread or base load generators like us. The second one which is probably a little bit more recent is an expansion in heat rates. And we saw that right after the CSAPR announcement. So I think markets are realizing that there may be more scarcity and better fundamentals shorter than what they believed in the past. But that clearly benefits some of the spark spread price. Those are two very discrete, I guess drivers that we have seen in the power space. With respect to liquidity, I will tell you that liquidity is probably the worse I have seen in many, many years. The balance of 2014 remains probably the best market and I think the prices, the market prices reflect to some extent decent volume. But beyond 2014 I would caution about the pricing that we are seeing because I think they are affected by liquidity.

Okay. So, you're saying we've seen a big move but on pretty poor volumes in the out years.

In the out years, yes, but in the front years I think the volume has been relatively decent. Having said that, the move that you have seen are supported by the fundamentals.

Okay, great. And then one other question on the distributed generation strategy. I was wondering if you had any, David, internal milestones or goals about how quickly you want to grow that business. I think on the last call I think you said it would be two years before you had cobbled together enough of a portfolio to drop into NRG Yield. Since then you've announced a few acquisitions. I wonder if maybe the timing of that has accelerated. So, what should we be looking for in terms of how you're executing there?

Well, Jon, one, I don’t want to be totally specific but the second thing is -- well, let me just tell you the way we are thinking about it. And some of this is anticipatory in terms of where we see the price going you know in terms of the expansion to the, sort of legendary price competitive with the retail price electricity in 20 to 25 states. The way I sort of think about it, by the end of this year we want to be in a position to compete in all the states where it makes sense for people to put residential solar on the roof. With all the tools that we need to sort of create value and bring the value to us. I mean one of the problems in the residential solar space for the last few years is, there is always some place in the value chain where value is being created but it's usually being created somewhere else. So for a while it was the installers that were sort of capturing the benefit of solar module prices dropping like a stone and all that. And so we wanted a platform where the value that exists in the value chain sort of comes to us not to somebody else that we than enable. So we want to have our capabilities in place, totally in place in all the markets we want to be in by the end of the year. And then in 2015 we want to execute and we want to be a market leader. And whatever lead in the market is and in the industry that’s facing exponential growth, I would rather not put a number on it other than to say, if you think of at least 2 million American homes that economically should have solar on their roof by 2015 and the current market leader Solar City is doing 30,000 a year, I don’t need to take business away from Solar City to see that there is a market opportunity that’s just almost infinite in its potential.

Right. Are there any capabilities that you think you're still lacking or are all of the pieces in place now?

There is one or two. Thank you for the question.

Thank you. Our next question is from Stephen Byrd of Morgan Stanley. You may begin.

Good morning and congratulations. I wanted to talk about capacity prices in general and talk about your EME assets. I know you're going to come back with a more specific plan but we had, I guess, it's fair to say, fairly disappointing pricing last year. Would you need to see materially better capacity prices for the entire fleet at EME to be economically viable or do you think, given where we've seen recent trends, that they would be viable? Do we need to really see an uplift there to see the entire fleet viable?

Hey, Stephen, Chris Moser is going to answer that.

Hey, Stephen, it's Chris. First things first, I think PJM is moving a lot of levers to try and make sure that we see good prices out there. I mean FERC has accepted hard caps on DR. They have accepted the capacity import limits there. I know that there is still a couple of things pending in terms of the operability and changes to the incremental auctions. Last year at $59 out there in RTO, and that was on the low end of things, obviously we are hoping for better numbers than that. But keep in mind there is both energy and capacity as well. So it's the combination of those two. And we would like it obviously to hit good numbers in both of those. And a lot of the forecasts out there now have the capacity moving up against that 59 mark from the 16, 17 auction. And we are certainly hopeful that it does. But don’t forget the wind in the sails back there is as David said, selling coal at natural gas prices and as gas continues to move up then that’s going to help those assets as well.

I see. So, the improved energy margin helps in that equation as well. As a follow up, just on your chart on page 14, looking at the PJM auction. I was curious about one of the remarks you made about new generation facing challenging economics, especially given the improvement in forward margins that we've seen. Could you expand on that a little bit?

I think on the challenging economics side I think we struggle with seeing some of the newbuild costs relative to I think where we expect to see them or where we look at when we are trying to do are looking at projects ourselves and I think that’s what that references to.

Okay. So, as you see the capital costs even with the improvement in energy margins, you struggle to see how the newbuild can make sense potentially.

Yes, I mean Steven, I got to tell you, it doesn’t matter what market you are in, even in Texas. I mean we are acquiring assets at deep discount to replacement costs. And so as prices get better we obviously have an opportunity to earn back the money we put in but we are not seeing things approach, pricing approach new entrant pricing. So how people are doing Greenfield in the merchant market, it's baffling to us.

Thank you. Our next question comes from Neil Mehta of Goldman Sachs. You may begin.

Can you review the changes in strategy of what assets you're going to drop down into NYLD in 3Q? I know originally it was CVSR but it sounds like it might be some of the Mission assets now. And I don't know if you can answer this question from NRG's perspective, but in your view will NYLD require equity to fund that next round of drop-downs?

Well, in terms of the assets as I mentioned in my remarks, yes. Having now closed the EME transaction we expect the next phase of drop-down to include some EME assets and defer CVSR to 2015. I think it's safe to say if we have a bias within that portfolio, we would lean towards the shorter duration assets within that portfolio as being kind of the first in the queue if you will among the EME portfolio for drop-down. As far as equity issuance is concerned, certainly having basically used the proceeds from this first drop-down, additional drop-downs will require obviously additional capital at NRG Yield. We have the ability to some extent to bridge that capital using the expanded revolver I spoke to but ultimately the anticipation is, I think it's likely we will probably see an equity issuance kind of in the back half of the year. But we will revisit that in greater detail as circumstances unfold.

Very helpful. And then on coal, Mauricio, you talked about how you were able to address some of the rail disruptions to ensure adequate supply in 2014. Can you talk about how you did that? And then PRB prices seem to be ticking up here as you look at the forward curve, particularly 2015. So how does that impact the way you think about contracting?

Yes, well, you know PRB in shorter term has been oscillating close the marginal cost of production. Historically there's been a [contango] (ph), though that has been tempered over the past 12-months. So as gas prices go up and certainly the announcement of CSAPR, you know lower sulfur coal becomes more desirable for generators. We are evaluating our hedge profile. As I said, we wanted to take care of 2014 given the increase in gas prices. We are now in the process of assessing 15 and beyond. We like the position that we are in. We have constructive gas fundamentals I already explained. So at the end of the day we are more concerned about the dark spread and less concerned about the absolute price of each of the commodities. With respect to the railroad I think it is fair to say that we have, given the size and the scale of our portfolio, we were able to identify these potential risks in terms of deliveries. Regarding front of it, we have very constructive dialog with the railroads and we were able to bring our units at inventory levels that we feel are adequate as we go into the summer. I mean I cannot give you any more specifics. We have in the past disclosed inventory levels on a unit by unit basis and we are not going to do that given the competitive nature of it. But I think it's fair to say that we feel comfortable as we approaching the summer months.

Shannon, we have a shareholders meeting in about 5 minutes, so I think we will take two more calls.

Our next question is from Neel Mitra of Tudor, Pickering, Holt. You may begin.

Congrats on the good quarter. My question is directed towards Mauricio. You kind of talked about how maybe NYHUB heat rates moving up have a fundamental reason to them and there could be something changing with the load around that area. Could you maybe talk about what's changing that could maybe make you more bullish on the Midwest market?

Look, I think it's more on the generation side than the load. The load hasn’t been particularly impressive in the Midwest and to the extent in the Northeast. We think that given some of the economic challenges and the higher penetration of wind and negative pricing, we believe that there is probably -- we are entering a transition period where additional retirements from base load resources that can cycle will happen particularly on units that are marginal, small with high fixed costs with little flexibility. So I think the market is starting to recognize that and you can clearly see it on the heat rate expansion. And I put the chart on the historical pricing and the forward pricing on COMED and I think it clearly has a awkward momentum to it. Now keep in mind the other one is, as I already said a couple of times, natural gas is right behind the price of power sold. So that perhaps is also something to look at.

When you talk about these units are you speaking more about nuclear, coal or what type of generation?

Yes, all of the above. I think coal and nuclear.

Is there an update on any kind of the repowering opportunities in California?

Well, we remain optimistic but there is not really any specific update. But certainly I would hope to have one by the next quarterly call.

Thank you. Our next question is from Steve Fleishman of Wolfe Trahan. You may begin.

Just, first curious if there's any update on the Maryland environmental rules going into the auction.

Do you want to answer that?

Yes. Good morning, Steve. What I can tell you is that we have a had a very constructive dialog with MDE. We are taking that into consideration with the plans that we have around our Maryland units and I think that’s pretty much about as much as we can say around the state of the Maryland units. But I can assure you that it's been a very positive dialog between the two of us as of late.

Okay. So, you have more clarity you think on the future for those two units at least?

Well, I think in relative terms we have more clarity, we don’t have absolute clarity. So I think that’s really all we can say right now, Steve. But since we didn’t really answer your question, why don’t you take (indiscernible)?

Yes. The other question is just -- you mentioned that we have the revival of CSAPR in some form and we're going to get these EPA THG proposed rules soon. When you think about the context of NRG overall in light of some of these new environmental rules, could you just maybe, again, give us your messaging on how you think about your company in context of kind of refocus on environmental rules?

Well, I am not sure if this answers the question but I mean we are, in terms of the conventional system and the generation assets, I think we have to keep in mind that the average age of an NRG coal plant is 41 years old. So when we think of the long-term strategy of the company, it's not built around 41 year old assets but those 41 year old assets are very critical to the short to medium term and to keeping the lights on this year and next year. So I mean our environmental strategy is geared towards the amount of time that we expect the assets to continue to perform their functions. So with expect to the specific rules, we think we have a good -- you know we are not spending and insubstantial amount of money. And so we are complying with the various environmental laws that seemingly come and go. But we are also not investing in stuff thinking that these plants are going to be there 40 years from now. So guess I am not sure if there is something more specific about that that you would like me to focus on.

You know I was thinking more in terms of the breadth of portfolio of assets that you have and your non-power. Net-net, do you think, obviously we don't know the details of how CSAPR will be implemented or how THG rules might be implemented. But do you think overall your portfolio benefits net from these rules or gets hurt by it?

Well, I mean since we are in pretty good compliance position with the new rules, to be Machiavellian about it, the new rules drive other peoples plans out of the market than that will be beneficial to us. What I would say is one of the big lessons for us and hopefully for the public policy makers and I try to make this point in the context of Illinois is that, we have always made a virtue of being multi-fuel. The conventional system is clearly trending to an all gas all the time system. And the gas, now it's simply not prepared for that to happen. And so to us there is tremendous value in not only having gas plants but having coal plants continue and nuclear and even our oil plants. I mean we ran our oil plants more this last winter than I think in the last several years cumulative. And so the first and foremost, no matter how much we focus on sustainability and being green and all, the focus of a power company is always on keeping the lights on. And to me having a multi-fuel fleet of generation is the way to do that. So we certainly are going to try and do that but you can't keep plants open if they are just losing money, hand over fist. And you don’t want to invest hundreds and millions of dollars in an asset that has left couple of years of life. And so that’s the reality that we juggle everyday at this company. And I think every other power company does as well. Anyway, I am sorry but I think we got to go. We are a few minutes late for our shareholders meeting. So thank you all very much and if there are any questions that we could not answer, my friend Chad here is sitting next to me, he would be happy to answer to questions at length. So thank you very much.