Good day, ladies and gentlemen. Welcome to the NRG Energy Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s call is being recorded. I would now like to turn the call over to Kevin Cole, Senior Vice President of Investor Relations. Sir, you may begin.

Thank you. Good morning, and welcome to NRG Energy’s full year and fourth quarter 2015 earnings call. This morning’s call is being broadcast live over the phone and via the webcast, which can be located on the Investor Relations section of our website at www.nrg.com under Presentations & Webcasts. As this is a call for NRG Energy, any statements made in this call that may pertain to NRG Yield will be provided from NRG perspective. Please note that today’s discussion may contain forward-looking statements, which are based on assumptions that we believe to be reasonable as of this date. Actual results may differ materially. We urge everyone to review the Safe Harbor in today’s presentation as well as the risk factors in our SEC filings. We undertake no obligation to update these statements as a result of future events, except as required by law. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and the reconciliation to the most directly comparable GAAP measures, please refer to today’s press release and presentation. With that, I’ll now turn the call over to Mauricio Gutierrez, NRG’s President and Chief Executive Officer.

Thank you, Kevin, and good morning, everyone. Joining me today and covering the financial part of the presentation is Kirk Andrews, our Chief Financial Officer. In addition, Elizabeth Killinger, Head of Retail; and Chris Moser, Head of Commercial Operations are available for questions. Let me also formally welcome Kevin Cole, as our new Head of Investor Relations. He is well-known by many of you, having spent a number of years in the energy sector on both the buy and sell side. I also want to thank Chad Plotkin for providing transitional support over the past few months and wish him well, as he moves on to take other responsibilities within the Company. Before we begin, I want to take a moment to acknowledge and thank David Crane for his years of service at NRG. We are grateful for his many contributions to the Company for over a decade. And I want to wish him well in his next endeavors. Today is my first time, addressing you as CEO of NRG. So, I’m going to deviate slightly from our normal earnings agenda because I want to use this time to not only report on the results of our business, which were exceptional, but also to give you my perspective on the strategic direction of the Company and our immediate priorities. So, let’s begin on slide four, where I have outlined the key messages you should take away from today’s call. First, as our financial performance has shown time and time again, we have the right portfolio and the right platform to succeed in this environment. Our business delivers strong results, during periods of low prices and importantly, our generation fleet remains significantly levered till market recovers. Second, in this environment, we will benefit from having a stronger balance sheet. We have…

Thank you, Mauricio and good morning everyone. Beginning with the financial summary on slide 15, NRG delivered a total of $3.34 billion in adjusted EBITDA and $1.127 billion in free cash flow before growth in 2015. Our 2015 results highlight the benefits and resilience of our integrated platform as the low commodity price environment helped Home Retail deliver $739 million in adjusted EBITDA, exceeding our original 2015 guidance of that segment by more than 20%. Business and Renew achieved $1.881 billion in EBITDA for the year, while NRG Yield which was aided by robust wind conditions in California late in the fourth quarter, contributed $720 million. NRG completed $786 million in dropdowns to NRG Yield in 2015, helping expand capital available for allocation and allowing us to return over $1.3 billion to stakeholders. $628 million of this capital was returned to shareholders including the repurchase of approximately 7% shares outstanding. Having shifted our capital allocation focus late in 2015, since November and through this past month, NRG has retired approximately $700 million in unsecured debt, including over $400 million at the NRG level and $274 million at GenOn. Our reduced unsecured debt allowances will also help increase recurring cash flow with over $50 million in annualized interest savings realized so far, as a result of these efforts. I’d also like to briefly address one element of our 2015 results outside of EBITDA and free cash flow that is the non-cash impairment charges we took in the fourth quarter. On an annual basis, we test our long lived assets and goodwill for potential impairment. Given the prolonged low commodity price outlook, we adjusted our long-term view of power prices, which resulted in a non-cash impairment charge of approximately $5.1 billion, consisting of a write-down of certain fixed assets as well as…

Thank you, Kirk. And we have taken a lot of time this morning. So, let me just end with our priorities for 2016 on slide 20. We have the right portfolio and the right platform to succeed in this environment. And with the further strengthening of our balance sheet, we will be in a great position to seize opportunities during this challenging market and greatly benefit to when it turns around. I look forward to the next phase of NRG. Thank you. And operator, let’s open the lines now for Q&A.

Thank you. [Operator Instructions] Our first question is from Greg Gordon with Evercore ISI. You may begin.

Thanks. Good morning, guys, a few questions. I’ll start with the detailed one. So, I just want to be clear on page 10, when you talk about the $150 million of EBITDA by year-end ‘17. Should we assume that that’s an aspiration to improve your run rate EBITDA by that amount?

Correct.

Or is that just accumulative impact on EBITDA of 150?

No. Good morning, Greg. And no, the objective here is to make it a recurring $150 million cost reduction that will impact EBITDA directly.

Great, thanks. And on page 17, when you talk about the CVSR and non-recourse fainting below the lines; if those are not included in your available capital, so should you be successful in achieving those that would be accretive?

That’s correct. Those would be incremental to capital available for allocation, Greg.

Okay. And that would be my big picture question, Mauricio. So sort of the first thing that happened after you took over the CEO role was we saw that in terms of a capital allocation decision as we saw that you cleared a new power plant in the New England auction, which was a little bit disconcerting to investors who are looking for a capital allocation program that was more focused on shrinking the balance sheet. Obviously that’s the core message that you’re giving us today. So, can you characterize, if you were to disbursement [ph] free up this incremental dropdown money on non-recourse financing, how do you think about each incremental dollar for capital allocation going forward and how do you characterize what you’re doing in New England in the context of the message you are giving us today?

Thank you, Greg. And I understand that that was the first news. And the timing with the New England capacity auction is something that I don’t control. Let me just start by providing you kind of the general -- my general take on capital allocation and then I’ll go into the specifics of Canal. As you can see from all the actions that we’re taking today, one of my key priorities, the first 90 days of being the CEO, was to focus on capital allocation, first being mindful and aware of the current commodity cycle that we are today and then second the dislocation that we have in our capital markets. It was important to me to afford us the maximum flexibility when deploying capital and to exert absolute financial discipline. I already talked about the actions that we’re taking, one on deleveraging and strengthening our balance sheet, and ensuring that we go through this cycle with the strong position to capitalize on opportunities, but importantly that we’re ready when the market turns around; two, the recalibration of the dividend; and then three, is the focus on cost savings and streamlining the cost structure on the organization. So, when I think about to Canal, it is not a capital allocation decision for 2016, it’s a capital allocation decision that we will make in 2018 and at that point, we will evaluate the current environment. And on that perspective then, we’ll make the determination what is the best use of our capital. But I want to make sure that we continue to generating low cost options at good returns, given the opportunity that we have to lock for seven years a very constructive capacity prices. And as I told you in the prepared remarks, in our focus in the Northeast and particularly in New England is focus on capacity revenues. And now is a dual fuel peaker that is needed in that market at good returns and it’s a capital allocation decision that we will make not today, where we are focusing all our attention on strengthening the balance sheet but in two years.

Thank you. Our next question is from Julien Dumoulin-Smith with UBS. You may begin.

Hi, good morning. Congratulations Mauricio and Kevin.

Thank you, Julien. Good morning.

So, perhaps first the follow-up on Greg’s last question on capital allocation. Can you elaborate on your latest thinking on the wholesale portfolio itself? Obviously it’s been under a good bit of strain, [ph] how do you think about reinvesting in your exiting asset portfolio and timing for rationalization, as you continue to see current -- before it manifest itself?

Yes, Julien. So first of all, I -- we are actually in the last year of what I consider a high water mark with respect to reinvesting in our portfolio. After acquiring GenOn and EME, we increased our portfolio significantly to close to 50,000 megawatts. We went through a process where we optimized that portfolio through fuel conversions and environmental retrofit. So, as you know, we have been executing that plan and this year is the last year of that. What I expect in the next couple of years is really to harvest on that investment. All the market dynamics that we were expecting when we made those investments are playing out, particularly around reliability and capacity for all three Northeast markets, whether it’s PJM for capacity performance New England and New York. We are moving forward that; we saw that during the polar vortex, we acted upon. And it’s playing out the way we thought it was going to play out. Now, with respect to other parts of the country, you know that I will expect absolute financial discipline when it comes to the profitability of our assets. If it’s not economically viable, we will shut them down, just like we have done in the past and just like we are doing today, in New York. If the market conditions don’t support our generation portfolio, we will take action on it. But we need to also take into consideration, not only the current state of the commodity cycle but also the prospective opportunities that we see.

And then coming back to what you were just talking about, the expansion was done on the EME. How do you think auction that’s on here? I mean, obviously it’s a dynamic situation but you paid down some debt there and cash on hand. What you think about next step and the timing of that?

Right. Look, I mean Julien, most of the -- bulk of the GenOn portfolios and PJM, we value significantly our strategic in the Northeast in particular in the PJM area. But what I’ll tell you is in the spirit of streamlining our organization that applies to streamlining our capital structure, I would like to see that. But, we will only do it if it is add value and not having a negative impact on our credit profile. And that’s the option that we are going to continue to maintain going forward. Kirk, do you have any additional comments?

Sure. I mean first of all, I agree with that obviously, we have taken an important step obviously towards deleveraging, as you acknowledged, Julien. But as I have indicated in my past remarks, at various conferences and one-on-ones, that order of magnitude is certainly helpful and necessary but sufficient in order to bring about rightsizing that balance sheet. I’ll remind folks, certainly we have got some near-term maturity with GenOn, we are focused on that as part and parcel of why we went at the delevering that we did. And as you saw in GenOn -- in Mauricio’s remarks, rather we have continuation of our asset sale program, which as we have indicated previously going back to the reset as focused on the Northeast. So, we’d expect it’s likely, more likely that that would probably come out of the GenOn complex which would enhance liquidity. But as the year progresses, certainly I would believe 2016 as the key inflection point, given those loan maturities. And we are mindful of the options obviously, continuing to delever through the open market purchase, as we have done before. We are recognizing -- we recognize that we have got some secured debt capacity there that provides us some alternative as well. So, what I would tell you is that as the year unfolds, I would expect you to hear more from us in terms of what we plan on executing there. And we are hopeful in terms of addressing and rightsizing the capital structure but -- and by reiterating what Mauricio said, we are only going to do that being mindful of preserving the integrity of the NRG balance sheet and the process.

Thank you. Our next question is from Jonathan Arnold with Deutsche Bank. You may begin.

One quick one, Mauricio, I think when you talked about the dividend, you talked about a static dividend being inappropriate in the context of the reduction. But, could you just clarify what we should be expecting going forward from this lower level, is it just to stay here as a token to allow yield investors to own the stock, or do you look to grow it modestly over time?

Yes. No, Jonathan, I mean first of all, the actions that we are taking on the dividend are -- I guess there are two main reasons. One, I think this level is consistent with the nature of power industry, capital intensive and cyclical. But certainly, when I look at the current dividend that we have and the underlying premises or principles that we used to implement it in 2012, a lot of them are not valid anymore. If you recall, when we announced the dividend back then, it was to highlight the value of contracted assets. Since then, we created NRG Yield; we already talk about -- one of the objectives was the yield support. And in this current market environment and with the level of volatility that we’re seeing in the stocks, it really doesn’t accomplish that objective. So, when I put the two together, one the nature of our industry and two, some of the principles that we had when we initiated, it’s just inconsistent. I think what you should expect is this number is the right number today and it afford us the maximum flexibility for capital deployment and capital allocation. And that is my assessment right now on the dividend.

Okay, makes sense. And just another topic, you’ve obviously been streamlining management structures out of the cost reductions et cetera. Can you just maybe give us a little more insight into what some of the key changes have been; where you are in that process; are they largely behind now, just some of the operational changes that may have gone on?

Look, I mean, I think with respect to the streamlining the organization, we started the end of last year. We went through significant efforts to reduce the cost structure. And over the past three months, I have continued with that effort on rationalizing and focusing the organization into our core strengths and as I articulated already in my remarks, focusing on what I think is the core value of energy, which is putting together generation and retail and the plus points around it. So, I am very comfortable today with the management team that I have. This is an area that I am going to continue evaluating in the weeks to come. And I think you should expect from me additional announcements, as I go to even further in line of our businesses, particularly as we go through the outcome of the GreenCo process.

Thank you. Our next question is from Michael Lapides with Goldman Sachs. You may begin.

Hey, guys. Two questions, one capital structure related. Just curious, you’ve announced a lot of debt reduction at the NRG level for 2016. Curious what your thoughts are about the debt reduction targets at the GenOn level in 2016. The only reason I ask that is you highlight the NRG debt maturity coming in 2018, but obviously GenOn has some too, and that some of the growth for NRG, meaning the Canal expansion that just cleared or even the Mandalay repowering that has a contract, those are actually assets owned within the GenOn box. So just curious about kind of the balance between debt reduction at GenOn and some of those growth projects of assets that are at the GenOn box that are actually part of NRG, Inc.’ growth trajectory?

Good morning, Michael. And let me just handle it to Kirk to answer the first part of the GenOn question, and I’ll take the next.

Sure. Thanks Mauricio. Michael, first of all on the Cana, which as I said in addressing Julien’s question, we’ve obviously begun to make progress in terms of delevering that’s been our confidence in doing that, we’re mindful of balancing, maintaining adequate liquidity at GenOn with the need to obviously attack the capital structure at the same time, which is why the asset sale process obviously kick started that. We got a head start on it at the end of the year having announced a couple of asset sales and we’re moving forward obviously to close the second of those two and continuing to focus on completing the remaining 500 or the remainder of the 500 that we announced on the reset, which as I indicated Julien, given the fact that we’re very clear about the fact that we expect those still be in the Northeast, the expectation, the knock-on expectation certainly is that that would continue to be at the GenOn level. So, we use the proceeds of those asset sales to continue to deploy towards deleveraging. And as we move through year, we’re mindful of that 2017 maturity, which is why supplemented by those asset sales, as I indicated also to Julien’s question, we’re focused on the best means apprehensively to use the options that are disposable, not only asset sales, but obviously we’ve got some secured debt capacity there that we’re remindful of. So, all I can tell you as we progress through the year, we’re going to focus on those alternatives and the best means possible, as I said though, always being mindful of preserving the integrity of the balance sheet of NRG given the non-recourse nature of the GenOn subsidiary, which will continue to be the case.

Got it.

Michael, with respect to your second part of the question, what I will say is that we’re going to continue developing options to grow the portfolio. When we have long-term contracts, we’re going to do it in close partnership with NRG Yield to continue replenishing capital; when it doesn’t have the profile to be able to be dropdown, that’s not a capital decision -- capital allocation decision that we need to make today. And we’re going to evaluate it when we have to actually deploy that capital. But I think it is important to continue to generate these projects in the context of growing our portfolio at good economics.

Got it. And one follow on Texas related, just curious our view is that coal plants in Texas are struggling to have cash break even right now. And even more importantly nuclear plants are generating limited cash flow, maybe positive but limited. At what point do you start considering coal retirement at ERCOT?

That’s a great question, Michael. And so, let me give you my perspective on it. The current market in Taxes has been very disappointed, despite what I consider is still pretty strong fundamentals, strong demand and a pricing that doesn’t incentivize new build economics, even though we have seen something, what I can say that out of not economical engine. When I look at our portfolio, particularly Parish and Limestone for and STP, they are very large in scale; they are environmentally controlled; and I would say that they are probably one of the most cost advantage based load plants or coal and nuclear plants in the state. We have identified what we believe is the least competitive assets in the supply stack when it comes to coal. And we believe that if the market continues to be at these levels, it will not be possible to sustain the operation of some of these assets. So that’s why I think there is going to be a supply rationalization in the immediate term and we should see a recalibration of the market. I feel comfortable right now with the three of our base load plants. But I think we have a pretty good track record in terms of if and when these plants are not economic and the prospects of these plants are not positive, we will act upon. And we have done that in other regions and there is no reason why we’d do it in Texas. But right now still not the time and I think the supply stack will react before we get to that point.

Thank you. Our next question is from Steve Fleishman with Wolfe Research. You may begin.

The $513 million of available capital at year-end that you are using in 2016, is that above kind of your normal cash levels? And if so, what cash do you have kind of available beyond that?

It is -- Steve -- and I’ll let Kirk give you specific details, but this is above the cash reserve that we have for both NRG and GenOn.

Sure. And this was -- good morning, Steve. This is one of the reasons why -- I think in a couple of points in my prepared remarks I made specific reference to contextualize capital available for allocation, which we consider to be a cash surplus versus cash on the balance sheet. And so, when we calculate that, we start with the minimum cash balance that we reserve at the NRG level. So, we set aside $700 million for liquidity. Now that -- part of that liquidity is what we need for cash collateral proceeds for example. So, as we post cash collateral, we consider that a utilization of the minimum cash reserve. So, whatever we deduct at any given time, think it about as $700 million in minimum cash minus the amount of cash collateral we posted. Comprehensively, and this is outside of capital available for allocation, we focus on liquidity separately. So, liquidity is that $700 million of minimum cash at the NRG level plus the $2.5 billion corporate credit facility. That’s separate in a part from what we consider excess capital, which is with that $513 million that you refer to represents. Does that help?

Yes, I think so. One other question, just on NRG Yield. Mauricio, as you thought about NRG yield, what is your view of kind of a long term strategy around it? And if it stays at a relatively depressed stock price, what are your options?

Yes, Steve. Well, I mean I’ll answer it from the NRG standpoint, and we are going to have the NRG Yield call in about 30 minutes. So, let me just say that the relationship between NRG and NRG Yield is there is a lot of synergies and it’s a symbiotic relationship. It’s of great importance for NRG. This is a way for us to access low cost of capital to replenish our capital, particularly on the development front in this type of commodity cycle. We need to have a good development platform for NRG Yield to have clear line of sight in terms of the growth and the potential dropdown that we have. That will benefit energy yield and a healthy NRG Yield is good for NRG in terms of our ability to stay competitive in developing new sites. So, that’s kind of my take on it. And I want to be very careful that I give you the answer from kind of the NRG perspective. And we can go into more detail when we go through the NRG Yield call.

Thank you. We have time for one more caller. Our last question is from Neel Mitra with Tudor, Pickering. You may begin.

Hi, good morning. I just had a follow-up question on the ERCOT coal power plant. Are there any opportunities to renegotiate the transport agreements or lower your PRB coal costs, so that those plants are more cost advantage at this point?

Good morning, Neel. And I will discipline myself to pass the mic to Chris Moser, who is the Head of Commercial Operations. Although under my watch, COO, I renegotiated a number of rail contracts. They have been good partners in this downturn of -- this commodity cycle downturn. But Chris, what are your thoughts on that?

No, I think that’s fair. I think we continue to work with our coal supply partners, both the mines -- the coal miners and the railroad company as well to make sure that we add to the plants competitiveness, to the extent that we can. They, as Mauricio just alluded to, have been good partners with us so far and we continue to look forward to working them with them in the future.

Thank you. And I recognize that you may have a lot more questions. We will get to them, and Kevin and the IR team will be available for any follow-ups. But unfortunately, we have a hard stop; we have to get NRG Yield call ongoing. So, thank you. And I look forward to continue this conversation. Thank you, operator.