Good day, ladies and gentlemen. Welcome to the NRG Energy first-quarter 2008 earnings results conference call. I'd now like to turn the meeting over to Ms. Nahla Azmy. Please go ahead.

Thank you, Michelle. Good morning and welcome to our first-quarter 2008 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 the website. A replay and podcast of the call will be posted on our website. This call, including the formal presentation and the 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. Now, for the obligatory Safe Harbor statement. 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 these 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 this press release and this conference call. In addition, please note that the date of this conference call is May 1, 2008 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. 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 to most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's press release and this presentation. Now with that, I'd like to turn the call over to David Crane, NRG's President and Chief Executive Officer.

Thank you, Nahla, and good morning everyone. Today, I'm joined by Bob Flexon, our Chief Operating Officer, and Clint Freeland, our Chief Financial Officer, both of whom will be giving part of the presentation today. I'm also joined by Mauricio Gutierrez, who runs or Commercial Operations Group and will be available to answer questions. In addition to other colleagues from NRG, we have new... two new colleagues from NRG joining us. Hopefully, you've all seen press releases on this recently. We have Jonathan Baliff and Michael Liebelson with us. Both joined the Company as Executive Vice Presidents enhancing what I believe to be already the best management team in the business. Then for the first time ever on this, the 17th earnings call that we've made as the new NRG, we have two special guests from outside the Company with us today... Yasuharu Igarashi, the President of Toshiba Power Systems, and Hiroshi Tsukamoto, the Senior Vice President of Toshiba America. Both of whom are here as our special guests at NRG today as we are in the process of closing today the formation of Nuclear Innovation North America, or NINA, the joint venture that we've entered into with Toshiba not only to develop South Texas Projects 3 and 4, but also to develop other advanced boiler water reactor projects in North America. So, welcome to Mr. Igarashi and Mr. Tsukamoto. Now, I want to... in terms of the style or the order of the presentation today, I want to remind anyone who is new to NRG or who may have missed our last earnings call in late February that we reorganized our executive management team on March 1. As a result, on this call, Bob Flexon, who is now our Chief Operating Officer, will now review the Company's plants and…

Thank you, David. I will begin this morning with a review of our first-quarter operating performance on slide 6, which in summary was excellent. Starting with safety, our recordable incident rate during the first quarter was 0.74. While we relentlessly strive to achieve a reportable incident rate of 0, our actual rate in the first quarter continued the progression we started several years ago towards that goal. The recordable rate of 0.74 is significantly below the industry average recordable rate of 3.9. One of our important safety goals for 2008 is extending the number of our plant locations that participate in OSHA's highly regarded Voluntary Protection Program. I will be providing updates on our progress during the course of the year. Our baseload operating plants also put up very impressive numbers during the first quarter, contributing 641,000 MW hours of increased coal and nuclear generation versus the same period last year. Baseload EFOR in the Texas and South Central regions were outstanding at 1.7% and 1.6%, respectively, while our Northeast region showed significant improvements quarter-over-quarter. As David highlighted, STP our nuclear site, has now run 12 full quarters without a forced outage event. Our efforts to improve fleet-wide plant reliability began several years ago as part of FORNRG, or Focus on ROIC. While there will likely be times in the future where we will experience higher EFOR numbers, our continued focus on safely running and maintaining our assets will drive reliability over the long-term. We continued building our coal inventory as we prepare for the peak summer season and anticipate the South Central BCII outage and the coal barge unloading area later this year. The inventory levels above the targeted range primarily relate to PRB 8400 used in our South Central and Texas locations. For the first time in several…

Thank you, Bob. Starting on slide 11, NRG has a solid first quarter as the Company generated adjusted EBITDA of $525 million compared to $500 million in the first quarter of 2007. As David and Bob have indicated, our South Central region had an outstanding quarter and accounted for a significant portion of the Company's year-over-year gain. Cash flow from operations was $60 million versus $106 million in last year's first quarter, as cash collateral outflows, working capital adjustments, and timing of interest payments more than offset the improvement in adjusted EBITDA. I would note, however, that a significant portion of these cash of flows are timing-related, and we expect them to either reverse or be smoothed out during the year. Taking our first quarter into account, we've updated our forecast for the year and we're reaffirming our adjusted EBITDA guidance of $2.16 billion and cash flow from operations guidance of $1.5 billion for the full year. We continue to make progress on our 2008 capital allocation plan, as we completed $40 million in share repurchases and $143 million in debt repayments between the year-end earnings call on February 28, 2008 and the end of the first quarter on March 31. This brings aggregate share repurchases and debt repayments to $140 million and $454 million, respectively, under the 2008 capital allocation plan since its commencement in December 2007. As we look forward to the remainder of 2008, we intended to complete the capital structure portion of our capital allocation plan with the repurchase of an additional $160 million in common shares, settlement of the common stock call options related to the CSF-1 structure, and repayment of $68 million in consolidated project debt. The investment component of the 2008 capital allocation plan remains on track as well, as the Company invested…

Thank you, Clint. Well, in a few minutes... I want to take a few minutes, before we open the lines for questions, to focus on one of our initiatives. If you turn to page 18, you'll see several of the long-standing corporate initiatives. These initiatives I think in many ways define NRG, and certainly they drive our efforts at value creation for all of our stakeholders. Today, I want to focus just a few comments on just one of these, and that's the activities of our Commercial Operations Group. I want to talk about the Commercial Operations Group this quarter because not only they had another exceptional quarter in this case hedging our assets, but they did so notwithstanding the unusually tumultuous market conditions that existed, as the problems on Wall Street, particularly the problems around Bear Stearns, from time to time infected the commodity markets. And in that regard, it's important that you understand what we do and what we do not do because, as prices rise and markets swing, it becomes inevitable that related commodity prices occasionally delink and correlations temporarily breakdown and this leads to mark-to-market swings in our accounting results, which given higher price levels and increased hedging activity, are somewhat bigger this quarter than previously. So if we turn to page 19, I want to start by reminding you of what our Commercial Operations Group is tasked with doing. Their mission is to systematically, but opportunistically reduce the risk inherent in being fundamentally long physical generation, in an immensely capital intensive, highly cyclical commodity business. They do this in multiple ways, through filling gaps in our load-serving obligations, managing basis risk, interfacing and taking our open position to market, procuring fuels and emission credits to the extent needed, and implementing our baseload hedging strategy. The…

Thank you. [Operator Instructions]. Your first question comes from Elizabeth Parrella, Merrill Lynch. Please go ahead.

Yes, thank you. One question for you... could you talk a little bit about your reasoning as to not updating your market EBITDA slide that you included in the last quarter's call?

Clint?

Sure. Elizabeth, I think our thought, at this point, is to update the market EBITDA slide when we provide annual guidance, typically during the third-quarter earnings call. At that point, like we did last year, we provide our sensitivities for the year based on a number of different commodities. So we believe that should give you a pretty good view into the potential performance, on an open EBITDA basis, of the Company for the year. So, at this point, I think our intention would be to refresh that analysis when we provide 2009 guidance on the third-quarter earnings call.

Okay. A question on a different area... you mentioned, with respect to your in-city capacity, that you had hedged I think you said the majority of it for 2008. There is obviously a big change between the '07 price and the '08 market-clearing price. Can you talk... give us a little bit more color on kind of relatively where your hedges are and also whether you've hedged any of it for 2009?

Elizabeth, we won't get to specifics on prices for 2008. We do have some hedges on 2009 as well, but certainly the majority of the hedges we have are in '08.

Okay. Some, but it sounds like not a majority for 2009, would that be fair?

That's correct.

Could I ask one other question, just in general on the hedging strategy? It's sort of a two-part question. Is there any kind of rule of thumb you can provide us in terms of sensitivity to additional collateral posting or sensitivity to changes in gas prices; how much collateral you would have to post on the current hedges? The other part of that question is can you just talk about what the capacity is under the first lien structure for doing more hedges?

Well, on the first one, the sensitivity of cash collateral postings, relative to increases or changes in gas prices, is basically a $1 move in gas prices across the board from 2008 to 2014 which obviously would be an enormous move; would be about an incremental $65 million in margin postings. But again, that's gas. I mean, we obviously trade in some other commodities as well. On the first lien structure, Clint, do you want to talk about that?

I don't have the exact figures with me, but right now we have got pretty significant room left under the first lien hedge program. We can hedge up to 80% of our baseload capacity and typically the hedges that we do, the longer term strategic hedges are the hedges that are underneath that program. So, at this point I believe the numbers are in the 50% to 55% of that available capacity going forward.

50% to 55% available?

No. I am sorry, used... used to date.

Used to date and that's like a five-year number, Clint, the 80%, like through 2013, or is it shorter than that or…

Actually I have the numbers here. Of the 80% amount that we can hedge under this program for 2009, we've used about 58% of that 80%. For 2010, we've used 55% of that 80%, and for 2011, we've used about half.

Your next question comes from Dan Eggers of Credit Suisse. Please go ahead.

Hi, good morning. Welcome aboard, Jonathan. The first question for you, if you could talk a little bit about the contraction in Texas heat rates, what that one does from an accounting perspective to hedges in place; and then, two, how that is affecting or changing your thought process for hedging out forward power, given that heat rate is quite a bit lower than what we've seen in the past.

Well, let me hand that to Mauricio, because I'm not sure how much he's going to want to be telling you about the... our... how it's going to change our hedging strategy, but go ahead, Mauricio.

Sure. Well, I mean, this was another quarter where we saw compression in heat rates in Texas through 2013. I would say particularly on the north zone, which was more impacted by the uncertainty of wind generation. My general take is, this was driven primarily by the sharp increase in natural gas prices which tend to naturally compress heat rates and two is the uncertainty around the buildup of transmission in Texas. The latter, I think the relevancy is probably beyond this trading period, after 2012 and 2013. We continue to be bullish, and I think 2008 is an example of that. While heat rates decrease 2009 and beyond, 2008 heat rates increase significantly, which is more in line with our expectations, at least in the next three to five years.

Given the market concerns about transmission, wind, etc., does that have any impact on your longer-term reinvestment strategy for Texas as far as building new plants, or do you think the market is overreacting to these potential supply events?

Well, I think this is... the question of the transmission build out to accommodate renewables in Texas is the big issue for the next few months. In some ways, I think there is a bit of an overreaction of the market. I think, as we look in terms of our asset position, if you think about the impact of wind long-term in Texas, it's certainly, again depending on how much transmission is going to be built, it certainly can nick our baseload generation, which is the center of our profitability in Texas. But I say nick because it would mainly impact our baseload generation off-peak and during the shoulder seasons. I think where it has more of a direct impact is on the seven heat rate combined cycle plants, and we don't have many of those. But there have been reports in the press about various people sort of looking, thinking twice about adding additional seven heat rate gas-fired combined-cycle plants. I think it would be fair to say, you to put us in that same category is that how much we would do of that certainly has to be taken into account, the wind impact.

Thank you. Your next question comes from John Kiani from Deutsche Bank. Please go ahead.

Good morning.

Good morning John.

I have a few questions. First, can you provide a little bit more color on the improved performance and EBITDA contribution from South Central?

Yes. Do you want to ask all your questions first or do you want to... just so we can prepare ourselves?

Sure, sure. The second question is what's your latest view on MIBRAG and the potential monetization of that asset?

Okay. You're going to limit yourself to two? Obviously you're scared of Nahla, okay.

I am very scared of Nahla.

Bob, do you want to talk about South Central?

John, on South Central, when you look at the EFOR rates, and I think the plant has done a great job over the past several quarters of improving it, but this really just dates back several years of being more judicious and making sure that we're doing all of the preventive maintenance we're supposed to be doing. We are reinvesting where we need to be. We've got targets to make these plants just be top quartile or in Texas, top deciles; we just continually strive for it. Obviously, having the MW makes a significant difference for us and we are committed to drive these plants, run them well and maintain them well to get these types of performance rates.

And from a hedging perspective, it sounds like you all have done a good job of hedging the short position for the load following contract in the summer months out at least a few years. Is that safe to assume?

Yes, I think that's the other part of it, too, John, on the reliability, where we try to minimize the cycling of the plant down in South Central by having tolls to back up some of the peak periods when the plant has to run up or the off-peak where it comes down. We try to balance developer using those toll arrangements.

Okay, thanks. That's helpful.

John, on your second point, I mean, we certainly are considering our MIBRAG options and we tend to these things with the international assets in sequence, number one. Number two, we are in a 50-50 partnership at MIBRAG and there's been a change in ownership of the 50% partner, last November and that has led subsequently to sort of occasional changes in personnel that we are dealing with. So, we would prefer to evaluate our options together with our 50% partner, because we've had trouble in the past trying to do something with the 50% partner not on board. So, we're looking at the situation, considering what our options are for value optimization, but it's gone a little bit more slowly than we thought. But we don't see any reason why we wouldn't be considering our options fully at this time.

Thank you. [Operator Instructions]. Your next question comes from Scott Thomas [ph] of Neuberger. Please go ahead.

Good morning folks, can you hear me?

Yes.

I just had a quick follow-up to Dan Egger's question from before. David, you mentioned, in your comments, about the effects of some of the financial players in the markets maybe derisking and selling off and maybe affecting some of the heat rates in PJM in those markets. Have you seen that more broadly in the Texas markets or in the West?

So the question is specifically about whether, financial players in some distress are unloading positions because of financial distress and more in Texas than in PJM? Is that the…

Yes, just looking at the timing of when those heat rates may be moved down over the quarter, is there some... can you make some educated guesses about whether that was a factor?

Well, Mauricio is much more at the coal phase on this one, so Mauricio?

I would say that it hasn't spilled over to Texas, and my take is probably localized to the Northeast markets.

Okay, that was really it for me. Thanks, guys.

Thank you. Your next question comes from Ficus Devlavetti [ph] of Morgan Stanley. Please go ahead.

Hi, good morning, guys.

Good morning Ficus.

Just... I know you guys are substantially hedged on your PRB purchases for a while, but any thoughts on how that market and its pricing may be evolving over the longer term, given what we've been seeing in the Eastern markets?

Well, I don't think that... I would invite Mauricio if he has a different point of view, but focusing on Powder River Basin itself, we see limited ability for what's going on with the Eastern prices, in terms of the international demand, to actually pull Powder River Basin prices out of where they stand now. Over the medium to long term, we think, with Powder River Basin, it is going to come back to what it's always come back to... is making sure that the suppliers get a bit of a margin over their costs and their cost levels are rising. So, maybe that supports prices close to where they are. But we don't see them blowing off from here, and that's particularly the case for 8400 Powder River Basin coal which, as we demonstrated on slide 7, is the most substantial portion of our... of what we buy. Mauricio, do you... no, Mauricio agrees.

Okay. Great, thank you.

Your next question comes from David Silverstein, Merrill Lynch. Please go ahead.

Hi, thanks for the comments on the ERCOT market. Just to touch base again on PJM, I know you guys don't have as many MW in the PJM market specifically, but what I was wondering is if you had any other theories as to why the sharp sell-off has occurred in PJM in the face of just rising coal and natural gas prices.

You know, I think, if you look at resource margins and pipeline form of generation, it continues to be fundamentally strong. I think this is probably just a short-term market trading dynamic.

Okay, thanks.

Thank you. Your next question comes from Lasan Johong, RBC Capital Markets. Please go ahead.

I will ask two questions and then just shut up because I, too, am very scared of Nahla here. Essentially my two questions are, one is a matter of confusion because I'm a little puzzled as to how things are working in terms of your hedging policy. My understanding is that I think, David, you're correct, if you have a forward curve and you don't hedging against that forward curve, you're taking a view that prices are going to go above that forward curve. On the other hand, if you take the opposite of that and say, I'm going to hedge 100% against that forward curve, then the view would be that you don't believe prices will be going up above that forward curve, and so the markets are being foolish and you're going to lock-in that price now. How do you then juxtapose that position versus your position which I think is the correct one, that the natural gas fundamentals are very bullish? If you look at Slide 21, the gap between oil and natural gas per mmBtu equivalent is very low, and as you correctly point out, that's probably going to move up. So, then it doesn't quite jive between one picture and other side. That's my first question. The second question is, in your alliance with Toshiba, if I'm not mistaken, Toshiba has said they would do four nuclear power plants together with NRG. So, I'm wondering if the $3800 KW pricing that Toshiba is guaranteeing NRG would be extended to the other two projects and how Toshiba can achieve that if they don't know when these contracts would be signed and when the plant operations would start and when they would start building the assets. With that, I will just shut up and let you guys answer. Thank you.

Well, those are two good questions. Let me tackle the Toshiba one first while it's fresh in my mind. First of all, I don't recognize the $3800 number. I think the number that we put for the actual EPC was a $2900 number. But what we've said is Toshiba, at this point is... it doesn't matter whether it's $2900 or $3800. Toshiba at this point is guaranteeing neither of those numbers. The reason they are not is for the very point that you raised, Lasan, which is no one can guarantee a number until they know when the plant is actually going to be built. The process that we've entered into with Toshiba, as it has with price, is to establish a price now as if the plant was going forward, which is built around again for the EPC, the 2,900, and then to have an open-book process with Toshiba on the key elements of the price until such time as we get the combined operating license from the NRC, which we expect sometime in late 2010 or 2011, at which point the price will be fixed. With any change that's been made from the baseline justified at that time and taking into account things that will also fluctuate between that time such as the exchange rate risk. So, that process is one which we think protects the owner from the fact that one of the issues you have in the permitting process is that you have to commit to someone who is going to build the plant virtually right upfront. It's virtually impossible, with the way the NRC approval process is, to have a meaningful competition between EPC suppliers at the time you get your combined operating license. So the process we've worked out with Toshiba is one that…

Not--

I'm equally afraid of Nahla, so at this point, I will shut up.

Thank you. Your next question comes from Mitan Tahiya [ph] of Lehman Brothers. Please go ahead.

Good morning.

Good morning

Now, the bonds have come up to the 103, 104 level again, and obviously, last time the company tried to do the Holdco structure, but now the bonds, they're are above 101. Do you think it's possible that you might come back to get approval even if you don't fund the Holdco at this point?

You know, that's something that we constantly think about. We always give thought to how to provide additional flexibility for capital allocation purposes. We have certainly noticed the rally in the high yield market and it's shone through in the prices for our bonds. But at this point, I would say that it's not kind of on the forefront of our thinking.

That's great. Thank you very much.

Thank you. Your next question comes from Michael Lapides, Goldman Sachs. Please go ahead.

Hey guys. Congrats on a good quarter. Really two questions... one on your hedging and hedging strategy. If you kind of look at page 22 and the implied gas price in some of your older hedges, it's pretty decently below where the current forward price of natural gas is. Are you considering at all another hedge reset type of initiative? That's question A. Question B is on coal and it's really on rail. Can you talk about trends you're seeing in terms of rail costs or rail contracting from the PRB to your plants or just from the PRB into the market in general?

Clint, do you want to ask the... as the architect of the first hedge reset, do you want to talk about hedge reset Part Deux?

Hi Michael. We have gotten that question a couple of times and I think its fair, I guess the way that I would answer that is, is that, right now that would not be a priority for us. One of the issues that you as you get from a practical matter even if you decided that you wanted to do something is access to the debt market. I am not sure that the credit market would be there in the size that you'd need in an efficient and price competitive way to do that transaction. But even if it were, I would say that right now that would not be a priority for us. We think that at this point, the open EBITDA analysis that we provided really kind of demonstrates the type of EBITDA and cash flow flowthrough that you would see with the hedge reset. But I would just say right now it's not a priority for us.

And what are we seeing in the coal/rail markets, Mauricio?

I mean, clear to the trends you saw, you know, moving north and we expect that trend to continue. I guess that would be the short answer. I don't believe we have disclosed in the past our specific transportation costs, and we're not going to do that on a going-forward basis.

Okay. One follow-up and I will test Nahla here for a little bit. Going back to the guidance you gave and, Clint, I think you responded to this that annual guidance for '08 and more importantly the open kind of EBITDA guidance that you provided, I think it was around 3 billion on an open basis. I don't remember what the gas price was that was embedded in that and what the sensitivity to the gas price was that was embedded in that.

You know, Michael, actually I don't have that sensitivity with me.

We will get that to you.

Okay, we will follow-up off-line. Thank you.

Thanks Michael

Thank you. Your next question comes from Chris Taylor, Evergreen Investments. Please go ahead.

Can you talk about heat rates, especially in Texas? Because the way I look at it, and correct me if I'm wrong, I mean, you've hedged away your gas price risk but you've left open, to a large extent, your heat rate risk. It seems like gas prices are going in your favor if you are unhedged, whereas heat rates are going against you, where you're not hedged. Is that a fair way of looking at your 2008 outlook?

Well, I think it's a question of heat rates are expanding in 2008 and contracting in the out years. So it depends on what you're talking about in Texas. Is that --?

Well, the whole heat rate forward curve looks weird. I mean, what's happening in Texas? Why is Texas... is it really just wind power? What's happening to the heat rates in Texas? Just give us a whole overview there.

Well, go ahead, Mauricio.

I guess we covered it, but I will expand again. I think we do agree with you that the heat rates look weird through 2013. I think it's probably an overreaction on the uncertainty of the transmission build-out to support I guess the potential wind generation in West Texas. If you look specifically at 2008, our heat rates have increased significantly. I think that is probably more in line with what we can expect, at least from now through 2011, 2012 when that transmission could potentially come online. I mean, we maintain our bullish view on heat rates and I think that is consistent with our hedge position.

If I could just... Chris, I don't know how long you've followed heat rates in Texas, but you know, there was a similar phenomena a couple of years back after TXU announced they were going to build an enormous number of baseload coal plants. You know, it actually crushed the heat rates in Texas in years far beyond when any human being could conceivably build a coal plant. So, I mean in a sense we're seeing the same thing. And I think that the market will get better knowledge about when the transmission could be built and how much will get built as the PUCT this summer goes through their hearings and makes a decision on how much transmission to build. But as Mauricio says, we know of no plan that provides for substantial transmission of additional transmission to bring the wind power from West Texas into the populated parts of the state, certainly now into the south zone before 2012. So, why heat rates before 2012 would be crushed over that. You know, it is hard for us to understand. The other phenomenon that we've seen is that heat rates in all markets tend to compress temporarily when forward gas prices are shooting up. But that's not a phenomenon that would be limited to Texas at this point. That would probably also explain [inaudible] degrees in Northeast.

And short-lived. I mean, power tends to lag gas and at one point, we will catch up.

Yes. So, we are not overly concerned about this, but you're right. We are speaking during moments of heat rate aberration. Operator, I think we have time for one more question.

Thank you. Our final question comes from Elizabeth Parrella of Merrill Lynch. Please go ahead.

Thanks for allowing me a follow-up. I guess I must not be sufficiently scared of Nahla.

Thank you, Elizabeth.

I just wanted to ask Clint if he could give us an update on the level of the restricted payments basket.

Sure, Elizabeth. As of the filing of the Q, we will have about $150 million in restricted payments capacity.

Okay. Thanks all to you very much.

Thank you, Elizabeth, and thank you all for participating in the call.

Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line, and have a great day.