Good day ladies and gentlemen and welcome to the second quarter 2009 NRG Energy Earnings Call. My name is Erica and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) I would now like to turn a presentation over to your host for today's call, Ms. Nahla Azmy, Vice President of Investor Relations. Please proceed.

Thank you, Erica. Good morning and welcome to our second quarter 2009 earnings call. This call is being broadcast live over the phone and from our website at www.nrgenergy.com. You can access the call presentation and press release furnished with the SEC through a link on the Investor Relations page of our website. A replay of the call will be also available on our website. This call, including the formal presentation and question-and-answer session, will be limited to 45 minutes. In the interest of time, we ask that you please limit yourself to one question with just one follow-up, and 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 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 July 30th, 2009 and any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of future events except as required by law. During this morning's call we will refer to both GAAP and non-GAAP financial measures of the company's operating financial results. For complete information regarding our non-GAAP financial information, to the 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 am pleased to turn this over to David Crane, NRG's President and Chief Executive Officer.

Thank you, Nahla. Good morning everyone, and welcome to our second quarter earnings call. This call is quite unusual in that comes shortly after rather than just before both the provision of updated full year guidance and an extensive investor outreach effort by the company. What this means is that there's relatively little new information provided today and as many of you have been very generous in giving us your time over the past few weeks, we intend to partially repay that debt by keeping this call short and sweet, and I do mean sweet. If you're looking at the slides, you may want to be looking at slide four. In our recent conversations with you, we have, for obvious reasons, been more focused on the long-term value proposition of the company. The fact is that the company's also delivering absolutely extraordinary results right now in the depth of the first great recession of the 21st century and that performance should not be overlooked because as all of you know and as all of us at NRG are acutely aware, long-term value is created by a succession of strong quarterly performances. So today we intend to shine the spotlight on our current performance. Here to do that are John Ragan, our Chief Operating Officer, who will review the performance of our plant and commercial operations groups; and Bob Flexon who will review our exceptional second quarter and first half 2009 financial results. John?

Thank you, David. Good morning everyone. During the second quarter of 2009 NRG continued to build on the strong operating performance that it had achieved during the first quarter and was well-positioned to enter into the critical summer months. On slide six, we highlight some of our second quarter achievements. Our focus on safety across the organization has remained strong with an OSHA recordable rate of 1.31 through the first half of 2009. Our OSHA rate continues to exceed the top quartile benchmark for the industry of 1.52. While this is a solid accomplishment for the company, safety continues to be a top priority for the management team and all of NRG's employees. Some of the activities that we have undertaken during the second quarter to reinforce safe work practices have included a national safety stand down with all of our corporate employees. The implementation of our new safety work policy to strengthen our expectations with our contractors, and advancing our efforts to achieve OSHA's DPP status at three of our generating facilities. Our baseload operations have had another solid quarter with our plant personnel delivering strong performance even though we continue to face challenging market conditions caused by cycling, an increase in reserve shutdowns and additional starts for our coal assets especially in the Northeast. From a construction standpoint, our EPC Group has continued to move forward with multiple projects across the fleet. We completed the construction of Dunkirk 3 & 4 back-end controls and delivered the system into successful operations at the end of May. Construction will be completed this fall on the remaining two units, Dunkirk 1 & 2. Additionally construction has begun on our peaking units in Connecticut at the Devon site. These new units are a part of the Repowering NRG program. I will review…

Thank you, John. Good morning and thank you for joining our call this morning. Beginning with the financial highlights from slide 11, as David highlighted in his opening comments, the company is achieving record financial performance in 2009 due largely to the acquisition of Reliant Energy. Adjusted EBITDA for the second quarter in the first half of 2009 came in at $747 million and $1.224 billion respectively. Both the quarter and year-to-date performances are all-time highs for the company. Cash from operations increased 66% to $722 million for the first half of the year while free cash flow from recurring ops was up over 94% compared to the first six months of last year. Cash from operations was the single biggest contributor to the June 30th record liquidity level which exceeded $4 billion. Liquidity also benefited from the high yield bond offering in June that raised $678 million in net proceeds and the MIBRAG sale which provided after-tax net proceeds of $260 million. Our full year outlook was previously updated on July 8, 2009. We raised our adjusted EBITDA guidance at that time by $325 million to $2.5 billion. The wholesale business continues to be largely protected by our hedge positions offsetting weak commodity prices and generation demand while the retail business outlook continues to benefit from these weak commodity prices and the low demand within the ERCOT market currently being experienced due to warmer than normal weather. Few high-level priorities for the second half of 2009 includes successfully executing and completing our capital allocations plan by repurchasing $500 million of our common shares and unwinding the credit sleeve currently supporting the retail business. The quarter-over-quarter comparison on slide 12 clearly highlights the exceptional performance of Reliant Energy, generating $230 million in adjusted EBITDA in its first two months of…

Thank you Bob, and thank you John. As we look forward for the remainder of the third quarter our intent, quite simply, is to focus on delivering the type of financial and operating performance for the balance of 2009 that we are reporting here today in respect of the first half. If we perform at such a level, we will produce for our shareholders across the board absolute record full year financial results. This is in, our opinion, the quickest and most likely path to further correction in our share price performance. Beyond our focus on current financial and operating performance, there are things we want to do as soon as possible and we have listed some of these on slide 20, both to improve the core business platform and to demonstrate the value of certain elements of them. Our sense of urgency in this regard is in-part the product of us at NRG being an inherently impatient company and in-part as a result of the consequences of the Exelon situation. As a management team that's driven to move the company forward each and every day and each and every quarter, we feel that the second quarter of 2009 was a bit of a loss in this regard. Certain aspects of some of our development projects essentially froze during the quarter as the proxy contest drew near, as some of our partners, suppliers, and off-takers put pencils down to await the outcome, with those clouds having parted over those projects, we want to push hard to make up for time lost. The other part of our focus for the balance of the quarter can be generally described as concentrating on basic corporate blocking and tackling; budgets, personnel, organizational improvements, procurement and major maintenance planning; the type of things that do…

(Operator Instructions) Our first question comes from the line of Ameet Thakkar with Deutsche Bank. Please proceed.

David, I think on the July 8 call, you alluded to that you were pretty confident you were going to be able to get something done as far as selling a portion of the equity in STP units 3&4 and then having the uncertainty of Exelon prevented you guys from doing that, any update on that or is it too soon to go there?

Well I would say that we are still highly confident. Yes, the update is that just a renewed sense of confidence that we will get that achieved before the end of 2009, before the end of this year. I am reluctant to put a month on it because I don't want to compromise our own position in the discussions but that’s obviously something that I am going to be focused on working with Steve Wynn and the NINA team and so I think that is in the offing. I just don't want to be too specific on exactly when we will get there.

If I could just ask one quick question on what you guys have seen as far as kind of demand in ERCOT. It looks like in June demand was off kind of about 50 basis points on a year-on-year basis but we obviously had a lot of hot weather in Texas. On a kind of weather adjusted basis, what are you guys seeing for demand?

That is a weather adjusted number. Do we have a non-weather-adjusted number John or Mauricio?

I don't have that with us. [1%] was the weather adjusted number

[1%] of?

1% below year-on-year last year.

But those numbers are weather adjusted in the presentation and again, that's a contrast with other regions. I think we see a positive situation now regarding Louisiana as well but not much signs of improvement in the Northeast.

Next question comes from the line of Michael Lapides with Goldman Sachs.

Two questions about your Northeast gas units; first on the new ones being developed in Connecticut. Can you talk a little bit about the economics? I think the contracts are publicly disclosed; just curious about kind of the capacity payments and whether there's any variability there. On the New York City power markets, kind of any updates on the Poletti retirement and what that would do to supply-demand fundamentals in the New York City market?

I think we will split that into two different speakers on that. As far as the Connecticut contracts, they are long-term contracts with the host utilities in the area. There is no variance in the way the capacity fees are paid. They're very stable contracts over the 30 year life.

With respect to New York, what we have seen is a significant improvement in capacity prices from last summer to this summer. Just to give you an order of magnitude, rest of state have been clearing for this summer close to $4 per KW a month. Last summer we were about $2.50. In New York City we're back up $8.60 per KW a month versus $6.00. So you have a summer-on-summer increase of close to 40% to 50%. With respect to Poletti, we are tracking closely. It should be retired next year and what that is going to do is going to put some upward pressure on capacity prices in New York City. Keep in mind that we also have a new power plant coming online next year around Albany, the Bessy Corp, that's about 500 MW. But we believe that the retirement of Poletti which is close to 850 MW is going to offset completely that.

Got it and just following up on Connecticut. Have you guys ever disclosed what the capacity payment is for those plants, for the new ones?

The way that is structured is the contract for differences between the capacity price that's set by the New England ISO and what the market bears. I don't think it's a number that we've disclosed in the past.

Our next question comes from the line of Brian Russo with Ladenburg Thalmann.

Could you just talk a little bit about the downward sloping coal and lignite hedges you have at your Texas baseload and where that pricing might compare to where forward or spot prices are?

Sure, well I mean what I will say is that those hedges are probably close to where current market is. We haven't disclosed in the past the specific levels. We try to be opportunistic about when to execute those hedges. If you look at the coal markets, they have been in [contango] for a long period of time and we have been waiting patiently to see those prices come back to the price targets that we feel comfortable with and we execute. So what I will say is the prices that we have on the hedges were not executed when the market was extremely high beginning of last year.

Just lastly, you guys reported about a $31 per MWh average margin in retail. I think historically Reliant had kind of targeted about a $20 per MWh margin on the residential customer. I'm just wondering are these outsized margins sustainable or is it just a function of the rapidly declining supply costs relative to a more sticky retail rate?

Brian, I think sustainability is sort of in the eye of the beholder. Would they be sustainable over 10 or 15 years? I don't think we would be making that claim. But I think the term that's usually used is sticky. So as you know, Reliant has cut prices twice since we owned it. So, we think in a low commodity price environment, you probably can get a margin above the sort of mid-level margin for a good period of time. But I think that we don't expect to keep that margin at that level continuously.

Just one more question, Cedar Bayou, is there an estimated full-year margin contribution from that JV?

It's relatively small, Brian. I'll estimate a little bit. I'm going to assume for the balance of the year, it's probably a $15 million to $20 million impact.

The next question comes from the line of Lasan Johong with RBC Capital Markets.

Congratulations on a good quarter and beating back the barbarians at the gate.

Lasan, those are your words; not ours.

I understand, I'm not being derogatory in any way, shape or form; just borrowing the title from the book. There is a pretty severe drought going on in Texas from what I understand. Is this going to have an effect on operating any of your coal plants or STP in any way?

No, we don't think limitations on water resource would have any impact on our plants in Texas.

That's great. David, why don't we just simplify the argument? I think you and I can both agree there's significant value in STP 3&4. I have my views on what that is and I'm sure you have your views on what you think it is. Can you give us a sense of kind of an MPV value or STP 3&4?

An MPV value, Bob, do you want to take it?

Well I think at this point it's still I think a bit early to come out with that. We're still working through all the final pricing, final [off-pay] contracts, loan guarantees, the cost of financing. I think right now if we tried to come out with that number, we would probably would be (inaudible) put it out there at this point.

We've looked at more from an option value perspective at this point in time Lasan and let's try to create some suspense around the analyst day. I think that's something that we would like to explore probably in greater depth at that time.

Fair enough, thank you very much. Congratulations again.

The next question comes from the line of Brian Chin with Citigroup.

Which is higher? The average purchase power price embedded in Reliant's retail purchase power contracts or the power sales price embedded in your wholesale generation fleet taxes; if we look at sort of the contracts in say third and fourth quarter or so for the remainder of the year?

Brian, let me just give you a sense of order of magnitude. Keep in mind that the Reliant retail business tends to hedge the portfolio front-loaded. If you look at what they have right now for 2009 and probably early part of 2010, they enter those hedges at relatively high prices. So I would say that their average price is probably higher than our hedge price without having the numbers in front of me. Just talking about it qualitatively, I would think that because of the front load characteristic of the retail portfolio and the fact that they are running up a completely hedged book, that those average hedges are higher.

When you say front loaded as in they put on the hedges with a shorter duration than you guys put on your hedges on the generation side?

Correct. On our generation portfolio strategic hedging program spans out five years. The Reliant retail portfolio, when they hedge, they really hedge what they call the contracted load or the fixed-price load and that tends to be front loaded.

Then also when you're making that comparison, you are excluding the transmission line flow-through costs from Centerpoint or any of the other transmission wires, is that right?

Correct, I'm only talking energy and energy components only.

Next question comes from the line of [Neel Mitra] with Simmons & Co. International.

I just wanted to understand some of the larger details in regards to how you plan to integrate the wholesale gas assets with the Reliant retail unit. Will you be able to avoid putting on some of the expensive super peak hedges by contracting the gas assets with the retail unit even though you have a lot of gas plants that have some significant startup times? If you do hedge retail with gas, what does this do to the historical range of EBITDA guidance that's been between about $100 million to $150 million in the past?

Mauricio, again do you want to talk about the super peak and how we're going to handle that at Reliant?

Well I'm just going to give a just generality. I think we are going to talk about that in specifics on our analyst day. I think you mentioned something about the long lead startup times that we have in our plants and I want to provide you some color on that. First, our Reliant retail portfolio will continue to be hedged, against a lot of [obligation], and yes, Neel, we're going to match our gas portfolio demand as the weather variability and the super peak for Reliant retail. With respect to the long-lead startup, keep in mind that we have a little over 5000 MW. I will say that a good portion of that is our GP's can be online in less than an hour. I would say the vast majority, two-thirds of our fleet can be online in less than 12 hours and that's a cold start. So if for any reason you had a warm or a hot start, can be online much faster than that. Really just a small portion of our gas fleet has a 24 hour lead startup. So I think we are very well positioned to manage the load peaks if Reliant needs that.

That's really helpful, thanks. How much was the retail EBITDA guidance for 2009? It comes from the C&I segment. How should we expect that to change in 2010 after you have had more time to relaunch the business?

We haven't split it publicly and at this point, I'm not prepared to do that. I think the overall in the retail guidance, we guided out there 400. We feel very comfortable that that number, we will exceed that. As we get further along in the business, whether or not we determine to split it out or not, we will make that call. But right now we are keeping all the margins information like more of a blended type average rather than specific to segment at the moment. Ladies and gentlemen, thank you and we look forward to talking to you in the fall on the third quarter call and then at the analyst day. So thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. Everyone have a great day.