Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 NRG Energy, Inc. Earnings Conference Call. My name is Janeyda, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to Mr. Chad Plotkin, Vice President of Investor Relations. Please proceed.

Thank you, Janeyda, and good morning. I'd like to welcome everyone to NRG's Third Quarter 2013 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 in the Investor Relations section of our website. [Operator Instructions] 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 in the forward-looking statements made in today's press release and presentation material. We caution you to consider the important risk factors contained in our press release and other filings with the SEC that could cause actual results to differ materially from those in the forward-looking statements in the press release and the conference call. In addition, please note that the date of this conference call is Tuesday, November 12, 2013, and any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of future events, except as required by law. During this morning's call, we will refer to both GAAP and non-GAAP financial measures of the company's operating and financial results. For complete information regarding our non-GAAP financial information, the most directly comparable GAAP measures and a quantitative reconciliation of those figures, please refer to today's press release and this presentation. And with that, I'd like to turn the call over to David Crane, NRG's President and Chief Executive Officer.

Thank you, Chad, and good morning, everyone. Thank you for joining us. I know many of you have taken time out of your schedule from the EEI conference in Orlando, so I thank you, in particular, for joining us. And I think you should consider yourself lucky that you're in Orlando because it's snowing up here in Princeton, New Jersey. I'm sure many of you would like to dial back later in the morning for the first-ever NRG Yield earnings call, so we're going to try and be very brief in our remarks on both calls today. Joining me here for the NRG call are Jim Steffes and Elizabeth Killinger, who run our Northeast Retail and Texas Retail businesses, respectively; and Chris Moser, who runs our commercial operations. All 3 of them will be available to answer any specific questions you might have in their areas. Plus, of course, I'm joined by Kirk Andrews, our Chief Financial Officer; and Mauricio Gutierrez, our Chief Operating Officer. They will both be presenting after me and then also available to answer your questions. Beginning with Slide 3 in the presentation deck, even with wholesale power prices in our core markets persistently weak throughout the summer period, I'm generally satisfied with the company's performance, financial and otherwise. As you know, the third quarter is, by far, our most important quarter. And this year, we generated $1 billion of adjusted EBITDA. In the weak wholesale power market environment that we remain mired in, $1 billion is a good result. Indeed, it is the most EBITDA NRG has ever generated in the third quarter. Given the average summer weather and the almost total absence of scarcity pricing in our core markets, this record performance, obviously, a product of the key strategic initiatives we have executed over…

Thank you, David, and good morning, everyone. We are first summer behind us as a combined company. And with over 47 gigawatts of generation under management, I was quite pleased with our third quarter performance. Our wholesale and retail units performed well. We have made significant improvement in safety, and the continued execution on our operational improvement initiatives across the organization allowed us to achieve record quarterly financial performance. While the overall summer was challenging in terms of wholesale prices in Texas and the Northeast, we are encouraged by the clear signs of market design improvements across our key markets. Specifically, we were pleased to see the Public Utility Commission of Texas making clear their commitment to a mandated reserve margin, eliminating some uncertainty in our largest market. As David mentioned, as a result of the weak summer prices in Texas and the increasing gas production in the Northeast, forward gas and power prices have continued to be under significant pressure and importantly, have not recovered to the levels we saw earlier this year. As such, we are now recalibrating our expectations for wholesale business for 2014. Our development program continues to achieve significant milestones. During the quarter, we achieved commercial operations at El Segundo Energy Center and Agua Caliente, and with CVSR coming online in October, brings our total solar portfolio to over 700 megawatts in operation. Finally, Ivanpah remains on track to achieve operations by the end of the fourth quarter. Turning to our operations review on Slide 10, and starting with safety. Our performance improved during the quarter as a direct result of the initiatives we implemented prior to the summer. We had 110 out of 119 facilities finish the quarter without a single recordable injury, and we remain well on track to deliver another year of…

Thank you, Mauricio. Turning to Slide 15. Although higher power prices failed to materialize over the summer months, NRG generated $1 billion in adjusted EBITDA during the third quarter, placing us at just under $2 billion for the first 9 months of the year and on track with our guidance range for 2013. Third quarter EBITDA was comprised of $741 million from wholesale, $176 million from our retail businesses and $83 million from NRG Yield. Turning to highlights. On the strength of $844 million in adjusted cash flow from operations and nearly $1.2 billion year-to-date, NRG's liquidity improved to a robust $3.7 billion as of the third quarter. In October, we reached full commercial operations at CVSR on time and on budget, putting us in a position to offer our remaining interest in the project, along with 3 other ROFO Assets through 2014, which I'll describe in greater detail shortly. Finally, during the quarter, we worked to complete negotiations with the relevant stakeholders in the Edison Mission bankruptcy, culminating an agreement to acquire substantially all of EME's assets for $2.635 billion or $1.572 billion net of acquired cash. Turning to the guidance overview on Slide 16. With the summer now behind us, we are narrowing our 2013 guidance ranges for both adjusted EBITDA and free cash flow by $100 million. Specifically, we expect 2013 adjusted EBITDA of $2.55 billion to $2.6 billion. Though a lack of any meaningful hot weather over the summer has caused us to reduce the upper end of our guidance ranges for both wholesale and retail by $50 million, we remain on track to end the year within the revised ranges we've provided on our last earnings call. Guidance for 2013 adjusted EBITDA for NRG Yield remains unchanged at $240 million. We've also narrowed the range…

Thank you, Kirk. As I had typically done in the past and because this is the last earnings call of the year, I'd like to take a few moments to assess the progress we have made this year -- I mean the goals we set at the beginning of the year, and this is on Slide 22. It would be easy for me to say our stock prices performed pretty well this year so we've had good performance, but we like to think a good stock price performance, in mathematical terms, is the product of our top-to-sell operating performance, times the aggressive and effective implementation of well-thought-through strategic initiatives. On both fronts, I feel like we've had a great year. Across our conventional portfolio, while wholesale prices in Texas did not come through like we had hoped, we've brought online, on time and on budget over 1,400 megawatts of new gas-fired generation across the fleet nationally. Additionally, we increased the amount of free cash flow synergies from the GenOn combination by over 60% from the original $300 million a year identified when we first announced the transaction to over $408 million now. In our retail business, even though we've experienced some challenges in both the Northeast and in the C&I parts of the retail business, our leading retail franchise in Texas remains quite strong, and we continue to bundle new products and services such as demand response with our energy solutions to further strengthen the retail business, which remains a very significant and steady contributor to NRG's corporate-wide strong cash flow. And across our clean energy franchise, we now have over 1,650 megawatts gross of solar and wind assets, which are soon to be augmented by another 1,700 megawatts of renewable generation from the Edison Mission fleet. We also vowed, at the beginning of 2013, to make the most important goal we set for ourselves in this area, was to highlight the full value of our leading solar platform. And with the success of NRG Yield, we feel that we have done just that. Before I close, I would be remiss in not mentioning our existing $200 million stock buyback program, which the EME transaction has prevented us from completing. With respect to capital allocation, we have always prided ourselves on being prudently balanced and on being value-maximizing. This has required us to be flexible so that we can deploy capital when we see value-enhancing opportunities in front of us such as the Edison Mission transaction. As such, while completing our 2013 share buyback program is off the table for the time being, we look forward to fulfilling our commitment once the EME transaction is completed and our unrestricted funds have been replenished. Now I'd like to turn the call back over to the operator, to Janeyda, to -- so we can answer your questions.

[Operator Instructions] And your first question comes from the line of Paul Patterson with Glenrock Associates.

Just on the increased financial information that you plan on providing after the go-shop period, I'm wondering how soon after the go-shop ends in December we might get that information.

Well, I mean, we haven't picked a time specifically, I mean, I'd be interested in your feedback. But I mean, with the holidays coming up fairly shortly after there, I think we were thinking early January. I mean, one thing is for certain, we now ask people to wait until our next call, which would be in late February. So -- but I mean, if there's a big difference in Newark, if you think between early January and the call we would otherwise schedule on December 25, we'd be happy to hear about it.

Your next question comes from the line of Paul Zimbardo with UBS.

This is Paul from [indiscernible]. My question is about -- if you could just provide some -- I know it's a sensitive topic, some high-level color on some of the synergies with the Edison transaction, particularly your plans for the new coal plants Wahkiakum County [ph]?

Paul, I mean, I don't really think we can. I mean, I think that for the most part, about all I can tell you is that if you look at the playbook that we followed for the GenOn transaction, it's pretty precisely the playbook we plan on following for the -- for Mission. And so I would sort of expect the same sort of thing. I mean, there's a certain amount that we're going to be able to talk about in terms of what we think we can achieve by putting the company together. But in the same way when we did the GenOn transaction, there were things that we were not comfortable sort of estimating in quantitative terms until we had actually owned the assets and got to a certain level of detail that comes with ownership as opposed to the level of detail that comes with due diligence, then we felt more comfortable to talk more specifically. I think that coal assets in Illinois, those are -- they definitely sort of fall in the second category. That's the more complicated part of the story. So the way we look at them and evaluate them in Illinois could be very much the way we evaluated the GenOn acquisition and the new assets we had in Pennsylvania, in particular, but also in Maryland.

Okay. And just a quick follow-up. Now that you're undertaking this transaction, what are your thoughts on further M&A at this point?

Well, I mean, there's no doubt that, I mean, we like to pride ourselves as a company that we can do several things at one time. But I mean, this is a big transaction, and the big transactions tend to be sequential, number one. Number two, the more transactions you do, the less -- potential transactions, there are less to be done. So I wouldn't say that we've shut down our ability to sort of look at what's available in the industry. But I would say, Paul, what we want to do is we want to be sort of actively engaged in the market because as you could tell by the general context of our earnings call, the commodity price environment at the wholesale side of the business remains extremely challenged. And the time that you want to be a buyer of assets in this space is when there's no hope. When the future looks as dire as possible, that's when you want to be a buyer because that sense of sort of giving up is what causes the price to be at a level where we can continue to do what we've tried to do, which is to accumulate assets in the sector in a way where we -- basically, we can reduce the cost structure because this is a scale business. And so we want to be as active as we can because we think it's a good time to be a buyer, precisely because the commodity price environment is so weak. But we have to recognize that with GenOn just done and Edison Mission still in our forward sights, there are limits to what else we could do until the Edison Mission deal is done.

[Operator Instructions] Your next question comes from the line of Travis Miller with Morningstar.

I want to think about this EME and think about the retail impact. Is there anything there that would either offer revenue synergies, cost synergies, any expansion opportunity on the retail side?

I'm going to ask Jim Steffes to talk a little bit about it. I would -- Travis, what I would say is at best, that would be not even a secondary, maybe even a tertiary or whatever comes after secondary. I mean, I think there's been some -- we've watched with interest a little bit what goes on, on the retail side in Illinois with community aggregation and all that. Not that we've been that interested in playing that space at the sort of -- at the margins that we've seen there. But clearly, having generation in Illinois would probably get us to take a slightly harder look at the market. But I would absolutely not say that anything having to do with retail wasn't a driver of the Edison Mission transaction. But, Jim, do you have anything?

No, I mean, I think I agree completely with that, David, which is it does position us to look again at Illinois on the retail side and see where that market will evolve to and how much more NRG and our multi-branch strategy can take, can move into that market. But it's something we'll be looking at over time as the transaction moves forward.

Yes. Travis, do you have anything else on your mind because we sure threw a wet blanket on that question?

No, that's exactly what I was thinking of your thinking about expanding. Obviously, we've seen Dynegy talk about that expansion in Illinois and potential margins there. But secondary on it, another subject then, similar I guess. But you talked about, and you have for several quarters, about the financial players, the liquidity issues. How has that changed? Let's look back 3 years or so or 4 years ago, how has that liquidity changed? So maybe liquidity 2, 4 years ago was better as we look out to 3 years forward and now maybe it's 2 years. Again, I'm just putting words in your mouth. But how has that liquidity shrink -- shrunk, if you get what I'm saying?

So -- and Chris Moser is going to answer that question. But Travis, I just want to make sure I understand. So you're asking about liquidity in terms of how it's affecting our ability to serve hedges we want to in our core markets? Or are you sort of saying the liquidity discount that often makes this sort of out years of trading to us look unnatural from what we actually expect to see in those years? Is it -- because that -- when you said 2 years out, we used to debate that all the time internally. I mean, are other markets a realistic proxy of what's going to happen for 2 years or 3 years or whatever, is that what you're wanting to ask about as well?

Yes, so that latter, whether you thought you -- yes, 3 or 4 years ago when you had some more financial players, perhaps even some more industry players, whether you were better able to capture what you thought were fair prices 3 years out, let's say. And relative to now, maybe you can only capture fair prices 2 years out?

Good question. Chris?

Travis, this is Chris. So as I rewind the clock and go back into kind of 2008, 2009, there were certainly more banks with bigger appetites out there willing to serve. But at the same time, with the general chaos in the markets back in '08 and '09, there were some pretty huge spreads in terms of CDS and whatnot, which actually made it pretty costly for us to go too far out in terms of the charges, credit charges, that the banks were charging back then. It's kind of the reverse now, things have calmed down on the CDS side. But there are just less and less banks that are interested in that with big prop books. One of the things I will emphasize, though, is I think we're in a much better position now than we were back then, simply because we have the retail side and we can cross internally as deep in the curve as we want, and not have to worry about what the banks are doing, or what the CDSs are doing. So I think that's a real nice choice that we have. We can go to the market if we choose to. We can choose to leave it open or we can cross with retail, because they're always -- retail is price agnostic from the perspective is they're pricing deals all the time. It doesn't matter if we think prices are high or low, they are pricing deals all the time. Whereas from the wholesale side, the perspective is always we'd rather sell it when prices are high. So that outlet, the retail outlet is a very good one, a very good option for us to use in cases when we see less liquidity.

Can you get that 3 years out? I know retail contracts tend to be a little shorter than that. But you [indiscernible] figure out period where you see that liquidity and that missed pricing right now?

Yes, I would say that the retail contracts, in terms of the residential and whatnot, it tend to definitely be at the shorter-term nature, but the C&I certainly extends beyond 3 years. And that's not a small part of the portfolio that we have.

Your next question comes from the line of Jon Cohen with ISI Group.

Just couple of questions. First of all, I noticed that you kept the guidance range $200 million wide despite adding a lot of hedges in the third quarter. Can you just run through like what the drivers that will determine where you'll fall in the guidance range, what those are now?

Yes, John, it's Kirk. I mean, I would say that the 2 primary drivers of that would be the upside on the retail side and most notably, the formation of scarcity prices, especially obviously in ERCOT and certainly, on a weather upside as well, which have an influence on that. So because we are more or less open or we'd lean long on the heat rate or on the gas side of our portfolio, that's probably the most significant component of what would lead us towards the upper end of that range.

Okay. And then just one other question. If in PJM, the gas dynamics don't improve or if they even get worse, are there levers that you can pull either on the cost side or additional shutdowns that will mitigate some of the revenue impact to the wholesale part of the business?

John, is this question motivated by this idea that gas and PJM's going to trade at a discount to Henry Hub because of Marcellus excess supply, just to be more specific, is that what you're asking?

Yes. I mean, if you see a persistent low gas price, does that continue to pressure power prices? Are there other things that you would do in how you operate your fleet?

Mauricio?

I guess, I'd try to elaborate a little bit on the earnings slide. Certainly, gas basis have been under a lot of pressure because of the gas [indiscernible] we're seeing out of the Marcellus Shale. We need to make sure that the absolute total price that is paid is the one that is going to drive the power dynamics in the East. And I tried to show that actually, chemical prices have moved from their lows that we saw in 2011. So the absolute price of gas in the Northeast have actually increased from 2 years ago, making the coal-to-gas switching less. I tried to depict 2014 and 2015 gas basis, and we see it even potentially a further compression on that. But you need to also take into consideration the Henry Hub price or the absolute price. Now the other dynamic here that will affect what we do with our plants, keep in mind, there is a very robust capacity market. And that capacity market, there are some market design changes that I think, in our perspective, will be supportive of our capacity prices, whether it is limiting imports into the capacity option or changing or tightening the rules around demand response. I mean, I think all of those changes will be supportive and will make a determination in light of not just energy markets but also capacity markets, Jon.

And this concludes the Q&A portion for today's call. I would now like to turn the call back over to Mr. David Crane for any closing remarks.

Well, Janeyda, I want to thank you, and I want to thank everyone again who participated on the call for taking time out from their schedule in Orlando or otherwise for participating. And we look forward to talking to you before next quarter, about the Edison Mission transaction. So thank you very much.

Ladies and gentlemen, this concludes the presentation. You may now all disconnect. Have a great day.