Good day, ladies and gentlemen, and welcome to the NRG Energy Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Kevin Cole, Head of Investor Relations. Sir, you may begin.

Thank you, Esther. Good morning and welcome to NRG Energy's third quarter 2016 earnings call. This morning's call is being broadcasted live over the phone and via webcast, which can be located in the Investor section of our website at www.nrg.com under Presentations and Webcasts. As this is an earnings call for NRG Energy, any statements made on this call that may pertain to NRG yield will be provided from NRG's 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 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 a reconciliation to the most directly comparable GAAP measures, please refer to today's press release and presentation. Now, with that, I'll now turn the call over to Mauricio Gutierrez, NRG Energy's President and Chief Executive Officer.

Thank you, Kevin, and good morning, everyone. I'm joined this morning by Kirk Andrews, our Chief Financial Officer. Also on the call and available for questions, we have Chris Moser, Head of Operations; Elizabeth Killinger, Head of our Retail business; and Craig Cornelius, Head of our Renewables business. I want to start by highlighting the key messages for today’s call on slide 3; first, we are narrowing and increasing our 2016 EBITDA guidance by $200 million at the midpoint. Our exceptional performance by everyone in the company once again highlights the value of our integrated platform and its continued ability to perform under a variety of market conditions. Second, after reintegrating the Renewables business in to NRG earlier this year, we’re now fully leveraging our proven operational platform. As you will hear later in the presentation, we have a robust and growing Renewables business that not only enables us to acquire and operate assets in one of the fastest growing parts of the energy industry, but also helps us strengthen our partnership with NRG yield. This business is executing on market opportunities and with a SunEdison transaction is only getting stronger. Last, I am extremely pleased with our progress in strengthening the balance sheet. As of today, we have reduced our corporate debt obligation by $1 billion, bought back $345 million in convertible preferred shares and extended over 6 billion in near-term maturities well beyond 2020. These are impressive numbers, given we started our efforts only one year ago, and this has been one of my primary objectives since becoming CEO. I wanted to thank everyone in the organization who worked hard to achieve our targets in such a short time frame. Now, moving on to the third quarter results on slide 4, today we are reported third quarter adjusted…

Thank you Mauricio and good morning everyone. Turning the financial summary on slide 11, NRG delivered 1.173 billion in adjusted EBITDA in the third quarter dated by strong performance by our Retail Mass business which contributed EBITDA of 266 million, Generation in renewables combined for 605 million in adjusted EBITDA in the third quarter, while NRG Yield contributed 246 million. As required by GAAP, following completion of the drop down of NRG’s remaining interest in CVSR to NRG Yield; adjusted EBITDA at NRG Yield now reflects 100% of consolidated CVSR results with an equal reduction in generation and renewables results. Through the first nine months of the year, NRG generated almost 2.8 billion in adjusted EBITDA and 1.1 billion of free cash flow before growth. Based on performance year-to-date and our updated outlook for the balance of the year, we’re increasing and narrowing our 2016 adjusted EBITDA guidance to 3.25 billion to 3.35 billion which I’ll review in greater detail following. As of this week, we’ve now completed over 1 billion in corporate debt reduction over the course of the last 12 months, with 777 million completed year-to-date and 246 million retired in the fourth quarter of 2015. This significant reduction in corporate debt helps to ensure we can maintain our balance sheet targets through the low commodity price cycle. In addition, when combined with the retirement of our convertible preferred and the extension of corporate debt maturities at more favorable rates, our deleveraging efforts also help generate nearly 90 million in annual interest and dividend savings, improving NRG level free cash flow. While the specifics of the capital allocation plan will be laid out in more detail on our year-end earnings call, we do intend to reduce corporate debt by an additional 400 million through the retirement of the…

Thank you Kirk, and to close on slide 16, you have our 2016 score card. And we have made significant progress across all the goals that we set for the organization. We have delivered on our operation and financial objectives, we have significantly reduced our debt profile, we have taken steps to reinvigorate capital replenishment through our strategic partnership with NRG Yield, and we continue to look for ways to streamline our organization. As I look at this score card, I want to commend the entire team for their efforts in strengthening our business. On our next call, I will outline my 2017 objectives, but for now, I will like to quickly touch upon a very important priority, GenOn. Both NRG and GenOn continued to be focused on a comprehensive strategy that maximizes value for all stakeholders. As we are at the initial stages of evaluating available options, it’s too early to provide any more specificity. But please know that we will update the market as appropriate. With that, operator, we’re ready to open the lines for questions.

[Operator Instructions] our first question comes from the line of Greg Gordon with Evercore. Your line is now open.

As you think about the capital allocation for 2017, you gave us the free cash flow before growth, then on slide 9 you sort of tell us preliminarily how you’re thinking about it. But when you look at the 31% of that cash that’s uncommitted and you talked about the idea of a share buyback. But are there other means of returning cash to shareholders that don’t necessarily result in an increase in the fixed quarterly dividend like some sort of variable dividend payment or special dividend that are on the menu of potential options?

As you mentioned, we’re evaluating all options. I think what I will try to do in this call since our capital allocation plan will be provided to all of you in our next earnings call is our current thinking and we’re evaluating all options, just like I did at the beginning of this year in terms of our priorities and how we see the market and the economics of our portfolio. You know we’re going to do the same, so we’re evaluating not only share buybacks, the dividend policy and I think the special dividends, but at this point what I will tell you is, as I think about it, I am comfortable with the dividend policy that we are - where we are today in terms of the cyclicality nature of our industry. And when I look at the share buybacks and the free cash flow particularly at these current prices, I’ll have to take that in to account. So Greg in the next couple of months we’re going continue accessing the market, we’re going to see our current stock price, we’re going to see our leverage ratios which as Kirk indicated is right on target with our guidance that we have provided and that we feel comfortable. And we’ll finalize it in a couple of months.

On a totally different subject you talked about the markets, we all saw what happened in Texas this summer, you articulated it very clearly. But you attributed a big part of the lack of scarcity pricing to the over production of wind. I guess I’m wondering and other people are wondering whether its right to assume that that’s over production, or if we’re looking at a permanent dynamic in terms of the way that wind is going to change pricing or if you actually really believe that there were dynamics that caused that whether that over production is permanent or whether there were just weather conditions that caused that?

Greg I’ll let Chris give you more specifics, but as I look at the data particularly when you look at the seasonal study that Texas put out. The over performance was not small, it was almost double of what we were expecting. So, I would attribute that to climatic drivers. But Chris is there anything else that you can share?

Yeah, I think it’s fair to say that and when we went back and looked, we’re pretty confident that at least for this year it was a weather phenomenon and not a miscalculation. They’ve been doing the same calculations for quite some time in ERCOT. And in this case it was happened to be windy when it was hot and that’s not generally the case that we see down there. So we’re attributing it mostly to the weather, but we’ll keep an eye on it.

Our next question comes from the line of Stephen Byrd with Morgan Stanley. Your line is now open.

Wanted to follow-up on Greg’s question on capital allocation; a portion of your cash flows are contracted, actually fairly significant amount of cash flows are contracted. And when you think about approaches to return of capital, in the past there’s been the thought of that that is a more stable source of cash flow. When you think about the dividend versus share buyback, how does that factor in to your thinking in terms of the fact that a part of you cash flows come from outright contracts, a good portion of cash flows also come from retail business that proving to be very resilient. How do you think about sort of the nature of that risk and whether or not that might factor in to your dividend thinking?

i think that’s a good observation, because as I have said in the past, we have been very successful in diversifying our business and the way I characterize it is, two-thirds of our gross margin comes from stable sources, whether that is contracted assets, retail or capacity payments or our interest in yield. Absolutely we factor that in in terms of our approach on returning capital to shareholders, whether it is a dividend or whether it is in the form of share buyback. So, rest assured that that is not lost on me, and as we’re thinking about the capital allocation plan for 2017, we take that in to account. But I also have to access as well the current state of our stock price and take that in to consideration as a barometer for all other investments that we have in the company.

And then I wanted to shift over to the SunEdison transaction and this is a fairly bright question, but we’re starting to see more companies attempt to get in to the renewables business and I’m just curious what you’re seeing in terms of degree of competition. I’m thinking more about competition more for development rather than acquiring mature assets if you’re seeing any trends out there in solar wind in terms of the degree of competition.

We are seeing a higher degree of competition but I think that’s a good thing. And since this is the first time that Craig has joined us in this call, I think that market and all of you would benefit from his comments and insights since he is living this on a day-to-day basis. But I will tell you is, I think that opens up additional opportunities for us in terms of tax equity, other type - but Craig is there an additional comment that you want to make?

Sure. While we do see new entrants to this space both in sources of permanent equity for assets as well as development, we think the current environment actually favors incumbent players with development and operational capabilities like our own, and with a significant access to both commercial and mass retail customers as well as utility customers that we service today. So when we look at the market complexion over the next three to four years, we believe in enterprise or like around that has significant access to customers, scale and stability over almost all renewable pure-play companies, access to a competitive cost of capital through yield, that’s technology agnostic and can take full advantage of cost to clients that are being realized in wind and solar. That’s advantaged by a virtue of our ownership of assets and our operational capabilities and the development platform that can address the full spectrum distributed and utility scale opportunities, exhibits advantages that smaller scale pure-play developers don’t have and can benefit from the trends of additional capital formation that’s being observed in the industry.

Our next question comes from the line of Steve Fleishman with Wolfe Research. Your line is now open.

So just a question on the corporate aspects of GenOn. So in the 2017 guidance, I assume, you still have the shared services payments in the guidance, so is that still about $200 million.

Yes, that is correct.

Just to clarify Steve, it’s Kirk. That is correct but the only place that that would really manifest itself in guidance is within that NRG level free cash flow, because obviously that’s eliminated in consolidation otherwise.

Right, and do you still believe that that’s most if not all of that could be offset with cost reduction in the event that went away?

We do. And certainly a substantial portion of it would be, yes.

Steve we have said it in the past and it’s our belief that that would be the case. So at this point I don’t any reason to provide any other indication to all of you.

That’s great. And then just secondly at a high level on retail we’re hearing on all the conference calls and just watching developments. Everyone that’s in the power business is a lot more interested in retail, obviously you guys have been extremely successful early mover. How worried if at all should we be about the competitive dynamic heating up for you from this? Are you kind of better protected because of the Texas footprint? Just high level thoughts on that issues?

So let me give you may perspective and then I will have Elizabeth provide some additional comments. When you think about retail platform, number one, I would say that we have a leading platform in the best market for retail in the United States that is incredibly difficult to replicate, particularly on the residential side. Most of the mode that we have seen from IPPs in to the retail space has been for C&I which is a very different value proposition and it’s a different approach to that market. Having said that, I always welcome new entrants in the space, because it allows us and it allows the market to provide some benchmark in terms of best practices. And I think as you said it, we were the first mover, we have benefited significantly from it. I think the fact that other IPPs are following suite is a testament of the integrated platform that we have been able to put in place and the winning formula I guess to navigate through these incredibly transition that we are going through the energy markets. But Elizabeth, is there something else that you can provide in terms of a competitive landscape as you’re seeing more IPPs going in to the retail business?

Sure, thanks for the question. I would say our retail has extraordinarily strong momentum that’s really underpinned by our scalable platform and the strength that we have in supply and risk management. And we’ve demonstrated year-over-year the ability to grow in both customer account and earnings. We are talking about 20,000 to 30,000 to over a 100,000 customers a year organically in addition to some of the acquisitions that we’ve done over the years. We also have a distinct approach in the market. We have a more diversified business than many of the competitors. We have multiple, very strong brands that focus on a particular customer segment. We have a variety of products, so customers can buy more than one recurring product or service from us and we also have strength both in Texas and the east. So overall with that momentum and ability to focus on the customer, have strong renewals and strong acquisition performance, I feel like we’re well positioned to compete in the market place as we have done so successfully for a number of years.

Our next question comes from the line of Julien Dumoulin-Smith with UBS. Your line is now open.

A little bit of a follow-up question on the last couple, perhaps trying to get a couple of concepts here. Can you talk about at least initially the capital allocation to the renewables business? I know you’ve laid out some numbers on the slides here, but can you try to tie that back in to what that means not just for ’17 but onwards. And also what is the return profile or [EVD] with that development multiple however you want to think about in terms of the projects that you’re pursuing under this 1.2 gigawatt backlog.

So Julien, let me just start with the returns that we’re seeing, and I gave some indication on the slide. We’re looking at current operational assets particularly the utility scale mid-teens kind of yield, that’s what we’re targeting. Clearly on the [DG] side, those reclaims are in a slightly higher yield spend nature of the markets. With respect to the capital allocation, one thing that is important to recognize is that these capital allocation has a high velocity of replenishment. That’s why it’s so important and so strategic the partnership and strengthening in our yield, because all these renewable assets that are on their long term contracts are yield eligible for drop downs, which allows us to replenish the capital very quickly and at the same time achieve very attractive returns. Kirk, is there anymore specificity in terms 2017? I think Julien wanted to get - Julien if I am not mistaken, do you wanted to get even more specificity than that? Because I think it’s important to - I mean the key characteristic here is a rapid replenishment of capital.

Julien, this is Kirk. Couple of things to know about, obviously we’ve layered in or added the capital allocated in 2016 relative to the SunEd acquisition that we announced. And this true of SunEd and not when you have SunEd, but a lot of the other projects that we look and evaluate all the time in the pipeline. Certainly the long term contracted nature of this project lends itself to significant levels of their capacity. In some cases the existing project level debt, like was the case in fact with CVSR which is what helped facilitate the capital return through sort of a two-pronged effect that was optimizing the leverage on the one hand and increasing that which gave proceeds back to NRG, and ultimately dropping that asset down the yield. We’re basically able to mirror that same approach by taking advantage of the significant debt capacity first which certainly reduces the amount of equity capital and that’s really what we refer to when we talk about capital allocated to renewables. As Mauricio says, because that’s relatively low capital intensity given the high degree of leverage capacity, so fine with the fact that we’re going to have line of sight of a healthy and robust [CASD] yield, it gives us good line of sight that we can continue our relationship with NRG yield, we compensated for taken up development and construction risk and still provide yield and opportunity for an acquisition, providing us that premium income to compensate us for the risk and still delivering accretion to yields. So that’s really overall how we think about the ongoing model. Not only is it a high velocity return, it is relatively low capital intensity because NRG’s capital allocated is simply to the equity side of that equation.

Got it, but what’s the total equity commitment for next year? And then just to go back to very quickly - we’ll I’ll leave it at that. And then a separate follow-up question would be, you’ve also talked about retail and your ’17 guidance shows a pretty healthy amount of continued retail. Obviously there have been some good tailwinds. Can you explain the dynamic about keeping this very high level of retail?

I may offer a little of the opportunity to expand my response on retail. What I tell you with respect to 2017, and we’ll roll this out certainly in greater details and Mauricio said, when we expand on our capital allocation plans. But the overall amount of capital there that’s represented in that percentage on the slide relative to renewables is relatively small. And by that I mean probably 10% to 20% of that at most right now is renewable investment. The balance of that is majority of our ongoing efforts in particular, some of the repowerings for the conventional projects which are also yield eligible. So the capital there is about 20% at most is currently the renewable committed capital within that. And again that’s a by-product of what I talked about before. It lends itself to a high degree of leverage, which means that the capital required from NRG is relatively small on a per megawatt basis. As far as retail is concerned, touching on some of the points that Elizabeth made a few minutes ago. Our diverse product backlog or offering I should say combined with the diversity of different channels through which we market give us a high degree of visibility and the resilience of that customer base, combined with the fact that obviously on the one side as we’ve said, we’re continuing to see us especially most acutely in 2017 in that low commodity price cycle that’s obviously beneficial on the retail side of things as manifested this year and we certainly see that given the outlook for commodity prices going in to ’17. But Elizabeth anything you would add there?

Yeah, the only thing I would add is, we have continuous improvement mindset in retail as we do with all of our for NRG efforts across the company, and so some of the improvements that we experienced this year are in cost efficiencies and we definitely carry those forward. And so that combined with our expertise in managing margins and growing customer account any will best have confidence that will continue to be able to deliver at that high level of EBITDA and cash flow performance.

It’s principally margin not customer account?

No, it’s both. I mean so far year-to-date we’ve grown a net of 40,000 customers with over 70,000 of those being in Texas, and we are striving to always balance EBITDA and customer account. But when we see that kind of growth year-over-year that does contribute to our earnings as well.

But Julien if I can just - because I get this question almost every year, the stability of retail margins. And I think this is the seventh year of ownership and we have delivered consistently. And not only delivered the retail margins but growing it. So I’m hopeful that we have earned your trust that this is a stable business and that we have the formula to continue having these margins for the foreseeable future.

Our next comes from the line of Angie Storozynski with Macquarie. Your line is now open.

I wanted to ask about this big drag from the working capital that’s showing in your guidance of free cash flow in ’17 at slide 43. Can you tell me a little bit more about that 240 million and also how much of it is a one-time issue and how much of it should I account for when I estimate your free cash flow going forward?

Okay Kirk, why don’t you take that one?

Angie, we came in to - this as much a year-over-year impact if anything else. We came in to 2016 with a significant surplus of coal inventory. It gave us the opportunity to right-size that coal and as you know as we burn what was on that pile a little bit more disproportionately than in years past because of that high level of inventory. And as we move in to 2017 that’s just a little bit of the natural rebuilding or recalibrating towards that. I would say that I can’t give you the number off the top of my head, but I think that’s probably a little bit of a high watermark. I wouldn’t say we return to just double-digit usage of working capital, but certainly over 200 million is a little bit of a high watermark in terms of the outlook, right. We’re recalibrating the inventories there and some of that coal burn it’s a (inaudible). We had at least one plan or a couple plans in our portfolio where we were in the process of transitioning from coal to gas and burning through that. So a lot of that is why that is exacerbated in sort of the year-over-year change in working capital.

Okay, but you also mentioned some other issues right, the asset, the activation charge etcetera, etcetera at least those should be going away right?

Yeah, but that’s not as such the deactivation charge in the context of working capital. What I’m saying is, in 2016 a lot of the positive benefits from working capital is just that we literally took the coal powers down at those plants we are converting to gas, basically down to zero during that period of time. So that really speaks to the year-over-year variance, not specifically to the working capital we use that you see in 2017. That’s the only distinction I was drawing there.

Okay. And then I know you’re not providing a long term guidance, but in the past you’d said that 2017 would be the weak point of your earnings from an EBITDA perspective. Is this still true?

Yeah, I think that’s a fair representation Angie. If you look at just the commodity prices in 2017 and the dynamics in terms of capacity revenues and energy margins and where natural gas is today and the roll up of hedges, I believe 2017 to be the low point.

And last question comes from the line of Shahriar Pourreza from Guggenheim. Your line is now open.

Can we just real quick on this SunEdison the 1.1 gigawatts, can you just talk about how much of that sort of has a PPA and whether any portion of that 1.1 needs to be built within a specific timeframe or the PPA expires.

Sure, I’ll let Craig take on that. Craig the pipeline the 1.2, just some general characterization of that.

Sure. And we’ve provided more detail about the asset mix on page 30 of the appendix, and I’ll speak from that as a prompt. One of the projects we expect to take in to construction over the course of the next 18 months is a project in Texas, on which we would expect to close later this month and then commence construction during the course of the next two quarters. That project has completion date that would be targeted in the first half of 2018. The balance of the pipeline is to be contracted, 111 megawatts worth of that pipeline is largely construction ready and actually was previously contracted. We’re in discussions around the targeted timeline for that mix and the balance of the pipeline is at various stages of development, and based on its progress in terms of permitting and interconnection and power marketing opportunities and how that pipeline compares to other potential uses of development and equity capital, we would look to advance those projects, but it’s reasonable to think of those projects as 2019 or 2020 type COD assets.

And then just on the [48] gigawatts in Texas. It’s a good color but it’s still a bit of a widespread, so what’s driving that range? Is it sort of your assumptions around gas or is it a function of environmental policy, just may be a little bit of color what’s driving the bottom and top end of the 4 to 8?

Yeah, the 4 to 8 gigawatts that are at risk right now, I think most of them is on controlled units, on scrub units, but Chris do you have more specificity?

I think it’s fair to say that its relatively cloudy, we’re still waiting to see if TXU is going to do something. The environmental rigs are up in the air being fought out in the courts. And honestly I’m not sure that we had Clear Lake as one of the ones that we thought was going to be shutting or if you would have backed up three or four quarters ago, I’m not sure we’d have had Greens Bayou 5 on it either. So I think there’s an abundance of caution when we throw a number out there. I think that’s as much as anything.

At this time, I’m showing no further questions, I would like to turn the call back over to Mauricio Gutierrez for any closing remarks.

Thank you. And appreciate very much your interest in NRG and with that we conclude the earnings call. Thank you.