Good day, ladies and gentlemen, and welcome to the Fourth Quarter and Full-Year 2017 NRG Energy 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 be given at that time. As a reminder, this call is being recorded. I would now like to turn the conference over to Kevin Cole, Head of Investor Relations. You may begin.

Great. Thank you, Sonia. Good morning and welcome to NRG Energy's fourth quarter and full-year 2017 earnings call. This morning's call is being broadcast live over the phone and via webcast. This can be located in the Investors section of our website at www.nrg.com under Presentations & Webcasts. As this is the earnings call for NRG Energy, any statement 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 the risk factors in our SEC filings. We undertake no obligations 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 reconciliations to the most directly comparable GAAP measures, please refer to today's presentation. Now, with that, I'll turn the call over to Mauricio Gutierrez, NRG's President and CEO.

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; and Elizabeth Killinger, Head of our Retail business. I'd like to start the call by highlighting the three key messages for today's presentation on the slide 4. First, we delivered on our 2017 goals and we are reaffirming 2018 guidance. After a year of relentless focus on multiple transformative priorities, we have a much clearer path to value, and I am very optimistic about the potential for upside in our business, particularly given the strength we're seeing in our core markets. Second, we have made significant progress in executing on our Transformation Plan. Our sale announcements over the past few weeks have brought us to over 90% of our target asset sale proceeds. We have also significantly exceeded our 2017 cost savings target and remain on track to achieve our target credit metrics. And third, with the vast majority of our asset sales now announced, and as a reflection of our confidence in the outlook for our business, we are announcing a $1 billion share buyback authorization with the first $500 million program to begin immediately. Now, turning to our Transformation Plan update on slide 5, as you can see by our scorecard on the left-hand side of the page, we're making good progress. We have realized $150 million of recurring EBITDA accretive savings during 2017, which is over 200% of our original target of $65 million. The excellent work throughout the organization and the focus on our continuous improvement initiative led to a jumpstart of our cost program early last year. This meant that we were able to pull forward some of our 2018 initiatives and…

Thank you, Mauricio. Turning to the financial summary on slide 11, in 2017, NRG generated $2.373 billion in adjusted EBITDA, $1.3 billion in consolidated free cash flow before growth, with nearly $900 million of that cash flow available at the NRG level. For the year, Retail delivered a robust $825 million in adjusted EBITDA, including the impact of low commodity prices, execution on cost reduction and continued customer growth. Generation and Renewables delivered a combined $615 million in 2017 EBITDA, including a one-time impact of a non-cash expense of approximately $60 million due to excess oil inventory write-down and the write-off of obsolete spare parts inventory across the fleet. NRG Yield contributed $933 million in line with expectations. Including today's announced sale of our Boston Energy Trading and Marketing business, the total Transformation Plan asset sales announced or closed to-date totals $3 billion, or only $200 million away from our revised target, which we expect to reach by 2019 In the fourth quarter, we successfully refinanced our 2023 unsecured notes at a record low rate for NRG of 5.75%, reducing annual interest expense and extending the previous maturity by five years. In 2017, we also completed the reduction of just over $600 million in corporate debt through redemption of the remaining balances of our 2018 and 2021 notes. These redemptions eliminated our nearest corporate maturities and combined with interest savings on the 2023 notes refinancing led to annual cash interest savings of $55 million. I'd like to take a moment to address one element of our 2017 income statement, which is not included in our EBITDA results. That is a non-cash impairment charge on fixed assets and goodwill of $1.8 billion. This charge primarily consists of a $1.2 billion impairment loss on our interest in the South Texas Project, or…

Thank you, Kirk. Just a few final remarks on our priorities for the year on slide 17. And as always, our first priority is to deliver on our financial and operational goals. We're focused on executing our Transformation Plan objectives and bringing our announced asset sales to a timely close in the second half of the year. In 2017, it was a priority to find a comprehensive resolution for GenOn, and during the year, we were able to achieve this objective. Now, with a plan confirmation by the courts, we're focused on working with GenOn on transition services so that GenOn may be a standalone company by September of 2018. I want to acknowledge that 2017 was an important year for our company and we underwent a series of changes stemming from multiple strategic initiatives. I am very proud of our success in greatly simplifying our business and positioning ourselves to thrive under any market cycles. I look forward to continuing our conversation about the long-term strategy and prospects of the company at our Analyst Day on March 27. I want to thank you for your time today and your interest in NRG. And with that, Sonia, we are now ready to open the lines for questions.

Thank you. Our first question comes from Stephen Byrd of Morgan Stanley. Your line is now open. Stephen Calder Byrd - Morgan Stanley & Co. LLC: Hi. Good morning.

Good morning, Stephen. Stephen Calder Byrd - Morgan Stanley & Co. LLC: Congratulations on continued progress on your Transformation Plan.

Thank you. Stephen Calder Byrd - Morgan Stanley & Co. LLC: Wanted to first touch on Texas. We share your optimism about the tightening supply-demand balance. Can you speak to how you're likely to be positioned for the summer, just at a high level? I know it's challenging to tell us exact megawatts of open position, but to the extent that we do see relatively high summertime prices, how can we think about the strategy for remaining open and positioned to take advantage of such price moves?

Right. So, Stephen, let me answer the question with, I guess, two timeframes. The first is 2018, because we have seen a pretty significant increase in prices for this summer, and then perhaps longer-term, which is more of a structural change. So, for summer of 2018, our Generation business is very well positioned. We actually disclosed in the Appendix our hedge percentages now on a pro forma basis. And as you're going to see, we are about 30% open on our heat rate exposure. So, we are – from a Generation standpoint, we're well positioned to benefit from the market tightening – or the tightening conditions that exist in the market. Our Retail business is well positioned as well. As you recall, we back-to-back all our Retail, I guess, load and about half of our portfolio is fixed price. So you should expect that that half of the portfolio is completely locked in and the margins are locked in. The other half is in variable pricing. We take steps to manage that load and as the load progresses and it fixes their price, we can, what I describe is, detail or perfect the hedges that we have on that variable pricing load. Now, longer-term, 2019 and beyond, our Generation business is pretty open, as you can tell on the hedging disclosures that we have provided. So, we will benefit from any structural changes. And we believe that these repricing of the Texas market is going to continue at least for 2019 and perhaps 2020, since – which is not going to have a chance to have new-builds in the span of a year and a half or two years. Our Retail business, on the other hand, as you appreciate, if there is a structural change in the Texas market, all…

Yeah. Well, I mean, first is the latter part of your question, which is we're deploying $1 billion because we believe the returns on our stock are pretty attractive. And number two, we are always evaluating the market in terms of attractive opportunities. What I will say is just given where the market conditions are, those attractive opportunities are perhaps more likely in the Retail business than in the Generation business. And that's where we're going to be focusing. I mean, keep in mind that in the East, we're still long Generation. We need to continue growing our Retail business both organically. And perhaps, if there is an attractive opportunity in the retail sector, we will evaluate that. But without a doubt, right now, the most compelling return for our capital is our own stock and that's where we're focusing on. Stephen Calder Byrd - Morgan Stanley & Co. LLC: That's great. Thank you very much.

Thank you, Stephen.

Thank you. Our next question comes from Julien Dumoulin-Smith of Bank of America Merrill Lynch. Your line is now open. Antoine Aurimond - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Hey, guys. This is Antoine for Julien, actually. How are you?

Hey. Good morning. Antoine Aurimond - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Hi. To come back a little bit on the capital allocation beyond the $1 billion buyback, how would you guys think about a recurring dividend program in terms of payout and yield?

Yes. I mean, it's one of the options that we have to returning capital to our shareholders. We laid out our priorities a couple of our earnings calls ago. And when I think of our capital deployment and capital allocation, it's just using those principles that we have already articulated to you. We need to make sure that our business is performing at the operating and financial level that we want. Now that we have line of sight after the asset sales on our credit metrics, then it gives us the opportunity to start thinking about growth or returning capital to shareholders. And in the returning capital to shareholders bucket, I mean, we have the share buybacks or a dividend. And right now, just given where the stock is, we have opted to execute on share repurchases, but dividends are a very viable way to returning capital to shareholders. We're going to continue evaluating that throughout the year. And once we finish with our initiatives and complete the repositioning of our portfolio, then we will have a robust conversation internally and with our board of directors to see what is the best way to return capital to shareholders. But, hopefully, the announcements that we're making today demonstrate and are clear examples of our commitment to be very disciplined when it comes to capital allocation Antoine Aurimond - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Got it. And then, can you give us a bit more detail on the $215 million Retail EBITDA enhancement in terms of how you plan to achieve that and whether the timing you laid out previously has changed at all?

Yeah. So, you're talking about the margin enhancement for Retail, right? Antoine Aurimond - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Right.

Yes. We provided some information about that when we announced the Transformation Plan and in subsequent calls. I would tell you that we're investing heavily in our Retail business both on our asset sale channels and our IT platform, and just the further integration of Generation and Retail, which helps us manage – or better manage and optimize our margins. In the Analyst Day, one of our objective is to provide you a lot more visibility and clarity in terms of how do we plan to achieve that $250 million. The only point that I also have made in the past is, if you look at what we have achieved the last three years, we actually grew our Retail business by $200 million. So, what we're saying is, in the next three years, we're going to grow it by another $200 million. We have done it before. It's achievable, but I am very mindful that we need to provide a lot more specificity about how we're going to do that. And I intend to do that with my colleagues, particularly Elizabeth and Rob, as responsibles of the Retail businesses, to provide more specificity about how we're going to do it. Antoine Aurimond - Merrill Lynch, Pierce, Fenner & Smith, Inc.: Great. Thank you very much.

Thank you, Antoine.

Thank you. Our next question comes from Greg Gordon of Evercore ISI. Your line is now open.

Thanks. Good morning.

Hey. Good morning, Greg.

Just a little bit of clean up on the Q4 and fiscal year results. The EBITDA came in a bit below the guidance range, but despite that the free cash flow was quite robust. Can I attribute that to that write-down that you guys called out in Q4 that was non-cash to $60 million as being sort of the key thing that took you down below the range?

Yeah. Greg, it's Kirk. That's correct. I mean that's one of the reasons why I highlighted that non-cash, obviously, non-recurring impairment charge, which – the larger impairments on the fixed assets, that's just the acceleration of depreciation, which isn't part of EBITDA. But because that's inventory which would normally go through COGS, we chose to leave that obviously as part of our deduct to get to EBITDA, but obviously highlighting the fact that that's one-time and non-cash. A couple of other elements as we roll through the statement of other (40:08) which are non-cash, we made an accrual for potential liquidated damages due to the delay of the Carlsbad project. I think that was like ZIP Code of $20 million of accrual towards the year end. And the remainder of sort of the unexpected variances, if you want to call it that for lack of a better term, we had is largely related to really the Renewables side, which is really still consolidated. We had some delays in projects reaching COD, which obviously delays their contribution of EBITDA. But overall, the main one to highlight is the $60 million you started with.

Right. Two more questions. On the $600-and-change million, that's currently unallocated. I presume you're going to give us some more guidance on how you're going to allocate that capital at the Analyst Day. And so it's sort of been held back and so you can give us a sense of how you're focusing the business strategy and therefore where you're going to allocate those dollars?

Yes, Greg. I mean, we'll provide you some more clarity during the Analyst Day, but what I can tell you today is we're going to be applying the same capital allocation principle that we have applied to date. So, while we will do that on the Analyst Day, I don't think you should expect any big surprises in terms of the disciplined approach that we're taking on capital allocation.

Great. And my last question, I think Stephen Byrd alluded to this earlier, just to be a little bit more direct. It's always been in hindsight over the years, a mistake to get too excited too early in the year in terms of guidance ranges and changing them. But forward curves and power market dynamics have improved quite significantly since you gave the guidance range. So, can you give us any sense of, given how you've hedged the portfolio, whether forward curves were to hold up at these levels for the remainder of the year? Where would you sort of be within the guidance range or is it just too early in the year and you don't want to get too excited about it?

Well, I mean, first of all, we're very comfortable with the guidance that we have provided today. That's why we're reaffirming it. Number two, we're not going to tell you specifically how we are positioning ourselves for the summer. I mean, we provided you the cash disclosures on the appendix. And as you can tell, we are roughly about 30% open on our total portfolio for heat rate exposure. So, the commercial team, and Chris Moser is managing very closely the position in the summer. Now, with the further integrations that we have between Generation and Retail, we have a pretty good line of sight in terms of the needs that our Retail business needs – has to mitigate any potential impact on it. But where I stand today, I just feel very, very comfortable with the position of our business and the guidance that we have provided to you.

Okay. Thank you, guys. Have a great morning.

Thanks.

Thank you, Greg.

Thank you. And our next question comes from Steve Fleishman of Wolfe Research. Your line is now open.

Yeah. Hi. Good morning.

Hey. Good morning, Steve.

Hey, Mauricio. So the – just, I know I've asked this in the past, but just you do give the continued benefits of the cost cutting and the margin enhancement out to 2020. Just the base business, excluding that, and I know there's a lot of moving parts, but is it fair – in the past, we've talked about it being kind of assume flattish off of the base in 2017, 2018. Is that still kind of a fair thing to do, or any guidance there on other drivers?

Yeah, Steve. It's Kirk. I mean, obviously, you already referenced sort of the on-to-come aspect of the Transformation Plan, that $275 million. But setting the Transformation Plan trajectory to the side, yes, we feel comfortable with the underpinnings of the base business, which is what informed our confidence to sort of reaffirm using that as an anchor in that roll-forward walk that I provided for you. Our outlook is consistent with that perspective over the long-term beyond 2018, yes.

Okay, great. And then one more question on ERCOT and specific really to the summer peak. Could you talk about your generation-to-load match at summer peak days, periods, et cetera, in terms of protecting in the event there is high-volume spiky pricing?

Hey, Steve. Chris Moser here. I would think of it this way. With the integrated portfolio, the final position in any given hour is going to depend on where the Retail actuals come in and how the units perform in that given random hour out of the 700 on-peak hours we're going to see. If it's a high-load, high-price situation, we're set up to be – we're just fine in that situation. If it is extreme load and extreme price, that's going to limit the upside as the unit's length ends up covering and protecting Retail margin, so. But in an extreme load, extreme price situation in 2018, that should have some carry-forward and bleed through into 2019 and beyond, which should give us some pretty good hedging opportunities in the forwards. And keep in mind, that's an area where Retail retains a lot of pricing flexibility, given that they haven't sold everything out up there yet. So, I feel like we're in a pretty good shape right now.

Okay. One last question, and you may want to leave this to the Analyst Day, but just your main peer company talked a little bit about, thinking about whether they might want to look to investment-grade credit metrics or rating in the future. Is that a priority for you at all, or is that really not something that you're focused on?

Yeah. Steve, it's Kirk. Not primarily focused on it. I mean, certainly, improvements in credit ratings are something we certainly do aspire to from a cost of capital and reliability of access in the market as you sort of leg up the scale, if you will. But I think we feel comfortable with sort of the ZIP code of that BB ratio, striking the right balance between delivering the right equity return to our shareholders on the one hand and managing the risk of the balance sheet on the other, and most importantly, maintaining our confidence in the access to reasonably priced capital even through the cycle. That's not to say we continue to look towards that. I mean, as I think I maybe even said in a prior call, maybe the last call we had, we don't look at our credit ratio objectives as a set it and forget it. We continue to review those in the context of what we see, including, but not limited to, the fact that obviously the tax shield is not quite as robust today as it was a few months ago by virtue of the Tax Reform Act. So that's in constant review, but I think suffice to say, that's not a primary focus. We're comfortable with our BB target.

Great.

And, Steve, let me just add that we have been very clear about our priorities. We have communicated that to all of you. Those priorities are right now on execution. That's our focus right now is to execute on those priorities. And as Kirk mentioned, I mean, once we have demonstrated that we've delivered on those commitments that we've made, then we will reevaluate. But for now, our priorities are very clear and we're executing towards them.

Thank you.

Thank you, Steve.

Thank you. And our next question comes from Shar Pourreza of Guggenheim. Your line is now open.

Hey, guys. Good morning.

Hey. Good morning, Shar.

So most of my questions were answered, but just on sort of the dividend and just a quick follow-up. Is there longevity in the token dividend? So like as you sort of think about returning capital and assuming you decide it's more economic to buy back shares, why sort of retain this token dividend? Should we sort of think about it as either you potentially looking to enact a higher payout ratio and maybe growing that dividend, given what your cash flow profile is, or removing the policy altogether? So why keep this dividend if you're going to maintain it at such a low level?

No, that is a good observation, Shar. And we actually have been having conversations internally about that. And as you can appreciate, we're going to have – we're going to be talking to you in a more comprehensive basis around our capital allocation program, but importantly, in the context of our long-term strategy and long-term prospects that the company has. So, this is something that we're going to be getting into more detail at the Analyst Day.

Okay. That's helpful. And then, Kirk, let me just follow-up real quick on sort of your leverage targets, like – and outside of ratings, you do have a peer that's noticeably shooting below that. You've got the integrated utility GenCos that are certainly leaner. You have other cyclical industries that have tighter metrics. Is 3 turns really optimal outside of ratings, especially given that you're kind of left without an industry, a sector, and eventually, going to have to benchmark yourself with other cyclical industries as you project sort of this message to investors? So, what is optimal? Is 3 turns still optimal, or is your thought process should it evolve?

Well, to avoid repeating some of the things I said in response to Steve's question, we are comfortable and reaffirming that 3 times target. And what informs our thinking beyond what I've talked about in the past about striking the right balance and everything else is cash flow context matters to us at the end of the day. And both Mauricio and I again reiterated how pleased we are with what the knock-on effect of what we're doing in the Transformation Plan means in our ability to more efficiently translate EBITDA to free cash flow. And legging towards two-thirds or $0.67 of every $1 translating, that makes a big difference. So, if I'm comparing apples-to-apples to somebody else's at a 2 times net debt-to-EBITDA ratio, but they're converting $0.35 on every $1 where I'm converting $0.70, that calibration factor on cash flow, I think, is important not to ignore because it certainly informs our thinking. And while EBITDA is a nice statistic, cash rules the day in terms of financial flexibility. And that I think is a distinction that's worth repeating.

Okay. That's helpful. Congrats, guys, on executing on the plan so far.

Okay. Thank you, Shar.

Thank you. And our next question comes from Angie Storozynski of Macquarie. Your line is now open. Angie Storozynski - Macquarie Capital (USA), Inc.: Thank you. I wanted to go back to the sensitivity of earnings to changes in heat rates. So, when I look at slide 24, where you show the sensitivity of your margins, especially for the Texas business, it seems largely unchanged versus what you showed us, I think, during the financial update – actually, during the third quarter earnings call. And you had a pretty meaningful move in heat rates in Texas. So, the sensitivity versus the levels at the end of the year, is this versus the current guidance? What is the basis for that sensitivity?

This is Chris, Angie. I believe that that is as of this week – are you looking at the heat rate sensitivity, $54 million Texas 2018? Angie Storozynski - Macquarie Capital (USA), Inc.: Yes.

That's what you're looking at? Yeah, think of it as $54 million from what is arguably a higher spot. Angie Storozynski - Macquarie Capital (USA), Inc.: Okay.

And, Angie, let me just – because you were talking about comparing against previous disclosures, so I think it's important to mention that in this new hedge disclosure, I think we pulled out some of the portfolios or assets that we're selling, particularly the LaGen business. So, I just want to make sure that the team is working with you, too, as you're looking at previous disclosures with new disclosures that you're comparing apples-to-apples. And this new hedge disclosure I believe does not include the businesses that are held for sale now. But that's an important – I guess that's an important piece of information, Angie. Angie Storozynski - Macquarie Capital (USA), Inc.: Okay. But there's nothing being sold in Texas, right? I mean, Texas Generation assets are intact. So you're saying that the...

Angie, we can... Angie Storozynski - Macquarie Capital (USA), Inc.: Okay.

We can – let me just make sure – I am looking at the third quarter 2017 earnings presentation where the heat rate sensitivity for Texas and South Central is $62 million and the one that you have in front of you with the $54 million is Texas only. But we can run this down off the call, if you like. Angie Storozynski - Macquarie Capital (USA), Inc.: Okay. Thank you.

Okay.

Thank you, Angie.

Thank you. And we have time for one more question. Our final question comes from the line of Abe Azar with Deutsche Bank. Your line is now open.

Good morning. Congratulations.

Thank you, Abe.

Just following up on your hedge profile, you remain more open for next year than I remember you being in recent years. Is this a reflection of your view that there's potentially more improvement in the forward curves or is this liquidity or something else?

No. It's two things and it goes to a little bit of what I was just talking to Angie about the – if you're looking at the previous quarters, they would have had South Central included in that. And given that South Central has a pretty big short position in it against the co-op contracts, when you pull that out and you're just looking at Texas by itself or Texas and the rest of the pro forma situation, it'll look slightly less hedged. But given that South Central is, give or take, a 20% kind of a number, if you look back at 4Q 2016 for 2018, we were about 44% hedged gas. And if now we're at 4Q 2017, looking at 2019, it's kind of 26%. So, that give or take, rough and tough, looks pretty similar to where we were on an apples-to-apples basis. Unfortunately, Q4 2017, Q4 2016 aren't apples-to-apples because of the South Central being pulled out of the numbers on the 2017 number.

Yeah. But I think it's fair to say that we were expecting a market tightening in Texas. We knew that the chronic prices that we experienced over six years were going to accelerate retirements or slow down new-builds. We positioned ourselves correctly. I think we will see the benefits in our portfolio. And we will execute on our strategy – on our hedging strategy just the way we have executed in the past. We're opportunistic based on our commodity price yield. We manage our credit ratios and our balance sheet. And now, we also have to be mindful that the synergies that exist between matching Generation and Retail. So, these are the three legs of our strategic hedging program. We are not deviating from that. And I think you should expect as the year progresses and the market reprices itself or re-rates itself that we will execute accordingly.

Great. And that's all. I will see you at the end of the month.

Okay, great. Thank you, Abe.

Thank you. And this does conclude our question-and-answer session. I would now like to turn the call back over to Mauricio Gutierrez for any closing remarks.

Great. Thank you, Sonia, and thank you again for your interest in NRG. We're very excited about the changes that we have made in our portfolio and our business. And I look forward to talking to all of you at the end of the month. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.