Wholesale Panel. A Tale of Three (Very Different) Markets

Transcription

1 Wholesale Panel A Tale of Three (Very Different) Markets Lee Davis President East Region John Ragan President Gulf Coast John Chillemi President West Region Chris Moser SVP Commercial Operations

2 East Region: Key Points A wellpositioned geographically and fueldiversified portfolio Poised to benefit from ongoing capacity market reforms Substantial investment opportunities at low multiples and more attractive risk/return profile than new builds 1

3 East: Market Update Retirements and Dependence on Demand Response Causing Reliability Concerns Driving Capacity Market Reforms and Improved Price Formation Cumulative Retirements (GW) Source: CERA NE PJM NY Capacity Price ($/kw-mo) $12 $10 $8 $6 $4 $2 $0 Capacity markets reacting to changing dynamics /17 17/18 18/19 16/17 17/18 18/19 NY PJM NE PJM Reserve Margin % 25% 20% 15% 10% 5% 0% Requirement Reserve Requirement 13/14 14/15 15/16 16/17 17/18 with DR/EE and imports without DR/EE without DR/EE or imports PJM-EAST On-Peak Spark Spread 1 Source: PJM ISO, NYISO, ISO-NE, Analyst s estimates $40 $35 $30 $25 $20 $15 $10 $5 $0 Spark Spread Required for New CCGT Ave '16-'18 Source: PJM 2016/17 and 2017/18 BRA reports, PJM Market Monitor 2013 State of the Market Report, NRG estimates Source: PJM, ICE, NRG Estimates Forward values as of 12/31/ spark spread calculated using actual DAM settles vs. 7 heat rate x TETCO M3 gas; spark spreads based on forward on-peak power prices vs. 7 heat rate x TETCO M3 gas 2 CCGT CONE range is calculated based on overnight capital cost of $1,100/kW, net of capacity and ancillary revenue; Spark Spreads = (On-peak power - 7 heat rate x TETCO M3 gas) 2 A focus on reliability and fuel diversity to take advantage of market reforms and retirements

4 East: Asset Strategy ~$1B Capital Committed 1 Midwest Gen (4,306 MW) PJM ComEd Environmental upgrades, natural gas additions, retirements Summer 2016 COD Avon Lake (732 MW) PJM ATSI Gas Addition Summer 2016 COD Dunkirk (435 MW) NY RoS Gas Repowering Fall 2016 COD Case Study New Castle (330 MW) PJM ATSI Gas Addition Summer 2016 COD Shawville (597 MW) PJM MAAC Gas Repowering Summer 2016 COD Portland (401 MW) PJM MAAC Oil Repowering Summer 2016 COD Oil conversion by Summer 2016 Investment: ~$65 MM Est. Adj. EBITDA: $11 MM 2 5.9x EBITDA multiple Significant Accretion Just Based on Capacity 1 From NRG s 2 nd Quarter 2014 Results Presentation on Aug. 7, Includes ~$545MM at Midwest Generation and ~$440MM at GenOn subsidiary 2 Assumes $120/mw-Day 3 Significant value enhancement aligned to market dynamics

5 Gulf Coast Region: Key Points Strong growth in electric demand provides opportunities both in front of and behind Our the meter integrated platform continues to drive value in Texas NRG Carbon360 provides a large, differentiated value proposition while also protecting fleet diversity 4

6 Gulf Coast: Market Update Market Fundamentals Remain Strong and ERCOT Reserve Margin is Vulnerable Load Growth 1 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Source: PIRA Robust ERCOT load growth ERCOT assumption 2 Impacted Capacity (GW) Significant capacity at risk due to environmental regulations Coal Natural Gas MATS CSAPR Regional Haze 316(b) ELG Ash Disposal Source: ERCOT study entitled Impacts of Environmental Regulations in the ERCOT Region $35 ERCOT Houston Zone On- Peak Spark Spread 4 $30 $25 $20 $15 $10 $5 Indicative New Brownfield 6 Spark Spread Required for New CCGT 5 Shortfall Reserve Margin 20% 15% 10% 5% 0% -5% ERCOT CDR 2018 Reserve Margin Makeup % 2.8% 3.7% 7.7% 2.3% 5.3% Target RM $ Ave '16-'18 Source: NRG estimates. Forward values as of 12/31/ % CDR Source: ERCOT CDR Mothballed Capacity DSM/DR CSAPR & Regional Haze Retirements Adjussted RM Wind 1 12-month rolling average of weather normalized YOY load growth. 2 ERCOT energy growth rate of 1.8% as defined in ERCOT s Long-Term Hourly Peak Demand and Energy Forecast 3 CDR reserve margin, Mothballed Capacity, DSM/DR, and Wind reserve margin values based on ERCOT Dec 2014 CDR values; CSAPR & Regional Haze retirements based on ERCOT study entitled Impacts of Environmental Regulations in the ERCOT Region spark spread calculated using actual RT settles vs. 7 heat rate x Houston Ship Channel gas; spark spreads based on forward on-peak power prices vs. 7 heat rate x Houston Ship Channel gas. 5 CCGT CONE range calculated based on overnight capital cost in the range of $800/kW to $900/kW; Spark spreads =(On-peak power - 7 heat rate x Houston Ship Channel gas). 6 Assumes overnight build cost of $700/kW and 6.3 heat rate CCGT 5 Strong fundamentals and precarious reserve margins set the stage for advantaged development

7 Gulf Coast: Asset Strategy Well-diversified portfolio and advantaged development opportunities provides resiliency and opportunity Industrial Expansion: 5 Year Opportunity 4,000 MW electric demand 700 MW steam demand NRG Brownfield Expansion Sites Robinson- 360 MW in construction Cedar Bayou MW air permit issued Bertron MW air permit issued Integrated Platform (wholesale/retail) Multiple Brownfield Sites CCS/EOR Opportunities 6 Demand growth will continue in the Gulf Coast

8 West Region: Key Points NRG is well positioned for continued growth The California electricity supply mix is going through drastic changes NRG has established a solid foundation and reputation through recent successes 7

9 West: Market Update Renewable Generation and Retirements Create Opportunities on Existing Sites for Firming Capacity 24 RPS 33% Target by ,000 Net Load March 31 Cumulative GWS Renewable Generation 9 GWs by ,000 18,000 13, (actual) 8, AM 3 AM 6 AM 9 AM 12 PM 3 PM 6 PM 9 PM 2020 Ramp need ~13 GW in three hours 10 Source: CAISO, NRG estimates Cumulative GWs 5 - (5) (10) (15) Renewables: Incremental 9 GW to meet RPS target by 2020 Conventional: 10 GW of retirements (Nuclear and OTC 1 ) 13 GW of ramping capacity to integrate renewables Capacity Additions and Retirements (Conventional) Source: CAISO, NRG estimates Preferred resources: Growing share of utility procurement programs 1 OTC = once thru cooling 8 Changing resource mix increases need for flexible generation

10 West: Asset Strategy Repowering projects create solid long-term foundation 2,600 MWs Potential growth through more gas repowering Marsh Landing Generating Station 720 MW PPA (2023) Walnut Creek Energy Park 500 MW PPA (2023) Willow Pass Generating Station El Segundo Energy Center 2 Mandalay Energy Center 262 MW PPA (2040) More growth through preferred resources and storage DR El Segundo Energy Center 550 MW PPA (2023) Carlsbad Energy Center 600 MW PPA (2037) Direct asset control Lighting, HVAC and Distributed Generation Demand response program support Electricity Load Management Energy Storage 1.3 GW Mandate 9