NRG Energy Inc. Mauricio Gutierrez President, NRG Business March 31, 2015
Safe Harbor Forward-Looking Statements In addition to historical information, the information presented in this communication includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These statements involve estimates, expectations, projections, goals, assumptions, known and unknown risks and uncertainties and can typically be identified by terminology such as may, should, could, objective, projection, forecast, goal, guidance, outlook, expect, intend, seek, plan, think, anticipate, estimate, predict, target, potential or continue or the negative of these terms or other comparable terminology. Such forward-looking statements include, but are not limited to, statements about the anticipated benefits of acquisitions, the Company s future revenues, income, indebtedness, capital structure, plans, expectations, objectives, projected financial performance and/or business results and other future events, and views of economic and market conditions. Although NRG believes that its expectations are reasonable, it can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated above include, among others, general economic conditions, hazards customary in the power industry, weather conditions, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets, changes in government regulations, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, adverse results in current and future litigation, failure to identify, execute or successfully implement acquisitions and repowerings, our ability to implement value enhancing improvements to plant operations and companywide processes, our ability to obtain federal loan guarantees, the inability to maintain or create successful partnering relationships, our ability to operate our businesses efficiently including NRG Yield, our ability to retain retail customers and to grow our NRG Home Solar business, our ability to realize value through our commercial operations strategy and the creation of NRG Yield, the ability to successfully integrate businesses of acquired companies, the ability to realize anticipated benefits of transactions (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, our ability to close the drop-down transactions with NRG Yield, and our ability to complete share repurchases under the Capital Allocation Plan may be made from time to time subject to market conditions and other factors, including as permitted by United States securities laws. Furthermore, any common stock dividend is subject to available capital and market conditions. NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The adjusted EBITDA and free cash flow guidance are estimates as of February 27, 2015. These estimates are based on assumptions believed to be reasonable as of that date. NRG disclaims any current intention to update such guidance, except as required by law. The foregoing review of factors that could cause NRG s actual results to differ materially from those contemplated in the forward-looking statements included in this Earnings Presentation should be considered in connection with information regarding risks and uncertainties that may affect NRG's future results included in NRG's filings with the Securities and Exchange Commission at www.sec.gov. 1
Today s Focus NRG: Premium Competitive Energy Business Platform Competitive Energy Business Model Organized Around Our Customers Clean Energy Retail Core Generation Augmented By Balanced Capital Allocation A Diversified Competitive Energy Company Positioned for Growth Around the Energy Consumer, While Generating Significant Free Cash Flow 2
$/MMBTu Evolution of NRG: Adapting to Market Dynamics Merchant Expansion Integrated Model Post-Merchant $10.00 $9.00 Selling Coal and Uranium at NG Prices Retail Expansion Risk Management & Hedging Industry Consolidation & Synergies Realization Renewables (early-mover) Contracts & Capacity Distributed Generation $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Nat Gas price based on average annual spot NG pricing NRG has navigated market cycles exceptionally over time; well positioned to execute in Post-Merchant environment 3
NRG Business: Generation Portfolio Unmatched in Scale and Diversification Scale 49,200 MW 1 Regional Merit Order Fuel Diversification MISO SERC CAISO 11% 17% PJM 36% Intermediate 39% Peaking 24% Coal 34% 12% Oil Nuclear NYISO NEISO 15% 22% 37% 51% Natural Gas ERCOT Baseload Coal Environmentally Controlled 1 Excludes international and renewable portfolio Portfolio of ~150 plants creates unique competitive advantage to survive and thrive 4
Repositioning the Portfolio: Strategic Initiatives Strategy Rationale Example Fuel Conversion Avoid enviro capex Low cost / quick payback options on marginal assets leveraging capacity markets. Free option on energy How Joliet Best to Invest Avon Lake $1 Billion? Big Cajun II-2 Environmental Retrofit Cost Synergies Brownfield Development Plants well positioned to benefit from energy and capacity margins SG&A and Operational synergies Merchant: Cost advantage at 50-60% replacement cost Contracted: Firming capacity with 10 year contracts. NRG Yield candidates ~6,500 MW 1 Limestone Life extension Multiple Parish Zones Capacity driven Big Cajun 1 & 3 Midwest Gen GenOn or Midwest Gen 1,200 MW CCGT 2 Brownfield Single Market Merchant Exposure PH Robinson El Segundo Marsh Landing De-carbonization Survive to thrive strategy, focused on capacity and contracts with energy upside 5
Growth Capital 2015 Growth Capital Deployment in 2015 Capacity Impacted by Growth Investments (MW) 7,000 28% 6,000 5,000 4,000 Environmental Compliance Fuel Conversions Repowering 55% 3,000 17% 2,000 1,000 NRG Business NRG Renew NRG Home / Other 0 2015 2016 2017 2018 2019 2020 Majority of growth capital targeting projects for NRG Business 6
US New Builds and Retirements (GW) Wholesale Market Trends 70 Regulated Utilities (Pre PURPA) De-Regulation IPPs Merchant Post Merchant 60 50 40 30 Trend Low prices Opportunity Integrated platform 20 10 0-10 Retirements Renewables Distributed Capacity reforms Firming Capacity Resiliency -20 126 GW of retirements expected this decade -30 1960 1970 1980 1990 2000 2010 2020 Coal Natural gas Renewables Nuclear Hydro Oil Source: CERA Changes in supply/demand balance present unprecedented retirement-driven market opportunity 7
$/MMBtu, 2013$ BCF/D BCF/D Market Outlook: Natural Gas Natural gas at the bottom of the cycle but significant demand on the horizon $12 75 100 $10 $8 Price 70 65 95 90 85 2014-2020 CAGR 4.2% $6 60 80 75 2012-2014 CAGR 2.6% $4 55 50 70 65 Incremental Demand Drivers - 2015 to 2020 $2 Production 45 60 55 $- 1995 2000 2005 2010 40 50 2012 2013 2014 Exports to Mexico Industrial/ Other Power/ Retirements LNG Exports Source: EIA, Platts Source: EIA, Wood Mackenzie NRG s Portfolio Remains Well-Positioned to Capture Market Upside 8
PJM - Coal Retirements and Gas Additions(GW) Capacity Price ($/kw-mo) Market Outlook: East Supply rationalization leading to reliability concerns but markets addressing through capacity reforms 15 8 GW Retiring This Year 25% $12 12 9 BRA Reserve Margin Target Reserve Margin Reserve Margin Less DR 20% 15% Reserve Margin $10 $8 $6? 6 10% $4 3 5% $2 0 2012 2013 2014 2015 2016 2017 2018 0% $0 2013 2014 2015 16/17 17/18 18/19 16/17 17/18 18/19 NY NE PJM Retirements Gas Additions NRG GW: ~4.2 ~2.9 ~17.6 Source: IHS CERA, PJM ISO, NRG Estimates Source: PJM ISO, NYISO, ISO-NE, Analyst s estimates, NRG data NRG s ~17 GW in PJM Poised to Benefit from Near and Long-Term Fundamentals 9
Market Outlook: ERCOT But supply is vulnerable given depressed prices and expected environmental regulations New Generation Effective Load Carrying Capability (MW) Reserve margin (%) Reserve margin improvements based on revised load forecast and expected new builds 4,000 20% 20% 3,500 18% 16.5% 2.8% 3,000 2,500 2,000 Target RM 16% 14% 12% 10% Reserve Margin 1 15% 10% 3.7% 7.7% 1,500 8% 1,000 6% 4% 5% 2.3% 5.3% 500-2015 2016 2017 2018 2019 2% 0% 0% Wind Dec '14 CDR Reserve Margin Non Wind May '14 CDR Reserve Margin -5% CDR Mothballed Capacity DSM/DR CSAPR & Adjussted RM Regional Haze Retirements Wind Source: ERCOT CDR Reserve margins and forward prices discount impact of supply at risk 1 CDR reserve margin, Mothballed Capacity, DSM/DR, and Wind reserve margin values based on ERCOT Dec 2014 CDR values; CSAPR & Regional Haze retirements based on ERCOT study entitled Impacts of Environmental Regulations in the ERCOT Region 10
NRG Home-Retail Highlights Stable Retail Margins Growing Customer Count ($ millions) $501 $560 Adj. EBITDA $528 $604 $615 (millions) 1.7 YE Mass Customers 2.0 2.1 2.2 2.8 0.4 NE Dominion 2.4 2011 2012 2013 2014 2015E 2010 2011 2012 2013 2014 Leader in Texas Major Player Nationwide Stream 5% 2,217 Ambit 7% Residential ERCOT Share (Customers) Other 20% Direct 13% 2,304 NRG 29% TXU 26% # 1 In TX (millions) 2.7 Direct Energy 2.5 2.4 NRG Residential Customers First- Energy 1.9 Just Energy # 2 Nationally 1.5 TXU NRG has established a strong Retail business though both acquisition and organic growth Source: Company Filings, Industry Reporting, NRG Analysis 11
Summary Leading competitive energy platform adapting to current market environment Re-positioning generation portfolio to out survive competitors and benefit from retirement-driven market recovery Majority of growth investments targeting core generation business Integrated retail platform continues to provide stable earnings NRG Well Positioned to WIN TODAY and WIN TOMORROW 12
Appendix
Environmental Compliance Fuel Conversions Repowering / Other Repositioning the Portfolio MW Project Focus Estimated COD Status Petra Nova Parish Project NM CCS / EOR Fall 16 Carlsbad 1 633 Natural Gas Fall'17 Mandalay 1 262 Natural Gas Spring'20 P.H. Robinson Peaker 360 4 Natural Gas Spring'16 Big Cajun II Unit 2 / Dunkirk 1,020 Natural Gas Spring'15/'16 GenOn Facilities 2 2,055 Natural Gas & Ultra- Low Sulfur Diesel Summer'16 Joliet Units 6-8 3 1,326 Natural Gas Summer'16 Waukegan 8 / Powerton 5 3 1,130 DSI/ESP Upgrade Spring'15 / Fall '16 Parish 5-8 / Limestone 1-2 4,193 ACI & CEMS Spring'15 Big Cajun II Units 1, 3 921 ACI & DSI Spring'15 A Significant Pipeline All on Schedule 1 Subject to applicable regulatory approvals and permits 2 Includes Avon Lake Units 7&9, New Castle Units 3-5, Portland Units 1-2 and Shawville Units 1-4 3 Assets owned by MidWest Generation 4 Represents average annual peaking capacity 14