Hedging Coal Price Risk in a Deregulated Power Market Ginny Farrow Manager Rail Car Fleet NCCI Spring Conference Greensboro, NC April 12, 2007
Safe Harbor Statement This Presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are subject to certain risks, uncertainties and assumptions and typically can be identified by the use of words such as “expect,” “estimate,” “anticipate,” “forecast,” “plan,” “guidance,” “believe” and similar terms. Such forward- looking statements include, but are not limited to, the successful implementation of our acquisition and repowering strategy, our environmental compliance strategy, our hedging profile, Big Cajun II – Unit 4 construction and our success in securing commercial arrangements for the output of the facility. 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 and related government regulation, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at generation facilities, our ability to convert facilities to western coal successfully, adverse results in current and future litigation, failure to identify or successfully implement acquisitions and repowerings, the inability to implement value enhancing improvements to plant operations and companywide processes and the ability to manage coal price risk. NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 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 Investor 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. 2
Agenda � NRG – Who are we? � NRG Coal Portfolio � Coal Procurement Strategy � NRG’s Role in Repowering � Future of Coal Procurement 3
NRG: Platform Established for Multiple Growth Opportunities W hat w e strive to be: A regionally focused, multi-fuel, carbon-diversifed scale generator with assets across the merit order and around transmission in each of our core markets with the capability to procure, transport and trade all of the commodities involved in our business. Extracting m axim um Enhance and Expand value from existing fleet Core Portfolio Northeast � FOR NRG � Texas Genco � W est Coast Pow er � Com m ercial Ops. � Padom a W ind � I m proved m arket design South W est Central Capital Allocation: Capital Allocation: Balance sheet Capital investm ent m anagem ent � Repow ering I nitiative � Portfolio Optim ization Texas � Environm ental Com pliance � Free cash flow generation & � Fuel supply chain investm ent ( railcars) liquidity � Return excess capital Our target custom er: Load serving entities in our core regions willing to contract for their bulk generation needs at a premium price in exchange for our assistance mitigating their customers’ aggregate electricity and fuel cost and transmission constraint risks. Expanding and enhancing our core asset base drives value enhancing grow th 4
NRG: Portfolio with Scale and Diversity Northeast W estern Gas 1 1 ,5 3 0 MW Gas 2 1 .5 % 1 ,9 4 8 MW Oil 3 ,5 5 6 MW Coal 1 0 0 % 2 ,0 2 9 MW 5 0 .0 % 2 8 .5 % Texas South Central Com bined Scale 2 Nuclear 1 ,1 0 1 MW 1 0 .2 % Gas 9 0 6 MW Oil Coal 3 7 .8 % 1 ,4 8 9 Nuclear 3 ,5 5 6 MW Gas Coal 6 2 .2 % 1 ,1 0 1 MW 1 5 .6 % 5 ,4 8 0 MW 4 ,1 9 5 MW 4 .8 % 5 0 .9 % 3 8 .9 % Gas 1 0 ,4 4 2 MW 4 5 .7 % Coal 7 ,7 2 9 MW 3 3 .9 % 1 Includes Devon 10 reactivated June 29, 2006; 2 Includes other North America capacity of 594 MW. For combined scale 3,419 MW MW data as of Septem ber 3 0 , 2 0 0 6 (15% ) is dual-fuel capable. Reflects only domestic generation capacity. Asset scale and diversity of fuel and location provide value creation opportunities 5
NRG: Existing Coal Portfolio Coal Sources Current PRB Lignite CAPP Colorado Import Petcoke Tons Coal Rank Com pany ( m illions) 1 Southern Company 80.0 75.0 2 AEP � 36MM tons – ranks us in the top 10 coal buyers in the US overall 3 TVA 45.0 44.3 4 Duke Energy and top 2 in the PRB 5 Ameren 38.2 � 92% of our fleet has sourcing and transportation flexibility 6 Berkshire Hathaway 37.0 � ~ 97% of transportation under firm contract through 2009 7 NRG ( current) 36.0 � Extensive rail fleet with over 6,800 privately leased or owned rail 8 TXU 35.3 9 Xcel 32.1 cars 10 Edison International 24.0 � Seasoned staff with experience in generation, coal production and Source: Company SEC filings, public presentations coal transportation – average 16 years in energy and Evelocity NRG’s coal portfolio features sourcing and transportation flexibility 6
Coal Procurement Strategy � Coal is always evaluated with emissions, Coal + SO 2 + NOx � Emissions Prices add additional complexity � Without a scrubber, emissions represent 10% – 50% of the cost of coal � Significant arbitrage opportunities exist for trading around coal qualities Coal Costs in $/MWh Delivered to PJM H isto ric a l S p o t S O 2 P ric e $45.00 $40.00 $ 1 ,8 0 0 $35.00 $ 1 ,6 0 0 $30.00 $ 1 ,4 0 0 $/MWh $25.00 SO2 $ 1 ,2 0 0 $20.00 Fuel & Transport e c $ 1 ,0 0 0 n $15.00 a w llo $ 8 0 0 $10.00 /A $ $ 6 0 0 $5.00 $ 4 0 0 $- $ 2 0 0 CAPP 12500 Columbia NAPP 13000 PRB 8800 0.8 lb $ 0 1.6 lb SO2 Import 3.0 lb SO2 SO2 All Commodity prices based on 4/ 5/ 07 prompt month market Transportation costs are based on estimated industry average Emissions are a key driver in optimizing our fuel mix 7
Historical PJM Delivered Coal Prices Historical Coal Price Delivered to PJM Coal + Transport + SO2 + NOx $55.00 $50.00 CAPP PRB $45.00 NAPP Col 11300 1% $40.00 $/MWh $35.00 $30.00 $25.00 $20.00 18-Feb-2005 20-Mar-2005 19-Apr-2005 19-May-2005 18-Jun-2005 18-Jul-2005 17-Aug-2005 16-Sep-2005 16-Oct-2005 15-Nov-2005 15-Dec-2005 14-Jan-2006 13-Feb-2006 15-Mar-2006 14-May-2006 13-Jun-2006 13-Jul-2006 12-Aug-2006 11-Sep-2006 11-Oct-2006 10-Nov-2006 10-Dec-2006 9-Jan-2007 8-Feb-2007 10-Mar-2007 14-Apr-2006 Transportation costs are based on estimated industry average Optimizing coal portfolio requires flexibility 8
Historical PJM Coal vs Gas PJM Dark Spreads vs Gas Spark Spreads $80.00 $60.00 $40.00 $/MWh $20.00 $0.00 -$20.00 -$40.00 Feb-05 Mar-05 May-05 Jun-05 Jul-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 May-06 Jun-06 Jul-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Sep-05 Sep-06 Apr-05 Aug-05 Apr-06 Aug-06 Peak Gas Spark Spread Peak Dark Spread Off Peak Gas Spark Spread Off Peak Dark Spread All Commodity prices based on spot market Coal basis = CAPP; Gas basis = Dominion-South Point; Power basis = PJM West Hub Transportation costs are based on estimated industry average Flexibility is even more important in a moderate natural gas price environment 9
Repowering: Opportunity for Coal Current U.S. Capacity Additions US Capacity A dditions 80,000 $10 $9 70,000 $8 OTHER 60,000 RENEW $7 OIL 50,000 $6 NG MWs by fuel Gas/ Coal Indifference Zone NUKE 40,000 $5 HYDRO $4 30,000 COAL NG Historical $3 20,000 NG Forecast $2 10,000 $1 0 $0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Year A flight to natural gas in the first half of this decade is causing a flight back to coal in the second half 10
Repowering: NRG’s Role Expected Tons Coal Rank Com pany ( m illions) 1 Southern Company 80.0 2 AEP 75.0 50.0 3 NRG ( after repow ering) 4 TVA 45.0 5 Duke Energy 44.3 6 Ameren 38.2 7 Berkshire Hathaway 37.0 8 TXU 35.3 9 Xcel 32.1 10 Edison International 24.0 Source: Company SEC filings, public presentations and Evelocity Technology New Build Site Gross MW Fuel Operation Fluildized Bed Boiler Big Cajun I 230 Coal/Pet Coke 2010 Indian River 752 Coal IGCC 2011-2012 Huntley 752 Coal IGCC 2012 Limestone 800 Coal PC 2012 PC Big Cajun II 775 Coal 2010 Industry repowering presents growth opportunities for coal producers through partnerships with generators 11
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