Second Quarter 2004 Financial Results

1
Second Quarter 2004 Financial Results

• August 5, 2004

2
Safe Harbor Statement
This Investor 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, believe and similar terms.
Such forward-looking statements include, but are
not limited to, expected earnings, future growth
and financial performance, the successful closing
of announced transactions, the successful closing
of the coal transportation agreement, the
successful implementation of our acquisition and
repowering strategy, the outcome of hearings on
our RMR agreements and cost tracker for scheduled
expenses. 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, 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, out ability to convert
facilities to western coal, our substantial
indebtedness and the possibility that we may
incur additional indebtedness, adverse results in
current and future litigation, delays in or
failure to meet closing conditions in announced
transactions, failure to identify or successfully
implement acquisitions and repowerings, the
amount of proceeds from asset sales and adverse
rulings on our RMR agreements and cost tracker
for scheduled expenses, resulting in us refunding
certain payments received to date. NRG
undertakes no obligation to update or revise any
forward-looking statements, whether as a result
of new information, future events or otherwise.
The adjusted EBITDA guidance is an estimate as of
todays date, August 5, 2004 and is based on
assumptions believed to be reasonable as of this
date. NRG disclaims any current intention to
update such guidance. The foregoing review of
factors that could cause NRGs 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.
3
Agenda

• Operational Update
• Q2 Financial Results and Outlook
• QA

4
Financial Highlights

• Second quarter performance
• Adjusted EBITDA of 232 million
• Reported net income of 83 million
• YTD performance
• Adjusted EBITDA of 489 million
• Reported net income of 113 million
• Free cash flow of 355 million

5
Operating Highlights

• The Company exhibited continued strength in all
  phases of operating performance
• Safety 20 lower injury frequency rate
  than industry average with continuing
  improvement
• Plant availability 96 in-market availability
  through May 2004
• Environmental Met and exceeded environmental
  standards for compliance with air,
  waste, and water regulations
• Summer Maintenance at 12 plants preparedness
  completed on time and within budget

6
Asset Sales - 2004

• We continue to make progress rationalizing
  nonsupported assets for value

7
Connecticut Update

• MW Revenue
• New RMR 1,392 5.10/kW-mo
• Middletown
• Montville
• Devon 11-14
• Devon 7 RMR 107 6.09/kW-mo
• (through May)
• 10.15/kW-mo
• (June-September)
• Norwalk/CT Jets 462 Market prices through
  PUSH bidding

8
8
California Update

• CPUC interim procurement order directed at
  California utilities
• Aging power plant study to be released, expected
  to have a positive impact
• Continued dialogue with California utilities
  regarding 2005 and beyond

9

• Financial Results

10
Key Financial Highlights
millions
YTD
Q2

• Operating revenues 574 1,174
• Gross margin 349 683
• Net income 83 113
• EBITDA 282 529
• Adjusted EBITDA 233 489

11
2nd Quarter 2004 Spark Spreads

• Dark Gas
  Dual Fuel/Oil
• Spread1,2 Spread
  Spread
• North America
• Gross Margin (000s) 71,220 2,027
  7,351
• Spark Spread /MWh 25.03 7.94
  43.61

1 Dark spread is the spread between energy prices
and coal-fired generation costs 2 Does not
include LaGen contracted output
12
NRG Generation by Fuel
2nd Quarter North American Generation by Fuel
Type Versus Net North American Capacity Owned
13
EBITDA by Operating Segment - YTD

• ( millions) Q2 Q2
  Q2 Adj Q1 Adj YTD Adj
• EBITDA Adj EBITDA
  EBITDA EBITDA
• Northeast 79.2 .3 79.5
  114.8 194.3
• South Central 30.3 1.6
  31.9 29.7 61.6
• West Coast 54.9 -- 54.9
  33.4 88.3
• Other NA 23.2 (2.6)
  20.6 12.3 32.9
• International 48.2
  (12.9) 35.2 54.2
  89.4
• Alt. Energy Services 54.4 (38.9)
  15.5 17.0 32.5
• Corp Unallocated (8.6) 3.5
  (5.1) (4.5) (9.6)
• Total 281.6 (49.0) 232.6
  256.9 489.4

14
Cash Flow YTD
in millions Q1 Actual Q2 Actual YTD
EBITDA 246.9 281.6 528.5
Interest Payments (31.1) (81.6) (112.7)
Income Tax (3.0) (27.5) (30.5)
Equity Earnings in Excess of Cash Distributions (30.9) (26.2) (57.1)
Other Funds used by Operations 10.8 (36.2) (25.4)
FFO 192.7 110.1 302.8
Working Capital Changes 25.0 (135.4) (110.4)
Xcel Settlement, net 125.0 -- 125.0
CFO 342.7 (25.3) 317.4
Asset Divestitures 3.0 85.9 88.9
CapEx (35.0) (29.7) (64.7)
Other Cash used by Investing (2.0) (20.6) (22.6)
FX Rate Changes Disc Ops. 9.6 26.8 36.4
FCF 318.3 37.1 355.4
Cash Used by Financing (38.0) (47.7) (85.7)
Net Cash Flow 280.3 (10.6) 269.7
15
Liquidity
millions
06/30/04 03/31/04 Unrestricted Cash Domestic
676 665 International
145 169 Restricted Cash Domestic
97 90 International 55 52 Total
Cash 973 976 Letter of Credit
Availability 118 137 Revolver
Availability 250 250 Total Current
Liquidity 1,341 1,363
16
2004 EBITDA and FCF Outlook
in millions Reported Outlook Adjustment Adjusted Outlook
EBITDA 837 13 850
Interest Payments (278) 15 (263)
Income Tax (36) -- (36)
Other Cash Used by Operations (50) -- (50)
FFO 473 28 501
Working Capital Changes (60) -- (60)
Xcel Settlement, net 100 (100) --
CFO 513 (72) 441
Asset Divestitures 145 (145) --
CapEx (130) -- (130)
Other Cash used by Investing (7) -- (7)
FCF 521 (217) 304


17
2004 Forecast Sensitivity Analysis
Results in the following change to2004 pre-tax
income
Factor Increased by
Factors
1.00/mmbtu
35.7 million
Natural Gas
--
1.00/ton
Coal
--
1.00/bbl
Oil
(4.7) million
100 bps
Interest rates
Sensitivities are for the remaining 6 months of
2004, assuming current hedged positions
18
Enterprise Value
How we look at equity value
As of 6/30/04 in millions Total Nonsupported 1 Supported
Consolidated Debt 4,037 1,003 3,034
Unrestricted Cash 821 31 790
Restricted Cash 152 63 89
Total Cash 973 94 879
Net Debt 3,064 909 2,155
Equity Value 2,700 - 2,700
Enterprise Value 5,764 909 4,855
Forecasted Adjusted EBITDA 850 100 850 100 750
TEV / FY Adjusted EBITDA TEV / FY Adjusted EBITDA 6.47x
1) Includes expected asset sales
19
Conclusion

• Continued focus on operating performance
• Continued focus on rationalizing our businesses
• Continued focus on maintaining strong leverage
  ratios

20
(No Transcript)
21
Supplemental information
22
Adjusted Net Income Reconciliation
NRG ENERGY, INC. AND SUBSIDIARIES Reconciliation
of NonGAAP Financial Measures Adjusted Net Income
Reconciliation
23
Adjusted EBITDA Reconciliation
NRG ENERGY, INC. AND SUBSIDIARIES Reconciliation
of NonGAAP Financial Measures Adjusted EBITDA
Reconciliation
24
GAAP Reconciliation (cont.)
EBITDA, Adjusted EBITDA and adjusted net income
are non-GAAP financial measures. These
measurements are not recognized in accordance
with GAAP and should not be viewed as an
alternative to GAAP measures of performance. The
presentation of Adjusted EBITDA and adjusted net
income should not be construed as an inference
that NRGs future results will be unaffected by
unusual or nonrecurring items. EBITDA represents
net income before interest, taxes, depreciation
and amortization. EBITDA is presented because NRG
considers it an important supplemental measure of
its performance and believe debt-holders
frequently use EBITDA to analyze operating
performance and debt service capacity. EBITDA has
limitations as an analytical tool, and you should
not consider it in isolation, or as a substitute
for analysis of our operating results as reported
under GAAP. Some of these limitations are
EBITDA does not reflect cash expenditures, or
future requirements for capital expenditures, or
contractual commitments EBITDA does not
reflect changes in, or cash requirements for,
working capital needs EBITDA does not reflect
the significant interest expense, or the cash
requirements necessary to service interest or
principal payments, on debts Although
depreciation and amortization are noncash
charges, the assets being depreciated and
amortized will often have to be replaced in the
future, and EBITDA does not reflect any cash
requirements for such replacements and Other
companies in this industry may calculate EBITDA
differently than NRG does, limiting its
usefulness as a comparative measure. Because of
these limitations, EBITDA should not be
considered as a measure of discretionary cash
available to use to invest in the growth of NRGs
business. NRG compensates for these limitations
by relying primarily on our GAAP results and
using EBITDA and Adjusted EBITDA only
supplementally. See the statements of cash flow
included in the financial statements that are a
part of this press release. Adjusted EBITDA is
presented as a further supplemental measure of
operating performance. Adjusted EBITDA represents
EBITDA adjusted for reorganization,
restructuring, impairment and corporate
relocation charges, discontinued operations, and
write downs and losses on the sales of equity
method investments factors which we do not
consider indicative of future operating
performance. The reader is encouraged to evaluate
each adjustment and the reasons NRG considers it
appropriate for supplemental analysis. As an
analytical tool, Adjusted EBITDA is subject to
all of the limitations applicable to EBITDA. In
addition, in evaluating Adjusted EBITDA, the
reader should be aware that in the future NRG may
incur expenses similar to the adjustments in this
presentation.