NRG Reports Strong First Quarter Results

MINNEAPOLIS (May 11, 2004) -- NRG Energy, Inc. (NYSE: NRG) reported solid earnings and robust cash flow for the first quarter of 2004, including net income of $30 million, or $0.30 per diluted share. Cash flow from operations was $350 million for the quarter.

“Favorable market conditions, including sustained high gas prices and manageable western coal prices, underpinned by solid operating performance across the portfolio resulted in strong first quarter financial results for NRG,” said David Crane, NRG's President and Chief Executive Officer. “I am pleased that we stayed focused on execution while making the transition out of Chapter 11.”

Financial Highlights (1)

• $350 million in cash flow from operations including $125 million net from Xcel settlement (2);


• $259 million in EBITDA ($266 million in adjusted EBITDA) for the first quarter;


• $30 million in net income ($34 million in adjusted net income) for the first quarter;


• $1.4 billion of liquidity as of March 31; and


• Reliability-must-run (RMR) agreements approved by the Federal Energy Regulatory Commission (FERC) for select Connecticut facilities.

(1) The Company implemented SOP 90-7, fresh start accounting, accordingly the financial results and financial position are not comparative to prior periods.
(2) Gross proceeds from the Xcel settlement were $288 million of which $163 million was distributed to the Predecessor Company's creditors.

Operational Summary
NRG's strong financial results were supported by our facilities' excellent operational performance. Plant staff maintained focus on operating our plants enabling the Company to realize good margins in the energy market. All of the regions achieved an in-market availability rate—the measure of how frequently a unit is available when called on to operate—of 95 percent or greater.

High gas prices throughout the first quarter led to higher energy prices, which helped to widen the energy revenue margin realized at NRG's baseload coal facilities in the Northeast region. Because the Company hedged over 90 percent of our estimated coal needs for 2004 prior to the recent rise in coal prices, we largely have been spared the volatility of the spot eastern coal market. In addition, NRG has reduced our dependence on eastern coal as we are converting some of our coal facilities in the Northeast to burn a blend of eastern and western coal. This conversion program is aimed at substantially reducing sulfur emissions from NRG's coal-fired plants.

The Company took advantage of the high gas price environment by hedging forward a portion of our northeastern coal-fired generation for the balance of 2004. In New York and New England, NRG has contracted sales for 500 megawatts (MW) of baseload coal generation for the remainder of the year. The Company also sold 700 MW (maximum) of load following capabilities as a part of the New Jersey Basic Generation Service auction and the Maryland Standard Offer Services Request for Proposal process.

During the first quarter, NRG took additional steps to stabilize our Connecticut portfolio. In mid-March FERC approved NRG's request to receive RMR payments retroactive to January 17, 2004 for certain of our Connecticut facilities. The RMR agreements cover Middletown, Montville, and Devon units 11-14. FERC also approved an extension of NRG's operating and maintenance expense cost tracker for these facilities and Norwalk Harbor. Previously, Devon 7 and 8 received FERC approval on a separate RMR agreement. However, the RMR agreement for Devon 8 has since expired and the unit will be retired, pursuant to a declaration by the New England Independent System Operator that the unit is no longer needed for reliability. These RMR agreements are expected to contribute up to $30 million in revenues per quarter subject to refund and will remain in place at least until the locational installed capacity (LICAP) market is implemented in New England.

“We've made significant progress with our Connecticut assets,” said Crane. “In addition to the expiration of the cash negative Connecticut Light & Power contract, these RMR agreements will provide us with a recovery of our costs sufficient to keep these units available to support the reliability and integrity of the Connecticut electrical grid.”

Liquidity and Cash Flow
Liquidity, as of March 31, 2004, remains healthy at almost $1.4 billion as set forth below:

Corporate Liquidity (in millions)	December 31, 2003		March 31, 2004
Unrestricted:
Domestic Unrestricted Cash	418		665
International Unrestricted Cash	134		168
Restricted Cash:
Domestic	111		123
International	46		52
Total Cash	709		1,008
Letter of Credit Availability	248		137
Revolver Availability	250		250
Total Current Liquidity	$1,207		$1,395

Cash flow from operations remains strong at $350 million while net cash flow generated was $280 million.

NRG continues to make progress in divesting noncore assets. In the first quarter, NRG completed asset sales resulting in $3 million in cash proceeds. Subsequent to March 31, NRG has completed sales resulting in $94 million in cash proceeds. Additionally NRG has executed a purchase and sale agreement for our Batesville facility, which will further reduce debt by $292 million and contribute cash proceeds of $27 million.

California Dispute Resolution
In late April, West Coast Power, a 50/50 joint venture beneficially owned by NRG and Dynegy., reached a settlement with FERC, Pacific Gas and Electric Company, San Diego Gas and Electric Company, Southern California Edison, The California Department of Water Resources (CDWR), the California Electricity Oversight Board, the California Attorney General, and the California Public Utilities Commission. This settlement puts an end to a substantial portion of the litigation associated with the California crisis and should open the door for West Coast Power to negotiate or bid on new commercial arrangements to replace the CDWR contract when it expires on December 31, 2004. This settlement has no impact on the Company's financial position.

Management Appointments
NRG today announced a number of appointments that serve to flesh out the Company's management team. NRG named James Ingoldsby the Company's Vice President and Controller and Caroline Angoorly as Vice President, New Business.

In his role as Vice President and Controller, Ingoldsby directs NRG's financial accounting and reporting activities, as well as ensuring the Company's compliance with Sarbanes-Oxley legislation. Ingoldsby, who led the Sarbanes-Oxley implementation at chemical company Hercules, Inc. previously held various executive positions at General Electric Betz, formerly Betz Dearborn, including serving as Controller and Director of Business Analysis. Ingoldsby reports to Robert Flexon, NRG's Chief Financial Officer.

As Vice President, New Business, Angoorly will spearhead the Company's initiatives in the environmental arena, including renewables, new technologies, environmental remediation and compliance. She will also manage NRG's Resource Recovery business. Angoorly comes to NRG from Enel North America, Inc. where she served as Vice President and General Counsel. Prior to joining Enel in 2001, she served as the Director and Chief Financial Officer at Line56Media and from 1994 to 2000 she was a partner in the Global Finance Group at Milbank, Tweed, Hadley & McCloy. Angoorly will report to David Crane.

Outlook
Notwithstanding our robust first quarter financial performance, NRG continues to operate our core business in an overbuilt and challenging wholesale power generation market. The structural change required to cause a general recovery in the commodity price cycle for electricity has yet to occur. Moreover, our business continues to be highly seasonal and weather dependent with the first and third quarters historically being the strongest. As such, our current focus is on ensuring that all of our plants achieve the highest possible level of availability for the summer peak season.

Earnings Conference Call
On May 11, NRG will host a conference call at 9 a.m. Eastern to discuss these results and present our longer-term business strategy. To access the live webcast and accompanying slide presentation, log on to NRG's website at www.nrgenergy.com and click on “Investors.” To participate in the call, dial 877.407.0727. International callers should dial 201.689.8035. Participants should dial in or log on approximately five minutes prior to the scheduled start time.

The call will be available for replay shortly after completion of the live event on the “Investors” section of the NRG website.

About NRG
NRG Energy, Inc. owns and operates a diverse portfolio of power-generating facilities, primarily in the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities.

Safe Harbor Disclosure
This news release 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. Such forward-looking statements are subject to certain risks, uncertainties and assumptions and include, but are not limited to, expected earnings, future growth and financial performance, and typically can be identified by the use of words such as “expect,” “estimate,” “anticipate,” “forecast,” “plan,” “believe” and similar terms. 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 our generation facilities, our ability to convert facilities to burn western coal, our substantial indebtedness and the possibility that we may incur additional indebtedness, adverse results in current and future litigation, the willingness of counterparties to negotiate new contracts in California, and the amount of proceeds from asset sales.

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 news release 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.

#     #     #

More information on NRG is available at www.nrgenergy.com
Contacts:	Investor Inquiries Katy Sullivan, 612.373.8875 Media Inquiries Lesa Bader, 612.373.6992
NRG Energy, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited)       Reorganized NRG   Predecessor Company (In thousands) March 31,2004   March 31,2003 Operating Revenues     Revenues from majority-owned operations $621,167 $519,582     Operating Costs and Expenses     Cost of majority-owned operations 392,403 388,097     Depreciation and amortization 58,637 64,071     General, administrative and development 37,339 48,982     Corporate relocation charges 1,116 —     Reorganization charges 6,250 —     Restructuring and impairment charges           — 22,136         Total operating costs and expenses 495,745 523,286 Operating Income/(Loss) 125,422 (3,704)     Minority interest in (earnings)/losses of      consolidated Subsidiaries (278) 184     Equity in earnings of unconsolidated affiliates 17,713 45,629     Write downs and losses on sales of equity      method Investments (1,738) (16,591)     Other income, net 3,115 9,255     Interest expense (102,182) (176,077)         Total other expense (83,370) (137,600) Income/(Loss) From Continuing Operations Before Income Taxes 42,052 (141,304) Income Tax Expense 14,208 32,878 Income/(Loss) From Continuing Operation) 27,844 (174,182) Income on Discontinued Operations, net of Income Taxes 2,391 161,550 Net Income/(Loss) $30,235 $(12,632) Weighted Average Number of Common Shares Outstanding – Diluted 100,018 Income From Continuing Operations per Weighted Average Common Share – Diluted $0.28 Income From Discontinued Operations per Weighted Average Common Share – Diluted $0.02 Net Income per Weighted Average Common Shares – Diluted $ 0.30     CONSOLIDATED BALANCE SHEETS (REORGANIZED COMPANY) (Unaudited) (In thousands) March 31,2004   December 31,2003 ASSETS     Current Assets           Cash and cash equivalents $832,526     $552,175     Restricted cash 174,967 157,175     Accounts receivable — trade, less allowance for      doubtful accounts of $191 and $0 243,183 212,314     Xcel Energy settlement receivable 352,000 640,000     Current portion of notes receivable — affiliates 1,700 200     Current portion of notes receivable 123,666 65,141     Inventory 182,716 202,323     Derivative instruments valuation 798 772     Prepayments and other current assets 202,806 229,494     Current deferred income taxes 1,028 1,850     Current assets — discontinued operations 48,775 52,395         Total current assets 2,164,165 2,113,839 Property, Plant and Equipment     In service 4,284,466 4,196,714     Under construction 105,810 149,835         Total property, plant and equipment 4,390,276 4,346,549     Less accumulated depreciation (71,215) (12,555)     Net property, plant and equipment 4,319,061 4,333,994 Other Assets     Equity investments in affiliates 723,324 745,636     Notes receivable, less current portion — affiliates 122,940 130,152     Notes receivable, less current portion 621,968 691,444     Intangible assets, net of accumulated amortization      of $22,068 and $5,230 413,085 434,402     Debt issuance costs, net of accumulated      amortization of $2,518 and $454 64,194 74,337     Derivative instruments valuation 55,763 59,907     Funded letter of credit 250,000 250,000     Other assets 129,643 133,377     Non-current assets — discontinued operations 277,075 277,899         Total other assets 2,657,992 2,797,154 Total Assets $9,141,218 $9,244,987     NRG ENERGY, INC. AND SUBSIDIARIES       CONSOLIDATED BALANCE SHEETS (REORGANIZED COMPANY)(Unaudited) (In thousands) March 31, 2004   December 31, 2003 LIABILITIES AND STOCKHOLDERS' EQUITY     Current Liabilities         Current portion of long-term debt $597,726     $846,551     Short-term debt 19,002 19,019     Accounts payable — trade 175,058 178,387     Accounts payable — affiliate 10,559 10,118     Accrued income tax 14,410 16,095     Accrued property, sales and other taxes 17,937 24,284     Accrued salaries, benefits and related costs 30,238 19,331     Accrued interest 55,245 19,872     Derivative instruments valuation 15,930 429     Creditor pool obligation 377,000 540,000     Other bankruptcy settlement 219,517 220,000     Other current liabilities 104,281 105,734     Current liabilities — discontinued operations 23,793 26,361         Total current liabilities 1,660,696 2,026,181 Other Liabilities     Long-term debt 3,851,670 3,617,881     Deferred income taxes 152,001 149,493     Postretirement and other benefit obligations 108,644 106,537     Derivative instruments valuation 178,255 153,503     Other long-term obligations 503,617 510,102     Non-current liabilities — discontinued operations 234,950 238,939       Total non-current liabilities 5,029,137 4,776,455         Total liabilities 6,689,833 6,802,636 Minority interest 5,530 5,095 Commitments and Contingencies Stockholders' Equity     Common stock; $.01 par value; 500,000,000 shares      authorized; 100,000,000 shares at March 31, 2004      and at December 31, 2003 issued and outstanding 1,000 1,000     Additional paid-in capital 2,406,771 2,403,429     Retained earnings 41,260 11,025     Accumulated other comprehensive (loss)/gain (3,176) 21,802         Total stockholders' equity 2,445,855 2,437,256 Total Liabilities and Stockholders' Equity $9,141,218 $9,244,987         NRG ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)   Reorganized NRG   Predecessor Company Three Months Ended March 31, (In thousands) 2004     2003 Cash Flows from Operating Activities Net Income/(loss) $30,235 $(12,632)     Adjustments to reconcile net loss to     net cash provided (used) by     operating activities     Distributions in excess of equity in     earnings of unconsolidated affiliates 19,709 (16,897)     Depreciation and amortization 59,114 70,900     Amortization of debt issuance costs 17,586 6,812     Amortization of debt discount/(premium) 6,969 —     Deferred income taxes 11,948 35,300     Minority interest 1,428 (217)     Unrealized (gains)/losses on derivatives (5,393) 23,801     Asset impairment — 24,289     Write down and (gains)/loss on sale of     equity method investments 1,738 16,591     (Gain)/loss on sale of      discontinued operations — (220,602)     Amortization of power contracts and      emission credits 22,747 —     Cash provided by changes in certain working     capital items, net of acquisition affects 184,074 15,815 Net Cash Provided (Used) by Operating Activities 350,155 (88,470) Net Cash (Used) Provided by Investing Activities (34,478) 64,205 Net Cash Used by Financing Activities (38,117) (23,758) Change in Cash from Discontinued Operations 3,192 25,743 Effect of Exchange Rate Changes on Cash and Cash Equivalents (401) (27,044) Net Increase (Decrease) in Cash and Cash Equivalents 280,351 (49,324) Cash and Cash Equivalents at Beginning of Period 552,175 361,353 Cash and Cash Equivalents at End of Period $832,526 $312,029   NRG ENERGY, INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Financial Measures Adjusted Net Income Reconciliation The following table summarizes the calculation of adjusted net income and provides a reconciliation to GAAP net income/(loss), including per share amounts, for the periods indicated: (Dollars in thousands, except per share amounts) Reorganized NRG March 31, 2004   Predecessor NRG March 31, 2003   Diluted EPS         Net Income / (Loss) $ 30,235 $ 0.30   $(12,632) Plus: (Income) on Discontinued Operations, net of tax (2,391) ( 0.02)   (161,550) Corporate relocation charges, net of tax 737 0.01 ---- Reorganization charges ,net of tax 4,125 0.04   ---- Restructuring and impairment charges, net of tax ---- ---   17,045 Write downs and losses on sales of equity method investments, net of tax 1,147 0.01 12,775 Adjusted net income $33,853 $0.34   $(144,362) EBITDA Reconciliation The following table summarizes the calculation of EBITDA and provides a reconciliation to net income/(loss) for the periods indicated:   (Dollars in thousands) Reorganized NRG March 31, 2004 Predecessor NRG March 31, 2003 Net Income / (Loss) $30,235   $ (12,632) Plus: Income Tax Expense 14,208   32,878 Interest expense, excluding amortization of debt issuance costs and debt discount/(premium) noted below 78,543   169,345 Depreciation and amortization 58,637   64,071 WCP CDWR contract amortization (included in equity in earnings of unconsolidated affiliates) 30,968   Amortization of power contracts 16,477   — Amortization of emission credits 6,270   ---- Amortization of debt issuance costs and debt discount/(premium) 23,639   6,732 EBITDA $258,977   $260,394 Plus: (Income) on Discontinued Operations, net of Income taxes (2,391)   (161,550) Corporate relocation charges 1,116   ---- Reorganization charges 6,250 ---- Restructuring and impairment charges ---- 22,136 Write downs and losses on sales of equity method investments 1,738 16,591 Adjusted EBITDA $265,690 $137,571 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 NRG's future results will be unaffected by unusual or non-recurring 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 non-cash 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 NRG's 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. Similar to Adjusted EBITDA, Adjusted net income represents net income 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. In addition, in evaluating Adjusted Net Income, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this presentation.