NRG Energy, Inc.
Q1 2015 Earnings Call Transcript

Published: 8 May 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the NRG Energy First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Matthew Orendorff, Managing Director of Investor Relations. Please go ahead.

[Matt Orendorff:]

Thank you, Danielle. Good morning, and welcome to NRG Energy's first quarter 2015 earnings call. This morning's call is being broadcast live over the phone and via webcast, which can be located on the Investors Relations section of our website at www.nrg.com, under Presentations & Webcasts. Because this call will be limited to one hour, we ask that you limit yourself to only one question with one follow up question. As this is the earnings call for NRG Energy, any statements made on this call that may pertain to NRG Yield will be provided from NRG's perspective. Please note that today's discussion may contain forward-looking statements, which are based on assumptions that we believe to be reasonable as of this date. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. We urge everyone to review the Safe Harbor statement provided in today's presentation, as well as the risk factors contained in our SEC filings. We undertake no obligation to update these statements as a result of future events, except as required by law. During this morning's call, we will refer to both GAAP and non-GAAP financial measures of the company's operating and financial results. For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's press release and this presentation. And with that, I will now turn the call over to David Crane, NRG's President and Chief Executive Officer.

[David Whipple Crane:]

Thank you, Matt. Good morning, everyone, and thank you for joining us. As always, joining me today and participating in the presentation are Kirk Andrews, our Chief Financial Officer, and Mauricio Gutierrez, our Chief Operating Officer and President of NRG Business. Additionally, and available for questions are Chris Moser, who heads our Commercial Operations; Elizabeth Killinger, who's the head of Home Retail; and Kelcy Pegler, Jr., who's the head of Home Solar. Somewhat unusually, we're actually communicating with you from multiple locations, so if we run into some technological issues, please bear with us. We've got a lot of great news to update you on today, and I realize we're starting slightly later than normal and during market hours, so we're going to get right into it and try and get through it as quickly as we can, give you all of the information you need. Starting on slide three of the presentation, the story of NRG's first quarter 2015 is quite simple

[Mauricio Gutierrez:]

Thank you, David, and good morning, everyone. We're off to a good start in 2015 with our integrated platform performing exceptionally well during the quarter. A combination of higher retail loads in Texas, opportunistic hedging, and solid operational performance allowed us to once again report record financial results for the quarter. But more importantly, reaffirm guidance for the year. Keep in mind these results were achieved despite the fact that wholesale power prices were 50% lower than last year, underscoring the importance of our integrated platform that performs under multiple price and weather scenarios. During the quarter, we also significantly increased our hedges in 2016, effectively protecting our earnings for the next two years, given our concerns on lower gas prices for this summer. In addition, our wholesale asset optimization and development program, which I will discuss in more detail in a few slides, remains largely on track. Moving to our wholesale operational metrics on slide seven, we had another quarter of top quartile safety performance with 147 out of 167 facilities without a single recordable injury. Total generation was down 12% for the quarter on a pro forma basis, driven primarily by lower generation in the East where power prices were 50% lower than last year. In the Gulf, generation was flat as nuclear and gas generation offset lower coal production. And in the West, generation was impacted by the retirement of our Coolwater plant. Reliability improved during the quarter, demonstrating our efforts to ensure that our units are available when it matters the most, during peak price periods. Over time, these metrics will become more relevant under the new capacity performance construct (13

[Kirkland B. Andrews:]

Thank you, Mauricio, and good morning, everyone. Turning to the financial summary on slide 13, for the first three months of 2015, adjusted EBITDA totaled $840 million, which is an increase of $23 million over the same period in 2014. NRG's record adjusted EBITDA in the first quarter of 2015 was achieved thanks to outstanding results from our wholesale and retail businesses and augmented by contributions from the assets acquired in the EME, Alta Wind, and Dominion transactions, which combined to more than offset the impact of the extreme weather in the first quarter of last year. For the first quarter, free cash flow before growth totaled $364 million. Supported by our substantial hedge position and the strong start to the year, we are once again reaffirming both EBITDA and free cash flow guidance with our expectations continuing to track to the upper quartile of those ranges. NRG also made substantial progress during the quarter on a number of fronts. Earlier this week, the public shareholders of NRG Yield approved a proposal to create two new share classes via a stock split, providing both ongoing capital replenishment for NRG and substantial funding capacity for Yield without the need for further NRG investment. With this important step now behind us, we are pleased to announce a new framework for the allocation of the portion of NRG's excess capital equivalent to future dropdown proceeds to be committed towards a balance of share repurchases, corporate debt reduction, and reinvestment in future NRG Yield-eligible projects. Going forward, we expect residential solar leases to represent a meaningful portion of future dropdowns, thanks to a newly established partnership with NRG Yield, which will permit our Home Solar business to benefit by accessing more competitive cost of capital while providing a new source of CAFD growth for Yield. And having meaningfully expanded our Home Solar tax equity runway with two new facilities, we have the two key pieces in place to realize value at NRG today in excess of the capital requirements of this fast-growing business. We have also established a similar new $100 million partnership with NRG Yield for future dropdowns of DG solar assets, which we expect to occur over the balance of 2015, providing further value realization at NRG and expanded growth for Yield. We will provide more details on this important partnership in the next quarter as we initiate our first DG solar dropdown. Finally, having completed $56 million of the $100 million second phase of our 2015 share buyback program, we are pleased to announce an increase of $81 million to this second phase; thereby, increasing remaining capacity to $125 million, providing us additional repurchasing power, which will be further augmented by future repurchases enabled by the NRG Yield dropdown one-third rule David mentioned earlier. Turning to slide 14, I'd like to provide a few highlights of the recently approved NRG Yield recapitalization, which provides significant benefits to both companies. The creation of the 1/100th vote Class C shares provides NRG Yield a substantial source of equity growth funding without reliance on NRG capital. These new C shares will be the primary source of future equity at NRG Yield, and the low vote structure gives Yield the ability to raise over $20 billion in new public equity without jeopardizing the strategic relationship with NRG. The two-for-one stock split at NRG Yield will be effective May 14 with no change in total dividends paid. As a result, we have now also expanded the pipeline of ROFO assets to include 900 megawatts, consisting primarily of the EME wind assets which we expect to offer NRG Yield later this quarter. The expanded pipeline now also includes up to $250 million in residential solar and DG portfolios and 800 megawatts of long-term contracted gas comprised of our Carlsbad and Mandalay projects in California expected to reach COD in 2017 and 2020. On slide 15 is a summary of the expected impact of our tax equity facilities and new NRG Yield partnership in realizing the key objective I first introduced at Investor Day in January

[David Whipple Crane:]

Well, thank you, Kirk, and thank you, Mauricio. And operator, I think I'll dispense with closing remarks so we can just take questions from people on the phone. So if you'd open the lines?

[Operator:]

Thank you. And our first question comes from Stephen Byrd from Morgan Stanley. Your line is now open. Please go ahead.

[Stephen Calder Byrd:]

Good morning, and congratulations on multiple fronts.

[David Whipple Crane:]

Thanks, Stephen.

[Stephen Calder Byrd:]

I wanted to just talk about leveraging your Retail business in the pursuit of your clean energy growth. Can you just talk a little bit about lessons learned, and how is that actually working day-to-day in terms of being able to use that Retail platform?

[David Whipple Crane:]

Stephen, it's a great question, and I could go on about how excited I am about the prospects there, but since we have the two experts in the room, why doesn't Elizabeth give her impression first and then Kelcy?

[Elizabeth Killinger:]

Sure. Thank you, Stephen. So we really are making strong progress on cross-selling, and as you've heard from us before, we've been working on this together. And I'll give you two examples. The first is the example of selling our electricity customers an incremental product. And in Texas, we have seen great success there with about 22% of our customers buying more than one product from us. And we have moved out of our trial phase and really are gaining momentum in the East where we are selling our solar customers electricity products, and we are also generating solar leads within our electricity conversations and sharing them with Kelcy's business. And at the end of the day, those are just examples of our kind of our plus concept. So if a customer starts with us as an electricity customer, the plus there would be home solar or backup generation or some of our warranty products or other new products we offer. And on – if they start as a solar customer, we can add electricity or backup generation or, again, other products. So I'll toss it over to Kelcy for anything else he might add.

[Kelcy Pegler:]

Yeah. I think Elizabeth covered it well. We're moving from the early days into some meaningful progress, especially in the lead transition of sharing within the business groups. And I think overall, from the cross-selling, the bundling, and the up-selling perspective, with recent news around solar-plus-battery being a winning concept, I think we feel validated in the solar-plus or electricity-plus strategy because we think it's a little more comprehensive of being able to put electricity, solar, EV charging, portable power, backup generation, which could include a battery, or natural gas generators. So we feel validated in our strategy there.

[Stephen Calder Byrd:]

Great. Thank you. And I just wanted to shift over to the partnership on distributed generation. Is this the form of relationship that we should be thinking on a going-forward basis? Or is this more opportunistic in the near-term? Just wanted to get a better sense if this is the sort of model that you all prefer going forward here with distributed generation?

[David Whipple Crane:]

You mean in terms of the way that the Yield and NRG are working together on Home Solar leases, and down the road on business to business? Is that...

[Stephen Calder Byrd:]

Yeah.

[David Whipple Crane:]

Kirk, do you want to address that?

[Kirkland B. Andrews:]

Sure. Stephen, the high-level answer to that is, yes, and is for the same reason for both distributed solar and residential solar. And that is just the ongoing continual nature of the opportunity set combined with the fact that, as you know, now that we've shifted from cash grants exclusively, really into ITCs, that requires that the equity funding basically be locked down once we reach COD. So for that reason, it's important for us to have capacity to be flexible and nimble when those opportunities present and they tend to do so on a sort of a rolling and ongoing basis, and so that affords us the ability to be nimble on both DG and residential solar. And broadly speaking, the structure of those two partnerships in terms of the sharing of cash flows between NRG and NRG Yield, especially NRG towards the residual as we retained the recontracting ability will be similar between those two partnerships.

[Stephen Calder Byrd:]

Understood. And maybe just to follow up on the structure, Kirk, in terms of the return threshold at which there is that effective flip, is there any color you can provide or are you not quite at that point that you want to provide that (37

[Kirkland B. Andrews:]

The only thing – I'd say it this way is that the CAFD yield, which is an average, and I'm using the example more tangibly from the residential solar partnership, that 7.5% yield is a good way to think about the economics, or at least the sharing, the cash flows, that are represented by that 95% that goes to NRG Yield.

[Stephen Calder Byrd:]

Great. Thank you very much.

[David Whipple Crane:]

Thanks.

[Operator:]

Thank you. And our next question comes from Daniel Eggers from Credit Suisse. Your line is now open. Please go ahead. Dan L. Eggers - Credit Suisse Securities (USA) LLC (Broker) Hi. Good morning, guys. I – just on the buyback update, which was helpful, can you walk us through, in addition to the recycling of the cash from drops to NYLD kind of how you're thinking about an allocation of cash between the free cash generation from the business as well as the proceed dropdown? So are there buckets we should be thinking about more comprehensively of all the cash you're generating?

[David Whipple Crane:]

Kirk, do you want to take that?

[Kirkland B. Andrews:]

Sure. The committed piece, and I'm speaking specifically – I think your question, Dan, was directly on the buyback front, the predictable component of that, the committed piece of that is the one-thirds of the dropdown proceeds that is earmarked for share repurchases. And while certainly we can opportunistically supplement that with additional capital allocation is really anchored by the free cash flow, a good example of which is the $81 million we added today, we maintain that flexibility. But the committed part of it is the one-thirds piece from the Yield dropdown. Dan L. Eggers - Credit Suisse Securities (USA) LLC (Broker) So the free cash generation from the core business is going to follow the same strategy of using it as you see the best and brightest use at that point in time.

[Kirkland B. Andrews:]

Yes. I think that's a safe summary, yes. Dan L. Eggers - Credit Suisse Securities (USA) LLC (Broker) Okay. And then I guess just on the Carlsbad plant, the CPUC deferred a decision yet again. What is your thinking as far as where their holdouts are on that project, and are there alternatives to you guys if they decide not to approve development of that property?

[David Whipple Crane:]

Well, I mean, certainly we hope, I mean in a world of getting things approved in California, this is pretty much a par for the course and we certainly support President Picker's alternative decision, and I think that they're now going to make a final decision in just a couple weeks, I think May 19 or May 21 or something like that, so we certainly hope it goes the right way because we think the plant is obviously the right solution for Southern California in the absence of the SONGS plant. But I mean, if it does go the other way, I mean, the project's not dead yet, it's just that the path to approval becomes longer and a little bit more opaque, and so at the very least I think there would be a delay, and we certainly hope for our sake and for the sake of California, that that's not the case. Dan L. Eggers - Credit Suisse Securities (USA) LLC (Broker) Got it. I'll stay to my two questions. Thank you.

[Operator:]

Thank you. And our next question comes from Jonathan Arnold from Deutsche Bank. Your line is now open. Please go ahead.

[Jonathan Philip Arnold:]

Hey. Good morning, guys.

[David Whipple Crane:]

Good morning, Jonathan.

[Jonathan Philip Arnold:]

Could I just ask about the Home Solar customer adds? It looks like you added less than 3,000 in the quarter. Is it seasonality, weather-related, or should we just expect the ramp to really pick up later in the year? Just how we kind of view that Q1 result in the context of what I guess is like 20,000-odd adds you wanted to do this year?

[David Whipple Crane:]

Well, Jonathan, I mean Kelcy – I'll ask Kelcy to address the question looking forward, but certainly I think your assessment of the first quarter is correct. First of all, we always anticipated a high ramp rate quarter-on-quarter during the year, but there's no doubt that our Home Solar business, which is a little unusual compared to the other main home solar companies in that we start as an East Coast-based home solar company, and you can imagine that no one in Massachusetts which is one of the biggest markets was thinking about, or executing on putting home solar on their roof from about the first of February through mid-March. So it was definitely weather impacted, but I mean we're confident for the rest of the year. And Kelcy can give you a little flavor of that. Kelcy?

[Kelcy Pegler:]

Yeah. Thanks, David. And I think you've framed it properly. We were impacted by Northeast weather which was extreme in states like Massachusetts and Connecticut especially. They had snow on the ground for better parts of four weeks at a time. But we've always recognized that our full year will have a ramp through that full year. If we experience similar growth rates from what a 2014 experienced, we're confident we're right in that ballpark for our full year number in 2015. We did gain considerable ground on some meaningful progress with both the partnership with Yield which you heard Kirk talk about, and extending our tax runway. So there's a lot of progress, and not the least of which is really gaining a foothold in the California market which will help mitigate that seasonality that we experienced in Q1 in future quarters.

[Jonathan Philip Arnold:]

Okay, great. Can I just ask about Carlsbad? Is the spending in the numbers? Not in the numbers? How should we think about that?

[David Whipple Crane:]

Kirk?

[Kirkland B. Andrews:]

Sure. Jonathan, there is no meaningful amount of spend currently in that, as it would ordinarily be the case in the growth investments component of capital allocation. We expect the preponderance of that spend to really begin in earnest in 2016.

[Jonathan Philip Arnold:]

Okay, great. Thanks a lot, guys.

[David Whipple Crane:]

Thanks, Jon.

[Operator:]

Thank you. And our next question comes from Steve Fleishman from Wolfe Research. Your line is now open. Please go ahead.

[Steven Isaac Fleishman:]

Yeah. Hi. Good morning. Just one simple question. Back at the Analyst Day, I think you had highlighted for 2015 that you were already kind of tracking to the maybe the upper half of the range for this year. And maybe you could just comment on that. Obviously, the first quarter was very good.

[David Whipple Crane:]

Yeah. I actually think we said to the upper quarter of the range. And we're still tracking to that same upper quarter. But if I didn't say, or if Kirk didn't say upper quarter, then we're saying it now.

[Kirkland B. Andrews:]

I actually did.

[Steven Isaac Fleishman:]

Okay. Thank you.

[Operator:]

Thank you. And our next question comes from Angie Storozynski from Macquarie Capital. Your line is now open. Please go ahead. Angie Storozynski - Macquarie Capital (USA), Inc. Thank you. I'm not going to ask questions about solar for once. But there is, you guys have shown us this integrated platform between the generation assets and the retail assets, especially your cash flows and earnings and volatility associated with natural gas prices. And we're seeing that one of the UK utilities has just put a big retail business in the U.S. for a strategic review. And I know that there's a bit of an overlap in retail services territories. And I know you don't comment on specific transactions, but could you, in general, tell us is it possible for you to enlarge your retail presence, especially in Texas?

[David Whipple Crane:]

Wow. Yeah, I don't. Yeah, I think certainly we would look to expand retail where we could do so at value. I mean, we like the platform we have. I mean, unlike when we bought Green Mountain or Energy Plus, I mean, we have the brands, and we have what we need. But we would look at other portfolios. I don't – I'm not sure I actually even know which portfolio you're talking about, but I can guess by the way you frame the question. I don't actually have any insights on whether or not there's a market share issue. But it's safe to say that if there's not a market share issue, we would look at anything in the retail space. Elizabeth, do you want to comment on that?

[Elizabeth Killinger:]

Yeah. I think you hit it on the head. But I would add, we are passionate about our Retail business and the Texas market. And to the degree, we can acquire either additional customers through acquisition or normal channels, we always look at opportunities to do so. Angie Storozynski - Macquarie Capital (USA), Inc. Okay. And the second one, more generic about M&A as well. So if you now have new classes of shares for NRG Yield that could allow you for third-party acquisitions. How should we think about it if you were, if both of the companies were to acquire existing portfolio of operating assets, would it be immediately dropdown into NRG Yield, and as such, boasts near-term distribution growth. Or would it be, in a way, warehoused at NRG or at some other facility in order to be preserved for future dropdowns in order to basically expand the growth of distributions into the future?

[David Whipple Crane:]

Angie, it's a very situationally-specific answer to that question. I mean we've really looked at every situation. I mean led by the independent directors at NRG Yield, they have repeatedly said they want to remain true to the idea that there's very specific risks they're willing to take, and a lot of risks that they're not willing to take. And if there's a big acquisition, half merchant, half contracted, and it has a lot of integration that has to be done and all that, they want to see that done at NRG first, and then receive the contracted assets when they're settled down. On the other hand, they've done direct acquisitions of assets which they perceived, and we perceived, didn't require a lot of new risk taking on their part. So it's really case by case is the best I could tell you. Angie Storozynski - Macquarie Capital (USA), Inc. Great. Thank you.

[Operator:]

Thank you. And our next question comes from Julien Dumoulin-Smith from UBS. Your line is now open. Please go ahead.

[Julien Dumoulin-Smith:]

Hi. Good morning.

[David Whipple Crane:]

Good morning, Julien.

[Julien Dumoulin-Smith:]

So wanted to come back to the conventional portfolio for a quick minute here. On Maryland, just if you could give a little bit more of an update around intentions there and the latest on the regulations, as well as at the GenOn fleet on Bowline? Is it your intention still to move forward there and bring that unit back up? Or fully back up, shall we say?

[David Whipple Crane:]

Mauricio, do you want to take that?

[Mauricio Gutierrez:]

Sure, David. And good morning, Julien. So as you know, Maryland implemented an emergency ruling for 2015 setting up a specific limit that can be complied across the entire portfolio. We continue to work with MDE in a solution that doesn't necessarily require a unit-by-unit NOS (49

[Julien Dumoulin-Smith:]

And then on Bowline?

[Mauricio Gutierrez:]

On Bowline, I mean we are – we're moving and rerating our units. We have invested already that capital at very attractive multiples, and we are bringing additional megawatts given the pricing conditions that we're seeing in the lower Hudson Valley.

[Julien Dumoulin-Smith:]

Okay, great. And then a bigger thematic question here; obviously, a lot on storage of late, but I'm curious, how big of an opportunity do you all see it? And then I suppose, specifically given the diversity of your current businesses, where do you see the best opportunity? Is it the C&I space? The utility scale space? I mean just curious how you all are thinking about tackling that opportunity here?

[David Whipple Crane:]

Okay. You – I'm sorry. You said, specifically in storage?

[Julien Dumoulin-Smith:]

Yes, indeed.

[David Whipple Crane:]

Well, I mean I think that we see the biggest opportunity, and we've had some success there in sort of California's preferred resources where there's a contract for it. I mean from my perspective, and particularly the more distributed you get, sort of merchant storage, if you will, is – I think is still some ways away from being a significant opportunity.

[Julien Dumoulin-Smith:]

Okay, great. Thank you.

[Operator:]

Thank you. And our next question comes from Greg Gordon from Evercore. Your line is now open. Please go ahead.

[Greg Gordon:]

Thanks. Good morning.

[David Whipple Crane:]

Morning, Greg.

[Greg Gordon:]

I only have one question, but it's in 27 parts.

[David Whipple Crane:]

Oh, thank you, thank you, we appreciate that. It's – well that's just what we wanted on a Friday after – Friday morning.

[Greg Gordon:]

Oh, three quick ones. Just to clarify your answer to a prior question. The $1.6 billion of CapEx in 2016 currently budgeted, that would go up if Carlsbad were approved?

[Kirkland B. Andrews:]

David, you want me to take that?

[David Whipple Crane:]

Oh. Yeah. I'm sorry, Kirk. Go ahead.

[Kirkland B. Andrews:]

Greg, I would not expect that to – the approval to have an impact on the $1.6 billion. From a timing perspective, while there may be a small amount of capital towards the end of the year, in any circumstance, I would still expect the bulk of the capital towards Carlsbad to really be in earnest in 2016.

[David Whipple Crane:]

But he asked...

[Greg Gordon:]

In 2016 or in 2017?

[David Whipple Crane:]

He asked in 2016.

[Kirkland B. Andrews:]

Oh, forgive me. I thought you said 2015. Yeah...

[Greg Gordon:]

Okay.

[Kirkland B. Andrews:]

...so it would – yes, it would start in 2016. Sorry about that.

[Greg Gordon:]

Okay. So that would be – you would – so the $1.6 billion would go up?

[Kirkland B. Andrews:]

Yes.

[Greg Gordon:]

The second question was with regard to the excess capital remaining, the $860 million of which $500 million is at GenOn and $360 million at NRG. You said – I think you said $200 million of that is associated with sort of the replenishment of NRG Yield eligible assets, so that means for all intents and purposes there's $160 million for the balance of this year that's unallocated?

[David Whipple Crane:]

Kirk?

[Kirkland B. Andrews:]

So when you're looking at the $360 million that's at the bottom there, that's correct, although I would say within the $960 million of committed capital that's on the growth investments page, that really includes the line of sight we have right now on the remaining NRG Yield-eligible assets. So while $200 million of that $360 million is the one-thirds component that goes towards Yield-eligible assets, I would expect those dollars more likely to be spent in 2016 and moving forward. I don't see a significant increase right now in allocations or towards Yield-eligible investments other than that which is already subsumed within that $960 million of growth capital. I do want to go back to your question. I apologize for the confusion over 2015 and 2016. When you go to the slide on capital expenditures, I said that Carlsbad would be an increase, that – I want to clarify that point. We provided that 2016 number for a reason and part of the committed capital in there is the Carlsbad plant and the Mandalay plant. So forgive me for misunderstanding your question. That is included in the 2016 capital expenditures.

[Greg Gordon:]

Great. That was exactly what I needed. Thank you. And the final question for Mauricio, I think in the first quarter vis-à-vis how the stock price traded, people definitely forgot how strong a sort of countercyclical hedge your Retail business is relative to your wholesale position in Texas. Look, you haven't changed your 2015 guidance for Home Retail, but if we continue to see depressed gas prices and depressed spark spreads, depressed wholesale prices in Texas for an extended period of time, given the tenor of your contracts, how do you think you trend in that $575 million to $650 million guidance range through the rest of the year?

[Mauricio Gutierrez:]

Yes, I mean, keep in mind that you need two elements for an over performance in Retail. Not only do you need lower commodity prices that translate in lower supply costs, but you also need higher loads given to extreme weather conditions. In the case of Q1, you have colder than normal weather. So as we look at the rest of the year, I think it's a little too early to tell how weather's going to play out, and I'm not going to – I mean, it's a little disingenuous to start making predictions about whether it's going to be hotter than normal or not. But certainly, if those two elements present themselves in the summer, we can expect retail to over-perform.

[Greg Gordon:]

Thank you, gentlemen. Have a good morning.

[David Whipple Crane:]

Thanks, Greg.

[Operator:]

Thank you. And our next question comes from Brian Chin from Merrill Lynch. Your line is now open. Please go ahead.

[Brian J. Chin:]

My questions were asked and answered. Thank you.

[Operator:]

Thank you. And our next question comes from Ryan Caylor from Tudor, Pickering, Holt. Your line is now open. Please go ahead.

[Ryan Caylor:]

Hi. Good morning.

[David Whipple Crane:]

Good morning.

[Ryan Caylor:]

So my questions were answered regarding Carlsbad, but regarding the other California repowering project added to the NYLD ROFO list, given there's CapEx allocated to both in 2016, can you provide us with an update, I guess, on Mandalay and whether there's any read-throughs from the Carlsbad process?

[David Whipple Crane:]

Yeah. That's a good question. I don't know of any – I think they're quite independent of each other, but I would say I'm not perfectly informed on that. Mauricio, do you have any viewpoint on that?

[Mauricio Gutierrez:]

Yes. I mean, I think the Mandalay project is back at the end of the decade, so what we provided to you is in the next two years. The capital required for that project would be in the latter part of the decade, so I don't think it's reflected on the numbers. Kirk?

[Kirkland B. Andrews:]

Not reflected on the numbers, and I'm not aware of any read-through in terms of the situation with the Carlsbad project onto Mandalay, no.

[Ryan Caylor:]

Okay, great. Thanks.

[Operator:]

Thank you. And that concludes today's Q&A session. I would now like to turn the call back to David Crane for any closing remarks.

[David Whipple Crane:]

Well thank you, operator, and thank you all for participating on this Friday morning, and we look forward to talking to you again next quarter. And thanks.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.