NRG ENERGY, INC. - Quarter Report: 2015 September (Form 10-Q)

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

(Do not check if a smaller reporting company)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		For the Quarterly Period Ended: September 30, 2015

o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-15891

NRG Energy, Inc.

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		41-1724239 (I.R.S. Employer Identification No.)

211 Carnegie Center, Princeton, New Jersey (Address of principal executive offices)		08540 (Zip Code)

(609) 524-4500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

As of October 31, 2015, there were 314,176,328 shares of common stock outstanding, par value $0.01 per share.

TABLE OF CONTENTS

Index



CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION	3
GLOSSARY OF TERMS	4
PART I — FINANCIAL INFORMATION	9
ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES	9
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	59
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	95
ITEM 4 — CONTROLS AND PROCEDURES	97
PART II — OTHER INFORMATION	98
ITEM 1 — LEGAL PROCEEDINGS	98
ITEM 1A — RISK FACTORS	98
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	98
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES	98
ITEM 4 — MINE SAFETY DISCLOSURES	98
ITEM 5 — OTHER INFORMATION	98
ITEM 6 — EXHIBITS	99
SIGNATURES	100

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q of NRG Energy, Inc., or NRG or the Company, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. The words "believes," "projects," "anticipates," "plans," "expects," "intends," "estimates" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause NRG's actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Item 1A — Risk Factors Related to NRG Energy, Inc., in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2014, and the following:


•	General economic conditions, changes in the wholesale power markets and fluctuations in the cost of fuel;


•	Volatile power supply costs and demand for power;

•

Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions, catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that NRG may not have adequate insurance to cover losses as a result of such hazards;


•	The effectiveness of NRG's risk management policies and procedures, and the ability of NRG's counterparties to satisfy their financial commitments;


•	Counterparties' collateral demands and other factors affecting NRG's liquidity position and financial condition;


•	NRG's ability to operate its businesses efficiently, manage capital expenditures and costs tightly, and generate earnings and cash flows from its asset-based businesses in relation to its debt and other obligations;


•	NRG's ability to enter into contracts to sell power and procure fuel on acceptable terms and prices;


•	The liquidity and competitiveness of commodities markets;


•	Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs and environmental laws and increased regulation of carbon dioxide and other GHG emissions;


•	Price mitigation strategies and other market structures employed by ISOs or RTOs that result in a failure to adequately compensate NRG's generation units for all of their costs;


•	NRG's ability to borrow additional funds and access capital markets, as well as NRG's substantial indebtedness and the possibility that NRG may incur additional indebtedness going forward;


•	NRG's ability to receive loan guarantees or cash grants to support development projects;


•	Operating and financial restrictions placed on NRG and its subsidiaries that are contained in the indentures governing NRG's outstanding notes, in NRG's Senior Credit Facility, and in debt and other agreements of certain of NRG subsidiaries and project affiliates generally;


•	Cyber terrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss and the possibility that NRG may not have adequate insurance to cover losses resulting from such hazards or the inability of NRG's insurers to provide agreed upon coverage;


•	NRG's ability to develop and build new power generation facilities, including new renewable projects;


•	NRG's ability to implement its strategy;


•	NRG's ability to sell assets to NRG Yield, Inc. and to close drop-down transactions;


•	NRG's ability to achieve its strategy of regularly returning capital to stockholders;


•	NRG's ability to obtain and maintain retail market share;


•	NRG's ability to successfully evaluate investments and achieve intended financial results in new business and growth initiatives;


•	NRG's ability to successfully integrate, realize cost savings and manage any acquired businesses; and


•	NRG's ability to develop and maintain successful partnership relationships.

Forward-looking statements speak only as of the date they were made, and NRG undertakes no obligation to publicly 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 any forward-looking statements included in this Quarterly Report on Form 10-Q should not be construed as exhaustive.

GLOSSARY OF TERMS

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:



2014 Form 10-K		NRG’s Annual Report on Form 10-K for the year ended December 31, 2014
Alta Wind Assets		Seven wind facilities that total 947 MWs located in Tehachapi, California and a portfolio of land leases
ASC		The FASB Accounting Standards Codification, which the FASB established as the source of authoritative U.S. GAAP
ASU		Accounting Standards Updates, which reflect updates to the ASC
Average realized prices		Volume-weighted average power prices, net of average fuel costs and reflecting the impact of settled hedges
B2B		Business-to-business, which includes demand response, commodity sales, energy efficiency and energy management services
BACT		Best Available Control Technology
BTU		British Thermal Unit
Buffalo Bear		Buffalo Bear, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the Buffalo Bear project
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAISO		California Independent System Operator
Capital Allocation Program		NRG's plan of allocating capital between debt reduction, reinvestment in the business, investment in acquisition opportunities, share repurchases and shareholder dividends
CCF		Carbon Capture Facility
CCPI		Clean Coal Power Initiative
CDD		Cooling Degree Day
CDFW		California Department of Fish and Wildlife
CEC		California Energy Commission
CenterPoint		CenterPoint Energy, Inc. and its subsidiaries, on and after August 31, 2002, and Reliant Energy, Incorporated and its subsidiaries prior to August 31, 2002
CFTC		U.S. Commodity Futures Trading Commission
C&I		Commercial, Industrial and Governmental/Institutional
COD		Commercial Operation Date
ComEd		Commonwealth Edison
CPS		Combined Pollutant Standard
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
CVSR		California Solar Valley Ranch
CWA		Clean Water Act
D.C. Circuit		U.S. Court of Appeals for the District of Columbia Circuit
DGPV Holdco		NRG DGPV Holdco 1 LLC
Direct Energy		Direct Energy Business Marketing, LLC
Discrete Customers		Customers measured by unit sales of one-time products or services, such as connected home thermostats, portable solar products and portable battery solutions
Distributed Solar		Solar power projects that primarily sell power produced to customers for usage on site, or are interconnected to sell power into the local distribution grid
Dominion		Dominion Resources, Inc.
Drop Down Assets		Collectively, the June 2014 Drop Down Assets and the January 2015 Drop Down Assets
DSI		Dry Sorbent Injection with Trona



Economic gross margin		Sum of energy revenue, capacity revenue, retail revenue and other revenue, less cost of sales
EME		Edison Mission Energy
Energy Plus Holdings		Energy Plus Holdings LLC and Energy Plus Natural Gas LLC
EPA		U.S. Environmental Protection Agency
ERCOT		Electric Reliability Council of Texas, the Independent System Operator and the regional reliability coordinator of the various electricity systems within Texas
ESP		Electrostatic Precipitator
ESPP		NRG Energy, Inc. Amended and Restated Employee Stock Purchase Plan
Exchange Act		The Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
FCM		Forward Capacity Market
FERC		Federal Energy Regulatory Commission
FPA		Federal Power Act
FTRs		Financial Transmission Rights
GenConn		GenConn Energy LLC
GenOn		GenOn Energy, Inc.
GenOn Americas Generation		GenOn Americas Generation, LLC
GenOn Americas Generation Senior Notes		GenOn Americas Generation's $850 million outstanding unsecured senior notes consisting of $450 million of 8.50% senior notes due 2021 and $400 million of 9.125% senior notes due 2031
GenOn Mid-Atlantic		GenOn Mid-Atlantic, LLC and, except where the context indicates otherwise, its subsidiaries, which include the coal generation units at the Dickerson and Morgantown generating facilities under operating leases
GenOn Senior Notes		GenOn's $2.0 billion outstanding unsecured senior notes consisting of $725 million of 7.875% senior notes due 2017, $675 million of 9.5% senior notes due 2018, and $550 million of 9.875% senior notes due 2020
GHG		Greenhouse Gases
GWh		Gigawatt Hour
HAPs		Hazardous Air Pollutants
HDD		Heating Degree Day
Heat Rate		A measure of thermal efficiency computed by dividing the total BTU content of the fuel burned by the resulting kWhs generated. Heat rates can be expressed as either gross or net heat rates, depending whether the electricity output measured is gross or net generation and is generally expressed as BTU per net kWh
High Desert		TA - High Desert, LLC, which owns the High Desert project
IASB		Independent Accounting Standards Board
ICAP		New York Installed Capacity
IFRS		International Financial Reporting Standards
IL CPS		Illinois Combined Pollutant Standard
ILU		Illinois Union Insurance Company
IPPNY		Independent Power Producers of New York
ISO		Independent System Operator
January 2015 Drop Down Assets		The Laredo Ridge, Tapestry and Walnut Creek projects, which were sold to NRG Yield, Inc. on January 2, 2015
June 2014 Drop Down Assets		The High Desert, Kansas South and El Segundo projects, which were sold to NRG Yield, Inc. on June 30, 2014
JX Nippon		JX Nippon Oil Exploration (EOR) Limited
Kansas South		NRG Solar Kansas South LLC, which owns the Kansas South project
kV		Kilovolts
kWh		Kilowatt-hours



LA DEQ		Louisiana Department of Environmental Quality
LaGen		Louisiana Generating LLC
Laredo Ridge		Laredo Ridge Wind, LLC, the operating subsidiary of Mission Wind Laredo, LLC, which owns the Laredo Ridge project
LIBOR		London Inter-Bank Offered Rate
LTIPs		Collectively, the NRG Long-Term Incentive Plan and the NRG GenOn Long-Term Incentive Plan
Mass		Residential and Small Business
MATS		Mercury and Air Toxics Standards promulgated by the EPA
MDE		Maryland Department of the Environment
Midwest Generation		Midwest Generation, LLC
MISO		Midcontinent Independent System Operator, Inc.
MMBtu		Million British Thermal Units
MW		Megawatt
MWh		Saleable megawatt hours, net of internal/parasitic load megawatt-hours
MWt		Megawatts Thermal Equivalent
NAAQS		National Ambient Air Quality Standards
NEPOOL		New England Power Pool
NERC		North American Electric Reliability Corporation
Net Exposure		Counterparty credit exposure to NRG, net of collateral
NextEra		NextEra Energy Resources, LLC
NOL		Net Operating Loss
NO_x		Nitrogen Oxide
NPDES		National Pollutant Discharge Elimination System
NPNS		Normal Purchase Normal Sale
NRC		U.S. Nuclear Regulatory Commission
NRG		NRG Energy, Inc.
NRG Marsh Landing		NRG Marsh Landing, LLC
NRG Wind TE Holdco		NRG Wind TE Holdco LLC
NRG Yield		Reporting segment that includes the projects held by NRG Yield, Inc.
NRG Yield, Inc.		NRG Yield, Inc., the owner of 53.3% of NRG Yield LLC with a controlling interest, and issuer of publicly held shares of Class A and Class C common stock
NSR		New Source Review
Nuclear Decommissioning Trust Fund		NRG's nuclear decommissioning trust fund assets, which are for the Company's portion of the decommissioning of the STP, units 1 & 2
NYAG		State of New York Office of Attorney General
NYISO		New York Independent System Operator
NYPA		New York Power Authority
NYSPSC		New York State Public Service Commission
OCI		Other Comprehensive Income/(Loss)
Peaking		Units expected to satisfy demand requirements during the periods of greatest or peak load on the system
PG&E		Pacific Gas and Electric Company
Pinnacle		Pinnacle Wind, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the Pinnacle project
PJM		PJM Interconnection, LLC
PM		Particulate Matter
POJO		Powerton and Joliet, of which the Company leases 100% interests in Unit 7 and Unit 8 of the Joliet generating facility and the Powerton generating facility, through Midwest Generation



PPA		Power Purchase Agreement
PPTA		Power Purchase Tolling Agreement
PSCs		Public Service Commissions
PSD		Prevention of Significant Deterioration
PUCT		Public Utility Commission of Texas
RCRA		Resource Conservation and Recovery Act of 1976
RDS		Roof Diagnostics Solar
Recurring Customers		Customers that subscribe to one or more recurring services, such as electricity, natural gas and protection products, the majority of which are retail electricity customers in Texas and the Northeast
REMA		NRG REMA LLC, which leases a 100% interest in the Shawville generating facility and 16.7% and 16.5% interests in the Keystone and Conemaugh generating facilities, respectively
Repowering		Technologies utilized to replace, rebuild, or redevelop major portions of an existing electrical generating facility, generally to achieve a substantial emissions reduction, increase facility capacity, and improve system efficiency
Revolving Credit Facility		The Company's $2.5 billion revolving credit facility due 2018, a component of the Senior Credit Facility
RFP		Request For Proposal
RGGI		Regional Greenhouse Gas Initiative
Right of First Offer Agreement		Amended and Restated Right of First Offer Agreement by and between NRG Energy, Inc. and NRG Yield, Inc.
RMR		Reliability Must-Run
RPM		Reliability Pricing Model
RPV Holdco		NRG RPV Holdco 1 LLC
RSSA		Reliability Support Services Agreement
RTO		Regional Transmission Organization
Sabine		Sabine Cogen, L.P.
SCE		Southern California Edison
SCR		Selective Catalytic Reduction Control System
SDG&E		San Diego Gas & Electric
SEC		U.S. Securities and Exchange Commission
Senior Credit Facility		NRG's senior secured facility, comprised of the Term Loan Facility and the Revolving Credit Facility
Senior Notes		The Company’s $6.4 billion outstanding unsecured senior notes, consisting of $1.1 billion of 7.625% senior notes due 2018, $1.1 billion of 8.25% senior notes due 2020, $1.1 billion of 7.875% senior notes due 2021, $1.1 billion of 6.25% senior notes due 2022, $990 million of 6.625% senior notes due 2023, and $1.0 billion of 6.25% senior notes due 2024
SF6		Sulfur Hexafluoride
SO₂		Sulfur Dioxide
STP		South Texas Project — nuclear generating facility located near Bay City, Texas in which NRG owns a 44% interest
SunPower		SunPower Corporation, Systems
Taloga		Taloga Wind, LLC, the operating subsidiary of Tapestry Wind LLC, which owns the Taloga project
TCPA		Telephone Consumer Protection Act
Term Loan Facility		The Company's $2.0 billion term loan facility due 2018, a component of the Senior Credit Facility
U.S.		United States of America
U.S. DOE		U.S. Department of Energy
U.S. GAAP		Accounting principles generally accepted in the U.S.



Utility Scale Solar		Solar power projects, typically 20 MW or greater in size (on an alternating current basis), that are interconnected into the transmission or distribution grid to sell power at a wholesale level
VaR		Value at Risk
VIE		Variable Interest Entity
Walnut Creek		NRG Walnut Creek, LLC, the operating subsidiary of WCEP Holdings, LLC, which owns the Walnut Creek project
Yield Operating		NRG Yield Operating LLC

PART I — FINANCIAL INFORMATION

ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Three months ended September 30,						Nine months ended September 30,
(In millions, except for per share amounts)	2015			2014			2015			2014
Operating Revenues
Total operating revenues	$	4,431		$	4,569		$	11,654		$	11,676
Operating Costs and Expenses
Cost of operations	3,034			3,278			8,530			8,843
Depreciation and amortization	382			375			1,173			1,096
Impairment losses	263			70			263			70
Selling, general and administrative	332			258			886			737
Acquisition-related transaction and integration costs	3			17			16			69
Development activity expenses	38			22			113			62
Total operating costs and expenses	4,052			4,020			10,981			10,877
Gain on postretirement benefits curtailment and sale of assets	—			—			14			19
Operating Income	379			549			687			818
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates	24			18			29			39
Other income/(expense), net	4			(3		)	27			13
Loss on debt extinguishment	(2		)	(13		)	(9		)	(94		)
Interest expense	(291		)	(280		)	(855		)	(809		)
Total other expense	(265		)	(278		)	(808		)	(851		)
Income/(Loss) Before Income Taxes	114			271			(121		)	(33		)
Income tax expense/(benefit)	47			89			(43		)	(68		)
Net Income/(Loss)	67			182			(78		)	35
Less: Net income/(loss) attributable to noncontrolling interest and redeemable noncontrolling interests	1			14			(10		)	20
Net Income/(Loss) Attributable to NRG Energy, Inc.	66			168			(68		)	15
Dividends for preferred shares	5			2			15			7
Income/(Loss) Available for Common Stockholders	$	61		$	166		$	(83	)	$	8
Earnings/(Loss) per Share Attributable to NRG Energy, Inc. Common Stockholders
Weighted average number of common shares outstanding — basic	331			338			334			333
Earnings/(Loss) per Weighted Average Common Share — Basic	$	0.18		$	0.49		$	(0.25	)	$	0.02
Weighted average number of common shares outstanding — diluted	332			343			334			338
Earnings/(Loss) per Weighted Average Common Share — Diluted	$	0.18		$	0.48		$	(0.25	)	$	0.02
Dividends Per Common Share	$	0.15		$	0.14		$	0.44		$	0.40

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
	(In millions)
Net Income/(Loss)	$	67		$	182		$	(78	)	$	35
Other Comprehensive Income/(Loss), net of tax
Unrealized (loss)/gain on derivatives, net of income tax (benefit)/expense of $(12), $4, $(6) and $(11)	(6		)	4			(2		)	(24		)
Foreign currency translation adjustments, net of income tax benefit of $(5), $(6), $(6) and $(2)	(8		)	(6		)	(10		)	(3		)
Available-for-sale securities, net of income tax expense/(benefit) of $6, $(1), $1 and $0	(7		)	(2		)	(11		)	2
Defined benefit plans, net of tax expense/(benefit) of $2, $0, $6 and $(7)	3			(3		)	9			9
Other comprehensive loss	(18		)	(7		)	(14		)	(16		)
Comprehensive Income/(Loss)	49			175			(92		)	19
Less: Comprehensive (loss)/income attributable to noncontrolling interest and redeemable noncontrolling interests	(17		)	17			(34		)	14
Comprehensive Income/(Loss) Attributable to NRG Energy, Inc.	66			158			(58		)	5
Dividends for preferred shares	5			2			15			7
Comprehensive Income/(Loss) Available for Common Stockholders	$	61		$	156		$	(73	)	$	(2	)

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



	September 30, 2015			December 31, 2014
(In millions, except shares)	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	2,265		$	2,116
Funds deposited by counterparties	68			72
Restricted cash	497			457
Accounts receivable — trade, less allowance for doubtful accounts of $26 and $23	1,492			1,322
Inventory	1,149			1,247
Derivative instruments	1,580			2,425
Cash collateral paid in support of energy risk management activities	367			187
Deferred income taxes	169			174
Renewable energy grant receivable, net	26			135
Prepayments and other current assets	460			447
Total current assets	8,073			8,582
Property, plant and equipment, net of accumulated depreciation of $8,969 and $7,890	21,985			22,367
Other Assets
Equity investments in affiliates	1,068			771
Notes receivable, less current portion	62			72
Goodwill	2,503			2,574
Intangible assets, net of accumulated amortization of $1,590 and $1,402	2,371			2,567
Nuclear decommissioning trust fund	551			585
Derivative instruments	522			480
Deferred income taxes	1,427			1,406
Other non-current assets	1,426			1,261
Total other assets	9,930			9,716
Total Assets	$	39,988		$	40,665
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and capital leases	$	457		$	474
Accounts payable	1,173			1,060
Derivative instruments	1,416			2,054
Cash collateral received in support of energy risk management activities	68			72
Accrued expenses and other current liabilities	1,222			1,199
Total current liabilities	4,336			4,859
Other Liabilities
Long-term debt and capital leases	19,598			19,900
Nuclear decommissioning reserve	322			310
Nuclear decommissioning trust liability	280			333
Deferred income taxes	20			21
Derivative instruments	619			438
Out-of-market contracts, net of accumulated amortization of $639 and $562	1,168			1,244
Other non-current liabilities	1,478			1,574
Total non-current liabilities	23,485			23,820
Total Liabilities	27,821			28,679
2.822% convertible perpetual preferred stock	299			291
Redeemable noncontrolling interest in subsidiaries	29			19
Commitments and Contingencies
Stockholders’ Equity
Common stock	4			4
Additional paid-in capital	8,382			8,327
Retained earnings	3,358			3,588
Less treasury stock, at cost — 97,190,988 and 78,843,552 shares, respectively	(2,330		)	(1,983		)
Accumulated other comprehensive loss	(188		)	(174		)
Noncontrolling interest	2,613			1,914
Total Stockholders’ Equity	11,839			11,676
Total Liabilities and Stockholders’ Equity	$	39,988		$	40,665

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine months ended September 30,
	2015			2014
	(In millions)
Cash Flows from Operating Activities
Net (Loss)/Income	$	(78	)	$	35
Adjustments to reconcile net loss to net cash provided by operating activities:
Distributions and equity in earnings of unconsolidated affiliates	28			32
Depreciation and amortization	1,173			1,096
Provision for bad debts	49			49
Amortization of nuclear fuel	36			33
Amortization of financing costs and debt discount/premiums	(9		)	(9		)
Adjustment for debt extinguishment	9			24
Amortization of intangibles and out-of-market contracts	68			52
Amortization of unearned equity compensation	37			32
Changes in deferred income taxes and liability for uncertain tax benefits	(72		)	(75		)
Changes in nuclear decommissioning trust liability	1			12
Changes in derivative instruments	180			248
Changes in collateral deposits supporting energy risk management activities	(180		)	(100		)
Loss on sale of emission allowances	(6		)	2
Gain on postretirement benefits curtailment and sale of assets	(14		)	(26		)
Impairment losses	263			70
Cash used by changes in other working capital	(93		)	(361		)
Net Cash Provided by Operating Activities	1,392			1,114
Cash Flows from Investing Activities
Acquisitions of businesses, net of cash acquired	(31		)	(2,832		)
Capital expenditures	(889		)	(675		)
Increase in restricted cash, net	(41		)	(52		)
Decrease in restricted cash to support equity requirements for U.S. DOE funded projects	1			21
Decrease in notes receivable	10			21
Investments in nuclear decommissioning trust fund securities	(500		)	(475		)
Proceeds from the sale of nuclear decommissioning trust fund securities	499			463
Proceeds from renewable energy grants and state rebates	62			431
Proceeds from sale of assets, net of cash disposed of	1			153
Cash proceeds to fund cash grant bridge loan payment	—			57
Investments in unconsolidated affiliates	(357		)	(87		)
Other	13			17
Net Cash Used by Investing Activities	(1,232		)	(2,958		)
Cash Flows from Financing Activities
Payment of dividends to common and preferred stockholders	(152		)	(140		)
Payment for treasury stock	(353		)	—
Net receipts from/(payments for) settlement of acquired derivatives that include financing elements	138			(64		)
Proceeds from issuance of long-term debt	679			4,456
Distributions from, net of contributions to, noncontrolling interest in subsidiaries	651			639
Proceeds from issuance of common stock	1			15
Payment of debt issuance costs	(14		)	(57		)
Payments for short and long-term debt	(954		)	(3,308		)
Other	(22		)	—
Net Cash (Used)/Provided by Financing Activities	(26		)	1,541
Effect of exchange rate changes on cash and cash equivalents	15			2
Net Increase/ (Decrease) in Cash and Cash Equivalents	149			(301		)
Cash and Cash Equivalents at Beginning of Period	2,116			2,254
Cash and Cash Equivalents at End of Period	$	2,265		$	1,953

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Basis of Presentation

NRG Energy, Inc., or NRG or the Company, is a competitive power company, which produces, sells and delivers energy and energy products and services in major competitive power markets primarily in the U.S. while positioning itself as a leader in the way residential, industrial and commercial consumers think about and use energy products and services. NRG has one of the nation's largest and most diverse competitive power generation portfolios balanced with one of the nation's largest retail energy providers. The Company owns and operates approximately 50,000 MWs of generation; engages in the trading of wholesale energy, capacity and related products; transacts in and trades fuel and transportation services; and directly sells energy, services, and innovative, sustainable products and services to retail customers under the name “NRG” and various other retail brand names owned by NRG.

On June 29, 2015, NRG Yield, Inc. closed on its offering of 28,198,000 shares of Class C common stock at a price of $22 per share, which included 3,678,000 shares of Class C common stock purchased by the underwriters through an over-allotment option. Net proceeds to NRG Yield, Inc. from the sale of the Class C common stock were $599 million, net of underwriting discounts and commissions of $21 million. The additional equity offering reduced the Company's economic interest in NRG Yield, Inc. to 46.7% and its voting interest to 55.1%. The Company continues to consolidate NRG Yield, Inc. through its controlling interest.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the SEC's regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the consolidated financial statements in the Company's 2014 Form 10-K. Interim results are not necessarily indicative of results for a full year.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Company's consolidated financial position as of September 30, 2015, and the results of operations, comprehensive income/(loss) and cash flows for the nine months ended September 30, 2015, and 2014.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Reclassifications

Certain prior year amounts have been reclassified for comparative purposes. The reclassifications did not affect results from operations, net assets or cash flows.

Note 2 — Summary of Significant Accounting Policies

Other Cash Flow Information

NRG’s investing activities exclude capital expenditures of $69 million which were accrued and unpaid at September 30, 2015.

Noncontrolling Interest

The following table reflects the changes in NRG's noncontrolling interest balance:



	(In millions)
Balance as of December 31, 2014	$	1,914
Sale of assets to NRG Yield, Inc.	(27		)
Distributions to noncontrolling interest	(115		)
Contributions from noncontrolling interest	153
Increase to noncontrolling interest due to NRG Yield, Inc. acquisitions	74
Proceeds received from NRG Yield, Inc. public offering	599
Non-cash adjustments for equity component of NRG Yield, Inc. convertible notes	23
Non-cash increase to noncontrolling interest	19
Comprehensive loss attributable to noncontrolling interest	(27		)
Balance as of September 30, 2015	$	2,613

NRG DGPV Holdco 1 LLC

On May 8, 2015, NRG Yield DGPV Holding LLC, a subsidiary of NRG Yield, Inc., and NRG Renew LLC, a subsidiary of the Company, entered into a partnership by forming NRG DGPV Holdco 1 LLC, or DGPV Holdco, the purpose of which is to own or purchase solar power generation projects and other ancillary related assets from NRG Renew LLC, via intermediate funds, including: (i) a tax equity-financed portfolio of 11 recently completed community solar projects representing approximately 11 MW with a weighted average remaining PPA term of 20 years; and (ii) a tax equity-financed portfolio of approximately 29 commercial photovoltaic systems representing approximately 89 MW. As of September 30, 2015, NRG Yield, Inc.'s investment in DGPV Holdco related to the recently completed community solar projects was $17 million. Additionally, as of September 30, 2015, NRG Yield, Inc.'s investment related to commercial photovoltaic systems was $2 million. The following illustrates the structure of DGPV Holdco:

NRG RPV Holdco 1 LLC

On April 9, 2015, NRG Yield RPV Holding LLC, a subsidiary of NRG Yield, Inc. and NRG Residential Solar Solutions LLC, a subsidiary of the Company, entered into a partnership, through their ownership of NRG RPV Holdco 1 LLC, or RPV Holdco, that will invest in and hold operating portfolios of residential solar assets developed by NRG Home Solar, including: (i) an existing, unlevered portfolio of over 2,200 leases across nine states representing approximately 17 MW with a weighted average remaining lease term of approximately 17 years, in which NRG Yield, Inc. invested $26 million in April 2015; and (ii) tax equity-financed portfolios of approximately 13,000 leases representing approximately 90 MW with an average lease term for the existing and new leases of approximately 17 to 20 years. NRG Yield, Inc. has committed to invest up to an additional $150 million of cash contributions into the partnership over time, excluding the $26 million noted above. As of September 30, 2015, NRG Yield, Inc. has contributed $21 million of the $150 million committed contributions. The following illustrates the structure of RPV Holdco:

Alta Wind X-XI TE Holdco, LLC

On June 30, 2015, NRG Yield Operating LLC, a subsidiary of NRG Yield, Inc., sold an economic interest in Alta Wind X-XI TE Holdco LLC, or Alta TE Holdco, holder of the Alta Wind X and Alta Wind XI projects, to a financial institution in order to monetize cash and tax attributes, primarily production tax credits. The net proceeds of $119 million are reflected as noncontrolling interest in the Company's balance sheet.

NRG Yield, Inc. Issuance of Class C Common Stock and Convertible Notes

On June 29, 2015, NRG Yield, Inc. issued 28,198,000 shares of Class C common stock for net proceeds of $599 million, as described in Note 1, Basis of Presentation, and issued $287.5 million in aggregate principal amount of 3.25% Convertible Senior Notes, due 2020, as described in Note 8, Debt and Capital Leases. The value of the conversion option of $23 million is reflected in the NRG Yield, Inc. noncontrolling interest balance.

Redeemable Noncontrolling Interest in Subsidiaries

Redeemable noncontrolling interest in subsidiaries represents third-party interests in the net assets under certain arrangements that the Company has entered into to finance the cost of certain projects, including solar energy systems under operating leases and wind facilities eligible for certain tax credits. To the extent that the third party has the right to redeem its interests for cash or other assets, the Company has included the noncontrolling interest attributable to the third party as a component of temporary equity in the mezzanine section of the consolidated balance sheet. The following table reflects the changes in the Company's redeemable noncontrolling interest balance for the nine months ended September 30, 2015:



	(In millions)
Balance as of December 31, 2014	$	19
Cash contributions from noncontrolling interest	17
Comprehensive loss attributable to noncontrolling interest	(7		)
Balance as of September 30, 2015	$	29

Gain on Postretirement Benefits Curtailment

During the first quarter of 2015, the Company recognized a gain of $14 million related to the curtailment of certain of the Company's postretirement plans.

Recent Accounting Developments

ASU 2015-16 — In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, or ASU No. 2015-16. The amendments of ASU No. 2015-16 require that an acquirer recognize measurement period adjustments to the provisional amounts recognized in a business combination in the reporting period during which the adjustments are determined. Additionally, the amendments of ASU No. 2015-16 require the acquirer to record in the same period's financial statements the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the measurement period adjustment, calculated as if the accounting had been completed at the acquisition date as well as disclosing either on the face of the income statement or in the notes the portion of the amount recorded in current period earnings that would have been recorded in previous reporting periods. The guidance in ASU No. 2015-16 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The amendments should be applied prospectively. The adoption of this standard is not expected to have a material impact on the Company's results of operations, cash flows or financial position.

ASU 2015-03 and ASU 2015-15 — In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, or ASU No. 2015-03. The amendments of ASU No. 2015-03 were issued to reduce complexity in the balance sheet presentation of debt issuance costs. ASU No. 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this standard. Additionally, in August 2015, the FASB issued ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, or ASU No. 2015-15, as ASU No. 2015-03 did not specifically address presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. ASU No. 2015-15 allows an entity to continue to defer and present debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The guidance in ASU No. 2015-03 and ASU No. 2015-15 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The adoption of ASU No. 2015-03 is not expected to have a material impact on the Company's balance sheets on a gross basis and will have no impact on net assets.

ASU 2015-02 — In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, or ASU No. 2015-02. The amendments of ASU No. 2015-02 were issued in an effort to minimize situations under previously existing guidance in which a reporting entity was required to consolidate another legal entity in which that reporting entity did not have: (1) the ability through contractual rights to act primarily on its own behalf; (2) ownership of the majority of the legal entity's voting rights; or (3) the exposure to a majority of the legal entity's economic benefits. ASU No. 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The guidance in ASU No. 2015-02 is effective for periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted the standard effective January 1, 2015 and the adoption of this standard did not impact the Company's results of operations, cash flows or financial position.

ASU 2014-16 — In November 2014, the FASB issued ASU No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity, or ASU No. 2014-16. The amendments of ASU No. 2014-16 clarify how U.S. GAAP should be applied in determining whether the nature of a host contract is more akin to debt or equity and in evaluating whether the economic characteristics and risks of an embedded feature are "clearly and closely related" to its host contract. The guidance in ASU No. 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company adopted the standard effective January 1, 2015 and the adoption of this standard did not impact the Company's results of operations, cash flows or financial position.

ASU 2014-09 — In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASU No. 2014-09. The amendments of ASU No. 2014-09 complete the joint effort between the FASB and the International Accounting Standards Board, or IASB, to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards, or IFRS, and to improve financial reporting. The guidance in ASU No. 2014-09 provides that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for the goods or services provided and establishes the following steps to be applied by an entity: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies the performance obligation. In August 2015, the FASB issued ASU 2015-14, which formally deferred the effective date by one year to make the guidance of ASU No. 2014-09 effective for annual reporting periods beginning after December 15, 2017, including interim periods therein. Early adoption is permitted, but not prior to the original effective date, which was for annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact of the standard on the Company's results of operations, cash flows and financial position.

Note 3 — Business Acquisitions and Dispositions

The Company has completed the following business acquisitions and dispositions that are material to the Company's financial statements:

NRG Yield Acquisitions

2015 Acquisition of Desert Sunlight

On June 29, 2015, NRG Yield, Inc., through its subsidiary Yield Operating, acquired 25% of the membership interest in Desert Sunlight Investment Holdings, LLC, which owns two solar photovoltaic facilities that total 550 MWs located in Desert Center, California from EFS Desert Sun, LLC, an affiliate of GE Energy Financial Services, for a purchase price of $285 million. The Company accounts for its 25% investment as an equity method investment.

2014 Acquisition of Alta Wind

On August 12, 2014, NRG Yield, Inc., through its subsidiary Yield Operating, completed the acquisition of 100% of the membership interests of Alta Wind Asset Management Holdings, LLC, Alta Wind Company, LLC, Alta Wind X Holding Company, LLC, and Alta Wind XI Holding Company, LLC, which collectively own seven wind facilities that total 947 MWs located in Tehachapi, California and a portfolio of land leases, or the Alta Wind Assets. Power generated by the Alta Wind facilities is sold to Southern California Edison under long-term power purchase agreements, with 21 years of remaining contract life for Alta I-V. The Alta X and XI power purchase agreements begin in 2016 with terms of 22 years and currently sell energy and renewable energy credits on a merchant basis.

The purchase price of the Alta Wind Assets was $923 million, which was comprised of a purchase price of $870 million and $53 million paid for working capital balances. In order to fund the purchase price of the acquisition, NRG Yield, Inc. issued 12,075,000 shares of its Class A common stock on July 29, 2014, for net proceeds of $630 million. In addition, on August 5, 2014, Yield Operating issued $500 million in aggregate principal amount at par of 5.375% senior notes due August 2024. Interest on the notes is payable semi-annually on February 15 and August 15 of each year and commenced on February 15, 2015. The notes are senior unsecured obligations of Yield Operating and are guaranteed by NRG Yield LLC, Yield Operating’s parent company, and by certain of Yield Operating’s wholly-owned subsidiaries.

The acquisition was recorded as a business combination under ASC 805, with identifiable assets acquired and liabilities assumed provisionally recorded at their estimated fair values on the acquisition date. The accounting for the business combination was completed as of August 11, 2015, at which point the fair values became final. The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of December 31, 2014, as well as adjustments made through August 11, 2015, when the allocation became final. The purchase price of $923 million was allocated as follows:



	Acquisition Date Fair Value at December 31, 2014		Measurement period adjustments			Revised Acquisition Date
	(In millions)
Assets
Cash	$	22	$	—		$	22
Current and non-current assets	49		(2		)	47
Property, plant and equipment	1,304		6			1,310
Intangible assets	1,177		(6		)	1,171
Total assets acquired	2,552		(2		)	2,550

Liabilities
Debt	1,591		—			1,591
Current and non-current liabilities	38		(2		)	36
Total liabilities assumed	1,629		(2		)	1,627
Net assets acquired	$	923	$	—		$	923

Acquisitions of Assets from NRG

On November 3, 2015, the Company sold 75% of the Class B interests of NRG Wind TE Holdco, which owns a portfolio of 12 wind facilities totaling 814 net MW, to NRG Yield, Inc. NRG Yield Inc., paid total cash consideration of $210 million, subject to working capital adjustments. NRG Yield, Inc. will be responsible for its pro-rata share of non-recourse project debt of $193 million and noncontrolling interest associated with a tax equity structure of $165 million (as of September 30, 2015).

On January 2, 2015, the Company sold the following facilities to NRG Yield, Inc.: Walnut Creek, the Tapestry projects (Buffalo Bear, Pinnacle and Taloga) and Laredo Ridge. NRG Yield, Inc. paid total cash consideration of $489 million, including $9 million of working capital adjustments, plus assumed project level debt of $737 million. The sale was recorded as a transfer of entities under common control and the related assets were transferred at their carrying value of $405 million.

On June 30, 2014, the Company sold the following facilities to NRG Yield, Inc.: High Desert, Kansas South, and El Segundo Energy Center. NRG Yield, Inc. paid total cash consideration of $357 million, which represents a base purchase price of $349 million and $8 million of working capital adjustments, plus assumed project level debt of approximately $612 million. The sale was recorded as a transfer of entities under common control and the related assets were transferred at their carrying value of $236 million.

NRG Dispositions

Sale of Sabine

On December 2, 2014, the Company, through its subsidiaries GenOn Sabine (Delaware), Inc. and GenOn Sabine (Texas), Inc., completed the sale of its 50% interest in Sabine to Bayou Power, LLC, an affiliate of Rockland Capital, LLC. Sabine owns a 105 MW natural gas-fired cogeneration facility located in Texas. The Company received cash consideration of $35 million at closing. A gain of $18 million was recognized as a result of the transaction and recorded as a gain on sale of equity-method investments within the Company's consolidated statements of operations.

Disposition of 50% Interest in Petra Nova Parish Holdings LLC

On July 3, 2014, the Company, through its wholly owned subsidiary Petra Nova Holdings LLC, sold 50% of its interest in Petra Nova Parish Holdings LLC to JX Nippon, a wholly owned subsidiary of JX Nippon Oil & Gas Exploration Corporation. As a result of the sale, the Company no longer has a controlling interest in and has deconsolidated Petra Nova Parish Holdings LLC as of the date of the sale. On July 7, 2014, the Company made its initial capital contribution into the partnership of $35 million, which was funded with a portion of the sale proceeds of $76 million. On March 3, 2014, Petra Nova CCS I LLC, a wholly owned subsidiary of Petra Nova Parish Holdings LLC, entered into a fixed-price agreement to build and operate a CCF at the W.A. Parish facility with a consortium of Mitsubishi Heavy Industries America, Inc. and TIC - The Industrial Company. Notice to proceed for the construction on the CCF was issued on July 15, 2014, and commercial operation is expected in late 2016.

Petra Nova Parish Holdings LLC also owns a 75 MW peaking unit at W.A. Parish, which achieved commercial operations on June 26, 2013. The peaking unit will be converted into a cogeneration facility to provide power and steam to the CCF. The project is being financed by: (i) up to $167 million from a U.S. DOE CCPI grant, (ii) $250 million in loans provided by the Japan Bank for International Cooperation and Mizuho Bank, Ltd., and (iii) approximately $300 million in equity contributions from each of the Company and JX Nippon. NRG’s contribution will include investments already made during the development of the project.

NRG Acquisitions

Acquisition of Dominion's Competitive Electric Retail Business

On March 31, 2014, the Company acquired the competitive retail electricity business of Dominion. The acquisition of Dominion's competitive retail electricity business increased NRG’s retail portfolio by approximately 540,000 customers in the aggregate by the end of 2014. The acquisition supports NRG's ongoing efforts to expand the Company's retail footprint in the Northeast and to grow its retail position in Texas. The Company paid approximately $192 million as cash consideration for the acquisition, including $165 million of purchase price and $27 million paid for working capital balances, which was funded by cash on hand. The purchase price was allocated to the following: $40 million to accounts receivable-trade, $64 million to customer relationships, $9 million to trade names, $14 million to current assets, $21 million to derivative assets, $47 million to current and non-current liabilities, and goodwill of $91 million, of which $8 million is deductible for U.S. income tax purposes in future periods. The factors that resulted in goodwill arising from the acquisition include the revenues associated with new customers in new regions and through the synergies associated with combining a new retail business with the Company's existing retail and generation assets. The assets acquired and liabilities assumed are included within the NRG Home Retail segment. The accounting for the Dominion acquisition was completed as of March 30, 2015, at which point the provisional fair values became final with no material changes.

EME Acquisition

On April 1, 2014, the Company acquired substantially all of the assets of EME. EME, through its subsidiaries and affiliates, owned or leased and operated a portfolio of approximately 8,000 MW consisting of wind energy facilities and coal- and gas-fired generating facilities. The Company paid an aggregate purchase price of $3.5 billion, which was funded through the issuance of 12,671,977 shares of NRG common stock on April 1, 2014, the issuance of $700 million in newly-issued corporate debt and cash on hand. The Company also assumed non-recourse debt of approximately $1.2 billion.

In connection with the transaction, NRG agreed to certain conditions with the parties to the POJO sale-leaseback transaction subject to which an NRG subsidiary assumed the POJO leveraged leases and NRG guaranteed the remaining payments under each lease, which total $405 million through 2034. In connection with this agreement, NRG has committed to fund up to $350 million in capital expenditures for plant modifications at Powerton and Joliet to comply with environmental regulations.

The acquisition was recorded as a business combination under ASC 805, with identifiable assets acquired and liabilities assumed provisionally recorded at their estimated fair values on the acquisition date. The accounting for the EME acquisition was completed as of March 31, 2015, at which point the fair values became final. The following table summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of December 31, 2014, as well as adjustments made through March 31, 2015, when the allocation became final. Measurement period adjustments primarily reflect the tax impact of the acquisition date fair values and final estimates for asset retirement obligations.

The purchase price of $3.5 billion was allocated as follows:



	Acquisition Date Fair Value at December 31, 2014		Measurement period adjustments			Revised Acquisition Date
	(In millions)
Assets
Cash	$	1,422	$	—		$	1,422
Current assets	724		72			796
Property, plant and equipment	2,438		(3		)	2,435
Intangible assets	172		—			172
Goodwill	334		(56		)	278
Non-current assets	773		—			773
Total assets acquired	5,863		13			5,876

Liabilities
Current and non-current liabilities	629		13			642
Out-of-market contracts and leases	159		—			159
Long-term debt	1,249		—			1,249
Total liabilities assumed	2,037		13			2,050
Less: noncontrolling interest	352		—			352
Net assets acquired	$	3,474	$	—		$	3,474

Note 4 — Fair Value of Financial Instruments

This footnote should be read in conjunction with the complete description under Note 4, Fair Value of Financial Instruments, to the Company's 2014 Form 10-K.

For cash and cash equivalents, funds deposited by counterparties, accounts and other receivables, accounts payable, restricted cash, and cash collateral paid and received in support of energy risk management activities, the carrying amount approximates fair value because of the short-term maturity of those instruments and are classified as Level 1 within the fair value hierarchy.

The estimated carrying amounts and fair values of NRG's recorded financial instruments not carried at fair market value are as follows:



	As of September 30, 2015				As of December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Assets:
Notes receivable^(a)	$	82	$	82	$	91	$	91
Liabilities:
Long-term debt, including current portion	$	20,041	$	19,163	$	20,366	$	20,361

(a) Includes the current portion of notes receivable which is recorded in prepayments and other current assets on the Company's consolidated balance sheets.

The fair value of the Company's publicly-traded long-term debt is based on quoted market prices and is classified as Level 2 within the fair value hierarchy. The fair value of debt securities, non-publicly-traded long-term debt and certain notes receivable of the Company are based on expected future cash flows discounted at market interest rates, or current interest rates for similar instruments with equivalent credit quality and are classified as Level 3 within the fair value hierarchy.

Recurring Fair Value Measurements

Debt securities, equity securities, and trust fund investments, which are comprised of various U.S. debt and equity securities, and derivative assets and liabilities, are carried at fair market value.

The following tables present assets and liabilities measured and recorded at fair value on the Company's condensed consolidated balance sheets on a recurring basis and their level within the fair value hierarchy:



	As of September 30, 2015
	Fair Value
(In millions)	Level 1		Level 2		Level 3		Total
Investment in available-for-sale securities (classified within other non-current assets):
Debt securities	$	—	$	—	$	18	$	18
Available-for-sale securities	15		—		—		15
Other ^(a)	14		—		—		14
Nuclear trust fund investments:
Cash and cash equivalents	4		—		—		4
U.S. government and federal agency obligations	58		2		—		60
Federal agency mortgage-backed securities	—		60		—		60
Commercial mortgage-backed securities	—		25		—		25
Corporate debt securities	—		83		—		83
Equity securities	269		—		49		318
Foreign government fixed income securities	—		1		—		1
Other trust fund investments:
U.S. government and federal agency obligations	1		—		—		1
Derivative assets:
Commodity contracts	720		1,161		221		2,102
Interest rate contracts	—		—		—		—
Total assets	$	1,081	$	1,332	$	288	$	2,701
Derivative liabilities:
Commodity contracts	$	815	$	866	$	188	$	1,869
Interest rate contracts	—		166		—		166
Total liabilities	$	815	$	1,032	$	188	$	2,035

(a) Consists primarily of mutual funds held in a Rabbi Trust for non-qualified deferred compensation plans for certain former employees.



	As of December 31, 2014
	Fair Value
(In millions)	Level 1		Level 2		Level 3		Total
Investment in available-for-sale securities (classified within other non-current assets):
Debt securities	$	—	$	—	$	18	$	18
Available-for-sale securities	30		—		—		30
Other ^(a)	21		—		11		32
Nuclear trust fund investments:
Cash and cash equivalents	14		—		—		14
U.S. government and federal agency obligations	44		3		—		47
Federal agency mortgage-backed securities	—		74		—		74
Commercial mortgage-backed securities	—		25		—		25
Corporate debt securities	—		78		—		78
Equity securities	292		—		52		344
Foreign government fixed income securities	—		3		—		3
Other trust fund investments:
U.S. government and federal agency obligations	1		—		—		1
Derivative assets:
Commodity contracts	1,078		1,515		309		2,902
Interest rate contracts	—		2		—		2
Equity contracts	—		—		1		1
Total assets	$	1,480	$	1,700	$	391	$	3,571
Derivative liabilities:
Commodity contracts	$	1,004	$	1,093	$	230	$	2,327
Interest rate contracts	—		165		—		165
Total liabilities	$	1,004	$	1,258	$	230	$	2,492

(a) Primarily consists of mutual funds held in rabbi trusts for non-qualified deferred compensation plans for certain former employees and a total return swap that does not meet the definition of a derivative.

There were no transfers during the three and nine months ended September 30, 2015, and 2014 between Levels 1 and 2. The following tables reconcile, for the three and nine months ended September 30, 2015, and 2014, the beginning and ending balances for financial instruments that are recognized at fair value in the consolidated financial statements, at least annually, using significant unobservable inputs:



	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Three months ended September 30, 2015													Nine months ended September 30, 2015
(In millions)	Debt Securities		Other		Trust Fund Investments			Derivatives^(a)			Total			Debt Securities		Other			Trust Fund Investments			Derivatives^(a)			Total
Beginning balance	$	18	$	—	$	55		$	49		$	122		$	18	$	11		$	52		$	80		$	161
Total gains/(losses) — realized/unrealized:
Included in earnings	—		—		—			(17		)	(17		)	—		(11		)	—			(95		)	(106		)
Included in nuclear decommissioning obligation	—		—		(6		)	—			(6		)	—		—			(4		)	—			(4		)
Purchases	—		—		—			9			9			—		—			1			44			45
Transfers into Level 3 ^(b)	—		—		—			(10		)	(10		)	—		—			—			1			1
Transfers out of Level 3 ^(b)	—		—		—			2			2			—		—			—			3			3
Ending balance as of September 30, 2015	$	18	$	—	$	49		$	33		$	100		$	18	$	—		$	49		$	33		$	100
Losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of September 30, 2015	$	—	$	—	$	—		$	(9	)	$	(9	)	$	—	$	—		$	—		$	(37	)	$	(37	)


(a)	Consists of derivative assets and liabilities, net.


(b)	Transfers into/out of Level 3 are related to the availability of external broker quotes and are valued as of the end of the reporting period. All transfers in/out are with Level 2.



	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Three months ended September 30, 2014													Nine months ended September 30, 2014
(In millions)	Debt Securities		Other		Trust Fund Investments			Derivatives^(a)			Total			Debt Securities		Other		Trust Fund Investments			Derivatives^(a)			Total
Beginning balance	$	18	$	11	$	58		$	(12	)	$	75		$	16	$	10	$	56		$	13		$	95
Total gains/(losses) — realized/unrealized:
Included in earnings	—		—		—			(22		)	(22		)	—		1		—			(18		)	(17		)
Included in OCI	—		—		—			—			—			2		—		—			—			2
Included in nuclear decommissioning obligations	—		—		(4		)	—			(4		)	—		—		(3		)	—			(3		)
Purchases	—		—		—			63			63			—		—		1			(21		)	(20		)
Contracts acquired in Dominion and EME acquisition	—		—		—			—			—			—		—		—			39			39
Transfers into Level 3 ^(b)	—		—		—			(1		)	(1		)	—		—		—			17			17
Transfers out of Level 3 ^(b)	—		—		—			1			1			—		—		—			(1		)	(1		)
Ending balance as of September 30, 2014	$	18	$	11	$	54		$	29		$	112		$	18	$	11	$	54		$	29		$	112
Gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held as of September 30, 2014	$	—	$	—	$	—		$	5		$	5		$	—	$	—	$	—		$	26		$	26


(a)	Consists of derivative assets and liabilities, net.


(b)	Transfers into/out of Level 3 are related to the availability of external broker quotes and are valued as of the end of the reporting period. All transfers in/out are with Level 2.

Derivative Fair Value Measurements

A portion of NRG's contracts are exchange-traded contracts with readily available quoted market prices. A majority of NRG's contracts are non-exchange-traded contracts valued using prices provided by external sources, primarily price quotations available through brokers or over-the-counter and on-line exchanges. The remainder of the assets and liabilities represent contracts for which external sources or observable market quotes are not available for the whole term or for certain delivery months or the contracts are retail and load following power contracts. These contracts are valued using various valuation techniques including but not limited to internal models that apply fundamental analysis of the market and corroboration with similar markets. As of September 30, 2015, contracts valued with prices provided by models and other valuation techniques make up 11% of the total derivative assets and 9% of the total derivative liabilities.

NRG's significant positions classified as Level 3 include physical and financial power and physical coal executed in illiquid markets as well as financial transmission rights, or FTRs. The significant unobservable inputs used in developing fair value include illiquid power and coal location pricing which is derived as a basis to liquid locations. The basis spread is based on observable market data when available or derived from historic prices and forward market prices from similar observable markets when not available. For FTRs, NRG uses the most recent auction prices to derive the fair value.

The following tables quantify the significant unobservable inputs used in developing the fair value of the Company's Level 3 positions as of September 30, 2015 and December 31, 2014:



	Significant Unobservable Inputs
	September 30, 2015
	Fair Value						Input/Range
	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High		Weighted Average
	(In millions)
Power Contracts	$	136	$	116	Discounted Cash Flow	Forward Market Price (per MWh)	$	9		$	78	$	34
Coal Contracts	—		9		Discounted Cash Flow	Forward Market Price (per ton)	46			49		47
FTRs	85		63		Discounted Cash Flow	Auction Prices (per MWh)	(93		)	64		—
	$	221	$	188



	Significant Unobservable Inputs
	December 31, 2014
	Fair Value						Input/Range
	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High		Weighted Average
	(In millions)
Power Contracts	$	195	$	154	Discounted Cash Flow	Forward Market Price (per MWh)	$	15		$	92	$	47
Coal Contracts	3		1		Discounted Cash Flow	Forward Market Price (per ton)	53			56		54
FTRs	111		75		Discounted Cash Flow	Auction Prices (per MWh)	(29		)	30		—
	$	309	$	230

The following table provides sensitivity of fair value measurements to increases/(decreases) in significant unobservable inputs as of September 30, 2015 and December 31, 2014:



Significant Unobservable Input	Position	Change In Input	Impact on Fair Value Measurement
Forward Market Price Power/Coal	Buy	Increase/(Decrease)	Higher/(Lower)
Forward Market Price Power/Coal	Sell	Increase/(Decrease)	Lower/(Higher)
FTR Prices	Buy	Increase/(Decrease)	Higher/(Lower)
FTR Prices	Sell	Increase/(Decrease)	Lower/(Higher)

The fair value of each contract is discounted using a risk-free interest rate. In addition, the Company applies a credit reserve to reflect credit risk, which is calculated based on published default probabilities. As of September 30, 2015, the credit reserve resulted in a $7 million increase in fair value, which is composed of a $4 million gain in OCI and a $3 million gain in operating revenue and cost of operations. As of September 30, 2014, the credit reserve resulted in a $1 million increase in fair value, which is a gain in OCI.

Concentration of Credit Risk

In addition to the credit risk discussion as disclosed in Note 2, Summary of Significant Accounting Policies, to the Company's 2014 Form 10-K, the following is a discussion of the concentration of credit risk for the Company's contractual obligations. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. NRG is exposed to counterparty credit risk through various activities including wholesale sales, fuel purchases and retail supply arrangements, and retail customer credit risk through its retail load activities.

Counterparty Credit Risk

The Company's counterparty credit risk policies are disclosed in its 2014 Form 10-K. As of September 30, 2015, counterparty credit exposure, excluding credit risk exposure under certain long term agreements, was $942 million and NRG held collateral (cash and letters of credit) against those positions of $111 million, resulting in a net exposure of $800 million. Approximately 81% of the Company's exposure before collateral is expected to roll off by the end of 2016. Counterparty credit exposure is valued through observable market quotes and discounted at a risk free interest rate. The following tables highlight net counterparty credit exposure by industry sector and by counterparty credit quality. Net counterparty credit exposure is defined as the aggregate net asset position for NRG with counterparties where netting is permitted under the enabling agreement and includes all cash flow, mark-to-market and NPNS, and non-derivative transactions. The exposure is shown net of collateral held, and includes amounts net of receivables or payables.



	Net Exposure ^(a)
Category	(% of Total)
Financial institutions	44	%
Utilities, energy merchants, marketers and other	32
ISOs	24
Total as of September 30, 2015	100	%



	Net Exposure ^(a)
Category	(% of Total)
Investment grade	99	%
Non-rated ^(b)	1
Total as of September 30, 2015	100	%


(a)	Counterparty credit exposure excludes uranium and coal transportation contracts because of the unavailability of market prices.


(b)	For non-rated counterparties, a significant portion are related to ISO and municipal public power entities, which are considered investment grade equivalent ratings based on NRG's internal credit ratings.

NRG has counterparty credit risk exposure to certain counterparties, each of which represent more than 10% of total net exposure discussed above. The aggregate of such counterparties' exposure was $279 million as of September 30, 2015. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, NRG does not anticipate a material impact on the Company's financial position or results of operations from nonperformance by any of NRG's counterparties.

Counterparty credit exposure described above excludes credit risk exposure under certain long term agreements, including California tolling agreements, Gulf Coast load obligations, wind and solar PPAs, and a coal supply agreement. As external sources or observable market quotes are not available to estimate such exposure, the Company estimates its credit exposure for these contracts based on various techniques including, but not limited to, internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics. Based on these valuation techniques, as of September 30, 2015, aggregate credit risk exposure managed by NRG to these counterparties was approximately $4.2 billion, including $2.9 billion related to assets of NRG Yield, Inc., for the next five years. This amount excludes potential credit exposures for projects with long-term PPAs that have not reached commercial operations. The majority of these power contracts are with utilities or public power entities with strong credit quality and public utility commission or other regulatory support. However, such regulated utility counterparties can be impacted by changes in government regulations and other technology and market factors, which NRG is unable to predict. In the case of the coal supply agreement, NRG holds a lien against the underlying asset, which significantly reduces the risk of loss.

Retail Customer Credit Risk

NRG is exposed to retail credit risk through the Company's retail electricity providers, which serve commercial, industrial and governmental/institutional customers and the Mass market. Retail credit risk results when a customer fails to pay for products or services rendered. The losses may result from both nonpayment of customer accounts receivable and the loss of in-the-money forward value. NRG manages retail credit risk through the use of established credit policies that include monitoring of the portfolio, and the use of credit mitigation measures such as deposits or prepayment arrangements.

As of September 30, 2015, the Company believes its retail customer credit exposure was diversified across many customers and various industries, as well as government entities.

Note 5 — Nuclear Decommissioning Trust Fund

This footnote should be read in conjunction with the complete description under Note 6, Nuclear Decommissioning Trust Fund, to the Company's 2014 Form 10-K.

NRG's Nuclear Decommissioning Trust Fund assets are comprised of securities classified as available-for-sale and recorded at fair value based on actively quoted market prices. NRG accounts for the Nuclear Decommissioning Trust Fund in accordance with ASC 980, Regulated Operations, because the Company's nuclear decommissioning activities are subject to approval by the PUCT with regulated rates that are designed to recover all decommissioning costs and that can be charged to and collected from the ratepayers per PUCT mandate. Since the Company is in compliance with PUCT rules and regulations regarding decommissioning trusts and the cost of decommissioning is the responsibility of the Texas ratepayers, not NRG, all realized and unrealized gains or losses (including other-than-temporary impairments) related to the Nuclear Decommissioning Trust Fund are recorded to nuclear decommissioning trust liability and are not included in net income or accumulated OCI, consistent with regulatory treatment.

The following table summarizes the aggregate fair values and unrealized gains and losses (including other-than-temporary impairments) for the securities held in the trust funds, as well as information about the contractual maturities of those securities.



	As of September 30, 2015							As of December 31, 2014
(In millions, except otherwise noted)	Fair Value		Unrealized Gains		Unrealized Losses		Weighted-average Maturities (In years)	Fair Value		Unrealized Gains		Unrealized Losses		Weighted-average Maturities (In years)
Cash and cash equivalents	$	4	$	—	$	—	—	$	14	$	—	$	—	—
U.S. government and federal agency obligations	60		2		—		10	47		2		—		11
Federal agency mortgage-backed securities	60		1		—		25	74		2		—		25
Commercial mortgage-backed securities	25		—		1		28	25		—		1		30
Corporate debt securities	83		1		1		10	78		2		1		11
Equity securities	318		185		—		—	344		211		—		—
Foreign government fixed income securities	1		—		—		15	3		1		—		16
Total	$	551	$	189	$	2		$	585	$	218	$	2

The following table summarizes proceeds from sales of available-for-sale securities and the related realized gains and losses from these sales. The cost of securities sold is determined on the specific identification method.



	Nine months ended September 30,
	2015		2014
	(In millions)
Realized gains	$	14	$	15
Realized losses	10		5
Proceeds from sale of securities	499		463

Note 6 — Accounting for Derivative Instruments and Hedging Activities

This footnote should be read in conjunction with the complete description under Note 5, Accounting for Derivative Instruments and Hedging Activities, to the Company's 2014 Form 10-K.

Energy-Related Commodities

As of September 30, 2015, NRG had energy-related derivative instruments extending through 2024. The Company voluntarily de-designated all remaining commodity cash flow hedges as of January 1, 2014, and prospectively marked these derivatives to market through the income statement.

Interest Rate Swaps

NRG is exposed to changes in interest rates through the Company's issuance of variable rate debt. In order to manage the Company's interest rate risk, NRG enters into interest rate swap agreements. As of September 30, 2015, the Company had interest rate derivative instruments on non-recourse debt extending through 2032, most of which are designated as cash flow hedges.

Volumetric Underlying Derivative Transactions

The following table summarizes the net notional volume buy/(sell) of NRG's open derivative transactions broken out by category, excluding those derivatives that qualified for the NPNS exception, as of September 30, 2015, and December 31, 2014. Option contracts are reflected using delta volume. Delta volume equals the notional volume of an option adjusted for the probability that the option will be in-the-money at its expiration date.



		Total Volume
		September 30, 2015			December 31, 2014
Category	Units	(In millions)
Emissions	Short Ton	6			2
Coal	Short Ton	34			57
Natural Gas	MMBtu	82			(58		)
Oil	Barrel	1			1
Power	MWh	(67		)	(56		)
Capacity	MW/Day	(1		)	—
Interest	Dollars	$	2,394		$	3,440
Equity	Shares	2			2

The increase in the natural gas position was primarily the result of additional retail hedges, as well as settlement of generation hedge positions. The decrease in the interest rate position was primarily the result of settling the Alta X and Alta XI interest rate swaps in connection with the repayment of the project-level debt, as described in Note 8, Debt and Capital Leases.

Fair Value of Derivative Instruments

The following table summarizes the fair value within the derivative instrument valuation on the balance sheets:



	Fair Value
	Derivative Assets				Derivative Liabilities
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
	(In millions)
Derivatives designated as cash flow hedges:
Interest rate contracts current	$	—	$	—	$	45	$	55
Interest rate contracts long-term	—		2		98		74
Total derivatives designated as cash flow hedges	—		2		143		129
Derivatives not designated as cash flow hedges:
Interest rate contracts current	—		—		6		8
Interest rate contracts long-term	—		—		17		28
Commodity contracts current	1,580		2,425		1,365		1,991
Commodity contracts long-term	522		477		504		336
Equity contracts long-term	—		1		—		—
Total derivatives not designated as cash flow hedges	2,102		2,903		1,892		2,363
Total derivatives	$	2,102	$	2,905	$	2,035	$	2,492

The Company has elected to present derivative assets and liabilities on the balance sheet on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. In addition, collateral received or paid on the Company's derivative assets or liabilities are recorded on a separate line item on the balance sheet. The following table summarizes the offsetting of derivatives by counterparty master agreement level and collateral received or paid:



	Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets / Liabilities			Derivative Instruments			Cash Collateral (Held) / Posted			Net Amount
As of September 30, 2015	(In millions)
Commodity contracts:
Derivative assets	$	2,102		$	(1,544	)	$	(71	)	$	487
Derivative liabilities	(1,869		)	1,544			112			(213		)
Total commodity contracts	233			—			41			274
Interest rate contracts:
Derivative assets	—			—			—			—
Derivative liabilities	(166		)	—			—			(166		)
Total interest rate contracts	(166		)	—			—			(166		)
Total derivative instruments	$	67		$	—		$	41		$	108



	Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets / Liabilities			Derivative Instruments			Cash Collateral (Held) / Posted			Net Amount
As of December 31, 2014	(In millions)
Commodity contracts:
Derivative assets	$	2,902		$	(2,155	)	$	(72	)	$	675
Derivative liabilities	(2,327		)	2,155			27			(145		)
Total commodity contracts	575			—			(45		)	530
Interest rate contracts:
Derivative assets	2			(2		)	—			—
Derivative liabilities	(165		)	2			—			(163		)
Total interest rate contracts	(163		)	—			—			(163		)
Equity contracts:
Derivative assets	1			—			—			1
Total derivative instruments	$	413		$	—		$	(45	)	$	368

Accumulated Other Comprehensive Loss

The following table summarizes the effects of ASC 815 on the Company's accumulated OCI balance attributable to cash flow hedge derivatives, net of tax:



	Three months ended September 30, 2015									Nine months ended September 30, 2015
	Energy Commodities			Interest Rate			Total			Energy Commodities			Interest Rate			Total
	(In millions)
Accumulated OCI beginning balance	$	(1	)	$	(62	)	$	(63	)	$	(1	)	$	(67	)	$	(68	)
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts	1			3			4			1			7			8
Mark-to-market of cash flow hedge accounting contracts	—			(33		)	(33		)	—			(32		)	(32		)
Accumulated OCI ending balance, net of $54 tax	$	—		$	(92	)	$	(92	)	$	—		$	(92	)	$	(92	)
Losses expected to be realized from OCI during the next 12 months, net of $7 tax	$	—		$	(13	)	$	(13	)	$	—		$	(13	)	$	(13	)



	Three months ended September 30, 2014									Nine months ended September 30, 2014
	Energy Commodities			Interest Rate			Total			Energy Commodities			Interest Rate			Total
	(In millions)
Accumulated OCI beginning balance	$	(1	)	$	(50	)	$	(51	)	$	(1	)	$	(22	)	$	(23	)
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts	—			11			11			—			3			3
Mark-to-market of cash flow hedge accounting contracts	—			(7		)	(7		)	—			(27		)	(27		)
Accumulated OCI ending balance, net of $25 tax	$	(1	)	$	(46	)	$	(47	)	$	(1	)	$	(46	)	$	(47	)

Amounts reclassified from accumulated OCI into income and amounts recognized in income from the ineffective portion of cash flow hedges are recorded to operating revenue for commodity contracts and interest expense for interest rate contracts. There was no ineffectiveness for the three and nine months ended September 30, 2015, and 2014.

Impact of Derivative Instruments on the Statements of Operations

Unrealized gains and losses associated with changes in the fair value of derivative instruments not accounted for as cash flow hedges and ineffectiveness of hedge derivatives are reflected in current period earnings.

The following table summarizes the pre-tax effects of economic hedges that have not been designated as cash flow hedges, ineffectiveness on cash flow hedges and trading activity on the Company's statement of operations. The effect of energy commodity contracts is included within operating revenues and cost of operations and the effect of interest rate contracts is included in interest expense.



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Unrealized mark-to-market results	(In millions)
Reversal of previously recognized unrealized gains on settled positions related to economic hedges	$	(29	)	$	(1	)	$	(179	)	$	(3	)
Reversal of acquired gain positions related to economic hedges	(33		)	(87		)	(83		)	(249		)
Net unrealized gains/(losses) on open positions related to economic hedges	55			162			(26		)	(61		)
Total unrealized mark-to-market (losses)/gains for economic hedging activities	(7		)	74			(288		)	(313		)
Reversal of previously recognized unrealized losses/(gains) on settled positions related to trading activity	2			(1		)	(34		)	4
Reversal of acquired gain positions related to trading activity	(1		)	(8		)	(13		)	(28		)
Net unrealized (losses)/gains on open positions related to trading activity	(2		)	15			—			45
Total unrealized mark-to-market (losses)/gains for trading activity	(1		)	6			(47		)	21
Total unrealized (losses)/gains	$	(8	)	$	80		$	(335	)	$	(292	)



	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
	(In millions)
Unrealized gains/(losses) included in operating revenues	$	34		$	159		$	(212	)	$	(205	)
Unrealized losses included in cost of operations	(42		)	(79		)	(123		)	(87		)
Total impact to statement of operations — energy commodities	$	(8	)	$	80		$	(335	)	$	(292	)
Total impact to statement of operations — interest rate contracts	$	(9	)	$	1		$	12		$	(6	)

The reversals of acquired gain or loss positions were valued based upon the forward prices on the acquisition date. The roll-off amounts were offset by realized gains or losses at the settled prices and are reflected in revenue or cost of operations during the same period.

For the nine months ended September 30, 2015, the $26 million unrealized loss from open economic hedge positions was primarily the result of a decrease in value of forward purchases of ERCOT electricity and coal due to decreases in ERCOT power and coal prices partially offset by an increase in value of forward sales of PJM electricity due to decreases in PJM power prices.

For the nine months ended September 30, 2014, the $61 million unrealized loss from open economic hedge positions was primarily the result of a decrease in value of forward sales of electricity due to increases in power prices and ERCOT heat rates.

Credit Risk Related Contingent Features

Certain of the Company's hedging agreements contain provisions that require the Company to post additional collateral if the counterparty determines that there has been deterioration in credit quality, generally termed “adequate assurance” under the agreements, or requires the Company to post additional collateral if there were a one notch downgrade in the Company's credit rating. The collateral required for contracts with adequate assurance clauses that are in a net liability position as of September 30, 2015, was $137 million. The collateral required for contracts with credit rating contingent features as of September 30, 2015, was $41 million. The Company is also a party to certain marginable agreements where NRG has a net liability position, but the counterparty has not called for the collateral due, which was approximately $11 million as of September 30, 2015.

See Note 4, Fair Value of Financial Instruments, to this Form 10-Q for discussion regarding concentration of credit risk.

Note 7 — Impairments

2015 Impairment Losses

Huntley — During the three months ended September 30, 2015, the Company filed a notice with the NYSPSC of its intent to retire Huntley's operating units on March 1, 2016. The Company considered this to be an indicator of impairment and performed an impairment test for these assets under ASC 360, Property, Plant and Equipment. On October 14, 2015, the Company filed a cost-of-service filing at FERC in anticipation that the Huntley operating units would be needed for reliability purposes, proposing a reliability must run service agreement for a four-year period beginning on March 1, 2016. On October 30, 2015, NYISO released the results of its reliability study, indicating that the Huntley operating units are not needed for bulk system reliability, but could be needed for short-term local system reliability in 2016. The Company considered the impact of the reliability study conducted and evaluated the estimated cash flows associated with the facility, including the impact of a potential short-term reliability agreement with NYISO and National Grid. Accordingly, the Company determined that the carrying amount of the assets was higher than the estimated future net cash flows expected to be generated by the assets and that the assets were impaired. The fair value of the Huntley operating units was determined using a weighting of the income approach and the market approach. The income approach utilized estimates of discounted future cash flows, which were Level 3 fair value measurements, and include key inputs such as forecasted contract prices, forecasted operating expenses and discount rates. The Company recorded an impairment loss of $106 million during the quarter ended September 30, 2015.

Dunkirk — The Company had previously signed a ten year agreement in November 2014 with National Grid to add natural gas-burning capabilities at the Dunkirk facility. On August 25, 2015, NRG announced that Dunkirk Unit 2 will be mothballed on January 1, 2016 at the expiration of its reliability support services agreement. The project to add natural gas-burning capabilities has been suspended, pending the outcome of litigation with respect to the gas addition contract and its validity. On October 30, 2015, NYISO released the results of its reliability study, indicating that the Dunkirk facility is not needed for system reliability. In connection with the planned mothball of the facility, the pending litigation and the latest reliability assessment completed by NYISO, the Company evaluated whether the related fixed assets were impaired as of September 30, 2015. The Company determined that the carrying amount of the assets was higher than the estimated future net cash flows expected to be generated by the assets and that the assets were impaired. The fair value of the Dunkirk facility was determined using a weighting of the income approach and the market approach. The income approach utilized estimates of discounted future cash flows, which were Level 3 fair value measurements, and include key inputs such as forecasted contract prices, forecasted operating and capital expenditures and discount rates. The Company recorded an impairment loss of $116 million during the quarter ended September 30, 2015.

Goal Zero — During the three months ended September 30, 2015, the Company agreed to relieve the Goal Zero seller of all known and unknown claims in return for the seller's agreement to forego all contingent consideration. Concurrently, the Company determined that there was an indication of goodwill impairment and performed an impairment test under ASC 350, Intangibles - Goodwill and Other. The carrying amount of the reporting unit was higher than the fair value, and accordingly, the Company recognized an impairment loss of $36 million to reduce the carrying value of the goodwill that was recognized in connection with the acquisition.

2014 Impairment Losses

Osceola — During the three months ended September 30, 2014, the Company determined that it would mothball the 463 MW natural gas-fired Osceola facility in Saint Cloud, Florida. The Company considered this to be an indicator of impairment and performed an impairment test for these assets under ASC 360, Property, Plant and Equipment. The carrying amount of the assets was higher than the future net cash flows expected to be generated by the assets and, as a result, the assets were considered to be impaired. The Company measured the impairment loss as the difference between the carrying amount and the fair value of the assets. Due to the location of the facility, it was determined that the best indicator of fair value is the market value of the combustion turbines. The Company recorded an impairment loss of approximately $60 million during the three months ended September 30, 2014, which represents the excess of the carrying value over the fair market value, and mothballed the facility effective January 1, 2015.

Solar Panels — During the three months ended September 30, 2014, the Company recorded an impairment loss of $10 million to reduce the carrying value of certain solar panels to their approximate fair value.

Note 8 — Debt and Capital Leases

This footnote should be read in conjunction with the complete description under Note 12, Debt and Capital Leases, to the Company's 2014 Form 10-K. Long-term debt and capital leases consisted of the following:



(In millions, except rates)	September 30, 2015		December 31, 2014		September 30, 2015 interest rate % ^(a)

Recourse debt:
Senior notes, due 2018	$	1,130	$	1,130	7.625
Senior notes, due 2020	1,063		1,063		8.250
Senior notes, due 2021	1,128		1,128		7.875
Senior notes, due 2022	1,100		1,100		6.250
Senior notes, due 2023	990		990		6.625
Senior notes, due 2024	1,000		1,000		6.250
Term loan facility, due 2018	1,968		1,983		L+2.00
Tax-exempt bonds	451		406		4.125 - 6.00
Subtotal NRG recourse debt	8,830		8,800
Non-recourse debt:
GenOn senior notes	2,097		2,133		7.875 - 9.875
GenOn Americas Generation senior notes	922		929		8.500 - 9.125
GenOn Other	57		60		various
Subtotal GenOn debt (non-recourse to NRG)	3,076		3,122
NRG Yield Operating LLC Senior Notes, due 2024	500		500		5.375
NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility, due 2019	92		—		L+2.75
NRG Yield, Inc. Convertible Senior Notes, due 2019	329		326		3.500
NRG Yield, Inc. Convertible Senior Notes, due 2020	266		—		3.250
NRG West Holdings LLC, due 2023 (El Segundo Energy Center)	485		506		L+1.625 - L+2.25
NRG Marsh Landing, due 2017 and 2023	431		464		L+1.75 - L+1.875
Alta Wind I - V lease financing arrangements, due 2034 and 2035	1,013		1,036		5.696 - 7.015
Alta Wind X, due 2021	—		300		L+2.00
Alta Wind XI, due 2021	—		191		L+2.00
Walnut Creek, term loans due 2023	363		391		L+1.625
Tapestry Wind LLC, due 2021	184		192		L+1.625
Laredo Ridge Wind LLC, due 2028	105		108		L+1.875
NRG Solar Alpine LLC, due 2022	156		163		L+1.750
NRG Energy Center Minneapolis LLC, due 2017 and 2025	110		121		5.95 - 7.25
NRG Yield - other	475		489		various
Subtotal NRG Yield debt (non-recourse to NRG)	4,509		4,787
Ivanpah Financing, due 2033 and 2038	1,175		1,187		2.285 - 4.256
Agua Caliente Solar LLC, due 2037	894		898		2.395 - 3.633
CVSR High Plains Ranch II LLC, due 2037	794		815		2.339 - 3.775
Viento Funding II LLC, due 2023	193		196		L+2.75
NRG Peaker Finance Co. LLC, bonds due 2019	102		100		L+1.07
Cedro Hill Wind LLC, due 2025	104		111		L+3.125
NRG - other	364		350		various
Subtotal other NRG non-recourse debt	3,626		3,657
Subtotal all non-recourse debt	11,211		11,566
Subtotal long-term debt (including current maturities)	20,041		20,366
Capital leases:
Home Solar capital leases	10		5		various
Chalk Point capital lease, due 2015	1		—		8.190
Other	3		3		various
Subtotal long-term debt and capital leases (including current maturities)	20,055		20,374
Less current maturities	457		474
Total long-term debt and capital leases	$	19,598	$	19,900

(a) As of September 30, 2015, L+ equals 3 month LIBOR plus x%, with the exception of the Viento Funding II term loan, which is 6 month LIBOR plus x%, and the NRG Marsh Landing term loan, Walnut Creek term loan, and NRG Yield Operating LLC Revolving Credit facility, which are 1 month LIBOR plus x%.

NRG Recourse Debt

Senior Notes

Issuance of 2022 Senior Notes

On January 27, 2014, NRG issued $1.1 billion in aggregate principal amount at par of 6.25% senior notes due 2022. The notes are senior unsecured obligations of NRG and are guaranteed by certain of its subsidiaries. Interest is payable semi-annually beginning on July 15, 2014, until the maturity date of July 15, 2022. The proceeds were utilized to redeem the 8.5% and 7.625% 2019 Senior Notes, as discussed below, and to fund the acquisition of EME.

Issuance of 2024 Senior Notes

On April 21, 2014, NRG issued $1.0 billion in aggregate principal amount at par of 6.25% senior notes due 2024. The notes are senior unsecured obligations of NRG and are guaranteed by certain of its subsidiaries. Interest is payable semi-annually beginning on November 1, 2014, until the maturity date of November 1, 2024. A portion of the cash proceeds were used to redeem all remaining of its 7.625% 2019 Senior Notes, as discussed below, and the rest of the proceeds were used to redeem all remaining $225 million of its 8.5% 2019 Senior Notes in September 2014.

Redemptions of 8.5% and 7.625% 2019 Senior Notes

On February 10, 2014, the Company redeemed $308 million of its 8.5% 2019 Senior Notes and $91 million of its 7.625% 2019 Senior Notes through a tender offer, at an average early redemption percentage of 106.992% and 105.500%, respectively. A $33 million loss on debt extinguishment of the 8.5% and 7.625% 2019 Senior Notes was recorded during the three months ended March 31, 2014, primarily consisting of the premiums paid on the redemption and the write-off of previously deferred financing costs.

On April 21, 2014, the Company redeemed $74 million of its 8.5% 2019 Senior Notes and $337 million of its 7.625% 2019 Senior Notes through a tender offer and call, at an average early redemption percentage of 105.250% and 104.200%, respectively. A $22 million loss on debt extinguishment of the 8.5% and 7.625% 2019 Senior Notes was recorded during the three months ended June 30, 2014, primarily consisting of the premiums paid on the redemption and the write-off of previously deferred financing costs.

On May 21, 2014, the Company redeemed for cash all of its remaining 7.625% 2019 Senior Notes at an average early redemption percentage of 103.813%. An $18 million loss on debt extinguishment of the 7.625% 2019 Senior Notes was recorded during the three months ended June 30, 2014, primarily consisting of the premiums paid on the redemption and the write-off of previously deferred financing costs.

On September 3, 2014, the Company redeemed for cash all of its remaining 8.5% 2019 Senior Notes at an average early redemption percentage of 104.25%. A $13 million loss on debt extinguishment of the 8.5% 2019 Senior Notes was recorded during the three months ended September 30, 2014, primarily consisting of the premiums paid on the redemption and the write-off of previously deferred financing costs.

NRG Non-Recourse Debt

The Company has non-recourse debt that is secured by acquired or developed projects that are held in several of its subsidiaries. In the event of a bankruptcy, receivership, liquidation or similar event involving a subsidiary, the assets of such subsidiary would be used to satisfy claims of creditors of the subsidiary, including liabilities under the non-recourse debt associated with such subsidiaries, rather than the creditors of NRG. As described in Note 3, Business Acquisitions and Dispositions, through the Company's acquisitions of EME on April 1, 2014 and Alta Wind on August 12, 2014, the Company acquired approximately $1.2 billion and $1.6 billion, respectively, of non-recourse debt.

Alta Wind X and Alta Wind XI due 2021

On June 30, 2015, the Company entered into a tax equity financing arrangement through which Yield Operating, a subsidiary of NRG Yield, Inc., received $119 million in net proceeds, as described in Note 2, Summary of Significant Accounting Policies. These proceeds, as well as proceeds obtained from the June 29, 2015, NRG Yield, Inc. common stock issuance and the 2020 Convertible Notes issuance, were utilized to repay all of the outstanding project indebtedness associated with Alta Wind X and Alta Wind XI facilities. The Company also settled interest rate swaps associated with the project level debt for Alta Wind X and Alta Wind XI and incurred a fee of $17 million.

NRG Yield, Inc. Convertible Notes

On June 29, 2015, NRG Yield, Inc. closed on its offering of $287.5 million aggregate principal amount of 3.25% Convertible Senior Notes due 2020, or the 2020 Convertible Notes. The 2020 Convertible Notes are convertible, under certain circumstances, into NRG Yield, Inc. Class C common stock, cash or a combination thereof at an initial conversion price of $27.50 per Class C common share, which is equivalent to an initial conversion rate of approximately 36.3636 shares of Class C common stock per $1,000 principal amount of notes. Interest on the 2020 Convertible Notes is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2015. The 2020 Convertible Notes mature on June 1, 2020, unless earlier repurchased or converted in accordance with their terms. Prior to the close of business on the business day immediately preceding December 1, 2019, the 2020 Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The 2020 Convertible Notes are accounted for in accordance with ASC 470-20. Under ASC 470-20, issuers of convertible debt instruments that may be settled in cash upon conversion, including partial cash settlement, are required to separately account for the liability (debt) and equity (conversion option) components. The equity component, the $23 million conversion option value, was recorded to NRG's noncontrolling interest for NRG Yield, Inc. with the offset to debt discount. The debt discount will be amortized to interest expense over the term of the notes.

During the first quarter of 2014, NRG Yield, Inc. closed on its offering of $345 million aggregate principal amount of 3.50% Convertible Senior Notes due 2019, or the 2019 Convertible Notes. The 2019 Convertible Notes were convertible, under certain circumstances, into NRG Yield, Inc. Class A common stock, cash or a combination thereof at an initial conversion rate of approximately 21.4822 shares of Class A common stock per $1,000 principal amount of 2019 Convertible Notes. Effective May 15, 2015, the conversion rate was adjusted to 42.9644 shares of Class A common stock per $1,000 principal amount of 2019 Convertible Notes in accordance with the terms of the related indenture. Interest on the 2019 Convertible Notes is payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2014. The 2019 Convertible Notes mature on February 1, 2019, unless earlier repurchased or converted in accordance with their terms. Prior to the close of business on the business day immediately preceding August 1, 2018, the 2019 Convertible Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The notes are accounted for in accordance with ASC 470-20. The equity component, the $23 million conversion option value, was recorded to NRG's noncontrolling interest for NRG Yield, Inc. with the offset to debt discount. The debt discount will be amortized to interest expense over the term of the notes.

NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility

On June 26, 2015, the Company amended the revolving credit facility to, among other things, increase the availability from $450 million to $495 million. As of September 30, 2015, $92 million of borrowings and $25 million of letters of credit were outstanding.

NRG West Holdings LLC

On May 29, 2015, NRG West Holdings LLC amended its financing agreement to increase borrowings under the Tranche A facility by $5 million and to reduce the related interest rate to LIBOR plus an applicable margin of 1.625% from May 29, 2015, to August 31, 2017, LIBOR plus an applicable margin of 1.75% from September 1, 2017, to August 31, 2020, and LIBOR plus 1.875% from September 1, 2020, through the maturity date; and to reduce Tranche B loan interest rate to LIBOR plus an applicable margin of 2.25% from May 29, 2015, to August 31, 2017, LIBOR plus 2.375% from September 1, 2017, to August 31, 2020, and LIBOR plus an applicable margin of 2.50% from September 1, 2020, through the maturity date and to reduce the working capital facility by $9 million. The proceeds of the increased borrowing were used to pay costs associated with the refinancing. Further, the amendment resulted in a $7 million loss on debt extinguishment.

Peakers

On February 21, 2014, NRG Peaker Finance Company LLC elected to redeem approximately $30 million of the outstanding bonds at a redemption price equal to the principal amount plus a redemption premium, accrued and unpaid interest, swap breakage, and other fees, totaling approximately $35 million in connection with the removal of Bayou Cove Peaking Power LLC from the Peaker financing collateral package, which also involved limited commitments for certain repairs on other assets that were funded concurrently with the December 10, 2013, debt service payment. On March 3, 2014, Bayou Cove Peaking Power LLC sold Bayou Cove Unit 1, which the Company continues to manage and operate.

High Lonesome Mesa Facility

Prior to the Company's acquisition of EME, an intercompany tax credit agreement related to the High Lonesome Mesa facility was terminated. The termination resulted in an event of default under the project financing arrangement. The Company received additional default notices for various items. As a result of the default, the balance under the project financing arrangement is classified as current. On November 3, 2015, the lender sent a notice of acceleration of such amount and indicated that it will accept the Company's interest in the assets in lieu of repayment. The Company is currently evaluating its options with respect to this notification.

Note 9 — Variable Interest Entities, or VIEs

Entities that are not Consolidated

NRG has interests in entities that are considered VIEs under ASC 810, Consolidation, but NRG is not considered the primary beneficiary. NRG accounts for its interests in these entities under the equity method of accounting.

GenConn Energy LLC — Through its consolidated subsidiary, Yield Operating, the Company owns a 50% interest in GCE Holding LLC, the owner of GenConn, which owns and operates </