NRG ENERGY, INC. - Quarter Report: 2015 March (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: March 31, 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 April 30, 2015, there were 333,494,559 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	8
ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES	8
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	47
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	74
ITEM 4 — CONTROLS AND PROCEDURES	76
PART II — OTHER INFORMATION	77
ITEM 1 — LEGAL PROCEEDINGS	77
ITEM 1A — RISK FACTORS	77
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	77
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES	77
ITEM 4 — MINE SAFETY DISCLOSURES	77
ITEM 5 — OTHER INFORMATION	77
ITEM 6 — EXHIBITS	78
SIGNATURES	79

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 rules 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 partnering 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
Ameren		AmerenEnergy Resources Generating Company
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
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
CAFD		Cash Available For Distribution
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
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
CO₂		Carbon Dioxide
COD		Commercial Operations Date
ComEd		Commonwealth Edison
CPS		Combined Pollutant Standard
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
CWA		Clean Water Act
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.
EME		Edison Mission Energy
Energy Plus Holdings		Energy Plus Holdings LLC and Energy Plus Natural Gas LLC
EPA		U.S. Environmental Protection Agency
EPSA		Electric Power Supply Association
ERCOT		Electric Reliability Council of Texas, the Independent System Operator and the regional reliability coordinator of the various electricity systems within Texas
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
FERC		Federal Energy Regulatory Commission



FPA		Federal Power Act
GEM		GenOn Energy Management, LLC
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 two 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
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
IL CPS		Illinois Combined Pollutant Standard
IPPNY		Independent Power Producers of New York
ISO		Independent System Operator
JX Nippon		JX Nippon Oil Exploration (EOR) Limited
Kansas South		NRG Solar Kansas South LLC
kV		Kilovolts
kWh		Kilowatt-hours
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
Marsh Landing		NRG Marsh Landing, LLC (formerly known as GenOn Marsh Landing, LLC)
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
NERC		North American Electric Reliability Corporation
Net Exposure		Counterparty credit exposure to NRG, net of collateral
Net Generation		The net amount of electricity produced, expressed in kWh or MWhs, that is the total amount of electricity generated (gross) minus the amount of electricity used during generation
NEXI		Nippon Export and Investment Insurance
NOL		Net Operating Loss



NOV		Notice of Violation
NO_x		Nitrogen Oxide
NPNS		Normal Purchase Normal Sale
NRC		U.S. Nuclear Regulatory Commission
NRG Yield		Reporting segment that includes the projects held by NRG Yield, Inc.
NRG Yield, Inc.		NRG Yield, Inc., the owner of 44.7% of NRG Yield LLC with a controlling interest, and issuer of publicly held shares of Class A common stock
NSPS		New Source Performance Standards
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
PADEP		Pennsylvania Department of Environmental Protection
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
PPA		Power Purchase Agreement
PPTA		Power Purchase Tolling Agreement
PSD		Prevention of Significant Deterioration
PUCT		Public Utility Commission of Texas
RCRA		Resource Conservation and Recovery Act of 1976
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 (formerly known as GenOn REMA, LLC)
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		Right of First Offer Agreement by and between NRG Energy, Inc. and NRG Yield, Inc.
RSSA		Reliability Support Services Agreement
RTO		Regional Transmission Organization
Sabine		Sabine Cogen, L.P.
SDG&E		San Diego Gas & Electric
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
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
Term Loan Facility		The Company's $2.0 billion term loan facility due 2018, a component of the Senior Credit Facility
Thermal Business		NRG Yield’s thermal business, which consists of thermal infrastructure assets that provide steam, hot water and/or chilled water, and in some instances electricity, to commercial businesses, universities, hospitals and governmental units
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 March 31,
(In millions, except for per share amounts)	2015			2014
Operating Revenues
Total operating revenues	$	3,826		$	3,486
Operating Costs and Expenses
Cost of operations	3,062			2,737
Depreciation and amortization	395			335
Selling, general and administrative	263			222
Acquisition-related transaction and integration costs	10			12
Development activity expenses	34			19
Total operating costs and expenses	3,764			3,325
Gain on postretirement benefits curtailment and sale of assets	14			19
Operating Income	76			180
Other Income/(Expense)
Equity in (loss)/earnings of unconsolidated affiliates	(3		)	7
Other income, net	19			11
Loss on debt extinguishment	—			(41		)
Interest expense	(301		)	(255		)
Total other expense	(285		)	(278		)
Loss Before Income Taxes	(209		)	(98		)
Income tax benefit	(73		)	(31		)
Net Loss	(136		)	(67		)
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interests	(16		)	(11		)
Net Loss Attributable to NRG Energy, Inc.	(120		)	(56		)
Dividends for preferred shares	5			2
Loss Available for Common Stockholders	$	(125	)	$	(58	)
Loss per Share Attributable to NRG Energy, Inc. Common Stockholders
Weighted average number of common shares outstanding — basic and diluted	336			324
Loss per Weighted Average Common Share — Basic and Diluted	$	(0.37	)	$	(0.18	)
Dividends Per Common Share	$	0.15		$	0.12

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)



	Three months ended March 31,
	2015			2014
	(In millions)
Net Loss	$	(136	)	$	(67	)
Other Comprehensive (Loss)/Income, net of tax
Unrealized loss on derivatives, net of income tax benefit of $6 and $3	(12		)	(9		)
Foreign currency translation adjustments, net of income tax (benefit)/expense of $(7) and $2	(11		)	6
Available-for-sale securities, net of income tax (benefit)/expense of $(4) and $2	(1		)	6
Defined benefit plans, net of tax expense of $4 and $0	7			2
Other comprehensive (loss)/income	(17		)	5
Comprehensive Loss	(153		)	(62		)
Less: Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interests	(29		)	(15		)
Comprehensive Loss Attributable to NRG Energy, Inc.	(124		)	(47		)
Dividends for preferred shares	5			2
Comprehensive Loss Available for Common Stockholders	$	(129	)	$	(49	)

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS



	March 31, 2015			December 31, 2014
(In millions, except shares)	(unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	2,164		$	2,116
Funds deposited by counterparties	68			72
Restricted cash	443			457
Accounts receivable — trade, less allowance for doubtful accounts of $21 and $23	1,179			1,322
Inventory	1,109			1,247
Derivative instruments	2,029			2,425
Cash collateral paid in support of energy risk management activities	400			187
Deferred income taxes	188			174
Renewable energy grant receivable, net	68			135
Prepayments and other current assets	474			447
Total current assets	8,122			8,582
Property, plant and equipment, net of accumulated depreciation of $8,261 and $7,890	22,276			22,367
Other Assets
Equity investments in affiliates	772			771
Notes receivable, less current portion	67			72
Goodwill	2,520			2,574
Intangible assets, net of accumulated amortization of $1,511 and $1,402	2,491			2,567
Nuclear decommissioning trust fund	586			585
Derivative instruments	591			480
Deferred income taxes	1,484			1,406
Non-current assets held-for-sale	17			17
Other non-current assets	1,404			1,244
Total other assets	9,932			9,716
Total Assets	$	40,330		$	40,665
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and capital leases	$	465		$	474
Accounts payable	1,045			1,060
Derivative instruments	1,884			2,054
Cash collateral received in support of energy risk management activities	68			72
Accrued expenses and other current liabilities	1,047			1,199
Total current liabilities	4,509			4,859
Other Liabilities
Long-term debt and capital leases	20,050			19,900
Nuclear decommissioning reserve	314			310
Nuclear decommissioning trust liability	328			333
Deferred income taxes	20			21
Derivative instruments	650			438
Out-of-market contracts, net of accumulated amortization of $585 and $562	1,221			1,244
Other non-current liabilities	1,549			1,574
Total non-current liabilities	24,132			23,820
Total Liabilities	28,641			28,679
2.822% convertible perpetual preferred stock	293			291
Redeemable noncontrolling interest in subsidiaries	19			19
Commitments and Contingencies
Stockholders’ Equity
Common stock	4			4
Additional paid-in capital	8,362			8,327
Retained earnings	3,413			3,588
Less treasury stock, at cost — 81,865,411 and 78,843,552 shares, respectively	(2,059		)	(1,983		)
Accumulated other comprehensive loss	(191		)	(174		)
Noncontrolling interest	1,848			1,914
Total Stockholders’ Equity	11,377			11,676
Total Liabilities and Stockholders’ Equity	$	40,330		$	40,665

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Three months ended March 31,
	2015			2014
	(In millions)
Cash Flows from Operating Activities
Net loss	$	(136	)	$	(67	)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Distributions and equity in earnings of unconsolidated affiliates	32			(2		)
Depreciation and amortization	395			335
Provision for bad debts	15			21
Amortization of nuclear fuel	13			11
Amortization of financing costs and debt discount/premiums	(4		)	(5		)
Adjustment for debt extinguishment	—			19
Amortization of intangibles and out-of-market contracts	19			13
Amortization of unearned equity compensation	11			8
Changes in deferred income taxes and liability for uncertain tax benefits	(83		)	(111		)
Changes in nuclear decommissioning trust liability	(3		)	5
Changes in derivative instruments	261			525
Changes in collateral deposits supporting energy risk management activities	(213		)	(407		)
Gain on postretirement benefits curtailment and sale of assets	(14		)	(19		)
Cash used by changes in other working capital	(33		)	65
Net Cash Provided by Operating Activities	260			391
Cash Flows from Investing Activities
Acquisitions of businesses, net of cash acquired	(1		)	(218		)
Capital expenditures	(252		)	(237		)
(Increase)/decrease in restricted cash, net	(11		)	3
Decrease in restricted cash to support equity requirements for U.S. DOE funded projects	25			56
Decrease in notes receivable	5			1
Investments in nuclear decommissioning trust fund securities	(193		)	(188		)
Proceeds from the sale of nuclear decommissioning trust fund securities	196			183
Proceeds from renewable energy grants and state rebates	2			387
Proceeds from sale of assets, net of cash disposed of	—			77
Cash proceeds to fund cash grant bridge loan payment	—			57
Other	(41		)	3
Net Cash (Used)/Provided by Investing Activities	(270		)	124
Cash Flows from Financing Activities
Payment of dividends to common and preferred stockholders	(51		)	(41		)
Payment for treasury stock	(79		)	—
Net receipts from/(payments for) settlement of acquired derivatives that include financing elements	40			(223		)
Proceeds from issuance of long-term debt	248			1,564
Contributions to, net of distributions from, noncontrolling interest in subsidiaries	(25		)	9
Proceeds from issuance of common stock	1			3
Payment of debt issuance costs	—			(23		)
Payments for short and long-term debt	(94		)	(873		)
Net Cash Provided by Financing Activities	40			416
Effect of exchange rate changes on cash and cash equivalents	18			2
Net Increase in Cash and Cash Equivalents	48			933
Cash and Cash Equivalents at Beginning of Period	2,116			2,254
Cash and Cash Equivalents at End of Period	$	2,164		$	3,187

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 is responding to a consumer-driven change to the U.S. energy industry by offering cleaner, smarter and ultimately more portable energy while enabling personal energy choice, building on the strength of one of the nation’s largest and most diverse competitive power generation portfolios. The Company owns and operates approximately 51,000 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.

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 March 31, 2015, and the results of operations, comprehensive income/(loss) and cash flows for the three months ended March 31, 2015, and 2014.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 or cash flows.

Note 2 — Summary of Significant Accounting Policies

Other Cash Flow Information

NRG’s investing activities exclude capital expenditures of $40 million which were accrued and unpaid at March 31, 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	(24		)
Non-cash increase to noncontrolling interest	14
Comprehensive loss attributable to noncontrolling interest	(29		)
Balance as of March 31, 2015	$	1,848

NRG RPV Holdco 1 LLC

In April 2015, NRG and NRG Yield, Inc. announced the formation of a partnership 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 which NRG Yield, Inc. invested $26 million in April 2015; (ii) an in-development, tax equity financed portfolio of between 6,000 to 7,000 leases across at least 10 states representing approximately 48 MW with a lease term of 20 years; and (iii) an in-development tax equity financed portfolio of 5,500 to 6,500 leases representing approximately 42 MW with a lease term of 20 years. As part of the agreement, NRG will periodically monetize its residential leases through equity investments by NRG Yield, Inc. in NRG RPV Holdco 1 LLC. NRG will retain a 5% residual economic interest in the portfolio and act as managing member of the partnership. Allocations of income and cash will be 5% to NRG and 95% to NRG Yield, Inc. over the contracted life of the investments. Once NRG Yield, Inc. reaches its expected return on its investment, which is expected to be achieved consistent with the expiry of the remaining lease term, allocations of income and cash thereafter will be 95% to NRG and 5% to NRG Yield, Inc. NRG also has an option to purchase NRG Yield, Inc.'s interest at fair value after the flip date occurs. 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.

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 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 their 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. During the three months ended March 31, 2015, changes in redeemable noncontrolling interest were immaterial and resulted from contributions from and allocated losses attributable to redeemable noncontrolling interests. As of March 31, 2015 and December 31, 2014, the Company's redeemable noncontrolling interest balance was $19 million.

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 2015-03 — 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. The guidance in ASU No. 2015-03 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 this standard 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. The guidance of ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early adoption is not permitted. 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:

2015 Dispositions

Sale of Assets to NRG Yield, Inc.

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 carrying value of $405 million.

2014 Acquisitions and 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.

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 a term 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 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 initial accounting for the business combination is not complete because the evaluation necessary to assess the fair values of certain net assets acquired is still in process. The provisional amounts are subject to revision until the evaluations are completed to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. The allocation of the purchase price may be modified up to one year from the date of the acquisition as more information is obtained about the fair value of assets acquired and liabilities assumed. 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. The purchase price of $923 million was provisionally 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

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 Oil Exploration (EOR) Limited, 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.

Sale of Assets to NRG Yield, Inc.

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 carrying value of $236 million.

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, as discussed further in Note 15, Environmental Matters.

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 March 31, 2015				As of December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Assets:
Notes receivable^(a)	$	86	$	86	$	91	$	91
Liabilities:
Long-term debt, including current portion	$	20,509	$	20,679	$	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 March 31, 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	24		—		—		24
Other ^(a)	20		—		11		31
Nuclear trust fund investments:
Cash and cash equivalents	5		—		—		5
U.S. government and federal agency obligations	50		3		—		53
Federal agency mortgage-backed securities	—		71		—		71
Commercial mortgage-backed securities	—		24		—		24
Corporate debt securities	—		84		—		84
Equity securities	293		—		54		347
Foreign government fixed income securities	—		2		—		2
Other trust fund investments:
U.S. government and federal agency obligations	1		—		—		1
Derivative assets:
Commodity contracts	998		1,358		264		2,620
Total assets	$	1,391	$	1,542	$	347	$	3,280
Derivative liabilities:
Commodity contracts	$	964	$	1,142	$	230	$	2,336
Interest rate contracts	—		198		—		198
Total liabilities	$	964	$	1,340	$	230	$	2,534

(a) Consists primarily of mutual funds held in a Rabbi Trust for non-qualified deferred compensation plans for certain former employees and a total return swap that does not meet the definition of a derivative.



	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.

There were no transfers during the three months ended March 31, 2015, and 2014 between Levels 1 and 2. The following tables reconcile, for the three months ended March 31, 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 March 31, 2015
(In millions)	Debt Securities		Other		Trust Fund Investments		Derivatives^(a)			Total
Beginning balance	$	18	$	11	$	52	$	80		$	161
Total gains/(losses) — realized/unrealized:
Included in earnings	—		—		—		(55		)	(55		)
Included in nuclear decommissioning obligation	—		—		2		—			2
Purchases	—		—		—		(4		)	(4		)
Transfers into Level 3 ^(b)	—		—		—		15			15
Transfers out of Level 3 ^(b)	—		—		—		(2		)	(2		)
Ending balance as of March 31, 2015	$	18	$	11	$	54	$	34		$	117
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 March 31, 2015	$	—	$	—	$	—	(20		)	$	(20	)


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


(b)	Transfers in/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 March 31, 2014
(In millions)	Debt Securities		Other		Trust Fund Investments		Derivatives^(a)			Total
Beginning balance	$	16	$	10	$	56	$	13		$	95
Total gains/(losses) — realized/unrealized:
Included in earnings	—		1		—		16			17
Included in OCI	2		—		—		—			2
Purchases	—		—		—		(21		)	(21		)
Contracts acquired in Dominion acquisition	—		—		—		3			3
Transfers into Level 3 ^(b)	—		—		—		18			18
Transfers out of Level 3 ^(b)	—		—		—		(6		)	(6		)
Ending balance as of March 31, 2014	$	18	$	11	$	56	$	23		$	108
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 March 31, 2014	—		—		—		19			19


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


(b)	Transfers in/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.

Realized and unrealized gains and losses included in earnings that are related to energy derivatives are recorded in operating revenues and cost of operations.

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 March 31, 2015, contracts valued with prices provided by models and other valuation techniques make up 10% of the total derivative assets and 9% of the total derivative liabilities.

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 March 31, 2015, the credit reserve resulted in a $5 million increase in fair value which is composed of a $3 million gain in OCI and a $2 million gain in operating revenue and cost of operations. As of March 31, 2014, the credit reserve was not a material amount.

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 March 31, 2015, counterparty credit exposure, excluding credit risk exposure under certain long term agreements, was $842 million and NRG held collateral (cash and letters of credit) against those positions of $84 million, resulting in a net exposure of $763 million. Approximately 91% 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	48	%
Utilities, energy merchants, marketers and other	32
ISOs	20
Total as of March 31, 2015	100	%



	Net Exposure ^(a)
Category	(% of Total)
Investment grade	96	%
Non-rated ^(b)	2
Non-investment grade	2
Total as of March 31, 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 $290 million as of March 31, 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 March 31, 2015, aggregate credit risk exposure managed by NRG to these counterparties was approximately $3.3 billion, including $2.3 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 March 31, 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 other comprehensive income, 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 March 31, 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	$	5	$	—	$	—	—	$	14	$	—	$	—	—
U.S. government and federal agency obligations	53		3		—		10	47		2		—		11
Federal agency mortgage-backed securities	71		2		—		24	74		2		—		25
Commercial mortgage-backed securities	24		—		1		30	25		—		1		30
Corporate debt securities	84		2		—		10	78		2		1		11
Equity securities	347		211		—		—	344		211		—		—
Foreign government fixed income securities	2		—		—		15	3		1		—		16
Total	$	586	$	218	$	1		$	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.



	Three months ended March 31,
	2015		2014
	(In millions)
Realized gains	$	6	$	3
Realized losses	2		1
Proceeds from sale of securities	196		183

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 March 31, 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 and fixed rate debt. In order to manage the Company's interest rate risk, NRG enters into interest rate swap agreements. As of March 31, 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 March 31, 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
		March 31, 2015			December 31, 2014
Category	Units	(In millions)
Emissions	Short Ton	4			2
Coal	Short Ton	48			57
Natural Gas	MMBtu	(35		)	(58		)
Oil	Barrel	1			1
Power	MWh	(52		)	(56		)
Capacity	MW/Day	(1		)	—
Interest	Dollars	$	3,399		$	3,440
Equity	Shares	2			2

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
	March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014
	(In millions)
Derivatives designated as cash flow hedges:
Interest rate contracts current	$	—	$	—	$	51	$	55
Interest rate contracts long-term	—		2		97		74
Commodity contracts current	—		—		—		—
Commodity contracts long-term	—		—		—		—
Total derivatives designated as cash flow hedges	—		2		148		129
Derivatives not designated as cash flow hedges:
Interest rate contracts current	—		—		9		8
Interest rate contracts long-term	—		—		41		28
Commodity contracts current	2,029		2,425		1,824		1,991
Commodity contracts long-term	591		477		512		336
Equity contracts long-term	—		1		—		—
Total derivatives not designated as cash flow hedges	2,620		2,903		2,386		2,363
Total derivatives	$	2,620	$	2,905	$	2,534	$	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 March 31, 2015	(In millions)
Commodity contracts:
Derivative assets	$	2,620		$	(2,092	)	$	(64	)	$	464
Derivative liabilities	(2,336		)	2,092			55			(189		)
Total commodity contracts	284			—			(9		)	275
Interest rate contracts:
Derivative liabilities	(198		)	—			—			(198		)
Total derivative instruments	$	86		$	—		$	(9	)	$	77



	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 March 31, 2015
	Energy Commodities			Interest Rate			Total
	(In millions)
Accumulated OCI beginning balance	$	(1	)	$	(67	)	$	(68	)
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts	—			2			2
Mark-to-market of cash flow hedge accounting contracts	—			(18		)	(18		)
Accumulated OCI ending balance, net of $50 tax	$	(1	)	$	(83	)	$	(84	)
Losses expected to be realized from OCI during the next 12 months, net of $7 tax	$	(1	)	$	(13	)	$	(14	)



	Three months ended March 31, 2014
	Energy Commodities			Interest Rate			Total
	(In millions)
Accumulated OCI beginning balance	$	(1	)	$	(22	)	$	(23	)
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts	—			(1		)	(1		)
Mark-to-market of cash flow hedge accounting contracts	—			(8		)	(8		)
Accumulated OCI ending balance, net of $17 tax	$	(1	)	$	(31	)	$	(32	)
Losses expected to be realized from OCI during the next 12 months, net of $7 tax	$	(1	)	$	(13	)	$	(14	)

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 months ended March 31, 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 commodity hedges is included within operating revenues and cost of operations and the effect of interest rate hedges is included in interest expense.



	Three months ended March 31,
	2015			2014
Unrealized mark-to-market results	(In millions)
Reversal of previously recognized unrealized (gains)/losses on settled positions related to economic hedges	$	(114	)	$	3
Reversal of acquired gain positions related to economic hedges	(26		)	(78		)
Net unrealized losses on open positions related to economic hedges	(138		)	(193		)
Total unrealized mark-to-market losses for economic hedging activities	(278		)	(268		)
Reversal of previously recognized unrealized gains on settled positions related to trading activity	(21		)	—
Reversal of acquired gain positions related to trading activity	(7		)	(1		)
Net unrealized gains on open positions related to trading activity	6			16
Total unrealized mark-to-market (losses)/gains for trading activity	(22		)	15
Total unrealized losses	$	(300	)	$	(253	)



	Three months ended March 31,
	2015			2014
	(In millions)
Unrealized losses included in operating revenues	$	(109	)	$	(316	)
Unrealized (losses)/gains included in cost of operations	(191		)	63
Total impact to statement of operations — energy commodities	$	(300	)	$	(253	)
Total impact to statement of operations — interest rate contracts	$	(14	)	$	(4	)

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 three months ended March 31, 2015, the $138 million unrealized loss from open economic hedge positions was primarily the result of a decrease in value of forward purchases of coal due to decreases in coal prices.

For the three months ended March 31, 2014, the $193 million unrealized loss from open economic hedge positions was primarily the result of a decrease in value of forward sales of natural gas and electricity due to an increase in forward natural gas and power prices.

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 March 31, 2015, was $131 million. The collateral required for contracts with credit rating contingent features as of March 31, 2015, was $39 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 $8 million as of March 31, 2015.

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

Note 7 — 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)	March 31, 2015		December 31, 2014		Current 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	1,978		1,983		L+2.00
Tax-exempt bonds	434		406		4.125 - 6.00
Subtotal NRG recourse debt	8,823		8,800
Non-recourse debt:
GenOn senior notes	2,121		2,133		7.875 - 9.875
GenOn Americas Generation senior notes	926		929		8.500 - 9.125
GenOn Other	60		60		various
Subtotal GenOn debt (non-recourse to NRG)	3,107		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	195		—		L+2.25
NRG Yield, Inc. Convertible Senior Notes, due 2019	327		326		3.500
NRG West Holdings LLC, due 2023 (El Segundo Energy Center)	484		506		L+2.25 - L+2.875
NRG Marsh Landing, due 2017 and 2023	457		464		L+1.75 - L+1.875
Alta Wind I - V lease financing arrangements, due 2034 and 2035	1,036		1,036		5.696-7.015
Alta Wind X, due 2021	300		300		L+2.00
Alta Wind XI, due 2021	191		191		L+2.00
Walnut Creek, term loans due 2023	384		391		L+1.625
Tapestry Wind LLC, due 2021	188		192		L+1.625
Laredo Ridge Wind LLC, due 2026	107		108		L+1.875
NRG Solar Alpine LLC, due 2022	162		163		L+1.750
NRG Energy Center Minneapolis LLC, due 2017 and 2025	119		121		5.95 - 7.25
NRG Yield - other	487		489		various
Subtotal NRG Yield debt (non-recourse to NRG)	4,937		4,787
Ivanpah Financing, due 2033 and 2038	1,179		1,187		2.285 - 4.256
Agua Caliente Solar LLC, due 2037	907		898		2.395 - 3.633
CVSR High Plains Ranch II LLC, due 2037	802		815		2.339 - 3.775
Viento Funding II, Inc., due 2023	196		196		L+2.75
NRG Peaker Finance Co. LLC, bonds due 2019	101		100		L+1.07
Cedro Hill Wind LLC, due 2025	108		111		L+3.125
NRG - other	349		350		various
Subtotal NRG non-recourse debt	3,642		3,657
Subtotal non-recourse debt (including GenOn and NRG Yield)	11,686		11,566
Subtotal long-term debt (including current maturities)	20,509		20,366
Capital leases:
Chalk Point capital lease, due 2015	3		5		8.190
Other	3		3		various
Subtotal long-term debt and capital leases (including current maturities)	20,515		20,374
Less current maturities	465		474
Total long-term debt and capital leases	$	20,050	$	19,900

(a) As of March 31, 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 West Holdings LLC term loan, 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 described below, and to fund the acquisition of EME.

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.

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 of non-recourse debt respectively.

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. As a result, the balance under the project financing arrangement is classified as current and the lender can request repayment at any time. The facility is secured by the assets of High Lonesome Mesa and is non-recourse to NRG.

NRG Yield, Inc. Convertible 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 NRG Yield Convertible Notes. The NRG Yield Convertible Notes are convertible, under certain circumstances, into NRG Yield, Inc. Class A common stock, cash or a combination thereof at an initial conversion price of $46.55 per Class A common share, which is equivalent to an initial conversion rate of approximately 21.4822 shares of Class A common stock per $1,000 principal amount of NRG Yield Convertible Notes. Interest on the NRG Yield Convertible Notes is payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2014. The NRG Yield 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 NRG Yield 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. 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.

NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility

NRG Yield LLC and Yield Operating entered into a senior secured revolving credit facility, which provides a revolving line of credit of $60 million. On April 25, 2014, NRG Yield LLC and Yield Operating amended the revolving credit facility to increase the available line of credit to $450 million and extend its maturity to April 2019. The revolving credit facility can be used for cash or for the issuance of letters of credit. On January 2, 2015, NRG Yield borrowed $210 million under the revolving credit facility to fund the acquisition of Walnut Creek, Laredo Ridge and the Tapestry projects. On February 2, 2015, NRG Yield made an optional repayment of $15 million of principal. In addition, there were $36 million of letters of credit issued under the revolving credit facility as of March 31, 2015.

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.

Note 8 — 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 GenConn, which owns and operates two 190 MW peaking generation facilities in Connecticut at NRG's Devon and Middletown sites. NRG's maximum exposure to loss is limited to its equity investment, which was $112 million as of March 31, 2015.

Sherbino I Wind Farm LLC — NRG owns a 50% interest in Sherbino, a joint venture with BP Wind Energy North America Inc. NRG's maximum exposure to loss is limited to its equity investment, which was $81 million as of March 31, 2015.

Entities that are Consolidated

Capistrano Wind Partners — Through the acquisition of EME, the Company has a controlling financial interest in Capistrano Wind Partners, whose Class B preferred equity interest are held by outside investors. Capistrano Wind Partners holds 100% ownership in five projects generating 411 MW of wind capacity. The five wind projects include Cedro Hill located in Texas, Mountain Wind Power I, located in Wyoming, Mountain Wind Power II located in Wyoming, Crofton Bluffs located in Nebraska, and Broken Bow I located in Nebraska.

Under the terms of the Capistrano Wind Partners formation documents, the holders of the Class B preferred equity interests receive 100% of the cash available for distribution, up to a scheduled amount to target a certain return and thereafter cash distributions are shared. The Company retains indirect beneficial ownership of the wind projects and retains responsibilities for managing the operations of Capistrano Wind Partners. Accordingly, the Company consolidates these projects. The Company does not consolidate Capistrano Wind Partners for tax purposes.

The summarized financial information for Capistrano Wind Holdings consisted of the following:



(In millions)	March 31, 2015
Current assets	$	28
Net property, plant and equipment	578
Other long-term assets	137
Total assets	743
Current liabilities	36
Long-term debt	180
Other long-term liabilities	154
Total liabilities	370
Noncontrolling interests	348
Net assets less noncontrolling interests	$	25

Note 9 — Changes in Capital Structure

As of March 31, 2015, and December 31, 2014, the Company had 500,000,000 shares of common stock authorized. The following table reflects the changes in NRG's common stock issued and outstanding:



	Issued	Treasury		Outstanding
Balance as of December 31, 2014	415,506,176	(78,843,552	)	336,662,624
Shares issued under LTIPs	1,176,486	—		1,176,486
Shares issued under ESPP	—	124,625		124,625
Shares repurchased under Capital Allocation Program	—	(3,146,484	)	(3,146,484	)
Balance as of March 31, 2015	416,682,662	(81,865,411	)	334,817,251

Employee Stock Purchase Plan

As of March 31, 2015, there were 1,435,427 shares of treasury stock available for issuance under the ESPP.

NRG Common Stock Dividends

The following table lists the dividends paid during the three months ended March 31, 2015:



	First Quarter 2015
Dividends per Common Share	$	0.145

On April 20, 2015, NRG declared a quarterly dividend on the Company's common stock of $0.145 per share, payable May 15, 2015, to stockholders of record as of May 1, 2015, representing $0.58 on an annualized basis.

The Company's common stock dividends are subject to available capital, market conditions, and compliance with associated laws, regulations and other contractual obligations.

2015 Capital Allocation Program

In December 2014, the Company was authorized to repurchase $100 million of its common stock under the 2015 Capital Allocation Program. In March 2015, the Company was authorized to repurchase an additional $100 million of its common stock under the 2015 Capital Allocation Program, for a total share repurchase of $200 million. In addition, in the second quarter of 2015, the Company's board of directors authorized the repurchase of an additional $81 million of the Company's common stock.

The following table reflects the repurchases made under the 2015 Capital Allocation Program:



	Total number of shares purchased	Average price paid per share ^(a)		Amounts paid for shares purchased (in millions) ^(a)
2015 Capital Allocation Program
December 2014	1,624,360	$	26.95	$	44

January 2015	1,755,976	25.19		44
February 2015	468,854	25.46		12
March 2015	921,654	24.92		23
Total Repurchases - First Quarter 2015	3,146,484			79

April 2015	1,328,329	24.47		33
Total Repurchases under 2015 Capital Allocation Program	6,099,173	—		$	156

(a) The average price paid per share and amounts paid for shares purchased excludes the commissions of $0.015 per share paid in connection with the share repurchase.

Note 10 — Loss Per Share

Basic loss per common share is computed by dividing net loss less accumulated preferred stock dividends by the weighted average number of common shares outstanding. Shares issued and treasury shares repurchased during the year are weighted for the portion of the year that they were outstanding. Diluted loss per share is computed in a manner consistent with that of basic loss per share while giving effect to all potentially dilutive common shares that were outstanding during the period. The reconciliation of NRG's basic and diluted loss per share is shown in the following table:



	Three months ended March 31,
(In millions, except per share data)	2015			2014
Basic and diluted loss per share attributable to NRG Energy, Inc. common stockholders
Net loss attributable to NRG Energy, Inc.	$	(120	)	$	(56	)
Dividends for preferred shares	5			2
Loss available for common stockholders	$	(125	)	$	(58	)
Weighted average number of common shares outstanding - basic and diluted	336			324
Loss per weighted average common share — basic and diluted	$	(0.37	)	$	(0.18	)

The following table summarizes NRG’s outstanding equity instruments that are anti-dilutive and were not included in the computation of the Company’s diluted loss per share:



	Three months ended March 31,
(In millions of shares)	2015	2014
Equity compensation plans	7	8
Embedded derivative of 2.822% redeemable perpetual preferred stock^(a)	16	16
Total	23	24

(a) As of March 31, 2014, the redeemable perpetual preferred stock had an interest rate of 3.625%.

Note 11 — Segment Reporting

Effective in December 2014, the Company's segment structure and its allocation of corporate expenses were updated to reflect how management currently makes financial decisions and allocates resources. The Company has recast data from prior periods to reflect this change in reportable segments to conform to the current year presentation. The Company's businesses are segregated as follows: NRG Business, which includes conventional power generation, the carbon capture business and energy services; NRG Home, which includes NRG Home Retail, consisting of residential retail services and products, and NRG Home Solar, which includes the installation and leasing of residential solar systems and the sale of solar energy services; NRG Renew, which includes solar and wind assets, excluding those in the NRG Yield segment; NRG Yield; and corporate activities. NRG Yield includes certain of the Company's contracted generation assets. On January 2, 2015, NRG Yield, Inc. acquired three projects from the Company: Walnut Creek formerly in the NRG Business segment, the Tapestry projects (Buffalo Bear, Pinnacle and Taloga) and Laredo Ridge, both formerly in the NRG Renew segment. As the transaction was accounted for as a transfer of entities under common control, all historical periods have been recast to reflect this change. The Company's corporate segment includes international business and electric vehicle services. Intersegment sales are accounted for at market.



				NRG Home
(In millions)	NRG Business^(a)			Retail^(a)		Solar^(a)			NRG Renew^(a)			NRG Yield^(a)			Corporate^(a)			Eliminations			Total
Three months ended March 31, 2015	(in millions)
Operating revenues^(a)	$	2,506		$	1,311	$	5		$	110		$	180		$	(7	)	$	(279	)	$	3,826
Depreciation and amortization	233			30		6			65			54			7			—			395
Equity in (loss)/earnings of unconsolidated affiliates	(4		)	—		—			—			1			(1		)	1			(3		)
Income/(loss) before income taxes	29			104		(45		)	(61		)	(20		)	(217		)	1			(209		)
Net income/(loss) attributable to NRG Energy, Inc.	$	29		$	104	$	(45	)	$	(50	)	$	(11	)	$	(142	)	$	(5	)	(120		)
Total assets as of March 31, 2015	$	28,744		$	6,270	$	178		$	7,155		$	6,595		$	31,493		$	(40,105	)	$	40,330



(a) Operating revenues include inter-segment sales and net derivative gains and losses of:	$	246	$	—	$	—	$	—	$	—	$	33	$	—	$	279



				NRG Home
(In millions)	NRG Business^(b)			Retail^(b)		Solar^(b)			NRG Renew^(b)(c)			NRG Yield^(b)		Corporate^(b)(c)			Eliminations			Total
Three months ended March 31, 2014	(in millions)
Operating revenues^(b)	$	2,346		$	1,082	$	2		$	53		$	140	$	4		$	(141	)	$	3,486
Depreciation and amortization	225			30		1			49			24		6			—			335
Equity in earnings/(loss) of unconsolidated affiliates	5			—		—			(3		)	1		2			2			7
(Loss)/income before income taxes	(6		)	185		(2		)	(65		)	29		(239		)	—			(98		)
Net (loss)/income attributable to NRG Energy, Inc.	$	(6	)	$	185	$	(2	)	$	(48	)	$	22	$	(209	)	$	2		(56		)



(b) Operating revenues include inter-segment sales and net derivative gains and losses of:	$	113	$	2	$	—	$	—	$	—	$	26	$	—	$	141



(c) Includes loss on debt extinguishment of:	$	—	$	—	$	—	$	(1	)	$	—	$	(40	)	$	—	$	(41	)

Note 12 — Income Taxes

Effective Tax Rate

The income tax provision consisted of the following:



	Three months ended March 31,
(In millions except otherwise noted)	2015			2014
Loss before income taxes	$	(209	)	$	(98	)
Income tax benefit	(73		)	(31		)
Effective tax rate	34.9		%	31.6		%

For the three months ended March 31, 2015, NRG's overall effective tax rate was different than the statutory rate of 35% primarily due to the impact of production tax credits generated from our wind assets partially offset by non-taxable equity earnings and tax expense attributable to consolidated partnerships.

For the three months ended March 31, 2014, NRG's overall effective tax rate was different than the statutory rate of 35% primarily due to the impact of non-taxable equity earnings, production tax credits and the impact of state and local income taxes.

Uncertain Tax Benefits

As of March 31, 2015, NRG has recorded a non-current tax liability of $55 million for uncertain tax benefits from positions taken on various state income tax returns, including accrued interest. For the three months ended March 31, 2015, NRG accrued an insignificant amount of interest relating to the uncertain tax benefits. As of March 31, 2015, NRG had cumulative interest and penalties related to these uncertain tax benefits of $6 million . The Company recognizes interest and penalties related to uncertain tax benefits in income tax expense.

NRG is subject to examination by taxing authorities for income tax returns filed in the U.S. federal jurisdiction and various state and foreign jurisdictions including operations located in Australia. The Company is not subject to U.S. federal income tax examinations for years prior to 2011. With few exceptions, state and local income tax examinations are no longer open for years before 2009. The Company's primary foreign operations are also no longer subject to examination by local jurisdictions for years prior to 2010.

Note 13 — Commitments and Contingencies

This footnote should be read in conjunction with the complete description under Note 22, Commitments and Contingencies, to the Company's 2014 Form 10-K.

Commitments

First Lien Structure

NRG has granted first liens to certain counterparties on a substantial portion of the Company's assets, excluding assets acquired in the GenOn and EME (including Midwest Generation) acquisitions, assets held by NRG Yield, Inc. and NRG's assets that have project-level financing, to reduce the amount of cash collateral and letters of credit that it would otherwise be required to post from time to time to support its obligations under out-of-the-money hedge agreements for forward sales of power or MWh equivalents. The Company's lien counterparties may have a claim on NRG's assets to the extent market prices exceed the hedged price. As of March 31, 2015, hedges under the first liens were in-the-money for NRG on a counterparty aggregate basis.

Contingencies

The Company's material legal proceedings are described below. The Company believes that it has valid defenses to these legal proceedings and intends to defend them vigorously. NRG records reserves for estimated losses from contingencies when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. In addition, legal costs are expensed as incurred. Management has assessed each of the following matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought, and the probability of success. Unless specified below, the Company is unable to predict the outcome of these legal proceedings or reasonably estimate the scope or amount of any associated costs and potential liabilities. As additional information becomes available, management adjusts its assessment and estimates of such contingencies accordingly. Because litigation is subject to inherent uncertainties and unfavorable rulings or developments, it is possible that the ultimate resolution of the Company's liabilities and contingencies could be at amounts that are different from its currently recorded reserves and that such difference could be material.

In addition to the legal proceedings noted below, NRG and its subsidiaries are party to other litigation or legal proceedings arising in the ordinary course of business. In management's opinion, the disposition of these ordinary course matters will not materially adversely affect NRG's consolidated financial position, results of operations, or cash flows.

Midwest Generation Asbestos Liabilities — The Company, through its subsidiary, Midwest Generation, may be subject to potential asbestos liabilities as a result of its acquisition of EME. The Company is currently analyzing the scope of potential liability as it may relate to Midwest Generation. The Company believes that it has established an adequate reserve to deal with these cases.

Actions Pursued by MC Asset Recovery —With Mirant Corporation's emergence from bankruptcy protection in 2006, certain actions filed by GenOn Energy Holdings and some of its subsidiaries against third parties were transferred to MC Asset Recovery, a wholly owned subsidiary of GenOn Energy Holdings. MC Asset Recovery is governed by a manager who is independent of NRG and GenOn. MC Asset Recovery is a disregarded entity for income tax purposes. Under the remaining action transferred to MC Asset Recovery, MC Asset Recovery seeks to recover damages from Commerzbank AG and various other banks, or the Commerzbank Defendants, for alleged fraudulent transfers that occurred prior to Mirant's bankruptcy proceedings. In December 2010, the U.S. District Court for the Northern District of Texas dismissed MC Asset Recovery's complaint against the Commerzbank Defendants. In January 2011, MC Asset Recovery appealed the District Court's dismissal of its complaint against the Commerzbank Defendants to the U.S. Court of Appeals for the Fifth Circuit. In March 2012, the Court of Appeals reversed the District Court's dismissal and reinstated MC Asset Recovery's amended complaint against the Commerzbank Defendants. If MC Asset Recovery succeeds in obtaining any recoveries from the Commerzbank Defendants, the Commerzbank Defendants have asserted that they will seek to file claims in Mirant's bankruptcy proceedings for the amount of those recoveries. GenOn Energy Holdings would vigorously contest the allowance of any such claims. If the Commerzbank Defendants were to receive an allowed claim as a result of a recovery by MC Asset Recovery on its claims against them, GenOn Energy Holdings would retain from the net amount recovered by MC Asset Recovery an amount equal to the dollar amount of the resulting allowed claim.

Pending Natural Gas Litigation — GenOn is party to several lawsuits, certain of which are class action lawsuits, in state and federal courts in Kansas, Missouri, Nevada and Wisconsin. These lawsuits were filed in the aftermath of the California energy crisis in 2000 and 2001 and the resulting FERC investigations and relate to alleged conduct to increase natural gas prices in violation of antitrust and similar laws. The lawsuits seek treble or punitive damages, restitution and/or expenses. The lawsuits also name as parties a number of energy companies unaffiliated with NRG. In July 2011, the U.S. District Court for the District of Nevada, which was handling four of the five cases, granted the defendants' motion for summary judgment and dismissed all claims against GenOn in those cases. The plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit which reversed the decision of the District Court. On August 26, 2013, GenOn along with the other defendants in the lawsuit filed a petition for a writ of certiorari to the U.S. Supreme Court challenging the Court of Appeals' decision. On July 1, 2014, the U.S. Supreme Court granted the petition. On April 21, 2015, the U.S. Supreme Court affirmed the Ninth Circuit’s holding that plaintiffs’ state antitrust law claims are not field-preempted. The U.S. Supreme Court left open whether the claims were preempted on the basis of conflict preemption and directed that the case be sent to the U.S. District Court for the District of Nevada for further proceedings.

In September 2012, the State of Nevada Supreme Court, which was handling the remaining case, affirmed dismissal by the Eighth Judicial District Court for Clark County, Nevada of all plaintiffs' claims against GenOn. In February 2013, the plaintiffs in the Nevada case filed a petition for a writ of certiorari to the U.S. Supreme Court. In June 2013, the U.S. Supreme Court denied the petition for a writ of certiorari, thereby ending one of the five lawsuits. GenOn has agreed to indemnify CenterPoint against certain losses relating to these lawsuits.

Cheswick Class Action Complaint — In April 2012, a putative class action lawsuit was filed against GenOn in the Court of Common Pleas of Allegheny County, Pennsylvania alleging that emissions from the Cheswick generating facility have damaged the property of neighboring residents. The Company disputes these allegations. Plaintiffs have brought nuisance, negligence, trespass and strict liability claims seeking both damages and injunctive relief. Plaintiffs seek to certify a class that consists of people who own property or live within one mile of the Company's plant. In July 2012, the Company removed the lawsuit to the U.S. District Court for the Western District of Pennsylvania. In October 2012, the District Court granted the Company's motion to dismiss, which plaintiffs appealed to the U.S. Court of Appeals for the Third Circuit. On August 20, 2013, the Court of Appeals reversed the decision of the District Court. On September 3, 2013, the Company filed a petition for rehearing with the Court of Appeals which was subsequently denied. In February 2014, the Company filed a petition for a writ of certiorari to the U.S. Supreme Court seeking review and reversal of the Court of Appeals' decision. On June 2, 2014, the U.S. Supreme Court denied the petition for a writ of certiorari. Following the U.S. Supreme Court's denial of GenOn’s petition for a writ of certiorari, the case continued to be litigated before the U.S. District Court for the Western District of Pennsylvania. After briefing by the parties on GenOn's motion to strike class allegations in the complaint, the court granted GenOn's motion, but allowed the plaintiffs the opportunity to re-file their complaint. On February 3, 2015, plaintiffs sought leave to file an amended complaint, which the Company is contesting.

Energy Plus Holdings — On August 7, 2012, Energy Plus Holdings received a subpoena from the NYAG which generally sought information and business records related to Energy Plus Holdings' sales, marketing and business practices. Energy Plus Holdings provided documents and information to the NYAG. Energy Plus Holdings continues to cooperate and discuss a resolution of these issues with the NYAG.

Maryland Department of the Environment v. GenOn Chalk Point and GenOn Mid-Atlantic — On January 25, 2013, Food & Water Watch, the Patuxent Riverkeeper and the Potomac Riverkeeper (together, the Citizens Group) sent GenOn Mid-Atlantic a letter alleging that the Chalk Point, Dickerson and Morgantown generating facilities were violating the terms of the three National Pollution Discharge Elimination System permits by discharging nitrogen and phosphorous in excess of the limits in each permit. On March 21, 2013, the MDE sent GenOn Mid-Atlantic a similar letter with respect to the Chalk Point and Dickerson generating facilities, threatening to sue within 60 days if the generating facilities were not brought into compliance. On June 11, 2013, the Maryland Attorney General on behalf of the MDE filed a complaint in the U.S. District Court for the District of Maryland alleging violations of the CWA and Maryland environmental laws related to water. The lawsuit is ongoing and seeks injunctive relief and civil penalties in excess of $100,000. The Company does not expect the resolution of this matter to have a material impact on the Company's consolidated financial position, results of operations, or cash flows.

Midwest Generation New Source Review Litigation — In August 2009, the EPA and the Illinois Attorney General, or the Government Plaintiffs, filed a complaint, or the Governments’ Complaint, in the U.S. District Court for the Northern District of Illinois alleging violations of CAA PSD requirements by Midwest Generation arising from maintenance, repair or replacement projects at six Illinois coal-fired electric generating stations performed by Midwest Generation or ComEd, a prior owner of the stations, including alleged failures to obtain PSD construction permits and to comply with BACT requirements. The Government Plaintiffs also alleged violations of opacity and PM standards at the Midwest Generation plants. Finally, the Government Plaintiffs alleged that Midwest Generation violated certain operating permit requirements under Title V of the CAA allegedly arising from such claimed PSD, opacity and PM emission violations. In addition to seeking penalties of up to $37,500 per violation, per day, the complaint seeks an injunction ordering Midwest Generation to install controls sufficient to meet BACT emission rates at the units subject to the complaint and other remedies, which could go well beyond the requirements of the CPS. Several environmental groups intervened as plaintiffs in this litigation and filed a complaint, or the Intervenors’ Complaint, which alleged opacity, PM and related Title V violations. Midwest Generation filed a motion to dismiss nine of the ten PSD counts in the Governments’ Complaint, and to dismiss the tenth PSD count to the extent the Governments’ Complaint sought civil penalties for that count. The trial court granted the motion in March 2010.

In June 2010, the Government Plaintiffs and Intervenors each filed an amended complaint. The Governments’ Amended Complaint again alleged that Midwest Generation violated PSD (based upon the same projects as alleged in their original complaint, but adding allegations that the Company was liable as the “successor” to ComEd), Title V and opacity and PM standards. It named EME and ComEd as additional defendants and alleged PSD violations (again, premised on the same projects) against them. The Intervenors’ Amended Complaint named only Midwest Generation as a defendant and alleged Title V and opacity/PM violations, as well as one of the ten PSD violations alleged in the Governments’ Amended Complaint. Midwest Generation again moved to dismiss all but one of the Government Plaintiffs’ PSD claims and the related Title V claims. Midwest Generation also filed a motion to dismiss the PSD claim in the Intervenors’ Amended Complaint and the related Title V claims. In March 2011, the trial court granted Midwest Generation’s partial motion to dismiss the Government Plaintiffs’ PSD claims. The trial court denied Midwest Generation’s motion to dismiss the PSD claim asserted in the Intervenors’ Amended Complaint, but noted that the plaintiffs would be required to convince the court that the statute of limitations should be equitably tolled. The trial court did not address other counts in the amended complaints that allege violations of opacity and PM emission limitations under the Illinois State Implementation Plan and related Title V claims. The trial court also granted the motions to dismiss the PSD claims asserted against EME and ComEd.

Following the trial court ruling, the Government Plaintiffs appealed the trial court’s dismissals of their PSD claims, including the dismissal of nine of the ten PSD claims against Midwest Generation and of the PSD claims against the other defendants. Those PSD claim dismissals were affirmed by the U.S. Court of Appeals for the Seventh Circuit in July 2013. In addition, in 2012, all but one of the environmental groups that had intervened in the case dismissed their claims without prejudice. As a result, only one environmental group remains a plaintiff intervenor in the case. The Company does not expect the resolution of this matter to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Note 14 — Regulatory Matters

This footnote should be read in conjunction with the complete description under Note 23, Regulatory Matters, to the Company's 2014 Form 10-K.

NRG operates in a highly regulated industry and is subject to regulation by various federal and state agencies. As such, NRG is affected by regulatory developments at both the federal and state levels and in the regions in which NRG operates. In addition, NRG is subject to the market rules, procedures, and protocols of the various ISO and RTO markets in which NRG participates. These power markets are subject to ongoing legislative and regulatory changes that may impact NRG's wholesale and retail businesses.

In addition to the regulatory proceedings noted below, NRG and its subsidiaries are a party to other regulatory proceedings arising in the ordinary course of business or have other regulatory exposure. In management's opinion, the disposition of these ordinary course matters will not materially adversely affect NRG's consolidated financial position, results of operations, or cash flows.

National

Court Rejects FERC's Jurisdiction Over Demand Response — On May 23, 2014, the U.S. Court of Appeals for the District of Columbia Circuit vacated FERC’s rules (known as Order No. 745) that allowed demand response resources to participate in FERC-jurisdictional energy markets. The Court of Appeals held that the Federal Power Act does not authorize FERC to exercise jurisdiction over demand response and that instead demand response is part of the retail market over which the states have jurisdiction. The specific order being challenged related to energy market compensation, but this ruling also calls into question whether demand response will be permitted to participate in the capacity markets in the future. Parties including the U.S. Solicitor General have filed petitions for a writ of certiorari with the U.S. Supreme Court. On May 4, 2015, the U.S. Supreme Court granted certiorari on two questions: first, on whether the FPA gives FERC jurisdiction over demand response, and second, whether FERC’s Order No. 745 correctly determined the level of compensation paid to generators participating in the energy markets. The eventual outcome of this proceeding could result in refunds of payments made for non-jurisdictional services and resettlement of wholesale markets, but it is not possible to predict the outcome or estimate the impact on the Company at this time.

East Region

Montgomery County Station Power Tax — On December 20, 2013, the Company received a letter from Montgomery County, Maryland requesting payment of an energy tax for the consumption of station power at the Dickerson Facility over the previous three years. Montgomery County seeks payment in the amount of $22 million, which includes tax, interest and penalties. The Company is disputing the applicability of the tax. On December 17, 2014, the Maryland Tax Court heard oral arguments from the parties. Subsequently, post hearing briefs were filed. The decision is pending.

Note 15 — Environmental Matters

This footnote should be read in conjunction with the complete description under Note 24, Environmental Matters, to the Company's 2014 Form 10-K.

NRG is subject to a wide range of environmental laws in the development, construction, ownership and operation of projects. These laws generally require that governmental permits and approvals be obtained before construction and during operation of power plants. NRG is also subject to laws and regulations surrounding the protection of wildlife, including migratory birds, eagles and threatened and endangered species. Environmental laws have become increasingly stringent and NRG expects this trend to continue. The electric generation industry is likely to face new requirements to address various emissions, including GHG, as well as combustion byproducts, water discharge and use, and threatened and endangered species. In general, future laws are expected to require the addition of emissions controls or other environmental controls or to impose certain restrictions on the operations of the Company's facilities, which could have a material effect on the Company's operations.

The EPA finalized CSAPR in 2011, which was intended to replace CAIR in January 2012. In December 2011, the U.S. Court of Appeals for the District of Columbia Circuit stayed the implementation of CSAPR and then issued an opinion in August 2012 vacating CSAPR and keeping CAIR in place until the EPA could replace it. On April 29, 2014, the U.S. Supreme Court reversed and remanded the D.C. Circuit's decision. In October 2014, the D.C. Circuit lifted the stay of CSAPR. In response, the EPA issued an interim final rule in November 2014 to amend the CSAPR compliance dates. Accordingly, CSAPR replaced CAIR on January 1, 2015. On February 25, 2015, the D.C. Circuit held oral argument regarding several unresolved legal issues and the Company expects a decision in the second quarter of 2015. While NRG cannot predict the final outcome of the ongoing litigation, the Company believes its investment in pollution controls and cleaner technologies coupled with planned plant retirements should leave the fleet well positioned for compliance.

In December 2014, the EPA proposed making the NAAQS for ozone more stringent. The EPA anticipates promulgating a more stringent ozone NAAQS by October 2015. A more stringent NAAQS would obligate the states to develop plans to reduce NO_x (an ozone precursor), which might affect some of the Company's units.

In February 2012, the EPA promulgated standards to control emissions of HAPs from coal and oil-fired electric generating units. The rule established limits for mercury, non-mercury metals, certain organics and acid gases, which limits must be met beginning in April 2015 (with some units getting a 1-year extension). In November 2014, the U.S. Supreme Court agreed to review the D.C. Circuit decision that denied the petitions seeking to vacate MATS but the review is limited to whether the EPA unreasonably refused to consider costs in determining whether it is appropriate to regulate HAPs emitted by electric generating units. Oral argument in the U.S. Supreme Court occurred in March 2015, and the Company expects a decision in the second quarter of 2015.

In January 2014, the EPA re-proposed the NSPS for CO₂ emissions from new fossil-fuel-fired electric generating units that had been previously proposed in April 2012. The re-proposed standards are 1,000 pounds of CO₂per MWh for large gas units and 1,100 pounds of CO₂ per MWh for coal units and small gas units. Proposed standards are in effect until a final rule is published or another rule is re-proposed. In June 2014, the EPA proposed a rule that would require states to develop CO₂ standards that would apply to existing fossil-fueled generating facilities. Specifically, the EPA proposed state-specific rate-based goals for CO₂ emissions, as well as guidelines for states to follow in developing plans to achieve the state-specific goals. The EPA anticipates finalizing both of these rules in the summer of 2015.

Water

In August 2014, the EPA finalized the regulation regarding the use of water for once through cooling at existing facilities to address impingement and entrainment concerns. NRG anticipates that more stringent requirements will be incorporated into some of its water discharge permits over the next several years.

Byproducts, Wastes, Hazardous Materials and Contamination

In April 2015, the EPA finalized the rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA. In 2010, the EPA had proposed two alternatives. Under the first proposal, these byproducts would be regulated as solid wastes. Under the second proposal, these byproducts would have been regulated as “special wastes” in a manner similar to the regulation of hazardous waste with an exception for certain types of beneficial use of these byproducts. The second alternative would have imposed significantly more stringent requirements and materially increased the cost of disposal of coal combustion byproducts. The Company is evaluating the impact of the new rule on its results of operations, financial condition and cash flows.

East Region

Maryland Environmental Regulations — In December 2014, MDE proposed in the Maryland Register a regulation regarding NO_x emissions from coal-fired electric generating units, which if finalized would have required by 2020 the Company (at each of the three Dickerson coal-fired units and the Chalk Point coal-fired unit that does not have an SCR) to (1) install and operate an SCR; (2) retire the unit; or (3) convert the fuel source from coal to natural gas. Earlier this year, a new administration decided not to finalize the regulation as proposed. Later this year, the Company expects MDE to propose revised regulations to address future NO_xreductions, which when finalized may negatively affect certain of the Company’s coal-fired units in Maryland.

Environmental Capital Expenditures

Based on current (and in some cases proposed) rules, technology and preliminary plans based on some proposed rules, NRG estimates that environmental capital expenditures from 2015 through 2019 required to comply with environmental laws will be approximately $614 million which includes $57 million for GenOn and $440 million for Midwest Generation. These costs are primarily associated with (i) controls to satisfy MATS and the recent NSR settlement at Big Cajun II; (ii) controls to satisfy MATS at W.A. Parish, Limestone and Conemaugh; (iii) NO_x controls for Sayreville and Gilbert; and (iv) DSI/ESP upgrades at Waukegan and Powerton to satisfy the IL CPS and the Joliet gas conversion.

Note 16 — Condensed Consolidating Financial Information

As of March 31, 2015, the Company had outstanding $6.4 billion of Senior Notes due from 2018 - 2024, as shown in Note 7, Debt and Capital Leases. These Senior Notes are guaranteed by certain of NRG's current and future 100% owned domestic subsidiaries, or guarantor subsidiaries. These guarantees are both joint and several. The non-guarantor subsidiaries include all of NRG's foreign subsidiaries and certain domestic subsidiaries, including GenOn and its subsidiaries and NRG Yield, Inc. and its subsidiaries.

Unless otherwise noted below, each of the following guarantor subsidiaries fully and unconditionally guaranteed the Senior Notes as of March 31, 2015:



Ace Energy, Inc.	NEO Freehold-Gen LLC	NRG Operating Services, Inc.
Allied Warranty LLC	NEO Power Services Inc.	NRG Oswego Harbor Power Operations Inc.
Arthur Kill Power LLC	New Genco GP, LLC	NRG PacGen Inc.
Astoria Gas Turbine Power LLC	Norwalk Power LLC	NRG Portable Power LLC
Bayou Cove Peaking Power, LLC	NRG Affiliate Services Inc.	NRG Power Marketing LLC
BidURenergy, Inc.	NRG Artesian Energy LLC	NRG Reliability Solutions LLC
Cabrillo Power I LLC	NRG Arthur Kill Operations Inc.	NRG Renter's Protection LLC
Cabrillo Power II LLC	NRG Astoria Gas Turbine Operations Inc.	NRG Retail LLC
Carbon Management Solutions LLC	NRG Bayou Cove LLC	NRG Retail Northeast LLC
Cirro Group, Inc.	NRG Business Solutions LLC	NRG Rockford Acquisition LLC
Cirro Energy Services, Inc.	NRG Cabrillo Power Operations Inc.	NRG Saguaro Operations Inc.
Clean Edge Energy LLC	NRG California Peaker Operations LLC	NRG Security LLC
Conemaugh Power LLC	NRG Cedar Bayou Development Company, LLC	NRG Services Corporation
Connecticut Jet Power LLC	NRG Connected Home LLC	NRG SimplySmart Solutions LLC
Cottonwood Development LLC	NRG Connecticut Affiliate Services Inc.	NRG South Central Affiliate Services Inc.
Cottonwood Energy Company LP	NRG Construction LLC	NRG South Central Generating LLC
Cottonwood Generating Partners I LLC	NRG Curtailment Solutions LLC	NRG South Central Operations Inc.
Cottonwood Generating Partners II LLC	NRG Development Company Inc.	NRG South Texas LP
Cottonwood Generating Partners III LLC	NRG Devon Operations Inc.	NRG Texas C&I Supply LLC
Cottonwood Technology Partners LP	NRG Dispatch Services LLC	NRG Texas Gregory LLC
Devon Power LLC	NRG Distributed Generation PR LLC	NRG Texas Holding Inc.
Dunkirk Power LLC	NRG Dunkirk Operations Inc.	NRG Texas LLC
Eastern Sierra Energy Company LLC	NRG El Segundo Operations Inc.	NRG Texas Power LLC
El Segundo Power, LLC	NRG Energy Efficiency-L LLC	NRG Warranty Services LLC
El Segundo Power II LLC	NRG Energy Efficiency-P LLC	NRG West Coast LLC
Energy Alternatives Wholesale, LLC	NRG Energy Labor Services LLC	NRG Western Affiliate Services Inc.
Energy Curtailment Specialists, Inc.	NRG Energy Services Group LLC	O'Brien Cogeneration, Inc. II
Energy Plus Holdings LLC	NRG Energy Services International Inc.	ONSITE Energy, Inc.
Energy Plus Natural Gas LLC	NRG Energy Services LLC	Oswego Harbor Power LLC
Energy Protection Insurance Company	NRG Generation Holdings, Inc.	RE Retail Receivables, LLC
Everything Energy LLC	NRG Home & Business Solutions LLC	Reliant Energy Northeast LLC
Forward Home Security LLC	NRG Home Services LLC	Reliant Energy Power Supply, LLC
GCP Funding Company, LLC	NRG Home Solutions LLC	Reliant Energy Retail Holdings, LLC
Green Mountain Energy	NRG Home Solutions Product LLC	Reliant Energy Retail Services, LLC
Green Mountain Energy Co LLC	NRG Homer City Services LLC	RERH Holdings LLC
Gregory Partners, LLC	NRG Huntley Operations Inc.	Saguaro Power LLC
Gregory Power Partners LLC	NRG HQ DC LLC	Somerset Operations Inc.
Huntley Power LLC	NRG Identity Protect LLC	Somerset Power LLC
Independence Energy Alliance LLC	NRG Ilion Limited Partnership	Texas Genco Financing Corp.
Independence Energy Group LLC	NRG Ilion LP LLC	Texas Genco GP, LLC
Independence Energy Natural Gas LLC	NRG International LLC	Texas Genco Holdings, Inc.
Indian River Operations Inc.	NRG Maintenance Services LLC	Texas Genco LP, LLC
Indian River Power LLC	NRG Mextrans Inc.	Texas Genco Operating Services, LLC
Keystone Power LLC	NRG MidAtlantic Affiliate Services Inc.	Texas Genco Services, LP
Langford Wind Power, LLC	NRG Middletown Operations Inc.	US Retailers LLC
Louisiana Generating LLC	NRG Montville Operations Inc.	Vienna Operations Inc.
Meriden Gas Turbines LLC	NRG New Roads Holdings LLC	Vienna Power LLC
Middletown Power LLC	NRG North Central Operations Inc.	WCP (Generation) Holdings LLC
Montville Power LLC	NRG Northeast Affiliate Services Inc.	West Coast Power LLC
NEO Corporation	NRG Norwalk Harbor Operations Inc.

NRG conducts much of its business through and derives much of its income from its subsidiaries. Therefore, the Company's ability to make required payments with respect to its indebtedness and other obligations depends on the financial results and condition of its subsidiaries and NRG's ability to receive funds from its subsidiaries. There are no restrictions on the ability of any of the guarantor subsidiaries to transfer funds to NRG. However, there may be restrictions for certain non-guarantor subsidiaries.

The following condensed consolidating financial information presents the financial information of NRG Energy, Inc., the guarantor subsidiaries and the non-guarantor subsidiaries in accordance with Rule 3-10 under the SEC Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor subsidiaries or non-guarantor subsidiaries operated as independent entities.

In this presentation, NRG Energy, Inc. consists of parent company operations. Guarantor subsidiaries and non-guarantor subsidiaries of NRG are reported on an equity basis. For companies acquired, the fair values of the assets and liabilities acquired have been presented on a push-down accounting basis.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2015

(Unaudited)



	Guarantor Subsidiaries			Non-Guarantor Subsidiaries			NRG Energy, Inc. (Note Issuer)			Eliminations^(a)			Consolidated
	(In millions)
Operating Revenues
Total operating revenues	$	2,563		$	1,303		$	—		$	(40	)	$	3,826
Operating Costs and Expenses
Cost of operations	2,104			995			12			(49		)	3,062
Depreciation and amortization	204			186			5			—			395
Selling, general and administrative	102			101			60			—			263
Acquisition-related transaction and integration costs	—			2			8			—			10
Development activity expenses	—			15			19			—			34
Total operating costs and expenses	2,410			1,299			104			(49		)	3,764
Gain on postretirement benefits curtailment	—			14			—			—			14
Operating Income/(Loss)	153			18			(104		)	9			76
Other Income/(Expense)
Equity in earnings of consolidated subsidiaries	(13		)	(8		)	50			(29		)	—
Equity in earnings of unconsolidated affiliates	—			(4		)	(1		)	2			(3		)
Other income, net	1			17			1			—