NRG ENERGY, INC. - Quarter Report: 2018 March (Form 10-Q)

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, 2018

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.)

804 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o	Emerging growth company o
		(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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 March 31, 2018, there were 314,886,197 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	5
PART I — FINANCIAL INFORMATION	10
ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES	10
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	55
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	81
ITEM 4 — CONTROLS AND PROCEDURES	83
PART II — OTHER INFORMATION	84
ITEM 1 — LEGAL PROCEEDINGS	84
ITEM 1A — RISK FACTORS	84
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	84
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES	84
ITEM 4 — MINE SAFETY DISCLOSURES	84
ITEM 5 — OTHER INFORMATION	84
ITEM 6 — EXHIBITS	85
SIGNATURES	86

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, 2017, and the following:


•	NRG's ability to achieve the expected benefits of its Transformation Plan;


•	NRG's ability to engage in successful sales and divestitures as well as mergers and acquisitions activity;


•	The potential adverse effects of the GenOn Entities' filings under Chapter 11 of the Bankruptcy Code and restructuring transactions on NRG's operations, management and employees and the risks associated with operating NRG's business during the restructuring process;


•	Risks and uncertainties associated with the GenOn Entities' Chapter 11 Cases including the ability to achieve anticipated benefits therefrom;


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


•	Volatile power supply costs and demand for power;


•	Changes in law, including judicial decisions;

•

Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions (including wind and solar 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 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 wholesale markets for energy commodities;


•	Government regulation, including changes in market rules, rates, tariffs and environmental laws;


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


•	NRG's ability to mitigate forced outage risk for units subject to capacity performance requirements in PJM, performance incentives in ISO-NE, and scarcity pricing in ERCOT;


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


•	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 coverage;


•	NRG's ability to develop and build new power generation facilities;


•	NRG's ability to develop and innovate new products as retail and wholesale markets continue to change and evolve;


•	NRG's ability to implement its strategy of finding ways to meet the challenges of climate change, clean air and protecting natural resources while taking advantage of business opportunities;


•	NRG's ability to increase cash from operations through operational and commercial initiatives, corporate efficiencies, asset strategy, and a range of other programs throughout NRG to reduce costs or generate revenues;


•	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 Energy, Inc. 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:



2017 Form 10-K		NRG’s Annual Report on Form 10-K for the year ended December 31, 2017
2023 Term Loan Facility		The Company's $1.9 billion term loan facility due 2023, a component of the Senior Credit Facility
Adjusted EBITDA		Adjusted earnings before interest, taxes, depreciation and amortization
ARO		Asset Retirement Obligation
ASC		The FASB Accounting Standards Codification, which the FASB established as the source of authoritative GAAP
ASU		Accounting Standards Updates - updates to the ASC
Average realized prices		Volume-weighted average power prices, net of average fuel costs and reflecting the impact of settled hedges
BACT		Best Available Control Technology
Bankruptcy Code		Chapter 11 of Title 11 the U.S. Bankruptcy Code
Bankruptcy Court		United States Bankruptcy Court for the Southern District of Texas, Houston Division
BETM		Boston Energy Trading and Marketing LLC
BTU		British Thermal Unit
Business Solutions		NRG's business solutions group, which includes demand response, commodity sales, energy efficiency and energy management services
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAISO		California Independent System Operator
CASPR		Competitive Auctions with Sponsored Resources
CDD		Cooling Degree Day
CDWR		California Department of Water Resources
CEC		California Energy Commission
CenterPoint		CenterPoint Energy Houston Electric, LLC
CFTC		U.S. Commodity Futures Trading Commission
Chapter 11 Cases		Voluntary cases commenced by the GenOn Entities under the Bankruptcy Code in the Bankruptcy Court
C&I		Commercial industrial and governmental/institutional
Cleco		Cleco Energy LLC
COD		Commercial Operation Date
ComEd		Commonwealth Edison
Company		NRG Energy, Inc.
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
CVSR		California Valley Solar Ranch
CWA		Clean Water Act
D.C. Circuit		U.S. Court of Appeals for the District of Columbia Circuit
DGPV Holdco 1		NRG DGPV Holdco 1 LLC
DGPV Holdco 2		NRG DGPV Holdco 2 LLC
DGPV Holdco 3		NRG DGPV Holdco 3 LLC
Distributed Solar		Solar power projects that primarily sell power to customers for usage on site, or are interconnected to sell power into a local distribution grid



DNREC		Delaware Department of Natural Resources and Environmental Control
DSI		Dry Sorbent Injection
Economic gross margin		Sum of energy revenue, capacity revenue, retail revenue and other revenue, less cost of fuels and other cost of sales
El Segundo Energy Center		NRG West Holdings LLC, the subsidiary of Natural Gas Repowering LLC, which owns the El Segundo Energy Center project
EME		Edison Mission Energy
Energy Plus Holdings		Energy Plus Holdings LLC
EPA		U.S. Environmental Protection Agency
EPC		Engineering, Procurement and Construction
EPSA		The 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
ESP		Electrostatic Precipitator
ESPP		NRG Energy, Inc. Amended and Restated Employee Stock Purchase Plan
ESPS		Existing Source Performance Standards
Exchange Act		The Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FGD		Flue gas desulfurization
Fresh Start		Reporting requirements as defined by ASC-852, Reorganizations
FTRs		Financial Transmission Rights
GAAP		Accounting principles generally accepted in the U.S.
GenConn		GenConn Energy LLC
GenOn		GenOn Energy, Inc.
GenOn Americas Generation		GenOn Americas Generation, LLC
GenOn Americas Generation Senior Notes		GenOn Americas Generation's $395 million outstanding unsecured senior notes consisting of $208 million of 8.5% senior notes due 2021 and $187 million of 9.125% senior notes due 2031
GenOn Entities		GenOn and certain of its wholly owned subsidiaries, including GenOn Americas Generation. that filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court on June 14, 2017
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 $1.8 billion outstanding unsecured senior notes consisting of $691 million of 7.875% senior notes due 2017, $649 million of 9.5% senior notes due 2018, and $489 million of 9.875% senior notes due 2020
GHG		Greenhouse Gas
GIP		Global Infrastructure Partners
GW		Gigawatt
GWh		Gigawatt Hour
HAP		Hazardous Air Pollutant
HDD		Heating Degree Day
Heat Rate		A measure of thermal efficiency computed by dividing the total BTU content of the fuel burned by the resulting kWhs generated. Heat rates can be expressed as either gross or net heat rates, depending whether the electricity output measured is gross or net generation and is generally expressed as BTU per net kWh
HLBV		Hypothetical Liquidation at Book Value
IASB		International Accounting Standards Board
IFRS		International Financial Reporting Standards



IPA		Illinois Power Agency
IPPNY		Independent Power Producers of New York
ISO		Independent System Operator, also referred to as RTOs
ISO-NE		ISO New England Inc.
ITC		Investment Tax Credit
kWh		Kilowatt-hour
LaGen		Louisiana Generating, LLC
LIBOR		London Inter-Bank Offered Rate
LTIPs		Collectively, the NRG LTIP and the NRG GenOn LTIP
Marsh Landing		NRG Marsh Landing, LLC (formerly known as GenOn Marsh Landing, LLC)
Mass Market		Residential and small commercial customers
MATS		Mercury and Air Toxics Standards promulgated by the EPA
MDth		Thousand Dekatherms
Midwest Generation		Midwest Generation, LLC
MISO		Midcontinent Independent System Operator, Inc.
MMBtu		Million British Thermal Units
MOPR		Minimum Offer Price Rule
MW		Megawatts
MWh		Saleable megawatt hour net of internal/parasitic load megawatt-hour
MWt		Megawatts Thermal Equivalent
NAAQS		National Ambient Air Quality Standards
NEPGA		New England Power Generators Association
NEPOOL		New England Power Pool
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 kWhs or MWhs, that is the total amount of electricity generated (gross) minus the amount of electricity used during generation
NOL		Net Operating Loss
NOV		Notice of Violation
NO_x		Nitrogen Oxides
NPDES		National Pollutant Discharge Elimination System
NPNS		Normal Purchase Normal Sale
NRC		U.S. Nuclear Regulatory Commission
NRG		NRG Energy, Inc.
NRG Yield		Reporting segment including the projects owned by NRG Yield, Inc.
NRG Yield 2019 Convertible Notes		$345 million aggregate principal amount of 3.50% Convertible Senior Notes due 2019 issued by NRG Yield, Inc.
NRG Yield 2020 Convertible Notes		$287.5 million aggregate principal amount of 3.25% Convertible Notes due 2020 issued by NRG Yield, Inc.
NRG Yield, Inc.		NRG Yield, Inc., the owner of 53.7% of the economic interests of NRG Yield LLC with a controlling interest, and issuer of publicly held shares of Class A and Class C common stock
NSR		New Source Review
Nuclear Decommissioning Trust Fund		NRG's nuclear decommissioning trust fund assets, which are for the Company's portion of the decommissioning of the STP, units 1 & 2
NYAG		State of New York Office of Attorney General
NYISO		New York Independent System Operator
NYMEX		New York Mercantile Exchange
NYSPSC		New York State Public Service Commission
OCI/OCL		Other Comprehensive Income/(Loss)



Peaking		Units expected to satisfy demand requirements during the periods of greatest or peak load on the system
PER		Peak Energy Rent
Petition Date		June 14, 2017
Pipeline		Projects that range from identified lead to shortlisted with an offtake, and represents a lower level of execution certainty.
PJM		PJM Interconnection, LLC
PPA		Power Purchase Agreement
PSD		Prevention of Significant Deterioration
PTC		Production Tax Credit
PUCT		Public Utility Commission of Texas
PUHCA		Public Utility Holding Company Act of 2005
RCRA		Resource Conservation and Recovery Act of 1976
REMA		NRG REMA LLC, which leases a 100% interest in the Shawville generating facility and 16.7% and 16.5% interests in the Keystone and Conemaugh generating facilities, respectively
Restructuring Support Agreement		Restructuring Support and Lock-Up Agreement, dated as of June 12, 2017 and as amended on October 2, 2017, by and among GenOn Energy, Inc., GenOn Americas Generation, LLC, and subsidiaries signatory thereto, NRG Energy, Inc. and the noteholders signatory thereto
Retail		Reporting segment that includes NRG's residential and small commercial businesses which go to market as Reliant, NRG and other brands owned by NRG, as well as Business Solutions
Revolving Credit Facility		The Company’s $2.5 billion revolving credit facility, a component of the Senior Credit Facility. The revolving credit facility consists of $289 million of Tranche A Revolving Credit Facility, due 2018, and $2.2 billion of Tranche B Revolving Credit Facility, due 2021
RFO		Request for Offer
RGGI		Regional Greenhouse Gas Initiative
RMR		Reliability Must-Run
ROFO		Right of First Offer
ROFO Agreement		Second Amended and Restated Right of First Offer Agreement by and between NRG Energy, Inc. and NRG Yield, Inc.
RPM		Reliability Pricing Model
RPV Holdco		NRG RPV Holdco 1 LLC
RTO		Regional Transmission Organization
RTR		Renewable Technology Resource
SCE		Southern California Edison
SDG&E		San Diego Gas & Electric
SEC		U.S. Securities and Exchange Commission
Securities Act		The Securities Act of 1933, as amended
Senior Credit Facility		NRG's senior secured credit facility, comprised of the Revolving Credit Facility and the 2023 Term Loan Facility
Senior Notes		As of December 31, 2017, NRG’s $4.8 billion outstanding unsecured senior notes consisting of $992 million of 6.25% senior notes due 2022, $733 million of 6.25% senior notes due 2024, $1.0 billion of 7.25% senior notes due 2026, $1.25 billion of 6.625% senior notes due 2027, and $870 million of 5.75% senior notes due 2028.
Settlement Agreement		A settlement agreement and any other documents necessary to effectuate the settlement among NRG, GenOn, and certain holders of senior unsecured notes of GenOn Americas Generation and GenOn, and certain of GenOn's direct and indirect subsidiaries
Services Agreement		NRG provided GenOn with various management, personnel and other services, which include human resources, regulatory and public affairs, accounting, tax, legal, information systems, treasury, risk management, commercial operations, and asset management, as set forth in the services agreement with GenOn
SIFMA		Securities Industry and Financial Markets Association



SO₂		Sulfur Dioxide
South Central		NRG's South Central business, which owns and operates a 3,555-MW portfolio of generation assets consisting of 225-MW Bayou Cove, 430-MW Big Cajun-I, 1,461-MW Big Cajun-II, 1,263-MW Cottonwood and 176-MW Sterlington, and serves a customer base of cooperatives, municipalities and regional utilities under load contracts.
S&P		Standard & Poor's
TCPA		Telephone Consumer Protection Act
TSA		Transportation Services Agreement
TWCC		Texas Westmoreland Coal Co.
U.S.		United States of America
U.S. DOE		U.S. Department of Energy
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
VCP		Voluntary Clean-Up Program
VIE		Variable Interest Entity
WECC		Western Electricity Coordinating Council
WST		Washington-St. Tammany Electric Cooperative, Inc.
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)	2018			2017
Operating Revenues
Total operating revenues	$	2,421		$	2,382
Operating Costs and Expenses
Cost of operations	1,558			1,862
Depreciation and amortization	235			257
Selling, general and administrative	191			260
Reorganization costs	20			—
Development costs	13			17
Total operating costs and expenses	2,017			2,396
Other income - affiliate	—			48
Gain on sale of assets	2			2
Operating Income	406			36
Other Income/(Expense)
Equity in (losses)/earnings of unconsolidated affiliates	(2		)	5
Other (expense)/income, net	(3		)	13
Loss on debt extinguishment, net	(2		)	(2		)
Interest expense	(167		)	(225		)
Total other expense	(174		)	(209		)
Income/(Loss) from Continuing Operations Before Income Taxes	232			(173		)
Income tax benefit	(1		)	(4		)
Income/(Loss) from Continuing Operations	233			(169		)
Loss from discontinued operations, net of income tax	—			(34		)
Net Income/(Loss)	233			(203		)
Less: Net loss attributable to noncontrolling interest and redeemable noncontrolling interests	(46		)	(40		)
Net Income/(Loss) Attributable to NRG Energy, Inc.	$	279		$	(163	)
Earnings/(Loss) per Share Attributable to NRG Energy, Inc. Common Stockholders
Weighted average number of common shares outstanding — basic	318			316
Income/(loss) from continuing operations per weighted average common share — basic	$	0.88		$	(0.41	)
Loss from discontinued operations per weighted average common share — basic	$	—		$	(0.11	)
Earnings/(Loss) per Weighted Average Common Share — Basic	$	0.88		$	(0.52	)
Weighted average number of common shares outstanding — diluted	322			316
Income/(loss) from continuing operations per weighted average common share — diluted	$	0.87		$	(0.41	)
Loss from discontinued operations per weighted average common share — diluted	$	—		$	(0.11	)
Earnings/(Loss) per Weighted Average Common Share — Diluted	$	0.87		$	(0.52	)
Dividends Per Common Share	$	0.03		$	0.03

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,
	2018			2017
	(In millions)
Net income/(loss)	$	233		$	(203	)
Other comprehensive income/(loss), net of tax
Unrealized gain on derivatives, net of income tax expense of $0 and $1	14			4
Foreign currency translation adjustments, net of income tax expense of $0 and $0	(2		)	7
Defined benefit plans, net of income tax expense of $0 and $0	(1		)	—
Other comprehensive income	11			11
Comprehensive income/(loss)	244			(192		)
Less: Comprehensive loss attributable to noncontrolling interest and redeemable noncontrolling interest	(38		)	(39		)
Comprehensive income/(loss) attributable to NRG Energy, Inc.	282			(153		)
Comprehensive income/(loss) available for common stockholders	$	282		$	(153	)

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



(In millions, except shares)	March 31, 2018			December 31, 2017
ASSETS
Current Assets
Cash and cash equivalents	$	764		$	991
Funds deposited by counterparties	241			37
Restricted cash	407			508
Accounts receivable, net	903			1,079
Inventory	528			532
Derivative instruments	1,015			626
Cash collateral paid in support of energy risk management activities	211			171
Accounts receivable - affiliate	73			95
Current assets - held for sale	89			115
Prepayments and other current assets	326			261
Total current assets	4,557			4,415
Property, plant and equipment, net	13,911			13,908
Other Assets
Equity investments in affiliates	1,011			1,038
Goodwill	539			539
Intangible assets, net	1,726			1,746
Nuclear decommissioning trust fund	680			692
Derivative instruments	354			172
Deferred income taxes	136			134
Non-current assets held-for-sale	157			43
Other non-current assets	681			631
Total other assets	5,284			4,995
Total Assets	$	23,752		$	23,318
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and capital leases	$	956		$	688
Accounts payable	787			881
Accounts payable - affiliate	32			33
Derivative instruments	790			555
Cash collateral received in support of energy risk management activities	240			37
Current liabilities held-for-sale	80			72
Accrued expenses and other current liabilities	662			890
Accrued expenses and other current liabilities - affiliate	161			161
Total current liabilities	3,708			3,317
Other Liabilities
Long-term debt and capital leases	15,406			15,716
Nuclear decommissioning reserve	272			269
Nuclear decommissioning trust liability	400			415
Deferred income taxes	20			21
Derivative instruments	264			197
Out-of-market contracts, net	201			207
Non-current liabilities held-for-sale	7			8
Other non-current liabilities	1,136			1,122
Total non-current liabilities	17,706			17,955
Total Liabilities	21,414			21,272
Redeemable noncontrolling interest in subsidiaries	80			78
Commitments and Contingencies
Stockholders’ Equity
Common stock	4			4
Additional paid-in capital	8,379			8,376
Accumulated deficit	(5,982		)	(6,268		)
Less treasury stock, at cost — 104,518,931 and 101,580,045 shares, at March 31, 2018 and December 31, 2017, respectively	(2,474		)	(2,386		)
Accumulated other comprehensive loss	(61		)	(72		)
Noncontrolling interest	2,392			2,314
Total Stockholders’ Equity	2,258			1,968
Total Liabilities and Stockholders’ Equity	$	23,752		$	23,318

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,
(In millions)	2018			2017
Cash Flows from Operating Activities
Net income/(loss)	$	233		$	(203	)
Loss from discontinued operations, net of income tax	—			(34		)
Income/(loss) from continuing operations	233			(169		)
Adjustments to reconcile net income to net cash provided/(used) by operating activities:
Distributions and equity in earnings of unconsolidated affiliates	12			8
Depreciation and amortization	235			257
Provision for bad debts	15			9
Amortization of nuclear fuel	13			12
Amortization of financing costs and debt discount/premiums	14			15
Adjustment for debt extinguishment	2			—
Amortization of intangibles and out-of-market contracts	22			30
Amortization of unearned equity compensation	13			8
Changes in deferred income taxes and liability for uncertain tax benefits	(3		)	1
Changes in nuclear decommissioning trust liability	34			36
Changes in derivative instruments	(247		)	38
Changes in collateral deposits in support of energy risk management activities	163			(127		)
Gain on sale of emission allowances	(8		)	—
Gain on sale of assets	(2		)	(2		)
Changes in other working capital	(139		)	(198		)
Cash provided/(used) by continuing operations	357			(82		)
Cash provided by discontinued operations	—			15
Net Cash Provided/(Used) by Operating Activities	357			(67		)
Cash Flows from Investing Activities
Acquisitions of businesses, net of cash acquired	(62		)	(3		)
Capital expenditures	(358		)	(236		)
Decrease in notes receivable	3			4
Purchases of emission allowances	(17		)	(9		)
Proceeds from sale of emission allowances	23			11
Investments in nuclear decommissioning trust fund securities	(216		)	(153		)
Proceeds from the sale of nuclear decommissioning trust fund securities	182			117
Proceeds from sale of assets, net of cash disposed of	11			14
Changes in investments in unconsolidated affiliates	2			(12		)
Other	—			18
Cash used by continuing operations	(432		)	(249		)
Cash used by discontinued operations	—			(32		)
Net Cash Used by Investing Activities	(432		)	(281		)
Cash Flows from Financing Activities
Payment of dividends to common and preferred stockholders	(10		)	(9		)
Payment for treasury stock	(93		)	—
Net receipts from settlement of acquired derivatives that include financing elements	—			1
Proceeds from issuance of long-term debt	179			193
Payments for short and long-term debt	(228		)	(177		)
Net contributions from/(distributions to) noncontrolling interests in subsidiaries	110			(5		)
Payment of debt issuance costs	(7		)	(14		)
Other - contingent consideration	—			(10		)
Cash used by continuing operations	(49		)	(21		)
Cash used by discontinued operations	—			(132		)
Net Cash Used by Financing Activities	(49		)	(153		)
Effect of exchange rate changes on cash and cash equivalents	—			(7		)
Change in Cash from discontinued operations	—			(149		)
Net Decrease in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash	(124		)	(359		)
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period	1,536			1,386
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period	$	1,412		$	1,027

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

General

NRG Energy, Inc., or NRG or the Company, is a customer-driven integrated power company built on a portfolio of leading retail electricity brands and diverse generation assets. NRG is continuously focused on serving the energy needs of end-use residential, commercial and industrial customers in competitive markets through multiple brands and channels. The Company:


•	directly sells energy and innovative, sustainable products and services to retail customers under the names “NRG”, “Reliant” and other retail brand names owned by NRG;


•	owns and operates approximately 30,000 MW of generation;


•	engages in the trading of wholesale energy, capacity and related products; and


•	transacts in and trades fuel and transportation services.

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 2017 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, 2018, and the results of operations, comprehensive income/(loss) and cash flows for the three months ended March 31, 2018 and 2017.

GenOn Chapter 11 Cases

On June 14, 2017, GenOn, along with GenOn Americas Generation and certain of their directly and indirectly-owned subsidiaries, or collectively the GenOn Entities, filed voluntary petitions for relief under Chapter 11, or the Chapter 11 Cases, of the U.S. Bankruptcy Code, in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, or the Bankruptcy Court. GenOn Mid-Atlantic, as well as its consolidated subsidiaries, REMA and certain other subsidiaries, did not file for relief under Chapter 11.

As a result of the bankruptcy filings and beginning on June 14, 2017, GenOn and its subsidiaries were deconsolidated from NRG’s consolidated financial statements. NRG determined that this disposal of GenOn and its subsidiaries is a discontinued operation and, accordingly, the financial information for all historical periods has been recast to reflect GenOn as a discontinued operation.

Use of Estimates

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

Reclassifications

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

Note 2 — Summary of Significant Accounting Policies

Other Balance Sheet Information

The following table presents the allowance for doubtful accounts included in accounts receivable, net; accumulated depreciation included in property, plant and equipment, net; accumulated amortization included in intangible assets, net and accumulated amortization included in out-of-market contracts, net:



	March 31, 2018		December 31, 2017
	(In millions)
Accounts receivable allowance for doubtful accounts	$	27	$	28
Property, plant and equipment accumulated depreciation	4,679		4,465
Intangible assets accumulated amortization	1,393		1,818
Out-of-market contracts accumulated amortization	364		358

Restricted Cash

The following table provides a reconciliation of cash and cash equivalents, restricted cash and funds deposited by counterparties reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the statement of cash flows.



	March 31, 2018		December 31, 2017		March 31, 2017		December 31, 2016
	(In millions)
Cash and cash equivalents	$	764	$	991	$	627	$	938
Funds deposited by counterparties	241		37		3		2
Restricted cash	407		508		397		446
Cash and cash equivalents, funds deposited by counterparties and restricted cash shown in the statement of cash flows	$	1,412	$	1,536	$	1,027	$	1,386

Funds deposited by counterparties consist of cash held by the Company as a result of collateral posting obligations from its counterparties. Some amounts are segregated into separate accounts that are not contractually restricted but, based on the Company's intention, are not available for the payment of general corporate obligations. Depending on market fluctuations and the settlement of the underlying contracts, the Company will refund this collateral to the hedge counterparties pursuant to the terms and conditions of the underlying trades. Since collateral requirements fluctuate daily and the Company cannot predict if any collateral will be held for more than twelve months, the funds deposited by counterparties are classified as a current asset on the Company's balance sheet, with an offsetting liability for this cash collateral received within current liabilities.

Restricted cash consists primarily of funds held to satisfy the requirements of certain debt agreements and funds held within the Company's projects that are restricted in their use.

Noncontrolling Interest

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



	(In millions)
Balance as of December 31, 2017	$	2,314
Dividends paid to NRG Yield, Inc. public shareholders	(30		)
Distributions to noncontrolling interest	(19		)
Comprehensive loss attributable to noncontrolling interest	(22		)
Non-cash adjustments to noncontrolling interest	6
Contributions from noncontrolling interest	147
Sale of assets to NRG Yield, Inc.	(4		)
Balance as of March 31, 2018	$	2,392

Redeemable Noncontrolling Interest

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



	(In millions)
Balance as of December 31, 2017	$	78
Distributions to redeemable noncontrolling interest	(1		)
Contributions from redeemable noncontrolling interest	12
Non-cash adjustments to redeemable noncontrolling interest	7
Comprehensive loss attributable to redeemable noncontrolling interest	(16		)
Balance as of March 31, 2018	$	80

Revenue Recognition

Revenue from Contracts with Customers

On January 1, 2018, the Company adopted the guidance in ASC 606 using the modified retrospective method applied to contracts which were not completed as of the adoption date. The Company recognized the cumulative effect of initially applying the new standard as a credit to the opening balance of accumulated deficit, resulting in a decrease of approximately $16 million. The adjustment primarily related to costs incurred to obtain a contract with customers and customer incentives. Following the adoption of the new standard, the Company’s revenue recognition of its contracts with customers remains materially consistent with its historical practice. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company's policies with respect to its various revenue streams are detailed below. In general, the Company applies the invoicing practical expedient to recognize revenue for the revenue streams detailed below, except in circumstances where the invoiced amount does not represent the value transferred to the customer.

Retail Revenues

Gross revenues for energy sales and services to retail customers are recognized as the Company transfers the promised goods and services to the customer. For the majority of its electricity contracts, the Company’s performance obligation with the customer is satisfied over time and performance obligations for its electricity products are recognized as the customer takes possession of the product. The Company also allocates the contract consideration to distinct performance obligation in a contract for which the timing of the revenue recognized is different. Additionally, customer discounts and incentives reduce the contract consideration and are recognized over the term of the contract.

Energy sales and services that have been delivered but not billed by period end are estimated. Accrued unbilled revenues are based on estimates of customer usage since the date of the last meter reading provided by the independent system operators or electric distribution companies. Volume estimates are based on daily forecasted volumes and estimated customer usage by class. Unbilled revenues are calculated by multiplying these volume estimates by the applicable rate by customer class. Estimated amounts are adjusted when actual usage is known and billed.

As contracts for retail electricity can be for multi-year periods, the Company has performance obligations under these contracts that have not yet been satisfied. These performance obligations have transaction prices that are both fixed and variable, and that vary based on the contract duration, customer type, inception date and other contract-specific factors. For the fixed price contracts, the amount of any unsatisfied performance obligations will vary based on customer usage, which will depend on factors such as weather and customer activity and therefore it is not practicable to estimate such amounts.

Energy Revenue

Both physical and financial transactions are entered into to optimize the financial performance of the Company's generating facilities. Electric energy revenue is recognized upon transmission to the customer over time, using the output method for measuring progress of satisfaction of performance obligations. Physical transactions, or the sale of generated electricity to meet supply and demand, are recorded on a gross basis in the Company's consolidated statements of operations. The Company applies the invoicing practical expedient, where applicable, in recognizing energy revenue. Under the practical expedient, revenue is recognized based on the invoiced amount which is equal to the value to the customer of NRG’s performance obligation completed to date. Financial transactions, or the buying and selling of energy for trading purposes, are recorded net within operating revenues in the consolidated statements of operations in accordance with ASC 815.

Capacity Revenue

Capacity revenues consist of revenues billed to a third party at either the market or a negotiated contract price for making installed generation capacity available in order to satisfy system integrity and reliability requirements. Capacity revenues are recognized over time, using the output method for measuring progress of satisfaction of performance obligations. The Company applies the invoicing practical expedient, where applicable, in recognizing capacity revenue. Under the practical expedient, revenue is recognized based on the invoiced amount which is equal to the value to the customer of NRG’s performance obligation completed to date.

Capacity revenue contracts mainly consist of:

Capacity auctions — The Company's largest sources of capacity revenues are capacity auctions in PJM, ISO-NE, and NYISO. Both ISO-NE and PJM operate a pay-for-performance model where capacity payments are modified based on real-time performance, where NRG's actual revenues will be the combination of revenues based on the cleared auction MWs plus the net of any over- and under-performance of NRG's fleet. In addition, MISO has an annual auction, known as the Planning Resource Auction, or PRA. The Gulf Coast assets situated in the MISO market may participate in this auction. Estimated revenues for cleared auction MWs in the various capacity auctions are $554 million, $508 million, $423 million, $222 million and $57 million for fiscal years 2018, 2019, 2020, 2021 and 2022, respectively.

Resource adequacy and bilateral contracts — In California, there is a resource adequacy requirement that is primarily satisfied through bilateral contracts. Such bilateral contracts are typically short-term resource adequacy contracts. When bilateral contracting does not satisfy the resource adequacy need, such shortfalls can be addressed through procurement tools administered by the CAISO, including the capacity procurement mechanism or reliability must-run contracts. Demand payments from the current long-term contracts are tied to summer peak demand and provide a mechanism for recovering a portion of the costs associated with new or changed environmental laws or regulations. In Texas, capacity and contracted revenues are through bilateral contracts with load serving entities.

Long-term PPAs — Energy, capacity and where applicable, renewable attributes, from the majority of renewable energy assets and certain conventional energy plants is sold through long-term PPAs and tolling agreements to a single counterparty, which is often a utility or commercial customer. Many of these PPAs are accounted for as leases.

Renewable Energy Credits

As stated above, renewable energy credits are usually sold through long-term PPAs. Revenue from the sale of self-generated RECs is recognized when related energy is generated and simultaneously delivered even in cases where there is a certification lag as it has been deemed to be perfunctory.

In a bundled contract to sell energy, capacity and/or self-generated RECs, all performance obligations are deemed to be delivered at the same time and hence, timing of recognition of revenue for all performance obligations is the same and occurs over time. In such cases, it is often unnecessary to allocate transaction price to multiple performance obligations.

Sale of Emission Allowances

The Company records its inventory of emission allowances as part of intangible assets. From time to time, management may authorize the transfer of emission allowances in excess of usage from the Company's emission bank to intangible assets held-for-sale for trading purposes. The Company records the sale of emission allowances on a net basis within operating revenue in the Company's consolidated statements of operations.

Disaggregated Revenues

The following table represents the Company’s disaggregation of revenue from contracts with customers for the three months ended March 31, 2018, along with the reportable segment for each category:



	Three months ended March 31, 2018
				Generation
(In millions)	Retail			Gulf Coast			East/West^(a)			Subtotal			Renewables			NRG Yield			Eliminations			Total
Energy revenue^(a)(b)	$	—		$	371		$	218		$	589		$	77		$	114		$	(161	)	$	619
Capacity revenue^(a)(b)	—			67			140			207			—			82			(1		)	288
Retail revenue
Mass customers	1,171			—			—			—			—			—			(1		)	1,170
Business solutions customers	316			—			—			—			—			—			—			316
Total retail revenue	1,487			—			—			—			—			—			(1		)	1,486
Mark-to-market for economic hedging activities^(c)	(6		)	(564		)	(10		)	(574		)	(10		)	—			484			(106		)
Contract amortization	—			3			—			3			—			(17		)	—			(14		)
Other revenue^(a)(b)	—			86			16			102			19			46			(19		)	148
Total operating revenue	1,481			(37		)	364			327			86			225			302			2,421
Less: Lease revenue	6			—			1			1			64			181			—			252
Less: Derivative revenue	(6		)	(188		)	80			(108		)	(10		)	—			484			360
Less: Contract amortization	—			3			—			3			—			(17		)	—			(14		)
Total revenue from contracts with customers	$	1,481		$	148		$	283		$	431		$	32		$	61		$	(182	)	$	1,823
(a) The following amounts of energy and capacity revenue relate to leases and are accounted for under ASC 840:
	Retail			Gulf Coast			East/West			Subtotal			Renewables			NRG Yield			Eliminations			Total
Energy revenue	—			—			—			—			61			102			—			163
Capacity revenue	—			—			—			—			—			79			—			79
Other revenue	6			—			1			1			3			—			—			10
(b) The following amounts of energy and capacity revenue relate to derivative instruments and are accounted for under ASC 815.
	Retail			Gulf Coast			East/West			Subtotal			Renewables			NRG Yield			Eliminations			Total
Energy revenue	—			371			61			432			—			—			—			432
Capacity revenue	—			—			26			26			—			—			—			26
Other revenue	—			5			3			8			—			—			—			8
(c) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815.

Contract Amortization

Assets and liabilities recognized from power sales agreements assumed at Fresh Start and through acquisitions related to the sale of electric capacity and energy in future periods for which the fair value has been determined to be significantly less (more) than market are amortized to revenue over the term of each underlying contract based on actual generation and/or contracted volumes.

Lease Revenue

Certain of the Company’s revenues are obtained through PPAs or other contractual agreements. Many of these agreements are accounted for as operating leases under ASC 840 Leases. Certain of these leases have no minimum lease payments and all of the rent is recorded as contingent rent on an actual basis when the electricity is delivered. Judgment is required by management in determining the economic life of each generating facility, in evaluating whether certain lease provisions constitute minimum payments or represent contingent rent and other factors in determining whether a contract contains a lease and whether the lease is an operating lease or capital lease.

Contract Balances

The following table reflects the contract assets and liabilities included in the Company’s balance sheet as of March 31, 2018:




(In millions)	March 31, 2018
Deferred customer acquisition costs	$	85

Accounts receivable, net - Contracts with customers	784
Accounts receivable, net - Leases	81
Accounts receivable, net - Derivative instruments	38
Total accounts receivable, net	903

Unbilled revenues (included within Accounts receivable, net - Contracts with customers)	292

Deferred revenues	63

The Company’s customer acquisition costs consist of broker fees, commission payments and other costs that represent incremental costs of obtaining the contract with customers for which the Company expects to recover. The Company amortizes these amounts over the estimated life of the customer contract. As a practical expedient, the Company expenses the incremental costs of obtaining a contract if the amortization period of the asset would have been one year or less.

When the Company receives consideration from the customer that is in excess of the amount due, such consideration is reclassified to deferred revenue, which represents a contract liability. Generally, the Company will recognize revenue from contract liabilities in the next period as the Company satisfies its performance obligations.

Recent Accounting Developments - Guidance Adopted in 2018

ASU 2017-07 — In March 2017, the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, or ASU No. 2017-07. Current GAAP does not indicate where the amount of net benefit cost should be presented in an entity’s income statement and does not require entities to disclose the amount of net benefit cost that is included in the income statement. The amendments of ASU No. 2017-07 require an entity to report the service cost component of net benefit costs in the same line item as other compensation costs arising from services rendered by the related employees during the applicable service period. The other components of net benefit cost are required to be presented separately from the service cost component and outside the subtotal of income from operations. Further, ASU No. 2017-07 prescribes that only the service cost component of net benefit costs is eligible for capitalization. The Company adopted the amendments of ASU No. 2017-07 effective January 1, 2018. In connection with the adoption of the standard, the Company has applied the guidance retrospectively which resulted in an increase in cost of operations of $4 million and a corresponding increase in other income, net on the statement of operations for the three months ended March 31, 2017.

ASU 2016-01 - In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, or ASU No. 2016-01. The amendments of ASU No. 2016-01 eliminate available-for-sale classification of equity investments and require that equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) be generally measured at fair value with changes in fair value recognized in net income. Further, the amendments require that financial assets and financial liabilities be presented separately in the notes to the financial statements, grouped by measurement category and form of financial asset. The guidance in ASU No. 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. The Company adopted the amendments of ASU No. 2016-01 effective January 1, 2018. In connection with the adoption of the standard, the Company has applied the guidance on a modified retrospective basis, which resulted in no material adjustments recorded to the consolidated results of operations, cash flows, and statement of financial position.

Recent Accounting Developments - Guidance Not Yet Adopted

ASU 2016-02 — In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), or Topic 842, with the objective to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and to improve financial reporting by expanding the related disclosures. The guidance in Topic 842 provides that a lessee that may have previously accounted for a lease as an operating lease under current GAAP should recognize the assets and liabilities that arise from a lease on the balance sheet. In addition, Topic 842 expands the required quantitative and qualitative disclosures with regards to lease arrangements. The Company will adopt the standard effective January 1, 2019, and expects to elect certain of the practical expedients permitted, including the expedient that permits the Company to retain its existing lease assessment and classification. The Company is currently working through an adoption plan which includes the evaluation of lease contracts compared to the new standard. While the Company is currently evaluating the impact the new guidance will have on its financial position and results of operations, the Company expects to recognize lease liabilities and right of use assets. The extent of the increase to assets and liabilities associated with these amounts remains to be determined pending the Company’s review of its existing lease contracts and service contracts which may contain embedded leases. While this review is still in process, NRG believes the adoption of Topic 842 will have a material impact on its financial statements. The Company is also monitoring recent changes to Topic 842 and the related impact on the implementation process.

Note 3 — Discontinued Operations and Dispositions

This footnote should be read in conjunction with the complete description under Note 3, Discontinued Operations, Acquisitions and Dispositions, to the Company's 2017 Form 10-K.

Discontinued Operations

On June 14, 2017, the GenOn Entities filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. As a result of the bankruptcy filings, NRG has concluded that it no longer controls GenOn as it is subject to the control of the Bankruptcy Court; and, accordingly, NRG no longer consolidates GenOn for financial reporting purposes.

By eliminating a large portion of its operations in the PJM market with the deconsolidation of GenOn, NRG has concluded that GenOn meets the criteria for discontinued operations, as this represents a strategic shift in the markets in which NRG operates. As such, all prior period results for GenOn have been reclassified as discontinued operations.

Summarized results of discontinued operations were as follows:



	Three months ended March 31, 2017
(In millions)	Three months ended March 31, 2017
Operating revenues	$	381
Operating costs and expenses	(373		)
Other expenses	(44		)
Loss from operations of discontinued components, before tax	(36		)
Income tax expense	1
Loss from operations of discontinued components	(37		)
Interest income - affiliate	3
Loss from discontinued operations, net of tax	$	(34	)

Income recorded from discontinued operations was immaterial for the three months ended March 31, 2018.

Restructuring Support Agreement

NRG, GenOn and certain holders representing greater than 93% in aggregate principal amount of GenOn’s Senior Notes and certain holders representing greater than 93% in aggregate principal amount of GenOn Americas Generation’s Senior Notes entered into a Restructuring Support Agreement that provides for a restructuring and recapitalization of the GenOn Entities through a prearranged plan of reorganization that was approved by the Bankruptcy Court pursuant to an order of confirmation. Completion of the agreed upon terms is contingent upon certain milestones in the Restructuring Support Agreement and the satisfaction or waiver or certain conditions precedent. Certain principal terms of the Restructuring Support Agreement and the plan of reorganization are detailed below:


1)	The dismissal of litigation and full releases from GenOn and GenOn Americas Generation in favor of NRG upon the earlier of the consummation of the GenOn Entities' plan of reorganization or the Settlement Agreement; a condition precedent to the consummation of the Settlement Agreement is a full release or indemnification in favor of NRG from any claims of GenOn Mid-Atlantic and REMA.

NRG will provide settlement cash consideration to GenOn of $261.3 million, which will be paid in cash less any amounts owed to NRG under the intercompany secured revolving credit facility. As of March 31, 2018, GenOn owed NRG approximately $125 million under the intercompany secured revolving credit facility. See Note 13, Related Party Transactions, for further discussion of the intercompany secured revolving credit facility. The net liability for these amounts, along with the services credit described below, is recorded in accrued expenses and other current liabilities - affiliate as of March 31, 2018 and December 31, 2017.

NRG will retain the pension liability, including payment of approximately $13 million of 2017 pension contributions, for GenOn employees for service provided prior to the completion of the reorganization, which was paid in September 2017. GenOn’s pension liability as of March 31, 2018, was approximately $91 million. NRG will also retain the liability for GenOn’s post-employment and retiree health and welfare benefits, in an amount up to $25 million. These liabilities are recorded within other non-current liabilities as of March 31, 2018 and December 31, 2017.

The shared services agreement between NRG and GenOn was terminated and replaced as of the plan confirmation date with a transition services agreement. Under the transition services agreement, NRG will continue to provide the shared services and other separation services at an annualized rate of $84 million, subject to certain credits and adjustments. See Note 13, Related Party Transactions, for further discussion of the Services Agreement.


5)	NRG will provide a credit of $28 million to GenOn to apply against amounts owed under the transition services agreement. Any unused amount can be paid in cash at GenOn’s request. The credit was intended to reimburse GenOn for its payment of financing costs.

NRG and GenOn have agreed to cooperate in good faith to maximize the value of certain development projects. Pursuant to this, GenOn made a one-time payment in the amount of $15 million to NRG in December 2017 as compensation for a purchase option with respect to the Canal 3 project. On March 22, 2018, NRG agreed to sell Canal 3 to Stonepeak Kestrel Holdings II LLC in conjunction with GenOn's sale of Canal Units 1 and 2 to Stonepeak Kestrel Holdings LLC. NRG expects to reimburse GenOn for $13.5 million of the one-time payment upon the close of the sale of Canal 3. This amount is recorded as a current liability as of March 31, 2018, and December 31, 2017.

GenMA Settlement

The Bankruptcy Court order confirming the plan of reorganization also approved the settlement terms agreed to among the GenOn Entities, NRG, the Consenting Holders, GenOn Mid-Atlantic, and certain of GenOn Mid-Atlantic’s stakeholders, or the GenMA Settlement, and directed the settlement parties to cooperate in good faith to negotiate definitive documentation consistent with the GenMA Settlement term sheet in order to pursue consummation of the GenMA Settlement. The definitive documentation effectuating the GenMA Settlement was finalized and effective as of April 27, 2018. Certain terms of the compromise with respect to NRG and GenOn Mid-Atlantic are as follows:


•	Settlement of all pending litigation and objections to the Plan (including with respect to releases and feasibility);


•	NRG provided $37.5 million in letters of credit as new qualifying credit support to GenOn Mid-Atlantic; and


•	NRG paid approximately $6 million as reimbursement of professional fees incurred by certain of GenOn Mid-Atlantic's stakeholders in connection with the GenMA Settlement.

Transfer of Assets Under Common Control

On March 30, 2018, as part of the Transformation Plan, the Company sold to NRG Yield, Inc. 100% of NRG's interests in Buckthorn Renewables, LLC, which owns a 154-MW construction-stage utility-scale solar generation project, located in Texas. NRG Yield, Inc. paid cash consideration of approximately $42 million, excluding working capital adjustments, and assumed non-recourse debt of approximately $183 million. Concurrently, an initial contribution of approximately $19 million was received from the third-party investor in the underlying tax equity partnership, which is included in noncontrolling interest.

On March 27, 2017, the Company sold to NRG Yield, Inc.: (i) a 16% interest in the Agua Caliente solar project, representing ownership of approximately 46 net MW of capacity and (ii) NRG's interests in seven utility-scale solar projects located in Utah representing 265 net MW of capacity, which have reached commercial operations. NRG Yield, Inc. paid cash consideration of $130 million, plus $1 million in working capital adjustments, and assumed non-recourse debt of approximately $328 million.

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 2017 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, 2018				As of December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In millions)
Assets:
Notes receivable^(a)	$	15	$	14	$	16	$	15
Liabilities:
Long-term debt, including current portion^(b)	16,559		16,687		16,603		16,894

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

(b) Excludes deferred financing costs, which are recorded as a reduction to long-term debt 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. The following table presents the level within the fair value hierarchy for long-term debt, including current portion as of March 31, 2018 and December 31, 2017:



	As of March 31, 2018				As of December 31, 2017
	Level 2		Level 3		Level 2		Level 3
	(In millions)
Long-term debt, including current portion	$	8,772	$	7,915	$	8,934	$	7,960

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, 2018
	Fair Value
(In millions)	Total		Level 1		Level 2		Level 3
Investments in securities (classified within other non-current assets)	$	22	$	3	$	—	$	19
Nuclear trust fund investments:
Cash and cash equivalents	16		16		—		—
U.S. government and federal agency obligations	56		55		1		—
Federal agency mortgage-backed securities	92		—		92		—
Commercial mortgage-backed securities	16		—		16		—
Corporate debt securities	100		—		100		—
Equity securities	333		333		—		—
Foreign government fixed income securities	5		—		5		—
Other trust fund investments:
U.S. government and federal agency obligations	1		1		—		—
Derivative assets:
Commodity contracts	1,277		168		1,060		49
Interest rate contracts	92		—		92		—
Measured using net asset value practical expedient:
Equity securities — nuclear trust fund investments	62
Total assets	$	2,072	$	576	$	1,366	$	68
Derivative liabilities:
Commodity contracts	1,024		224		729		71
Interest rate contracts	30		—		30		—
Total liabilities	$	1,054	$	224	$	759	$	71



	As of December 31, 2017
	Fair Value
(In millions)	Total		Level 1		Level 2		Level 3
Investments in securities (classified within other non-current assets)	$	22	$	3	$	—	$	19
Nuclear trust fund investments:
Cash and cash equivalents	47		45		2		—
U.S. government and federal agency obligations	43		42		1		—
Federal agency mortgage-backed securities	82		—		82		—
Commercial mortgage-backed securities	14		—		14		—
Corporate debt securities	99		—		99		—
Equity securities	334		334		—		—
Foreign government fixed income securities	5		—		5		—
Other trust fund investments:
U.S. government and federal agency obligations	1		1		—		—
Derivative assets:
Commodity contracts	745		191		509		45
Interest rate contracts	53		—		53		—
Measured using net asset value practical expedient:
Equity securities — nuclear trust fund investments	68
Total assets	$	1,513	$	616	$	765	$	64
Derivative liabilities:
Commodity contracts	693		257		359		77
Interest rate contracts	59		—		59		—
Total liabilities	$	752	$	257	$	418	$	77

There were no transfers during the three months ended March 31, 2018 and 2017 between Levels 1 and 2. The following tables reconcile, for the three months ended March 31, 2018 and 2017, the beginning and ending balances for financial instruments that are recognized at fair value in the condensed consolidated financial statements, at least annually, using significant unobservable inputs:



	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Three months ended March 31, 2018
(In millions)	Debt Securities		Derivatives^(a)			Total
Beginning balance	$	19	$	(32	)	$	(13	)
Total gains — realized/unrealized:
Included in earnings	—		2			2
Purchases	—		1			1
Transfers into Level 3 ^(b)	—		4			4
Transfers out of Level 3 ^(b)	—		3			3
Ending balance as of March 31, 2018	$	19	$	(22	)	$	(3	)
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, 2018	$	—	$	3		$	3


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


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



	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
	Three months ended March 31, 2017
(In millions)	Debt Securities		Trust Fund Investments		Derivatives^(a)			Total
Beginning balance	$	17	$	54	$	(68	)	$	3
Total gains — realized/unrealized:
Included in earnings	1		—		6			7
Included in nuclear decommissioning obligation	—		4		—			4
Purchases	—		—		4			4
Transfers into Level 3 ^(b)	—		—		(8		)	(8		)
Transfers out of Level 3 ^(b)	—		—		10			10
Ending balance as of March 31, 2017	$	18	$	58	$	(56	)	$	20
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, 2017	$	—	$	—	$	(15	)	$	(15	)


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


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

Derivative Fair Value Measurements

A portion of NRG's contracts are exchange-traded contracts with readily available quoted market prices. A majority of NRG's contracts are non-exchange-traded contracts valued using prices provided by external sources, primarily price quotations available through brokers or over-the-counter and on-line exchanges. The remainder of the assets and liabilities represent contracts for which external sources or observable market quotes are not available for the whole term or for certain delivery months or the contracts are retail and load following power contracts. These contracts are valued using various valuation techniques including but not limited to internal models that apply fundamental analysis of the market and corroboration with similar markets. As of March 31, 2018, contracts valued with prices provided by models and other valuation techniques make up 4% of the total derivative assets and 7% of the total derivative liabilities.

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

The following tables quantify the significant unobservable inputs used in developing the fair value of the Company's Level 3 positions as of March 31, 2018 and December 31, 2017:



	Significant Unobservable Inputs
	March 31, 2018
	Fair Value						Input/Range
	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High		Weighted Average
	(In millions)
Power Contracts	$	38	$	63	Discounted Cash Flow	Forward Market Price (per MWh)	$	9		$	319	$	40
FTRs	11		8		Discounted Cash Flow	Auction Prices (per MWh)	(28		)	46		—
	$	49	$	71



	Significant Unobservable Inputs
	December 31, 2017
	Fair Value						Input/Range
	Assets		Liabilities		Valuation Technique	Significant Unobservable Input	Low			High		Weighted Average
	(In millions)
Power Contracts	$	34	$	65	Discounted Cash Flow	Forward Market Price (per MWh)	$	10		$	142	$	33
FTRs	11		12		Discounted Cash Flow	Auction Prices (per MWh)	(28		)	46		—
	$	45	$	77

The following table provides sensitivity of fair value measurements to increases/(decreases) in significant unobservable inputs as of March 31, 2018 and December 31, 2017:



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

The fair value of each contract is discounted using a risk-free interest rate. In addition, the Company applies a credit reserve to reflect credit risk, which is calculated based on published default probabilities. As of March 31, 2018, the credit reserve resulted in a $2 million decrease in fair value in operating revenue and cost of operations. As of December 31, 2017, the credit reserve resulted in no change in fair value in operating revenue and cost of operations.

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 2017 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 2017 Form 10-K. As of March 31, 2018, the Company's counterparty credit exposure, excluding credit risk exposure under certain long term agreements, was $505 million with net exposure of $244 million. NRG held collateral (cash and letters of credit) against those positions of $264 million. Approximately 83% of the Company's exposure before collateral is expected to roll off by the end of 2019. 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) (b)}
Category by Industry Sector	(% of Total)
Utilities, energy merchants, marketers and other	78	%
Financial institutions	22
Total as of March 31, 2018	100	%



	Net Exposure ^{(a) (b)}
Category by Counterparty Credit Quality	(% of Total)
Investment grade	78	%
Non-Investment grade/Non-Rated	22
Total as of March 31, 2018	100	%


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


(b)	The figures in the tables above exclude potential counterparty credit exposure related to RTOs, ISOs, registered commodity exchanges and certain long term contracts.

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 $65 million as of March 31, 2018. 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.

RTOs and ISOs

The Company participates in the organized markets of CAISO, ERCOT, ISO-NE, MISO, NYISO and PJM, known as RTOs or ISOs. Trading in these markets is approved by FERC, or in the case of ERCOT, approved by the PUCT and includes credit policies that, under certain circumstances, require that losses arising from the default of one member on spot market transactions be shared by the remaining participants. As a result, the counterparty credit risk to these markets is limited to NRG’s share of overall market and are excluded from the above exposures.

Exchange Traded Transactions

The Company enters into commodity transactions on registered exchanges, notably ICE and NYMEX. These clearinghouses act as the counterparty and transactions are subject to extensive collateral and margining requirements. As a result, these commodity transactions have limited counterparty credit risk.

Long Term Contracts

Counterparty credit exposure described above excludes credit risk exposure under certain long term agreements, including California tolling agreements, Gulf Coast load obligations, and wind and solar PPAs. 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, 2018, aggregate credit risk exposure managed by NRG to these counterparties was approximately $4.1 billion, including $2.5 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 or treatment by regulatory agencies which NRG is unable to predict.

Retail Customer Credit Risk

The Company is exposed to retail credit risk through the Company's retail electricity providers, which serve C&I customers and the Mass market. Retail credit risk results in losses when a customer fails to pay for services rendered. The losses may result from both nonpayment of customer accounts receivable and the loss of in-the-money forward value. The Company 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, 2018, the Company's retail customer credit exposure to C&I and Mass customers 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 2017 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 the Nuclear Decommissioning Trust liability and are not included in net income or accumulated OCI, consistent with regulatory treatment.

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



	As of March 31, 2018							As of December 31, 2017
(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	$	16	$	—	$	—	—	$	47	$	—	$	—	—
U.S. government and federal agency obligations	56		1		1		11	43		1		—		11
Federal agency mortgage-backed securities	92		—		2		23	82		1		1		23
Commercial mortgage-backed securities	16		—		1		22	14		—		—		20
Corporate debt securities	100		1		2		11	99		2		1		11
Equity securities	395		265		—		—	402		272		—		—
Foreign government fixed income securities	5		—		—		8	5		—		—		9
Total	$	680	$	267	$	6		$	692	$	276	$	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,
	2018		2017
	(In millions)
Realized gains	$	3	$	2
Realized losses	3		2
Proceeds from sale of securities	182		117

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 2017 Form 10-K.

Energy-Related Commodities

As of March 31, 2018, NRG had energy-related derivative instruments extending through 2031. The Company marks these derivatives to market through the statement of operations.

Interest Rate Swaps

NRG is exposed to changes in interest rates through the Company's issuance of variable rate debt. In order to manage the Company's interest rate risk, NRG enters into interest rate swap agreements. As of March 31, 2018, NRG had interest rate derivative instruments on recourse debt extending through 2021, which are not designated as cash flow hedges. The Company had interest rate swaps on non-recourse debt extending through 2041, a portion 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, 2018 and December 31, 2017. 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, 2018			December 31, 2017
Category	Units	(In millions)
Emissions	Short Ton	2			1
Coal	Short Ton	17			21
Natural Gas	MMBtu	(208		)	(17		)
Power	MWh	16			14
Capacity	MW/Day	(1		)	(1		)
Interest	Dollars	$	3,938		$	3,876
Equity	Shares	1			1

The increase in the natural gas position was primarily the result of additional generation hedge positions.

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, 2018		December 31, 2017		March 31, 2018		December 31, 2017
	(In millions)
Derivatives Designated as Cash Flow or Fair Value Hedges:
Interest rate contracts current	$	2	$	1	$	2	$	5
Interest rate contracts long-term	20		11		7		11
Total Derivatives Designated as Cash Flow or Fair Value Hedges	22		12		9		16
Derivatives Not Designated as Cash Flow or Fair Value Hedges:
Interest rate contracts current	13		9		7		15
Interest rate contracts long-term	57		32		14		28
Commodity contracts current	1,000		616		781		535
Commodity contracts long-term	277		129		243		158
Total Derivatives Not Designated as Cash Flow or Fair Value Hedges	1,347		786		1,045		736
Total Derivatives	$	1,369	$	798	$	1,054	$	752

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, 2018	(In millions)
Commodity contracts:
Derivative assets	$	1,277		$	(835	)	$	(201	)	$	241
Derivative liabilities	(1,024		)	835			120			(69		)
Total commodity contracts	253			—			(81		)	172
Interest rate contracts:
Derivative assets	92			(4		)	—			88
Derivative liabilities	(30		)	4			—			(26		)
Total interest rate contracts	62			—			—			62
Total derivative instruments	$	315		$	—		$	(81	)	$	234



	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, 2017	(In millions)
Commodity contracts:
Derivative assets	$	745		$	(578	)	$	(11	)	$	156
Derivative liabilities	(693		)	578			73			(42		)
Total commodity contracts	52			—			62			114
Interest rate contracts:
Derivative assets	53			(3		)	—			50
Derivative liabilities	(59		)	3			—			(56		)
Total interest rate contracts	(6		)	—			—			(6		)
Total derivative instruments	$	46		$	—		$	62		$	108

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:



	Interest Rate Contracts
	Three months ended March 31,
	2018			2017
	(In millions)
Accumulated OCI beginning balance	$	(54	)	$	(66	)
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts	4			3
Mark-to-market of cash flow hedge accounting contracts	19			2
Accumulated OCI ending balance, net of $6, and $14 tax	$	(31	)	$	(61	)
Losses expected to be realized from OCI during the next 12 months, net of $2 tax	$	(9	)

Amounts reclassified from accumulated OCI into income are recorded to interest expense for interest rate contracts.

The Company's regression analysis for Marsh Landing, Walnut Creek, and Avra Valley interest rate swaps, while positively correlated, no longer contain match terms for cash flow hedge accounting. As a result, the Company voluntarily de-designated the Marsh Landing, Walnut Creek, and Avra Valley cash flow hedges as of April 28, 2017, and will prospectively mark these derivatives to market through the income statement.

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 are reflected in current period consolidated results of operations.

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



	Three months ended March 31,
	2018			2017
Unrealized mark-to-market results	(In millions)
Reversal of previously recognized unrealized losses on settled positions related to economic hedges	$	2		$	3
Net unrealized gains/(losses) on open positions related to economic hedges	194			(22		)
Total unrealized mark-to-market gains/(losses) for economic hedging activities	196			(19		)
Reversal of previously recognized unrealized gains on settled positions related to trading activity	(3		)	(15		)
Net unrealized gains on open positions related to trading activity	11			1
Total unrealized mark-to-market gains/(losses) for trading activity	8			(14		)
Total unrealized gains/(losses)	$	204		$	(33	)



	Three months ended March 31,
	2018			2017
	(In millions)
Unrealized (losses)/gains included in operating revenues	$	(98	)	$	104
Unrealized gains/(losses) included in cost of operations	302			(137		)
Total impact to statement of operations — energy commodities	$	204		$	(33	)
Total impact to statement of operations — interest rate contracts	$	48		$	5

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 operating revenue or cost of operations during the same period.

For the three months ended March 31, 2018, the $194 million unrealized gain from open economic hedge positions was primarily the result of an increase in value of forward purchases of ERCOT heat rate contracts due to ERCOT heat rate expansion.

For the three months ended March 31, 2017, the $22 million unrealized loss from open economic hedge positions was primarily the result of a decrease in value of forward purchases of natural gas, coal, and ERCOT electricity due to decreases in natural gas, coal, and ERCOT electricity 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 require 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, 2018, was $20 million. The collateral required for contracts with credit rating contingent features that are in a net liability position as of March 31, 2018, was $5 million. The Company is also a party to certain marginable agreements under which it has a net liability position, but the counterparty has not called for the collateral due, which was approximately $5 million as of March 31, 2018.

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 2017 Form 10-K. Long-term debt and capital leases consisted of the following:



(In millions, except rates)	March 31, 2018			December 31, 2017			March 31, 2018 interest rate % ^(a)

Recourse debt:
Senior notes, due 2022	992			992			6.250
Senior notes, due 2024	733			733			6.250
Senior notes, due 2026	1,000			1,000			7.250
Senior notes, due 2027	1,250			1,250			6.625
Senior notes, due 2028	870			870			5.750
Term loan facility, due 2023	1,867			1,872			L+1.75
Tax-exempt bonds	465			465			4.125 - 6.00
Subtotal recourse debt	7,177			7,182
Non-recourse debt:
NRG Yield, Inc. Convertible Senior Notes, due 2019	345			345			3.500
NRG Yield, Inc. Convertible Senior Notes, due 2020	288			288			3.250
NRG Yield Operating LLC Senior Notes, due 2024	500			500			5.375
NRG Yield Operating LLC Senior Notes, due 2026	350			350			5.000
NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility, due 2023^(b)	75			55			L+2.500
El Segundo Energy Center, due 2023	369			400			L+1.75 - L+2.375
Marsh Landing, due 2023	309			318			L+2.125
Alta Wind I - V lease financing arrangements, due 2034 and 2035	926			926			5.696 - 7.015
Walnut Creek, term loans due 2023	259			267			L+1.625
Utah Portfolio, due 2022	278			278			various
Tapestry, due 2021	158			162			L+1.625
CVSR, due 2037	731			746			2.339 - 3.775
CVSR HoldCo, due 2037	188			194			4.680
Alpine, due 2022	135			135			L+1.750
Energy Center Minneapolis, due 2025	83			83			5.95
Energy Center Minneapolis, due 2031	125			125			3.55
Viento, due 2023	163			163			L+3.00
Buckthorn Solar, due 2018 and 2025	183			169			L+1.750
NRG Yield - other	573			579			various
Subtotal NRG Yield debt (non-recourse to NRG) ^(c)	6,038			6,083
Ivanpah, due 2033 and 2038	1,068			1,073			2.285 - 4.256
Carlsbad Energy Project ^(c)	475			427			L+1.625 - 4.120
Agua Caliente, due 2037	815			818			2.395 - 3.633
Agua Caliente Borrower 1, due 2038	86			89			5.430
Cedro Hill, due 2025 ^(c)	149			151			L+1.75
Midwest Generation, due 2019	132			152			4.390
NRG Other Renewables ^(c)	466			478			various
NRG Other	178			180			various
Subtotal other NRG non-recourse debt	3,369			3,368
Subtotal all non-recourse debt	9,407			9,451
Subtotal long-term debt (including current maturities)	16,584			16,633
Capital leases	4			5			various
Subtotal long-term debt and capital leases (including current maturities)	16,588			16,638
Less current maturities^(d)	(956		)	(688		)
Less debt issuance costs	(201		)	(204		)
Discounts	(25		)	(30		)
Total long-term debt and capital leases	$	15,406		$	15,716

(a) As of March 31, 2018, L+ equals 3 month LIBOR plus x%, except for the Buckthorn Solar and Utah Solar Portfolio where L+ equals 1 month LIBOR plus x%.

(b) Applicable rate is determined by the Borrower Leverage Ratio, as defined in the credit agreement.

(d) The NRG Yield, Inc. Convertible Senior Notes, due 2019, become due in February 2019 and are recorded in current maturities as of March 31, 2018.

Recourse Debt

2023 Term Loan Facility

On March 21, 2018, NRG repriced the 2023 Term Loan Facility, reducing the interest rate margin by 50 basis points to LIBOR plus 1.75% and reducing the LIBOR floor to 0.00%.

Non-recourse Debt

NRG Yield LLC and NRG Yield Operating LLC Revolving Credit Facility

NRG Yield LLC and its direct wholly owned subsidiary, NRG Yield Operating LLC, are parties to a senior secured revolving credit facility, which can be used for cash and for the issuance of letters of credit. At March 31, 2018, there was $67 million of letters of credit issued under the revolving credit facility and outstanding borrowings of $75 million on the revolver. On April 30, 2018, NRG Yield LLC and NRG Yield Operating LLC refinanced the revolving credit facility, which extended the maturity of the facility to April 28, 2023, and decreased the overall cost of borrowing from L+ 2.50% to L+1.75%.

Project Financings

Agua Caliente Project Financing

On February 17, 2017, Agua Caliente Borrower 1 LLC and Agua Caliente Borrower 2 LLC, or Agua Caliente Holdco, the indirect owners of 51% of the Agua Caliente solar facility, issued $130 million of senior secured notes under the Agua Caliente Holdco Financing Agreement, or 2038 Agua Caliente Holdco Notes, that bear interest at 5.43% and mature on December 31, 2038. As described in Note 3, Discontinued Operations and Dispositions, on March 27, 2017, NRG Yield, Inc. acquired Agua Caliente Borrower 2 LLC from NRG. The debt is joint and several with respect to Agua Caliente Borrower 1 LLC and Agua Caliente Borrower 2 LLC and is secured by the equity interests of each borrower in the Agua Caliente solar facility.

Carlsbad Project Financing

On May 26, 2017, Carlsbad Energy Holdings, LLC entered into a note payable agreement with financial institutions for the issuance of up to $407 million of senior secured notes that bear interest at a rate of 4.12%, and mature on October 31, 2038, and a credit agreement for a $194 million construction loan, that will convert to a term loan upon completion of the project as well as a letter of credit facility with an aggregate principal amount not to exceed $83 million, and a working capital loan facility with an aggregate principal amount not to exceed $4 million. As of March 31, 2018, $475 million was outstanding under both the note and the construction loan.

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.

Utility-Scale Solar Portfolio — Through its consolidated subsidiary, NRG Yield, Inc., the Company has equity interests in Four Brothers Solar, LLC, Granite Mountain Holdings, LLC, and Iron Springs Holdings, LLC which are accounted for as equity method investments as the Company does not have a controlling financial interest. The assets have 20-year PPAs with PacifiCorp. NRG's maximum exposure to loss is limited to its equity investment, which was $338 million as of March 31, 2018.

GenConn Energy LLC — Through its consolidated subsidiary, NRG Yield, Inc., the Company owns a 50% interest in GCE Holding LLC, the owner of 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 $100 million as of March 31, 2018.

Entities that are Consolidated

The Company has a controlling financial interest in certain entities which have been identified as VIEs under ASC 810. These arrangements are primarily related to tax equity arrangements entered into with third-parties in order to finance the cost of solar energy systems under operating leases and wind facilities eligible for certain tax credits as further described in Note 2, Summary of Significant Accounting Policies to the Company's 2017 Form 10-K. For one of the tax equity arrangements, the Company has a deficit restoration obligation equal to $81 million as of March 31, 2018, which would be required to be funded if the arrangement were to be dissolved.

The summarized financial information for the Company's consolidated VIEs consisted of the following:



(In millions)	March 31, 2018		December 31, 2017
Current assets	$	171	$	118
Net property, plant and equipment	2,712		2,337
Other long-term assets	665		658
Total assets	3,548		3,113
Current liabilities	111		96
Long-term debt	856		661
Other long-term liabilities	211		209
Total liabilities	1,178		966
Redeemable noncontrolling interest	80		78
Noncontrolling interests	646		507
Net assets less noncontrolling interests	$	1,644	$	1,562

Note 9 — Changes in Capital Structure

As of March 31, 2018 and December 31, 2017, 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, 2017	418,323,134	(101,580,045	)	316,743,089
Shares issued under LTIPs	1,081,994	—		1,081,994
Shares issued under ESPP	—	175,862		175,862
Shares repurchased	—	(3,114,748	)	(3,114,748	)
Balance as of March 31, 2018	419,405,128	(104,518,931	)	314,886,197

Employee Stock Purchase Plan

In January 2018, 175,862 shares of common stock were issued to employee accounts from treasury stock for the offering period of July 1, 2017 to December 31, 2017. In January 2018, NRG suspended the ESPP.

Share Repurchases

In February 2018, the Company's board of directors authorized the Company to repurchase $1 billion of its common stock, with the first $500 million program beginning as soon as permitted. In March 2018, share repurchases were made as follows:



	Total number of shares purchased	Average price paid per share ^(a)		Amounts paid for shares purchased (in millions) ^(a)
Board Authorized Share Repurchases
March 2018	3,114,748	$	29.75	$	93

(a) The average price paid per share and amounts paid for shares purchased exclude the commissions of $0.01 per share paid in connection with the share repurchase.

NRG Common Stock Dividends

The following table lists the dividends paid during the three months ended March 31, 2018:



	First Quarter 2018
Dividends per Common Share	$	0.03

On April 19, 2018, NRG declared a quarterly dividend on the Company's common stock of $0.03 per share, payable May 15, 2018, to stockholders of record as of May 1, 2018, representing $0.12 per share 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.

Note 10 — Earnings/(Loss) Per Share

Basic earnings/(loss) per common share is computed by dividing net income/(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 earnings/(loss) per share is computed in a manner consistent with that of basic income/(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)	2018		2017
Basic income/(loss) per share attributable to NRG Energy, Inc. common stockholders
Net income/(loss) attributable to NRG Energy, Inc.	$	279	$	(163	)
Weighted average number of common shares outstanding - basic	318		316
Earnings/(loss) per weighted average common share — basic	$	0.88	$	(0.52	)
Diluted income/(loss) per share attributable to NRG Energy, Inc. common stockholders
Weighted average number of common shares outstanding - diluted	318		316
Incremental shares attributable to the issuance of equity compensation (treasury stock method)	4		—
Total dilutive shares	322		316
Earnings/(loss) per weighted average common share — diluted	$	0.87	$	(0.52	)

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)	2018	2017
Equity compensation plans	1	6
Total	1	6

Note 11 — Segment Reporting

The Company's segment structure reflects how management currently makes financial decisions and allocates resources. The Company's businesses are segregated as follows: Generation, which includes generation, international and BETM; Retail, which includes Mass customers and Business Solutions, which includes C&I customers and other distributed and reliability products; Renewables, which includes solar and wind assets, excluding those in NRG Yield; NRG Yield; and corporate activities.

During 2017, NRG Yield acquired several projects totaling 555 MW from NRG. On March 30, 2018, the Company sold to NRG Yield, Inc. 100% of NRG's interests in Buckthorn Renewables, LLC, which owns a 154 MW construction-stage utility-scale solar generation project, located in Texas. These acquisitions were treated as a transfer of entities under common control and accordingly, all historical periods have been recast to reflect the acquisition as if they had occurred at the beginning of the financial statement period.

On June 14, 2017, as described in Note 3, Discontinued Operations and Dispositions, NRG deconsolidated GenOn for financial reporting purposes. The financial information for all historical periods have been recast to reflect the presentation of GenOn as discontinued operations within the corporate segment.

NRG’s chief operating decision maker, its chief executive officer, evaluates the performance of its segments based on operational measures including adjusted earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA, free cash flow and capital for allocation, as well as net income/(loss).



	Retail ^(a)		Generation^(a)			Renewables^(a)			NRG Yield				Corporate^(a)			Eliminations			Total
Three months ended March 31, 2018			(In millions)
Operating revenues^(a)	$	1,481	$	327		$	86		$	225			$	2		$	300		$	2,421
Depreciation and amortization	28		67			51			81				8			—			235
Reorganization costs	3		4			—			—				13			—			20
Equity in earnings/(losses) of unconsolidated affiliates	—		2			—			4				(1		)	(7		)	(2		)
Income/(loss) from continuing operations before income taxes	946		(536		)	(40		)	(1		)		(126		)	(11		)	232
Income/(loss) from continuing operations	946		(536		)	(34		)	—				(132		)	(11		)	233
Net Income/(Loss)	946		(536		)	(34		)	—				(132		)	(11		)	233
Net Income/(Loss) attributable to NRG Energy, Inc.	$	940	$	(536	)	$	1		$	21		—	$	(148	)	$	1		$	279
Total assets as of March 31, 2018	$	3,521	$	7,313		$	5,191		$	8,362			$	9,108		$	(9,743	)	$	23,752



(a) Operating revenues include inter-segment sales and net derivative gains and losses of:	$	1	$	(307	)	$	8	$	—	$	(2	)	$	—	$	(300	)



	Retail^(a)			Generation^(a)			Renewables^(a)			NRG Yield			Corporate^(a)(b)			Eliminations			Total
Three months ended March 31, 2017				(In millions)
Operating revenues^(a)	$	1,335		$	965		$	95		$	221		$	10		$	(244	)	$	2,382
Depreciation and amortization	28			97			47			77			8			—			257
Equity in (losses)/earnings of unconsolidated affiliates	—			(13		)	—			19			3			(4		)	5
(Loss)/income from continuing operations before income taxes	(31		)	37			(35		)	(3		)	(137		)	(4		)	(173		)
(Loss)/income from continuing operations	(34		)	37			(29		)	(2		)	(137		)	(4		)	(169		)
Loss from discontinued operations, net of tax	—			—			—			—			(34		)	—			(34		)
Net (Loss)/Income	(34		)	37			(29		)	(2		)	(171		)	(4		)	(203		)
Net (Loss)/Income attributable to NRG Energy, Inc.	$	(33	)	$	37		$	(1	)	$	12		$	(171	)	$	(7	)	$	(163	)



(a) Operating revenues include inter-segment sales and net derivative gains and losses of:	$	1	$	209	$	8	$	—	$	26	$	—	$	244
(b) Includes other income - affiliate	$	—	$	—	$	—	$	—	$	48	$	—	$	48

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)	2018			2017
Income/(Loss) before income taxes	$	232		$	(173	)
Income tax benefit from continuing operations	(1		)	(4		)
Effective tax rate	(0.4		)%