NRG ENERGY, INC. - Quarter Report: 2020 June (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the Quarterly Period Ended:

June 30, 2020

☐

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

41-1724239

(State or other jurisdiction
of incorporation or organization)

(I.R.S. Employer
Identification No.)

804 Carnegie Center,

Princeton

New Jersey

08540

(Address of principal executive offices)

(Zip Code)

(609) 524-4500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Exchange on Which Registered
Common Stock, par value $0.01	NRG	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☒ No ☐

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

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth 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. ☐

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

Yes ☐ No ☒

As of August 6, 2020, there were 244,137,848 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			9
ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES			9
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			55
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			89
ITEM 4 — CONTROLS AND PROCEDURES			91
PART II — OTHER INFORMATION			92
ITEM 1 — LEGAL PROCEEDINGS			92
ITEM 1A — RISK FACTORS			92
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			94
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES			94
ITEM 4 — MINE SAFETY DISCLOSURES			94
ITEM 5 — OTHER INFORMATION			94
ITEM 6 — EXHIBITS			95
SIGNATURES			96

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 the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the 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 Risk Factors, in Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and the following:

•NRG's inability to estimate with any degree of certainty the future impact that COVID-19, any resurgence of COVID-19, or other pandemic may have on NRG's results of operations, financial position, risk exposure and liquidity;

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

•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, 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;

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

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

•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 in the future;

•Operating and financial restrictions placed on NRG and its subsidiaries that are contained in the indentures governing NRG's Senior Notes, Senior Secured Notes and 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 market initiatives, corporate efficiencies, asset strategy, and a range of other programs throughout NRG to reduce costs or generate revenues;

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

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

•NRG's ability to develop and maintain successful partnering relationships as needed.

Forward-looking statements speak only as of the date they were made and NRG undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing 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:


2019 Form 10-K						NRG’s Annual Report on Form 10-K for the year ended December 31, 2019
2023 Term Loan Facility						The Company's term loan facility due 2023, a component of the Senior Credit Facility, which was repaid during the second quarter of 2019
ACE						Affordable Clean Energy
Agua Caliente						Agua Caliente Solar Project, a 290 MW photovoltaic power station located in Yuma County, Arizona in which NRG owns 35% interest
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 power prices						Volume-weighted average power prices, net of average fuel costs and reflecting the impact of settled hedges
Bankruptcy Code						Chapter 11 of Title 11 the U.S. Bankruptcy Code
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
CAISO						California Independent System Operator
California Bankruptcy Court						United States Bankruptcy Court for the Northern District of California, San Francisco Division
CARES Act						Coronavirus Aid, Relief, and Economic Security Act
Carlsbad						Carlsbad Energy Center, a 528 MW natural gas-fired project located in Carlsbad, CA
CCR						Coal Combustion Residuals
CDD						Cooling Degree Day

CFTC						U.S. Commodity Futures Trading Commission

C&I						Commercial industrial and governmental/institutional
Centrica						Centrica plc
CES						Clean Energy Standard
Cleco						Cleco Corporate Holdings LLC
CO₂						Carbon Dioxide
ComEd						Commonwealth Edison
Company						NRG Energy, Inc.
Convertible Senior Notes						As of June 30, 2020, consists of NRG’s $575 million unsecured 2.75% Convertible Senior Notes due 2048
Cottonwood						Cottonwood Generating Station, a 1,153 MW natural gas-fueled plant
COVID-19						Coronavirus Disease 2019
CPP						Clean Power Plan
CPUC						California Public Utilities Commission
CWA						Clean Water Act
D.C. Circuit						U.S. Court of Appeals for the District of Columbia Circuit
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
Economic gross margin						Sum of energy revenue, capacity revenue, retail revenue and other revenue, less cost of fuels and other cost of sales
EGU						Electric Generating Unit
EPA						U.S. Environmental Protection Agency
ERCOT						Electric Reliability Council of Texas, the Independent System Operator and the regional reliability coordinator of the various electricity systems within Texas
ESCO						Energy Service Companies
ESPP						NRG Energy, Inc. Amended and Restated Employee Stock Purchase Plan


Exchange Act						The Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
FERC						Federal Energy Regulatory Commission
FGD						Flue gas desulfurization
FTRs						Financial Transmission Rights
GAAP						Generally accepted accounting principles in the U.S.
GenOn						GenOn Energy, Inc.
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 Texas Bankruptcy Court on June 14, 2017
GHG						Greenhouse Gas
GIP						Global Infrastructure Partners
Green Mountain Energy						Green Mountain Energy Company
GWh						Gigawatt Hour
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 upon whether the electricity output measured is gross or net generation. Heat rates are generally expressed as BTU per net kWh
HLW						High-level radioactive waste
HSR Act						Hart-Scott-Rodino Act
ICE						Intercontinental Exchange
ISO						Independent System Operator, also referred to as RTOs
ISO-NE						ISO New England Inc.
Ivanpah						Ivanpah Solar Electric Generation Station, a 393 MW solar thermal power plant located in California's Mojave Desert in which NRG owns 54.5% interest
kWh						Kilowatt-hour
LaGen						Louisiana Generating, LLC
LIBOR						London Inter-Bank Offered Rate
LTIPs						Collectively, the NRG long-term incentive plan ("LTIP") and the NRG GenOn LTIP
Mass Market						Residential and small commercial customers
MDth						Thousand Dekatherms
Midwest Generation						Midwest Generation, LLC
MISO						Midcontinent Independent System Operator, Inc.
MMBtu						Million British Thermal Units
MW						Megawatts
MWe						Megawatt equivalent
MWh						Saleable megawatt hour net of internal/parasitic load megawatt-hour
NAAQS						National Ambient Air Quality Standards
NEPOOL						New England Power Pool
NERC						North American Electric Reliability Corporation
NJBPU						New Jersey Board of Public Utilities
Net Exposure						Counterparty credit exposure to NRG, net of collateral
Nodal						Nodal Exchange is a derivatives exchange
NOL						Net Operating Loss
NOx						Nitrogen Oxides
NPNS						Normal Purchase Normal Sale
NRC						U.S. Nuclear Regulatory Commission
NRG						NRG Energy, Inc.


NRG Yield, Inc.						NRG Yield, Inc., which changed its name to Clearway Energy, Inc. following the sale by NRG of NRG Yield and the Renewables Platform to GIP


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
Nuclear Waste Policy Act						U.S. Nuclear Waste Policy Act of 1982
NYISO						New York Independent System Operator
NYMEX						New York Mercantile Exchange
NYSPSC						New York State Public Service Commission
OCI/OCL						Other Comprehensive Income/(Loss)
ORDC						Operating Reserve Demand Curve
Petra Nova						Petra Nova Parish Holdings, LLC which is 50% owned by NRG and which owns and operates a 240 MWe carbon capture system and a 78 MW cogeneration facility, and owns an equity interest in an oilfield
PG&E						PG&E Corporation (NYSE: PCG) and its primary operating subsidiary, Pacific Gas and Electric Company
PJM						PJM Interconnection, LLC
PM2.5						Particulate Matter that has a diameter of less than 2.5 micrometers
PPA						Power Purchase Agreement
PUCT						Public Utility Commission of Texas
RCE						Residential Customer Equivalent is a unit of measure used by the energy industry to denote the typical annual commodity consumption by a single-family residential customer. 1 RCE represents 1,000 therms of natural gas or 10,000 kWh of electricity
RCRA						Resource Conservation and Recovery Act of 1976
Reliant Energy						Reliant Energy Retail Services, LLC

Renewables						Consists of the following projects in which NRG has an ownership interest: Agua Caliente, Ivanpah, and solar generating stations located at various NFL Stadiums
Renewables Platform						The renewable operating and development platform sold by NRG to GIP with NRG's interest in NRG Yield, Inc.
Revolving Credit Facility						The Company's $2.6 billion revolving credit facility, a component of the Senior Credit Facility, due 2024 was amended on May 28, 2019
RGGI						Regional Greenhouse Gas Initiative
RTO						Regional Transmission Organization, also referred to as ISOs
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. The 2023 Term Loan Facility was repaid in the second quarter of 2019
Senior Notes						As of June 30, 2020, NRG's $3.8 billion outstanding unsecured senior notes consisting of $1.0 billion of the 7.25% senior notes due 2026, $1.23 billion of the 6.625% senior notes due 2027, $821 million of 5.75% senior notes due 2028 and $733 million of the 5.250% senior notes due 2029
Senior Secured Notes						As of June 30, 2020, NRG’s $1.1 billion outstanding Senior Secured First Lien Notes consists of $600 million of the 3.75% Senior Secured First Lien Notes due 2024 and $500 million of the 4.45% Senior Secured First Lien Notes due 2029

SNF						Spent Nuclear Fuel
SO₂						Sulfur Dioxide


South Central Portfolio						NRG's South Central Portfolio, which owned and operated a portfolio of generation assets consisting of Bayou Cove, Big Cajun-I, Big Cajun-II, Cottonwood and Sterlington, was sold on February 4, 2019. NRG is leasing back the Cottonwood facility through May 2025
STP						South Texas Project — nuclear generating facility located near Bay City, Texas in which NRG owns a 44% interest
STPNOC						South Texas Project Nuclear Operating Company

TDSP						Transmission/distribution service provider
Texas Bankruptcy Court						United States Bankruptcy Court for the Southern District of Texas, Houston Division
Transformation Plan						NRG's three-year plan announced in 2017, which includes targets related to operations and excellence, portfolio optimization, and capital structure and allocation enhancement
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
VIE						Variable Interest Entity
ZECs						Zero Emissions Credits

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 June 30,						Six months ended June 30,
(In millions, except for per share amounts)	2020		2019		2020		2019
Operating Revenues
Total operating revenues	$	2,238	$	2,465	$	4,257	$	4,630
Operating Costs and Expenses
Cost of operations	1,434		1,845		2,891		3,496
Depreciation and amortization	110		85		219		170
Impairment losses	—		1		—		1
Selling, general and administrative costs	208		211		417		405
Reorganization costs	—		2		3		15
Development costs	2		2		5		4
Total operating costs and expenses	1,754		2,146		3,535		4,091

Gain on sale of assets	—		1		6		2
Operating Income	484		320		728		541
Other Income/(Expense)
Equity in earnings/(losses) of unconsolidated affiliates	12		—		1		(21)
Impairment losses on investments	—		—		(18)		—
Other income, net	14		20		41		32
Loss on debt extinguishment, net	—		(47)		(1)		(47)
Interest expense	(96)		(105)		(193)		(219)
Total other expense	(70)		(132)		(170)		(255)
Income from Continuing Operations Before Income Taxes	414		188		558		286
Income tax expense/(benefit)	101		(1)		124		3
Income from Continuing Operations	313		189		434		283
Income from discontinued operations, net of income tax	—		13		—		401
Net Income	313		202		434		684
Less: Net income attributable to redeemable noncontrolling interests	—		1		—		1
Net Income Attributable to NRG Energy, Inc.	$	313	$	201	$	434	$	683
Earnings per Share
Weighted average number of common shares outstanding — basic	245		265		246		272
Income from continuing operations per weighted average common share — basic	$	1.28	$	0.71	$	1.76	$	1.04
Income from discontinued operations per weighted average common share — basic	$	—	$	0.05	$	—	$	1.47
Earnings per Weighted Average Common Share — Basic	$	1.28	$	0.76	$	1.76	$	2.51
Weighted average number of common shares outstanding — diluted	246		267		247		274
Income from continuing operations per weighted average common share — diluted	$	1.27	$	0.70	$	1.76	$	1.03
Income from discontinued operations per weighted average common share — diluted	$	—	$	0.05	$	—	$	1.46
Earnings per Weighted Average Common Share — Diluted	$	1.27	$	0.75	$	1.76	$	2.49

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended June 30,						Six months ended June 30,
(In millions)	2020		2019		2020		2019
Net Income	$	313	$	202	$	434	$	684
Other Comprehensive Income/(Loss)

Foreign currency translation adjustments	13		(1)		(2)		—
Available-for-sale securities	—		1		—		1
Defined benefit plans	—		(3)		—		(6)
Other comprehensive income/(loss)	13		(3)		(2)		(5)
Comprehensive Income	326		199		432		679
Less: Comprehensive income attributable to redeemable noncontrolling interest	—		1		—		1
Comprehensive Income Attributable to NRG Energy, Inc.	$	326	$	198	$	432	$	678

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2020		December 31, 2019
(In millions, except share data)	(Unaudited)		(Audited)
ASSETS
Current Assets
Cash and cash equivalents	$	418	$	345
Funds deposited by counterparties	36		32
Restricted cash	8		8
Accounts receivable, net	1,015		1,025
Inventory	388		383
Derivative instruments	791		860
Cash collateral paid in support of energy risk management activities	136		190

Prepayments and other current assets	284		245


Total current assets	3,076		3,088
Property, plant and equipment, net	2,533		2,593
Other Assets
Equity investments in affiliates	372		388

Operating lease right-of-use assets, net	429		464
Goodwill	579		579
Intangible assets, net	733		789
Nuclear decommissioning trust fund	794		794
Derivative instruments	439		310
Deferred income taxes	3,170		3,286
Other non-current assets	212		240


Total other assets	6,728		6,850
Total Assets	$	12,337	$	12,531

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt	$	7	$	88
Current portion of operating lease liabilities	69		73
Accounts payable	736		722

Derivative instruments	728		781
Cash collateral received in support of energy risk management activities	36		32
Accrued expenses and other current liabilities	581		663



Total current liabilities	2,157		2,359
Other Liabilities
Long-term debt	5,810		5,803
Non-current operating lease liabilities	458		483
Nuclear decommissioning reserve	307		298
Nuclear decommissioning trust liability	478		487

Derivative instruments	299		322
Deferred income taxes	17		17
Other non-current liabilities	1,061		1,084


Total other liabilities	8,430		8,494
Total Liabilities	10,587		10,853
Redeemable noncontrolling interest in subsidiaries	—		20
Commitments and Contingencies
Stockholders' Equity
Common stock; $0.01 par value; 500,000,000 shares authorized; 423,031,777 and 421,890,790 shares issued and 244,137,848 and 248,996,189 shares outstanding at June 30, 2020 and December 31, 2019, respectively	4		4
Additional paid-in-capital	8,505		8,501
Accumulated deficit	(1,331)		(1,616)
Treasury stock, at cost - 178,893,929 and 172,894,601 shares at June 30, 2020 and December 31, 2019, respectively	(5,234)		(5,039)
Accumulated other comprehensive loss	(194)		(192)

Total Stockholders' Equity	1,750		1,658
Total Liabilities and Stockholders' Equity	$	12,337	$	12,531

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended June 30,
(In millions)	2020		2019
Cash Flows from Operating Activities
Net Income	$	434	$	684
Income from discontinued operations, net of income tax	—		401
Income from continuing operations	434		283
Adjustments to reconcile net income to cash provided by operating activities:
Distributions from and equity in (earnings)/losses of unconsolidated affiliates	7		22
Depreciation and amortization	219		170
Accretion of asset retirement obligations	18		14
Provision for credit losses	48		52
Amortization of nuclear fuel	25		27
Amortization of financing costs and debt discount/premiums	12		13
Loss on debt extinguishment, net	1		47
Amortization of emissions allowances and energy credits	33		14
Amortization of unearned equity compensation	12		10
(Gain)/loss on sale of assets and disposal of assets	(15)		1

Impairment losses	18		1
Changes in derivative instruments	(131)		(22)
Changes in deferred income taxes and liability for uncertain tax benefits	116		(5)
Changes in collateral deposits in support of energy risk management activities	58		125
Changes in nuclear decommissioning trust liability	36		17


Changes in other working capital	(199)		(352)
Cash provided by continuing operations	692		417
Cash provided by discontinued operations	—		8
Net Cash Provided by Operating Activities	692		425
Cash Flows from Investing Activities
Payments for acquisitions of businesses	(5)		(21)
Capital expenditures	(116)		(107)

Net purchases of emission allowances	(4)		(1)
Investments in nuclear decommissioning trust fund securities	(257)		(209)
Proceeds from the sale of nuclear decommissioning trust fund securities	220		191
Proceeds from sale of assets, net of cash disposed and sale of discontinued operations, net of fees	15		1,289

Net distributions from investments in unconsolidated affiliates	2		7
Contributions to discontinued operations	—		(44)

Cash (used)/provided by continuing operations	(145)		1,105
Cash used by discontinued operations	—		(2)
Net Cash (Used)/Provided by Investing Activities	(145)		1,103
Cash Flows from Financing Activities
Payments of dividends to common stockholders	(148)		(16)
Payments for share repurchase activity	(229)		(1,075)

Payments for debt extinguishment costs	—		(24)
Purchase of and distributions to noncontrolling interests from subsidiaries	(2)		(1)
Proceeds from issuance of common stock	1		2
Proceeds from issuance of long-term debt	59		1,833
Payment of debt issuance costs	(1)		(33)
Repayments of long-term debt	(61)		(2,485)
Net repayment of Revolving Credit Facility	(83)		—

Other	(5)		—
Cash used by continuing operations	(469)		(1,799)
Cash provided by discontinued operations	—		43
Net Cash Used by Financing Activities	(469)		(1,756)
Effect of exchange rate changes on cash and cash equivalents	(1)		—
Change in Cash from discontinued operations	—		49
Net Increase/(Decrease) in Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash	77		(277)
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at Beginning of Period	385		613
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash at End of Period	$	462	$	336

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


(In millions)	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stock-holders' Equity
Balance at December 31, 2019	$	4	$	8,501	$	(1,616)	$	(5,039)	$	(192)	$	1,658
Net income attributable to NRG Energy, Inc.					121						121
Other comprehensive loss									(15)		(15)
Repurchase of partners' equity interest in VIE			18								18

Share repurchases							(150)				(150)
Equity-based awards activity, net			(21)								(21)

Common stock dividends and dividend equivalents declared^(a)					(75)						(75)





Balance at March 31, 2020	$	4	$	8,498	$	(1,570)	$	(5,189)	$	(207)	$	1,536
Net income attributable to NRG Energy, Inc.					313						313
Other comprehensive income									13		13
Shares reissuance for ESPP							2				2
Share repurchases							(47)				(47)
Equity-based awards activity, net			6								6
Issuance of common stock			1								1
Common stock dividends and dividend equivalents declared^(a)					(74)						(74)

Balance at June 30, 2020	$	4	$	8,505	$	(1,331)	$	(5,234)	$	(194)	$	1,750


(In millions)	Common Stock		Additional Paid-In Capital		Accumulated Deficit		Treasury Stock		Accumulated Other Comprehensive Loss		Total Stock-holders' Equity
Balance at December 31, 2018	$	4	$	8,510	$	(6,022)	$	(3,632)	$	(94)	$	(1,234)
Net income attributable to NRG Energy, Inc.					482						482
Other comprehensive loss									(2)		(2)

Share repurchases			(10)				(739)				(749)
Equity-based awards activity, net			(32)								(32)
Issuance of common stock			5								5
Common stock dividends and dividend equivalents declared^(a)					(8)						(8)



Balance at March 31, 2019	$	4	$	8,473	$	(5,548)	$	(4,371)	$	(96)	$	(1,538)
Net income attributable to NRG Energy, Inc.					201						201
Other comprehensive loss									(3)		(3)


Share repurchases			10				(315)				(305)
Equity-based awards activity, net			5								5

Common stock dividends and dividend equivalents declared^(a)					(8)						(8)






Balance at June 30, 2019	$	4	$	8,488	$	(5,355)	$	(4,686)	$	(99)	$	(1,648)

(a) Dividends per common share were $0.30 for each of the quarters ended June 30, 2020 and March 31, 2020 and $0.03 for each of the quarters ended June 30, 2019 and March 31, 2019

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Nature of Business and Basis of Presentation

General

NRG Energy, Inc., or NRG or the Company, is an integrated power company built on dynamic retail brands with diverse generation assets. NRG brings the power of energy to consumers by producing and selling electricity and related products and services in major competitive power markets in the U.S. and Canada in a manner that delivers value to all of NRG's stakeholders. NRG is a customer-driven business focused on perfecting the integrated model by balancing retail load with generation supply within its deregulated markets. The Company sells energy, services, and innovative, sustainable products and services directly to retail customers under the brand names NRG, Reliant, Green Mountain Energy, Stream, and XOOM Energy, as well as other brand names owned by NRG, supported by approximately 23,000 MW of generation as of June 30, 2020.

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 condensed consolidated financial statements in the Company's 2019 Form 10-K and the Current Report on Form 8-K filed May 7, 2020, which provides retrospectively revised historical financial information to correspond with the Company's current segment structure. 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 June 30, 2020, and the results of operations, comprehensive income, cash flows and statements of stockholders' equity for the three and six months ended June 30, 2020 and 2019.

Segments

As part of perfecting the integrated model, in which the majority of the Company’s generation serves its retail customers, the Company began managing its operations based on the combined results of the retail and wholesale generation businesses with a geographical focus in 2020. As a result, the Company changed its business segments from Retail and Generation to Texas, East and West/Other beginning in the first quarter of 2020. The Company's updated segment structure reflects how management currently makes financial decisions and allocates resources.

The Company's businesses are segregated as follows:

•Texas, which includes all activity related to customer, plant and market operations in Texas;

•East, which includes the remaining activity related to customer operations and all activity related to plant and market operations in the East;

•West/Other, which includes the following assets and activities: (i) all activity related to plant and market operations in the West, (ii) activity related to the Cottonwood power plant that was sold to Cleco on February 4, 2019 and is being leased back until 2025, (iii) the remaining renewables activity, including the Company’s equity method investments in Ivanpah Master Holdings, LLC and Agua Caliente, the remaining Home Solar assets and the NFL stadium solar generating assets, and (iv) activity related to the Company’s equity method investment for the Gladstone power plant in Australia; and

•Corporate activities.

All affected disclosures have been recast to reflect these changes for all periods presented. For further discussion of segment reporting, refer to Note 13, Segment Reporting.

COVID-19

In March 2020, the World Health Organization categorized COVID-19 as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. Electricity was deemed a 'critical and essential business operation' under various state and federal governmental COVID-19 mandates. NRG had activated its Crisis Management Team ("CMT") in January 2020 to proactively manage the Company's response to the impacts of COVID-19.

NRG continues to remain focused on protecting the health and well-being of its employees, while supporting its customers and the communities in which it operates and assuring the continuity of its operations. During the second quarter of 2020, the Company began to evaluate and implement protocols for return to normal work operations.

The Company continues to maintain certain restrictions on business travel and face-to-face sales channels, remote work practices remain in place and there are enhanced cleaning and hygiene protocols in all of its facilities. In addition, select essential employees and contractors are continuing to report to plant and certain office locations. The Company also continues to require pre-entry screening, including temperature checks, separation of work crews, additional personal protective equipment for employees and contractors when social distancing cannot be maintained, and a ban on all non-essential visitors. The Company has not experienced any material disruptions in its ability to continue its business operations to date.

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.

Note 2 — Summary of Significant Accounting Policies

Other Balance Sheet Information

The following table presents the accumulated depreciation included in property, plant and equipment, net and accumulated amortization included in intangible assets, net:


(In millions)	June 30, 2020		December 31, 2019
Property, plant and equipment accumulated depreciation	$	1,868	$	1,752
Intangible assets accumulated amortization	1,279		1,262

Credit Losses

On January 1, 2020, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or ASU No. 2016-13, using the modified retrospective approach. Following the adoption of the new standard, the Company’s process of estimating expected credit losses remains materially consistent with its historical practice. Information prior to January 1, 2020, which was previously referred to as the allowance and provision for bad debt, has not been restated and continues to be reported under the accounting standards in effect for that period.

Retail trade receivables are reported on the balance sheet net of the allowance for credit losses. The Company accrues an allowance for current expected credit losses based on (i) estimates of uncollectible revenues by analyzing accounts receivable aging and current and reasonable forecasts of expected economic factors including, but not limited to, unemployment rates and weather-related events, (ii) historical collections and delinquencies, and (iii) counterparty credit ratings for commercial and industrial customers.

The following table represents the activity in the allowance for credit losses for the three and six months ended June 30, 2020:


(In millions)	Three months ended June 30, 2020		Six months ended June 30, 2020
Beginning balance	$	39	$	43
Provision for credit losses	24		48
Write-offs	(20)		(52)
Recoveries collected	4		8
Ending balance	$	47	$	47

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 sheets that sum to the total of the same such amounts shown in the statements of cash flows:


(In millions)	June 30, 2020		December 31, 2019
Cash and cash equivalents	$	418	$	345
Funds deposited by counterparties	36		32
Restricted cash	8		8
Cash and cash equivalents, funds deposited by counterparties and restricted cash shown in the statement of cash flows	$	462	$	385

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 within the Company's projects that are restricted for specific uses.

Pension Plan Contributions

On March 27, 2020, the Senate passed the CARES Act to provide necessary emergency relief related to the COVID-19 pandemic. The CARES Act allows NRG and other pension plan sponsors to postpone 2020 contributions until January 1, 2021. As a result, NRG will consider deferring approximately $47 million in cash contributions previously planned to be made to the Company's pension plans in 2020. NRG’s pension and postretirement benefit plans are further described in Note 15, Benefit Plans and Other Postretirement Benefits, to the Company’s 2019 Form 10-K.

Recent Accounting Developments - Guidance Adopted in 2020

ASU 2018-17 — In October 2018, the FASB issued ASU No. 2018-17, Consolidations (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, or ASU No. 2018-17, in response to stakeholders’ observations that Topic 810, Consolidations, could be improved thereby improving general purpose financial reporting. Specifically, ASU No. 2018-17 requires application of the variable interest entity (VIE) guidance to private companies under common control and consideration of indirect interest held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. All entities are required to apply the amendments retrospectively. The adoption did not have a material impact on the Company's results of operations, cash flows, or statement of financial position.

ASU 2018-15 — In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in Cloud Computing Arrangement That Is a Service Contract, or ASU No. 2018-15. The amendments in ASU No. 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing costs incurred to develop or obtain internal-use software (and hosting arrangement that include an internal-use software license). The amendment also requires the customer to amortize the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The Company adopted the amendments effective January 1, 2020 using the prospective approach. The adoption did not have a material impact on the Company's results of operations, cash flows, or statement of financial position.

ASU 2018-13 — In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirement for Fair value Measurement), or ASU No. 2018-13. The amendments in ASU No. 2018-13 eliminate such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and add new disclosure requirements for Level 3 measurements. ASU No. 2018-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain disclosures in ASU No. 2018-13 are required to be applied on a retrospective basis and others on a prospective basis. The Company adopted the amendments effective January 1, 2020. As the amendments contemplates changes in disclosures only, it did not have an impact on the Company's results of operations, cash flows, or statement of financial position.

ASU 2016-13 — In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, or ASU No. 2016-13, which was further amended through various updates issued by the FASB thereafter. The guidance in ASU No. 2016-13 provides a new model for recognizing credit losses on financial assets carried at amortized cost using an estimate of expected credit losses, instead of the "incurred loss" methodology previously required for recognizing credit losses that delayed recognition until it was probable that a loss was incurred. The estimate of expected credit losses is to be based on consideration of past events, current conditions and reasonable and supportable forecasts of future conditions. The Company adopted the standard and its subsequent corresponding updates effective January 1, 2020 using the modified retrospective approach. Results for the reporting periods after January 1, 2020 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company's adoption of Topic 326 did not have a material impact on the Company's results of operations, cash flows, or statement of financial position.

Recent Accounting Developments - Guidance Not Yet Adopted

ASU 2019-12 — In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU No. 2019-12, to simplify various aspects related to accounting for income taxes. The guidance in ASU 2019-12 amends the general principles in Topic 740 to eliminate certain exceptions for recognizing deferred taxes for investment, performing intraperiod allocation and calculating income taxes in interim periods. This ASU also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years,. Early adoption is permitted, including adoption in an interim period. The Company is currently in the process of assessing the impact of this guidance on the consolidated financial statements.

Note 3 — Revenue Recognition

Performance Obligations

As of June 30, 2020, estimated future fixed fee performance obligations are $314 million for the remaining six months of fiscal year 2020, and $620 million, $307 million, $42 million and $8 million for the fiscal years 2021, 2022, 2023 and 2024, respectively. These performance obligations are for cleared auction MWs in the PJM, ISO-NE, NYISO and MISO capacity auctions and are subject to penalties for non performance.

Disaggregated Revenues

The following tables represent the Company’s disaggregation of revenue from contracts with customers for the three and six months ended June 30, 2020 and 2019:


	Three months ended June 30, 2020
(In millions)	Texas		East		West/Other		Corporate/Eliminations		Total
Retail revenue:
Mass Market	$	1,273	$	291	$	—	$	—	$	1,564
Business Solutions	248		20		—		—		268
Total retail revenue	1,521		311		—		—		1,832
Energy revenue^(a)	5		19		60		(1)		83
Capacity revenue^(a)	—		179		16		—		195
Mark-to-market for economic hedging activities^(b)	—		40		1		2		43

Other revenue^(a)	52		17		17		(1)		85
Total operating revenue	1,578		566		94		—		2,238
Less: Lease revenue	—		1		4		—		5
Less: Realized and unrealized ASC 815 revenue	7		85		16		1		109

Total revenue from contracts with customers	$	1,571	$	480	$	74	$	(1)	$	2,124
(a) The following table represents the realized revenues related to derivative instruments that are accounted for under ASC 815 and included in the amounts above:
(In millions)	Texas		East		West/Other		Corporate/Eliminations		Total
Energy revenue	$	—	$	2	$	10	$	(1)	$	11
Capacity revenue	—		41		—		—		41
Other revenue	7		2		5		—		14
(b) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815


	Three months ended June 30, 2019
(In millions)	Texas		East		West/Other		Corporate/Eliminations		Total
Retail revenue:
Mass Market	$	1,161	$	235	$	—	$	(1)	$	1,395
Business Solutions	272		18		—		—		290
Total retail revenue	1,433		253		—		(1)		1,685
Energy revenue^(a)	136		48		52		—		236
Capacity revenue^(a)	—		195		6		—		201
Mark-to-market for economic hedging activities^(b)	210		16		16		(1)		241

Other revenue^(a)	58		12		32		—		102
Total operating revenue	1,837		524		106		(2)		2,465
Less: Lease revenue	—		1		4		—		5
Less: Realized and unrealized ASC 815 revenue	579		64		34		—		677

Total revenue from contracts with customers	$	1,258	$	459	$	68	$	(2)	$	1,783
(a) The following table represents the realized revenues related to derivative instruments that are accounted for under ASC 815 and included in the amounts above:
(In millions)	Texas		East		West/Other		Corporate/Eliminations		Total
Energy revenue	$	355	$	20	$	5	$	—	$	380
Capacity revenue	—		29		—		1		30
Other revenue	14		(1)		13		—		26
(b) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815


	Six months ended June 30, 2020
(In millions)	Texas		East		West/Other		Corporate/Eliminations		Total
Retail revenue:
Mass Market	$	2,305	$	638	$	—	$	(1)	$	2,942
Business Solutions	508		43		—		—		551
Total retail revenue	2,813		681		—		(1)		3,493
Energy revenue^(a)	10		64		135		(2)		207
Capacity revenue^(a)	—		313		31		—		344
Mark-to-market for economic hedging activities^(b)	—		20		16		3		39

Other revenue^(a)	113		27		37		(3)		174
Total operating revenue	2,936		1,105		219		(3)		4,257
Less: Lease revenue	—		1		9		—		10
Less: Realized and unrealized ASC 815 revenue	14		124		60		—		198

Total revenue from contracts with customers	$	2,922	$	980	$	150	$	(3)	$	4,049
(a) The following table represents the realized revenues related to derivative instruments that are accounted for under ASC 815 and included in the amounts above:
(In millions)	Texas		East		West/Other		Corporate/Eliminations		Total
Energy revenue	$	—	$	37	$	29	$	(2)	$	64
Capacity revenue	—		65		—		—		65
Other revenue	14		2		15		(1)		30
(b) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815


	Six months ended June 30, 2019
(In millions)	Texas		East		West/Other		Corporate/Eliminations		Total
Retail revenue:
Mass Market	$	2,156	$	555	$	—	$	(3)	$	2,708
Business Solutions	530		36		—		—		566
Total retail revenue	2,686		591		—		(3)		3,274
Energy revenue^(a)	241		174		110		1		526
Capacity revenue^(a)	—		339		18		—		357
Mark-to-market for economic hedging activities^(b)	241		1		20		(1)		261

Other revenue^(a)	135		28		51		(2)		212
Total operating revenue	3,303		1,133		199		(5)		4,630
Less: Lease revenue	—		1		9		—		10
Less: Realized and unrealized ASC 815 revenue	894		118		46		—		1,058

Total revenue from contracts with customers	$	2,409	$	1,014	$	144	$	(5)	$	3,562
(a) The following table represents the realized revenues related to derivative instruments that are accounted for under ASC 815 and included in the amounts above:
(In millions)	Texas		East		West/Other		Corporate/Eliminations		Total
Energy revenue	$	626	$	67	$	7	$	—	$	700
Capacity revenue	—		47		—		1		48
Other revenue	27		3		19		—		49
(b) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815

Contract Balances

The following table reflects the contract assets and liabilities included in the Company’s balance sheet as of June 30, 2020 and December 31, 2019:


(In millions)	June 30, 2020		December 31, 2019
Deferred customer acquisition costs	$	133	$	133

Accounts receivable, net - Contracts with customers	981		1,002

Accounts receivable, net - Derivative instruments	30		18
Accounts receivable, net - Affiliate	4		5
Total accounts receivable, net	$	1,015	$	1,025

Unbilled revenues (included within Accounts receivable, net - Contracts with customers)	$	328	$	402

Deferred revenues^(a)	84		82

(a) Deferred revenues from contracts with customers for the three months ended June 30, 2020 and the year ended December 31, 2019 were approximately $33 million and $24 million, respectively

The revenue recognized from contracts with customers during both the six months ended June 30, 2020 and 2019 relating to the deferred revenue balance at the beginning of each period was $13 million. The revenue recognized during the three months ended June 30, 2020 and 2019 relating to the deferred revenue balance at the beginning of each period was $25 million and $19 million, respectively. The change in deferred revenue balances during the three and six months ended June 30, 2020 and 2019 was primarily due to the timing difference of when consideration was received and when the performance obligation was transferred.

Note 4 — Acquisitions, Discontinued Operations and Dispositions

Acquisitions

Stream Energy Acquisition

On August 1, 2019, the Company acquired Stream Energy's retail electricity and natural gas operating in 9 states and Washington, D.C. for $329 million, including working capital and other adjustments of approximately $29 million. The acquisition increased NRG's retail portfolio by approximately 600,000 RCEs or 450,000 customers. The purchase price was allocated as follows:


	(In millions)
Account receivable	$	98
Accounts payable	(73)
Other net current and non-current working capital	5
Marketing partnership	154
Customer relationships	85
Trade name	28
Other intangible assets	26
Goodwill ^(a)	6
Stream Purchase Price	$	329

(a) Goodwill arising from the acquisition is attributed to the value of the platform acquired and the synergies expected from combining the operations of Stream Energy with NRG's existing businesses. Goodwill of $5 million and $1 million was assigned to the Texas and East segments, respectively, and is not deductible for tax purposes

Discontinued Operations

Sale of South Central Portfolio

On February 4, 2019, the Company completed the sale of the South Central Portfolio to Cleco for cash consideration of $1 billion excluding working capital and other adjustments. The Company concluded that the divested business met the criteria for discontinued operations as of December 31, 2018, as the disposition represented a strategic shift in the business in which NRG operates and the criteria for held-for-sale were met. As such, all prior period results for the operations of the South Central Portfolio, except for the Cottonwood facility as discussed below, were reclassified as discontinued operations at December 31, 2018. In connection with the transaction, NRG also entered into a transition services agreement to provide certain corporate services to the divested business.

The South Central Portfolio includes the 1,153 MW Cottonwood natural gas generating facility. Upon the closing of the sale of the South Central Portfolio, NRG entered into an agreement with Cleco to leaseback the Cottonwood facility through 2025. Due to its continuing involvement with the Cottonwood facility, NRG did not use held-for-sale or discontinued operations treatment in accounting for the Cottonwood facility.

Summarized results of the South Central Portfolio discontinued operations were as follows:


	Three months ended			Six months ended
(In millions)		June 30, 2019		June 30, 2019
Operating revenues		$	—	$	31
Operating costs and expenses		—		(23)




Gain from operations of discontinued components		—		8
Gain on disposal of discontinued operations, net of tax		1		28
Gain from discontinued operations, including disposal, net of tax		$	1	$	36

Carlsbad

On February 6, 2018, NRG entered into an agreement with NRG Yield and GIP to sell 100% of its membership interests in Carlsbad Energy Holdings LLC, which owns the Carlsbad project, for $385 million of cash consideration, excluding working capital adjustments. The primary condition to close the Carlsbad transaction was the completion of the sale of NRG Yield and the Renewables Platform. At the time of the sale of NRG Yield and the Renewables Platform in August 2018, the Company concluded that the Carlsbad project met the criteria for discontinued operations and accordingly, all prior period results for Carlsbad were reclassified as discontinued operations. The transaction closed on February 27, 2019. Carlsbad continues to have a ground lease and easement agreement with NRG with an initial term ending in 2039 and two, ten-year extensions. As a result of the transaction, additional commitments related to the project totaled approximately $23 million as of June 30, 2020 and December 31, 2019.

Summarized results of Carlsbad discontinued operations were as follows:


	Three months ended					Six months ended
(In millions)		June 30, 2019		June 30, 2019
Operating revenues		$	—	$	19
Operating costs and expenses		—		(9)
Other expenses		—		(5)


Gain from discontinued operations, net of tax		—		5
(Loss)/gain on disposal of discontinued operations, net of tax		(17)		331

Other Commitments, Indemnification and Fees		27		27
Gain on disposal of discontinued operations, net of tax		10		358
Gain from discontinued operations, including disposal, net of tax		$	10	$	363

GenOn

On June 14, 2017, the GenOn Entities filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Texas Bankruptcy Court. As a result of the bankruptcy filings, NRG concluded that it no longer controlled GenOn as it was subject to the control of the Texas Bankruptcy Court; and accordingly, NRG deconsolidated GenOn and its subsidiaries for financial reporting purposes as of such date.

Summarized results of GenOn discontinued operations were as follows:


	Three months ended		Six months ended
(In millions)	June 30, 2019		June 30, 2019


Gain from discontinued operations, net of tax	$	2	$	2

Dispositions

The Company completed other asset sales for cash proceeds of $15 million and $18 million during the six months ended June 30, 2020 and 2019, respectively.

Note 5 — Fair Value of Financial Instruments

For cash and cash equivalents, funds deposited by counterparties, restricted cash, accounts and other receivables, accounts payable, and cash collateral paid and received in support of energy risk management activities, the carrying amounts approximate fair values 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:


	June 30, 2020						December 31, 2019
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Assets:
Notes receivable	$	10	$	7	$	11	$	8
Liabilities:
Long-term debt, including current portion^(a)	5,878		6,208		5,956		6,504

(a) Excludes deferred financing costs, which are recorded as a reduction to long-term debt in 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 June 30, 2020 and December 31, 2019:


	June 30, 2020						December 31, 2019
(In millions)	Level 2		Level 3		Level 2		Level 3
Long-term debt, including current portion	$	6,176	$	32	$	6,388	$	116

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:


	June 30, 2020

(In millions)	Total		Level 1		Level 2		Level 3
Investments in securities (classified within other current and non-current assets)	$	13	$	—	$	13	$	—

Nuclear trust fund investments:
Cash and cash equivalents	26		26		—		—
U.S. government and federal agency obligations	48		47		1		—
Federal agency mortgage-backed securities	87		—		87		—
Commercial mortgage-backed securities	38		—		38		—
Corporate debt securities	148		—		148		—
Equity securities	371		371		—		—
Foreign government fixed income securities	7		—		7		—
Other trust fund investments:
U.S. government and federal agency obligations	1		1		—		—
Derivative assets:
Commodity contracts	1,230		87		677		466


Measured using net asset value practical expedient:
Equity securities — nuclear trust fund investments	69
Equity securities	7
Total assets	$	2,045	$	532	$	971	$	466
Derivative liabilities:
Commodity contracts	$	1,027	$	151	$	562	$	314

Total liabilities	$	1,027	$	151	$	562	$	314


	December 31, 2019

(In millions)	Total		Level 1		Level 2		Level 3
Investments in securities (classified within other current and non-current assets)	$	20	$	—	$	20	$	—
Nuclear trust fund investments:
Cash and cash equivalents	17		17		—		—
U.S. government and federal agency obligations	68		68		—		—
Federal agency mortgage-backed securities	100		—		100		—
Commercial mortgage-backed securities	29		—		29		—
Corporate debt securities	109		—		109		—
Equity securities