NRG ENERGY, INC. - Quarter Report: 2024 June (Form 10-Q)

Nuclear Decommissioning Trust FundPrior to the sale of STP on November 1, 2023, nuclear decommissioning trust fund assets, for NRG's portion of the decommissioning of the STP units 1 & 2NYISONew York Independent System OperatorNYMEXNew York Mercantile ExchangeOCI/OCLOther Comprehensive Income/(Loss)OECDOrganization for Economic Cooperation and Development PJMPJM Interconnection, LLCPM2.5Particulate Matter that has a diameter of less than 2.5 micrometersPPAPower Purchase AgreementPUCTPublic Utility Commission of TexasRCRAResource Conservation and Recovery Act of 1976Receivables Facility

NRG Receivables LLC, a bankruptcy remote, special purpose, wholly-owned indirect subsidiary of the Company's $2.3 billion accounts receivables securitization facility due 2025, which was last amended on June 21, 2024

Receivables Securitization FacilitiesCollectively, the Receivables Facility and the Repurchase FacilityRECsRenewable Energy CertificatesRenewable PPAA third-party PPA entered into directly with a renewable generation facility for the offtake of the Renewable Energy Certificates or other similar environmental attributes generated by such facility, couple with the associated power generated by that facilityREPRetail electric provider


Repurchase Facility						NRG's $150 million uncommitted repurchase facility related to the Receivables Facility due 2024, which was terminated on June 21, 2024
Revolving Credit Facility						The Company's $4.2 billion revolving credit facility due 2028, which was last amended on April 22, 2024
RGGI						Regional Greenhouse Gas Initiative
RMR						Reliability Must-Run
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 Term Loan B Facility
Senior Notes						As of June 30, 2024, NRG's $3.9 billion outstanding unsecured senior notes consisting of $375 million of the 6.625% senior notes due 2027, $821 million of 5.750% senior notes due 2028, $733 million of the 5.250% senior notes due 2029, $500 million of the 3.375% senior notes due 2029, $1.0 billion of the 3.625% senior notes due 2031 and $480 million of the 3.875% senior notes due 2032
Senior Secured First Lien Notes						As of June 30, 2024, NRG’s $2.6 billion outstanding Senior Secured First Lien Notes consists of $500 million of the 2.000% Senior Secured First Lien Notes due 2025, $900 million of the 2.450% Senior Secured First Lien Notes due 2027, $500 million of the 4.450% Senior Secured First Lien Notes due 2029 and $740 million of the 7.000% Senior Secured First Lien Notes due 2033
Series A Preferred Stock						As of June 30, 2024, NRG's Series A Preferred Stock consists of 650,000 outstanding shares of the 10.25% Series A Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, with a $1,000 liquidation preference per share
Services						NRG Services, which primarily includes the services businesses acquired in the Direct Energy acquisition and the Goal Zero business
SO2						Sulfur Dioxide
SOFR						Secured overnight financing rate
STP						South Texas Project — a nuclear generating facility located near Bay City, Texas in which NRG owned a 44% interest. NRG closed on the sale of its interest in STP on November 1, 2023
TDSP						Transmission/distribution service provider
TWh						Terawatt Hour
U.S.						United States of America
VaR						Value at Risk
VIE						Variable Interest Entity
Winter Storm Uri						A major winter and ice storm that had widespread impacts across North America occurring in February 2021

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)	2024	2023	2024	2023
Revenue
Revenue	$	$	$	$
Operating Costs and Expenses
Cost of operations (excluding depreciation and amortization shown below)
Depreciation and amortization
Impairment losses
Selling, general and administrative costs

Acquisition-related transaction and integration costs
Total operating costs and expenses

Gain on sale of assets
Operating Income/(Loss)				()
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates

Other income, net
Loss on debt extinguishment	()		()
Interest expense	()	()	()	()
Total other expense	()	()	()	()
Income/(Loss) Before Income Taxes				()
Income tax expense/(benefit)				()


Net Income/(Loss)	$	$	$	$	()
Less: Cumulative dividends attributable to Series A Preferred Stock
Net Income/(Loss) Available for Common Stockholders	$	$	$	$	()
Income/(Loss) per Share
Weighted average number of common shares outstanding — basic


Income/(Loss) per Weighted Average Common Share — Basic	$	$	$	$	()
Weighted average number of common shares outstanding — diluted


Income/(Loss) per Weighted Average Common Share —Diluted	$	$	$	$	()

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Unaudited)


	Three months ended June 30,		Six months ended June 30,
(In millions)	2024	2023	2024	2023
Net Income/(Loss)	$	$	$	$	()
Other Comprehensive (Loss)/Income

Foreign currency translation adjustments	()		()

Defined benefit plans	()		()	()
Other comprehensive (loss)/income	()		()
Comprehensive Income/(Loss)	$	$	$	$	()

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2024	December 31, 2023
(In millions, except share data)	(Unaudited)	(Audited)
ASSETS
Current Assets
Cash and cash equivalents	$	$
Funds deposited by counterparties
Restricted cash
Accounts receivable, net

Inventory
Derivative instruments
Cash collateral paid in support of energy risk management activities

Prepayments and other current assets


Total current assets
Property, plant and equipment, net
Other Assets
Equity investments in affiliates

Operating lease right-of-use assets, net
Goodwill
Customer relationships, net
Other intangible assets, net

Derivative instruments
Deferred income taxes
Other non-current assets


Total other assets
Total Assets	$	$

June 30, 2024

December 31, 2023

(In millions, except share data)

(Unaudited)

(Audited)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Current portion of long-term debt and finance leases

Current portion of operating lease liabilities

Accounts payable

Derivative instruments

Cash collateral received in support of energy risk management activities

Deferred revenue current

Accrued expenses and other current liabilities

Total current liabilities

Other Liabilities

Long-term debt and finance leases

Non-current operating lease liabilities

Derivative instruments

Deferred income taxes

Deferred revenue non-current

Other non-current liabilities

Total other liabilities

Total Liabilities

Commitments and Contingencies

shares authorized; Series A shares issued and outstanding at June 30, 2024 and December 31, 2023, aggregate liquidation preference of $ at June 30, 2024 and December 31, 2023

Common stock; $ par value; shares authorized; and shares issued and and shares outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in-capital

Retained earnings

Treasury stock, at cost; shares and shares at June 30, 2024 and December 31, 2023, respectively

()

Accumulated other comprehensive loss

()

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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	Six months ended June 30,
(In millions)	2024		2023
Cash Flows from Operating Activities
Net Income/(Loss)	$		$	()


Adjustments to reconcile net income/(loss) to cash provided/(used) by operating activities:
Equity in and distributions from earnings of unconsolidated affiliates	()		()
Depreciation and amortization
Accretion of asset retirement obligations
Provision for credit losses
Amortization of nuclear fuel
Amortization of financing costs and debt discounts
Loss on debt extinguishment
Amortization of in-the-money contracts and emissions allowances
Amortization of unearned equity compensation
Net loss/(gain) on sale of assets and disposal of assets			()

Impairment losses
Changes in derivative instruments	()
Changes in current and deferred income taxes and liability for uncertain tax benefits			()
Changes in collateral deposits in support of risk management activities			()
Changes in nuclear decommissioning trust liability


Changes in other working capital	()		()
Cash provided/(used) by operating activities	$		$	()


Cash Flows from Investing Activities
Payments for acquisitions of businesses and assets, net of cash acquired	$	()	$	()
Capital expenditures	()		()

Net purchases of emissions allowances	()		()
Investments in nuclear decommissioning trust fund securities			()
Proceeds from the sale of nuclear decommissioning trust fund securities
Proceeds from sales of assets, net of cash disposed
Proceeds from insurance recoveries for property, plant and equipment, net



Cash used by investing activities	$	()	$	()


Cash Flows from Financing Activities
Proceeds from issuance of preferred stock, net of fees	$		$
Payments of dividends to preferred and common stockholders	()		()
Equivalent shares purchased in lieu of tax withholdings	()		()
Payments for share repurchase activity	()
Net (payments)/receipts from settlement of acquired derivatives that include financing elements	()
Net proceeds of Revolving Credit Facility and Receivable Securitization Facilities
Proceeds from issuance of long-term debt
Payments of debt issuance costs	()		()
Repayments of long-term debt and finance leases	()		()
Payments for debt extinguishment costs	()



Proceeds from credit facilities
Repayments to credit facilities	()		()
Cash (used)/provided by financing activities	$	()	$


Effect of exchange rate changes on cash and cash equivalents

) ) ) )

(a)

(b)

(c)) million and $() million for the quarters ended June 30, and March 31, 2024, respectively, and $() million and $() million for the quarters ended June 30, and March 31, 2023, respectively, of equivalent shares purchased in lieu of tax withholding on equity compensation issuances

(d) for each of the quarters ended June 30 and March 31, 2024 and $ for each of the quarters ended June 30, and March 31, 2023

(e)

(f) million for the three months ended June 30, 2024

(g)

See accompanying notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 —

million residential consumers in addition to commercial, industrial, and wholesale customers, supported by approximately GW of generation as of June 30, 2024.

The Company's business is segmented as follows:

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

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

•West/Services/Other, which includes the following assets and activities: (i) all activity related to customer, plant and market operations in the West and Canada, (ii) the Services businesses and (iii) activity related to the Cottonwood facility and other investments;

•Vivint Smart Home; and

•Corporate activities.

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 GAAP 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 2023 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 June 30, 2024, and the results of operations, comprehensive income/(loss), cash flows and stockholders' equity for the three and six months ended June 30, 2024 and 2023.

The Company identified an error in the previously issued condensed consolidated financial statements for the period ended June 30, 2023 related to the presentation of cash flows associated with certain borrowings and repayments related to certain credit facilities. The statement of cash flows for the period ended June 30, 2023 has been adjusted to present on a gross basis the certain borrowings from credit facilities of $ billion and the related repayments of $ billion. The change had no impact to the total cash used by financing activities for the period ended June 30, 2023. The Company evaluated the materiality of this error both qualitatively and quantitatively and has concluded it is immaterial to the impacted period.

Note 2 —

$ Customer relationships and other intangible assets accumulated amortization $ $ $ Acquired balance from Vivint Smart Home Provision for credit losses Write-offs()()()()Recoveries collected Other Ending balance$ $ $ $

Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash

$ Funds deposited by counterparties Restricted cash Cash and cash equivalents, funds deposited by counterparties and restricted cash shown in the statement of cash flows$ $

$ $ $ $ Impairment () ()Foreign currency translation adjustments () ()

Balance as of June 30, 2024

$ $ $ $ $

Note 3 —

million for the remaining six months of fiscal year 2024, and $ billion, $ million, $ million, $ million and $ million for the fiscal years 2025, 2026, 2027, 2028 and 2029, respectively. These performance obligations include Vivint Smart Home products and services, as well as cleared auction MWs in the PJM, ISO-NE, NYISO and MISO capacity auctions. The cleared auction MWs are subject to penalties for non-performance.

$ $ $ $()$ Business

Total retail revenue(b)

()

Energy revenue(b)

()

Capacity revenue(b)

()

Mark-to-market for economic hedging activities(c)

Contract amortization ()() ()

Other revenue(b)

() Total revenue () Less: Revenues accounted for under topics other than ASC 606 and ASC 815

Less: Realized and unrealized ASC 815 revenue

Total revenue from contracts with customers$ $ $ $ $()$

(a) Home includes Services

(b) 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)

TexasEastWest/Services/OtherVivint Smart HomeCorporate/EliminationsTotalRetail revenue$ $ $ $ $ $ Energy revenue () Capacity revenue Other revenue () (c) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815

$ $ $ $ $ Business

Total retail revenue(b)

Energy revenue(b)

()

Capacity revenue(b)

Mark-to-market for economic hedging activities(c)

Contract amortization ()() ()

Other revenue(b)

() Total revenue () Less: Revenues accounted for under topics other than ASC 606 and ASC 815

Less: Realized and unrealized ASC 815 revenue

() Total revenue from contracts with customers$ $ $ $ $()$ (a) Home includes Services

(b) 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)

TexasEastWest/Services/OtherVivint Smart HomeCorporate/EliminationsTotalRetail revenue$ $ $ $ $ $ Energy revenue () () Capacity revenue Other revenue () (c) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815

Six months ended June 30, 2024

(In millions)

Texas

East

West/Services/Other

Vivint Smart Home

Corporate/Eliminations

Total

Retail revenue:

Home(a)

()

Business

Total retail revenue(b)

()

Energy revenue(b)

()

Capacity revenue(b)

()

Mark-to-market for economic hedging activities(c)

Contract amortization

()

Other revenue(b)

()

Total revenue

()

Less: Revenues accounted for under topics other than ASC 606 and ASC 815

Less: Realized and unrealized ASC 815 revenue

()

Total revenue from contracts with customers

()

(a) Home includes Services

(b) 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/Services/Other

Vivint Smart Home

Corporate/Eliminations

Total

Retail revenue

Energy revenue

()

Capacity revenue

Other revenue

()

$ $ $ $ $ Business

Total retail revenue(c)

Energy revenue(c)

Capacity revenue(c)

Mark-to-market for economic hedging activities(d)

() Contract amortization ()() ()

Other revenue(c)

() Total revenue () Less: Revenues accounted for under topics other than ASC 606 and ASC 815

Less: Realized and unrealized ASC 815 revenue

() Total revenue from contracts with customers$ $ $ $ $()$ (a) Includes results of operations following the acquisition date of March 10, 2023

(b) Home includes Services

(c) 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)

TexasEastWest/Services/OtherVivint Smart HomeCorporate/EliminationsTotalRetail revenue$ $ $ $ $ $ Energy revenue Capacity revenue Other revenue () (d) Revenue relates entirely to unrealized gains and losses on derivative instruments accounted for under ASC 815Convertible Senior Notes$ $ $ $

Other long-term debt, including current portion

Total long-term debt, including current portion(a)

$ $ $ $

(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, the Term Loan and Vivint Senior Secured Term Loan are based on quoted market prices and are classified as Level 2 within the fair value hierarchy.

Recurring Fair Value Measurements

Debt securities, equity securities and derivative assets and liabilities are carried at fair market value.

$ $ $ Derivative assets: Interest rate contracts Foreign exchange contracts Commodity contracts

Equity securities measured using net asset value practical expedient (classified within other non-current assets)

$ $ $ Derivative liabilities: Interest rate contracts$ $ $ $ Commodity contracts Consumer Financing Program Total liabilities$ $ $ $

$ $ $ Derivative assets: Interest rate contracts Foreign exchange contracts Commodity contracts

Equity securities measured using net asset value practical expedient (classified within other non-current assets)

$ $ $ Derivative liabilities: Interest rate contracts$ $ $ $ Foreign exchange contracts Commodity contracts Consumer Financing Program Total liabilities$ $ $ $

$ $ $ December 31, 2023Fair ValueInput/Range(In millions, except as noted)AssetsLiabilitiesValuation TechniqueSignificant Unobservable InputLowHighWeighted AverageNatural Gas Contracts$ $ Discounted Cash FlowForward Market Price ($ per MMBtu)$ $ $ Power Contracts Discounted Cash FlowForward Market Price ($ per MWh) Capacity Contracts Discounted Cash FlowForward Market Price ($ per MW/Day) RECs Discounted Cash FlowForward Market Price ($ per Certificate) FTRs Discounted Cash FlowAuction Prices ($ per MWh)() Consumer Financing Program Discounted Cash FlowCollateral Default Rates % % %Discounted Cash FlowCollateral Prepayment Rates % % %Discounted Cash FlowCredit Loss Rates % % %$ $ Total as of June 30, 2024 %


	Net Exposure (a)(b)
Category by Counterparty Credit Quality	(% of Total)
Investment grade		%
Non-investment grade/Non-Rated
Total as of June 30, 2024		%

(a)Counterparty credit exposure excludes 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

The Company currently has exposure to two wholesale counterparties in excess of % of total net exposure as of June 30, 2024. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration.

million for the next .

Retail Customer Credit Risk

The Company is exposed to retail credit risk through the Company's retail electricity and gas providers as well as through Vivint Smart Home, which serve both Home and Business customers. Retail credit risk results in losses when a customer fails to pay for services rendered. The losses may result from both non-payment of customer accounts receivable and the loss of in-the-money forward value. The Company manages retail credit risk by using established credit policies, which include monitoring of the portfolio and the use of credit mitigation measures such as deposits or prepayment arrangements.

As of June 30, 2024, the Company's retail customer credit exposure to Home and Business customers was diversified across many customers and various industries, as well as government entities. Current economic conditions may affect the Company’s customers’ ability to pay their bills in a timely manner or at all, which could increase customer delinquencies and may lead to an increase in credit losses.

Note 6 —

million extending through 2029 to hedge the floating rate of the Term Loans (as defined in Note 7, Long-term Debt and Finance Leases). Additionally, as of June 30, 2024, the Company had $ billion of interest rate swaps extending through 2027 to hedge the floating rate on the Vivint Term Loans (as defined in Note 7, Long-term Debt and Finance Leases).

Foreign Exchange Contracts

NRG is exposed to changes in foreign currency primarily associated with the purchase of U.S. dollar denominated natural gas for its Canadian business. To manage the Company's foreign exchange risk, NRG entered into foreign exchange contracts. As of June 30, 2024, NRG had foreign exchange contracts extending through 2027. The Company marks these derivatives to market through the consolidated statement of operations.

CoalShort Ton Natural GasMMBtu PowerMWh InterestDollars Foreign ExchangeDollars Consumer Financing ProgramDollars

Fair Value of Derivative Instruments

$ $ $ Interest rate contracts - long-term Foreign exchange contracts - current Foreign exchange contracts - long-term Commodity contracts - current Commodity contracts - long-term Consumer Financing Program - short-term Consumer Financing Program - long-term Total Derivatives Not Designated as Cash Flow or Fair Value Hedges$ $ $ $

$()$ $ Derivative liabilities() Total interest rate contracts$ $ $ $ Foreign exchange contracts:Derivative assets$ $ $ $

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 and fair value hedges are reflected in current period results of operations.

$()$ $()

Reversal of acquired loss positions related to economic hedges

Net unrealized gains/(losses) on open positions related to economic hedges

()

Total unrealized mark-to-market gains/(losses) for economic hedging activities

()

Reversal of previously recognized unrealized losses on settled positions related to trading activity

Net unrealized gains on open positions related to trading activity

Total unrealized mark-to-market gains for trading activity

Total unrealized gains/(losses) - commodities and foreign exchange$ $ $ $()


	Three months ended June 30,				Six months ended June 30,
(In millions)	2024		2023		2024		2023
Total impact to statement of operations - interest rate contracts	$		$		$		$
Unrealized gains included in revenues - commodities	$		$		$		$
Unrealized gains/(losses) included in cost of operations - commodities							()
Unrealized gains/(losses) included in cost of operations - foreign exchange			()				()
Total impact to statement of operations - commodities and foreign exchange	$		$		$		$	()
Total impact to statement of operations - Consumer Financing Program	$	()	$	()	$	()	$	()

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

For the six months ended June 30, 2024, the $ million unrealized gain from open economic hedge positions was primarily the result of an increase in the value of forward positions as a result of increases in ERCOT power prices.

For the six months ended June 30, 2023, the $ million unrealized loss from open economic hedge positions was primarily the result of a decrease in the value of forward positions as a result of decreases in natural gas and power prices in the East and West.

Credit Risk Related Contingent Features

Certain of the Company's trading agreements contain provisions that entitle the counterparty to demand that the Company post additional collateral if the counterparty determines that there has been deterioration in the Company's credit quality, generally termed “adequate assurance” under the agreements, or require the Company to post additional collateral if there were a downgrade in the Company's credit rating. The collateral potentially required for all contracts with adequate assurance clauses that are in a net liability position as of June 30, 2024 was $ million. The Company is also party to certain marginable agreements under which it has net liability position, but the counterparty has not called for the collateral due, which was approximately $ million as of June 30, 2024. In the event of a downgrade in the Company's credit rating and if called for by the counterparty, $ million of additional collateral would be required for all contracts with credit rating contingent features as of June 30, 2024.

See Note 5, Fair Value of Financial Instruments, for discussion regarding concentration of credit risk.

Note 7 —

$ Senior Notes, due 2028 Senior Notes, due 2029 Senior Notes, due 2029 Senior Notes, due 2031 Senior Notes, due 2032

Convertible Senior Notes, due 2048(a)

Senior Secured First Lien Notes, due 2024 Senior Secured First Lien Notes, due 2025 Senior Secured First Lien Notes, due 2027 Senior Secured First Lien Notes, due 2029 Senior Secured First Lien Notes, due 2033 Term Loan, due 2031

SOFR +

Tax-exempt bonds

0 -

Subtotal recourse debt Non-recourse debt:Vivint Senior Notes, due 2029 Vivint Senior Secured Notes, due 2027 Vivint Senior Secured Term Loan, due 2028

SOFR +

Subtotal all Vivint non-recourse debt

Subtotal long-term debt (including current maturities)

Finance leases variousSubtotal long-term debt and finance leases (including current maturities) Less current maturities()()Less debt issuance costs()()Discounts()()Total long-term debt and finance leases$ $

(a)As of the ex-dividend date of August 1, 2024, the Convertible Senior Notes were convertible at a price of $, which is equivalent to a conversion rate of approximately 24.322 shares of common stock per $1,000 principal amount

Recourse Debt

Senior Credit Facility

Term Loan B Incurrence

On April 16, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Eighth Amendment to the Second Amended and Restated Credit Agreement (the “Eighth Amendment”) with, among others, Citicorp North America, Inc., as administrative agent (the “Agent”) and as collateral agent, and certain financial institutions, as lenders, which amended the Company’s Second Amended and Restated Credit Agreement, dated as of June 30, 2016 (as amended, restated, supplemented and/or otherwise modified from time to time prior to the effectiveness of the Eighth Amendment, the “Credit Agreement”), in order to (i) establish a new term loan B facility with borrowings of $ million in aggregate principal amount (the “Term Loan Facility” and the loans thereunder, the “Term Loans”) and (ii) make certain other modifications to the Credit Agreement as set forth therein. The proceeds from the Term Loans were used to repay a portion of the Company’s Convertible Senior Notes, all of the Company’s % senior secured first lien notes due 2024 and for general corporate purposes.

% or (2) Term SOFR (as defined in the Credit Agreement (as amended by the Eighth Amendment and the Ninth Amendment)) (which Term SOFR shall not be less than %) for a one-, three- or six-month interest period (or such other period as agreed to by the Agent and the lenders, as selected by the Company), plus a margin of %.

The Term Loan Facility is guaranteed by each of the Company’s subsidiaries that guarantee the Revolving Credit Facility and is secured on a first lien basis by substantially all of the Company’s and such subsidiaries’ assets, in each case, subject to certain customary exceptions and limitations set forth in the Credit Agreement (as amended by the Eighth Amendment and the Ninth Amendment).

The Term Loans have a final maturity date of April 16, 2031 and amortize at a rate of % per annum payable in equal quarterly installments. If an event of default occurs under the Term Loan Facility, the entire principal amount outstanding thereunder, together with all accrued unpaid interest and other amounts owing in respect thereof, may be declared immediately due and payable, subject, in certain instances, to the expiration of applicable cure periods. The Term Loan Facility also provides for customary asset sale mandatory prepayments, reporting covenants and negative covenants governing dividends, investments, indebtedness, and other matters that are customary for similar term loan B facilities.

Revolving Credit Facility

On April 22, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Ninth Amendment to the Second Amended and Restated Credit Agreement (the “Ninth Amendment”) to extend the maturity date of a portion of the revolving commitments thereunder to February 14, 2028.

2048 Convertible Senior Notes

As of July 1, 2024, the Company's Convertible Senior Notes are convertible during the quarterly period ending September 30, 2024 due to the satisfaction of the Common Stock Sale Price Condition (as defined below). As of June 30, 2024, the Convertible Senior Notes are convertible into cash or a combination of cash and the Company’s common stock at a price of $ per common share, which is the equivalent to a conversion rate of approximately 24.1998 shares of common stock per $1,000 principal amount of Convertible Senior Notes. The net carrying amounts of the Convertible Senior Notes as of June 30, 2024 and December 31, 2023 were $ million and $ million, respectively. The Convertible Senior Notes mature on June 1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms. The Convertible Senior notes are convertible at the option of the holders under certain circumstances. Prior to the close of business on the business day immediately preceding December 1, 2024, the Convertible Senior Notes will be convertible only upon the occurrence of certain events and during certain periods, including, among others, during any calendar quarter (and only during such calendar quarter) if the last reported sales price per share of the Company's common stock exceeds % of the conversion price for each of at least trading days, whether or not consecutive, during the consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter (the "Common Stock Sale Price Condition"). Thereafter during specified periods as follows:

•from December 1, 2024 until the close of business on the second scheduled trading day immediately before June 1, 2025; and

•from December 1, 2047 until the close of business on the second scheduled trading day immediately before the maturity date.

All conversions with a conversion date that occurs within the specific periods above will be settled after such period pursuant to the terms of the Convertible Senior Notes indenture.

$ $ $ Amortization of deferred finance costs Total$ $ $ $ Effective Interest Rate % % % %

million loss on debt extinguishment was recorded. $ %April 2024 %Total Repurchases$ $

(a)Includes accrued interest of $ million and $ million for the March and April repurchases, respectively

Capped Call Options

During the second quarter of 2024, the Company entered into privately negotiated capped call transactions with certain counterparties (the "Capped Calls") to effectively lock in a conversion premium of $ million on the remaining $ million of the Convertible Senior Notes. The option price of $ million was incurred when the Company entered into the Capped Calls, which will be payable upon the earlier of settlement and expiration of the applicable Capped Calls. For further discussion see Note 9, Changes in Capital Structure.

Receivables Securitization Facilities

On June 21, 2024, NRG Receivables LLC (“NRG Receivables”), an indirect wholly-owned subsidiary of the Company, amended its existing Receivables Facility to, among other things, (i) extend the scheduled termination date to June 20, 2025, (ii) increase the aggregate commitments from $ billion to $ billion (adjusted seasonally) and (iii) add a new originator. As of June 30, 2024, there were outstanding borrowings and there were $ billion in letters of credit issued.

Also on June 21, 2024, Direct Energy Services, LLC (in its capacity as additional originator, the “Additional Originator”) entered into a Joinder Agreement (the “Joinder Agreement”) to join as Additional Originator to the Receivables Sale Agreement, dated as of September 22, 2020, among Direct Energy, LP, Direct Energy Business, LLC, Green Mountain Energy Company, NRG Business Marketing, LLC, Reliant Energy Northeast LLC, Reliant Energy Retail Services, LLC, Stream SPE, Ltd., US Retailers LLC and XOOM Energy Texas, LLC, as originators, NRG Retail, as the servicer, and NRG Receivables (the “Receivables Sale Agreement”). Pursuant to the Joinder Agreement, the Additional Originator agrees to be bound by the terms of the Receivables Sale Agreement, will sell to NRG Receivables substantially all of its receivables for the sale of electricity, natural gas and/or related services and certain related rights (collectively, the “Receivables”) and in connection therewith have transferred to NRG Receivables the deposit accounts into which the proceeds of such Receivables are paid.

Concurrently with the amendments to the Receivables Facility, the Company and the originators thereunder terminated the existing uncommitted Repurchase Facility.

Senior Secured First Lien Note Repayment

During the six months ended June 30, 2024, the Company repaid $ million in aggregate principal amount of its % Senior Secured First Lien Notes due 2024.

Non-recourse Debt

Vivint Term Loan Repricing

On April 10, 2024, the Company’s wholly-owned indirect subsidiary, APX Group, Inc. (“Vivint”), entered into Amendment No. 2 (the "Second Amendment") to the Second Amended and Restated Credit Agreement dated as of June 9, 2021 (the “Vivint Credit Agreement”) with, among others, Bank of America, N.A. as administrative agent (the “Vivint Agent”), and certain financial institutions, as lenders, which amended the Vivint Agreement in order to (i) reprice its term loan B facility (the term loans thereunder, the “Vivint Term Loans”) and (ii) make certain other changes to the Vivint Credit Agreement.

From and after the closing of the Second Amendment, at Vivint’s election, the Vivint Term Loans will bear interest at a rate per annum equal to either (1) a fluctuating rate equal to the highest of (A) the rate published by the Federal Reserve Bank of New York in effect on such day, plus %, (B) the rate of interest per annum publicly announced from time to time by The Wall Street Journal as the “Prime Rate” in the United States, and (C) a rate of one-month Term SOFR (as defined in the Vivint Credit Agreement), (after giving effect to any floor applicable to Term SOFR) plus % in each case, plus a margin of %, or (2) Term SOFR (as defined in the Vivint Credit Agreement) (which Term SOFR shall not be less than %) for a one-, three- or six-month interest period or such other period as agreed to by the Vivint Agent and the lenders, as selected by Vivint, plus a margin of %.

Note 8 —

$ Current liabilities Net assets$ $

Note 9 —

shares of preferred stock authorized and shares of common stock authorized. () Shares issued under LTIPs— — Shares issued under ESPP— — Shares repurchased — — ()()Retirement of treasury stock— () — Balance as of June 30, 2024 () Shares issued under LTIPs— Shares repurchased— — ()()Partial settlement of Capped Call Options— — ()()Retirement of treasury stock— () —

Balance as of July 31, 2024

()

% of cash available for allocation, after debt reduction, to be returned to shareholders. As part of the revised capital allocation framework, the Company announced an increase to its share repurchase authorization to $ billion, to be executed through 2025. As of July 31, 2024, $ billion is remaining under the $ billion authorization. billion authorization through July 31, 2024: $ $ Repurchases made under the accelerated share repurchase agreements (b) Total Share Repurchases during 2023 (a)2024 Repurchases:Repurchases made under the accelerated share repurchase agreements (b)

Open market repurchases

$ Total Share Repurchases during the six months ended June 30, 2024 $ (c)

Open market repurchases July 1, 2024 through July 31, 2024

Total Share Repurchases under the $ billion authorization

$ $

(a)Excludes $ million accrued for excise tax owed as of December 31, 2023

(b)Under the November 6, 2023 ASR, the Company received a total of shares for an average price per share of $, excluding the impact of the excise tax incurred. See discussion below for further information of the ASR agreements

(c)Excludes $ million accrued for excise tax owed as of June 30, 2024

On November 6, 2023, the Company executed Accelerated Share Repurchase agreements to repurchase a total of $ million of NRG's outstanding common stock based on volume-weighted average prices. The Company received shares in the fourth quarter of 2023, which were recorded in treasury stock at fair value based on the closing prices of $ million, with the remaining $ million recorded in additional paid-in-capital, representing the value of the forward contracts to purchase additional shares. During the first quarter of 2024, the Company received an additional shares pursuant to the ASR agreements. Upon receipt of the final shares, the Company transferred the $ million from additional paid-in-capital to treasury stock.

Employee Stock Purchase Plan

The Company offers participation in the ESPP which allows eligible employees to elect to withhold between % and % of their eligible compensation to purchase shares of NRG common stock at the lesser of % of its market value on the offering date or % of the fair market value on the exercise date. An offering date occurs each April 1 and October 1. An exercise date occurs each September 30 and March 31.

NRG Common Stock Dividends

During the first quarter of 2024, NRG increased the annual dividend to $ from $ per share and expects to target an annual dividend growth rate of %-% per share in subsequent years. A quarterly dividend of $ per share was paid on the Company's common stock during the three months ended June 30, 2024. On July 19, 2024, NRG declared a quarterly dividend on the Company's common stock of $ per share, payable on August 15, 2024 to stockholders of record as of August 1, 2024.

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

$ $ Shares retired during the second quarter of 2024 Total shares retired during the six months ended June 30, 2024 $

Capped Call Options

During the second quarter of 2024, the Company entered into privately negotiated capped call transactions with certain counterparties (the "Capped Calls"). The Capped Calls each have a strike price of $ per share, subject to certain adjustments, which correspond to the conversion price of the Convertible Senior Notes as of June 30, 2024. The Capped Calls have a cap price of $ per share, subject to certain adjustments, and effectively lock in a conversion premium of $ million on the remaining $ million balance of the Convertible Senior Notes. The options will expire on June 1, 2025 if not exercised. The Capped Calls are separate transactions and not part of the terms of the Convertible Senior Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders' equity. The option price of $ million incurred in connection with the Capped Calls, of which $ million was recorded as a reduction to additional paid-in capital and a $ million loss was recorded to other income, net to account for the change in the value of the Capped Calls during the calculation period which began on May 31, 2024 and concluded on June 28, 2024. The option price will be payable upon the earlier of settlement and expiration of the applicable Capped Calls.

Preferred Stock

Series A Preferred Stock Dividends

During the quarter ended March 31, 2024, the Company declared and paid a semi-annual % dividend of $ per share on its outstanding Series A Preferred Stock, totaling $ million.

Note 10 —

$ $ $()Less: Cumulative dividends attributable to Series A Preferred Stock Net income/(loss) available for common stockholders$ $ $ $()Weighted average number of common shares outstanding - basic Income/(loss) per weighted average common share — basic$ $ $ $()Diluted income/(loss) per share:Net income/(loss)$ $ $ $()Less: Cumulative dividends attributable to Series A Preferred Stock Net income/(loss) available for common stockholders$ $ $ $()

Weighted average number of common shares outstanding - basic

Incremental shares attributable to the issuance of equity compensation (treasury stock method) Incremental shares attributable to the potential share settlements of the Convertible Senior Notes (if converted method)

Weighted average number of common shares outstanding - dilutive

Income/(loss) per weighted average common share — diluted$ $ $ $()

Note 11 —

$ $ $ $ $()$

Depreciation and amortization

Impairment losses

Gain on sale of assets

Equity in earnings of unconsolidated affiliates

Loss on debt extinguishment () ()Income/(loss) before income taxes ()()() Net income/(loss) $ $ $ $()$()$ $

Three months ended June 30, 2023

(In millions)

Texas

East

West/Services/Other

Vivint Smart Home

Corporate

Eliminations

Total

Revenue

()

Depreciation and amortization

Gain on sale of assets

Equity in earnings of unconsolidated affiliates

Income/(loss) before income taxes

()

Net income/(loss)

()

Six months ended June 30, 2024

(In millions)

Texas

East

West/Services/Other

Vivint Smart Home

Corporate

Eliminations

Total

Revenue

()

Depreciation and amortization

Impairment losses

(Loss)/ gain on sale of assets

()

Equity in earnings of unconsolidated affiliates

Loss on debt extinguishment

()

Income/(loss) before income taxes

()

Net income/(loss)

()

Six months ended June 30, 2023

(In millions)

Texas

East

West/Services/Other

Vivint Smart Home(a)

Corporate

Eliminations

Total

Revenue

()

Depreciation and amortization

Gain on sale of assets

Equity in earnings of unconsolidated affiliates

Income/(loss) before income taxes

()

Net income/(loss)

()

Note 12 —

$ $ $()Income tax expense/(benefit) ()Effective income tax rate % % % %

million for uncertain tax benefits from positions taken on various federal and state income tax returns inclusive of accrued interest. For the six months ended June 30, 2024, NRG accrued an immaterial amount of interest relating to the uncertain tax benefits. As of June 30, 2024, NRG had cumulative interest and penalties related to these uncertain tax benefits of $ million. The Company recognizes interest and penalties related to uncertain tax benefits in income tax expense.

NRG is subject to examination by taxing authorities for income tax returns filed in the U.S. federal jurisdiction and various state and foreign jurisdictions including operations located in Australia and Canada. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2020. With few exceptions, state and Canadian income tax examinations are no longer open for years prior to 2015.

Note 13 —

$ $ $

Ivanpah(a)

Midway-Sunset

Total

$ $ $ $

(a)Also includes fees under project management agreements with each project company

Note 14 —

facilities in Illinois and caused or allowed coal ash constituents to impact groundwater. On September 9, 2019, Midwest Generation filed a Motion to Reconsider numerous issues, which the court granted in part and denied in part on February 6, 2020. In 2023, the IPCB held hearings regarding the appropriate relief. Midwest Generation has been working with the Illinois EPA to address the groundwater issues since 2010.

Consumer Lawsuits

Similar to other energy service companies (“ESCOs”) operating in the industry, from time-to-time, the Company and/or its subsidiaries may be subject to consumer lawsuits in various jurisdictions where they sell natural gas and electricity.

Variable Price Case

Mirkin v. XOOM Energy (E.D.N.Y. Aug. 2019) — XOOM Energy is a defendant in a putative class action lawsuit pending in New York, alleging that XOOM Energy promised that consumers would pay the same or less than they would have paid if they stayed with their default utility or previous energy supplier. The Court denied XOOM's motion for summary judgment and granted class certification. The Second Circuit denied XOOM's request to appeal the class certification grants. XOOM plans to challenge Mirkin's expert testimony to further hamper Mirkin's ability to support its case. The parties held a court-ordered remediation on March 21, 2024 where the parties did not settle. The parties continue to prepare pre-trial materials for submission to the Court. A trial date has not been scheduled. The Company continues to deny the allegations and is vigorously defending this matter. This matter was known and accrued for at the time of the XOOM acquisition.

Telephone Consumer Protection Act ("TCPA") Cases — In the cases set forth below, referred to as the TCPA Cases, such actions involve consumers alleging violations of the Telephone Consumer Protection Act of 1991, as amended, by receiving calls, texts or voicemails without consent in violation of the federal Telemarketing Sales Rule, and/or state counterpart legislation. The underlying claims of each case are similar. The Company denies the allegations asserted by plaintiffs and intends to vigorously defend these matters. These matters were known and accrued for at the time of the Direct Energy acquisition.

There are putative class actions pending against Direct Energy: (1) Holly Newman v. Direct Energy, LP (D. Md Sept 2021) - Direct Energy filed its Motion to Dismiss asserting the ruling in the Brittany Burk v. Direct Energy (S.D. Tex. Feb 2019) preempts the Plaintiff's ability to file suit based on the same facts. The Court denied Direct Energy's motion stating the Court does not have the benefit of all of the facts that were in front of the Burk court to issue a similar ruling. On April 12, 2023, the Court granted Direct Energy’s Motion to Transfer Venue, moving to the case to the Southern District of Texas. The parties are proceeding with written discovery; and (2) Matthew Dickson v. Direct Energy (N.D. Ohio Jan. 2018) - The case was stayed pending the outcome of an appeal to the Sixth Circuit based on the unconstitutionality of the TCPA during the period from 2015-2020. The Sixth Circuit found the TCPA was in effect during that period and remanded the case back to the trial court. Direct Energy refiled its motions along with supplements. On March 25, 2022, the Court granted summary judgment in favor of Direct Energy and dismissed the case. Dickson appealed. The Sixth Circuit found that Dickson has standing and reversed the trial court's dismissal of the case. The matter is back at the trial court. The parties conducted fact and expert discovery and submitted its motion for summary judgment in August 2024.

Sales Practice Lawsuit

A Vivint Smart Home competitor has made a claim against Vivint Smart Home alleging, among other things, that Vivint Smart Home's sales representatives used deceptive sales practices. This matter was known and accrued for at the time of the Vivint Smart Home acquisition. CPI Security Systems, Inc. ("CPI") v. Vivint Smart Home, Inc. (W.D.N.C. Sept. 2020) was

million of compensatory damages and an additional $ million of punitive damages. Vivint Smart Home has fully briefed the appeal and is awaiting a hearing date to be set. While Vivint Smart Home believes the CPI jury verdict is not legally or factually supported and intends to pursue post judgment remedies and file an appeal, there can be no assurance that such defense efforts will be successful.

Patent Infringement Lawsuit

SB IP Holdings LLC (“Skybell”) v. Vivint Smart Home, Inc. — On October 23, 2023, a jury in the U.S. District Court, Eastern District of Texas, Sherman Division, issued a verdict against the Company in favor of Skybell for $ million in damages for patent infringement. The patents that were the basis for the claims made by Skybell were ruled invalid by the U.S. International Trade Commission in November 2021. In accordance with advice by legal counsel, the Company does not believe the verdict is legally supported and will pursue post-judgment and appellate remedies along with any other legal options available. This matter was known and accrued for at the time of the Vivint acquisition.

Contract Dispute

STP — In July 2023, the partners in STP, CPS and Austin Energy, initiated a lawsuit and filed to intervene in the license transfer application with the NRC, claiming a right of first refusal exists in relation to the proposed sale of NRG South Texas' % interest in STP to Constellation. The parties entered into a settlement agreement in May 2024, and the litigation was dismissed. There was no incremental impact to NRG as a result of the settlement.

Winter Storm Uri Lawsuits

The Company has been named in certain property damage and wrongful death claims that have been filed in connection with Winter Storm Uri in its capacity as a generator and a REP. Most of the lawsuits related to Winter Storm Uri are consolidated into a single multi-district litigation matter in Harris County District Court. NRG's REPs have since been dismissed from the multi-district litigation. As a power generator, the Company is named in various cases with claims ranging from: wrongful death; personal injury only; property damage and personal injury; property damage only; and subrogation. The First Court of Appeals conditionally granted the generators' mandamus relief, ordering the trial court to grant the generator defendants' Motion to Dismiss. The Company expected the Plaintiffs to challenge this ruling. The Company intends to vigorously defend these matters.

Note 15 —

of NRG's retail energy suppliers (serving both electricity and natural gas) of alleged non-compliance with New York regulatory requirements. Among other items, the notices allege that the NRG suppliers did not transition existing residential customers to of the compliant products authorized by the NYSPSC

Note 16 —

million disclosure threshold, as permitted, for environmental proceedings to which the government is a party.

Air

CPP/ACE Rules — The attention in recent years on GHG emissions has resulted in federal and state regulations. In 2019, the EPA promulgated the ACE rule, which rescinded the CPP, which had sought to broadly regulate CO2 emissions from the power sector. The ACE rule required states that have coal-fired EGUs to develop plans to seek heat rate improvements from coal-fired EGUs. On January 19, 2021, the D.C. Circuit vacated the ACE rule (but on February 22, 2021, at the EPA's request, stayed the issuance of the portion of the mandate that would vacate the repeal of the CPP). On June 30, 2022, the U.S. Supreme Court held that the "generation shifting" approach in the CPP exceeded the powers granted to the EPA by Congress. The Court did not address the related issues of whether the EPA may adopt only measures applied at each source. On May 9, 2024, the EPA promulgated a rule that repealed the ACE rule and significantly revised the manner in which new combustion-turbine and existing steam EGU's GHG emissions will be regulated including capturing and storing/sequestering CO2 in some instances. This rule has been challenged by numerous parties in the D.C. Circuit including 27 states with 22 states intervening in support of the rule. The EPA has stated that it will address GHG emissions from existing combustion turbines in a future rule.

Cross-State Air Pollution Rule ("CSAPR") — On March 15, 2023, the EPA signed and released a prepublication version of a final rule that sought to significantly revise the CSAPR to address the good-neighbor obligations of the 2015 ozone NAAQS for 23 states after earlier having disapproved numerous state plans to address the issue. Several states, including Texas, challenged the EPA's disapproval of their state plans. On May 1, 2023, the United States Court of Appeals for the Fifth Circuit stayed the EPA's disapproval of Texas' and Louisiana's state plans, which disapprovals are a condition precedent to the EPA imposing its plan on Texas and Louisiana. Several other states are also similarly situated because of similar stays. Nonetheless, on June 5, 2023, the EPA promulgated this rule. On July 31, 2023, the EPA promulgated an interim final rule that addresses the various judicial orders that have stayed several State-Implementation-Plan disapprovals by limiting the effectiveness of certain requirements of the final rule promulgated on June 5, 2023 in Texas and several other states. On June 27, 2024, the U.S. Supreme Court stayed the final rule in the 11 states where the rule had not already been stayed. The Company cannot predict the outcome of the legal challenges to the: (i) various state disapprovals; (ii) the final rule promulgated on June 5, 2023; and (iii) the interim final rule promulgated on July 31, 2023 that seeks to address the judicial orders.

Regional Haze Proposal — In May 2023, the EPA proposed to withdraw the existing Texas Sulfur Dioxide Trading Program and replace it with unit-specific SO2 limits for 12 units in Texas to address requirements to improve visibility at National Parks and Wilderness areas. If finalized as proposed, it would result in more stringent SO2 limits for of the Company's coal-fired units in Texas. The Company cannot predict the outcome of this proposal.

Mercury and Air Toxics Standards (“MATS”) — On May 7, 2024, the EPA promulgated a final rule that amends the MATS rule by, among other things, increasing the stringency of the filterable particulate matter standard at coal-burning units. The deadline for complying with this more stringent standard is 2027. Twenty three states have challenged this rule in the D.C. Circuit. Accordingly, the outcome of this rulemaking may be uncertain for several years.

Water

plants that have coal-fired units in Texas. On May 9, 2024, the EPA promulgated a rule that revises the ELG by, among other things, further restricting the discharge of (i) FGD wastewater, (ii) bottom ash transport water, and (iii) combustion residual leachate. The rule was challenged in numerous courts, but the cases have been consolidated in the Eighth Circuit of the United States Court of Appeals. The Company expects that the outcome of the legal challenges will be uncertain for several years.

Byproducts

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis below has been organized as follows:

•Executive summary, including introduction and overview, business strategy, and changes to the business environment during the period, including environmental and regulatory matters;

•Results of operations;

•Liquidity and capital resources including liquidity position, financial condition addressing credit ratings, material cash requirements and commitments, and other obligations; and

•Known trends that may affect NRG's results of operations and financial condition in the future.

As you read this discussion and analysis, refer to NRG's condensed consolidated statements of operations to this Form 10-Q, which present the results of operations for the three and six months ended June 30, 2024 and 2023. Also refer to NRG's 2023 Form 10-K, which includes detailed discussions of various items impacting the Company's business, results of operations and financial condition, including: General section; Strategy section; Business Overview section, including how regulation, weather, and other factors affect NRG's business; and Critical Accounting Estimates section.

Executive Summary

Introduction and Overview

NRG Energy, Inc., or NRG or the Company, sits at the intersection of energy and home services. NRG is a leading energy and home services company fueled by market-leading brands, proprietary technologies, and complementary sales channels. Across the U.S. and Canada, NRG delivers innovative, sustainable solutions, predominately under brand names such as NRG, Reliant, Direct Energy, Green Mountain Energy and Vivint, while also advocating for competitive energy markets and customer choice. The Company has a customer base that includes approximately 8 million residential consumers in addition to commercial, industrial, and wholesale customers, supported by approximately 13 GW of generation as of June 30, 2024.

Strategy

NRG's strategy is to maximize stakeholder value by being a leader in the emerging convergence of energy and smart automation in the home and business. Through a diversified supply strategy, the Company sells reliable electricity and natural gas to its customers in the markets it serves, while also providing innovative home solutions to customers. NRG's unique combination of assets and capabilities enables the Company to develop and sell highly differentiated offerings that bring together every day essential services like powering and securing the home through a seamless and integrated experience. This strategy is intended to enable the Company to optimize its unique integrated platform to delight customers, generate recurring cash flow, significantly strengthen earnings and cost competitiveness, and lower risk and volatility. Sustainability is a philosophy that underpins and facilitates value creation across NRG's business for its stakeholders. It is an integral piece of NRG's strategy and ties directly to the Company's business success, reduced risks and enhanced reputation.

To effectuate the Company’s strategy, NRG is focused on: (i) serving the energy needs of end-use residential, commercial and industrial, and wholesale counterparties in competitive markets and optimizing on additional revenue opportunities through its multiple brands and channels; (ii) offering a variety of energy products and services, including renewable energy solutions and smart home products and services that are differentiated by innovative features, premium service, integrated platforms, sustainability, and loyalty/affinity programs; (iii) excellence in operating performance of its assets; (iv) achieving the optimal mix of supply to serve its customer load requirements through a diversified supply strategy ; and (v) engaging in disciplined and transparent capital allocation.

Energy Regulatory Matters

The Company’s regulatory matters are described in the Company’s 2023 Form 10-K in Item 1, Business — Regulatory Matters. These matters have been updated below and in Note 15, Regulatory Matters.

As participants in wholesale and retail energy markets and owners and operators of power plants, certain NRG entities are subject to regulation by various federal and state government agencies. These include the CFTC, FERC, NRC and the PUCT, as well as other public utility commissions in certain states where NRG's generation or distributed generation assets are located. In addition, NRG is subject to the market rules, procedures and protocols of the various ISO and RTO markets in which it participates. Likewise, certain NRG entities participating in the retail markets are subject to rules and regulations established by the states and provinces in which NRG entities are licensed to sell at retail. NRG must also comply with the mandatory reliability requirements imposed by NERC and the regional reliability entities in the regions where NRG operates.

NRG's operations within the ERCOT footprint are not subject to rate regulation by FERC, as they are deemed to operate solely within the ERCOT market and not in interstate commerce. These operations are subject to regulation by the PUCT.

State and Provincial Energy Regulation

Maryland Legislation — On May 9, 2024, Maryland Governor Wes Moore signed Senate Bill 1 into law, which restricts the competitive retail electric and natural-gas market in Maryland, affecting residential customers but not commercial and industrial customers. The new law contains provisions which will come into force by January 1, 2025. The legislation imposes a price cap on residential contracts tied to a trailing 12-month historical average of utility rates, with only a limited exception for renewable power products. Renewable products must now have their price pre-approved pursuant to a process to be established and run by the Maryland Public Service Commission and source their renewable electricity certificates from within the PJM region. The law also requires that any variable-price contract not contain a change in price more than once a year, except time-of-use contracts, and limits contract terms to 12 months. It requires affirmative consent for the renewal of customer contracts for renewable power products. The law also imposes licensing requirements on energy salespersons. The law states that it does not impair existing contracts. The Maryland Public Service Commission is expected to conduct rulemakings to determine the details of a variety of the law’s provisions, but timing is not yet certain.

Regional Regulatory Developments

NRG is affected by rule/tariff changes that occur in the ISO regions. For further discussion on regulatory developments, see Note 15, Regulatory Matters.

Texas

Public Utility Commission of Texas’ Actions with Respect to Wholesale Pricing and Market Design — The PUCT continues to analyze and implement multiple options for promoting increased reliability in the wholesale electric market, including the adoption of a reliability standard for resource adequacy and market-based mechanisms to achieve this standard. The Commission is expected to adopt a reliability standard by the end of 2024. During the 88th Regular Session, the Texas Legislature authorized implementation of the Performance Credit Mechanism ("PCM"), which will measure real-time contribution to system reliability and provide compensation for resources to be available, subject to certain "guardrails" such as an absolute annual net cost cap, as part of its adoption of the PUCT Sunset Bill (House Bill 1500). The Texas Legislature also directed the PUCT to implement additional market design changes such as the creation of a new ancillary service called Dispatchable Reliability Reserve Service ("DRRS") to further increase ERCOT's capability to manage net load variability and firming requirements for new generation resources which penalize poor performance during periods of low grid reserves. The PUCT directed ERCOT to implement DRRS as a standalone product which will delay implementation until 2026 or 2027.

Through Senate Bill 2627, the Texas Legislature created the Texas Energy Fund, which received voter approval in November 2023, and will provide grants and low-interest loans (3%) to incentivize the development of more dispatchable generation and smaller backup generation in ERCOT. The PUCT adopted a rule in March 2024, which establishes the application and participation requirements and the process by which the Texas Energy Fund loan proceeds for dispatchable generation in ERCOT will be distributed. The initial window for submitting loan applications was opened on June 1, 2024 and closed on July 27, 2024. NRG, through its subsidiaries, has filed for loan proceeds for three separate projects, totaling more than 1,500 MWs of capacity. The PUCT also adopted a rule for the completion bonus grant program in April 2024, which provides for opportunities for grants of $120,000 per MW for dispatchable generation projects interconnected before June 1, 2026, or $80,000 per MW for dispatchable generation projects interconnected on or after June 1, 2026 but before June 1, 2029, subject to performance requirements. Applications for completion bonus grants can be submitted beginning in January 2025.

Real-time Co-optimization of Energy and Ancillary Services ("RTC") – ERCOT is progressing with a multi-year project to upgrade their systems to co-optimize the dispatch of energy and ancillary services in real-time. The RTC project will also replace the Operating Reserve Demand Curve with demand curves for each ancillary service product which will act as the primary scarcity pricing mechanism when energy or ancillary services are in shortage. ERCOT anticipates commencing market trials for testing the RTC project in Spring 2025 with production go-live in late 2025 or early 2026.

Supreme Court of Texas Ruling on Pricing during Winter Storm Uri — On June 14, 2024, the Supreme Court of Texas issued an order affirming the validity of two orders issued by the PUCT on February 15 and 16, 2021, respectively, governing scarcity pricing in the ERCOT wholesale electricity market during Winter Storm Uri. The Supreme Court's order reversed the judgment of the Third Court of Appeals, which held that the PUCT exceeded its statutory authority by ordering the market price of energy to be set at the high system wide offer cap due to scarcity conditions as a result of firm load shed occurring in ERCOT. In addition to holding that the PUCT's orders were consistent with the agency's statutory authority, the Supreme Court of Texas's order found that the PUCT had substantially complied with the Administrative Procedure Act's procedural rulemaking requirements, which was an issue that the Third Court of Appeals did not reach.

Voluntary Mitigation Plan ("VMP") Changes — On March 13, 2023, the PUCT Staff determined that a portion of NRG's VMP should be terminated due to the increase in procurement of ancillary services by ERCOT, specifically non-spin reserve services, following Winter Storm Uri. As such, PUCT Staff terminated part of the VMP for NRG which provides protection from wholesale market power abuse accusations related to offers for ancillary services. NRG agreed with these changes to the VMP. At the March 23, 2023 open meeting, the PUCT approved the amended VMP. In February 2024, NRG filed a notice of intent with the PUCT and terminated its existing VMP as of March 1, 2024.

Lubbock, Texas Transition to Competition — The customers of Lubbock Power and Light ("LP&L"), a municipally owned utility, entered the Texas retail competitive market in March 2024. Starting in January 2024, LP&L customers were able to shop for a REP. Customers who did not select a REP by February 15, 2024 were assigned to one of three default REPs, one of which is Reliant. LP&L customers started transitioning to their chosen REP or a default REP on March 4, 2024.

PJM

Revisions to PJM Local Deliverability Area Reliability Requirement — The Base Residual Auction for the 2024/2025 delivery year commenced on December 7, 2022 and closed on December 13, 2022. On December 19, 2022, PJM announced that it would delay the publication of the auction results. On December 23, 2022, PJM made a filing at FERC to revise the definition of Locational Deliverability Area ("LDA") Reliability Requirement in the Tariff. This would allow PJM to exclude certain resources from the calculation of the Local Deliverability Area Reliability Requirement. On February 21, 2023, FERC accepted PJM's filing. Multiple parties, including NRG, filed for rehearing. Rehearing was denied by operation of law, and multiple parties, including the Company, filed appeals to the Third Circuit Court of Appeals. On March 12, 2024, the court vacated the portion of the FERC orders that allow PJM to apply the Local Deliverability Area Reliability Requirement to the 2024/2025 capacity auction. On March 29, 2024, PJM filed a petition seeking confirmation as to the capacity commitments rules for the 2024/2025 auction. On April 22, 2024, multiple parties filed a complaint seeking to find the revised rate unjust and unreasonable and implement rates consistent with FERC's February 2023 decision, which was denied on July 9, 2024. On May 6, 2024, FERC directed PJM to recalculate the 2024/2025 auction results under the Initial LDA Reliability Requirement rules, and further directed PJM to rerun the Third Incremental Auction. PJM published the revised Base Residual Auction and Third Incremental Auction results on May 8, 2024 and May 23, 2024, respectively. On June 14, 2024, multiple parties filed appeals to the Third Circuit Court of Appeals seeking review of the May 6, 2024 FERC orders approving PJM's petition to restore the original capacity commitment rules for PJM to recalculate the 2024/2025 Base Residual Auction and the rerun of the 2024/2025. As a result, the capacity for the 2024/2025 delivery year in the Delmarva Power and Light South zone resulted in higher prices. This outcome may change depending upon the disposition of the outstanding complaint and appeals.

PJM Base Residual Auction Revisions and Delay — On April 11, 2023, PJM filed, and FERC subsequently approved, to delay the Base Residual Auctions for the 2025/2026 to 2028/2029 delivery years. On October 13, 2023, PJM made two filings proposing to develop market reforms to improve the operation of the capacity market through changes to the Market Seller Offer Cap rules, changes to PJM's resource adequacy risk modeling and capacity accreditation processes, and changes to capacity performance enhancements. On January 30, 2024, FERC accepted certain reforms to PJM's resource adequacy risk modeling and accreditation processes; on February 6, 2024, FERC rejected PJM's proposed changes to certain Market Seller Offer Cap rules and capacity performance enhancements. The approved changes were in effect for the 2025/2026 Base Residual Auction that occurred in July 2024.

Indian River RMR Proceeding — On June 29, 2021, Indian River notified PJM that it intended to retire Unit 4, effective May 31, 2022, due to expected uneconomic operations. On July 30, 2021, PJM responded to the deactivation notice and stated that PJM had identified reliability violations resulting from the proposed deactivation of Unit 4. NRG filed a cost based RMR rate schedule at FERC on April 1, 2022. FERC accepted the rate schedule with a June 1, 2022 effective date, subject to refund and established hearing and settlement procedures. The Company reached settlement with a number of the intervening parties and the settlement agreement was filed at FERC on April 2, 2024 and is pending FERC review. Delmarva Power submitted to PJM and the Maryland Public Service Commission an update on its projected completion date for the transmission upgrades that would eliminate the need for the Indian River RMR. The new anticipated date is in December 2024, which is sooner than originally estimated by PJM.

Independent Market Monitor Market Seller Offer Cap Complaint — On March 18, 2021, finding that the calculation of the default Market Seller Offer Cap was unjust and unreasonable, FERC issued an Order, which permitted the PJM May 2021 capacity auction for the 2022/2023 delivery year to continue under the existing rules and set a procedural schedule for parties to file briefs with possible solutions. On September 2, 2021, FERC issued an order in response to a complaint filed by the PJM Independent Market Monitor's proposal, which eliminated the Cost of New Entry-based Market Seller Offer Cap, implemented a limited default cap for certain asset classes based on going-forward costs and provided for unit specific cost review by the Independent Market Monitor for all other non-zero offers into the auctions. On October 4, 2021, as required by the Order, PJM submitted its compliance tariff and certain parties filed a motion for rehearing, which was denied by operation of law. On February 18, 2022, FERC addressed the arguments raised on rehearing and rejected the rehearing requests. Multiple parties

filed appeals at the Court of Appeals for the D.C. Circuit, and on August 15, 2023, the Court denied the petitions for review. On January 12, 2024, the generator trade association filed a petition for review with the U.S. Supreme Court to overturn the August 15, 2023 judgment. On May 28, 2024, the U.S. Supreme Court denied the petition for review.

Other Regulatory Matters

From time to time, NRG entities may be subject to examinations, investigations and/or enforcement actions by federal, state and provincial licensing agencies and may face the risk of penalties for violation of financial services, consumer protections and other applicable laws and regulations.

Environmental Regulatory Matters

NRG is subject to numerous environmental laws in the development, construction, ownership and operation of power plants. These laws generally require that governmental permits and approvals be obtained before construction and maintained during operation of power plants. Federal and state environmental laws have become more stringent over time. Future laws may require the addition of emissions controls or other environmental controls or impose restrictions on the Company's operations including unit retirements. Complying with environmental laws often involves specialized human resources and significant capital and operating expenses, as well as occasionally curtailing operations. NRG decides to invest capital for environmental controls based on the relative certainty of the requirements, an evaluation of compliance options, and the expected economic returns on capital.

A number of regulations that affect the Company have been and continue to be revised by the EPA, including requirements regarding coal ash, GHG emissions, NAAQS revisions and implementation and effluent limitation guidelines. NRG will evaluate the impact of these regulations as they are revised but cannot fully predict the impact of each until anticipated revisions and legal challenges are finally resolved. The Company’s environmental matters are described in the Company’s 2023 Form 10-K in Item 1, Business - Environmental Matters and Item 1A, Risk Factors. These matters have been updated in Note 16, Environmental Matters, to the condensed consolidated financial statements of this Form 10-Q and as follows.

Air

The CAA and related regulations (as well as similar state and local requirements) have the potential to affect air emissions, operating practices and pollution control equipment required at power plants. Under the CAA, the EPA sets NAAQS for certain pollutants including SO2, ozone, and PM2.5. Many of the Company's facilities are located in or near areas that are classified by the EPA as not achieving certain NAAQS (non-attainment areas). The relevant NAAQS may become more stringent. In March 2024, the EPA increased the stringency of the PM2.5 NAAQS. The Company maintains a comprehensive compliance strategy to address continuing and new requirements. Complying with increasingly stringent air regulations could require the installation of additional emissions control equipment at some NRG facilities or retiring of units if installing such controls is not economic. Significant changes to air regulatory programs affecting the Company are described below.

CPP/ACE Rules — The attention in recent years on GHG emissions has resulted in federal and state regulations. In 2019, the EPA promulgated the ACE rule, which rescinded the CPP, which had sought to broadly regulate CO2 emissions from the power sector. On January 19, 2021, the D.C. Circuit vacated the ACE rule (but on February 22, 2021, at the EPA's request, stayed the issuance of the portion of the mandate that would vacate the repeal of the CPP). On June 30, 2022, the U.S. Supreme Court held that the "generation shifting" approach in the CPP exceeded the powers granted to the EPA by Congress. The Court did not address the related issues of whether the EPA may adopt only measures applied at each source. On May 9, 2024, the EPA promulgated a rule that repealed the ACE rule and significantly revised the manner in which new combustion-turbine and existing steam EGU's GHG emissions will be regulated including capturing and storing/sequestering CO2 in some instances. This rule has been challenged by numerous parties in the D.C. Circuit including 27 states with 22 states intervening in support of the rule. The EPA has stated that it will address GHG emissions from existing combustion turbines in a future rule.

CSAPR — On March 15, 2023, the EPA signed and released a prepublication of a final rule that sought to significantly revise the CSAPR to address the good-neighbor obligations of the 2015 ozone NAAQS for 23 states after earlier having disapproved numerous state plans to address the issue. Several states, including Texas, challenged the EPA's disapproval of their state plans. On May 1, 2023, the United States Court of Appeals for the Fifth Circuit stayed the EPA's disapproval of Texas' and Louisiana's state plans, which disapprovals are a condition precedent to the EPA imposing its plan on Texas and Louisiana. Several other states are also similarly situated because of similar stays. Nonetheless, on June 5, 2023, the EPA promulgated this rule. On July 31, 2023, the EPA promulgated an interim final rule that addresses the various judicial orders that have stayed several State-Implementation-Plan disapprovals by limiting the effectiveness of certain requirements of the final rule promulgated on June 5, 2023 in Texas and several other states. On June 27, 2024, the United States Supreme Court stayed the final rule in the 11 states where the rule had not already been stayed. The Company cannot predict the outcome of the

legal challenges to the: (i) various state disapprovals; (ii) the final rule promulgated on June 5, 2023; and (iii) the interim final rule promulgated on July 31, 2023 that seeks to address the judicial orders.

Regional Haze Proposal — On May 2023, the EPA proposed to withdraw the existing Texas Sulfur Dioxide Trading Program and replace it with unit-specific SO2 limits for 12 units in Texas to address requirements to improve visibility at National Parks and Wilderness areas. If finalized as proposed, the rule would result in more stringent SO2 limits for two of the Company's coal-fired units in Texas. The Company cannot predict the outcome of this proposal.

MATS — On May 7, 2024, the EPA promulgated a final rule that amends the MATS rule by, among other things, increasing the stringency of the filterable particulate matter standard at coal-burning units. The deadline for complying with this more stringent standard is 2027. Twenty three states have challenged this rule in the D.C. Circuit. Accordingly, the outcome of this rulemaking may be uncertain for several years.

Byproducts

In April 2015, the EPA finalized the rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA. On July 30, 2018, the EPA promulgated a rule that amended the ash rule by extending some of the deadlines and providing more flexibility for compliance. On August 21, 2018, the D.C. Circuit found, among other things, that the EPA had not adequately regulated unlined ponds and legacy surface impoundments. On August 28, 2020, the EPA finalized "A Holistic Approach to Closure Part A: Deadline to Initiate Closure," which amended the April 2015 Rule to address the August 2018 D.C. Circuit decision and extend some of the deadlines. On November 12, 2020, the EPA finalized "A Holistic Approach to Closure Part B: Alternative Demonstration for Unlined Surface Impoundments," which further amended the April 2015 Rule to, among other things, provide procedures for requesting approval to operate existing ash impoundments with an alternate liner. On May 8, 2024, the EPA promulgated a rule that establishes requirements for: (i) inactive (or legacy) surface impoundments at inactive facilities and (ii) coal combustion residual ("CCR") management units (regardless of how or when the CCR was placed) at regulated facilities. The rule also creates an obligation to conduct site assessments (at all active and certain inactive facilities) to determine whether CCR management units are present. The rule has been challenged in the D.C. Circuit and may be uncertain for several years.

Domestic Site Remediation Matters

Under certain federal, state and local environmental laws, a current or previous owner or operator of a facility, including an electric generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products. NRG may be responsible for property damage, personal injury and investigation and remediation costs incurred by a party in connection with hazardous material releases or threatened releases. These laws impose liability without regard to whether the owner knew of or caused the presence of the hazardous substances, and the courts have interpreted liability under such laws to be strict (without fault) and joint and several. Cleanup obligations can often be triggered during the closure or decommissioning of a facility, in addition to spills during its operations.

Water

The Company is required under the CWA to comply with intake and discharge requirements, requirements for technological controls and operating practices. As with air quality regulations, federal and state water regulations have become more stringent and imposed new requirements.

ELG — In 2015, the EPA revised the ELG for Steam Electric Generating Facilities, which imposed more stringent requirements (as individual permits were renewed) for wastewater streams from FGD, fly ash, bottom ash and flue gas mercury control. In 2017, the EPA promulgated a final rule that, among other things, postponed the compliance dates to preserve the status quo for FGD wastewater and bottom ash transport water by two years to November 2020 until the EPA amended the rule. On October 13, 2020, the EPA amended the 2015 ELG rule by: (i) altering the stringency of certain limits for FGD wastewater; (ii) relaxing the zero-discharge requirement for bottom ash transport water; and (iii) changing several deadlines. In October 2021, NRG informed its regulators that the Company intends to comply with the ELG by ceasing combustion of coal by the end of 2028 at its domestic coal units outside of Texas, and installing appropriate controls by the end of 2025 at its two plants that have coal-fired units in Texas. On May 9, 2024, the EPA promulgated a rule that revises the ELG by, among other things, further restricting the discharge of (i) FGD wastewater, (ii) bottom ash transport water, and (iii) combustion residual leachate. The rule was challenged in numerous courts, but the cases have been consolidated in the Eighth Circuit of the United States Court of Appeals. The Company expects that the outcome of the legal challenges will be uncertain for several years.

Regional Environmental Developments

Ash Regulation in Illinois — On July 30, 2019, Illinois enacted legislation that required the state to promulgate regulations regarding coal ash at surface impoundments. On April 15, 2021, the state promulgated the implementing regulation, which became effective on April 21, 2021. NRG has applied for initial operating permits and construction permits (for closure and retrofits) as required by the regulation and is waiting for most of its permits to be issued by the Illinois EPA.

Houston Nonattainment for 2008 Ozone Standard — During the fourth quarter of 2022, the EPA changed the Houston area's classification from Serious to Severe nonattainment for the 2008 Ozone Standard. Accordingly, Texas is required to develop a new control strategy and submit it to the EPA.

Significant Events

The following significant events have occurred during 2024 as further described within this Management's Discussion and Analysis and the condensed consolidated financial statements:

Dispositions

On August 3, 2024, the Company entered into a definitive agreement to sell its Airtron business unit for total proceeds of $500 million, subject to standard purchase price adjustments. Airton is a leading provider of HVAC systems for residential new construction homes and was acquired as part of the Direct Energy acquisition in 2021. The transaction is subject to regulatory approval under the Hart Scott Rodino act and is expected to close by the end of 2024.

Capital Allocation

During the six months ended June 30, 2024, the Company completed $90 million of open market share repurchases at an average price of $80.76 per share. Through July 31, 2024, an additional $86 million share repurchases were executed at an average price of $76.27 per share. See Note 9, Changes in Capital Structure for additional discussion.

On November 6, 2023, the Company executed Accelerated Share Repurchase agreements to repurchase a total of $950 million of NRG's outstanding common stock. The Company received shares of NRG's common stock on specified settlement dates. The ASR program concluded on March 28, 2024, with total of 18,839,372 shares received at an average price of $50.43 per share.

On April 16, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Eighth Amendment with, among others, Citicorp North America, Inc., as administrative agent and as the Agent, and certain financial institutions, as lenders, which amended the Credit Agreement, in order to (i) establish a new Term Loan Facility with borrowings of $875 million in aggregate principal amount and the Term Loans and (ii) make certain other modifications to the Credit Agreement as set forth therein. The proceeds from the Term Loans were used to repay a portion of the Company’s Convertible Senior Notes, all of the Company's 3.750% senior secured first lien notes due 2024 and for general corporate purposes. For further discussion, see Note 7, Long-term Debt and Finance Leases.

Through April 2024, the Company repurchased $343 million in aggregate principal amount of its Convertible Senior Notes, for $603 million, which included the payment of $3 million of accrued interest, using cash on hand and a portion of the proceeds from the Term Loans. For further discussion, see Note 7, Long-term Debt and Finance Leases.

During the second quarter of 2024, the Company entered into privately negotiated capped call transactions with certain counterparties to effectively lock in a conversion premium of $257 million on the remaining $232 million of the Convertible Senior Notes. The option price of $257 million was incurred when the Company entered into the capped call transactions, which will be payable upon the earlier of settlement and expiration of the applicable Capped Call. For further discussion see Note 9, Changes in Capital Structure.

On June 21, 2024, NRG Receivables, amended its existing Receivables Facility to, among other things, (i) extend the scheduled termination date to June 20, 2025, (ii) increase the aggregate commitments from $1.4 billion to $2.3 billion (adjusted seasonally) and (iii) add a new originator. For further discussion, see Note 7, Long-term Debt and Finance Leases.

During the six months ended June 30, 2024, the Company repaid $600 million in aggregate principal amount of its 3.750% Senior Secured First Lien Notes due 2024.

In the first quarter of 2024, NRG increased the annual common stock dividend to $1.63 from $1.51 per share, representing an 8% increase from 2023. The Company expects to target an annual dividend growth rate of 7-9% per share in subsequent years.

Operations

A component of the Company's strategy is to procure mid to long-term generation through power purchase agreements. NRG has entered into Renewable PPAs totaling approximately 1.9 GW with third-party project developers and other counterparties, of which all are operational as of July 31, 2024. The average tenure of these agreements is eleven years. The Company expects to continue evaluating and executing similar agreements that support the needs of the business. The total GW procured through Renewable PPAs may be impacted by contract terminations when they occur.

Trends Affecting Results of Operations and Future Business Performance

The Company’s trends are described in the Company’s 2023 Form 10-K in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Environment, except for the update below:

Load Growth — The electric industry is expected to experience a surge in demand driven primarily by new manufacturing, industrial and data center facilities (inclusive of generative artificial intelligence ("gen AI")). The EIA's 2023 Annual Energy Outlook, combined with external forecasts of gen AI, shows the potential for 500 TWh of incremental load across the U.S. through 2030, as compared to 2023. ERCOT's current long term load forecast shows peak demand increasing from 86 GW in 2024 to 137 GW in 2028. This load growth will require significant planning and construction of new generation and transmission. ERCOT has announced its New Era of Planning effort to prepare for the possibility of very large and rapid load growth.

Texas Development Priorities

NRG continues to evaluate the expansion of flexible dispatchable power plants within the ERCOT market in connection with the creation of the Texas Energy Fund, a loan program created by the Texas Legislature to finance new build of generation assets within their footprint. The Company submitted applications to the Texas Energy Fund to receive financing for the following projects:

Facility

Fuel Type

Net Generation Capacity (MW)

Cedar Bayou 5

Natural Gas

689

Greens Bayou 6

Natural Gas

443

T.H. Wharton

Natural Gas

415

Total

1,547

Changes in Accounting Standards

See Note 2, Summary of Significant Accounting Policies, for a discussion of recent accounting developments.

Consolidated Results of Operations

The following table provides selected financial information for the Company:


	Three months ended June 30,						Six months ended June 30,
(In millions)	2024		2023		Change		2024		2023		Change
Revenue
Retail revenue	$	6,344	$	6,027	$	317	$	13,573	$	13,390	$	183
Energy revenue(a)	110		83		27		262		211		51
Capacity revenue(a)	44		49		(5)		86		91		(5)
Mark-to-market for economic hedging activities	84		75		9		24		166		(142)
Contract amortization	(7)		(8)		1		(17)		(19)		2
Other revenues(a)(b)	84		122		(38)		160		231		(71)
Total revenue	6,659		6,348		311		14,088		14,070		18
Operating Costs and Expenses
Cost of fuel	169		227		58		352		390		38
Purchased energy and other cost of sales(c)	4,482		4,282		(200)		9,996		10,284		288

Mark-to-market for economic hedging activities	(791)		11		802		(1,323)		2,046		3,369
Contract and emissions credit amortization(c)	(17)		(18)		(1)		46		90		44
Operations and maintenance	424		361		(63)		794		746		(48)
Other cost of operations	89		99		10		176		184		8
Cost of operations (excluding depreciation and amortization shown below)	4,356		4,962		606		10,041		13,740		3,699
Depreciation and amortization	285		315		30		553		505		(48)
Impairment losses	15		—		(15)		15		—		(15)
Selling, general and administrative costs	592		522		(70)		1,183		948		(235)

Acquisition-related transaction and integration costs	6		22		16		15		93		78
Total operating costs and expenses	5,254		5,821		567		11,807		15,286		3,479

Gain on sale of assets	5		3		2		1		202		(201)
Operating Income/(Loss)	1,410		530		880		2,282		(1,014)		3,296
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates	4		5		(1)		7		10		(3)

Other income, net	3		13		(10)		33		29		4
Loss on debt extinguishment	(202)		—		(202)		(260)		—		(260)
Interest expense	(163)		(151)		(12)		(315)		(299)		(16)
Total other expense	(358)		(133)		(225)		(535)		(260)		(275)
Income/(Loss) Before Income Taxes	1,052		397		655		1,747		(1,274)		3,021
Income tax expense/(benefit)	314		89		(225)		498		(247)		(745)




Net Income/(Loss)	$	738	$	308	$	430	$	1,249	$	(1,027)	$	2,276

3,700 6,648

(a) Home customer count includes recurring residential customers, services customers and community choice

(b) Vivint Smart Home subscribers includes customers that also purchase other NRG products


	Three months ended June 30, 2023
($ In millions)	Texas		East		West/Services/Other		Vivint Smart Home		Corporate/Eliminations		Total
Retail revenue	$	2,395	$	2,358	$	830	$	444	$	—	$	6,027
Energy revenue	16		28		40		—		(1)		83
Capacity revenue	—		49		—		—		—		49
Mark-to-market for economic hedging activities	—		52		23		—		—		75
Contract amortization	—		(7)		(1)		—		—		(8)
Other revenue(a)	104		23		—		—		(5)		122
Total revenue	2,515		2,503		892		444		(6)		6,348
Cost of fuel	(184)		(15)		(28)		—		—		(227)
Purchased energy and other cost of sales(b)(c)(d)	(1,403)		(2,129)		(714)		(41)		5		(4,282)
Mark-to-market for economic hedging activities	334		(204)		(141)		—		—		(11)
Contract and emissions credit amortization	(3)		23		(2)		—		—		18
Depreciation and amortization	(73)		(30)		(23)		$	(180)	(9)		(315)
Gross margin	$	1,186	$	148	$	(16)	$	223	$	(10)	$	1,531
Less: Mark-to-market for economic hedging activities, net	334		(152)		(118)		—		—		64
Less: Contract and emissions credit amortization, net	(3)		16		(3)		—		—		10
Less: Depreciation and amortization	(73)		(30)		(23)		(180)		(9)		(315)
Economic gross margin	$	928	$	314	$	128	$	403	$	(1)	$	1,772
(a) Includes trading gains and losses and ancillary revenues
(b) Includes capacity and emissions credits
(c) Includes $688 million, $56 million and $241 million of TDSP expense in Texas, East, and West/Services/Other, respectively
(e) Excludes depreciation and amortization shown separately
Business Metrics	Texas		East		West/Services/Other		Vivint Smart Home		Corporate/Eliminations		Total
Retail sales
Home electricity sales volume (GWh)	9,799		2,789		509		—		—		13,097
Business electricity sales volume (GWh)	10,028		11,391		2,282		—		—		23,701
Home natural gas sales volume (MDth)	—		7,716		11,582		—		—		19,298
Business natural gas sales volume (MDth)	—		352,007		42,179		—		—		394,186
Average retail Home customer count (in thousands)(a)	2,866		1,850		777		—		—		5,493
Ending retail Home customer count (in thousands)(a)	2,869		1,858		772		—		—		5,499
Average Vivint Smart Home subscriber count (in thousands)(b)	—		—		—		1,965		—		1,965
Ending Vivint Smart Home subscriber count (in thousands)(b)	—		—		—		2,004		—		2,004
Power generation
GWh sold	7,508		624		1,566		—		—		9,698
GWh generated(c)
Coal	3,690		148		—		—		—		3,838
Gas	1,625		46		1,565		—		—		3,236
Nuclear	2,193		—		—		—		—		2,193

Renewables	—		—		1		—		—		1
Total	7,508		194		1,566		—		—		9,268
(a) Home customer count includes recurring residential customers, services customers and community choice
(b) Vivint Smart Home subscribers includes customers that also purchase other NRG products
(c) Includes owned and leased generation, excludes tolled generation and equity investments

The following table represents the weather metrics for the three months ended June 30, 2024 and 2023:


	Three months ended June 30,
Weather Metrics	Texas	East	West/Services/Other(b)
2024
CDDs(a)	1,173	431	638
HDDs(a)	31	435	200
2023
CDDs	978	273	502
HDDs	57	479	254
10-year average
CDDs	989	350	554
HDDs	59	538	192

(a) National Oceanic and Atmospheric Administration-Climate Prediction Center - A Cooling Degree Day, or CDD, represents the number of degrees that the mean temperature for a particular day is above 65 degrees Fahrenheit in each region. A Heating Degree Day, or HDD, represents the number of degrees that the mean temperature for a particular day is below 65 degrees Fahrenheit in each region. The CDDs/HDDs for a period of time are calculated by adding the CDDs/HDDs for each day during the period

(b) The West/Services/Other weather metrics are comprised of the average of the CDD and HDD regional results for the West - California and West - South Central regions

Gross Margin and Economic Gross Margin

Gross margin increased $1.0 billion and economic gross margin increased $159 million during the three months ended June 30, 2024, compared to the same period in 2023.

The following tables describe the changes in gross margin and economic gross margin by segment:

Texas


	(In millions)
Lower gross margin due to the net effect of: •a 12%, or $83 million increase in cost to serve the retail load, driven by higher realized power prices associated with the Company's diversified supply strategy including asset sales in 2023 •an increase in net revenue of $50 million, primarily driven by changes in customer term, product and mix	$	(33)
Higher gross margin due to an increase in load of 510 GWhs, or $12 million, driven by an increase in customer counts and an increase in load of 371 GWhs, or $12 million, from weather	24
Lower gross margin due to market optimization activities	(6)
Other	(3)
Decrease in economic gross margin	$	(18)
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open positions related to economic hedges	271
Decrease in contract and emissions credit amortization	1
Decrease in depreciation and amortization	10
Increase in gross margin	$	264

East


		(In millions)
Lower gross margin due to a decrease in generation and capacity as a result of the Joliet and Astoria asset retirements		$	(6)
Higher electric gross margin due to higher net revenue rates as a result of changes in customer term, product and mix of $2.00 per MWh, or $33 million as well as lower supply costs of $1.25 per MWh, or $17 million, driven primarily by decreases in power prices		50
Higher electric gross margin due to weather		6
Higher electric gross margin due to an increase in customer count and change in customer mix		11
Higher natural gas gross margin, including the impact of transportation and storage contract optimization, resulting in lower supply costs of $0.40 per Dth, or $148 million, driven primarily by decreases in gas costs, partially offset lower net revenue rates from changes in customer term, product, and mix of $0.30 per Dth, or $99 million		49
(3)	$	12

—	$	(11)

Mark-to-market results consist of unrealized gains and losses on contracts that are not yet settled. The settlement of these transactions is reflected in the same revenue or cost caption as the items being hedged.

For the three months ended June 30, 2024, the $84 million gain in revenues from economic hedge positions was driven primarily by an increase in the value of East open positions as a result of decreases in PJM power prices. The $791 million gain in operating costs and expenses from economic hedge positions was driven primarily by an increase in the value of open positions in Texas as a result of increases in ERCOT power prices, as well as the reversal of previously recognized unrealized losses on contracts that settled during the period.

For the three months ended June 30, 2023, the $75 million gain in revenues from economic hedge positions was driven primarily by an increase in the value of open positions as a result of decreases in natural gas and power prices as well as the reversal of previously recognized unrealized losses on contracts that settled during the period. The $11 million loss in operating costs and expenses from economic hedge positions was driven primarily by the reversal of previously recognized unrealized gains on contracts that settled during the period, as well as a decrease in the value of East and West open positions as a result of decreases in natural gas and power prices. This was partially offset by an increase in the value of Texas open positions as a result of increases in ERCOT power prices and the reversal of acquired loss positions.

In accordance with ASC 815, the following table represents the results of the Company's financial and physical trading of energy commodities for the three months ended June 30, 2024 and 2023. The realized and unrealized financial and physical trading results are included in revenue. The Company's trading activities are subject to limits based on the Company's Risk Management Policy.


	Three months ended June 30,
(In millions)	2024		2023
Trading (losses)/gains
Realized	$	—	$	(5)
Unrealized	9		13
Total trading gains	$	9	$	8

Operations and Maintenance Expense

Operations and maintenance expense is comprised of the following:


(In millions)	Texas		East		West/Services/Other		Vivint Smart Home		Corporate/Eliminations		Total
Three months ended June 30, 2024	$	231	$	80	$	55	$	57	$	1	$	424
Three months ended June 30, 2023	164		89		55		54		(1)		361

Operations and maintenance expense increased by $63 million for the three months ended June 30, 2024, compared to the same period in 2023, due to the following:


	(In millions)
Increase in planned major maintenance expenditures primarily associated with the scope and duration of outages at the Texas coal facilities	$	54
Increase primarily due to the prior year partial property insurance claim for the extended outage at W.A. Parish	48
Decrease primarily due to the sale of STP in November 2023	(38)
Decrease driven by a reduction in deactivation expenditures primarily in the East	(11)
Other	10
Increase in operations and maintenance expense	$	63

Other Cost of Operations

Other cost of operations is comprised of the following:


(In millions)	Texas		East		West/Services/Other		Vivint Smart Home		Total
Three months ended June 30, 2024	$	57	$	26	$	4	$	2	$	89
Three months ended June 30, 2023	62		34		2		1		99

Other cost of operations for the three months ended June 30, 2024 decreased by $10 million, when compared to the same period in 2023, due to the following:


	(In millions)
Decrease due to the sale of STP in November 2023	$	(10)
Decrease primarily due to lower retail gross receipt taxes in the East	(1)
Other	1
Decrease in other cost of operations	$	(10)

Depreciation and Amortization

Depreciation and amortization are comprised of the following:


(In millions)	Texas		East		West/Services/Other		Vivint Smart Home		Corporate		Total
Three months ended June 30, 2024	$	63	$	22	$	46	$	144	$	10	$	285
Three months ended June 30, 2023	73		30		23		180		9		315

Depreciation and amortization decreased by $30 million for the three months ended June 30, 2024, compared to the same period in 2023, primarily due to lower amortization as a result of the expected roll off of the acquired Vivint Smart Home intangibles.

Selling, General and Administrative Costs

Selling, general and administrative costs are comprised of the following:


(In millions)	Texas		East		West/Services/Other		Vivint Smart Home		Corporate/Elimination		Total
Three months ended June 30, 2024	$	195	$	150	$	69	$	170	$	8	$	592
Three months ended June 30, 2023	173		136		54		153		6		522

Selling, general and administrative costs increased by $70 million for the three months ended June 30, 2024, compared to the same period in 2023, due to the following:


	(In millions)
Increase in broker fee and commission expenses	$	18
Increase in marketing and media expenses	18
Increase in personnel costs	14
Increase in provision for credit losses due to higher Home retail revenues	13
Decrease due to the sale of STP in November 2023	(3)

($ In millions)

TexasEast

West/Services/Other

Vivint Smart Home(a)

Corporate/EliminationsBusiness MetricsTexasEast

West/Services/Other

Vivint Smart HomeCorporate/Eliminations

The following table represents the weather metrics for the six months ended June 30, 2024 and 2023:


	Six months ended June 30,
Weather Metrics	Texas	East	West/Services/Other(b)
2024
CDDs(a)	1,289	463	687
HDDs(a)	916	2,648	1,299
2023
CDDs	1,144	327	575
HDDs	856	2,570	1,413
10-year average
CDDs	1,101	392	605
HDDs	1,037	3,040	1,298

(b) The West/Services/Other weather metrics are comprised of the average of the CDD and HDD regional results for the West-California and West-South Central regions

Gross Margin and Economic Gross Margin

Gross margin increased $3.7 billion and economic gross margin increased $484 million, both of which include intercompany sales, during the six months ended June 30, 2024, compared to the same period in 2023.

The following tables describe the changes in gross margin and economic gross margin by segment:

Texas


	(In millions)
Lower gross margin due to the net effect of: •a 13% or $169 million increase in cost to serve the retail load, driven by higher realized power prices associated with the Company's diversified supply strategy including asset sales in 2023 •an increase in net revenue of $68 million, primarily driven by changes in customer term, product and mix	$	(101)
Higher gross margin due to an increase in load of 1.6 TWhs, or $30 million, driven by an increase in customer counts and an increase in load of 515 GWhs, or $17 million, from weather	47
Lower gross margin due to market optimization activities	(6)
Decrease in economic gross margin	$	(60)
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open positions related to economic hedges	367
Decrease in contract and emissions credit amortization	2
Decrease in depreciation and amortization	18
Increase in gross margin	$	327

East


	(In millions)
Lower gross margin due to a decrease in generation and capacity as a result of Joliet and Astoria asset retirements	$	(18)
Higher electric gross margin due to lower supply costs of $3.50 per MWh, or $106 million, driven primarily by decreases in power prices as well as higher net revenue rates as a result of changes in customer term, product and mix of $0.50 per MWh, or $14 million	120
Higher electric gross margin due to an increase in customer count and change in customer mix	30
Higher natural gas gross margin, including the impact of transportation and storage contract optimization, resulting in lower supply costs of $1.00 per Dth, or $817 million, driven primarily by a decrease in gas costs, partially offset by lower net revenue rates of $0.95 per Dth, or $809 million, from changes in customer term, product, and mix	8
Lower natural gas gross margin due to weather	(4)
Higher gross margin due to an increase in average realized price at Midwest Generation	44
Other	(7)
Increase in economic gross margin	$	173
Increase in mark-to-market for economic hedging primarily due to net unrealized gains/losses on open positions related to economic hedges	2,526
Decrease in contract amortization	41
Decrease in depreciation and amortization	15
Increase in gross margin	$	2,755

West/Services/Other


	(In millions)
Higher electric gross margin due to a decrease in supply costs of $20.00 per MWh, or $143 million, and changes in customer mix of $8 million, offset by lower revenue rates of $12.50 per MWh, or $89 million	$	62
Higher natural gas gross margin due to lower supply costs of $1.40 per Dth, or $201 million, partially offset by lower revenue rates $1.35 per Dth, or $190 million	11
Higher gross margin at Cottonwood driven by spark spread expansion	38
Lower gross margin from market optimization activities	(8)
Other	(1)
Increase in economic gross margin	$	102
Increase in mark-to-market for economic hedges primarily due to net unrealized gains/losses on open positions related to economic hedges	334
Decrease in contract amortization	3
Increase in depreciation and amortization	(23)
Increase in gross margin	$	416

Vivint Smart Home(a)


	(In millions)
Increase due to the acquisition of Vivint Smart Home	$	276
Higher gross margin due to increased subscribers, or $31 million, as well as higher revenue rates of $1.85 per subscriber or $15 million, partially offset by lower non-recurring sales revenue of $12 million	34
Lower gross margin due to an increase in amortized capitalized contract costs in 2024, associated with the fulfillment of subscriber contracts(b)	(28)
Lower gross margin due to recognition of fees associated with licensing products and services	(4)
Other	(2)
Increase in economic gross margin	$	276
2			$	(39)

11			$	(2,046)

For the six months ended June 30, 2024, the $24 million gain in revenues from economic hedge positions was primarily driven by an increase in the value of newly executed East open positions and decreases in PJM power prices, partially offset by the reversal of previously recognized unrealized gains on contracts that settled during the period. The $1.3 billion gain in operating costs and expenses from economic hedge positions was driven primarily by an increase in the value of Texas open positions as a result of increases in ERCOT power prices, as well as the reversal of previously recognized unrealized gains on contracts that settled during the period.

For the six months ended June 30, 2023, the $166 million gain in revenues from economic hedge positions was driven by an increase in the value of open positions as a result of decreases in power and natural gas prices. The $2.0 billion loss in operating costs and expenses from economic hedge positions was driven primarily by a decrease in the value of East and West open positions as a result of decreases in natural gas and power prices, as well as the reversal of previously recognized unrealized gains on contracts that settled during the period. This was partially offset by an increase in the value of Texas open positions as a result of increase in ERCOT power prices and the reversal of acquired loss positions.

In accordance with ASC 815, the following table represents the results of the Company's financial and physical trading of energy commodities for the six months ended June 30, 2024 and 2023. The realized and unrealized financial and physical trading results are included in revenue. The Company's trading activities are subject to limits based on the Company's Risk Management Policy.


	Six months ended June 30,
(In millions)	2024		2023
Trading gains/(losses)
Realized	$	5	$	(3)
Unrealized	5		25
Total trading gains	$	10	$	22

Operations and Maintenance Expense

Operations and maintenance expense are comprised of the following:


(In millions)	Texas		East		West/Services/Other		Vivint Smart Home(a)		Corporate/Eliminations		Total
Six months ended June 30, 2024	$	417	$	158	$	107	$	111	$	1	$	794
Six months ended June 30, 2023	382		168		126		72		(2)		746

184

(a) Includes results of operations following the acquisition date of March 10, 2023

Other cost of operations decreased by $8 million for the six months ended June 30, 2024, compared to the same period in 2023, due to the following:


	(In millions)
Decrease primarily due to the sale of STP in November 2023	$	(15)
Increase in retail gross receipt taxes due to higher revenues in Texas partially offset by lower retail gross receipt taxes in the East	4
Other	3
Decrease in other cost of operations	$	(8)

Depreciation and Amortization

Depreciation and amortization expenses are comprised of the following:


(In millions)	Texas		East		West/Services/Other		Vivint Smart Home(a)		Corporate		Total
Six months ended June 30, 2024	$	130	$	45	$	70	$	288	$	20	$	553
Six months ended June 30, 2023	148		60		47		232		18		505

(a) Includes results of operations following the acquisition date of March 10, 2023

Depreciation and amortization increased by $48 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to higher amortization of intangible assets due to the acquisition of Vivint Smart Home in March 2023.

Selling, General and Administrative Costs

Selling, general and administrative costs comprised of the following:


(In millions)	Texas		East		West/Services/Other		Vivint Smart Home(a)		Corporate/Eliminations		Total
Six months ended June 30, 2024	$	389	$	310	$	124	$	336	$	24	$	1,183
Six months ended June 30, 2023	343		285		105		203		12		948

Acquisition-Related Transaction and Integration Costs

Acquisition-related transaction and integration costs were $15 million and $93 million for the six months ended June 30, 2024 and 2023, respectively include:


	Six months ended June 30,
(In millions)	2024		2023
Vivint Smart Home integration costs	$	13	$	44
Vivint Smart Home acquisition costs	—		38
Other integration costs, primarily related to Direct Energy	2		11
Acquisition-related transaction and integration costs	$	15	$	93

Gain on Sale of Assets

The gain on sale of assets of $202 million for the six months ended June 30, 2023 was due to the $199 million gain related to the sale of land and related assets from the Astoria site, as well as other assets sales of $3 million.

Loss on Debt Extinguishment

A loss on debt extinguishment of $260 million was recorded for the six months ended June 30, 2024, driven by the repurchase of a portion of the Convertible Senior Notes, as further discussed in Note 7, Long-term Debt and Finance Leases.

Interest Expense

Interest expense increased by $16 million for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to the acquisition of Vivint Smart Home in March 2023.

Income Tax Expense/(Benefit)

For the six months ended June 30, 2024, an income tax expense of $498 million was recorded on a pre-tax income of $1.7 billion. For the same period in 2023, income tax benefit of $247 million was recorded on pre-tax loss of $1.3 billion. The effective tax rates were 28.5% and 19.4% for the six months ended June 30, 2024 and 2023, respectively.

For the six months ended June 30, 2024, NRG's effective tax rate was higher than the statutory rate of 21%, primarily due to the state tax expense and permanent differences. For the same period in 2023, NRG's overall effective tax rate was lower than the statutory rate of 21%, primarily due to current state tax expense which has an inverted effect and reduces the overall effective tax rate when applied to year-to-date financial statement losses.

Liquidity and Capital Resources

Liquidity Position

As of June 30, 2024 and December 31, 2023, NRG's total liquidity, excluding funds deposited by counterparties, of approximately $5.3 billion and $4.8 billion, respectively, was comprised of the following:


(In millions)	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	376	$	541
Restricted cash - operating	10		21
Restricted cash - reserves(a)	6		3
Total	392		565
Total availability under Revolving Credit Facility and collective collateral facilities(b)	4,950		4,278
Total liquidity, excluding funds deposited by counterparties	$	5,342	$	4,843

(a) Includes reserves primarily for debt service, performance obligations and capital expenditures

(b) Total capacity of Revolving Credit Facility and collective collateral facilities was $7.9 billion and $7.4 billion as of June 30, 2024 and December 31, 2023, respectively.

For the six months ended June 30, 2024, total liquidity, excluding funds deposited by counterparties, increased by $499 million. Changes in cash and cash equivalent balances are further discussed hereinafter under the heading Cash Flow Discussion. Cash and cash equivalents at June 30, 2024 were predominantly held in bank deposits.

Management believes that the Company's liquidity position and cash flows from operations will be adequate to finance operating and maintenance capital expenditures, to fund dividends, and to fund other liquidity commitments in the short and long-term. Management continues to regularly monitor the Company's ability to finance the needs of its operating, financing and investing activity within the dictates of prudent balance sheet management.

The Company remains committed to maintaining a strong balance sheet and continues to work to achieve investment grade credit metrics over time primarily through debt reduction and the realization of growth initiatives.

Credit Ratings

On March 18, 2024, Standard and Poor's ("S&P") affirmed the Company's issuer credit rating of BB and changed the rating outlook from Stable to Positive.

Liquidity

The principal sources of liquidity for NRG's operating and capital expenditures are expected to be derived from cash on hand, cash flows from operations and financing arrangements. As described in Note 7, Long-term Debt and Finance Leases, to this Form 10-Q, the Company's financing arrangements consist mainly of the Senior Notes, Convertible Senior Notes, Senior Secured First Lien Notes, Revolving Credit Facility, Term Loan Facility, the Receivables Securitization Facilities and tax-exempt bonds. The Company also issues letters of credit through bilateral letter of credit facilities and the P-Caps letter of credit facility. As part of the acquisition of Vivint Smart Home on March 10, 2023, NRG acquired Vivint's existing debt, which includes senior secured notes, senior notes and a senior secured term-loan.

The Company's requirements for liquidity and capital resources, other than for operating its facilities, can generally be categorized by the following: (i) market operations activities; (ii) debt service obligations, as described in Note 7, Long-term Debt and Finance Leases; (iii) capital expenditures, including maintenance, environmental, and investments and integration; and (iv) allocations in connection with acquisition opportunities, debt repayments, share repurchases and dividend payments to stockholders, as described in Note 9, Changes in Capital Structure.

Planned sale of Airtron

Senior Credit Facility

On April 16, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Eighth Amendment with, among others, Citicorp North America, Inc., as the Agent and as collateral agent, and certain financial institutions, as lenders, which amended the Credit Agreement, in order to (i) establish a new Term Loan Facility with borrowings of $875 million in aggregate principal amount and the Term Loans and (ii) make certain other modifications to the Credit Agreement as set forth therein. The proceeds from the Term Loans were used to repay a portion of the Company’s Convertible Senior notes, all of the Company’s 3.750% senior secured first lien notes due 2024 and for general corporate purposes.

At the Company’s election, the Term Loans bear interest at a rate per annum equal to either (1) a fluctuating rate equal to the highest of (A) the rate published by the Federal Reserve Bank of New York in effect on such day, plus 0.50%, (B) the rate of interest per annum publicly announced from time to time by The Wall Street Journal as the “Prime Rate” in the United States, and (C) a rate of one-month Term SOFR (as defined in the Credit Agreement) (after giving effect to any floor applicable to Term SOFR), in each case, plus a margin of 1.00% or (2) Term SOFR (as defined in the Credit Agreement) (which Term SOFR shall not be less than 0.00%) for a one-, three- or six-month interest period (or such other period as agreed to by the Agent and the lenders, as selected by the Company), plus a margin of 2.00%.

On April 22, 2024, the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into the Ninth Amendment to its Revolving Credit Facility to extend the maturity date of a portion of the revolving commitments thereunder to February 14, 2028. For further discussion, see Note 7, Long-term Debt and Finance Leases.

Convertible Senior Notes

During the six months ended June 30, 2024, the Company completed repurchases of a portion of the Convertible Senior Notes using cash on hand and a portion of the proceeds from the Term Loans, as detailed in the table below. For the six months ended June 30, 2024, a $260 million loss on debt extinguishment was recorded.


(In millions, except percentages)
Settlement Period	Principal Repurchased		Cash Paid(a)		Average Repurchase Percentage
March 2024	$	92	$	151	162.356%
April 2024	251		452		179.454%
Total Repurchases	$	343	$	603

(a)Includes accrued interest of $1 million and $2 million for the March and April repurchases, respectively

During the second quarter of 2024, the Company entered into privately negotiated capped call transactions with certain counterparties. The Capped Calls have a cap price of $249.00 per share, subject to certain adjustments, and effectively lock in a conversion premium of $257 million on the remaining $232 million balance of the Convertible Senior Notes. The option price of $257 million was incurred was incurred when the Company entered into the Capped Calls, which will be payable upon the earlier of settlement and expiration of the applicable Capped Calls. For further discussion see Note 9, Changes in Capital Structure.

Receivables Securitization Facilities

On June 21, 2024, NRG Receivables, amended its existing Receivables Facility to, among other things, (i) extend the scheduled termination date to June 20, 2025, (ii) increase the aggregate commitments from $1.4 billion to $2.3 billion (adjusted seasonally) and (iii) add a new originator. As of June 30, 2024, there were no outstanding borrowings and there were $1.1 billion in letters of credit issued.

Also on June 21, 2024, the Additional Originator entered into the Joinder Agreement to join as Additional Originator to the Receivables Sale Agreement, dated as of September 22, 2020, among Direct Energy, LP, Direct Energy Business, LLC, Green Mountain Energy Company, NRG Business Marketing, LLC, Reliant Energy Northeast LLC, Reliant Energy Retail Services, LLC, Stream SPE, Ltd., US Retailers LLC and XOOM Energy Texas, LLC, as Originators, NRG Retail, as the servicer, and the Receivables Sale Agreement. Pursuant to the Joinder Agreement, the Additional Originator agrees to be bound by the terms of the Receivables Sale Agreement, will sell to NRG Receivables substantially all of its Receivables and in connection therewith have transferred to NRG Receivables the deposit accounts into which the proceeds of such Receivables are paid.

Concurrently with the amendments to the Receivables Facility, the Company and the originators thereunder terminated the existing uncommitted Repurchase Facility.

Senior Secured First Lien Note Repayment

During the six months ended June 30, 2024, the Company repaid $600 million in aggregate principal amount of its 3.750% Senior Secured First Lien Notes due 2024.

Vivint Term Loan Repricing

On April 10, 2024, Vivint, entered into the Second Amendment with, among others, the Vivint Agent, and certain financial institutions, as lenders, which amended the Vivint Credit Agreement, in order to (i) reprice its term loan B facility (the term loans thereunder, the “Vivint Term Loans”) and (ii) make certain other changes to the Vivint Credit Agreement.

From and after the closing of the Second Amendment, at Vivint’s election, the Vivint Term Loans will bear interest at a rate per annum equal to either (1) a fluctuating rate equal to the highest of (A) the rate published by the Federal Reserve Bank of New York in effect on such day, plus 0.50%, (B) the rate of interest per annum publicly announced from time to time by The Wall Street Journal as the “Prime Rate” in the United States, and (C) a rate of one-month Term SOFR (as defined in the Vivint Credit Agreement), (after giving effect to any floor applicable to Term SOFR) plus 1.00% in each case, plus a margin of 1.75%, or (2) Term SOFR (as defined in the Vivint Credit Agreement) (which Term SOFR shall not be less than 0.50%) for a one-, three- or six-month interest period or such other period as agreed to by the Vivint Agent and the lenders, as selected by Vivint, plus a margin of 2.75%.

Debt Reduction

The Company intends to spend approximately $500 million reducing debt during 2024 to maintain its targeted credit metrics. The Company intends to fund the debt reduction from cash from operations. Through June 30, 2024, as part of the 2024 capital allocation plan, the Company has spent $325 million on the planned debt reduction.

Market Operations

The Company's market operations activities require a significant amount of liquidity and capital resources. These liquidity requirements are primarily driven by: (i) margin and collateral posted with counterparties; (ii) margin and collateral required to participate in physical markets and commodity exchanges; (iii) timing of disbursements and receipts (e.g., buying energy before receiving retail revenues); and (iv) initial collateral for large structured transactions. As of June 30, 2024, the Company had total cash collateral outstanding of $384 million and $2.9 billion outstanding in letters of credit to third parties primarily to support its market activities. As of June 30, 2024, total funds deposited by counterparties were $688 million in cash and $801 million of letters of credit.

Future liquidity requirements may change based on the Company's hedging activities and structures, fuel purchases, and future market conditions, including forward prices for energy and fuel and market volatility. In addition, liquidity requirements depend on the Company's credit ratings and general perception of its creditworthiness.

First Lien Structure

NRG has the capacity to grant first liens to certain counterparties on a substantial portion of the Company's assets, subject to various exclusions including NRG's assets that have project-level financing and the assets of certain non-guarantor subsidiaries, to reduce the amount of cash collateral and letters of credit that it would otherwise be required to post from time to time to support its obligations under out-of-the-money hedge agreements. The first lien program does not limit the volume that can be hedged, or the value of underlying out-of-the-money positions. The first lien program also does not require NRG to post collateral above any threshold amount of exposure. The first lien structure is not subject to unwind or termination upon a ratings downgrade of a counterparty and has no stated maturity date.

The Company's first lien counterparties may have a claim on its assets to the extent market prices differ from the hedged prices. As of June 30, 2024, all hedges under the first liens were in-the-money on a counterparty aggregate basis.

Capital Expenditures

The following table summarizes the Company's capital expenditures for maintenance, environmental and growth investments for the six months ended June 30, 2024, and the estimated forecast for the remainder of the year.


(In millions)	Maintenance		Environmental		Investments and Integration		Total
Texas	$	101	$	8	$	16	$	125

West/Services/Other	9		—		1		10
Vivint Smart Home	8				2		10
Corporate	8		—		19		27
Total cash capital expenditures for the six months ended June 30, 2024	126		8		38		172
Integration operating expenses and cost to achieve	—		—		32		32
Investments	—		—		90		90
Total cash capital expenditures and investments for the six months ended June 30, 2024	$	126	$	8	$	160	$	294




Estimated cash capital expenditures and investments for the remainder of 2024(a)	184		17		175		376
Estimated full year 2024 cash capital expenditures and investments	$	310	$	25	$	335	$	670

(a)Excludes capital expenditures related to brownfield development projects that were submitted to the Texas Energy Fund

Investments and Integration for the six months ended June 30, 2024 include growth expenditures, integration, small book acquisitions and other investments.

Environmental Capital Expenditures

NRG estimates that environmental capital expenditures from 2024 through 2028 required to comply with environmental laws will be approximately $62 million, primarily driven by the cost of complying with ELG at the Company's coal units in Texas.

Share Repurchases

On June 22, 2023, NRG revised its long-term capital allocation policy to target allocating approximately 80% of cash available for allocation after debt reduction to be returned to shareholders. As part of the revised capital allocation framework, the Company announced an increase to its share repurchase authorization to $2.7 billion, to be executed through 2025.

During the six months ended June 30, 2024, the Company completed $90 million of open market share repurchases at an average price of $80.76 per share. Through July 31, 2024, an additional $86 million of share repurchases were executed at an average price of $76.27 per share. As of July 31, 2024, $1.4 billion is remaining under the $2.7 billion authorization. See Note 9, Changes in Capital Structure for additional discussion.

Common Stock Dividends

During the first quarter of 2024, NRG increased the annual dividend to $1.63 from $1.51 per share and expects to target an annual dividend growth rate of 7%-9% per share in subsequent years. A quarterly dividend of $0.4075 per share was paid on the Company's common stock during the three months ended June 30, 2024. On July 19, 2024, NRG declared a quarterly dividend on the Company's common stock of $0.4075 per share, payable on August 15, 2024 to stockholders of record as of August 1, 2024.

Series A Preferred Stock Dividends

During the quarter ended March 31, 2024, the Company declared and paid a semi-annual 10.25% dividend of $51.25 per share on its outstanding Series A Preferred Stock, totaling $33 million.

Obligations under Certain Guarantees

NRG and its subsidiaries enter into various contracts that include indemnifications and guarantee provisions as a routine part of the Company’s business activities. For further discussion, see Note 27, Guarantees, to the Company's 2023 Form 10-K.

Obligations Arising Out of a Variable Interest in an Unconsolidated Entity

Variable interest in equity investments — NRG’s investment in Ivanpah is a variable interest entity for which NRG is not the primary beneficiary. NRG's pro-rata share of non-recourse debt was approximately $461 million as of June 30, 2024. This indebtedness may restrict the ability of Ivanpah to issue dividends or distributions to NRG.

Contractual Obligations and Market Commitments

NRG has a variety of contractual obligations and other market commitments that represent prospective cash requirements in addition to the Company's capital expenditure programs, as disclosed in the Company's 2023 Form 10-K. See also Note 7, Long-term Debt and Finance Leases, and Note 14, Commitments and Contingencies, to this Form 10-Q for a discussion of new commitments and contingencies that also include contractual obligations and market commitments that occurred during the three and six months ended June 30, 2024.

Cash Flow Discussion

The following table reflects the changes in cash flows for the six month ended June 30, 2024 and 2023, respectively:


	Six months ended June 30,
(In millions)	2024		2023		Change
Cash provided/(used) by operating activities	$	1,323	$	(1,028)	$	2,351
Cash used by investing activities	(201)		(2,502)		2,301
Cash (used)/provided by financing activities	(691)		2,162		(2,853)

Cash provided/(used) by operating activities

Changes to cash provided/(used) by operating activities were driven by:


	(In millions)
Changes in cash collateral in support of risk management activities due to change in commodity prices	$	2,015
Increase in operating income/loss adjusted for other non-cash items	542
Decrease in working capital primarily related to the payout of the Company's annual incentive plan in 2024 reflecting financial outperformance for 2023	(173)
Other	(33)
	$	2,351

Cash used by investing activities

Changes to cash provided/(used) by investing activities were driven by:


	(In millions)
Decrease in cash paid for acquisitions primarily due to the acquisition of Vivint Smart Home in March 2023	$	2,466
Decrease in proceeds from sale of assets primarily due to the sale of the land and related assets from the Astoria site in January 2023	(218)
Decrease in capital expenditures	152
Decrease in insurance proceeds for property, plant and equipment, net	(118)
Increase due to fewer purchases of emissions allowances, net of sales	14
Other	5
	$	2,301

Cash (used)/provided by financing activities

Changes to cash (used)/provided by financing activities were driven by:


	(In millions)
Decrease due to repayments of long-term debt and finance leases	$	(946)
Decrease in proceeds from Revolving Credit Facility and Receivables Securitization Facilities in 2023	(700)
Decrease in proceeds due to the issuance of preferred stock in 2023	(635)
Decrease in net receipts from settlement of acquired derivatives	(330)
Decrease primarily due to debt extinguishment costs in 2024	(247)
Increase in proceeds due to the issuance of long-term debt	144
Decrease due to payments for share repurchase activity	(109)
Increase in payments of dividends primarily due to preferred stock	(30)
	$	(2,853)

NOLs, Deferred Tax Assets and Uncertain Tax Position Implications, under ASC 740

For the six months ended June 30, 2024, the Company had domestic pre-tax book income of $1.8 billion and foreign pre-tax book loss of $100 million. As of December 31, 2023, the Company had cumulative U.S. Federal NOL carryforwards of $8.4 billion, of which $6.4 billion do not have an expiration date, and cumulative state NOL carryforwards of $6.4 billion for financial statement purposes. NRG also has cumulative foreign NOL carryforwards of $411 million, most of which do not have an expiration date. In addition to the above NOLs, NRG has a $517 million indefinite carryforward for interest deductions, as well as $317 million of tax credits to be utilized in future years. As a result of the Company's tax position, including the utilization of federal and state NOLs, and based on current forecasts, the Company anticipates net income tax payments due to federal, state and foreign jurisdictions of up to $160 million in 2024. As of June 30, 2024, NRG as an applicable corporation is subject to the CAMT and expects to claim a CAMT credit in future years. The Company has reflected the impact of the CAMT in its current and deferred taxes. There is no CAMT impact to NRG's effective income tax rate.

As of June 30, 2024, the Company has $64 million of tax-effected uncertain federal and state tax benefits, for which the Company has recorded a non-current tax liability of $67 million (inclusive of accrued interest) until final resolution is reached with the related taxing authority.

On December 31, 2021, the OECD released rules which set forth a common approach to a global minimum tax at 15% for multinational companies, which has been enacted into law by certain countries effective for 2024. The Company's preliminary analysis indicates that there is no material impact to the Company's financial statements from these rules.

The Company is no longer subject to U.S. federal income tax examinations for years prior to 2020. With few exceptions, state and Canadian income tax examinations are no longer open for years prior to 2015.

Deferred tax assets and valuation allowance

Net deferred tax balance — As of June 30, 2024 and December 31, 2023, NRG recorded a net deferred tax asset, excluding valuation allowance, of $2.1 billion and $2.5 billion, respectively. The Company believes certain state net operating losses may not be realizable under the more-likely-than-not measurement and as such, a valuation allowance was recorded as of June 30, 2024 and December 31, 2023 as discussed below.

NOL Carryforwards — As of June 30, 2024, the Company had a tax-effected cumulative U.S. NOLs consisting of carryforwards for federal and state income tax purposes of $1.8 billion and $367 million, respectively. The Company estimates it will need to generate future taxable income to fully realize the net federal deferred tax asset before the expiration of certain carryforwards commences in 2030. In addition, NRG has tax-effected cumulative foreign NOL carryforwards of $106 million.

Valuation Allowance — As of June 30, 2024 and December 31, 2023, the Company’s tax-effected valuation allowance was $271 million and $275 million, respectively, consisting of state NOL carryforwards and foreign NOL carryforwards. The valuation allowance was recorded based on the assessment of cumulative and forecasted pre-tax book earnings and the future reversal of existing taxable temporary differences.

Guarantor Financial Information

As of June 30, 2024, the Company's outstanding registered senior notes consisted of $375 million of the 2027 Senior Notes and $821 million of the 2028 Senior Notes as shown in Note 7, Long-term Debt and Finance Leases. These Senior Notes are guaranteed by certain of NRG's current and future 100% owned domestic subsidiaries, or guarantor subsidiaries (the “Guarantors”). See Exhibit 22.1 to this Form 10-Q for a listing of the Guarantors. These guarantees are both joint and several.

NRG conducts much of its business through and derives much of its income from its subsidiaries. Therefore, the Company's ability to make required payments with respect to its indebtedness and other obligations depends on the financial results and condition of its subsidiaries and NRG's ability to receive funds from its subsidiaries. There are no restrictions on the ability of any of the Guarantors to transfer funds to NRG. Other subsidiaries of the Company do not guarantee the registered debt securities of either NRG Energy, Inc or the Guarantors (such subsidiaries are referred to as the “Non-Guarantors”). The Non-Guarantors include all of NRG's foreign subsidiaries and certain domestic subsidiaries.

The following tables present summarized financial information of NRG Energy, Inc. and the Guarantors in accordance with Rule 3-10 under the SEC's Regulation S-X. The financial information may not necessarily be indicative of the results of operations or financial position of NRG Energy, Inc. and the Guarantors in accordance with U.S. GAAP.

The following table presents the summarized statement of operations:


(In millions)	Six months ended June 30, 2024
Revenue(a)	$	11,664
Operating income(b)	2,291
Total other expense	(430)
Income before income taxes	1,861
Net Income	1,341

(a)Intercompany transactions with Non-Guarantors of $1 million during the six months ended June 30, 2024

(b)Intercompany transactions with Non-Guarantors including cost of operations of $44 million and selling, general and administrative of $122 million during the six months ended June 30, 2024

The following table presents the summarized balance sheet information:


(In millions)	June 30, 2024
Current assets(a)	$	6,363
Property, plant and equipment, net	1,235
Non-current assets	12,481
Current liabilities(b)	6,844
Non-current liabilities	9,919

(a)Includes intercompany receivables due from Non-Guarantors of $45 million as of June 30, 2024

(b)Includes intercompany payables due to Non-Guarantors of $23 million as of June 30, 2024

Fair Value of Derivative Instruments

NRG may enter into power purchase and sales contracts, fuel purchase contracts and other energy-related financial instruments to mitigate variability in earnings due to fluctuations in spot market prices and to hedge fuel requirements at power plants or retail load obligations. In order to mitigate interest rate risk associated with the issuance of the Company's variable rate debt, NRG enters into interest rate swap agreements. In addition, in order to mitigate foreign exchange rate risk primarily associated with the purchase of U.S. dollar denominated natural gas for the Company's Canadian business, NRG enters into foreign exchange contract agreements.

Under Flex Pay, offered by Vivint Smart Home, subscribers pay for smart home products by obtaining financing from a third-party financing provider under the Consumer Financing Program. Vivint Smart Home pays certain fees to the Financing Providers and shares in credit losses depending on the credit quality of the subscriber.

NRG's trading activities are subject to limits in accordance with the Company's Risk Management Policy. These contracts are recognized on the balance sheet at fair value and changes in the fair value of these derivative financial instruments are recognized in earnings.

The following tables disclose the activities that include both exchange and non-exchange traded contracts accounted for at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). Specifically, these tables disaggregate realized and unrealized changes in fair value; disaggregate estimated fair values as of June 30, 2024, based on their level within the fair value hierarchy defined in ASC 820; and indicate the maturities of contracts at June 30, 2024. For a full discussion of the Company's valuation methodology of its contracts, see Derivative Fair Value Measurements in Note 5, Fair Value of Financial Instruments.


Derivative Activity Gains	(In millions)
Fair Value of Contracts as of December 31, 2023	$	648
Contracts realized or otherwise settled during the period	471
Other changes in fair value	927
Fair Value of Contracts as of June 30, 2024	$	2,046


	Fair Value of Contracts as of June 30, 2024
(In millions)	Maturity
Fair Value Hierarchy Gains/(Losses)	1 Year or Less		Greater than 1 Year to 3 Years		Greater than 3 Years to 5 Years		Greater than 5 Years		Total Fair Value
Level 1	$	1	$	36	$	—	$	(2)	$	35
Level 2	868		773		227		173		2,041
Level 3	(13)		(27)		(10)		20		(30)
Total	$	856	$	782	$	217	$	191	$	2,046

The Company has elected to disclose derivative assets and liabilities on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. Also, collateral received or posted on the Company's derivative assets or liabilities are recorded on a separate line item on the balance sheet. Consequently, the magnitude of the changes in individual current and non-current derivative assets or liabilities is higher than the underlying credit and market risk of the Company's portfolio. As discussed in Item 3, Quantitative and Qualitative Disclosures About Market Risk — Commodity Price Risk, to this Form 10-Q, NRG measures the sensitivity of the Company's portfolio to potential changes in market prices using VaR, a statistical model which attempts to predict risk of loss based on market price and volatility. NRG's risk management policy places a limit on one-day holding period VaR, which limits the Company's net open position. As the Company's trade-by-trade derivative accounting results in a gross-up of the Company's derivative assets and liabilities, the net derivative asset and liability position is a better indicator of NRG's hedging activity. As of June 30, 2024, NRG's net derivative asset was $2.0 billion, an increase to total fair value of $1.4 billion as compared to December 31, 2023. This increase was primarily driven by gains in fair value and the roll-off of trades that settled during the period.

Based on a sensitivity analysis using simplified assumptions, the impact of a $0.50 per MMBtu increase or decrease in natural gas prices across the term of the derivative contracts would result in a change of approximately $2.1 billion in the net value of derivatives as of June 30, 2024.

Critical Accounting Estimates

NRG's discussion and analysis of the financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements and related disclosures in compliance with GAAP requires the application of appropriate technical accounting rules and guidance as well as the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. The application of appropriate technical accounting rules and guidance involves judgments regarding future events, including the likelihood of success of particular projects, legal and regulatory challenges, and the fair value of certain assets and liabilities. These judgments, in and of themselves, could materially affect the financial statements and disclosures based on varying assumptions, which may be appropriate to use. In addition, the financial and operating environment may also have a significant effect, not only on the operation of the business, but on the results reported through the application of accounting measures used in preparing the financial statements and related disclosures, even if the nature of the accounting policies has not changed.

NRG evaluates these estimates, on an ongoing basis, utilizing historic experience, consultation with experts and other methods the Company considers reasonable. In any event, actual results may differ substantially from the Company's estimates. Any effects on the Company's business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the information that gives rise to the revision becomes known.

The Company identifies its most critical accounting estimates as those that are the most pervasive and important to the portrayal of the Company's financial position and results of operations, and require the most difficult, subjective and/or complex judgments by management regarding estimates about matters that are inherently uncertain.

The Company's critical accounting estimates are described in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Company's 2023 Form 10-K. There have been no material changes to the Company's critical accounting estimates since the 2023 Form 10-K.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

NRG is exposed to several market risks in the Company's normal business activities. Market risk is the potential loss that may result from market changes associated with the Company's retail operations, merchant power generation or with existing or forecasted financial or commodity transactions. The types of market risks the Company is exposed to are commodity price risk, credit risk, liquidity risk, interest rate risk and currency exchange risk. The following disclosures about market risk provide an update to, and should be read in conjunction with, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of the Company's 2023 Form 10-K.

Commodity Price Risk

Commodity price risks result from exposures to changes in spot prices, forward prices, volatilities and correlations between various commodities, such as natural gas, electricity, coal, oil and emissions credits. NRG manages the commodity price risk of the Company's load serving obligations and merchant generation operations by entering into various derivative or non-derivative instruments to hedge the variability in future cash flows from forecasted sales and purchases of energy and fuel. NRG measures the risk of the Company's portfolio using several analytical methods, including sensitivity tests, scenario tests, stress tests, position reports and VaR. NRG uses a Monte Carlo simulation based VaR model to estimate the potential loss in the fair value of its energy assets and liabilities, which includes generation assets, gas transportation and storage assets, load obligations and bilateral physical and financial transactions, based on historical and forward values for factors such as customer demand, weather, commodity availability and commodity prices. The Company's VaR model is based on a one-day holding period at a 95% confidence interval for the forward 36 months, not including the spot month. The VaR model is not a complete picture of all risks that may affect the Company's results. Certain events such as counterparty defaults, regulatory changes, and extreme weather and prices that deviate significantly from historically observed values are not reflected in the model.

The following table summarizes average, maximum and minimum VaR for NRG's commodity portfolio, calculated using the VaR model for the three and six months ended June 30, 2024 and 2023:


(In millions)	2024		2023
VaR as of June 30,	$	57	$	62
Three months ended June 30,
Average	$	66	$	63
Maximum	75		78
Minimum	55		46
Six months ended June 30,
Average	$	63	$	67
Maximum	75		82
Minimum	51		46

The Company also uses VaR to estimate the potential loss of derivative financial instruments that are subject to mark-to-market accounting. These derivative instruments include transactions that were entered into for both asset management and trading purposes. The VaR for the derivative financial instruments calculated using the diversified VaR model for the entire term of these instruments entered into for both asset management and trading, was $194 million, as of June 30, 2024, primarily driven by asset-backed and hedging transactions.

Credit Risk

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 sales. Counterparty credit risk and retail customer credit risk are discussed below. See Note 6, Accounting for Derivative Instruments and Hedging Activities, to this Form 10-Q for discussion regarding credit risk contingent features.

Counterparty Credit Risk

The Company's counterparty credit risk policies are disclosed in its 2023 Form 10-K. As of June 30, 2024, counterparty credit exposure, excluding credit exposure from RTOs, ISOs, registered commodity exchanges and certain long-term agreements, was $2.6 billion and NRG held collateral (cash and letters of credit) against those positions of $1.3 billion, resulting in a net exposure of $1.4 billion. NRG periodically receives collateral from counterparties in excess of their exposure. Collateral amounts shown include such excess while net exposure shown excludes excess collateral received. Approximately 61% of the Company's exposure before collateral is expected to roll off by the end of 2025. 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	79	%
Financial institutions	21
Total as of June 30, 2024	100	%


	Net Exposure (a)(b)
Category by Counterparty Credit Quality	(% of Total)
Investment grade	54	%
Non-investment grade/Non-Rated	46
Total as of June 30, 2024	100	%

(a)Counterparty credit exposure excludes 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

The Company currently has exposure to two wholesale counterparties in excess of 10% of total net exposure discussed above as of June 30, 2024. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration.

RTOs and ISOs

The Company participates in the organized markets of CAISO, ERCOT, AESO, IESO, ISO-NE, MISO, NYISO and PJM, known as RTOs or ISOs. Trading in the majority of these markets is approved by FERC, whereas in the case of ERCOT, it is approved by the PUCT, and whereas in the case of AESO and IESO, both exist provincially with AESO primarily subject to Alberta Utilities Commission and the IESO to the Ontario Energy Board. These ISOs may include 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 the overall market and are excluded from the above exposures.

Exchange Traded Transactions

The Company enters into commodity transactions on registered exchanges, notably ICE, NYMEX and Nodal. 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 contracts, primarily solar under Renewable PPAs. As external sources or observable market quotes are not always available to estimate such exposure, the Company values 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 June 30, 2024, aggregate credit risk exposure managed by NRG to these counterparties was approximately $962 million for the next five years.

Retail Customer Credit Risk

The Company is exposed to retail credit risk through the Company's retail electricity and gas providers as well as through Vivint Smart Home, which serve both Home and Business customers. Retail credit risk results in losses when a customer fails to pay for services rendered. The losses may result from both non-payment 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, which include monitoring of the portfolio and the use of credit mitigation measures such as deposits or prepayment arrangements.

Liquidity Risk

Liquidity risk arises from the general funding needs of the Company's activities and in the management of the Company's assets and liabilities. The Company is currently exposed to additional collateral posting if natural gas prices decline, primarily due to the long natural gas equivalent position at various exchanges used to hedge NRG's retail supply load obligations.

Based on a sensitivity analysis for power and gas positions under marginable contracts as of June 30, 2024, a $0.50 per MMBtu decrease in natural gas prices across the term of the marginable contracts would cause an increase in margin collateral posted of approximately $857 million and a 1.00 MMBtu/MWh decrease in heat rates for heat rate positions would result in an increase in margin collateral posted of approximately $190 million. This analysis uses simplified assumptions and is calculated based on portfolio composition and margin-related contract provisions as of June 30, 2024.

Interest Rate Risk

NRG is exposed to fluctuations in interest rates through its issuance of variable rate debt. Exposures to interest rate fluctuations may be mitigated by entering into derivative instruments known as interest rate swaps, caps, collars and put or call options. These contracts reduce exposure to interest rate volatility and result in primarily fixed rate debt obligations when taking into account the combinations of the variable rate debt and the interest rate derivative instrument. NRG's management policies allow the Company to reduce interest rate exposure from variable rate debt obligations. In the first quarter of 2024, the Company entered into interest rate swaps with a total nominal value of $700 million extending through 2029 to hedge the floating rate of the Term Loans. Additionally, as of June 30, 2024, the Company had $1.0 billion of interest rate swaps extending through 2027 to hedge the floating rate on the Vivint Term Loans.

As of June 30, 2024, the fair value and related carrying value of the Company's debt was $10.6 billion and $10.7 billion, respectively. NRG estimates that a 1% decrease in market interest rates would have increased the fair value of the Company's long-term debt as of June 30, 2024 by $535 million.

Currency Exchange Risk

NRG is subject to transactional exchange rate risk from transactions with customers in countries outside of the United States, primarily within Canada, as well as from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than the Company's functional currency or the functional currency of an applicable subsidiary. NRG hedges a portion of its forecasted currency transactions with foreign exchange forward contracts. As of June 30, 2024, NRG is exposed to changes in foreign currency primarily associated with the purchase of U.S. dollar denominated natural gas for its Canadian business and entered into foreign exchange contracts with a notional amount of $429 million.

The Company is subject to translation exchange rate risk related to the translation of the financial statements of its foreign operations into U.S. dollars. Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using exchange rates effective during the respective period. As a result, the Company is exposed to movements in the exchange rates of various currencies against the U.S. dollar, primarily the Canadian and Australian dollars. A hypothetical 10% appreciation in major currencies relative to the U.S. dollar as of June 30, 2024 would have resulted in a decrease of $8 million to net income within the consolidated statement of operations.

ITEM 4 — CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of NRG's management, including its principal executive officer, principal financial officer and principal accounting officer, NRG conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act. Based on this evaluation, the Company's principal executive officer, principal financial officer and principal accounting officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

There were no changes in NRG's internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred in the quarter ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, NRG's internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1 — LEGAL PROCEEDINGS

For a discussion of material legal proceedings in which NRG was involved through June 30, 2024, see Note 14, Commitments and Contingencies, to this Form 10-Q.

ITEM 1A — RISK FACTORS

During the six months ended June 30, 2024, there were no material changes to the Risk Factors disclosed in Part I, Item 1A, Risk Factors, of the Company's 2023 Form 10-K.

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth the information with respect to purchases made by or on behalf of NRG or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange Act), of NRG's common stock during the quarter ended June 30, 2024.


For the three months ended June 30, 2024	Total Number of Shares Purchased	Average Price Paid per Share(b)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)(a)(c)
Month #1
(April 1, 2024 to April 30, 2024)	—	$	—	—	$	1,550
Month #2
(May 1, 2024 to May 31, 2024)	1,114,400	$	80.76	1,114,400	$	1,460
Month #3
(June 1, 2024 to June 30, 2024)	—	$	—	—	$	1,460

Total at June 30, 2024	1,114,400	$	80.76	1,114,400

(a)On June 22, 2023, the Company announced that the Board of Directors has authorized $2.7 billion for share repurchases to be executed through 2025, as part of NRG's long-term capital allocation policy. The program began following the announcement in 2023 and is subject to the availability of excess cash and full visibility of the achievement of the Company's target credit metrics

(b)The average price paid per share excludes excise tax and commissions of $0.015 to $0.02 per share paid in connection with the open market share repurchases

(c)Includes commissions of $0.015 to $0.02 per share paid in connection with the open market share repurchases

ITEM 3 — DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 — MINE SAFETY DISCLOSURES

There have been no events that are required to be reported under this Item.

ITEM 5 — OTHER INFORMATION

During the three months ended June 30, 2024, the following

Up to shares to be Sold

9/13/2024-5/30/2025N/A

(a)Potential sales may be subject to certain price limitations set forth in the 10b5-1 plans and therefore actual number of shares sold could vary if certain minimum stock prices are not met

ITEM 6 — EXHIBITS

Number

Description

Method of Filing

10.1

Amendment No. 4 to Receivables Loan and Servicing Agreement, dated as of June 21, 2024, among NRG Retail LLC, as Servicer, NRG Receivables LLC, as Borrower, NRG Energy, Inc., as Performance Guarantor, the Conduit Lenders, Committed Lenders, Facility Agents and LC Issuers party thereto, and Royal Bank of Canada, as administrative Agent, and included as Exhibit A-2 thereto a clean, conformed copy of the Receivables Loan and Servicing Agreement.

Incorporated herein by reference to Exhibit 10.1 to the Registrant's current report on Form 8-K filed on June 24, 2024.

10.2

Joinder Agreement, dated as of June 21, 2024, by Direct Energy Services, LLC, as an additional originator and consented to by NRG Receivables LLC, as Borrower, NRG Retail LLC, as Servicer, and Royal Bank of Canada, as administrative agent, to the Receivables Sale Agreement, dated as of September 22, 2020, among the Originators from time to time parties thereto, NRG Retail LLC, as Servicer, and NRG Receivables LLC.

Incorporated herein by reference to Exhibit 10.2 to the Registrant's current report on Form 8-K filed on June 24, 2024.

10.3*

The NRG Energy, Inc. Amended and Restated Long-Term Incentive Plan

Filed herewith.

10.4*

Employment Agreement, dated August 1, 2024 by and between NRG Energy, Inc. and Lawrence S. Coben

Incorporated herein by reference to Exhibit 10.1 to the Registrant's current report on Form 8-K filed on August 1, 2024.

22.1

List of Guarantor Subsidiaries

Filed herewith.

31.1

Rule 13a-14(a)/15d-14(a) certification of Lawrence S. Coben.

Filed herewith.

31.2

Rule 13a-14(a)/15d-14(a) certification of Woo-Sung Chung.

Filed herewith.

31.3

Rule 13a-14(a)/15d-14(a) certification of G. Alfred Spencer.

Filed herewith.

Section 1350 Certification.

Furnished herewith.

101 INS

Inline XBRL Instance Document.

The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101 SCH

Inline XBRL Taxonomy Extension Schema.

Filed herewith.

101 CAL

Inline XBRL Taxonomy Extension Calculation Linkbase.

Filed herewith.

101 DEF

Inline XBRL Taxonomy Extension Definition Linkbase.

Filed herewith.

101 LAB

Inline XBRL Taxonomy Extension Label Linkbase.

Filed herewith.

101 PRE

Inline XBRL Taxonomy Extension Presentation Linkbase.

Filed herewith.

104

Cover Page Interactive Data File (the cover page interactive data file does not appear in Exhibit 104 because it's Inline XBRL tags are embedded within the Inline XBRL document).

Filed herewith.


*						Exhibit relates to compensation arrangements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NRG ENERGY, INC.
(Registrant)

/s/ LAWRENCE S. COBEN

Lawrence S. Coben

President and Chief Executive Officer

(Principal Executive Officer)

/s/ WOO-SUNG CHUNG

Woo-Sung Chung

Chief Financial Officer

(Principal Financial Officer)

/s/ G. ALFRED SPENCER

G. Alfred Spencer

Date: August 8, 2024

Chief Accounting Officer

(Principal Accounting Officer)

NRG ENERGY, INC. - Quarter Report: 2024 June (Form 10-Q)

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