PRINCETON, N.J.--(BUSINESS WIRE)--Dec. 27, 2004--NRG Energy, Inc. (NYSE:NRG) today announced the closing of its sale of $420 million of convertible perpetual preferred stock with a dividend coupon rate of 4%. This transaction enabled the Company to repurchase 13 million common shares from investment partnerships managed by MatlinPatterson Global Advisers, LLC (MP) at a purchase price of $31.16 per share. The cash proceeds from the preferred stock issuance are expected to be used to redeem a portion of the Company's existing debt while the 13 million shares were repurchased using existing cash balances as depicted in Table 1 below:

Table 1: Transaction Proceeds


Sources     Amount--Net   Uses                         Amount
----------------------------------------------------------------------
Convertible               Redemption of 8% High Yield
 Preferred  $406 million   Notes at 108                $406 million(1)
----------------------------------------------------------------------
Cash        $405 million  Repurchase of Common Shares  $405 million
----------------------------------------------------------------------
Total       $811 million  Total                        $811 million
----------------------------------------------------------------------
(1) Includes planned principal redemption of $373.6 million, a
redemption premium of $29.9 million, and accrued interest payable of
$2.9 million.
----------------------------------------------------------------------

"We are pleased with the expeditious timing and completion of these transactions and with the far-reaching positive implications for our stakeholders," said David Crane, President and Chief Executive Officer. "By contracting our share base, we increased our remaining shareholders' stake in the Company's earnings potential while, through the partial redemption of our 8% notes, we will achieve a meaningful reduction in our highest cost debt."

Under certain conditions, shares of the preferred stock will be convertible into NRG common stock at $40.00 per share, which is approximately a 24.5% premium to the NRG stock closing price on December 14, 2004. Holders of preferred stock will be entitled to receive cash dividends at the rate of 4% per year, payable quarterly. After five years, the preferred stock is callable at par plus accrued and unpaid dividends. Proceeds from the sale of the preferred securities are expected to be used to redeem certain of the Company's 8% high yield notes at 108% of par in early 2005.

As previously announced, NRG's 13 million share repurchase from MP reduced their share ownership in NRG to less than 10 percent from the prior 21.5 percent. Even with this repurchase, MP remains the Company's largest shareholder. In addition, MP's registration rights were terminated and the three directors affiliated with MP have resigned from the Company's Board. The NRG Board's Governance and Nominating Committee has begun the process of identifying appropriate independent directors to fill the three vacancies.

Transactional Pro-Forma Analysis:

Below is an unaudited pro forma consolidated balance sheet reflecting the impact of the issuance of the $420 million of preferred stock, the planned redemption of $373.6 million of our 8% high yield notes due 2013, and the repurchase of 13 million shares from MP as if they were effective on September 30, 2004. The following pro forma financial information is not prepared in accordance with pro forma rules under Article 11 of SEC Regulation S-X, but is presented below because management believes that this unaudited pro forma financial information helps provide an understanding of the effect of these transactions on NRG's balance sheet as of the end of our most recent reporting period.

Table 2: Pro Forma Balance Sheet Analysis (unaudited)


                                         September 30, 2004
                               ---------------------------------------
                                            Pro Forma
                                           Adjustments
                                          --------------
                                             Issue of
                                            Preferred
                                           Stock, Share
                                          Repurchase and
                                          Redemption of
                               Historical     Notes        Pro Forma
                               ---------- --------------   -----------
Current Assets
  Cash and cash equivalents    $1,104,783      (405,833) A   $698,950
  Restricted cash                 148,919                     148,919
  Accounts receivable             242,245                     242,245
  Inventory                       214,980                     214,980
  Other current assets            402,006        12,649  H    414,655
                               ---------- --------------   -----------
   Total current assets         2,112,933      (393,184)    1,719,749

Property, Plant and Equipment,
 net                            3,350,991                   3,350,991
Other assets
  Investments in projects         689,974                     689,974
  Notes receivable, less
   current portion                730,643                     730,643
  Other long term assets        1,301,043        (7,066) B  1,293,977
                               ---------- --------------   -----------
   Total other assets           2,721,660        (7,066)    2,714,594
                               ---------- --------------   -----------
Total assets                   $8,185,584      (400,250)   $7,785,334
                               ========== ==============   ===========

Current Liabilities
  Current portion of long term
   debt                          $100,105          (583) C     99,522
  Accounts payable                120,571                     120,571
  Other current liabilities       511,255        (2,921) D    508,334
                               ---------- --------------   -----------
   Total current liabilities      731,931        (3,504)      728,427
Long term debt                  3,511,231      (378,765) C  3,132,466
Other long term obligations     1,345,271                   1,345,271
                               ---------- --------------   -----------
  Total liabilities             5,588,433      (382,269)    5,206,164

Convertible Perpetual Preferred
 Shares                                 -       406,025  E    406,025
Common Stock and Additional
 Paid in Capital                2,414,962                   2,414,962
Treasury Stock                          -      (405,033) F   (405,033)
Retained Earnings and OCI         182,189       (18,973) G    163,216
                               -------------------------   -----------
  Total Shareholders Equity     2,597,151       (17,981)    2,579,170
                               ---------- --------------   -----------
Total Liabilities and
 Shareholders Equity           $8,185,584      (400,250)   $7,785,334
                               ========== ==============   ===========

Footnotes to Pro Forma Balance Sheet

A - This amount includes the net decrease in cash due to the
repurchase of MatlinPatterson shares, and the related expenses.

B - Reflects the write-off of deferred finance costs associated with
the planned redemption of $373.6M of our 8% high yield notes.

C - These amounts reflect the payoff of $373.6M of 8% high yield notes
with the proceeds from the Convertible Perpetual Preferred Stock. This
adjustment also includes a prorata reduction of $5.7M to the premium
received for the 8% high yield notes.

D - Reflects the payment of accrued interest associated with the
$373.6M of 8% high yield notes.

E - Proceeds from issuance of Convertible Perpetual Preferred Stock,
net of expenses.

F - Amount paid to MatlinPatterson, pursuant to the Stock Purchase
Agreement, for 13,000,000 shares of NRG.

G - Reflects the adjustments to the Profit & Loss for the costs
associated with the repurchase of $373.6M of 8% high yield notes, the
write off of associated deferred finance costs and debt premium.

H - Tax effect based on a 40% statutory rate.

The redemption of the 8% high yield notes is subject to conditions and there can be no assurance that it will be consummated.

About NRG

NRG Energy, Inc. owns and operates a diverse portfolio of power-generating facilities, primarily in the Northeast, South Central and West Coast regions of the United States. Its operations include baseload, intermediate, peaking, and cogeneration facilities, thermal energy production and energy resource recovery facilities. NRG also has ownership interests in generating facilities in Australia and Germany.

Safe Harbor Disclosure

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks, uncertainties and assumptions and include, but are not limited to, expected earnings, future growth and financial performance, and typically can be identified by the use of words such as "expect," "estimate," "anticipate," "forecast," "plan," "believe," "will" and similar terms. Although NRG believes that its expectations are reasonable, it can give no assurance that these expectations will prove to have been correct, and actual results may vary materially. Factors that could cause actual results to differ materially from those contemplated above include, among others, general economic conditions, hazards customary in the power industry, weather conditions, foreign exchange rates, competition in wholesale power markets, the volatility of energy and fuel prices, failure of customers to perform under contracts, changes in the wholesale power markets and related government regulation, the condition of capital markets generally, our ability to access capital markets, unanticipated outages at our generation facilities, our ability to convert facilities to burn western coal, our substantial indebtedness and the possibility that we may incur additional indebtedness, adverse results in current and future litigation, the willingness of counterparties to negotiate new contracts in California, and the amount of proceeds from asset sales.

NRG undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause NRG's actual results to differ materially from those contemplated in the forward-looking statements included in this news release should be considered in connection with information regarding risks and uncertainties that may affect NRG's future results included in NRG's filings with the Securities and Exchange Commission at www.sec.gov.

More information on NRG is available at www.nrgenergy.com