Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 	 	 	
þ	 	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	

o	 	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
For the quarterly period ended: September 30, 2009
Commission File Number: 001-15891
NRG Energy, Inc.
(Exact name of Registrant as specified in its charter)
 	 	 	
Delaware	 	41-1724239	
(State or other jurisdiction	 	(I.R.S. Employer	
of incorporation or organization)	 	Identification No.)	
 	 	 	
211 Carnegie Center Princeton, New Jersey	 	08540	
(Address of principal executive offices)	 	(Zip Code)	
(609) 524-4500
(Registrant’s telephone number, including area code)
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ   No o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     Large accelerated filer þ	 	Accelerated filer o	 	Non-accelerated filer o	 	Smaller reporting company o	
 	 	 	 	(Do not check if a smaller reporting company)	 	 	
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o   No þ
     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes þ   No o
      As of October 28, 2009, there were 256,409,300 shares of common stock outstanding, par value $0.01 per share.

 

 
TABLE OF CONTENTS
Index
 	 	 	 	 	 	 	 	 	
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION	 	 	3	 	 	 	 	 	
GLOSSARY OF TERMS	 	 	4	 	 	 	 	 	
PART I — FINANCIAL INFORMATION	 	 	9	 	 	 	 	 	
ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES	 	 	9	 	 	 	 	 	
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	 	 	61	 	 	 	 	 	
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	 	 	110	 	 	 	 	 	
ITEM 4 — CONTROLS AND PROCEDURES	 	 	115	 	 	 	 	 	
PART II — OTHER INFORMATION	 	 	116	 	 	 	 	 	
ITEM 1 — LEGAL PROCEEDINGS	 	 	116	 	 	 	 	 	
ITEM 1A — RISK FACTORS	 	 	116	 	 	 	 	 	
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	 	 	116	 	 	 	 	 	
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES	 	 	116	 	 	 	 	 	
ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	 	 	116	 	 	 	 	 	
ITEM 5 — OTHER INFORMATION	 	 	117	 	 	 	 	 	
ITEM 6 — EXHIBITS	 	 	118	 	 	 	 	 	
SIGNATURES	 	 	119	 	 	 	 	 	
 EX-10.1.A	
 EX-10.1.B	
 EX-31.1	
 EX-31.2	
 EX-31.3	
 EX-32	
 EX-101 INSTANCE DOCUMENT	
 EX-101 SCHEMA DOCUMENT	
 EX-101 CALCULATION LINKBASE DOCUMENT	
 EX-101 LABELS LINKBASE DOCUMENT	
 EX-101 PRESENTATION LINKBASE DOCUMENT	
 EX-101 DEFINITION LINKBASE DOCUMENT	
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Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
     This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words “believes,” “projects,” “anticipates,” “plans,” “expects,” “intends,” “estimates” and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause NRG’s actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Risks Factors Related to NRG Energy, Inc. in Part I, Item 1A, of the Company’s Annual Report on Form 10-K, for the year ended December 31, 2008 and Risk Factors in Part II, Item 1A, of the Quarterly Report on Form 10-Q, for the quarters ended March 31, 2009 and June 30, 2009 including the following:
 	•	 	General economic conditions, changes in the wholesale power markets and fluctuations in the cost of fuel;	
 	 	 	 	
 	•	 	Volatile power supply costs and demand for power;	
 	 	 	 	
 	•	 	Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions, catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that NRG may not have adequate insurance to cover losses as a result of such hazards;	
 	 	 	 	
 	•	 	The effectiveness of NRG’s risk management policies and procedures, and the ability of NRG’s counterparties to satisfy their financial commitments;	
 	 	 	 	
 	•	 	Counterparties’ collateral demands and other factors affecting NRG’s liquidity position and financial condition;	
 	 	 	 	
 	•	 	NRG’s ability to operate its businesses efficiently, manage capital expenditures and costs tightly, and generate earnings and cash flows from its asset-based businesses in relation to its debt and other obligations;	
 	 	 	 	
 	•	 	NRG’s ability to enter into contracts to sell power and procure fuel on acceptable terms and prices;	
 	 	 	 	
 	•	 	The liquidity and competitiveness of wholesale markets for energy commodities;	
 	 	 	 	
 	•	 	Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs and environmental laws and increased regulation of carbon dioxide and other greenhouse gas emissions;	
 	 	 	 	
 	•	 	Price mitigation strategies and other market structures employed by ISOs or RTOs that result in a failure to adequately compensate NRG’s generation units for all of its costs;	
 	 	 	 	
 	•	 	NRG’s ability to borrow additional funds and access capital markets, as well as NRG’s substantial indebtedness and the possibility that NRG may incur additional indebtedness going forward;	
 	 	 	 	
 	•	 	Operating and financial restrictions placed on NRG and its subsidiaries that are contained in the indentures governing NRG’s outstanding notes, in NRG’s Senior Credit Facility, and in debt and other agreements of certain of NRG subsidiaries and project affiliates generally;	
 	 	 	 	
 	•	 	NRG’s ability to implement its RepoweringNRG strategy of developing and building new power generation facilities, including new nuclear, wind and solar projects;	
 	 	 	 	
 	•	 	NRG’s ability to implement its econrg strategy of finding ways to meet the challenges of climate change, clean air and protecting natural resources while taking advantage of business opportunities;	
 	 	 	 	
 	•	 	NRG’s ability to implement its FORNRG strategy of increasing the return on invested capital through operational performance improvements and a range of initiatives at plants and corporate offices to reduce costs or generate revenue;	
 	 	 	 	
 	•	 	NRG’s ability to achieve its strategy of regularly returning capital to shareholders; and	
 	 	 	 	
 	•	 	NRG’s ability to successfully integrate and manage any acquired companies.	
     Forward-looking statements speak only as of the date they were made, and NRG undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause NRG’s actual results to differ materially from those contemplated in any forward-looking statements included in this Quarterly Report on Form 10-Q should not be construed as exhaustive.
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GLOSSARY OF TERMS
     When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:
 	 	 	
APB	 	Accounting Principles Board	
 	 	 	
ASC	 	The FASB Accounting Standards Codification, which the FASB has established as the source of authoritative U.S. GAAP	
 	 	 	
ASU	 	Accounting Standards Updates – updates to the ASC	
 	 	 	
Baseload capacity	 	Electric power generation capacity normally expected to serve loads on an around-the-clock basis throughout the calendar year	
 	 	 	
BACT	 	Best Available Control Technology	
 	 	 	
BTA	 	Best Technology Available	
 	 	 	
BTU	 	British Thermal Unit	
 	 	 	
CAA	 	Clean Air Act	
 	 	 	
CAGR	 	Compound annual growth rate	
 	 	 	
CAIR	 	Clean Air Interstate Rule	
 	 	 	
CAISO	 	California Independent System Operator	
 	 	 	
Capital Allocation Plan	 	Share repurchase program	
 	 	 	
Capital Allocation Program	 	NRG’s plan of allocating capital between debt reduction, reinvestment in the business, and share repurchases through the Capital Allocation Plan	
 	 	 	
CDWR	 	California Department of Water Resources	
 	 	 	
C&I	 	Commercial, industrial and governmental/institutional	
 	 	 	
CL&P	 	The Connecticut Light & Power Company	
 	 	 	
CO2	 	Carbon dioxide	
 	 	 	
CREZ	 	Competitive Renewable Energy Zones	
 	 	 	
CS	 	Credit Suisse Group	
 	 	 	
CSF I	 	NRG Common Stock Finance I LLC	
 	 	 	
CSF II	 	NRG Common Stock Finance II LLC	
 	 	 	
CSF CAGRs	 	Embedded derivatives within the CSF debt, individually referred to as CSF I CAGR and CSF II CAGR	
 	 	 	
CSF Debt	 	CSF I and CSF II issued notes and preferred interest, individually referred to as CSF I Debt and CSF II Debt	
 	 	 	
CSRA	 	Credit Sleeve Reimbursement Agreement with Merrill Lynch in connection with acquisition of Reliant Energy, as hereinafter defined	
 	 	 	
DNREC	 	Delaware Department of Natural Resources and Environmental Control	
 	 	 	
DPUC	 	Department of Public Utility Control	
 	 	 	
EITF	 	Emerging Issues Task Force	
 	 	 	
EPC	 	Engineering, Procurement and Construction	
 	 	 	
ERCOT	 	Electric Reliability Council of Texas, the Independent System Operator and the Regional Reliability Coordinator of the various electricity systems within Texas	
 	 	 	
ESPP	 	Employee Stock Purchase Plan	
 	 	 	
Exchange Act	 	The Securities Exchange Act of 1934, as amended	
 	 	 	
FASB	 	Financial Accounting Standards Board	
 	 	 	
FERC	 	Federal Energy Regulatory Commission	
 	 	 	
FSP	 	FASB Staff Position	
 	 	 	
GHG	 	Greenhouse Gases	
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 	 	GLOSSARY OF TERMS (continued)	
 	 	 	
Heat Rate	 	A measure of thermal efficiency computed by dividing the total BTU content of the fuel burned by the resulting kWh’s generated. Heat rates can be expressed as either gross or net heat rates, depending whether the electricity output measured is gross or net generation and is generally expressed as BTU per net kWh.	
 	 	 	
IGCC	 	Integrated Gasification Combined Cycle	
 	 	 	
IRS	 	Internal Revenue Service	
 	 	 	
ISO	 	Independent System Operator, also referred to as Regional Transmission Organizations, or RTO	
 	 	 	
ISO-NE	 	ISO New England Inc.	
 	 	 	
ITISA	 	Itiquira Energetica S.A.	
 	 	 	
kV	 	Kilovolts	
 	 	 	
kW	 	Kilowatts	
 	 	 	
kWh	 	Kilowatt-hours	
 	 	 	
LIBOR	 	London Inter-Bank Offer Rate	
 	 	 	
Licensing Board	 	Atomic Licensing and Safety Board	
 	 	 	
LTIP	 	Long-Term Incentive Plan	
 	 	 	
MACT	 	Maximum Achievable Control Technology	
 	 	 	
Mass	 	Residential and small business	
 	 	 	
MDPSC	 	Maryland Public Service Commission	
 	 	 	
Merit Order	 	A term used for the ranking of power stations in order of ascending marginal cost	
 	 	 	
MIBRAG	 	Mitteldeutsche Braunkohlengesellschaft mbH	
 	 	 	
MMBtu	 	Million British Thermal Units	
 	 	 	
MRTU	 	Market Redesign and Technology Upgrade	
 	 	 	
MVA	 	Megavolt-ampere	
 	 	 	
MW	 	Megawatts	
 	 	 	
MWh	 	Saleable megawatt hours net of internal/parasitic load megawatt-hours	
 	 	 	
MWt	 	Megawatts Thermal	
 	 	 	
NAAQS	 	National Ambient Air Quality Standards	
 	 	 	
Net Exposure	 	Counterparty credit exposure to NRG, net of collateral	
 	 	 	
NINA	 	Nuclear Innovation North America LLC	
 	 	 	
NOx	 	Nitrogen oxide	
 	 	 	
NOL	 	Net Operating Loss	
 	 	 	
NOV	 	Notice of Violation	
 	 	 	
NPNS	 	Normal Purchase Normal Sale	
 	 	 	
NRC	 	United States Nuclear Regulatory Commission	
 	 	 	
NSR	 	New Source Review	
 	 	 	
NYISO	 	New York Independent System Operator	
 	 	 	
OCI	 	Other Comprehensive Income	
 	 	 	
Phase II 316(b) Rule	 	A section of the Clean Water Act regulating cooling water intake structures	
 	 	 	
PJM	 	PJM Interconnection, LLC	
 	 	 	
PJM market	 	The wholesale and retail electric market operated by PJM primarily in all or parts of Delaware, the District of Columbia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia	
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 	 	GLOSSARY OF TERMS (continued)	
 	 	 	
PML	 	NRG Power Marketing, LLC, a wholly-owned subsidiary of NRG which procures transportation and fuel for the Company’s generation facilities, sells the power from these facilities, and manages all commodity trading and hedging for NRG	
 	 	 	
PPA	 	Power Purchase Agreement	
 	 	 	
PUCT	 	Public Utility Commission of Texas	
 	 	 	
Reliant Energy	 	NRG’s retail business in Texas purchased on May 1, 2009, from Reliant Energy, Inc. which is now known as RRI Energy, Inc., or RRI	
 	 	 	
Repowering	 	Technologies utilized to replace, rebuild, or redevelop major portions of an existing electrical generating facility, not only to achieve a substantial emissions reduction, but also to increase facility capacity, and improve system efficiency	
 	 	 	
RepoweringNRG	 	NRG’s program designed to develop, finance, construct and operate new, highly efficient, environmentally responsible capacity over the next decade	
 	 	 	
REPS	 	Reliant Energy Power Supply, LLC	
 	 	 	
RERH	 	RERH Holding, LLC and its subsidiaries	
 	 	 	
Revolving Credit Facility	 	NRG’s $1 billion senior secured revolving credit facility which matures on February 2, 2011	
 	 	 	
RGGI	 	Regional Greenhouse Gas Initiative	
 	 	 	
ROIC	 	Return on Invested Capital	
 	 	 	
RPM	 	Reliability Pricing Model — term for capacity market in PJM market	
 	 	 	
RTO	 	Regional Transmission Organization, also referred to as an Independent System Operator, or ISO	
 	 	 	
Sarbanes-Oxley	 	Sarbanes-Oxley Act of 2002 (as amended)	
 	 	 	
SEC	 	United States Securities and Exchange Commission	
 	 	 	
Securities Act	 	The Securities Act of 1933, as amended	
 	 	 	
Senior Credit Facility	 	NRG’s senior secured facility, which is comprised of a Term Loan Facility and a $1.3 billion Synthetic Letter of Credit Facility which mature on February 1, 2013, and a $1 billion Revolving Credit Facility, which matures on February 2, 2011	
 	 	 	
SIFMA	 	Securities Industry and Financial Markets Association	
 	 	 	
Senior Notes	 	The Company’s $5.4 billion outstanding unsecured senior notes consisting of $1.2 billion of 7.25% senior notes due 2014, $2.4 billion of 7.375% senior notes due 2016, $1.1 billion of 7.375% senior notes due 2017 and $700 million of 8.5% senior notes due 2019	
 	 	 	
SFAS	 	Statement of Financial Accounting Standards issued by the FASB	
 	 	 	
STP	 	South Texas Project — nuclear generating facility located near Bay City, Texas in which NRG owns a 44% Interest	
 	 	 	
STPNOC	 	South Texas Project Nuclear Operating Company	
 	 	 	
Synthetic Letter of Credit Facility	 	NRG’s $1.3 billion senior secured synthetic letter of credit facility which matures on February 1, 2013	
 	 	 	
TANE	 	Toshiba American Nuclear Energy Corporation	
 	 	 	
TANE Facility	 	NINA’s $500 million credit facility with TANE which matures on February 24, 2012	
 	 	 	
Term Loan Facility	 	A senior first priority secured term loan which matures on February 1, 2013, and is included as part of NRG’s Senior Credit Facility	
 	 	 	
Texas Genco	 	Texas Genco LLC, now referred to as the Company’s Texas Region	
 	 	 	
Tonnes	 	Metric tonnes, which are units of mass or weight in the metric system each equal to 2,205 lbs and are the global measurement for GHG	
 	 	 	
U.S.	 	United States of America	
 	 	 	
U.S. EPA	 	United States Environmental Protection Agency	
 	 	 	
U.S. GAAP	 	Accounting principles generally accepted in the United States	
 	 	 	
VaR	 	Value at Risk	
 	 	 	
WCP	 	WCP (Generation) Holdings, Inc.	
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ACCOUNTING PRONOUNCEMENTS
     The following ASC topics are referenced in this report. In addition, certain U.S. GAAP standards and interpretations were adopted by the Company in 2009 prior to the July 1, 2009, effective date of the ASC, and were subsequently incorporated into one or more ASC topics. Further, certain U.S. GAAP standards were ratified by the FASB in 2009 prior to July 1, 2009, but are not yet effective and have therefore not yet been incorporated into the ASC. This glossary includes the definition of these “legacy” standards and interpretations under the ASC topic or topics which have been, or are expected to be, fully or partially incorporated.
 	 	 	
ASC 105	 	ASC-105, Generally Accepted Accounting Principles; incorporates:	

 	•	 	SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles	

ASC 270	 	ASC-270, Interim Reporting; incorporates:	

 	•	 	FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments	

ASC 275	 	ASC-275, Risks and Uncertainties, incorporates:	

 	•	 	FSP FAS 142-3, Determination of the Useful Life of Intangible Assets	

ASC 320	 	ASC-320, Investments-Debt and Equity Securities; incorporates:	

 	•	 	FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments	

ASC 323	 	ASC-323, Investments-Equity Method and Joint Ventures; incorporates:	

 	•	 	EITF 08-6, Equity Method Investment Accounting Considerations	

ASC 350	 	ASC-350, Intangibles-Goodwill and Others; incorporates:	

 	•	 	FSP FAS 142-3, Determination of the Useful Life of Intangible Assets	

ASC 450	 	ASC-450, Contingencies	
 	 	 	
ASC 470	 	ASC-470, Debt; incorporates:	

 	•	 	FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)	

ASC 715	 	ASC-715, Compensation-Retirement Benefits, incorporates:	

 	•	 	FSP FAS 132 (R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets	

ASC 718	 	ASC-718, Compensation-Stock Compensation; incorporates:	

 	•	 	EITF 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock	

ASC 740	 	ASC-740, Income Taxes	
 	 	 	
ASC 805	 	ASC-805, Business Combinations; incorporates:	

 	•	 	SFAS 141(R), Business Combinations	

 	•	 	FSP FAS 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies	

ASC 810	 	ASC-810, Consolidation; incorporates:	

 	•	 	SFAS 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51, Consolidate Financial Statements	
 	 	 	 	
 	Expected to incorporate SFAS 167, Amendments to FASB Interpretations No. 46 (R), effective January 1, 2010	

ASC 815	 	ASC-815, Derivatives and Hedging; incorporates:	

 	•	 	SFAS 161, Disclosures About Derivative Instruments and Hedging Activities	
 	 	 	 	
 	•	 	EITF 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock	

ASC 820	 	ASC-820, Fair Value Measurements and Disclosures; incorporates:	
 	 	 	 	
 	•	 	FSP FAS 157-2, Effective Date of FASB Statement No. 157	
 	 	 	 	
 	•	 	FSP FAS 157-4 Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly	
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 	•	 	EITF 08-5, Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement	

ASC 825	 	ASC-825, Financial Instruments; incorporates:	

 	•	 	FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)	

 	•	 	FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments	

ASC 855	 	ASC-855, Subsequent Events; incorporates:	

 	•	 	SFAS 165, Subsequent Events	

ASU 2009-5	 	ASU 2009-5, Fair Value Measurement and Disclosures: Measuring Liabilities at Fair Value	
 	 	 	
ASU 2009-15	 	ASU 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing;  incorporates:	

 	•	 	EITF 09-1, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing	
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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 September 30,	 	 	Nine months ended September 30,	    	
(In millions, except for per share amounts)	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	$	2,916	 	 	$	2,612	 	 	$	6,811	 	 	$	5,230	 	
 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of operations	 	 	1,893	 	 	 	997	 	 	 	3,901	 	 	 	2,812	 	
Depreciation and amortization	 	 	212	 	 	 	156	 	 	 	594	 	 	 	478	 	
Selling, general and administrative	 	 	182	 	 	 	75	 	 	 	396	 	 	 	233	 	
Acquisition-related transaction and integration costs	 	 	6	 	 	 	—	 	 	 	41	 	 	 	—	 	
Development costs	 	 	12	 	 	 	13	 	 	 	34	 	 	 	29	 	
 	
Total operating costs and expenses	 	 	2,305	 	 	 	1,241	 	 	 	4,966	 	 	 	3,552	 	
Operating Income	 	 	611	 	 	 	1,371	 	 	 	1,845	 	 	 	1,678	 	
 	
Other Income/(Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of unconsolidated affiliates	 	 	6	 	 	 	58	 	 	 	33	 	 	 	35	 	
Gain on sale of equity method investment	 	 	—	 	 	 	—	 	 	 	128	 	 	 	—	 	
Other income/(loss), net	 	 	5	 	 	 	(7	)	 	 	(9	)	 	 	14	 	
Interest expense	 	 	(178	)	 	 	(142	)	 	 	(475	)	 	 	(442	)	
 	
Total other expense	 	 	(167	)	 	 	(91	)	 	 	(323	)	 	 	(393	)	
 	
Income From Continuing Operations Before Income Taxes	 	 	444	 	 	 	1,280	 	 	 	1,522	 	 	 	1,285	 	
Income tax expense	 	 	166	 	 	 	502	 	 	 	614	 	 	 	503	 	
 	
Income From Continuing Operations	 	 	278	 	 	 	778	 	 	 	908	 	 	 	782	 	
Income from discontinued operations, net of income taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	172	 	
 	
Net Income	 	 	278	 	 	 	778	 	 	 	908	 	 	 	954	 	
Less: Net loss attributable to noncontrolling interest	 	 	—	 	 	 	—	 	 	 	(1	)	 	 	—	 	
 	
Net income attributable to NRG Energy, Inc.	 	 	278	 	 	 	778	 	 	 	909	 	 	 	954	 	
 	
Dividends for preferred shares	 	 	6	 	 	 	13	 	 	 	27	 	 	 	41	 	
 	
Income Available for NRG Energy, Inc. Common Stockholders	 	$	272	 	 	$	765	 	 	$	882	 	 	$	913	 	
 	
Earnings per share attributable to NRG Energy, Inc.	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Stockholders	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding — basic	 	 	249	 	 	 	235	 	 	 	247	 	 	 	236	 	
Income from continuing operations per weighted average common share — basic	 	$	1.09	 	 	$	3.26	 	 	$	3.58	 	 	$	3.14	 	
Income from discontinued operations per weighted average common share — basic	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.73	 	
 	
Net Income per Weighted Average Common Share — Basic	 	$	1.09	 	 	$	3.26	 	 	$	3.58	 	 	$	3.87	 	
 	
Weighted average number of common shares outstanding — diluted	 	 	272	 	 	 	277	 	 	 	274	 	 	 	278	 	
Income from continuing operations per weighted average common share — diluted	 	$	1.02	 	 	$	2.81	 	 	$	3.29	 	 	$	2.79	 	
Income from discontinued operations per weighted average common share — diluted	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.62	 	
 	
Net Income per Weighted Average Common Share — Diluted	 	$	1.02	 	 	$	2.81	 	 	$	3.29	 	 	$	3.41	 	
 	
Amounts attributable to NRG Energy, Inc.:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, net of income taxes	 	$	278	 	 	$	778	 	 	$	909	 	 	$	782	 	
Income from discontinued operations, net of income taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	172	 	
 	
Net Income	 	$	278	 	 	$	778	 	 	$	909	 	 	$	954	 	
 	
See notes to condensed consolidated financial statements.
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 	 	 	 	 	 	 	 	 	
 	 	  September 30, 2009     	 	December 31, 2008     	
(In millions, except shares)	 	(unaudited)	 	 	 	 	
 	
ASSETS	 	 	 	 	 	 	 	 	
Current Assets	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	  $	2,250	 	 	  $	1,494	 	
Funds deposited by counterparties	 	 	293	 	 	 	754	 	
Restricted cash	 	 	26	 	 	 	16	 	
Accounts receivable, less allowance for doubtful accounts of $40 and $3, respectively	 	 	1,119	 	 	 	464	 	
Inventory	 	 	533	 	 	 	455	 	
Derivative instruments valuation	 	 	3,199	 	 	 	4,600	 	
Deferred income taxes	 	 	101	 	 	 	—	 	
Cash collateral paid in support of energy risk management activities	 	 	475	 	 	 	494	 	
Prepayments and other current assets	 	 	215	 	 	 	215	 	
 	
Total current assets	 	 	8,211	 	 	 	8,492	 	
 	
Property, plant and equipment, net of accumulated depreciation of $2,876 and $2,343, respectively	 	 	11,610	 	 	 	11,545	 	
 	
Other Assets	 	 	 	 	 	 	 	 	
Equity investments in affiliates	 	 	392	 	 	 	490	 	
Capital leases and note receivable, less current portion	 	 	507	 	 	 	435	 	
Goodwill	 	 	1,718	 	 	 	1,718	 	
Intangible assets, net of accumulated amortization of $483 and $335, respectively	 	 	1,942	 	 	 	815	 	
Nuclear decommissioning trust fund	 	 	354	 	 	 	303	 	
Derivative instruments valuation	 	 	1,039	 	 	 	885	 	
Other non-current assets	 	 	181	 	 	 	125	 	
 	
Total other assets	 	 	6,133	 	 	 	4,771	 	
 	
Total Assets	 	  $	25,954	 	 	  $	24,808	 	
 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current Liabilities	 	 	 	 	 	 	 	 	
Current portion of long-term debt and capital leases	 	  $	537	 	 	  $	464	 	
Accounts payable	 	 	725	 	 	 	451	 	
Derivative instruments valuation	 	 	3,017	 	 	 	3,981	 	
Deferred income taxes	 	 	—	 	 	 	201	 	
Cash collateral received in support of energy risk management activities	 	 	293	 	 	 	760	 	
Accrued expenses and other current liabilities	 	 	636	 	 	 	724	 	
 	
Total current liabilities	 	 	5,208	 	 	 	6,581	 	
 	
Other Liabilities	 	 	 	 	 	 	 	 	
Long-term debt and capital leases	 	 	8,229	 	 	 	7,697	 	
Nuclear decommissioning reserve	 	 	296	 	 	 	284	 	
Nuclear decommissioning trust liability	 	 	249	 	 	 	218	 	
Deferred income taxes	 	 	1,572	 	 	 	1,190	 	
Derivative instruments valuation	 	 	859	 	 	 	508	 	
Out-of-market contracts	 	 	324	 	 	 	291	 	
Other non-current liabilities	 	 	1,138	 	 	 	669	 	
 	
Total non-current liabilities	 	 	12,667	 	 	 	10,857	 	
 	
Total Liabilities	 	 	17,875	 	 	 	17,438	 	
 	
3.625% convertible perpetual preferred stock	 	 	247	 	 	 	247	 	
Commitments and Contingencies	 	 	 	 	 	 	 	 	
Stockholders’ Equity	 	 	 	 	 	 	 	 	
Preferred stock	 	 	406	 	 	 	853	 	
Common stock	 	 	3	 	 	 	3	 	
Additional paid-in capital	 	 	4,568	 	 	 	4,350	 	
Retained earnings	 	 	3,305	 	 	 	2,423	 	
Less treasury stock, at cost — 26,080,051 and 29,242,483 shares, respectively	 	 	(782	)	 	 	(823	)	
Accumulated other comprehensive income	 	 	320	 	 	 	310	 	
Noncontrolling interest	 	 	12	 	 	 	7	 	
 	
Total Stockholders’ Equity	 	 	7,832	 	 	 	7,123	 	
 	
Total Liabilities and Stockholders’ Equity	 	  $	25,954	 	 	  $	24,808	 	
 	
See notes to condensed consolidated financial statements.
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 	 	 	 	 	 	 	 	 	
(In millions)	 	 	 	 	 	 	
Nine months ended September 30,	 	2009	 	 	2008	 	
 	
Cash Flows from Operating Activities	 	 	 	 	 	 	 	 	
Net income	 	$  	908	 	 	$  	954	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Distributions and equity in earnings of unconsolidated affiliates	 	 	(33	)	 	 	(24	)	
Depreciation and amortization	 	 	594	 	 	 	478	 	
Provision for bad debts	 	 	37	 	 	 	—	 	
Amortization of nuclear fuel	 	 	28	 	 	 	31	 	
Amortization of financing costs and debt discount/premiums	 	 	35	 	 	 	28	 	
Amortization of intangibles and out-of-market contracts	 	 	79	 	 	 	(226	)	
Changes in deferred income taxes and liability for unrecognized tax benefits	 	 	561	 	 	 	439	 	
Changes in nuclear decommissioning trust liability	 	 	19	 	 	 	8	 	
Changes in derivatives	 	 	(234	)	 	 	(144	)	
Changes in collateral deposits supporting energy risk management activities	 	 	13	 	 	 	(320	)	
Loss on sale of assets	 	 	2	 	 	 	13	 	
Gain on sale of equity method investment	 	 	(128	)	 	 	—	 	
Gain on sale of discontinued operations	 	 	—	 	 	 	(273	)	
Gain on sale of emission allowances	 	 	(8	)	 	 	(52	)	
Gain recognized on settlement of pre-existing relationship	 	 	(31	)	 	 	—	 	
Amortization of unearned equity compensation	 	 	20	 	 	 	21	 	
Changes in option premiums collected	 	 	(278	)	 	 	203	 	
Cash used by changes in other working capital	 	 	(304	)	 	 	(50	)	
 	
Net Cash Provided by Operating Activities	 	 	1,280	 	 	 	1,086	 	
 	
Cash Flows from Investing Activities	 	 	 	 	 	 	 	 	
Acquisition of Reliant Energy, net of cash acquired	 	 	(356	)	 	 	—	 	
Capital expenditures	 	 	(560	)	 	 	(649	)	
Increase in restricted cash, net	 	 	(10	)	 	 	(3	)	
(Increase)/decrease in notes receivable	 	 	(18	)	 	 	20	 	
Purchases of emission allowances	 	 	(68	)	 	 	(6	)	
Proceeds from sale of emission allowances	 	 	20	 	 	 	75	 	
Investments in nuclear decommissioning trust fund securities	 	 	(237	)	 	 	(441	)	
Proceeds from sales of nuclear decommissioning trust fund securities	 	 	218	 	 	 	434	 	
Proceeds from sale of discontinued operations, net of cash divested	 	 	—	 	 	 	241	 	
Proceeds from sale of assets, net	 	 	6	 	 	 	14	 	
Proceeds from sale of equity method investment	 	 	284	 	 	 	—	 	
Equity investment in unconsolidated affiliate	 	 	—	 	 	 	(17	)	
Other investments	 	 	(6	)	 	 	—	 	
 	
Net Cash Used by Investing Activities	 	 	(727	)	 	 	(332	)	
 	
Cash Flows from Financing Activities	 	 	 	 	 	 	 	 	
Payment of dividends to preferred stockholders	 	 	(27	)	 	 	(41	)	
Net payments to settle acquired derivatives that include financing elements	 	 	(140	)	 	 	(49	)	
Payment to settle CSF I CAGR	 	 	—	 	 	 	(45	)	
Payment for treasury stock	 	 	(250	)	 	 	(185	)	
Proceeds from issuance of common stock, net of issuance costs	 	 	1	 	 	 	8	 	
Installment proceeds from sale of noncontrolling interest in subsidiary	 	 	50	 	 	 	50	 	
Proceeds from issuance of long-term debt	 	 	843	 	 	 	20	 	
Payment of deferred debt issuance costs	 	 	(29	)	 	 	(2	)	
Payments for short and long-term debt	 	 	(248	)	 	 	(202	)	
 	
Net Cash Provided by/(Used by) Financing Activities	 	 	200	 	 	 	(446	)	
 	
Change in cash from discontinued operations	 	 	—	 	 	 	43	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	3	 	 	 	—	 	
 	
Net Increase in Cash and Cash Equivalents	 	 	756	 	 	 	351	 	
Cash and Cash Equivalents at Beginning of Period	 	 	1,494	 	 	 	1,132	 	
 	
Cash and Cash Equivalents at End of Period	 	$  	2,250	 	 	$  	1,483	 	
 	
See notes to condensed consolidated financial statements.
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NRG ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 — Basis of Presentation
     NRG Energy, Inc., or NRG or the Company, is primarily a wholesale power generation company with a significant presence in major competitive power markets in the United States, as well as a major retail electricity franchise in the ERCOT (Texas) market. NRG is engaged in the ownership, development, construction and operation of power generation facilities, the transacting in and trading of fuel and transportation services, the trading of energy, capacity and related products in the United States and select international markets, and supply of electricity and energy services to retail electricity customers in the Texas market.
     The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission’s, or SEC’s, regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2008. 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 September 30, 2009, the results of operations for the three and nine months ended September 30, 2009, and 2008, and cash flows for the nine months ended September 30, 2009, and 2008. These financial statements and notes reflect the Company’s evaluation of events occurring subsequent to the balance sheet date through November 2, 2009, the date the financial statements were issued.
     Certain prior-year amounts have been reclassified for comparative purposes. In addition, as disclosed in Note 27, Unaudited Quarterly Financial Data , to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, the results of operations for the three months ended September 30, 2008, have been revised to reflect the correction of a $78 million overstatement of revenues from an error in the accounting for energy options. The effect of the revision on the three and nine months ended September 30, 2008 from the Company’s previously filed Form 10-Q, as adjusted for the effect of the adoption of FSP APB 14-1 (as discussed in Note 2, Summary of Significant Accounting Policies), is summarized as follows:
 	 	 	 	 	
(In millions, except per share amounts)	 	Adjustment	
 	
Increase/(decrease):	 	 	 	 	
Operating revenues	 	$	(78	)	
Operating income	 	 	(78	)	
Income tax expense	 	 	28	 	
Income/(losses) from continuing operations, net of income taxes	 	 	(50	)	
Net income attributable to NRG Energy, Inc.	 	$	(50	)	
Income/(losses) from continuing operations per weighted average common share — basic	 	$	(0.21	)	
Net income per weighted average common share — basic	 	$	(0.21	)	
Income/(losses) from continuing operations per weighted average common share — diluted	 	$	(0.18	)	
Net income per weighted average common share — diluted	 	$	(0.18	)	
 	
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Use of Estimates
     The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during the reporting period. Actual results could be different from these estimates.
Note 2 — Summary of Significant Accounting Policies
Cash and Cash Equivalents
     Cash and cash equivalents at September 30, 2009, were predominantly held in money market funds invested in treasury securities, treasury repurchase agreements or government agency debt.
Other Cash Flow Information
     NRG’s investing activities do not include non-cash capital expenditures of $43 million which were accrued at September 30, 2009.
Recent Accounting Developments
     SFAS 168 — In June 2009, the Financial Accounting Standards Board, or FASB, issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles , or SFAS 168. Effective July 1, 2009, this guidance establishes the FASB Accounting Standards Codification, or ASC, as the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. In addition, SFAS 168 also specifies that rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the ASC carries an equal level of authority. The Company adopted SFAS 168 for the quarterly reporting period ending September 30, 2009. SFAS 168 has been incorporated into the ASC as ASC-105,  Generally Accepted Accounting Principles,  or ASC 105.
     Certain U.S. GAAP standards and interpretations were adopted by the Company in 2009 prior to the July 1, 2009, effective date of the ASC, and were subsequently incorporated into one or more ASC topics. Further, certain U.S. GAAP standards were ratified by the FASB in 2009 prior to July 1, 2009, but are not yet effective and have therefore not yet been incorporated into the ASC. This report retains the original title of these standards and interpretations, and references the ASC topic or topics which have been, or are expected to be, incorporated.
     SFAS 141R — The Company adopted SFAS No. 141 (revised 2007), Business Combinations, or SFAS 141R, on January 1, 2009. The provisions of SFAS 141R are applied prospectively to business combinations for which the acquisition date occurs after January 1, 2009. The statement requires an acquirer to recognize and measure in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at fair value at the acquisition date. It also recognizes and measures the goodwill acquired or a gain from a bargain purchase in the business combination and determines what information to disclose to enable users of an entity’s financial statements to evaluate the nature and financial effects of the business combination. In addition, transaction costs are required to be expensed as incurred. As discussed in Note 4,  Business Acquisition , to this Form 10-Q, on May 1, 2009, NRG acquired all of the Texas electric retail business operations, or Reliant Energy, of Reliant Energy, Inc., now known as RRI Energy, Inc., or RRI. The Company has applied the provisions of SFAS 141R to the Reliant Energy acquisition. As discussed further in Note 13,  Income Taxes , any reductions after January 1, 2009, to existing net deferred tax assets or valuation allowances or changes to uncertain tax benefits, as they relate to Fresh Start or previously completed acquisitions, will be recorded to income tax expense rather than additional paid-in capital or goodwill. SFAS 141R has been incorporated into ASC-805,  Business Combinations , or ASC 805.
     FSP FAS 141R-1 — In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies , or FSP FAS 141R-1, which the Company adopted effective January 1, 2009. This FSP amends and clarifies SFAS 141R ,  to address application issues on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The provisions of FSP FAS 141R-1 are applied prospectively to assets or liabilities arising from contingencies in business combinations for which the acquisition date occurs after January 1, 2009. Accordingly, the Company has applied the provisions of FSP FAS 141R-1 to the Reliant Energy acquisition. The provisions of FSP FAS 141R-1 have been incorporated into ASC 805.
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     SFAS 160 — The Company adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51, Consolidated Financial Statements , or SFAS 160, on January 1, 2009. SFAS 160 establishes accounting and reporting standards for the minority interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB No. 51’s consolidation procedures for consistency with the requirements of SFAS 141R. This statement is applied prospectively from the date of adoption, except for the presentation and disclosure requirements, which shall be applied retrospectively. Accordingly, the Company has conformed its financial statement presentation and disclosures to the requirements of SFAS 160. SFAS 160 has been incorporated into ASC-810,  Consolidation , or ASC 810.
     FSP APB 14-1 — The Company adopted FSP No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement),  or FSP APB 14-1, on January 1, 2009, applying it retrospectively to all periods presented .  FSP APB 14-1 clarifies that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) should separately account for the liability component and the equity component represented by the embedded conversion option in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. Upon settlement, the entity shall allocate consideration transferred and transaction costs incurred to the extinguishment of the liability component and the reacquisition of the equity component. The provisions of FSP APB 14-1 have been incorporated into ASC-470,  Debt , or ASC 470, and ASC-825, Financial Instruments , or ASC 825.
     During the third quarter 2006, NRG’s unrestricted wholly-owned subsidiaries CSF I and CSF II issued notes and preferred interests, or CSF Debt, which included embedded derivatives, or CSF CAGRs, requiring NRG to pay to Credit Suisse Group, or CS, at maturity, either in cash or stock at NRG’s option, the excess of NRG’s then current stock price over a threshold price. The CSF Debt and CSF CAGRs are accounted for under the guidance in ASC 470. Upon adoption of FSP APB 14-1, the fair value of the CSF CAGRs at the date of issuance was determined to be $32 million and has been recorded as a debt discount to the CSF Debt, with a corresponding credit to Additional Paid-in Capital. This debt discount will be amortized over the terms of the underlying CSF Debt. The cumulative effect of the change in accounting principle for periods prior to December 31, 2008, was recorded as a $7 million decrease to Long-Term Debt, a $13 million decrease to Additional Paid-In Capital, and a $20 million increase to Retained Earnings on the Condensed Consolidated Balance Sheet as of December 31, 2008. In addition, in August 2008 the Company paid $45 million to CS for the benefit of CSF I to early settle the CSF CAGR in the Company’s CSF I notes and preferred interests, which was reclassified from interest expense to Additional Paid-In Capital upon the adoption of FSP APB 14-1.
     The following table summarizes the effect of the adoption of FSP APB 14-1 on income and per-share amounts for all periods presented:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended	 	 	Nine months ended	 	
 	 	September 30,	 	 	September 30,	 	
(In millions, except per share amounts)	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
 	
Increase/(decrease):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest Expense	 	$	2	 	 	$	(44	)	 	$	5	 	 	$	(39	)	
Income From Continuing Operations	 	 	(2	)	 	 	44	 	 	 	(5	)	 	 	39	 	
Net Income attributable to NRG Energy, Inc.	 	 	(2	)	 	 	44	 	 	 	(5	)	 	 	39	 	
Basic Earnings Per Share	 	$	(0.01	)	 	$	0.19	 	 	$	(0.02	)	 	$	0.16	 	
Diluted Earnings Per Share	 	$	—	 	 	$	0.16	 	 	$	(0.02	)	 	$	0.14	 	
 	
     FSP FAS 157-4 — In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, or FSP FAS 157-4. FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with ASC-820,  Fair Value Measurements and Disclosure , or ASC 820, when the volume and level of activity for the asset or liability have significantly decreased, includes guidance on identifying circumstances that indicate a transaction is not orderly, and requires disclosures about inputs and valuation techniques used to measure fair value. This FSP applies to all assets and liabilities within the scope of accounting pronouncements that require or permit fair value measurements. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. The Company’s adoption of FSP FAS 157-4 beginning with the interim reporting period ended June 30, 2009, did not have a material impact on the Company’s results of operations, financial position, or cash flows. The provisions of FSP FAS 157-4 have been incorporated into ASC 820.
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     FSP FAS 107-1 and APB 28-1 — In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments,  or FSP 107-1 and APB 28-1. This FSP requires disclosures about fair value of financial instruments for interim and annual reporting periods of publicly traded companies ending after the FSP’s effective date of June 15, 2009. The Company’s adoption of FSP FAS 107-1 and APB 28-1 beginning with the interim period ended June 30, 2009, did not have an impact on the Company’s results of operations, financial position, or cash flows. The provisions of FSP FAS 107-1 and APB 28-1 have been incorporated in ASC-270,  Interim Reporting , or ASC 270, and ASC-825,  Financial Instruments,  or ASC 825.
     FSP FAS 115-2 and FAS 124-2 — In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments,  or FSP FAS 115-2 and FAS 124-2. This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting periods ending after June 15, 2009, and its disclosure requirements apply only to periods ending after the FSP’s effective date. The Company’s adoption of FSP FAS 115-2 and FAS 124-2 beginning with the interim period ended June 30, 2009, did not have an impact on the Company’s results of operations, financial position, or cash flows. The provisions of FSP FAS 115-2 and FAS 124-2 have been incorporated in ASC-320,  Investments — Debt and Equity Securities , or ASC 320.
     SFAS 165 — In May 2009, the FASB issued SFAS No. 165, Subsequent Events, or SFAS 165. SFAS 165 incorporates the accounting and disclosure requirements related to subsequent events found in auditing standards into U.S. GAAP, effectively making management directly responsible for subsequent events accounting and disclosures. SFAS 165 also requires disclosure of the date through which subsequent events have been evaluated. SFAS 165 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. The Company’s adoption of SFAS 165 beginning with the interim period ended June 30, 2009, did not have an impact on the Company’s results of operations, financial position, or cash flows. SFAS 165 has been incorporated in ASC-855,  Subsequent Events , or ASC 855.
     SFAS 167 — In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), or SFAS 167. This guidance amends FIN 46(R) by altering how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated. SFAS 167 is effective at the start of the first fiscal year beginning after November 15, 2009. The Company is presently evaluating the impact of SFAS 167 on its results of operations, financial position, and cash flows. SFAS 167 is expected be incorporated into ASC 810 upon its effective date.
     ASU 2009-15/EITF 09-1 — In July 2009, the FASB ratified EITF Issue No. 09-1, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing,  or EITF 09-1. This Issue applies to equity-classified share lending arrangements on an entity’s own shares, when executed in contemplation of a convertible debt offering or other financing. EITF 09-1 addresses how to account for the share-lending arrangement and the effect, if any, that the loaned shares have on earnings-per-share calculations. The share lending arrangement is required to be measured at fair value and recognized as an issuance cost associated with the convertible debt offering or other financing. Earnings-per-share calculations would not be affected by the loaned shares unless the share borrower defaults on the arrangement and does not return the shares. If counterparty default is probable, the share lender is required to recognize an expense equal to the then fair value of the unreturned shares, net of the fair value of probable recoveries. The Company will apply EITF 09-1 for share lending agreements entered into after June 15, 2009, and will apply EITF 09-1 on a retrospective basis for arrangements outstanding as of January 1, 2010. NRG is currently evaluating the impact of this statement upon its adoption on the Company’s results of operations, financial position and cash flows. In October 2009, the FASB issued Accounting Standards Update, or ASU No. 2009-15,  Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing , or ASU 2009-15, which formally incorporated the provisions of EITF 09-1 into ASC 470.
     ASU 2009-5 — In August 2009, the FASB issued ASU No. 2009-05, Fair Value Measurement and Disclosures: Measuring Liabilities at Fair Value , or ASU 2009-5. This ASU, which amends ASC 820 and ASC 825, provides clarification on measuring liabilities at fair value when a quoted price in an active market is not available. The Company’s adoption of ASU 2009-5 beginning with the interim period ended September 30, 2009, did not have an impact on the Company’s results of operations, financial position or cash flows.
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     Other — The following accounting standards were adopted on January 1, 2009, with no impact on the Company’s results of operations, financial position, or cash flows:
 	•	 	FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets, which has been incorporated in ASC-275,  Risks and Uncertainties,  or ASC 275, and ASC-350,  Intangibles — Goodwill and Other , or ASC 350.	
 	 	 	 	
 	•	 	FSP No. FAS 157-2, Effective Date of FASB Statement No. 157, which has been incorporated in ASC 820.	
 	 	 	 	
 	•	 	SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities, which has been incorporated in ASC-815,  Derivatives and Hedging,  or ASC 815.	
 	 	 	 	
 	•	 	FSP No. FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, which has been incorporated in ASC-715,  Compensation–Retirement Benefits,  or ASC 715.	
 	 	 	 	
 	•	 	EITF No. 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock,  which has been incorporated in ASC 718,  Compensation-Equity Compensation,  or ASC 718, and ASC 815.	
 	 	 	 	
 	•	 	EITF No. 08-5, Issuer’s Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement,  which has been incorporated in ASC 820.	
 	 	 	 	
 	•	 	EITF No. 08-6, Equity Method Investment Accounting Considerations, which has been incorporated in ASC-323, Investments-Equity Method and Joint Ventures,  or ASC 323 .	
Note 3 — Comprehensive Income/(Loss)
     The following table summarizes the components of the Company’s comprehensive income/(loss), net of tax:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended	 	 	Nine months ended	 	
 	 	September 30,	 	 	September 30,	 	
(In millions)	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
 	
Net income	 	$	278	 	 	$	778	 	 	$	908	 	 	$	954	 	
 	
Changes in derivative activity	 	 	(73	)	 	 	1,112	 	 	 	(9	)	 	 	112	 	
Foreign currency translation adjustment	 	 	20	 	 	 	(104	)	 	 	38	 	 	 	(69	)	
Reclassification adjustment for translation loss/(gain) realized upon sale of foreign investments	 	 	—	 	 	 	—	 	 	 	(22	)	 	 	15	 	
Unrealized gain/(loss) on available-for-sale securities	 	 	1	 	 	 	(4	)	 	 	3	 	 	 	(1	)	
 	
Other comprehensive income/(loss)	 	 	(52	)	 	 	1,004	 	 	 	10	 	 	 	57	 	
Comprehensive income attributable to noncontrolling interest	 	 	—	 	 	 	—	 	 	 	1	 	 	 	—	 	
 	
Comprehensive income attributable to NRG Energy, Inc.	 	$	226	 	 	$	1,782	 	 	$	919	 	 	$	1,011	 	
 	
     The following table summarizes the changes in the Company’s accumulated other comprehensive income, net of tax:
 	 	 	 	 	
(In millions)	 	 	 	 	
 	
Accumulated other comprehensive income as of December 31, 2008	 	$	310	 	
Changes in derivative activity	 	 	(9	)	
Foreign currency translation adjustment	 	 	38	 	
Reclassification adjustment for translation gain realized upon sale of foreign investment	 	 	(22	)	
Unrealized gain on available-for-sale securities	 	 	3	 	
 	
Accumulated other comprehensive income as of September 30, 2009	 	$	320	 	
 	
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Note 4 — Business Acquisition
General
     On May 1, 2009, NRG, through its wholly-owned subsidiary NRG Retail LLC, acquired Reliant Energy, which consisted of the entire Texas electric retail business operations of RRI, including the exclusive use of the trade name “Reliant.” Reliant Energy arranges for the transmission and delivery of electricity to customers, bills customers, collects payments for electricity sold and maintains call centers to provide customer service. Reliant Energy is the second largest electricity provider to residential and small business, or Mass, customers in Texas, with approximately 1.6 million Mass customers as of September 30, 2009. Reliant Energy also sells electricity and energy services to commercial, industrial and governmental/institutional customers, or C&I, customers in Texas with approximately 0.1 million C&I customers, based on metered locations as of September 30, 2009. These customers include refineries, chemical plants, manufacturing facilities, hospitals, universities, government agencies, restaurants, and other facilities.
     With its complementary generation portfolio, the Texas region is a supplier of power to Reliant Energy, thereby creating the potential for a more stable, reliable and competitive business that benefits Texas consumers. By backing Reliant Energy’s load-serving requirements with NRG’s generation and risk management practices, the need to sell and buy power from other financial institutions and intermediaries that trade in the ERCOT market may be reduced, resulting in reduced transaction costs and credit exposures. This combination of generation and retail allows for a reduction in actual and contingent collateral, initially through offsetting transactions and over time by reducing the need to hedge the retail power supply through third parties, thus reducing collateral postings. In addition, with Reliant Energy’s base of retail customers, NRG now has a customer interface with the scale that is important to the successful deployment of new distributed generation and retail alternative energy technologies.
Credit Support
     On May 1, 2009, NRG arranged with Merrill Lynch Commodities, Inc. and certain of its affiliates, or Merrill Lynch, the former credit provider of RRI Energy, Inc., or RRI, to provide continuing credit support to Reliant Energy after closing the acquisition. In connection with entering into a transitional credit sleeve facility, or CSRA, NRG contributed $200 million of cash to Reliant Energy. In conjunction with the CSRA, NRG Power Marketing LLC, or PML, and Reliant Energy Power Supply LLC, or REPS, wholly-owned subsidiaries of NRG, modified or novated certain transactions with counterparties to transfer PML’s in-the-money transactions to REPS and moved $522 million of cash collateral held by NRG to Merrill Lynch, thereby reducing Merrill Lynch’s actual and contingent collateral supporting Reliant Energy out-of-money positions. At September 30, 2009, these trades with counterparties were still open, thus there was no impact on NRG’s consolidated financial statements, and NRG continued to record unrealized and realized gains/losses for these novated trades in its Texas and Northeast segments. The monthly fee for the CSRA was 5.875% on an annualized basis of the predetermined exposure.
     Additionally, on May 1, 2009, NRG entered into a $50 million working capital facility with Merrill Lynch in connection with the acquisition of Reliant Energy. The facility required that the Company comply with all terms of the CSRA. NRG initially drew $25 million under the facility. These funds accrued interest at the prime rate.
     Reliant Energy conducts its business through RERH Holdings, LLC and subsidiaries, or RERH, Reliant Energy Texas Retail, LLC, and Reliant Energy Services Texas, LLC. Through October 5, 2009, the obligations of Reliant Energy under the CSRA were secured by first liens on substantially all of the assets of RERH, and the obligations of RERH under the CSRA were non-recourse to NRG and its other non-pledgor subsidiaries. The CSRA agreement (a) restricted the ability of RERH to, among other actions, (i) encumber its assets; (ii) sell certain assets; (iii) incur additional debt; (iv) pay dividends or pay subordinated debt; (v) make investments or acquisitions; or (vi) enter into certain transactions with affiliates and (b) required NRG to manage risks related to commodity prices. RERH was designed to maintain the separate nature of its assets in order to ensure that such assets are available first and foremost to satisfy the entities’ creditor claims. At September 30, 2009, the cash balance at RERH was $322 million.
     Effective October 5, 2009, as discussed in Note 20, Subsequent Event, to this Form 10-Q, the Company executed the CSRA Amendment resulting in the removal of the associated first liens and the termination of the $50 million working capital facility with Merrill Lynch.
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   Acquisition method of accounting
     The acquisition of Reliant Energy is accounted for under the acquisition method of accounting in accordance with ASC-805. Accordingly, NRG has conducted an assessment of net assets acquired and has recognized provisional amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisition are expensed as incurred. The initial accounting for the business combination is not complete because the appraisals necessary to assess the fair values of the net assets acquired and the amount of goodwill (if any) to be recognized are still in process, and the Company is also in the process of valuing the tax basis of the net assets acquired, which will affect the deferred tax balances. The provisional amounts recognized are subject to revision until the appraisals are completed and to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. Any changes to the fair value assessments and the tax basis values will affect the final balance of goodwill.
     NRG paid RRI $287.5 million in cash at closing, funded from NRG’s cash on hand. NRG also made payments to RRI of $63 million on June 15, 2009, and $11 million on July 24, 2009, as initial remittances of acquired net working capital. In addition, the Company expects to remit approximately $9 million of acquired net working capital to RRI in the fourth quarter of 2009, bringing the total cash consideration to approximately $370 million. NRG also recognized a $31 million non-cash gain on the settlement of a pre-existing relationship, representing the in-the-money value to NRG of an agreement that permits Reliant Energy to call on certain NRG gas plants when necessary for Reliant Energy to meet its load obligations. NRG has recorded this gain within “Operating Revenues” in its condensed consolidated statement of operations. This non-cash gain is considered a component of consideration in accordance with ASC 805, and together with cash consideration, brings total consideration to approximately $401 million.
     The following table summarizes the provisional values assigned to the net assets acquired, including cash acquired of $6 million, as of the acquisition date:
 	 	 	 	 	
(In millions)	 	 	 	 	
 	
Assets	 	 	 	 	
Current and non-current assets	 	$	635	 	
Property, plant and equipment	 	 	72	 	
Intangible assets subject to amortization:	 	 	 	 	
In-market customer contracts	 	 	790	 	
Customer relationships	 	 	399	 	
Trade names	 	 	178	 	
In-market energy supply contracts	 	 	54	 	
Other	 	 	6	 	
Derivative assets	 	 	1,942	 	
Deferred tax asset, net	 	 	14	 	
Goodwill	 	 	—	 	
 	
Total assets acquired	 	 	4,090	 	
 	
Liabilities	 	 	 	 	
Current and non-current liabilities	 	 	550	 	
Derivative liabilities	 	 	2,996	 	
Out-of-market energy supply and customer contracts	 	 	143	 	
 	
Total liabilities assumed	 	 	3,689	 	
 	
Net assets acquired	 	$	401	 	
 	
     No goodwill is expected to be deductible for tax purposes.
     Current assets include accounts receivable with a preliminary fair value of $569 million and gross contractual amounts of $589 million at the time of acquisition. The Company expects to collect the fair value of the contractual cash flows; any difference between fair value and the amount collected will be an adjustment to the acquired working capital payment due to RRI.
     The Company, through its acquisition of Reliant Energy, is subject to material contingencies relating to Excess Mitigation Credits (see Note 15,  Commitments and Contingencies,  to this Form 10-Q) and Retail Replacement Reserve (see Note 16, Regulatory Matters,  to this Form 10-Q). Due to the number of variables and assumptions involved in assessing the possible outcome of these matters, sufficient information does not exist to reasonably estimate the fair value of these contingent liabilities. These material contingencies have been evaluated in accordance with ASC-450,  Contingencies,  or ASC 450, and related guidance, and no provisional amounts for these matters have been recorded at the acquisition date. In addition, NRG provided certain indemnities in connection with the acquisition. See Note 18,  Guarantees,  to this Form 10-Q for further discussion.
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Measurement period adjustments
     The following measurement period adjustments to the provisional amounts, attributable to refinement of the underlying appraisal assumptions, were recognized during the quarter ended September 30, 2009:
 	 	 	 	 	
(In millions)	 	Increase/(Decrease)	
 	
Assets	 	 	 	 	
Intangible assets subject to amortization:	 	 	 	 	
In-market customer contracts	 	$	57	 	
Customer relationships	 	 	(82	)	
In-market energy supply contracts	 	 	17	 	
Deferred tax asset, net	 	 	3	 	
 	
Total assets acquired	 	 	(5	)	
 	
Liabilities	 	 	 	 	
Out-of-market energy supply and customer contracts	 	 	(5	)	
 	
Total liabilities assumed	 	 	(5	)	
 	
Net assets acquired	 	$	—	 	
 	
Fair value measurements
     The provisional fair values of the intangible assets/liabilities and property, plant and equipment at the acquisition date were measured primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820. Significant inputs were as follows:
 	•	 	Customer contracts — The fair values of the customer contracts, representing those with Reliant Energy’s C&I customers, were estimated based on the present value of the above/below market cash flows attributable to the contracts based on contract type, discounted utilizing a current market interest rate consistent with the overall credit quality of the portfolio. The fair values also accounted for Reliant Energy’s historical costs to acquire customers. The above/below market cash flows were estimated by comparing the expected cash flows to be generated based on existing contracted prices and expected volumes with the cash flows from estimated current market contract prices for the same expected volumes. The estimated current market contract prices were derived considering current market costs, such as price of energy, transmission and distribution costs, and miscellaneous fees, plus a normal profit margin. The customer contracts are amortized to revenues, over a weighted average amortization period of five years, based on expected volumes to be delivered for the portfolio.	
 	 	 	 	
 	•	 	Customer relationships — The customer relationships, reflective of Reliant Energy’s Mass customer base, were valued using a variation of the income approach. Under this approach, the Company estimated the present value of expected future cash flows resulting from the existing customer relationships, considering attrition and charges for contributory assets (such as net working capital, fixed assets, software, workforce and trade names) utilized in the business, discounted at an independent power producer peer group’s weighted average cost of capital. The customer relationships are amortized to depreciation and amortization, over a weighted average amortization period of eight years, based on the expected discounted future net cash flows by year.	
 	 	 	 	
 	•	 	Trade names — The trade names were valued using a “relief from royalty” method, an approach under which fair value is estimated to be the present value of royalties saved because NRG owns the intangible asset and therefore does not have to pay a royalty for its use. The trade names were valued in two parts based on Reliant Energy’s two primary customer segments — Mass customers and C&I customers. The avoided royalty revenues were discounted at an independent power producer peer group’s weighted average cost of capital. The remaining useful life of the trade names was determined by considering various factors, such as turnover and name changes in the independent power producer and utility industries, the current age of the Reliant brand, management’s intent to continue using the name at the current time, and feedback from external consultants regarding their experience with similar trade names. The trade names are amortized to depreciation and amortization, on a straight-line basis, over 15 years.	
 	 	 	 	
 	•	 	Energy supply contracts — The fair values of the in-market and out-of-market energy supply contracts were determined in accordance with ASC 820. These contracts are amortized over periods ranging through 2016, based on the expected delivery under the respective contracts.	
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 	•	 	Property, plant and equipment — The fair value of property, plant and equipment was valued using a cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation.	
     The fair values of derivative assets and liabilities as of the acquisition date were determined in accordance with ASC 820. The breakdown of Level 1, 2 and 3 is as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Fair Value	
(In millions)	 	Level 1	 	 	Level 2	 	 	Level 3	 	 	Total	 	
 	
Derivative assets	 	  $	534	 	 	$	1,375	 	 	$	33	 	 	$  	1,942	 	
 	
Derivative liabilities	 	  $	534	 	 	$	2,357	 	 	$	105	 	 	$  	2,996	 	
 	
Amortization of acquired intangible assets and out-of-market contracts
     The following table presents the estimated remaining amortization related to the acquired intangible assets, for periods subsequent to September 30, 2009 and through 2014:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Year Ended December 31,	 	Customer	 	Customer	 	Trade	 	Energy Supply  	
(In millions)	 	Contracts	 	Relationships	 	Names	 	Contracts	
 	
2009 (three months)	 	$	99	 	 	$	44	 	 	$	3	 	 	$	—	 	
2010	 	 	225	 	 	 	81	 	 	 	12	 	 	 	3	 	
2011	 	 	152	 	 	 	57	 	 	 	12	 	 	 	4	 	
2012	 	 	104	 	 	 	44	 	 	 	12	 	 	 	5	 	
2013	 	 	49	 	 	 	31	 	 	 	12	 	 	 	6	 	
2014	 	 	—	 	 	 	24	 	 	 	12	 	 	 	6	 	
 	
     The following table presents the estimated amortization related to the acquired out-of-market contracts for 2009 — 2014:
 	 	 	 	 	
 	 	   Energy Supply   	
Year Ended December 31,	 	and Customer	
(In millions)	 	Contracts	
 	
2009 (three months)	 	$  	23	 	
2010	 	 	48	 	
2011	 	 	18	 	
2012	 	 	7	 	
2013	 	 	3	 	
2014	 	 	—	 	
 	
     These amortization tables reflect the measurement period adjustments recognized during the quarter ended September 30, 2009.
Supplemental Pro Forma Information
     Since the acquisition date, Reliant Energy contributed $2,965 million of operating revenues and $807 million in net income attributable to NRG.
     The following supplemental pro forma information represents the results of operations as if NRG and Reliant Energy had combined at the beginning of the respective reporting periods:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30,	 	Nine months ended September 30,	
(In millions, except per share amounts)	 	2009	 	2008	 	2009	 	2008	
 	
Operating revenues	 	$  	2,911	 	 	$  	5,122	 	 	$  	8,625	 	 	$  	11,633	 	
Net income/(loss) attributable to NRG Energy, Inc.	 	 	282	 	 	 	(322	)	 	 	878	 	 	 	245	 	
Earnings per share attributable to NRG common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$  	1.11	 	 	$  	(1.43	)	 	$  	3.45	 	 	$  	1.60	 	
Diluted	 	$  	1.04	 	 	$  	(1.43	)	 	$  	3.17	 	 	$  	1.49	 	
 	
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     The supplemental pro forma information has been adjusted to include the pro forma impact of amortization of intangible assets and out-of-market contracts, and depreciation of property, plant and equipment, based on the preliminary purchase price allocations. The pro forma data has also been adjusted to eliminate the non-recurring transaction costs incurred by NRG. Transactions between NRG and Reliant Energy have not been eliminated. The pro forma results are presented for illustrative purposes only and do not reflect the realization of potential cost savings, or any related integration costs. Certain cost savings may result from the acquisition, however, there can be no assurance that these cost savings will be achieved.
Significant Accounting Policies
     The following pertains to Reliant Energy, in addition to NRG’s significant accounting policies referred to in Note 2, Summary of Significant Accounting Policies , to this Form 10-Q:
 	•	 	Revenues — Gross revenues for energy sales and services to Mass customers and to C&I customers are recognized upon delivery under the accrual method. Energy sales and services that have been delivered but not billed by period end are estimated. Gross revenues also includes energy revenues from resales of purchased power, which were $151 million for the period ended September 30, 2009. These revenues represent a sale of excess supply to third parties in the market.	
 	 	 	 	
 	 	 	As of September 30, 2009, Reliant Energy recorded unbilled revenues of $321 million for energy sales and services. Accrued unbilled revenues are based on Reliant Energy’s estimates of customer usage since the date of the last meter reading provided by the independent system operators or electric distribution companies. Volume estimates are based on daily forecasted volumes and estimated customer usage by class. Unbilled revenues are calculated by multiplying these volume estimates by the applicable rate by customer class. Estimated amounts are adjusted when actual usage is known and billed.	
 	 	 	 	
 	•	 	Cost of Energy — Reliant Energy records cost of energy for electricity sales and services to retail customers based on estimated supply volumes for the applicable reporting period. A portion of its cost of energy ($68 million as of September 30, 2009) consisted of estimated transmission and distribution charges not yet billed by the transmission and distribution utilities. In estimating supply volumes, Reliant Energy considers the effects of historical customer volumes, weather factors and usage by customer class. Reliant Energy estimates its transmission and distribution delivery fees using the same method that it uses for electricity sales and services to retail customers. In addition, Reliant Energy estimates ERCOT ISO fees based on historical trends, estimates supply volumes and initial ERCOT ISO settlements. Volume estimates are then multiplied by the supply rate and recorded as cost of operations in the applicable reporting period.	
 	 	 	 	
 	•	 	Allowance for Doubtful Accounts — Reliant Energy accrues an allowance for doubtful accounts based on estimates of uncollectible revenues by analyzing counterparty credit ratings (for commercial and industrial customers), historical collections, accounts receivable aging and other factors. Reliant Energy writes-off accounts receivable balances against the allowance for doubtful accounts when it determines a receivable is uncollectible.	
 	 	 	 	
 	•	 	Gross Receipts Taxes — Reliant Energy records gross receipts taxes on a gross basis in revenues and cost of operations in its condensed consolidated statements of operations. During the period ended September 30, 2009, Reliant Energy’s revenues and cost of operations included gross receipts taxes of $39 million.	
 	 	 	 	
 	•	 	Sales Taxes — Reliant Energy records sales taxes collected from its taxable customers and remitted to the various governmental entities on a net basis, thus, there is no impact on the Company’s condensed consolidated statement of operations.	
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Note 5 — Investments Accounted for by the Equity Method
MIBRAG — On June 10, 2009, NRG completed the sale of its 50% ownership interest in Mibrag B.V. to a consortium of Severoćeské doly Chomutov, a member of the CEZ Group, and J&T Group. Mibrag B.V.’s principal holding is MIBRAG, which is jointly owned by NRG and URS Corporation. As part of the transaction, URS Corporation also entered into an agreement to sell its 50% stake in MIBRAG.
     For its share, NRG received EUR 203 million ($284 million at an exchange rate of 1.40 U.S.$/EUR), net of transaction costs. During the nine months ended September 30, 2009, NRG recognized an after-tax gain of $128 million. Prior to completion of the sale, NRG continued to record its share of MIBRAG’s operations to “Equity in earnings of unconsolidated affiliates.”
     In connection with the transaction, NRG entered into a foreign currency forward contract to hedge the impact of exchange rate fluctuations on the sale proceeds. The foreign currency forward contract had a fixed exchange rate of 1.277 and required NRG to deliver EUR 200 million in exchange for $255 million on June 15, 2009. For the nine months ended September 30, 2009, NRG recorded an exchange loss of $24 million on the contract within “Other income/(loss), net.”
     NRG provided certain indemnities in connection with its share of the transaction. See Note 18, Guarantees, to this Form 10-Q for further discussion.
Note 6 — Fair Value of Financial Instruments
     The estimated carrying values and fair values of NRG’s recorded financial instruments are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Carrying Amount	 	Fair Value	
 	 	September 30,	 	December 31,	 	September 30,	 	December 31,	
 	 	2009	 	2008	 	2009	 	2008	
 	 	(In millions)	
Cash and cash equivalents	 	$  	2,250	 	 	$ 	 1,494	 	 	$  	2,250	 	 	$ 	1,494	 	
Funds deposited by counterparties	 	 	293	 	 	 	754	 	 	 	293	 	 	 	754	 	
Restricted cash	 	 	26	 	 	 	16	 	 	 	26	 	 	 	16	 	
Cash collateral paid in support of energy risk management activities	 	 	475	 	 	 	494	 	 	 	475	 	 	 	494	 	
Investment in available-for-sale securities (classified within other non-current assets):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Debt securities	 	 	8	 	 	 	7	 	 	 	8	 	 	 	7	 	
Marketable equity securities	 	 	4	 	 	 	2	 	 	 	4	 	 	 	2	 	
Trust fund investments	 	 	356	 	 	 	305	 	 	 	356	 	 	 	305	 	
Notes receivable	 	 	214	 	 	 	156	 	 	 	221	 	 	 	166	 	
Derivative assets	 	 	4,238	 	 	 	5,485	 	 	 	4,238	 	 	 	5,485	 	
Long-term debt, including current portion	 	 	8,636	 	 	 	8,019	 	 	 	8,422	 	 	 	7,475	 	
Cash collateral received in support of energy risk management activities	 	 	293	 	 	 	760	 	 	 	293	 	 	 	760	 	
Derivative liabilities	 	 	3,876	 	 	 	4,489	 	 	 	3,876	 	 	 	4,489	 	
 	
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Recurring Fair Value Measurements
     The following table presents assets and liabilities measured and recorded at fair value on the Company’s condensed consolidated balance sheet on a recurring basis and their level within the fair value hierarchy:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 (In millions)	 	Fair Value	
 As of September 30, 2009	 	Level 1	 	Level 2	 	Level 3	 	Total	
 	
  Cash and cash equivalents	 	$ 	2,250	 	 	$ 	—	 	 	$  	—	 	 	$ 	2,250	 	
  Funds deposited by counterparties	 	 	293	 	 	 	—	 	 	 	 —	 	 	 	293	 	
  Restricted cash	 	 	26	 	 	 	—	 	 	 	 —	 	 	 	26	 	
  Cash collateral paid in support of energy risk management activities	 	 	475	 	 	 	—	 	 	 	 —	 	 	 	475	 	
  Investment in available-for-sale securities (classified within other non-current assets):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Debt securities	 	 	—	 	 	 	—	 	 	 	 8	 	 	 	8	 	
Marketable equity securities	 	 	4	 	 	 	—	 	 	 	 —	 	 	 	4	 	
 Trust fund investments	 	 	203	 	 	 	113	 	 	 	 40	 	 	 	356	 	
 Derivative assets	 	 	964	 	 	 	3,171	 	 	 	 103	 	 	 	4,238	 	
 	
Total assets	 	$ 	4,215	 	 	$ 	3,284	 	 	$  	151	 	 	$ 	7,650	 	
 	
 Cash collateral received in support of energy risk management activities	 	$ 	293	 	 	$ 	—	 	 	$  	—	 	 	$ 	293	 	
 Derivative liabilities	 	 	956	 	 	 	2,747	 	 	 	 173	 	 	 	3,876	 	
 	
Total liabilities	 	$ 	1,249	 	 	$ 	2,747	 	 	$  	173	 	 	$ 	4,169	 	
 	
     The following table reconciles the beginning and ending balances for financial instruments that are recognized at fair value in the consolidated financial statements using significant unobservable inputs:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Fair Value Measurement Using Significant Unobservable Inputs	
 	 	(Level 3)	
 (In millions)	 	 	 	 	 	Trust Fund	 	 	 	 	
 Nine months ended September 30, 2009	 	Debt Securities	 	Investments	 	Derivatives	 	Total	
 	
  Beginning balance as of January 1, 2009	 	$ 	7	 	 	$ 	31	 	 	$ 	49	 	 	$ 	87	 	
Total gains/(losses) (realized and unrealized)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Included in earnings	 	 	1	 	 	 	—	 	 	 	(110	)	 	 	(109	)	
Included in nuclear decommissioning obligations	 	 	—	 	 	 	8	 	 	 	—	 	 	 	8	 	
Purchases/(sales), net	 	 	—	 	 	 	1	 	 	 	(3	)	 	 	(2	)	
Transfers out of Level 3	 	 	—	 	 	 	—	 	 	 	(6	)	 	 	(6	)	
 	
 Ending balance as of September 30, 2009	 	$ 	8	 	 	$ 	40	 	 	$	(70	)	 	$	(22	)	
 	
 The amount of the total gains for the period included in earnings attributable to the change in unrealized gains relating to assets still held as of September 30, 2009	 	$ 	—	 	 	$ 	—	 	 	$ 	3	 	 	$ 	3	 	
 	
     Realized and unrealized gains and losses included in earnings that are related to the energy derivatives are recorded in operating revenues and cost of operations.
     In determining the fair value of NRG’s Level 2 and 3 derivative contracts, NRG applies a credit reserve to reflect credit risk which is calculated based on credit default swaps. As of September 30, 2009, the credit reserve resulted in a $18 million increase in fair value which is composed of a $4 million gain in other comprehensive income, or OCI, and a $14 million gain in operating revenue and cost of operations.
     This footnote should be read in conjunction with the complete description under Note 4, Fair Value of Financial Instruments, to the Company’s financial statements in its 2008 Annual Report on Form 10-K.
     See Note 7, Accounting for Derivative Instruments and Hedging Activities, to this Form 10-Q for discussion regarding concentration of credit risk.
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Note 7 — Accounting for Derivative Instruments and Hedging Activities
     ASC 815 requires NRG to recognize all derivative instruments on the balance sheet as either assets or liabilities and to measure them at fair value each reporting period unless they qualify for a Normal Purchase Normal Sale, or NPNS, exception. If certain conditions are met, NRG may be able to designate certain derivatives as cash flow hedges and defer the effective portion of the change in fair value of the derivatives to OCI until the hedged transactions occur and are recognized in earnings. The ineffective portion of a cash flow hedge is immediately recognized in earnings.
     For derivatives designated as hedges of the fair value of assets or liabilities, the changes in fair value of both the derivative and the hedged transaction are recorded in current earnings. The ineffective portion of a hedging derivative instrument’s change in fair value is immediately recognized into earnings.
     For derivatives that are not designated as cash flow hedges or do not qualify for hedge accounting treatment, the changes in the fair value will be immediately recognized in earnings. Under the guidelines established per ASC 815, certain derivative instruments may qualify for the NPNS exception and are therefore exempt from fair value accounting treatment. ASC 815 applies to NRG’s energy related commodity contracts, interest rate swaps, and foreign exchange contracts.
     As the Company engages principally in the trading and marketing of its generation assets and retail business, some of NRG’s commercial activities qualify for hedge accounting under the requirements of ASC 815. In order for the generation assets to qualify, the physical generation and sale of electricity should be highly probable at inception of the trade and throughout the period it is held, as is the case with the Company’s baseload plants. For this reason, many trades in support of NRG’s baseload units normally qualify for NPNS or cash flow hedge accounting treatment, and trades in support of NRG’s peaking units will generally not qualify for hedge accounting treatment, with any changes in fair value likely to be reflected on a mark-to-market basis in the statement of operations. Most of the retail load contracts either qualify for the NPNS exception or fail to meet the criteria for a derivative and the majority of the supply contracts are recorded under mark-to-market accounting. All of NRG’s hedging and trading activities are in accordance with the Company’s Risk Management Policy.
Energy-Related Commodities
     To manage the commodity price risk associated with the Company’s competitive supply activities and the price risk associated with wholesale and retail power sales from the Company’s electric generation facilities, NRG may enter into a variety of derivative and non-derivative hedging instruments, utilizing the following:
 	•	 	Forward contracts, which commit NRG to sell or purchase energy commodities or purchase fuels in the future.	
 	 	 	 	
 	•	 	Futures contracts, which are exchange-traded standardized commitments to purchase or sell a commodity or financial instrument.	
 	 	 	 	
 	•	 	Swap agreements, which require payments to or from counter-parties based upon the differential between two prices for a predetermined contractual, or notional, quantity.	
 	 	 	 	
 	•	 	Option contracts, which convey the right or obligation to purchase or sell a commodity.	
 	 	 	 	
 	•	 	Weather and hurricane derivative products used to mitigate a portion of Reliant Energy’s lost revenue due to weather.	
     The objectives for entering into derivative contracts designated as hedges include:
 	•	 	Fixing the price for a portion of anticipated future electricity sales through the use of various derivative instruments including gas collars and swaps at a level that provides an acceptable return on the Company’s electric generation operations.	
 	 	 	 	
 	•	 	Fixing the price of a portion of anticipated fuel purchases for the operation of NRG’s power plants.	
 	 	 	 	
 	•	 	Fixing the price of a portion of anticipated energy purchases to supply Reliant Energy’s customers.	
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     NRG’s trading activities include contracts entered into to profit from market price changes as opposed to hedging an exposure, and 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. These trading activities are a complement to NRG’s competitive wholesale supply and retail operations.
Interest Rate Swaps
     NRG is exposed to changes in interest rates through the Company’s issuance of variable and fixed rate debt. In order to manage the Company’s interest rate risk, NRG enters into interest-rate swap agreements. As of September 30, 2009, NRG had interest rate derivative instruments extending through June 2019, all of which had been designated as either cash flow or fair value hedges.
Volumetric Underlying Derivative Transactions
     The following table summarizes the net notional volume buy/(sell) of NRG’s derivative transactions broken out by commodity, excluding those derivatives that qualified for the NPNS exception as of September 30, 2009. Option contracts are reflected using delta volume. Delta volume equals the notional volume of an option adjusted for the probability that the option will be in-the-money at its expiration date.
 	 	 	 	 	 	 	
 	 	 	 	Total Volume as	
 	 	 	 	of September 30, 2009	
Commodity	 	Units	 	(In millions)	
 	
Emissions	 	Short Ton	 	 	1	 	
Coal	 	Short Ton	 	 	60	 	
Natural Gas	 	MMBtu	 	 	(582	)	
Power(a)	 	MWH	 	 	(27	)	
Interest	 	Dollars	 	$  	3,306	 	

 	 	 	
(a)	 	Power volumes include capacity sales.	
Fair Value of Derivative Instruments
     The following table summarizes the fair value within the derivative instrument valuation on the balance sheet as of September 30, 2009:
 	 	 	 	 	 	 	 	 	
 	 	Fair Value	
(In millions)	 	Derivatives Asset	 	Derivatives Liability	
 	
Derivatives Designated as Cash Flow or Fair Value Hedges:	 	 	 	 	 	 	 	 	
Interest rate contracts current	 	$  	—	 	 	$  	4	 	
Interest rate contracts long term	 	 	9	 	 	 	123	 	
Commodity contracts current	 	 	278	 	 	 	13	 	
Commodity contracts long term	 	 	378	 	 	 	30	 	
 	
Total Derivatives Designated as Cash Flow or Fair Value Hedges	 	 	665	 	 	 	170	 	
 	
Derivatives Not Designated as Cash Flow or Fair Value Hedges:	 	 	 	 	 	 	 	 	
Commodity contracts current	 	 	2,921	 	 	 	3,000	 	
Commodity contracts long term	 	 	652	 	 	 	706	 	
 	
Total Derivatives Not Designated as Cash Flow or Fair Value Hedges	 	 	3,573	 	 	 	3,706	 	
 	
Total Derivatives	 	$  	4,238	 	 	$  	3,876	 	
 	
Impact of Derivative Instruments on the Statement of Operations
     The following table summarizes the amount of gain/(loss) resulting from fair value hedges reflected in interest income/(expense) for interest rate contracts:
 	 	 	 	 	 	 	 	 	
Amount of gain/(loss) recognized	 	Three months ended	 	Nine months ended	
(In millions)	 	September 30, 2009	 	September 30, 2009	
 	
Derivative	 	$  	3	 	 	$  	(5	)	
Senior Notes (hedged item)	 	$  	(3	)	 	$  	5	 	
 	
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     The following table summarizes the location and amount of gain/(loss) resulting from cash flow hedges:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Location of	 	Amount of	
 	 	Amount of	 	Location of	 	Amount of	 	gain/(loss)	 	gain/(loss)	
 	 	gain/(loss)	 	gain/(loss)	 	gain/(loss)	 	recognized in	 	recognized in	
 	 	recognized in OCI	 	reclassified from	 	reclassified from	 	income	 	income	
(In millions)	 	(effective portion)	 	Accumulated	 	Accumulated	 	(ineffective	 	(ineffective	
Three months ended September 30, 2009	 	after tax	 	OCI into Income	 	OCI into Income	 	portion)	 	portion)	
 	
Interest rate contracts	 	$ 	(2	)	 	Interest expense	 	$ 	—	 	 	Interest expense	 	$ 	4	 	
Commodity contracts	 	 	(71	)	 	Operating revenue	 	 	75	 	 	Operating revenue	 	 	16	 	
 	
Total	 	$ 	(73	)	 	 	 	 	 	$ 	75	 	 	 	 	 	 	$ 	20	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Location of	 	Amount of	
 	 	Amount of	 	Location of	 	Amount of	 	gain/(loss)	 	gain/(loss)	
 	 	gain/(loss)	 	gain/(loss)	 	gain/(loss)	 	recognized in	 	recognized in	
 	 	recognized in OCI	 	reclassified from	 	reclassified from	 	income	 	Income	
(In millions)	 	(effective portion)	 	Accumulated	 	Accumulated	 	(ineffective	 	(ineffective	
Nine months ended September 30, 2009	 	after tax	 	OCI into Income	 	OCI into Income	 	portion)	 	Portion)	
 	
Interest rate contracts	 	$ 	23	 	 	Interest expense	 	$ 	—	 	 	Interest expense	 	$ 	4	 	
Commodity contracts	 	 	(32	)	 	Operating revenue	 	 	398	 	 	Operating revenue	 	 	17	 	
 	
Total	 	$ 	(9	)	 	 	 	 	 	$ 	398	 	 	 	 	 	 	$ 	21	 	
 	
     The following table summarizes the amount of gain/(loss) recognized in income for derivatives not designated as cash flow or fair value hedges on commodity contracts:
 	 	 	 	 	 	 	 	 	
Amount of gain/(loss) recognized in income or cost of operations for derivatives	 	Three months ended	 	Nine months ended	
(In millions)	 	September 30, 2009	 	September 30, 2009	
 	
Location of gain/(loss) recognized in income for derivatives:	 	 	 	 	 	 	 	 	
Operating revenue	 	$ 	(233	)	 	$ 	(117	)	
Cost of operations	 	$ 	203	 	 	$ 	476	 	
 	
Credit Risk Related Contingent Features
     Certain of the Company’s hedging agreements contain provisions that require the Company to post additional collateral if the counterparty determines that there has been deterioration in credit quality, generally termed “adequate assurance” under the agreements. Other agreements contain provisions that require the Company to post additional collateral if there was a one notch downgrade in the Company’s credit rating. The collateral required for out-of-the-money positions and net accounts payable for contracts that have adequate assurance clauses that are in a net liability position as of September 30, 2009, was $163 million. The collateral required for out-of-the-money positions and net accounts payable for contracts with credit rating contingent features that are in a net liability position as of September 30, 2009, was $31 million. The Company is also a party to certain marginable agreements where NRG has a net liability position but the counterparty has not called for the collateral due, which is approximately $24 million as of September 30, 2009.
     Under the CSRA, Merrill Lynch provided guarantees and the posting of collateral to the Company’s counterparties in supply transactions for the Company’s retail energy business. As of September 30, 2009, Merrill Lynch was providing $163 million in credit support to various counterparties (includes cash collateral posted by counterparties and Reliant Energy as an offset to exposure).
     As described in Note 20, Subsequent Event, to this Form 10-Q, pursuant to the CSRA Amendment, effective October 5, 2009, the Company was required to post collateral for any net liability derivatives and other static margin associated with supply for Reliant Energy. In connection with the CSRA Amendment, the Company posted $366 million of cash collateral to Merrill Lynch and other counterparties, returned $53 million of counterparty collateral, issued letters of credit of $206 million, and received $45 million of counterparty collateral.
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Concentration of 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. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) a daily monitoring of counterparties’ credit limits; (iii) the use of credit mitigation measures such as margin, collateral, credit derivatives or prepayment arrangements; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty risk with a diversified portfolio of counterparties, including ten participants under its first and second lien structure. The Company also has credit protection within various agreements to call on additional collateral support if and when necessary. Cash margin is collected and held at NRG to cover the credit risk of the counterparty until positions settle.
     Since the credit crisis began in late 2008, NRG has taken several additional steps to mitigate credit risk including the use of netting arrangements, entering contracts with collateral thresholds, setting volumetric limits with certain counterparties and restricting trading relationships with counterparties where exposure was high or where credit quality of the counterparty had deteriorated. NRG avoids concentration of counterparties whenever possible and applies credit policies that include an evaluation of counterparties’ financial condition, collateral requirements and the use of standard agreements that allow for netting and other security.
     As of September 30, 2009, total credit exposure to substantially all counterparties was $1.8 billion and NRG held collateral (cash and letters of credit) against those positions of $280 million resulting in a net exposure of $1.5 billion. Total credit exposure is discounted at the risk free rate.
     The following table highlights the credit quality and the net counterparty credit exposure by industry sector. 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, includes amounts net of receivables or payables and excludes non-affiliate third party exposure under the CSRA.
 	 	 	 	 	
 	 	Net Exposure(a)(b)	
 	 	   as of September 30, 2009   	
Category	 	(% of Total)	
 	
Financial institutions	 	 	81	%	
Utilities, energy, merchants, marketers and other	 	 	13	 	
Coal suppliers	 	 	3	 	
ISOs	 	 	3	 	
 	
Total	 	 	100	%	

 	 	Net Exposure(a)(b)	
 	 	   as of September 30, 2009   	
Category	 	(% of Total)	
 	
Investment grade	 	 	93	%	
Non-Investment grade	 	 	2	 	
Non-rated	 	 	5	 	
 	
Total	 	 	100	%	

 	 	 	
(a)	 	Credit exposure excludes California tolling, uranium, coal transportation, New England Reliability Must-Run, cooperative load contracts, and Texas Westmoreland coal contracts. The aforementioned exposures were excluded for various reasons including regulatory support or liens held against the contracts which serve to reduce the risk of loss, or credit risks for certain contracts are not readily measurable due to a lack of market reference prices.	
 	 	 	
(b)	 	The exposure amounts presented in the above table do not include non-affiliate third party exposure under the CSRA which was amended on October 5, 2009. The gross credit exposure to third parties under the CSRA was $385 million, and the cash collateral held by Merrill Lynch against this exposure was $304 million.	
     NRG has credit risk exposure to certain counterparties representing more than 10% of total net exposure and the aggregate of such counterparties was $704 million. Approximately 72% of NRG’s positions relating to credit risk roll-off by the end of 2011. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, NRG does not anticipate a material impact on the Company’s financial results from nonperformance by a counterparty.
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     NRG is exposed to retail credit risk through our competitive electricity supply business, which serves C&I customers and the Mass market in Texas. Retail credit risk results when a customer fails to pay for services rendered. The losses could be incurred from nonpayment of customer accounts receivable and any in-the-money forward value. NRG manages retail credit risk through the use of established credit policies that include monitoring of the portfolio, and the use of credit mitigation measures such as deposits or prepayment arrangement. Retail credit risk is dependent on the overall economy, but is minimized due to the fact that NRG’s portfolio of retail customers is largely diversified, with no significant single name concentration.
Accumulated Other Comprehensive Income
     The following table summarizes the effects of ASC 815 on NRG’s accumulated OCI balance attributable to hedged derivatives, net of tax:
 	 	 	 	 	 	 	 	 	 	 	 	 	
(In millions)	 	Energy	 	Interest	 	 	
Three months ended September 30, 2009	 	Commodities	 	Rate	 	Total	
 	
Accumulated OCI balance at June 30, 2009	 	$  	445	 	 	$  	(66	)	 	$  	379	 	
Realized from OCI during the period:	 	 	 	 	 	 	 	 	 	 	 	 	
— Due to realization of previously deferred amounts	 	 	(75	)	 	 	—	 	 	 	(75	)	
Mark-to-market of cash flow hedge accounting contracts	 	 	4	 	 	 	(2	)	 	 	2	 	
 	
Accumulated OCI balance at September 30, 2009	 	$  	374	 	 	$  	(68	)	 	$  	306	 	
 	
Gains/(losses) expected to be realized from OCI during the next 12 months, net of $172 tax	 	$  	288	 	 	$  	(3	)	 	$  	285	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
(In millions)	 	Energy	 	Interest	 	 	
Three months ended September 30, 2008	 	Commodities	 	Rate	 	Total	
 	
Accumulated OCI balance at June 30, 2008	 	$  	(1,235	)	 	$  	(30	)	 	$  	(1,265	)	
Realized from OCI during the period:	 	 	 	 	 	 	 	 	 	 	 	 	
— Due to realization of previously deferred amounts	 	 	26	 	 	 	—	 	 	 	26	 	
Mark-to-market of cash flow hedge accounting contracts	 	 	1,088	 	 	 	(2	)	 	 	1,086	 	
 	
Accumulated OCI balance at September 30, 2008	 	$  	(121	)	 	$  	(32	)	 	$  	(153	)	

 	 	 	 	 	 	 	 	 	 	 	 	 	
(In millions)	 	Energy	 	Interest	 	 	
Nine months ended September 30, 2009	 	Commodities	 	Rate	 	Total	
 	
Accumulated OCI balance at December 31, 2008	 	$  	406	 	 	$  	(91	)	 	$  	315	 	
Realized from OCI during the period:	 	 	 	 	 	 	 	 	 	 	 	 	
— Due to realization of previously deferred amounts	 	 	(263	)	 	 	—	 	 	 	(263	)	
— Due to discontinuance of cash flow hedge accounting	 	 	(135	)	 	 	—	 	 	 	(135	)	
Mark-to-market of cash flow hedge accounting contracts	 	 	366	 	 	 	23	 	 	 	389	 	
 	
Accumulated OCI balance at September 30, 2009	 	$  	374	 	 	$  	(68	)	 	$  	306	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
(In millions)	 	Energy	 	Interest	 	 	
Nine months ended September 30, 2008	 	Commodities	 	Rate	 	Total	
 	
Accumulated OCI balance at December 31, 2007	 	$  	(234	)	 	$  	(31	)	 	$  	(265	)	
Realized from OCI during the period:	 	 	 	 	 	 	 	 	 	 	 	 	
— Due to realization of previously deferred amounts	 	 	32	 	 	 	—	 	 	 	32	 	
Mark-to-market of cash flow hedge accounting contracts	 	 	81	 	 	 	(1	)	 	 	80	 	
 	
Accumulated OCI balance at September 30, 2008	 	$  	(121	)	 	$  	(32	)	 	$  	(153	)	
 	
     As of September 30, 2009, the net balance in OCI relating to ASC 815 was an unrecognized gain of approximately $306 million, which is net of $189 million in income taxes. As of September 30, 2008, the net balance in OCI relating to ASC 815 was an unrecognized loss of approximately $153 million, which was net of $102 million in income taxes.
     Accounting guidelines require a high degree of correlation between the derivative and the hedged item throughout the period in order to qualify as a cash flow hedge. As of July 31, 2008, the Company’s regression analysis for natural gas prices to ERCOT power prices, while positively correlated, did not meet the required threshold for cash flow hedge accounting for calendar years 2012 and 2013. As a result, the Company de-designated its 2012 and 2013 ERCOT cash flow hedges as of July 31, 2008 and prospectively marked these derivatives to market. On April 1, 2009, the required correlation threshold for cash flow hedge accounting was achieved for these transactions, and accordingly, these hedges were re-designated as cash flow hedges.
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     As discussed in Note 4, Business Acquisition, to this Form 10-Q, in conjunction with the CSRA, PML and REPS modified or novated certain transactions with counterparties. The novated transactions are financial sales of natural gas to the counterparties covering the period from 2009 through 2012 to hedge NRG’s Texas baseload generation. A portion of these transactions were accounted for as cash flow hedges. The effective portion of the fair value of these transactions recorded in OCI was approximately $245 million. On the date of novation, NRG elected to de-designate these cash flow hedges and to recognize future changes in value in earnings prospectively. As the underlying baseload power generation is still probable, the gains through the date of novation related to the cash flow hedges remain frozen in OCI and will be amortized into income when the underlying power is generated. Approximately $248 million of the fair values of these transactions at the novation date were accounted for as mark-to-market transactions through the income statement both before and after the novations.
     As discussed in Note 20, Subsequent Event, to this Form 10-Q, NRG amended the CSRA effective October 5, 2009, and net settled or offset certain REPS transactions with counterparties.
Statement of Operations
     In accordance with ASC 815, unrealized gains and losses associated with changes in the fair value of derivative instruments not accounted for as cash flow hedge derivatives and ineffectiveness of hedge derivatives are reflected in current period earnings.
     The following table summarizes the pre-tax effects of economic hedges that did not qualify for cash flow hedge accounting, ineffectiveness on cash flow hedges, and trading activity on NRG’s statement of operations. These amounts are included within operating revenues and cost of operations.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months ended September 30,	 	Nine months ended September 30,	
(In millions)	 	2009	 	2008	 	2009	 	2008	
 	
Unrealized mark-to-market results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reversal of previously recognized unrealized losses/(gains) on settled positions related to economic hedges	 	$  	1	 	 	$ 	(7	)	 	$ 	(33	)	 	$  	(32	)	
Reversal of loss positions acquired as part of the Reliant Energy acquisition as of May 1, 2009	 	 	238	 	 	 	—	 	 	 	448	 	 	 	—	 	
Reversal of previously recognized unrealized gains on settled positions related to trading activity	 	 	(21	)	 	 	(9	)	 	 	(125	)	 	 	(20	)	
Net unrealized (losses)/gains on open positions related to economic hedges	 	 	(239	)	 	 	439	 	 	 	70	 	 	 	180	 	
Gains/(losses) on ineffectiveness associated with open positions treated as cash flow hedges	 	 	16	 	 	 	352	 	 	 	17	 	 	 	(27	)	
Net unrealized (losses)/gains on open positions related to trading activity	 	 	(9	)	 	 	60	 	 	 	(1	)	 	 	91	 	
 	
Total unrealized (losses)/gains	 	$  	(14	)	 	$  	835	 	 	$  	376	 	 	$  	192	 	

 	 	Three months ended September 30,	 	Nine months ended September 30,	
(In millions)	 	2009	 	2008	 	2009	 	2008	
 	
Revenue from operations — energy commodities	 	$  	(217	)	 	$  	835	 	 	$  	(100	)	 	$  	192	 	
Cost of operations	 	 	203	 	 	 	—	 	 	 	476	 	 	 	—	 	
 	
Total impact to statement of operations	 	$  	(14	)	 	$  	835	 	 	$  	376	 	 	$  	192	 	
 	
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     For the nine months ended September 30, 2009, the unrealized gain associated with changes in the fair value of derivative instruments not accounted for as hedge derivatives of $376 million was comprised of gains of $70 million from fair value increases in forward sales and purchases of natural gas, electricity and fuel, $17 million gain from ineffectiveness, $158 million loss from the reversal of mark-to-market gains, $448 million roll-off of Reliant Energy loss positions acquired as of May 1, 2009, and $1 million of losses associated with the Company’s trading activity. The $70 million gain from economic hedge positions includes $217 million recognized in earnings from previously deferred amounts in OCI as the Company discontinued cash flow hedge accounting for certain 2009 transactions in Texas and New York due to lower expected generation, and a $147 million increase in value of forward purchases and sales of natural gas, electricity and fuel due to decrease in forward power and gas prices. The $17 million gain is primarily from hedge accounting ineffectiveness related to gas trades in Texas which was driven by decreasing forward gas prices while forward power prices decreased at a slower pace. The Company recognized a derivative loss of $29 million resulting from discontinued NPNS designated coal purchases due to expected lower coal consumption and accordingly could not assert taking physical delivery. This amount is included in the Company’s cost of operations.
     The Reliant Energy’s loss positions were acquired as of May 1, 2009 and valued using forward prices on that date. The $448 million roll-off amounts were offset by realized losses at the settled prices and are reflected in the cost of operations during the same period.
     For the nine months ended September 30, 2008, the unrealized gain associated with changes in the fair value of derivative instruments not accounted for as hedge derivatives of $192 million was comprised of $180 million of fair value increases in forward sales of electricity and fuel, a $27 million loss due to the ineffectiveness associated with financial forward contracted electric and gas sales, $52 million from the reversal of mark-to-market gains which ultimately settled as financial revenues of which $32 million was related to economic hedges and $20 million was related to trading activity. These decreases were partially offset by $91 million of gains associated with open positions related to trading activity.
     Discontinued Hedge Accounting — During the first half of 2009, a relatively sharp decline in commodity prices resulted in falling power prices and lower power generation for the remainder of 2009. As such, NRG discontinued cash flow hedge accounting for certain 2009 contracts previously accounted for as cash flow hedges. These contracts were originally entered into as hedges of forecasted sales by baseload plants in Texas and Northeast. As a result, $217 million of gain previously deferred in OCI was recognized in earnings for the nine months ended September 30, 2009.
     Discontinued Normal Purchase and Sale for Coal Purchases — Due to lower coal-fired generation during the first quarter 2009, the Company’s coal consumption was lower than forecasted. The Company net settled some of its coal purchases under NPNS designation and thus was no longer able to assert physical delivery under these coal contracts. The forward positions previously treated as accrual accounting have been reclassified into mark-to-market accounting during the first quarter and prospectively. The impact of discontinuance of coal NPNS designated transactions resulted in a derivative loss of $29 million that is reflected in the cost of operations for the nine months ended September 30, 2009.
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Note 8 — Long-Term Debt
2019 Senior Notes
     On June 5, 2009, NRG issued $700 million aggregate principal amount of 8.5% Senior Notes due 2019, or 2019 Senior Notes, at a discount resulting in a yield of 8.75%. The 2019 Senior Notes were issued under an Indenture, dated February 2, 2006, between NRG and Law Debenture Trust Company of New York, as trustee, as amended through Supplemental Indentures, which is discussed in Note 11,  Debt and Capital Leases,  in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The Indentures and the form of the notes provide, among other things, that the 2019 Senior Notes will be senior unsecured obligations of NRG.
     A portion of the net proceeds of $678 million were used to facilitate the early termination of NRG’s obligations pursuant to the CSRA Amendment, which became effective on October 5, 2009, as discussed in Note 20,  Subsequent Event , to this Form 10-Q. Interest is payable semi-annually on the 2019 Senior Notes beginning on December 15, 2009, until their maturity date of June 15, 2019. As of September 30, 2009, $700 million in principal was outstanding under the 2019 Senior Notes.
     Prior to June 15, 2012, NRG may redeem up to 35% of the aggregate principal amount of the 2019 Senior Notes with the net proceeds of certain equity offerings, at a redemption price of 108.5% of the principal amount. Prior to June 15, 2014, NRG may redeem all or a portion of the 2019 Senior Notes at a price equal to 100% of the principal amount plus a premium and accrued and unpaid interest. The premium is the greater of (i) 1% of the principal amount of the note; or (ii) the excess of the principal amount of the note over the following: the present value of 104.25% of the note, plus interest payments due on the note from the date of redemption through June 15, 2014, discounted at a Treasury rate plus 0.50%. In addition, on or after June 15, 2014, NRG may redeem some or all of the notes at redemption prices expressed as percentages of principal amount as set forth in the following table, plus accrued and unpaid interest on the notes redeemed to the first applicable redemption date:
 	 	 	 	 	
 	 	Redemption	
Redemption Period	 	Percentage	
 	
June 15, 2014 to June 14, 2015	 	 	104.25	%	
June 15, 2015 to June 14, 2016	 	 	102.83	%	
June 15, 2016 to June 14, 2017	 	 	101.42	%	
June 15, 2017 and thereafter	 	 	100.00	%	
 	
Interest Rate Swaps
     In May 2009, NRG entered into a series of forward-starting interest rate swaps. These interest rate swaps become effective on April 1, 2011, and are intended to hedge the risks associated with floating interest rates. For each of the interest rate swaps, the Company will pay its counterparty the equivalent of a fixed interest payment on a predetermined notional value, and NRG receives the monthly equivalent of a floating interest payment based on a 1-month LIBOR calculated on the same notional value. All interest rate swap payments by NRG and its counterparties are made monthly and the LIBOR is determined in advance of each interest period. The total notional amount of these swaps is $900 million. The swaps mature on February 1, 2013.
Reliant Energy Acquisition
     See discussion in Note 4, Business Acquisition, to this Form 10-Q, regarding the CSRA entered into as a result of the acquisition of Reliant Energy on May 1, 2009. Further, see discussion in Note 4,  Business Acquisition , to this Form 10-Q, regarding the $50 million working capital facility entered into on May 1, 2009. Under the working capital facility, the Company borrowed $25 million on May 1, 2009. On October 5, 2009, $25 million was repaid on the working capital facility, which was terminated in conjunction with the amendment of the CSRA as discussed in Note 20,  Subsequent Event,  to this Form 10-Q.
Senior Credit Facility
     In March 2009, NRG made a repayment of approximately $197 million to its first lien lenders under the Term Loan Facility. This payment resulted from the mandatory annual offer of a portion of NRG’s excess cash flow (as defined in the Senior Credit Facility) for the prior year.
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TANE Facility
     On February 24, 2009, Nuclear Innovation North America LLC, or NINA, executed an Engineering, Procurement and Construction, or EPC, agreement with Toshiba American Nuclear Energy Corporation, or TANE, which specifies the terms under which STP Units 3 and 4 will be constructed. Concurrent with the execution of the EPC agreement, NINA and TANE entered into a credit facility, or the TANE Facility, wherein TANE has committed up to $500 million to finance purchases of long-lead materials and equipment for the construction of STP Units 3 and 4. The TANE Facility matures on February 24, 2012, subject to two renewal periods, and provides for customary events of default, which include, among others: nonpayment of principal or interest; default under other indebtedness; the rendering of judgments; and certain events of bankruptcy or insolvency. Outstanding borrowings will accrue interest at LIBOR plus 3%, subject to a ratings grid, and are secured by substantially all of the assets of and membership interests in NINA and its subsidiaries. As of September 30, 2009, no amounts have been borrowed under the TANE Facility.
Debt Related to Capital Allocation Program
     Share Lending Agreements — On February 20, 2009, CSF I and CSF II, wholly-owned unrestricted subsidiaries of the Company, entered into Share Lending Agreements with affiliates of CS relating to the shares of NRG common stock currently held by CSF I and II in connection with the CSF Debt originally entered into during the third quarter 2006, by and between CSF I and II and affiliates of CS. The Company entered into Share Lending Agreements due to a lack of liquidity in the stock borrow market for NRG shares and in order to maintain the intended economic benefits of the CSF Debt agreements. As of September 30, 2009, CSF I and II have lent affiliates of CS 12,000,000 shares of the 21,970,903 shares of NRG common stock held by CSF I and II. The Share Lending Agreements permit affiliates of CS to borrow up to the total number of shares of NRG common stock held by CSF I and II.
     Shares borrowed by affiliates of CS under the Share Lending Agreements will be used to replace shares borrowed by affiliates of CS from third parties in connection with CS hedging activities related to the financing agreements.
     The shares are expected to be returned upon the termination of the financing agreements. Until the shares are returned, the shares will be treated as outstanding for corporate law purposes, and accordingly, the holders of the borrowed shares will have all of the rights of a holder of the Company’s outstanding shares, including the right to vote the shares on all matters submitted to a vote of the Company’s stockholders. However, because the CS affiliates must return all borrowed shares (or identical shares), the borrowed shares are not considered outstanding for the purpose of computing and reporting the Company’s basic or diluted earnings per share.
     Adoption of FSP APB 14-1 — As discussed in Note 1, Basis of Presentation, to this Form 10-Q, the Company adopted FSP APB 14-1 on January 1, 2009, which has been incorporated in ASC 470 and ASC 825. The following table summarizes certain information related to the CSF Debt in accordance with ASC 470.
 	 	 	 	 	      	 	 	 	
 	 	September 30,	 	December 31,   	
 	 	2009	 	2008	
 	
Equity Component	 	 	 	 	 	 	 	 	
Additional Paid-in Capital	 	$  	14	 	 	$  	14	 	
 	
Liability Component	 	 	 	 	 	 	 	 	
Principal amount	 	$  	333	 	 	$  	333	 	
Unamortized discount	 	 	(3	)	 	 	(8	)	
 	
Net carrying amount	 	$  	330	 	 	$  	325	 	
 	
     The unamortized discount will be amortized through the maturity of the CSF Debt. The CSF I Debt has a maturity date of June 2010 and the CSF II Debt has a maturity date of October 2009. Interest expense for the CSF Debt, including the debt discount amortization for the three and nine months ended September 30, 2009, was $10 million and $28 million, respectively. Interest expense for the CSF Debt, including the debt discount amortization for the three and nine months ended September 30, 2008, was $9 million and $28 million, respectively. The effective interest rate as of September 30, 2009, was 11.4% for the CSF I Debt and 12.1% for the CSF II Debt.
     Subsequent Event — On October 9, 2009, NRG commenced the process of unwinding the CSF II Debt, making a $181.4 million capital contribution to a CSF II cash account, effectively restricting the cash for the benefit of CS. On October 13, 2009, CS began the process of unwinding their hedges in connection with the CSF II structure, which they are required to complete by November 24, 2009. Once complete, CS is scheduled to return 5,400,000 shares of NRG common stock borrowed under the Share Lending Agreements, and release 9,528,930 common shares held as collateral for the CSF II Debt, and the Company will remit payment to CS of the $181.4 million outstanding principal and interest.
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     The CSF II Debt contains an embedded derivative feature, or CFS II CAGR, which requires NRG to pay CS at maturity, either in cash or stock at NRG’s option, the excess of NRG’s then current stock price over a Threshold Price of $40.80 per share. On November 24, 2009, the CSF II CAGR will also be evaluated to determine whether any payment is due to CS, at which point the CSF II CAGR will expire.
     Dunkirk Power LLC Tax-Exempt Bonds — On April 15, 2009, NRG executed a $59 million tax-exempt bond financing through its wholly-owned subsidiary, Dunkirk Power LLC. The bonds were issued by the County of Chautauqua Industrial Development Agency and will be used for construction of emission control equipment on the Dunkirk Generating Station in Dunkirk, NY. The bonds initially bear weekly interest based on the Securities Industry and Financial Markets Association, or SIFMA, rate, have a maturity date of April 1, 2042, and are enhanced by a letter of credit under the Company’s Revolving Credit Facility covering amounts drawn on the facility. The proceeds received through September 30, 2009, were $38 million with the remaining balance being released over time as construction costs are paid.
     GenConn Energy LLC related financings — On April 27, 2009, a wholly-owned subsidiary of NRG closed on an equity bridge loan facility, or EBL, in the amount of $121.5 million from a syndicate of banks. The purpose of the EBL is to fund the Company’s proportionate share of the project construction costs required to be contributed into GenConn Energy LLC, or GenConn, a 50% equity method investment of the Company. The EBL, which is fully collateralized with a letter of credit issued under the Company’s Synthetic Letter of Credit Facility covering amounts drawn on the facility, will bear interest at a rate of LIBOR plus 2% on drawn amounts. The EBL will mature on the earlier of the commercial operations date of the Middletown project or July 26, 2011. The EBL also requires mandatory prepayment of the portion of the loan utilized to pay costs of the Devon project, of approximately $56 million, on the earlier of Devon’s commercial operations date or January 27, 2011. The proceeds of the EBL received through September 30, 2009, were $88 million and the remaining amounts will be drawn as necessary to fund construction costs.
     In April 2009, GenConn secured financing for 50% of the Devon and Middletown project construction costs through a 7-year term loan facility, and also entered into a 5-year revolving working capital loan and letter of credit facility, which collectively with the term loan is referred to as the GenConn Facility. The aggregate credit amount secured under the GenConn Facility, which is non-recourse to NRG, is $291 million, including $48 million for the revolving facility. In August 2009, GenConn began to draw under the GenConn Facility to cover costs related to the Devon project and as of September 30, 2009, has drawn $19 million.
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Note 9 — Changes in Capital Structure
     The following table reflects the changes in NRG’s common stock issued and outstanding during the nine months ended September 30, 2009:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Authorized	 	Issued	 	Treasury	 	Outstanding	
 	
Balance as of December 31, 2008	 	 	500,000,000	 	 	 	263,599,200	 	 	 	(29,242,483	)	 	 	234,356,717	 	
Shares issued from LTIP	 	 	—	 	 	 	268,220	 	 	 	—	 	 	 	268,220	 	
Shares issued under NRG Employee Stock Purchase Plan, or ESPP	 	 	—	 	 	 	—	 	 	 	81,532	 	 	 	81,532	 	
Shares borrowed by affiliates of CS	 	 	—	 	 	 	—	 	 	 	12,000,000	 	 	 	12,000,000	 	
2009 Share Repurchases	 	 	—	 	 	 	—	 	 	 	(8,919,100	)	 	 	(8,919,100	)	
4.00% Preferred Stock conversion	 	 	—	 	 	 	20,650	 	 	 	—	 	 	 	20,650	 	
5.75% Preferred Stock conversion	 	 	—	 	 	 	18,601,201	 	 	 	—	 	 	 	18,601,201	 	
 	
Balance as of September 30, 2009	 	 	500,000,000	 	 	 	282,489,271	 	 	 	(26,080,051	)	 	 	256,409,220	 	
 	
Employee Stock Purchase Plan
     As of September 30, 2009, there were 418,468 shares of treasury stock reserved for issuance under the ESPP.
5.75% Preferred Stock
     Certain holders of the Company’s 5.75% convertible perpetual preferred stock, or 5.75% Preferred Stock, elected to convert their preferred shares into NRG common shares prior to the mandatory conversion date of March 16, 2009, at the minimum conversion rate of 8.2712. As of March 16, 2009, each remaining outstanding share of the 5.75% Preferred Stock automatically converted into shares of common stock at a rate of 10.2564, based upon the applicable market value of NRG’s common stock. These conversions resulted in a decrease in preferred stock of $447 million, and a corresponding increase in Additional Paid-in Capital. The following table summarizes the conversion of the 5.75% Preferred Stock into NRG Common Stock:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred Stock	 	Conversion Rate	 	Common Stock	
 	 	Shares	 	(per share)	 	Shares	
 	
Balance as of December 31, 2008	 	 	1,841,680	 	 	 	 	 	 	 	—	 	
Preferred shares converted by the holders prior to March 16, 2009	 	 	144,975	 	 	 	8.2712	 	 	 	1,199,116	 	
Preferred shares automatically converted as of March 16, 2009	 	 	1,696,705	 	 	 	10.2564	 	 	 	17,402,085	 	
 	
Balance at September 30, 2009	 	 	—	 	 	 	 	 	 	 	18,601,201	 	
 	
4% Preferred Stock
     As of September 30, 2009, 413 shares of the 4% Preferred Stock were converted into 20,650 shares of common stock in 2009.
2009 Capital Allocation Program
     In July 2009, as part of the Company’s 2009 Capital Allocation Program, NRG’s Board of Directors approved an increase to the Company’s previously authorized common share repurchases under its capital allocation plan from the existing $330 million to $500 million. The Company’s repurchases during the period ended September 30, 2009, were $250 million. NRG intends to complete its $500 million of share repurchases by the end of 2009, subject to market prices, financial restrictions under the Company’s debt facilities, and as permitted by securities laws.
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Note 10 — Equity Compensation
Non-Qualified Stock Options, or NQSO’s
     The following table summarizes the Company’s NQSO activity as of September 30, 2009, and changes during the nine months then ended:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Weighted	 	Aggregate Intrinsic	
 	 	 	 	 	 	Average	 	Value	
 	 	Shares	 	Exercise Price	 	(In millions)	
 	
Outstanding as of December 31, 2008	 	 	4,008,188	 	 	$  	25.84	 	 	 	 	 	
Granted	 	 	1,402,000	 	 	 	23.62	 	 	 	 	 	
Exercised	 	 	(25,000	)	 	 	21.41	 	 	 	 	 	
Forfeited	 	 	(212,935	)	 	 	27.55	 	 	 	 	 	
 	 	 	 	 	
Outstanding at September 30, 2009	 	 	5,172,253	 	 	 	25.19	 	 	$ 	29.71	 	
Exercisable at September 30, 2009	 	 	2,815,800	 	 	$ 	21.80	 	 	$ 	22.98	 	
 	
     The weighted average grant date fair value of NQSO’s granted for the nine months ended September 30, 2009, was $8.63.
Restricted Stock Units, or RSU’s
     The following table summarizes the Company’s non-vested RSU awards as of September 30, 2009, and changes during the nine months then ended:
 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Weighted Average	
 	 	 	 	 	 	Grant-Date	
 	 	Units	 	Fair Value Per Unit	
 	
Non-vested as of December 31, 2008	 	 	1,061,996	 	 	$ 	32.97	 	
Granted	 	 	927,000	 	 	 	26.12	 	
Vested	 	 	(334,752	)	 	 	23.24	 	
Forfeited	 	 	(45,850	)	 	 	33.59	 	
 	
Non-vested as of September 30, 2009	 	 	1,608,394	 	 	$ 	31.03	 	
 	
   Performance Units, or PU’s
     The following table summarizes the Company’s non-vested PU awards as of September 30, 2009, and changes during the nine months then ended:
 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Weighted Average	
 	 	 	 	 	 	Grant- Date	
 	 	Units	 	Fair Value Per Unit	
 	
Non-vested as of December 31, 2008	 	 	659,564	 	 	$ 	22.81	 	
Granted	 	 	338,100	 	 	 	22.91	 	
Forfeited	 	 	(272,864	)	 	 	19.44	 	
 	
Non-vested as of September 30, 2009	 	 	724,800	 	 	$ 	24.29	 	
 	
     In the nine months ended September 30, 2009, there were no performance unit payouts in accordance with the terms of the performance units.
Deferral Stock Units, or DSU’s
     The following table summarizes the Company’s outstanding DSU awards as of September 30, 2009, and changes during the nine months then ended:
 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Weighted Average	
 	 	 	 	 	 	Grant- Date	
 	 	Units	 	Fair Value Per Unit	
 	
Outstanding as of December 31, 2008	 	 	260,768	 	 	$ 	18.50	 	
Granted	 	 	65,437	 	 	 	22.77	 	
Conversions	 	 	(22,156	)	 	 	23.69	 	
 	
Outstanding as of September 30, 2009	 	 	304,049	 	 	$ 	19.34	 	
 	
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Note 11 — Earnings Per Share
     Basic earnings per share attributable to NRG common stockholders is computed by dividing net income attributable to NRG adjusted for accumulated preferred stock dividends by the weighted average number of common shares outstanding. Shares issued and treasury shares repurchased during the year are weighted for the portion of the year that they were outstanding. The 12,000,000 shares outstanding under the Share Lending Agreements with CS affiliates are not treated as outstanding for earnings per share purposes because the CS affiliates must return all borrowed shares (or identical shares) upon termination of the Agreements. See Note 8,  Long-Term Debt,  to this Form 10-Q, for more information on the Share Lending Agreements. Diluted earnings per share attributable to NRG common stockholders is computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive common shares that were outstanding during the period.
     The reconciliation of basic earnings per common share to diluted earnings per share attributable to NRG is as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months ended	 	 	Nine months ended	 	
 	 	September 30,	 	 	September 30,	 	
(In millions, except per share data)	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
 	
Basic earnings per share attributable to NRG common stockholders	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Numerator:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, net of income taxes	 	$	278	 	 	$	778	 	 	$	909	 	 	$	782	 	
Dividends for preferred shares	 	 	(6	)	 	 	(13	)	 	 	(27	)	 	 	(41	)    	
 	
Net income available to common stockholders from continuing operations	 	 	272	 	 	 	765	 	 	 	882	 	 	 	741	 	
Income from discontinued operations, net of income taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	172	 	
 	
Net income attributable to NRG Energy, Inc. available to common stockholders	 	$	272	 	 	$	765	 	 	$	882	 	 	$	913	 	
 	
Denominator:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding	 	 	249.3	 	 	 	234.8	 	 	 	246.6	 	 	 	235.7	 	
Basic earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	1.09	 	 	$	3.26	 	 	$	3.58	 	 	$	3.14	 	
Income from discontinued operations, net of income taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.73	 	
 	
Net income attributable to NRG Energy, Inc.	 	$	1.09	 	 	$	3.26	 	 	$	3.58	 	 	$	3.87	 	
 	
Diluted earnings per share attributable to NRG common stockholders	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Numerator:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income available to common stockholders from continuing operations	 	$	272	 	 	$	765	 	 	$	882	 	 	$	741	 	
Add preferred stock dividends for dilutive preferred stock	 	 	4	 	 	 	11	 	 	 	19	 	 	 	34	 	
 	
Adjusted income from continuing operations	 	 	276	 	 	 	776	 	 	 	901	 	 	 	775	 	
Income from discontinued operations, net of income taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	172	 	
 	
Net income attributable to NRG Energy, Inc. available to common stockholders	 	$	276	 	 	$	776	 	 	$	901	 	 	$	947	 	
 	
Denominator:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding	 	 	249.3	 	 	 	234.8	 	 	 	246.6	 	 	 	235.7	 	
Incremental shares attributable to the issuance of equity compensation (treasury stock method)	 	 	1.5	 	 	 	2.2	 	 	 	1.1	 	 	 	3.0	 	
Incremental shares attributable to embedded derivatives of 3.625% redeemable perpetual preferred stock (if-converted method)	 	 	—	 	 	 	2.0	 	 	 	—	 	 	 	1.8	 	
Incremental shares attributable to assumed conversion features of outstanding preferred stock (if-converted method)	 	 	21.0	 	 	 	37.5	 	 	 	26.4	 	 	 	37.5	 	
 	
Total dilutive shares	 	 	271.8	 	 	 	276.5	 	 	 	274.1	 	 	 	278.0	 	
Diluted earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	1.02	 	 	$	2.81	 	 	$	3.29	 	 	$	2.79	 	
Income from discontinued operations, net of income taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	0.62	 	
 	
Net income attributable to NRG Energy, Inc.	 	$	1.02	 	 	$	2.81	 	 	$	3.29	 	 	$	3.41	 	
 	
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Effects on Earnings per Share
     The following table summarizes NRG’s outstanding equity instruments that were anti-dilutive and not included in the computation of the Company’s diluted earnings per share for the three and nine months ended September 30:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	   Three months ended September 30,   	 	   Nine months ended September 30,   	
(In millions of shares)	 	2009	 	2008	 	2009	 	2008	
 	
Equity compensation (NQSO’s and PU’s)	 	 	4.8	 	 	 	1.8	 	 	 	6.4	 	 	 	1.4	 	
Embedded derivative of 3.625% redeemable perpetual preferred stock	 	 	16.0	 	 	 	14.0	 	 	 	16.0	 	 	 	14.2	 	
Embedded derivative of CSF II Debt	 	 	7.6	 	 	 	7.6	 	 	 	7.6	 	 	 	7.6	 	
 	
Total	 	 	28.4	 	 	 	23.4	 	 	 	30.0	 	 	 	23.2	 	
 	
Note 12 — Segment Reporting
     NRG’s segment structure has changed to reflect the Company’s acquisition of Reliant Energy along with the previously reported core areas of operation which are primarily the geographic regions of the Company’s wholesale power generation, thermal and chilled water business, and corporate activities. Within NRG’s wholesale power generation operations, there are distinct components with separate operating results and management structures for the following regions: Texas, Northeast, South Central, West and International.
     In the second quarter 2009, management changed its method for allocating corporate general and administrative expenses to the segments. Corporate general and administrative expenses had been allocated based on budgeted segment revenues. Beginning in the second quarter 2009, corporate general and administrative expenses have been allocated based on forecasted earnings/(losses) before interest expense, income taxes, depreciation and amortization expense.
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(In millions)	 	 	 	 	 	Wholesale Power Generation	 	 	 	 	 	 	 	 	
Three months ended	 	Reliant	 	 	 	 	 	 	 	 	 	South	 	 	 	 	 	 	 	 	 	 	 	 	
September 30, 2009	 	Energy	 	Texas(a)	 	Northeast	 	Central	 	West	 	International	 	Thermal	 	Corporate	 	Elimination	 	Total	
 	
Operating revenues	 	$	1,790	 	 	$	760	 	 	$	270	 	 	$	143	 	 	$	40	 	 	$	38	 	 	$	33	 	 	$	(3	)	 	$	(155	)	 	$	2,916	 	
Depreciation and amortization	 	 	42	 	 	 	119	 	 	 	29	 	 	 	16	 	 	 	2	 	 	 	—	 	 	 	2	 	 	 	2	 	 	 	—	 	 	 	212	 	
Equity in earnings of unconsolidated affiliates	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	4	 	 	 	2	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6	 	
Income/(loss) from continuing operations before income taxes	 	 	393	 	 	 	196	 	 	 	50	 	 	 	(34	)	 	 	16	 	 	 	7	 	 	 	2	 	 	 	(186	)	 	 	—	 	 	 	444	 	
Net income/(loss) attributable to NRG Energy, Inc.	 	$	393	 	 	$	196	 	 	$	50	 	 	$	(34	)	 	$	16	 	 	$	6	 	 	$	2	 	 	$	(351	)	 	$	—	 	 	$	278	 	
 	
Total assets	 	$	4,048	 	 	$	13,634	 	 	$	1,823	 	 	$	914	 	 	$	278	 	 	$	791	 	 	$	198	 	 	$	22,602	 	 	$	(18,334	)	 	$	25,954	 	

(a)      Includes inter-segment sales of $162 million to Reliant Energy.
     If the Company continued using the 2008 allocation method for corporate general and administrative expenses, the effect to net income/(loss) of each segment for the three months ended September 30, 2009, would have been as follows:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income/(loss) attributable to NRG Energy, Inc. as reported	 	$	393	 	 	$	196	 	 	$	50	 	 	$	(34	)	 	$	16	 	 	$	6	 	 	$	2	 	 	$	(351	)	 	$	—	 	 	$	278	 	
Increase/(decrease) in net income/(loss) attributable to NRG Energy, Inc.	 	 	(19	)	 	 	14	 	 	 	6	 	 	 	(1	)	 	 	—	 	 	 	1	 	 	 	(1	)	 	 	—	 	 	 	—	 	 	 	—	 	
 	
Adjusted net income/(loss) attributable to NRG Energy, Inc.	 	$	374	 	 	$	210	 	 	$	56	 	 	$	(35	)	 	$	16	 	 	$	7	 	 	$	1	 	 	$	(351	)	 	$	—	 	 	$	278	     	

 	 	 	 	 	 	Wholesale Power Generation	 	 	 	 	 	 	 	 	
(In millions)	 	 	 	 	 	 	 	 	 	 	 	 	 	South	 	 	 	 	 	 	 	 	 	 	 	 	
Three months ended September 30, 2008	 	 	 	 	 	Texas	 	Northeast	 	Central	 	West	 	International	 	Thermal	 	Corporate	 	Elimination	 	Total	
 	
Operating revenues	 	 	 	 	 	$	1,637	 	 	$	622	 	 	$	234	 	 	$	40	 	 	$	41	 	 	$	36	 	 	$	3	 	 	$	(1	)	 	$	2,612	 	
Depreciation and amortization	 	 	 	 	 	 	108	 	 	 	26	 	 	 	16	 	 	 	2	 	 	 	—	 	 	 	3	 	 	 	1	 	 	 	—	 	 	 	156	 	
Equity in earnings of unconsolidated affiliates	 	 	 	 	 	 	40	 	 	 	—	 	 	 	—	 	 	 	1	 	 	 	17	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	58	 	
Income/(loss) from continuing operations before income taxes	 	 	 	 	 	 	1,026	 	 	 	296	 	 	 	25	 	 	 	13	 	 	 	25	 	 	 	4	 	 	 	(108	)	 	 	(1	)	 	 	1,280	 	
Net income/(loss) attributable to NRG Energy, Inc.	 	 	 	 	 	$	576	 	 	$	296	 	 	$	25	 	 	$	13	 	 	$	19	 	 	$	4	 	 	$	(154	)	 	$	(1	)	 	$	778	 	
 	
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(In millions)	 	 	 	 	 	Wholesale Power Generation	 	 	 	 	 	 	 	 	
Nine months ended	 	Reliant	 	 	 	 	 	 	 	 	 	South	 	 	 	 	 	 	 	 	 	 	 	 	
September 30, 2009	 	Energy (a)	 	Texas(b)	 	Northeast	 	Central	 	West	 	International	 	Thermal	 	Corporate	 	Elimination	 	Total	
 	
Operating revenues	 	$	2,965	 	 	$	2,304	 	 	$	971	 	 	$	444	 	 	$	110	 	 	$	106	 	 	$	103	 	 	$	33	 	 	$	(225	)	 	$	6,811	     	
Depreciation and amortization	 	 	85	 	 	 	353	 	 	 	88	 	 	 	50	 	 	 	6	 	 	 	—	 	 	 	7	 	 	 	5	 	 	 	—	 	 	 	594	 	
Equity in earnings/(losses) of unconsolidated affiliates	 	 	—	 	 	 	(3	)	 	 	—	 	 	 	—	 	 	 	8	 	 	 	28	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	33	 	
Income/(loss) from continuing operations before income taxes	 	 	807	 	 	 	681	 	 	 	303	 	 	 	(42	)	 	 	32	 	 	 	149	 	 	 	6	 	 	 	(414	)	 	 	—	 	 	 	1,522	 	
Net income/(loss)	 	 	807	 	 	 	510	 	 	 	303	 	 	 	(42	)	 	 	32	 	 	 	143	 	 	 	6	 	 	 	(851	)	 	 	—	 	 	 	908	 	
Net loss attributable to non-controlling interest	 	 	—	 	 	 	(1	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1	)	
Net income/(loss) attributable to NRG Energy, Inc.	 	$	807	 	 	$	511	 	 	$	303	 	 	$	(42	)	 	$	32	 	 	$	143	 	 	$	6	 	 	$	(851	)	 	$	—	 	 	$	909	 	
 	
(a)    Reliant Energy balances are for the five months ended September 30, 2009.
(b)    Includes inter-segment sales of $228 million to Reliant Energy.
     If the Company continued using the 2008 allocation method for corporate general and administrative expenses, the effect to net income/(loss) of each segment for the nine months ended September 30, 2009, would have been as follows:	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income/(loss) attributable to NRG Energy, Inc. as reported	 	$	807	 	 	$	511	 	 	$	303	 	 	$	(42	)	 	$	32	 	 	$	143	 	 	$	6	 	 	$	(851	)	 	$	—	 	 	$	909	 	
Increase/(decrease) in net income/(loss) attributable to NRG Energy, Inc.	 	 	(30	)	 	 	22	 	 	 	9	 	 	 	(2	)	 	 	1	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	
Adjusted net income/(loss) attributable to NRG Energy, Inc.	 	$	777	 	 	$	533	 	 	$	312	 	 	$	(44	)	 	$	33	 	 	$	143	 	 	$	6	 	 	$	(851	)	 	$	—	 	 	$	909	 	

(In millions)	 	 	 	 	 	Wholesale Power Generation	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	South	 	 	 	 	 	 	 	 	 	 	 	 	
Nine months ended September 30, 2008	 	 	 	 	 	Texas	 	Northeast	 	Central	 	West	 	International	 	Thermal	 	Corporate	 	Elimination	 	Total	
 	
Operating revenues	 	 	 	 	 	$	3,037	 	 	$	1,247	 	 	$	585	 	 	$	127	 	 	$	122	 	 	$	114	 	 	$	1	 	 	$	(3	)	 	$	5,230	 	
Depreciation and amortization	 	 	 	 	 	 	334	 	 	 	77	 	 	 	50	 	 	 	6	 	 	 	—	 	 	 	8	 	 	 	3	 	 	 	—	 	 	 	478	 	
Equity in (losses)/earnings of unconsolidated affiliates	 	 	 	 	 	 	(10	)	 	 	—	 	 	 	—	 	 	 	(2	)	 	 	47	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	35	 	
Income/(loss) from continuing operations before income taxes	 	 	 	 	 	 	1,107	 	 	 	310	 	 	 	58	 	 	 	38	 	 	 	72	 	 	 	11	 	 	 	(300	)	 	 	(11	)	 	 	1,285	 	
Income from discontinued operations, net of income taxes	 	 	 	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	172	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	172	 	
Net income/(loss) attributable to NRG Energy, Inc.	 	 	 	 	 	$	626	 	 	$	310	 	 	$	58	 	 	$	38	 	 	$	229	 	 	$	11	 	 	$	(307	)	 	$	(11	)	 	$	954	 	
 	
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Note 13 — Income Taxes
Effective Tax Rate
     Income taxes included in continuing operations were as follows:
 	 	 	 	 	 	 	 	 	
 	 	    Three months ended September 30,    	
(In millions except otherwise noted)	 	2009	 	2008	
 	
Income tax expense	 	$	166	 	 	$	502	 	
Effective tax rate	 	 	37.4	%	 	 	39.2	%	
 	
     For the three months ended September 30, 2009, NRG’s overall effective tax rate on continuing operations was different than the statutory rate of 35% primarily due to the U.S. taxation of foreign earnings offset by a reduction in the valuation allowance. For the three months ended September 30, 2008, NRG’s effective tax rate was increased primarily due to the impact of state and local income taxes.
     Income taxes included in continuing operations were as follows:
 	 	 	 	 	 	 	 	 	
 	 	  Nine months ended September 30,  	
(In millions except otherwise noted)	 	2009	 	2008	
 	
Income tax expense	 	$	614	 	 	$	503	 	
Effective tax rate	 	 	40.3	%	 	 	39.1	%	
 	
     For the nine months ended September 30, 2009, NRG’s overall effective tax rate on continuing operations was different than the statutory rate of 35% primarily due to an increase in the valuation allowance as a result of capital losses generated during the nine months for which there are no projected capital gains or available tax planning strategies. For the nine months ended September 30, 2008, NRG’s overall effective tax rate was increased primarily due to the impact of state and local income taxes.
Deferred tax assets, liabilities and valuation allowance
     On a provisional basis, NRG established deferred tax assets of $1,203 million and deferred tax liabilities of $1,189 million as a result of NRG’s acquisition of Reliant Energy.
     In addition, the Company anticipates reversal of the deferred tax assets and corresponding valuation allowance pertaining to capital losses which will expire on December 31, 2009.
Valuation Allowance
     As of September 30, 2009, the Company’s valuation allowance was increased by approximately $63 million primarily due to losses generated in the period from derivative trading activity which require capital treatment for tax purposes. The Company increased its foreign valuation allowance by approximately $13 million.
Uncertain tax benefits
     As of September 30, 2009, NRG has recorded a $688 million non-current tax liability for unrecognized tax benefits, resulting from taxable earnings for the period for which there are no NOLs available to offset for financial statement purposes. NRG has accrued interest and penalties related to these unrecognized tax benefits of approximately $11 million for the nine months ended September 30, 2009, and has accrued approximately $19 million since adoption. The Company recognizes interest and penalties related to unrecognized 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 major operations located in Germany and Australia. The Company is no longer subject to U.S. federal income tax examinations for years prior to 2002. With few exceptions, state and local income tax examinations are no longer open for years before 2002. The Company’s significant foreign operations are also no longer subject to examination by local jurisdictions for years prior to 2000. The Company continues to be under examination by the Internal Revenue Service.
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Tax Receivable and Payable
     As of September 30, 2009, the Company has recorded a tax receivable of approximately $51 million that represents a domestic federal tax receivable of $9 million and state tax receivable of $42 million, net of $6 million reserve. In addition, the Company has recorded a current payable of approximately $56 million which includes domestic tax payable of approximately $45 million as well as foreign taxes payable of approximately $11 million.
Note 14 — Benefit Plans and Other Postretirement Benefits
NRG Defined Benefit Plans
     NRG sponsors and operates three defined benefit pension and other postretirement plans. The NRG Plan for Bargained Employees and the NRG Plan for Non-Bargained Employees are maintained solely for eligible legacy NRG participants. A third plan, the Texas Genco Retirement Plan, is maintained for participation solely by eligible employees. The total amount of employer contributions paid for the nine months ended September 30, 2009, was $22 million. NRG expects to make $5 million in further contributions for the remainder of 2009. The total 2009 planned contribution of $27 million was a decrease of $33 million from the expected contributions as disclosed in Note 12,  Benefit Plans and Other Postretirement Benefits , in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008. This decrease in the 2009 expected contributions is due to the adoption by the Company in March 2009 of the new funding method options now available. The new methods were made allowable under new IRS guidance on the application of recent Congressional legislation on funding requirements.
     The net periodic pension cost related to all of the Company’s defined benefit pension plans include the following components:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Defined Benefit Pension Plans	
 	 	  Three months  ended September 30,  	 	  Nine months ended September 30,  	
(In millions)	 	 2009	 	2008       	 	2009	 	2008	
 	
Service cost benefits earned	 	$ 	4	 	 	$   	4	 	 	$   	11	 	 	$  	11	 	
Interest cost on benefit obligation	 	 	5	 	 	 	4	 	 	 	15	 	 	 	13	 	
Prior service cost	 	 	—	 	 	 	—	 	 	 	1	 	 	 	—	 	
Net gain	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1	)	
Expected return on plan assets	 	 	(4	)	 	 	(4	)	 	 	(12	)	 	 	(11	)	
 	
Net periodic benefit cost	 	$ 	5	 	 	$   	4	 	 	$   	15	 	 	$  	12	 	
 	
     The net periodic cost related to all of the Company’s other postretirement benefits plans includes the following components:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Other Postretirement Benefits Plans	
 	 	    Three months ended September 30,    	 	    Nine months ended September 30,    	
(In millions)	 	2009	 	2008	 	2009	 	2008   	
 	
Service cost benefits earned	 	$	—	 	 	$	1	 	 	$  	2	 	 	$  	2	 	
Interest cost on benefit obligation	 	 	3	 	 	 	1	 	 	 	5	 	 	 	4	 	
 	
Net periodic benefit cost	 	$	3	 	 	$	2	 	 	$  	7	 	 	$  	6	 	
 	
STP Defined Benefit Plans
     NRG has a 44% undivided ownership interest in STP. South Texas Project Nuclear Operating Company, or STPNOC, which operates and maintains STP, provides its employees a defined benefit pension plan as well as postretirement health and welfare benefits. Although NRG does not sponsor the STP plan, it reimburses STPNOC for 44% of the contributions made towards its retirement plan obligations. The total amount of employer contributions reimbursed to STPNOC for the nine months ended September 30, 2009, was $3 million. The Company recognized net periodic costs related to its 44% interest in STP defined benefits plans of $3 million and $2 million for the three months ended September 30, 2009, and 2008, respectively. The Company recognized net periodic costs related to its 44% interest in STP defined benefits plans of $8 million and $6 million for the nine months ended September 30, 2009, and 2008, respectively.
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Note 15 — Commitments and Contingencies
Operating Lease Commitments
     As a result of the acquisition of Reliant Energy, the Company’s operating lease commitments have increased primarily due to additional lease agreements for office space through 2021. As of September 30, 2009, eight additional office space locations were under lease for future commitments of approximately $85 million.
Fuel Commitments
     NRG enters into long-term contractual arrangements to procure fuel and transportation services for the Company’s generation assets. NRG’s total net coal commitments, which span from 2009 through 2012, decreased by approximately $409 million during the nine months ended September 30, 2009, as the 2009 monthly commitments were settled. In addition, NRG’s natural gas purchase commitments decreased by approximately $199 million during the nine months ended September 30, 2009, as the 2009 monthly commitments were settled and average natural gas prices decreased.
Purchased Power Commitments
     As a result of the acquisition of Reliant Energy, NRG is party to purchased power contracts of various quantities and durations that are not classified as derivative assets and liabilities. These contracts are not included in the consolidated balance sheet as of September 30, 2009. Minimum purchase commitment obligations under these agreements are as follows as of September 30, 2009:
 	 	 	 	 	 	 	 	 	
(In millions)	 	Fixed Pricing(a)	 	Variable Pricing(b)	
 	
Remainder of 2009	 	$   	23	 	 	$   	  36	 	
2010	 	 	54	 	 	 	7	 	
2011	 	 	30	 	 	 	3	 	
2012	 	 	21	 	 	 	1	 	
2013	 	 	10	 	 	 	—	 	
 	
Total	 	$   	  138	 	 	$   	47	 	

 	 	 	
(a)	 	As of September 30. 2009, the maximum remaining term under any individual purchased power contract is four years.	
(b)	 	For contracts with variable pricing components, estimated prices are based on forward commodity curves as of September 30, 2009.	
Other
     As a result of the acquisition of Reliant Energy, the Company acquired the naming rights, including advertising and other benefits, for a football stadium and other convention and entertainment facilities included in the stadium complex in Houston, Texas. Pursuant to this agreement, the Company is required to pay $10 million per year through 2031.
     See discussion in Note 4, Business Acquisition, to this Form 10-Q, regarding the CSRA as a result of the acquisition of Reliant Energy on May 1, 2009.
First and Second Lien Structure
     NRG has granted first and second liens to certain counterparties on substantially all of the Company’s assets to reduce the amount of cash collateral and letters of credit that it would otherwise be required to post from time to time to support its obligations under out-of-the-money hedge agreements for forward sales of power or MWh equivalents. The Company’s lien counterparties may have a claim on NRG’s assets to the extent market prices exceed the hedged price. As of September 30, 2009, and October 22, 2009, all hedges under the first and second liens were in-the-money on a counterparty aggregate basis.
RepoweringNRG Initiatives
     NRG has capitalized $32 million through September 30, 2009, for the repowering of its El Segundo generating facility in California. As a result of permitting delays related to on-going Natural Resource Defense Counsel claims, the El Segundo project will not reach its original completion date of June 1, 2011. The Company is working with the counterparty to consider certain PPA modifications including the commercial operations date.
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Contingencies
     Set forth below is a description of the Company’s material legal proceedings. The Company believes that it has valid defenses to these legal proceedings and intends to defend them vigorously. Pursuant to the requirements of ASC 450 and related guidance, NRG records reserves for estimated losses from contingencies when information available indicates that a loss is probable and the amount of the loss, or range of loss, can be reasonably estimated. In addition, legal costs are expensed as incurred. Management has assessed each of the following matters based on current information and made a judgment concerning its potential outcome, considering the nature of the claim, the amount and nature of damages sought, and the probability of success. Unless specified below, the Company is unable to predict the outcome of these legal proceedings or reasonably estimate the scope or amount of any associated costs and potential liabilities. As additional information becomes available, management adjusts its assessment and estimates of such contingencies accordingly. Because litigation is subject to inherent uncertainties and unfavorable rulings or developments, it is possible that the ultimate resolution of the Company’s liabilities and contingencies could vary from its currently recorded reserves and such differences could be material.
     In addition to the legal proceedings noted below, NRG and its subsidiaries are party to other litigation or legal proceedings arising in the ordinary course of business. In management’s opinion, the disposition of these ordinary course matters will not materially adversely affect NRG’s consolidated financial position, results of operations, or cash flows.
Exelon Related Litigation
     Delaware Chancery Court
     On November 11, 2008, Exelon and its wholly-owned subsidiary Exelon Xchange filed a complaint against NRG and NRG’s Board of Directors. The complaint alleges, among other things, that NRG’s Board of Directors failed to give due consideration and to take appropriate action in response to the acquisition proposal announced by Exelon on October 19, 2008, in which Exelon offered to acquire all of the outstanding shares of NRG common stock at an exchange ratio of 0.485 Exelon shares for each NRG common share. On November 14, 2008, NRG and NRG’s Board of Directors filed a motion to dismiss Exelon’s complaint on the grounds that it failed to state a claim upon which relief can be granted. On March 16, 2009, prior to responding to the motion to dismiss, Exelon and Exelon Xchange filed an amended complaint. On April 17, 2009, NRG and NRG’s Board of Directors filed a partial motion to dismiss the amended complaint. On July 28, 2009, Exelon, NRG, and NRG’s Board of Directors collectively filed a Stipulation of Dismissal of Exelon’s lawsuit, thereby ending the case.
     On December 11, 2008, the Louisiana Sheriffs’ Pension & Relief Fund and City of St. Claire Shores Police & Fire Retirement System, on behalf of themselves and all others similarly situated, served a previously filed complaint on NRG and its Board of Directors alleging substantially similar allegations as the Exelon complaint. On December 23, 2008, NRG and NRG’s Board of Directors filed a motion to dismiss the complaint on the grounds that it failed to state a claim upon which relief can be granted. On March 16, 2009, prior to responding to the motion to dismiss, these plaintiffs filed an amended complaint against only NRG’s Board of Directors. On April 17, 2009, the NRG Board of Directors filed a motion to dismiss the amended complaint asserting that it fails to state a claim upon which relief can be granted. On August 4, 2009, the plaintiffs filed a notice and proposed order of dismissal and on August 5, 2009, the court dismissed the lawsuit, thereby ending the case.
     Mercer County, New Jersey Superior Court
     On January 6, 2009, three lawsuits previously filed against NRG and NRG’s Board of Directors on behalf of individual shareholders and all others similarly situated were consolidated into one case in the Law Division of the Superior Court of Mercer County, New Jersey. On January 21, 2009, the plaintiffs filed an Amended Consolidated Complaint in which they allege a single count of breach of fiduciary duty against NRG’s Board of Directors and seek injunctive relief. On February 20, 2009, NRG’s Board of Directors filed a motion to dismiss the amended consolidated complaint for failure to state a claim or, in the alternative, to stay the action in favor of the Delaware Chancery Court proceedings. On March 19, 2009, the plaintiffs filed their response and on April 6, 2009, NRG’s Board of Directors filed its reply. On April 17, 2009, and again on May 7, 2009, oral argument was held and on June 18, 2009, the court found in favor of NRG’s Board of Directors and stayed the consolidated lawsuits pending resolution of the purported class-action lawsuit filed in Delaware Chancery court by the Louisiana Sheriffs’ Pension & Relief Fund and City of St. Claire Shores Police & Fire Retirement System. On August 10, 2009, the plaintiffs filed a Notice of Voluntary Dismissal, thereby ending the case.
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California Department of Water Resources
     This matter concerns, among other contracts and other defendants, the California Department of Water Resources, or CDWR, and its wholesale power contract with subsidiaries of WCP (Generation) Holdings, Inc., or WCP. The case originated with a February 2002 complaint filed by the State of California alleging that many parties, including WCP subsidiaries, overcharged the State of California. For WCP, the alleged overcharges totaled approximately $940 million for 2001 and 2002. The complaint demanded that the Federal Energy Regulatory Commission, or FERC, abrogate the CDWR contract and sought refunds associated with revenues collected under the contract. In 2003, the FERC rejected this complaint, denied rehearing, and the case was appealed to the U.S. Court of Appeals for the Ninth Circuit where oral argument was held on December 8, 2004. On December 19, 2006, the Ninth Circuit decided that in the FERC’s review of the contracts at issue, the FERC could not rely on the  Mobile-Sierra  standard presumption of just and reasonable rates, where such contracts were not reviewed by the FERC with full knowledge of the then existing market conditions. WCP and others sought review by the U.S. Supreme Court. WCP’s appeal was not selected, but instead held by the Supreme Court. In the appeal that was selected by the Supreme Court, on June 26, 2008 the Supreme Court ruled: (i) that the  Mobile-Sierra  public interest standard of review applied to contracts made under a seller’s market-based rate authority; (ii) that the public interest “bar” required to set aside a contract remains a very high one to overcome; and (iii) that the  Mobile-Sierra  presumption of contract reasonableness applies when a contract is formed during a period of market dysfunction unless (a) such market conditions were caused by the illegal actions of one of the parties or (b) the contract negotiations were tainted by fraud or duress. In this related case, the U.S. Supreme Court affirmed the Ninth Circuit’s decision agreeing that the case should be remanded to the FERC to clarify the FERC’s 2003 reasoning regarding its rejection of the original complaint relating to the financial burdens under the contracts at issue and to alleged market manipulation at the time these contracts were formed. As a result, the U.S. Supreme Court then reversed and remanded the WCP CDWR case to the Ninth Circuit for treatment consistent with its June 26, 2008 decision in the related case. On October 20, 2008, the Ninth Circuit asked the parties in the remanded CDWR case, including WCP and the FERC, whether that Court should answer a question the U.S. Supreme Court did not address in its June 26, 2008, decision; whether the  Mobile-Sierra  doctrine applies to a third-party that was not a signatory to any of the wholesale power contracts, including the CDWR contract, at issue in that case. Without answering that reserved question, on December 4, 2008, the Ninth Circuit vacated its prior opinion and remanded the WCP CDWR case back to the FERC for proceedings consistent with the U.S. Supreme Court’s June 26, 2008 decision. On December 15, 2008, WCP and the other seller-defendants filed with the FERC a Motion for Order Governing Proceedings on Remand. On January 14, 2009, the Public Utilities Commission of the State of California filed an Answer and Cross Motion for an Order Governing Procedures on Remand, and on January 28, 2009, WCP and the other seller-defendants filed their reply.
     At this time, while NRG cannot predict with certainty whether WCP will be required to make refunds for rates collected under the CDWR contract or estimate the range of any such possible refunds, a reconsideration of the CDWR contract by the FERC with a resulting order mandating significant refunds could have a material adverse impact on NRG’s financial position, statement of operations, and statement of cash flows. As part of the 2006 acquisition of Dynegy’s 50% ownership interest in WCP, WCP and NRG assumed responsibility for any risk of loss arising from this case, unless any such loss was deemed to have resulted from certain acts of gross negligence or willful misconduct on the part of Dynegy, in which case any such loss would be shared equally between WCP and Dynegy.
     On April 27, 2009, the U.S. Supreme Court granted certiorari in an unrelated proceeding involving the Mobile-Sierra doctrine that may affect the standard of review applied to the CDWR contract on remand before the FERC. Specifically, on March 18, 2008, the U.S. Court of Appeals for the DC Circuit rejected the appeals filed by the Attorneys General of the State of Connecticut and Commonwealth of Massachusetts regarding the settlement that established the current New England capacity market. The settlement, filed with the FERC on March 7, 2006, provides for interim capacity transition payments for all generators in New England for the period starting December 1, 2006 through May 31, 2010 and for the Forward Capacity Market thereafter. The DC Circuit Court of Appeals rejected all substantive challenges to the settlement, but sustained one procedural argument relating to the applicability of the  Mobile-Sierra  doctrine to non-settling parties. NRG sought  certiorari  before the U.S. Supreme Court, which was granted on April 27, 2009. Oral argument is scheduled for November 3, 2009.
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Louisiana Generating, LLC
     On February 11, 2009, the U.S. Department of Justice acting at the request of the U.S. Environmental Protection Agency, or U.S. EPA, commenced a lawsuit against Louisiana Generating, LLC in federal district court in the Middle District of Louisiana alleging violations of the Clean Air Act, or CAA, at the Big Cajun II power plant. This is the same matter for which Notices of Violation, or NOVs, were issued to Louisiana Generating, LLC on February 15, 2005, and on December 8, 2006. Specifically, it is alleged that in the late 1990’s, several years prior to NRG’s acquisition of the Big Cajun II power plant from the Cajun Electric bankruptcy and several years prior to the NRG bankruptcy, modifications were made to Big Cajun II Units 1 and 2 by the prior owners without appropriate or adequate permits and without installing and employing the best available control technology, or BACT, to control emissions of nitrogen oxides and/or sulfur dioxides. The relief sought in the complaint includes a request for an injunction to: (i) preclude the operation of Units 1 and 2 except in accordance with the CAA; (ii) order the installation of BACT on Units 1 and 2 for each pollutant subject to regulation under the CAA; (iii) obtain all necessary permits for Units 1 and 2; (iv) order the surrender of emission allowances or credits; (v) conduct audits to determine if any additional modifications have been made which would require compliance with the CAA’s Prevention of Significant Deterioration program; (vi) award to the Department of Justice its costs in prosecuting this litigation; and (vii) assess civil penalties of up to $27,500 per day for each CAA violation found to have occurred between January 31, 1997, and March 15, 2004, up to $32,500 for each CAA violation found to have occurred between March 15, 2004, and January 12, 2009, and up to $37,500 for each CAA violation found to have occurred after January 12, 2009.
     On April 27, 2009, Louisiana Generating, LLC made several filings. It filed an objection in the Cajun Electric Cooperative Power, Inc.’s bankruptcy proceeding in the U.S. Bankruptcy Court for the Middle District of Louisiana to seek to prevent the bankruptcy from closing. It also filed a complaint in the same bankruptcy proceeding in the same court seeking a judgment that: (i) it did not assume liability from Cajun Electric for any claims or other liabilities under environmental laws with respect to Big Cajun II that arose, or are based on activities that were undertaken, prior to the closing date of the acquisition; (ii) it is not otherwise the successor to Cajun Electric; and (iii) Cajun Electric and/or the Bankruptcy Trustee are exclusively liable for the violations alleged in the February 11, 2009 lawsuit to the extent that such claims are determined to have merit. On June 8, 2009, the parties filed a joint status report setting forth their views of the case and proposing a trial schedule. On June 18, 2009, Louisiana Generating, LLC filed a motion to bifurcate the Department of Justice lawsuit into separate liability and remedy phases, and on June 30, 2009, the Department of Justice filed its opposition. On August 24, 2009, Louisiana Generating, LLC filed a motion to dismiss this lawsuit, and on September 25, 2009, the Department of Justice filed its opposition to the motion to dismiss. A new federal bankruptcy judge was appointed on October 9, 2009.
Citizens for Clean Power
     On November 6, 2008, Citizens for Clean Power, or CCP, filed a notice of its intent to file a lawsuit under the CAA against Indian River Power, LLC, or IRP, seeking to enforce opacity limitations applicable to units 1, 2, 3, and 4. On January 5, 2009, the Delaware Department of Natural Resources and Environmental Control, or DNREC, filed a lawsuit relating to opacity issues against IRP in the Superior Court in Kent County, Delaware. On January 6, 2009, DNREC and IRP agreed to a consent order resolving the DNREC action in which IRP agreed to pay a $5,000 civil penalty and agreed to purchase for DNREC’s use an Ultrafine Particle Monitor for approximately $60,000. The consent order was filed with the court on February 6, 2009, and entered by the court on February 13, 2009, thereby precluding CCP’s ability under the CAA to commence its noticed lawsuit. On February 26, 2009, notwithstanding the entry of the consent order, CCP filed a complaint against IRP in federal district court in Delaware. On March 25, 2009, IRP filed a motion to dismiss the complaint, on April 7, 2009, CCP filed its opposition, and on April 20, 2009, IRP filed its reply. On July 23, 2009, the court dismissed the matter, thereby ending the case.
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Excess Mitigation Credits
     From January 2002 to April 2005, CenterPoint Energy applied excess mitigation credits, or EMCs, to its monthly charges to retail electric providers as ordered by the Public Utility Commission of Texas, or PUCT. The PUCT imposed these credits to facilitate the transition to competition in Texas, which had the effect of lowering the retail electric providers’ monthly charges payable to CenterPoint Energy. As indicated in its Petition for Review filed with the Supreme Court of Texas on June 2, 2008, CenterPoint Energy has claimed that the portion of those EMCs credited to Reliant Energy Retail Services, LLC, or RERS, a retail electric provider and NRG subsidiary acquired from RRI, totaled $385 million for RERS’s “Price to Beat” Customers. It is unclear what the actual number may be. “Price to Beat” was the rate RERS was required by state law to charge residential and small commercial customers that were transitioned to RERS from the incumbent integrated utility company commencing in 2002. In its original stranded cost case brought before the PUCT on March 31, 2004, CenterPoint Energy sought recovery of all EMCs that were credited to all retail electric providers, including RERS, and the PUCT ordered that relief in its Order on Rehearing in Docket No. 29526, on December 17, 2004. After an appeal to state district court, the court entered a final judgment on August 26, 2005, affirming the PUCT’s order with regard to EMCs credited to RERS. Various parties filed appeals of that judgment with the Court of Appeals for the Third District of Texas with the first such appeal filed on the same date as the state district court judgment and the last such appeal filed on October 10, 2005. On April 17, 2008, the Court of Appeals for the Third District reversed the lower court’s decision ruling that CenterPoint Energy’s stranded cost recovery should exclude only EMCs credited to RERS for its “Price to Beat” customers. On June 2, 2008, CenterPoint Energy filed a Petition for Review with the Supreme Court of Texas and on June 19, 2009, the Court agreed to consider the CenterPoint Energy appeal as well as two related petitions for review filed by other entities. Oral argument occurred on October 6, 2009.
     In November 2008, CenterPoint Energy and RRI, on behalf of itself and affiliates including RERS, agreed to suspend unexpired deadlines, if any, related to limitations periods that might exist for possible claims against REI and its affiliates if CenterPoint Energy is ultimately not allowed to include in its stranded cost calculation those EMCs previously credited to RERS. Regardless of the outcome of the Texas Supreme Court proceeding, NRG believes that any possible future CenterPoint Energy claim against RERS for EMCs credited to RERS would lack legal merit. No such claim has been filed.
Disputed Claims Reserve
     As part of NRG’s plan of reorganization, NRG funded a disputed claims reserve for the satisfaction of certain general unsecured claims that were disputed claims as of the effective date of the plan. Under the terms of the plan, as such claims are resolved, the claimants are paid from the reserve on the same basis as if they had been paid out in the bankruptcy. Any excess funds in the disputed claims reserve will be reallocated to the creditor pool for the pro rata benefit of all allowed claims. The contributed common stock and cash in the reserves is held by an escrow agent to complete the distribution and settlement process. Since NRG has surrendered control over the common stock and cash provided to the disputed claims reserve, NRG recognized the issuance of the common stock as of December 6, 2003, and removed the cash amounts from the balance sheet. Similarly, NRG removed the obligations relevant to the claims from the balance sheet when the common stock was issued and cash contributed.
     As of December 21, 2008, the reserve held approximately $9.8 million in cash and 1,282,783 shares of common stock. On December 21, 2008, the Company issued an instruction letter to The Bank of New York Mellon to distribute all remaining cash and stock in the Disputed Claims Reserve to NRG’s creditors. On January 12, 2009, The Bank of New York Mellon commenced the distribution of all remaining cash and stock in the Disputed Claim Reserve to the Company’s creditors pursuant to NRG’s Chapter 11 bankruptcy plan and on July 13, 2009, that distribution was complete.
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Note 16 — Regulatory Matters
     NRG operates in a highly regulated industry and is subject to regulation by various federal and state agencies. As such, NRG is affected by regulatory developments at both the federal and state levels and in the regions in which NRG operates. In addition, NRG is subject to the market rules, procedures and protocols of the various ISO markets in which NRG participates. These power markets are subject to ongoing legislative and regulatory changes that may impact NRG’s wholesale and retail businesses.
     In addition to the regulatory proceedings noted below, NRG and its subsidiaries are a party to other regulatory proceedings arising in the ordinary course of business or have other regulatory exposure. In management’s opinion, the disposition of these ordinary course matters will not materially adversely affect NRG’s consolidated financial position, results of operations, or cash flows.
     PJM — By Order dated March 17, 2009, the U.S. Court of Appeals for the DC Circuit denied the remaining appeals of the FERC orders establishing the Reliability Pricing Model, or RPM capacity market. In February of 2009, the entities representing load interests, including the New Jersey Board of Public Utilities, the District of Columbia Office of the People’s Counsel, and the Maryland Office of People’s Counsel, agreed to withdraw their appeals regarding the establishment of the RPM market design.
     On June 18, 2009, FERC denied rehearing of its order dated September 19, 2008, dismissing a complaint filed by the Maryland Public Service Commission, or MDPSC, together with other load interests, against PJM challenging the results of the RPM transition Base Residual Auctions for installed capacity, held between April 2007 and January 2008. The complaint had sought to replace the auction-determined results for installed capacity for the 2008/2009, 2009/2010, and 2010/2011 delivery years with administratively-determined prices. On August 14, 2009, the MDPSC and the New Jersey Board of Public Utilities filed an appeal of FERC’s orders to the U.S. Court of Appeals for the Fourth Circuit, and a successful appeal could disrupt the auction-determined results and create a refund obligation for market participants.
     Retail (Replacement Reserve) — On November 14, 2006, Constellation Energy Commodities Group, or Constellation, filed a complaint with the PUCT alleging that ERCOT misapplied the Replacement Reserve Settlement, or RPRS, Formula contained in the ERCOT protocols from April 10, 2006, through September 27, 2006. Specifically, Constellation disputed approximately $4 million in under-scheduling charges for capacity insufficiency asserting that ERCOT applied the wrong protocol. Reliant Energy Power Supply, or REPS, other market participants, ERCOT, and PUCT staff opposed Constellation’s complaint. On January 25, 2008, the PUCT entered an order finding that ERCOT correctly settled the capacity insufficiency charges for the disputed dates in accordance with ERCOT protocols and denied Constellation’s complaint. On April 9, 2008, Constellation appealed the PUCT order to the Civil District Court of Travis County, Texas and on June 19, 2009, the court issued a judgment reversing the PUCT order, finding that the ERCOT protocols were in irreconcilable conflict with each other. On July 20, 2009, REPS filed an appeal to the Third Court of Appeals in Travis County, Texas, thereby staying the effect of the trial court’s decision. If all appeals are unsuccessful, on remand to the PUCT, it would determine the appropriate methodology for giving effect to the trial court’s decision. It is not known at this time whether only Constellation’s under-scheduling charges, the under-scheduling charges of all other QSEs that disputed REPS charges for the same time frame, the entire market, or some other approach would be used for any resettlement.
     Under the PUCT ordered formula, Qualified Scheduling Entities, or QSEs, who under-scheduled capacity within any of ERCOT’s four congestion zones were assessed under-scheduling charges which defrayed the costs incurred by ERCOT for RPRS that would otherwise be spread among all load-serving QSEs. Under the Court’s decision, all RPRS costs would be assigned to all load-serving QSEs based upon their load ratio share without assessing any separate charge to those QSEs who under-scheduled capacity. If under-scheduling charges for capacity insufficient QSEs were not used to defray RPRS costs, REPS’s share of the total RPRS costs allocated to QSEs would increase.
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Note 17 — Environmental Matters
     The construction and operation of power projects are subject to stringent environmental and safety protection and land use laws and regulation in the United States. If such laws and regulations become more stringent, or new laws, interpretations or compliance policies apply and NRG’s facilities are not exempt from coverage, the Company could be required to make modifications to further reduce potential environmental impacts. New legislation and regulations to mitigate the effects of greenhouse gases, or GHGs, including CO 2  from power plants, are under consideration at the federal and state levels. In general, the effect of such future laws or regulations is expected to require the addition of pollution control equipment or the imposition of restrictions or additional costs on the Company’s operations.
Environmental Capital Expenditures
     Based on current rules, technology and plans, NRG has estimated that environmental capital expenditures from 2010 through 2013 to meet NRG’s environmental commitments will be approximately $900 million and are primarily associated with controls on the Company’s Big Cajun and Indian River facilities. These capital expenditures, in general, are related to installation of particulate, SO 2 , NO x , and mercury controls to comply with federal and state air quality rules and consent orders, as well as installation of “Best Technology Available” under the Phase II 316(b) Rule. NRG continues to explore cost effective alternatives that can achieve desired results. This estimate reflects anticipated schedules and controls related to the Clean Air Interstate Rule, or CAIR, Maximum Achievable Control Technology, or MACT, for mercury, and the Phase II 316(b) Rule which are under remand to the U.S. EPA, and, as such, the full impact on the scope and timing of environmental retrofits from any new or revised regulations cannot be determined at this time.
Northeast Region
     NRG operates electric generating units located in Connecticut, Delaware, Maryland, Massachusetts and New York which are subject to RGGI. These units must surrender one allowance for every U.S. ton of CO 2  emitted with true up for 2009-2011 occurring in 2012. Allowances are partially allocated only in the state of Delaware. In 2008, NRG emitted approximately 12 million tonnes of CO 2  in RGGI states, although 2009 is tracking lower than 2008 year to date. NRG believes that to the extent CO 2  will not be fully reflected in wholesale electricity prices, the direct financial impact on the Company is likely to be negative as costs will be incurred in the course of securing the necessary RGGI allowances and offsets at auction and in the market.
     In January 2006, NRG’s Indian River Operations, Inc. received a letter of informal notification from the DNREC stating that the Company may be a potentially responsible party with respect to a historic captive landfill. On October 1, 2007, NRG signed an agreement with the DNREC to investigate the site through the Voluntary Clean-up Program. On February 4, 2008, the DNREC issued findings that no further action is required in relation to surface water and that a previously planned shoreline stabilization project would adequately address shoreline erosion. The landfill itself will require a further Remedial Investigation and Feasibility Study to determine the type and scope of any additional work required. Until the Remedial Investigation and Feasibility Study is completed, the Company is unable to predict the impact of any required remediation.
     On May 29, 2008, the DNREC requested that NRG’s Indian River Operations, Inc. participate in the development and performance of a Natural Resource Damage Assessment, or NRDA, at the Burton Island Old Ash Landfill. NRG is currently working with the DNREC and other trustees to close out the assessment phase.
South Central Region
     On February 11, 2009, the U.S. Department of Justice acting at the request of the U.S. EPA commenced a lawsuit against Louisiana Generating, LLC in federal district court in the Middle District of Louisiana alleging violations of the CAA at the Big Cajun II power plant. This is the same matter for which NOVs were issued to Louisiana Generating, LLC on February 15, 2005, and on December 8, 2006. Further discussion on this matter can be found in Note 15,  Commitments and Contingencies , to this Form 10-Q,  Louisiana Generating, LLC .
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Note 18 — Guarantees
     NRG and its subsidiaries enter into various contracts that include indemnification and guarantee provisions as a routine part of the Company’s business activities. Examples of these contracts include asset purchases and sale agreements, commodity sale and purchase agreements, retail contracts, joint venture agreements, EPC agreements, operation and maintenance agreements, service agreements, settlement agreements, and other types of contractual agreements with vendors and other third parties, as well as affiliates. These contracts generally indemnify the counterparty for tax, environmental liability, litigation and other matters, as well as breaches of representations, warranties and covenants set forth in these agreements. In some cases, NRG’s maximum potential liability cannot be estimated, since the underlying agreements contain no limits on potential liability. The Company is also obligated with respect to customer deposits associated with Reliant Energy.
     This Note 18 should be read in conjunction with the complete description under Note 25, Guarantees, to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2008.
     In connection with the agreement to sell its 50% ownership interest in Mibrag B.V., NRG executed an agreement guaranteeing the performance of its subsidiary Lambique Beheer under the purchase and sale agreement. This agreement indemnifies the buyer for tax, environmental liability and other matters, as well as breaches of representations and warranties and is limited to EUR 206 million.
     NRG signed a guarantee agreement on behalf of its subsidiary NRG Retail, LLC guaranteeing the payment and performance of its obligations under the LLC Membership Interest Purchase Agreement and related agreements with RRI in connection with the purchase of its retail business, including purchase price and acquired net working capital. In accordance with the LLC Membership Interest Purchase Agreement, on May 1, 2009, NRG signed an agreement guaranteeing payments up to $85 million related to the Restated Power Purchase Agreement with FPL Energy Upton Wind II, LLC. NRG has no reason to believe that the Company currently has any material liability relating to such routine indemnification obligations.
     In connection with the October 5, 2009 amendment of the CSRA, NRG signed guarantee agreements on behalf of its subsidiary NRG Retail, LLC guaranteeing performance under power purchase and sales contracts. See Note 20,  Subsequent Event, to this Form 10-Q for further discussion of the CSRA Amendment.
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Note 19 — Condensed Consolidating Financial Information
     As of September 30, 2009, the Company had outstanding $1.2 billion of 7.25% Senior Notes due 2014, $2.4 billion of 7.375% Senior Notes due 2016, $1.1 billion of 7.375% Senior Notes due 2017, and $700 million of 8.50% Senior Notes due 2019. The Senior Notes are guaranteed by certain of NRG’s current and future wholly-owned domestic subsidiaries, or guarantor subsidiaries. On October 5, 2009, RERH became a guarantor subsidiary as a result of the CSRA Amendment. See Note 20, Subsequent Event,  to this Form 10-Q  ,  for a discussion of the CSRA Amendment.
     Unless otherwise noted below, each of the following guarantor subsidiaries fully and unconditionally guaranteed the Senior Notes as of September 30, 2009:
 	 	 	
Arthur Kill Power LLC	 	NRG Devon Operations Inc.	
Astoria Gas Turbine Power LLC	 	NRG Dunkirk Operations, Inc.	
Berrians I Gas Turbine Power LLC	 	NRG El Segundo Operations Inc.	
Big Cajun II Unit 4 LLC	 	NRG Generation Holdings, Inc.	
Cabrillo Power I LLC	 	NRG Huntley Operations Inc.	
Cabrillo Power II LLC	 	NRG International LLC	
Chickahominy River Energy Corp.	 	NRG Kaufman LLC	
Commonwealth Atlantic Power LLC	 	NRG Mesquite LLC	
Conemaugh Power LLC	 	NRG MidAtlantic Affiliate Services Inc.	
Connecticut Jet Power LLC	 	NRG Middletown Operations Inc.	
Devon Power LLC	 	NRG Montville Operations Inc.	
Dunkirk Power LLC	 	NRG New Jersey Energy Sales LLC	
Eastern Sierra Energy Company	 	NRG New Roads Holdings LLC	
El Segundo Power, LLC	 	NRG North Central Operations, Inc.	
El Segundo Power II LLC	 	NRG Northeast Affiliate Services Inc.	
GCP Funding Company LLC	 	NRG Norwalk Harbor Operations Inc.	
Hanover Energy Company	 	NRG Operating Services Inc.	
Hoffman Summit Wind Project LLC	 	NRG Oswego Harbor Power Operations Inc.	
Huntley IGCC LLC	 	NRG Power Marketing LLC	
Huntley Power LLC	 	NRG Rocky Road LLC	
Indian River IGCC LLC	 	NRG Saguaro Operations Inc.	
Indian River Operations Inc.	 	NRG South Central Affiliate Services Inc.	
Indian River Power LLC	 	NRG South Central Generating LLC	
James River Power LLC	 	NRG South Central Operations Inc.	
Kaufman Cogen LP	 	NRG South Texas LP	
Keystone Power LLC	 	NRG Texas LLC	
Lake Erie Properties Inc.	 	NRG Texas C & I Supply LLC	
Langford Wind Power, LLC	 	NRG Texas Holding Inc.	
Louisiana Generating LLC	 	NRG Texas Power LLC	
Middletown Power LLC	 	NRG West Coast LLC	
Montville IGCC LLC	 	NRG Western Affiliate Services Inc.	
Montville Power LLC	 	Oswego Harbor Power LLC	
NEO Chester-Gen LLC	 	Padoma Wind Power, LLC	
NEO Corporation	 	Reliant Energy Services Texas LLC	
NEO Freehold-Gen LLC	 	Reliant Energy Texas Retail LLC	
NEO Power Services Inc.	 	Saguaro Power LLC	
New Genco GP LLC	 	San Juan Mesa Wind Project II, LLC	
Norwalk Power LLC	 	Somerset Operations Inc.	
NRG Affiliate Services Inc.	 	Somerset Power LLC	
NRG Arthur Kill Operations Inc.	 	Texas Genco Financing Corp.	
NRG Asia-Pacific Ltd.	 	Texas Genco GP, LLC	
NRG Astoria Gas Turbine Operations Inc.	 	Texas Genco Holdings, Inc.	
NRG Bayou Cove LLC	 	Texas Genco LP, LLC	
NRG Cabrillo Power Operations Inc.	 	Texas Genco Operating Services, LLC	
NRG Cadillac Operations Inc.	 	Texas Genco Services, LP	
NRG California Peaker Operations LLC	 	Vienna Operations, Inc.	
NRG Cedar Bayou Development Company LLC	 	Vienna Power LLC	
NRG Connecticut Affiliate Services Inc.	 	WCP (Generation) Holdings LLC	
NRG Construction LLC	 	West Coast Power LLC	
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     The non-guarantor subsidiaries include all of NRG’s foreign subsidiaries and certain domestic subsidiaries. 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. Except for NRG Bayou Cove, LLC, which is subject to certain restrictions under the Company’s Peaker financing agreements, there are no restrictions on the ability of any of the guarantor subsidiaries to transfer funds to NRG. In addition, there may be restrictions for certain non-guarantor subsidiaries.
     The following condensed consolidating financial information presents the financial information of NRG, the guarantor subsidiaries and the non-guarantor subsidiaries in accordance with Rule 3-10 under the Securities and Exchange Commission’s Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor subsidiaries or non-guarantor subsidiaries operated as independent entities.
     In this presentation, NRG Energy, Inc. consists of parent company operations. Guarantor subsidiaries and non-guarantor subsidiaries of NRG are reported on an equity basis. For companies acquired, the fair values of the assets and liabilities acquired have been presented on a push-down accounting basis.
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2009
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	NRG Energy,	 	 	 	 	 	 	
 	 	Guarantor	 	Non-Guarantor	 	Inc.	 	 	 	 	 	Consolidated	
(In millions)	 	Subsidiaries	 	Subsidiaries	 	(Note Issuer)	 	Eliminations(a)	 	Balance	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	$  	1,216	 	 	$  	1,854	 	 	$  	(1	)	 	$  	(153	)	 	$  	2,916	 	
 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of operations	 	 	749	 	 	 	1,301	 	 	 	(1	)	 	 	(156	)	 	 	1,893	 	
Depreciation and amortization	 	 	160	 	 	 	51	 	 	 	1	 	 	 	—	 	 	 	212	 	
Selling, general and administrative	 	 	16	 	 	 	78	 	 	 	88	 	 	 	—	 	 	 	182	 	
Acquisition-related transaction and integration costs	 	 	—	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	6	 	
Development costs	 	 	1	 	 	 	1	 	 	 	10	 	 	 	—	 	 	 	12	 	
 	
Total operating costs and expenses	 	 	926	 	 	 	1,431	 	 	 	104	 	 	 	(156	)	 	 	2,305	 	
 	
Operating Income/(Loss)	 	 	290	 	 	 	423	 	 	 	(105	)	 	 	3	 	 	 	611	 	
Other Income/(Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of consolidated subsidiaries	 	 	—	 	 	 	—	 	 	 	592	 	 	 	(592	)	 	 	—	 	
Equity in earnings of unconsolidated affiliates	 	 	3	 	 	 	3	 	 	 	—	 	 	 	—	 	 	 	6	 	
Other income/(loss), net	 	 	2	 	 	 	2	 	 	 	4	 	 	 	(3	)	 	 	5	 	
Interest expense	 	 	(5	)	 	 	(38	)	 	 	(135	)	 	 	—	 	 	 	(178	)	
 	
Total other (expense)/income	 	 	—	 	 	 	(33	)	 	 	461	 	 	 	(595	)	 	 	(167	)	
 	
Income/(Losses) Before Income Taxes	 	 	290	 	 	 	390	 	 	 	356	 	 	 	(592	)	 	 	444	 	
Income tax expense/(benefit)	 	 	(51	)	 	 	139	 	 	 	78	 	 	 	—	 	 	 	166	 	
 	
Net Income/(Loss)	 	 	341	 	 	 	251	 	 	 	278	 	 	 	(592	)	 	 	278	 	
Less: Net loss attributable to noncontrolling interest	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	
Net Income/(Loss) attributable to NRG Energy, Inc.	 	$  	341	 	 	$  	251	 	 	$  	278	 	 	$  	(592	)	 	$  	278	 	

 	 	 	
(a)	 	All significant intercompany transactions have been eliminated in consolidation.	
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2009
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	NRG Energy,	 	 	 	 	 	 	
 	 	Guarantor	 	Non-Guarantor	 	Inc.	 	 	 	 	 	Consolidated	
(In millions)	 	Subsidiaries	 	Subsidiaries	 	(Note Issuer)	 	Eliminations(a)	 	Balance	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	$  	3,807	 	 	$  	3,203	 	 	$  	31	 	 	$  	(230	)	 	$  	6,811	 	
 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of operations	 	 	2,043	 	 	 	2,088	 	 	 	3	 	 	 	(233	)	 	 	3,901	 	
Depreciation and amortization	 	 	475	 	 	 	115	 	 	 	4	 	 	 	—	 	 	 	594	 	
Selling general and administrative	 	 	50	 	 	 	132	 	 	 	214	 	 	 	—	 	 	 	396	 	
Acquisition-related transaction and integration costs	 	 	—	 	 	 	—	 	 	 	41	 	 	 	—	 	 	 	41	 	
Development costs	 	 	5	 	 	 	6	 	 	 	23	 	 	 	—	 	 	 	34	 	
 	
Total operating costs and expenses	 	 	2,573	 	 	 	2,341	 	 	 	285	 	 	 	(233	)	 	 	4,966	 	
 	
Operating Income/(Loss)	 	 	1,234	 	 	 	862	 	 	 	(254	)	 	 	3	 	 	 	1,845	 	
Other Income/(Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of consolidated subsidiaries	 	 	129	 	 	 	—	 	 	 	1,466	 	 	 	(1,595	)	 	 	—	 	
Equity in earnings of unconsolidated affiliates	 	 	7	 	 	 	26	 	 	 	—	 	 	 	—	 	 	 	33	 	
Gain on sale of equity method investment	 	 	—	 	 	 	128	 	 	 	—	 	 	 	—	 	 	 	128	 	
Other income/(loss), net	 	 	5	 	 	 	(17	)	 	 	6	 	 	 	(3	)	 	 	(9	)	
Interest expense	 	 	(71	)	 	 	(97	)	 	 	(307	)	 	 	—	 	 	 	(475	)	
 	
Total other income/(expense)	 	 	70	 	 	 	40	 	 	 	1,165	 	 	 	(1,598	)	 	 	(323	)	
 	
Income/(Losses) Before Income Taxes	 	 	1,304	 	 	 	902	 	 	 	911	 	 	 	(1,595	)	 	 	1,522	 	
Income tax expense	 	 	298	 	 	 	314	 	 	 	2	 	 	 	—	 	 	 	614	 	
 	
Net Income/(Loss)	 	 	1,006	 	 	 	588	 	 	 	909	 	 	 	(1,595	)	 	 	908	 	
Less: Net loss attributable to noncontrolling interest	 	 	(1	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1	)	
 	
Net Income/(Loss) attributable to NRG Energy, Inc.	 	$  	1,007	 	 	$  	588	 	 	$  	909	 	 	$  	(1,595	)	 	$  	909	 	

 	 	 	
(a)	 	All significant intercompany transactions have been eliminated in consolidation.	
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2009
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Non-	 	 	 	 	 	 	 	 	
 	 	Guarantor	 	Guarantor	 	NRG Energy, Inc.	 	 	 	 	 	Consolidated	
(In millions)	 	Subsidiaries	 	Subsidiaries	 	(Note Issuer)	 	Eliminations(a)	 	Balance	
 	
ASSETS	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$  	11	 	 	$  	418	 	 	$  	1,821	 	 	$  	—	 	 	$  	2,250	 	
Funds deposited by counterparties	 	 	293	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	293	 	
Restricted cash	 	 	1	 	 	 	25	 	 	 	—	 	 	 	—	 	 	 	26	 	
Accounts receivable, net	 	 	355	 	 	 	764	 	 	 	—	 	 	 	—	 	 	 	1,119	 	
Inventory	 	 	518	 	 	 	15	 	 	 	—	 	 	 	—	 	 	 	533	 	
Derivative instruments valuation	 	 	2,517	 	 	 	1,010	 	 	 	—	 	 	 	(328	)	 	 	3,199	 	
Deferred income taxes	 	 	(489	)	 	 	248	 	 	 	342	 	 	 	—	 	 	 	101	 	
Cash collateral paid in support of energy risk management activities	 	 	222	 	 	 	253	 	 	 	—	 	 	 	—	 	 	 	475	 	
Prepayments and other current assets	 	 	166	 	 	 	71	 	 	 	243	 	 	 	(265	)	 	 	215	 	
 	
Total current assets	 	 	3,594	 	 	 	2,804	 	 	 	2,406	 	 	 	(593	)	 	 	8,211	 	
 	
Net property, plant and equipment	 	 	10,597	 	 	 	970	 	 	 	43	 	 	 	—	 	 	 	11,610	 	
 	
Other Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment in subsidiaries	 	 	530	 	 	 	221	 	 	 	16,955	 	 	 	(17,706	)	 	 	—	 	
Equity investments in affiliates	 	 	35	 	 	 	357	 	 	 	—	 	 	 	—	 	 	 	392	 	
Capital leases and notes receivable, less current portion	 	 	4,621	 	 	 	507	 	 	 	3,018	 	 	 	(7,639	)	 	 	507	 	
Goodwill	 	 	1,718	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,718	 	
Intangible assets, net	 	 	795	 	 	 	1,145	 	 	 	33	 	 	 	(31	)	 	 	1,942	 	
Nuclear decommissioning trust fund	 	 	354	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	354	 	
Derivative instruments valuation	 	 	795	 	 	 	460	 	 	 	9	 	 	 	(225	)	 	 	1,039	 	
Other non-current assets	 	 	37	 	 	 	9	 	 	 	135	 	 	 	—	 	 	 	181	 	
 	
Total other assets	 	 	8,885	 	 	 	2,699	 	 	 	20,150	 	 	 	(25,601	)	 	 	6,133	 	
 	
Total Assets	 	$  	23,076	 	 	$  	6,473	 	 	$  	22,599	 	 	$  	(26,194	)	 	$  	25,954	 	
 	
LIABILITIES AND STOCKHOLDERS’ EQUITY
	
Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current portion of long-term debt and capital leases	 	$  	67	 	 	$  	505	 	 	$  	32	 	 	$  	(67	)	 	$  	537	 	
Accounts payable	 	 	(625	)	 	 	1,111	 	 	 	239	 	 	 	—	 	 	 	725	 	
Derivative instruments valuation	 	 	1,971	 	 	 	1,370	 	 	 	4	 	 	 	(328	)	 	 	3,017	 	
Cash collateral received in support of energy risk management activities	 	 	293	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	293	 	
Accrued expenses and other current liabilities	 	 	270	 	 	 	273	 	 	 	291	 	 	 	(198	)	 	 	636	 	
 	
Total current liabilities	 	 	1,976	 	 	 	3,259	 	 	 	566	 	 	 	(593	)	 	 	5,208	 	
 	
Other Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt and capital leases	 	 	2,580	 	 	 	890	 	 	 	12,398	 	 	 	(7,639	)	 	 	8,229	 	
Nuclear decommissioning reserve	 	 	296	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	296	 	
Nuclear decommissioning trust liability	 	 	249	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	249	 	
Deferred income taxes	 	 	670	 	 	 	111	 	 	 	791	 	 	 	—	 	 	 	1,572	 	
Derivative instruments valuation	 	 	315	 	 	 	679	 	 	 	90	 	 	 	(225	)	 	 	859	 	
Out-of-market contracts	 	 	229	 	 	 	126	 	 	 	—	 	 	 	(31	)	 	 	324	 	
Other non-current liabilities	 	 	425	 	 	 	26	 	 	 	687	 	 	 	—	 	 	 	1,138	 	
 	
Total non-current liabilities	 	 	4,764	 	 	 	1,832	 	 	 	13,966	 	 	 	(7,895	)	 	 	12,667	 	
 	
Total liabilities	 	 	6,740	 	 	 	5,091	 	 	 	14,532	 	 	 	(8,488	)	 	 	17,875	 	
 	
3.625% Preferred Stock	 	 	—	 	 	 	—	 	 	 	247	 	 	 	—	 	 	 	247	 	
Stockholders’ Equity	 	 	16,336	 	 	 	1,382	 	 	 	7,820	 	 	 	(17,706	)	 	 	7,832	 	
 	
Total Liabilities and Stockholders’ Equity	 	$  	23,076	 	 	$  	6,473	 	 	$  	22,599	 	 	$  	(26,194	)	 	$  	25,954	 	

 	 	 	
(a)	 	All significant intercompany transactions have been eliminated in consolidation.	
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2009
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Non-	 	NRG Energy,	 	 	 	 	 	 	 	
 	 	Guarantor	 	Guarantor	 	Inc.	 	 	 	 	 	Consolidated	
(In millions)	 	Subsidiaries	 	Subsidiaries	 	(Note Issuer)	 	Eliminations(a)	 	Balance	
 	
Cash Flows from Operating Activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$  	1,006	 	 	$  	588	 	 	$  	909	 	 	$  	(1,595	)	 	$  	908	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Distributions and equity in (earnings)/losses of unconsolidated affiliates and consolidated subsidiaries	 	 	194	 	 	 	(26	)	 	 	(1,136	)	 	 	935	 	 	 	(33	)	
Depreciation and amortization	 	 	475	 	 	 	115	 	 	 	4	 	 	 	—	 	 	 	594	 	
Provision for bad debts	 	 	—	 	 	 	37	 	 	 	—	 	 	 	—	 	 	 	37	 	
Amortization of nuclear fuel	 	 	28	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	28	 	
Amortization of financing costs and debt discount/premiums	 	 	—	 	 	 	11	 	 	 	24	 	 	 	—	 	 	 	35	 	
Amortization of intangibles and out-of-market contracts	 	 	(65	)	 	 	144	 	 	 	—	 	 	 	—	 	 	 	79	 	
Changes in deferred income taxes and liability for unrecognized tax benefits	 	 	(46	)	 	 	6	 	 	 	601	 	 	 	—	 	 	 	561	 	
Changes in nuclear decommissioning liability	 	 	19	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	19	 	
Changes in derivatives	 	 	(32	)	 	 	(202	)	 	 	—	 	 	 	—	 	 	 	(234	)	
Changes in collateral deposits supporting energy risk management activities	 	 	266	 	 	 	(253	)	 	 	—	 	 	 	—	 	 	 	13	 	
Loss on sale of assets	 	 	2	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	2	 	
Gain on sale of equity method investment	 	 	—	 	 	 	(128	)	 	 	—	 	 	 	—	 	 	 	(128	)	
Gain on sale of emission allowances	 	 	(8	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(8	)	
Gain recognized on settlement of pre-existing relationship	 	 	—	 	 	 	—	 	 	 	(31	)	 	 	—	 	 	 	(31	)	
Amortization of unearned equity compensation	 	 	—	 	 	 	—	 	 	 	20	 	 	 	—	 	 	 	20	 	
Changes in option premiums collected	 	 	(266	)	 	 	(12	)	 	 	—	 	 	 	—	 	 	 	(278	)	
Cash provided by/(used by) changes in other working capital	 	 	614	 	 	 	248	 	 	 	(1,166	)	 	 	—	 	 	 	(304	)	
 	
Net Cash Provided/(Used) by Operating Activities	 	 	2,187	 	 	 	528	 	 	 	(775	)	 	 	(660	)	 	 	1,280	 	
 	
Cash Flows from Investing Activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intercompany (loans to)/receipts from subsidiaries	 	 	(1,395	)	 	 	—	 	 	 	159	 	 	 	1,236	 	 	 	—	 	
Acquisition of Reliant Energy, net of cash acquired	 	 	—	 	 	 	(68	)	 	 	(288	)	 	 	—	 	 	 	(356	)	
Investment in Reliant Energy	 	 	—	 	 	 	200	 	 	 	(200	)	 	 	—	 	 	 	—	 	
Capital expenditures	 	 	(409	)	 	 	(149	)	 	 	(2	)	 	 	—	 	 	 	(560	)	
(Increase)/decrease in restricted cash, net	 	 	6	 	 	 	(16	)	 	 	—	 	 	 	—	 	 	 	(10	)	
Decrease/(increase) in notes receivable	 	 	—	 	 	 	(53	)	 	 	35	 	 	 	—	 	 	 	(18	)	
Purchases of emission allowances	 	 	(68	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(68	)	
Proceeds from sale of emission allowances	 	 	20	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	20	 	
Investments in nuclear decommissioning trust fund securities	 	 	(237	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(237	)	
Proceeds from sales of nuclear decommissioning
trust fund securities	 	 	218	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	218	 	
Proceeds from sale of assets, net	 	 	6	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	6	 	
Other investment	 	 	(1	)	 	 	—	 	 	 	(5	)	 	 	—	 	 	 	(6	)	
Proceeds from sale of equity method investment	 	 	—	 	 	 	284	 	 	 	—	 	 	 	—	 	 	 	284	 	
 	
Net Cash (Used)/Provided by Investing Activities	 	 	(1,860	)	 	 	198	 	 	 	(301	)	 	 	1,236	 	 	 	(727	)	
 	
Cash Flows from Financing Activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from intercompany loans	 	 	(188	)	 	 	29	 	 	 	1,395	 	 	 	(1,236	)	 	 	—	 	
Payment from intercompany dividends	 	 	(330	)	 	 	(330	)	 	 	—	 	 	 	660	 	 	 	—	 	
Payment of dividends to preferred stockholders	 	 	—	 	 	 	—	 	 	 	(27	)	 	 	—	 	 	 	(27	)	
Net payments to settle acquired derivatives that include financing elements	 	 	166	 	 	 	(306	)	 	 	—	 	 	 	—	 	 	 	(140	)	
Payment for treasury stock	 	 	—	 	 	 	—	 	 	 	(250	)	 	 	—	 	 	 	(250	)	
Proceeds from issuance of common stock, net of issuance costs	 	 	—	 	 	 	—	 	 	 	1	 	 	 	—	 	 	 	1	 	
Installment proceeds from sale of noncontrolling interest in subsidiary	 	 	—	 	 	 	50	 	 	 	—	 	 	 	—	 	 	 	50	 	
Proceeds from issuance of long-term debt	 	 	38	 	 	 	116	 	 	 	689	 	 	 	—	 	 	 	843	 	
Payment of deferred debt issuance costs	 	 	—	 	 	 	(2	)	 	 	(27	)	 	 	—	 	 	 	(29	)	
Payment of short and long-term debt	 	 	—	 	 	 	(27	)	 	 	(221	)	 	 	—	 	 	 	(248	)	
 	
Net Cash (Used)/Provided by Financing Activities	 	 	(314	)	 	 	(470	)	 	 	1,560	 	 	 	(576	)	 	 	200	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	—	 	 	 	3	 	 	 	—	 	 	 	—	 	 	 	3	 	
 	
Net Increase in Cash and Cash Equivalents	 	 	13	 	 	 	259	 	 	 	484	 	 	 	—	 	 	 	756	 	
Cash and Cash Equivalents at Beginning of Period	 	 	(2	)	 	 	159	 	 	 	1,337	 	 	 	—	 	 	 	1,494	 	
 	
Cash and Cash Equivalents at End of Period	 	$  	11	 	 	$  	418	 	 	$  	1,821	 	 	$  	—	 	 	$  	2,250	 	

(a)	 	All significant intercompany transactions have been eliminated in consolidation.	
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2008
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	NRG Energy,	 	 	 	 	 	 	 	
 	 	Guarantor	 	Non-Guarantor	 	Inc.	 	 	 	 	 	Consolidated	
(In millions)	 	Subsidiaries	 	Subsidiaries	 	(Note Issuer)	 	Eliminations(a)	 	Balance	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	$  	2,519	 	 	$  	111	 	 	$  	—	 	 	$  	(18	)	 	$  	2,612	 	
 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of operations	 	 	919	 	 	 	99	 	 	 	(3	)	 	 	(18	)	 	 	997	 	
Depreciation and amortization	 	 	148	 	 	 	7	 	 	 	1	 	 	 	—	 	 	 	156	 	
General and administrative	 	 	16	 	 	 	14	 	 	 	45	 	 	 	—	 	 	 	75	 	
Development costs	 	 	2	 	 	 	2	 	 	 	9	 	 	 	—	 	 	 	13	 	
 	
Total operating costs and expenses	 	 	1,085	 	 	 	122	 	 	 	52	 	 	 	(18	)	 	 	1,241	 	
 	
Operating Income/(Loss)	 	 	1,434	 	 	 	(11	)	 	 	(52	)	 	 	—	 	 	 	1,371	 	
Other Income/(Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings/(losses) of consolidated subsidiaries	 	 	52	 	 	 	50	 	 	 	868	 	 	 	(970	)	 	 	—	 	
Equity in earnings of unconsolidated affiliates	 	 	1	 	 	 	57	 	 	 	—	 	 	 	—	 	 	 	58	 	
Other income/(loss), net	 	 	4	 	 	 	11	 	 	 	(22	)	 	 	—	 	 	 	(7	)	
Interest expense	 	 	(46	)	 	 	(17	)	 	 	(79	)	 	 	—	 	 	 	(142	)	
 	
Total other income/(expense)	 	 	11	 	 	 	101	 	 	 	767	 	 	 	(970	)	 	 	(91	)	
 	
Income/(Loss) From Continuing Operations Before Income Taxes	 	 	1,445	 	 	 	90	 	 	 	715	 	 	 	(970	)	 	 	1,280	 	
Income tax expense/(benefit)	 	 	527	 	 	 	38	 	 	 	(63	)	 	 	—	 	 	 	502	 	
 	
Income/(Loss) From Continuing Operations	 	 	918	 	 	 	52	 	 	 	778	 	 	 	(970	)	 	 	778	 	
Net Income/(Loss) attributable to NRG Energy, Inc.	 	$  	918	 	 	$  	52	 	 	$  	778	 	 	$  	(970	)	 	$  	778	 	

 	 	 	
(a)	 	All significant intercompany transactions have been eliminated in consolidation.	
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2008
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	NRG Energy,	 	 	 	 	 	 	
 	 	Guarantor	 	Non-Guarantor	 	Inc.	 	 	 	 	 	Consolidated	
(In millions)	 	Subsidiaries	 	Subsidiaries	 	(Note Issuer)	 	Eliminations(a)	 	Balance	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	$	4,942	 	 	$	306	 	 	$	—	 	 	$	(18	)	 	$	5,230	 	
 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of operations	 	 	2,600	 	 	 	231	 	 	 	—	 	 	 	(19	)	 	 	2,812	 	
Depreciation and amortization	 	 	454	 	 	 	21	 	 	 	3	 	 	 	—	 	 	 	478	 	
General and administrative	 	 	47	 	 	 	10	 	 	 	176	 	 	 	—	 	 	 	233	 	
Development costs	 	 	(3	)	 	 	5	 	 	 	27	 	 	 	—	 	 	 	29	 	
 	
Total operating costs and expenses	 	 	3,098	 	 	 	267	 	 	 	206	 	 	 	(19	)	 	 	3,552	 	
 	
Operating Income/(Loss)	 	 	1,844	 	 	 	39	 	 	 	(206	)	 	 	1	 	 	 	1,678	 	
Other Income/(Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings/(losses) of consolidated subsidiaries	 	 	262	 	 	 	—	 	 	 	1,313	 	 	 	(1,575	)	 	 	—	 	
Equity in (losses)/earnings of unconsolidated affiliates	 	 	(2	)	 	 	37	 	 	 	—	 	 	 	—	 	 	 	35	 	
Other income/(loss), net	 	 	19	 	 	 	10	 	 	 	(14	)	 	 	(1	)	 	 	14	 	
Interest expense	 	 	(148	)	 	 	(56	)	 	 	(238	)	 	 	—	 	 	 	(442	)	
 	
Total other income/(expense)	 	 	131	 	 	 	(9	)	 	 	1,061	 	 	 	(1,576	)	 	 	(393	)	
 	
Income/(Loss) From Continuing Operations Before Income Taxes	 	 	1,975	 	 	 	30	 	 	 	855	 	 	 	(1,575	)	 	 	1,285	 	
Income tax expense/(benefit)	 	 	694	 	 	 	5	 	 	 	(196	)	 	 	—	 	 	 	503	 	
 	
Income/(Loss) From Continuing Operations	 	 	1,281	 	 	 	25	 	 	 	1,051	 	 	 	(1,575	)	 	 	782	 	
Income/(loss) from discontinued operations, net of income taxes	 	 	—	 	 	 	269	 	 	 	(97	)	 	 	—	 	 	 	172	 	
 	
Net Income/(Loss) attributable to NRG Energy, Inc.	 	$	1,281	 	 	$	294	 	 	$	954	 	 	$	(1,575	)	 	$	954	 	

(a)	 	All significant intercompany transactions have been eliminated in consolidation.	
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2008
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Non-	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor	 	Guarantor	 	NRG Energy,	 	 	 	 	 	Consolidated	
(In millions)	 	Subsidiaries	 	Subsidiaries	 	Inc.	 	Eliminations(a)	 	Balance	
 	
ASSETS
	
Current Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	(2	)	 	$	159	 	 	$	1,337	 	 	$	—	 	 	$	1,494	 	
Funds deposited by counterparties	 	 	—	 	 	 	—	 	 	 	754	 	 	 	—	 	 	 	754	 	
Restricted cash	 	 	7	 	 	 	9	 	 	 	—	 	 	 	—	 	 	 	16	 	
Accounts receivable, net	 	 	422	 	 	 	42	 	 	 	—	 	 	 	—	 	 	 	464	 	
Inventory	 	 	443	 	 	 	12	 	 	 	—	 	 	 	—	 	 	 	455	 	
Derivative instruments valuation	 	 	4,600	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	4,600	 	
Cash collateral paid in support of energy risk management activities	 	 	494	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	494	 	
Prepayments and other current assets	 	 	130	 	 	 	37	 	 	 	278	 	 	 	(230	)	 	 	215	 	
 	
Total current assets	 	 	6,094	 	 	 	259	 	 	 	2,369	 	 	 	(230	)	 	 	8,492	 	
 	
Net Property, Plant and Equipment	 	 	10,725	 	 	 	791	 	 	 	29	 	 	 	—	 	 	 	11,545	 	
 	
Other Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment in subsidiaries	 	 	651	 	 	 	—	 	 	 	11,949	 	 	 	(12,600	)	 	 	—	 	
Equity investments in affiliates	 	 	26	 	 	 	464	 	 	 	—	 	 	 	—	 	 	 	490	 	
Capital leases and note receivable, less current portion	 	 	598	 	 	 	435	 	 	 	3,177	 	 	 	(3,775	)	 	 	435	 	
Goodwill	 	 	1,718	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,718	 	
Intangible assets, net	 	 	797	 	 	 	16	 	 	 	2	 	 	 	—	 	 	 	815	 	
Nuclear decommissioning trust fund	 	 	303	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	303	 	
Derivative instruments valuation	 	 	870	 	 	 	—	 	 	 	15	 	 	 	—	 	 	 	885	 	
Other non-current assets	 	 	9	 	 	 	4	 	 	 	112	 	 	 	—	 	 	 	125	 	
 	
Total other assets	 	 	4,972	 	 	 	919	 	 	 	15,255	 	 	 	(16,375	)	 	 	4,771	 	
 	
Total Assets	 	$	21,791	 	 	$	1,969	 	 	$	17,653	 	 	$	(16,605	)	 	$	24,808	 	
 	
LIABILITIES AND STOCKHOLDERS’ EQUITY
	
Current Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current portion of long-term debt and capital leases	 	$	67	 	 	$	235	 	 	$	229	 	 	$	(67	)	 	$	464	 	
Accounts payable	 	 	(1,302	)	 	 	429	 	 	 	1,324	 	 	 	—	 	 	 	451	 	
Derivative instruments valuation	 	 	3,976	 	 	 	3	 	 	 	2	 	 	 	—	 	 	 	3,981	 	
Deferred income taxes	 	 	503	 	 	 	31	 	 	 	(333	)	 	 	—	 	 	 	201	 	
Cash collateral received in support of energy risk management activities	 	 	760	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	760	 	
Accrued expenses and other current liabilities	 	 	507	 	 	 	48	 	 	 	333	 	 	 	(164	)	 	 	724	 	
 	
Total current liabilities	 	 	4,511	 	 	 	746	 	 	 	1,555	 	 	 	(231	)	 	 	6,581	 	
 	
Other Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Long-term debt and capital leases	 	 	2,730	 	 	 	1,014	 	 	 	7,729	 	 	 	(3,776	)	 	 	7,697	 	
Nuclear decommissioning reserve	 	 	284	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	284	 	
Nuclear decommissioning trust liability	 	 	218	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	218	 	
Deferred income taxes	 	 	705	 	 	 	(187	)	 	 	672	 	 	 	—	 	 	 	1,190	 	
Derivative instruments valuation	 	 	348	 	 	 	46	 	 	 	114	 	 	 	—	 	 	 	508	 	
Out-of-market contracts	 	 	291	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	291	 	
Other non-current liabilities	 	 	405	 	 	 	44	 	 	 	220	 	 	 	—	 	 	 	669	 	
 	
Total non-current liabilities	 	 	4,981	 	 	 	917	 	 	 	8,735	 	 	 	(3,776	)	 	 	10,857	 	
 	
Total liabilities	 	 	9,492	 	 	 	1,663	 	 	 	10,290	 	 	 	(4,007	)	 	 	17,438	 	
 	
3.625% Preferred Stock	 	 	—	 	 	 	—	 	 	 	247	 	 	 	—	 	 	 	247	 	
Stockholders’ Equity	 	 	12,299	 	 	 	306	 	 	 	7,116	 	 	 	(12,598	)	 	 	7,123	 	
 	
Total Liabilities and Stockholders’ Equity	 	$	21,791	 	 	$	1,969	 	 	$	17,653	 	 	$	(16,605	)	 	$	24,808	 	

(a)	 	All significant intercompany transactions have been eliminated in consolidation.	
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NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2008
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Non-	 	NRG Energy,	 	 	 	 	 	 	
 	 	Guarantor	 	Guarantor	 	Inc.	 	 	 	 	 	Consolidated	 	
(In millions)	 	Subsidiaries	 	Subsidiaries	 	(Note Issuer)	 	Eliminations(a)	 	Balance	 	
 	
Cash Flows from Operating Activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	1,281	 	 	$	294	 	 	$	954	 	 	$	(1,575	)	 	$	954	 	
Adjustments to reconcile net income to net cash provided by operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Distributions and equity (earnings)/losses of unconsolidated affiliates and consolidated subsidiaries	 	 	(260	)	 	 	(26	)	 	 	(1,313	)	 	 	1,575	 	 	 	(24	)	
Depreciation and amortization	 	 	454	 	 	 	21	 	 	 	3	 	 	 	—	 	 	 	478	 	
Amortization of nuclear fuel	 	 	31	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	31	 	
Amortization of financing costs and debt discount/ premiums	 	 	—	 	 	 	11	 	 	 	17	 	 	 	—	 	 	 	28	 	
Amortization of intangibles and out-of-market contracts	 	 	(226	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(226	)	
Changes in deferred income taxes and liability for unrecognized tax benefits	 	 	102	 	 	 	(21	)	 	 	358	 	 	 	—	 	 	 	439	 	
Changes in nuclear decommissioning liability	 	 	8	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	8	 	
Changes in derivatives	 	 	(135	)	 	 	(9	)	 	 	—	 	 	 	—	 	 	 	(144	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Changes in collateral deposits supporting energy risk management activities	 	 	(320	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(320	)	
Loss on sale of assets	 	 	13	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	13	 	
Gain on sale of discontinued operations	 	 	—	 	 	 	(273	)	 	 	—	 	 	 	—	 	 	 	(273	)	
Gain on sale of emission allowances	 	 	(52	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(52	)	
Amortization of unearned equity compensation	 	 	—	 	 	 	—	 	 	 	21	 	 	 	—	 	 	 	21	 	
Changes in option premiums collected	 	 	203	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	203	 	
Cash provided by/(used by) changes in other working capital	 	 	377	 	 	 	52	 	 	 	(479	)	 	 	—	 	 	 	(50	)	
 	
Net Cash Provided by/(Used) by Operating Activities	 	 	1,476	 	 	 	49	 	 	 	(439	)	 	 	—	 	 	 	1,086	 	
 	
Cash Flows from Investing Activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Intercompany (loans to)/receipts from subsidiaries	 	 	(175	)	 	 	—	 	 	 	885	 	 	 	(710	)	 	 	—	 	
Capital expenditures	 	 	(444	)	 	 	(200	)	 	 	(5	)	 	 	—	 	 	 	(649	)	
Increase in restricted cash	 	 	—	 	 	 	(3	)	 	 	—	 	 	 	—	 	 	 	(3	)	
Decrease/(increase) in notes receivable	 	 	—	 	 	 	35	 	 	 	(15	)	 	 	—	 	 	 	20	 	
Purchases of emission allowances	 	 	(6	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(6	)	
Proceeds from sale of emission allowances	 	 	75	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	75	 	
Investments in nuclear decommissioning trust fund securities	 	 	(441	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(441	)	
Proceeds from sales of nuclear decommissioning trust fund securities	 	 	434	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	434	 	
Proceeds from sale of discontinued operations and assets, net of cash divested	 	 	—	 	 	 	(59	)	 	 	300	 	 	 	—	 	 	 	241	 	
Proceeds from sale of assets	 	 	14	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	14	 	
Equity investment in unconsolidated affiliate	 	 	—	 	 	 	—	 	 	 	(17	)	 	 	—	 	 	 	(17	)	
 	
Net Cash (Used)/Provided by Investing Activities	 	 	(543	)	 	 	(227	)	 	 	1,148	 	 	 	(710	)	 	 	(332	)	
 	
Cash Flows from Financing Activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Payments)/proceeds for intercompany loans	 	 	(882	)	 	 	208	 	 	 	(36	)	 	 	710	 	 	 	—	 	
Payments for dividends to preferred stockholders	 	 	—	 	 	 	—	 	 	 	(41	)	 	 	—	 	 	 	(41	)	
Net payments to settle acquired derivatives that include financing elements	 	 	(49	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(49	)	
Payment for CSF I CAGR settlement	 	 	—	 	 	 	(45	)	 	 	—	 	 	 	—	 	 	 	(45	)	
Payments for treasury stock	 	 	—	 	 	 	—	 	 	 	(185	)	 	 	—	 	 	 	(185	)	
Proceeds from issuance of common stock, net of issuance costs	 	 	—	 	 	 	—	 	 	 	8	 	 	 	—	 	 	 	8	 	
Installment proceeds from sale of noncontrolling interest on subsidiary	 	 	—	 	 	 	50	 	 	 	—	 	 	 	—	 	 	 	50	 	
Proceeds from issuance of long-term debt	 	 	—	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	20	 	
Payments for deferred debt issuance costs	 	 	—	 	 	 	—	 	 	 	(2	)	 	 	—	 	 	 	(2	)	
Payments for short and long-term debt	 	 	—	 	 	 	(36	)	 	 	(166	)	 	 	—	 	 	 	(202	)	
 	
Net Cash (Used)/Provided by Financing Activities	 	 	(931	)	 	 	197	 	 	 	(422	)	 	 	710	 	 	 	(446	)	
Change in cash from discontinued operations	 	 	—	 	 	 	43	 	 	 	—	 	 	 	—	 	 	 	43	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
 	
Net Increase in Cash and Cash Equivalents	 	 	2	 	 	 	62	 	 	 	287	 	 	 	—	 	 	 	351	 	
Cash and Cash Equivalents at Beginning of Period	 	 	—	 	 	 	120	 	 	 	1,012	 	 	 	—	 	 	 	1,132	 	
 	
Cash and Cash Equivalents at End of Period	 	$	2	 	 	$	182	 	 	$	1,299	 	 	$	—	 	 	$	1,483	 	

(a)	 	All significant intercompany transactions have been eliminated in consolidation.	
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Note 20 — Subsequent Event
  Unwind of the Merrill Lynch Credit Sleeve
      The Company executed an amendment of the existing CSRA with Merrill Lynch, or CSRA Amendment, which became effective October 5, 2009. The CSRA Amendment removed the first liens associated with the CSRA, and RERH subsequently became a guarantor of the Company’s obligations under its Senior Notes. See Note 19,  Condensed Consolidating Financial Information , to this Form 10-Q for further discussion of NRG’s guarantees under its Senior Notes.
      In connection with the CSRA Amendment, NRG net settled or offset certain REPS transactions with counterparties and received $165 million in net cash consideration. Merrill Lynch returned $250 million of previously posted cash collateral and released liens on $322 million of unrestricted cash held at Reliant Energy.
      Pursuant to the CSRA Amendment, the Company was required to post collateral for any net liability derivatives and other static margin associated with supply for Reliant Energy. In connection with this transaction, NRG posted $366 million of cash collateral to Merrill Lynch and other counterparties, returned $53 million of counterparty collateral, issued letters of credit of $206 million, and received $45 million in counterparty collateral. The funds posted by the Company were sourced from a portion of the proceeds from the June 5, 2009 issuance of the 2019 Senior Notes. See Note 8,  Long-Term Debt , to this Form 10-Q, for further discussion of the 2019 Senior Notes. In addition, $25 million outstanding under NRG’s $50 million working capital facility with Merrill Lynch was repaid, and the facility was terminated. See Note 4,  Business Acquisition , to this Form 10-Q, for further discussion of the working capital facility entered into on May 1, 2009.
     NRG has also paid Merrill Lynch $5 million in connection with the CSRA Amendment, and will make a second payment of $5 million on January 4, 2010. Merrill Lynch has terminated NRG’s contingent equity obligations under the previous credit sleeve. The parties have agreed to settle any outstanding wholesale obligations under the CSRA Amendment by January 29, 2010, and any C&I related Merrill Lynch obligations by April 30, 2010.
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ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     In this discussion and analysis, NRG discusses and explains its financial condition and results of operations, including:
 	•	 	Factors which affect the Company’s business;	
 	 	 	 	
 	•	 	NRG’s earnings and costs in the periods presented;	
 	 	 	 	
 	•	 	Changes in earnings and costs between periods;	
 	 	 	 	
 	•	 	Impact of these factors on NRG’s overall financial condition;	
 	 	 	 	
 	•	 	A discussion of new and ongoing initiatives that may affect NRG’s future results of operations and financial condition;	
 	 	 	 	
 	•	 	Expected future expenditures for capital projects; and	
 	 	 	 	
 	•	 	Expected sources of cash for future operations and capital expenditures.	
     As you read this discussion and analysis, refer to the Company’s Condensed Consolidated Statements of Operations, which present the results of operations for the three and nine months ended September 30, 2009, and 2008. NRG analyzes and explains the differences between periods in the specific line items of NRG’s Condensed Consolidated Statements of Operations. Also refer to NRG’s 2008 Annual Report on Form 10-K, which includes detailed discussions of various items impacting the Company’s business, results of operations and financial condition, including:
 	•	 	Introduction and Overview section which provides a description of NRG’s business segments;	
 	 	 	 	
 	•	 	Strategy section;	
 	 	 	 	
 	•	 	Business Environment section, including how regulation, weather, and other factors affect NRG’s business; and	
 	 	 	 	
 	•	 	Critical Accounting Policies and Estimates section.	
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 regulatory and environmental matters;	
 	 	 	 	
 	•	 	Results of operations beginning with an overview of the Company’s consolidated results, followed by a more detailed discussion of those results by operating segment;	
 	 	 	 	
 	•	 	Financial condition addressing liquidity position, sources and uses of cash, capital resources and requirements, commitments, and off-balance sheet arrangements; and	
 	 	 	 	
 	•	 	Known trends that may affect NRG’s results of operations and financial condition in the future, including the Reliant Energy acquisition and the disposition of the MIBRAG investment.	
Executive Summary
Introduction and Overview
     NRG Energy, Inc., or NRG or the Company, is primarily a wholesale power generation company with a significant presence in major competitive power markets in the United States, as well as a major retail electricity franchise in the ERCOT (Texas) market. NRG is engaged in the ownership, development, construction and operation of power generation facilities, the transacting in and trading of fuel and transportation services, the trading of energy, capacity and related products in the United States and select international markets, and supply of electricity and energy services to retail electricity customers in the Texas market.
     As of September 30, 2009, NRG had a total global generation portfolio of 187 active operating fossil fuel and nuclear generation units, at 46 power generation plants, with an aggregate generation capacity of approximately 24,100 MW, and approximately 550 MW under construction which includes partners’ interests of 200 MW. In addition to its fossil fuel plant ownership, NRG has ownership interests in two operating wind farms representing an aggregate generation capacity of 270 MW, which includes partner interests of 75 MW. Within the U.S., NRG has one of the largest and most diversified power generation portfolios in terms of geography, fuel-type and dispatch levels, with approximately 23,095 MW of fossil fuel and nuclear generation capacity in 179 active generating units at 42 plants. The Company’s power generation facilities are most heavily concentrated in Texas (approximately 11,190 MW, including 195 MW from the two wind farms), the Northeast (approximately 7,015 MW), South Central (approximately 2,840 MW), and West (approximately 2,130 MW) regions of the U.S., and approximately 115 MW of additional generation capacity from the Company’s thermal assets.
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     NRG’s principal domestic power plants consist of a mix of natural gas-, coal-, oil-fired, nuclear and wind facilities, representing approximately 46%, 32%, 16%, 5% and 1% of the Company’s total domestic generation capacity, respectively. In addition, 11% of NRG’s domestic generating facilities have dual or multiple fuel capacity, which allows plants to dispatch with the lowest cost fuel option.
     NRG’s domestic generation facilities consist of intermittent, baseload, intermediate and peaking power generation facilities, the ranking of which is referred to as Merit Order, and include thermal energy production plants. The sale of capacity and power from baseload generation facilities accounts for the majority of the Company’s revenues and provides a stable source of cash flow. In addition, NRG’s generation portfolio provides the Company with opportunities to capture additional revenues by selling power during periods of peak demand, offering capacity or similar products to retail electric providers and others, and providing ancillary services to support system reliability.
     On May 1, 2009, NRG acquired Reliant Energy, which is the second largest mass market electricity provider to residential and commercial customers in Texas. Based on metered locations, as of September 30, 2009, Reliant Energy had approximately 1.6 million Mass customers and approximately 0.1 million C&I customers. Reliant Energy arranges for the transmission and delivery of electricity to customers, bills customers, collects payments for electricity sold and maintains call centers to provide customer service.
NRG’s Business Strategy
     NRG’s business strategy is intended to maximize shareholder value over time through the production and the sale of safe, reliable and affordable power to its customers and in the markets served by the Company, while aggressively pursuing sustainable energy solutions for the future. The key to successful implementation of this strategy is the Company’s sizable fleet of wholesale power generation assets in the U.S., its leading retail franchise in Texas and, increasingly, its position as an industry leader in the development of various types of low and no carbon generation technologies and integrated solutions aimed at satisfying the Company’s customers’ increasing demand for sustainable energy lifestyles. In addition, NRG utilizes its asset base as a platform for growth and development and as a source of cash flow generation which can be used for the return of capital to debt and equity holders. More specifically, the Company’s strategy is focused on: (i) top decile operating performance of its existing operating assets and enhanced operating performance of the Company’s commercial operations and hedging program; (ii) repowering of power generation assets at existing sites and development of new power generation projects; (iii) empowering retail customers with distinctive products and services that transform how they use, manage, and value energy; (iv) investment in energy-related new businesses and new technologies being developed and deployed in response to the twin societal dynamics to foster sustainability and combat climate change; and (v) engaging in a proactive capital allocation plan focused on achieving the regular return of capital to stockholders within the dictates of prudent balance sheet management. This strategy is supported by the Company’s five major initiatives ( FOR NRG,  Repowering NRG, econrg, Future NRG and NRG Global Giving) which are designed to enhance the Company’s competitive advantages in these strategic areas and enable the Company to convert the challenges faced by the power industry in the coming years into opportunities for financial growth. This strategy is being implemented by focusing on the following principles, which are more fully described in the Company’s 2008 Annual Report on Form 10-K:
     Operational Performance — The Company is focused on increasing value from its existing assets, primarily through the Company’s  FOR NRG 2.0 initiative, commercial operations strategy, achieving synergies between the Company’s retail and wholesale business in Texas, and maintaining of appropriate levels of liquidity, debt and equity in order to ensure continued access to capital through all economic and financial cycles.
     Development — NRG is favorably positioned to pursue growth opportunities through expansion of its existing generating capacity and development of new generating capacity at its existing facilities, primarily through the Company’s Repowering NRG initiative. NRG expects that these efforts will provide some or all of the following benefits: improved heat rates; lower delivered costs; expanded electricity production capability; improved ability to dispatch economically across the regional general portfolio; increased technological and fuel diversity; and reduced environmental impacts, including facilities that either have near zero GHG emissions or can be equipped to capture and sequester GHG emissions. In addition, several of the Company’s original  Repowering NRG projects or projects commenced under that initiative since its inception may qualify for financial support under the infrastructure financing component of the American Recovery and Reinvestment Act and NRG has several applications pending or contemplated.
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     New Businesses and New Technology — NRG is focused on the development and investment in energy-related new businesses and new technologies where the benefits of such investments represent significant commercial opportunities and create a comparative advantage for the Company, including low or no GHG emitting energy generating sources, such as nuclear, wind, solar thermal, photovoltaic, “clean” coal and gasification, and the retrofit of post-combustion carbon capture technologies. A primary focus of this strategy is supported by the econrg initiative whereby NRG is pursuing investments in new generating facilities and technologies that are expected to be highly efficient and will employ no and low carbon technologies to limit CO 2  emissions and other air emissions. While the Company’s effort in this regard to date has focused on businesses and technologies applicable to the centralized power station, the acquisition of Reliant Energy has put the Company in a position to consider and pursue sustainable energy lifestyles, such as smart meters, electric vehicle ecosystems, and distributed “clean” solutions.
     Company-Wide Initiatives — In addition, the Company’s overall strategy is also supported by Future NRG and NRG Global Giving initiatives, which address workforce planning and community involvement and support, respectively.
     Finally, NRG will continue to pursue selective acquisitions, joint ventures and divestitures to enhance its asset mix and competitive position in the Company’s core markets. NRG intends to concentrate on opportunities that present attractive risk-adjusted returns. NRG will also opportunistically pursue other strategic transactions, including mergers, acquisitions or divestitures.
Business Environment
Financial Credit Market Availability
     Power generation companies are capital intensive and, as such, rely on the credit markets for liquidity and for the financing of power generation investments. During the first nine months of 2009, the nation’s credit markets have recovered to some extent although credit continued to be tight relative to years prior to 2008. As evidence of the markets’ improvement, in April 2009, GenConn Energy, a joint venture of NRG and the United Illuminating Company, closed on a $534 million project financing and NRG was able to issue $700 million of bonds in June 2009, with a 10 year maturity at a yield to maturity of 8.75%. NRG has a diversified liquidity program, with $3.9 billion in total liquidity as of September 30, 2009, excluding funds deposited by counterparties, and a first and second lien structure that enables significant strategic hedging while reducing requirements for the posting of cash or letters of credit as collateral. NRG transacts with a diversified pool of counterparties and actively manages the Company’s exposure to any single counterparty. See Part I, Item 2  — Liquidity and Capital Resources , and Part I, Item 3  — Quantitative and Qualitative Disclosures about Market Risk  for further discussion.
     The addition of Reliant Energy to NRG’s existing generation business may provide opportunities to match generation to load directly which should reduce hedging and credit costs that both businesses would incur if hedged separately. Reliant Energy, which expects to lock in its wholesale supply in order to secure its margin as load is contracted, should also benefit from having better access to nonstandard products necessary to meet load. NRG expects to continue hedging its wholesale production consistent with its prior practice, but now will benefit from having an additional outlet for its range of generation products.
Proposed Over-the-Counter Derivative Legislation
     Congress is currently considering legislative proposals that would significantly increase the regulation of over-the-counter derivatives including those related to energy commodities, through the amendment of the Commodity Exchange Act. While NRG cannot predict at this time the outcome of any of the legislative efforts, many of the proposals generally contemplate mandatory clearing of such derivatives through clearing organizations and the increased standardization of contracts, products, and collateral requirements. Such changes could negatively impact NRG’s ability to hedge its portfolio in an efficient, cost-effective manner, and, among other things, may limit NRG’s ability to utilize liens as collateral. Such changes may also result in a decrease in liquidity in the commodity markets.
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Unsolicited Exelon Proposal
     On October 19, 2008, the Company received an unsolicited proposal from Exelon Corporation to acquire all of the outstanding shares of the Company and on November 12, 2008, Exelon announced a tender offer for all of the Company’s outstanding common stock. NRG’s Board of Directors, after carefully reviewing the proposal, unanimously concluded that the proposal was not in the best interests of the stockholders and recommended that NRG stockholders not tender their shares. In addition, on June 17, 2009, Exelon filed a Definitive Proxy Statement with the SEC with respect to their proposals for the Company’s 2009 Annual Meeting of Stockholders, which consisted of: (i) consideration of Exelon’s four nominees as Class III directors; (ii) consideration of the expansion of NRG’s Board of Directors to 19 directors; (iii) if the Exelon board expansion is approved, consideration of five additional Exelon nominees; and (iv) consideration of repealing any amendments to the NRG Bylaws after February 26, 2008. NRG’s Board of Directors recommended a vote against each of the proposals. On July 2, 2009, Exelon revised their unsolicited proposal and NRG’s Board of Directors, after carefully reviewing the proposal, unanimously concluded that the proposal was not in the best interests of the stockholders and recommended that NRG stockholders not tender their shares. On July 21, 2009, based on the preliminary vote count at NRG’s 2009 Annual Meeting of Stockholders, stockholders voted to re-elect all of the Company’s director nominees to the NRG Board of Directors. In addition, NRG’s stockholders rejected Exelon’s proposal to expand NRG’s Board with its own slate of five Director nominees. On July 21, 2009, Exelon Corporation announced that in light of the vote results, effective immediately, it terminated its offer to acquire all of the outstanding shares of NRG. On July 29, 2009, IVS Associates, Inc., the independent inspector of elections, certified the final results. The total defense costs associated with Exelon’s unsolicited proposal was approximately $39 million for the period October 1, 2008, through September 30, 2009, of which $31 million was for the nine months ended September 30, 2009.
Environmental Matters
Climate Change
     Senators Kerry and Boxer introduced climate legislation based on The American Clean Energy and Security Act of 2009 which passed the House of Representatives in June 2009. The Senate bill proposes a multi-sector, market based greenhouse gas cap-and-trade system starting in 2012. It provides for a declining cap in U.S. GHG emissions and provides for the allocation of allowances to merchant coal generators, the use of both international and domestic offsets to local distribution companies , and a transition from already existing state programs, all of which are important to the electric generation industry. It proposes requirements for new coal-fueled power plants to implement, based on commercial availability, carbon capture and sequestration to reduce CO 2  emissions. NRG will continue to provide input as a leading energy company and member of the U.S. Climate Action Partnership, or USCAP, in support of federal legislation.
     In 2008, NRG emitted 60 million metric tonnes of CO2 from its domestic operations. If climate change legislation or some other federal comprehensive climate change bill were to pass both Houses of Congress and be enacted into law, the actual impact on the Company’s financial performance would depend on a number of factors, including the overall level of GHG reductions required under any final legislation, the degree to which offsets may be used for compliance and their price and availability, and the extent to which NRG would be entitled to receive CO 2  emissions allowances without having to purchase them in an auction or on the open market. Thereafter, the impact would depend on the level of success of the Company’s multifold strategy, which includes (i) shaping public policy with the objective being constructive and effective federal GHG regulatory policy; and (ii) pursuing its  Repowering NRG and econrg programs. The Company’s multifold strategy is discussed in greater detail in Part I, Item 1 —  Business, Carbon Update  in NRG’s 2008 Annual Report on Form 10-K.
     On April 24, 2009, the U.S. EPA published a proposed endangerment finding that stated that the mix of six key GHGs, including CO 2 , threaten the public health and welfare. On September 28, 2009, U.S.EPA and Department of Transportation, or DOT published “Proposed GHG Emissions Standards for Motor Vehicles”. These actions are in response to the Supreme Court’s decision in  Massachusetts v. U.S. EPA , which requires the U.S. EPA to decide under the CAA’s mobile source title whether GHGs contribute to climate change, and if so, promulgate appropriate regulations. Under the CAA, these regulations when final, would render GHGs regulated pollutants and subject them to other existing requirements that affect stationary sources, including power plants. The primary impact on NRG would be a statutory requirement to install BACT determined on a case-by-case basis, for major modifications or improvements at power plants if they cause GHG emissions to increase by the statutory Prevention of Significant Deterioration, or PSD limits of 100 tons per year. The U.S. EPA also released, on September 30, 2009, a draft PSD tailoring rule for GHGs that would increase the major stationary source threshold of 25,000 tons per year of carbon dioxide equivalents. This threshold level would be used to determine (i) if an existing source would be required to obtain a Title V operating permit and (ii) if a new facility or a major modification at an existing facility would trigger PSD permitting requirements. Existing major sources making modifications that result in an increase of emissions above the significance level would be required to obtain a PSD permit and install BACT. The timing of the final motor vehicle rule, acceptance of the PSD tailoring rule and EPA’s approach to BACT for GHGs could affect the level of impact to NRG’s plants and future repowering projects.
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Federal Environmental Initiatives
     A number of regulations are under review by U.S. EPA including CAIR, MACT, National Ambient Air Quality Standards, or NAAQS, for ozone, nitrogen dioxide, SO 2 , small particle matter, or PM2.5, and the Phase II 316(b) Rule. These rules address air emissions and best practices for units with once-through-cooling. In addition, the U.S. EPA has announced that it is considering new rules regarding the handling and disposition of coal combustion byproducts. While the Company cannot predict the requirements in the final versions nor the ultimate effect that the changing regulations will have on NRG’s business, NRG’s planned environmental capital expenditures include installation of particulate, SO 2 , NO x , and mercury controls to comply with federal and state air quality rules and consent orders, as well as installation of “Best Technology Available” under Phase II 316(b) Rule. NRG continues to explore cost-effective alternatives that can achieve desired results. This planned investment reflects anticipated schedules and controls related to CAIR, MACT for mercury, and the Phase II 316(B) Rule which are under remand to the U.S. EPA and, as such, the full impact on the scope and timing of environmental retrofits from any new or revised regulations cannot be determined at this time.
     On April 24, 2009, the U.S. EPA granted petitions to reconsider three NSR rules; Fugitive Emissions, PM2.5 Implementation, and Reasonable Possibility. A Notice for reconsideration of the PM2.5 Implementation Rule was published in the Federal Register on May 1, 2009. While none of these actions directly impact NRG at this point, it is unknown if any such final rules will impact future projects.
     The U.S. Supreme Court released its decision in the Phase II 316(b) Rule case on April 1, 2009, in which it concluded that the U.S. EPA does have the authority to allow a cost-benefit analysis in the evaluation of Best Technology Available, or BTA. This ruling is favorable for the industry and NRG as it improves the U.S. EPA’s ability to include alternatives to closed-loop cooling in its redraft of the Phase II 316(b) Rules. In the absence of federal regulations, some states in which NRG operates, such as California, Connecticut, Delaware and New York, are moving ahead with guidance for more stringent requirements for once through cooled units which may have an impact on future operations.
Regional Environmental Initiatives
     Northeast Region — NRG operates electric generating units located in Connecticut, Delaware, Maryland, Massachusetts and New York which are subject to RGGI. The RGGI CO 2  cap-and-trade program went into effect on January 1, 2009. An allowance must be surrendered for every U.S. ton of CO 2  emitted with true up for 2009-2011 occurring in 2012. NRG’s emissions under RGGI were approximately 12 million tonnes in 2008.
Regulatory Matters
     As an operator of power plants and a participant in the wholesale markets, NRG is subject to regulation by various federal and state government agencies. In addition, NRG is subject to the market rules, procedures, and protocols of the various ISO markets in which NRG participates. NRG is also subject to regulatory requirements as a competitive retail electric service provider in Texas. The power markets are subject to ongoing legislative and regulatory changes. In some of NRG’s regions, interested parties have advocated for material market design changes, including the elimination of a single clearing price mechanism, as well as proposals to re-regulate the markets or require divestiture by generating companies in order to reduce their market share. The Company cannot predict the future design of the wholesale power markets or the ultimate effect that the changing regulatory environment will have on NRG’s business.
West Region
     California — The CAISO Market Redesign and Technology Update, or MRTU, commenced April 1, 2009. Significant components of the MRTU include: (i) locational marginal pricing of energy; (ii) a more effective congestion management system; (iii) a day-ahead market; and (iv) an increase to the existing bid caps. NRG considers these market reforms to generally be a positive development for its assets in the region, but additional time is needed to assess the impact of MRTU.
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Texas Region
     On October 6, 2008, as part of its determination of Competitive Renewable Energy Zones, or CREZ, the PUCT issued its final order approving a significant transmission expansion plan to provide for the delivery of approximately 18,500 MW of energy from the western region of Texas, primarily wind generation. The transmission expansion plan is composed of approximately 2,300 miles of new 345 kV lines and 42 miles of new 138 kV lines. In January 2009, Texas Industrial Energy Consumers, a trade organization composed of large industrial customers, appealed the PUCT’s CREZ plan in state district court, seeking reversal of the final order. On March 30, 2009, the PUCT issued a final order designating the transmission utilities that plan to construct the various CREZ transmission component projects. A large number of separate transmission licensing proceedings will be required prior to construction of the CREZ facilities. In July of 2009, the PUCT approved schedules for utilities to file applications to license several of the CREZ transmission projects (to obtain certificates of convenience and necessity, or CCNs). If the CREZ projects are completed as currently anticipated, the transmission upgrades and associated wind generation could impact wholesale energy and ancillary service prices in ERCOT. As part of the normal ERCOT five-year planning process, transmission utilities are also planning other system improvements, 2,800 circuit miles of transmission and more than 17,000 MVA of autotransformer capacity, intended to support increasing power demand and to address transmission congestion in the ERCOT Region.
Changes in Accounting Standards
     See Note 2, Summary of Significant Accounting Policies, to the condensed consolidated financial statements of this Form 10-Q as found in Item 1 for a discussion of recent accounting developments.
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     Consolidated Results of Operations
     The following table provides selected financial information for the Company:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30,	 	Nine months ended September 30,	
(In millions except otherwise noted)	 	2009	 	2008	 	Change %	 	2009	 	2008	 	Change %	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Energy revenue	 	$ 	771	 	 	$ 	1,373	 	 	 	(44	)%	 	$ 	2,383	 	 	$ 	3,671	 	 	 	(35	)%   	
Capacity revenue	 	 	278	 	 	 	356	 	 	 	(22	)	 	 	791	 	 	 	1,037	 	 	 	(24	)	
Retail revenue	 	 	1,876	 	 	 	—	 	 	 	N/A	 	 	 	3,126	 	 	 	—	 	 	 	N/A	 	
Risk management activities	 	 	6	 	 	 	744	 	 	 	(99	)	 	 	431	 	 	 	27	 	 	 	N/A	 	
Contract amortization	 	 	(60	)	 	 	76	 	 	 	(179	)	 	 	(92	)	 	 	233	 	 	 	(139	)	
Thermal revenue	 	 	22	 	 	 	26	 	 	 	(15	)	 	 	77	 	 	 	85	 	 	 	(9	)	
Other revenues	 	 	23	 	 	 	37	 	 	 	(38	)	 	 	95	 	 	 	177	 	 	 	(46	)	
 	
Total operating revenues	 	 	2,916	 	 	 	2,612	 	 	 	12	 	 	 	6,811	 	 	 	5,230	 	 	 	30	 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	 	1,628	 	 	 	780	 	 	 	109	 	 	 	3,256	 	 	 	2,133	 	 	 	53	 	
Risk management activities	 	 	(16	)	 	 	—	 	 	 	N/A	 	 	 	(152	)	 	 	—	 	 	 	N/A	 	
Other cost of operations	 	 	281	 	 	 	217	 	 	 	29	 	 	 	797	 	 	 	679	 	 	 	17	 	
 	
Total cost of operations	 	 	1,893	 	 	 	997	 	 	 	90	 	 	 	3,901	 	 	 	2,812	 	 	 	39	 	
Depreciation and amortization	 	 	212	 	 	 	156	 	 	 	36	 	 	 	594	 	 	 	478	 	 	 	24	 	
Selling, general and administrative	 	 	182	 	 	 	75	 	 	 	143	 	 	 	396	 	 	 	233	 	 	 	70	 	
Acquisition-related transaction and integration costs	 	 	6	 	 	 	—	 	 	 	N/A	 	 	 	41	 	 	 	—	 	 	 	N/A	 	
Development costs	 	 	12	 	 	 	13	 	 	 	(8	)	 	 	34	 	 	 	29	 	 	 	17	 	
 	
Total operating costs and expenses	 	 	2,305	 	 	 	1,241	 	 	 	86	 	 	 	4,966	 	 	 	3,552	 	 	 	40	 	
 	
Operating Income	 	 	611	 	 	 	1,371	 	 	 	(55	)	 	 	1,845	 	 	 	1,678	 	 	 	10	 	
Other Income/(Expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity in earnings of unconsolidated affiliates	 	 	6	 	 	 	58	 	 	 	(90	)	 	 	33	 	 	 	35	 	 	 	(6	)	
Gain on sale of equity method investments	 	 	—	 	 	 	—	 	 	 	—	 	 	 	128	 	 	 	—	 	 	 	N/A	 	
Other income/(loss), net	 	 	5	 	 	 	(7	)	 	 	171	 	 	 	(9	)	 	 	14	 	 	 	(164	)	
Interest expense	 	 	(178	)	 	 	(142	)	 	 	25	 	 	 	(475	)	 	 	(442	)	 	 	7	 	
 	
Total other expense	 	 	(167	)	 	 	(91	)	 	 	84	 	 	 	(323	)	 	 	(393	)	 	 	(18	)	
 	
Income from Continuing Operations before income tax expense	 	 	444	 	 	 	1,280	 	 	 	(65	)	 	 	1,522	 	 	 	1,285	 	 	 	18	 	
Income tax expense	 	 	166	 	 	 	502	 	 	 	(67	)	 	 	614	 	 	 	503	 	 	 	22	 	
 	
Income from Continuing Operations	 	 	278	 	 	 	778	 	 	 	(64	)	 	 	908	 	 	 	782	 	 	 	16	 	
Income from discontinued operations, net of income taxes	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	172	 	 	 	N/A	 	
 	
Net Income	 	 	278	 	 	 	778	 	 	 	(64	)	 	 	908	 	 	 	954	 	 	 	(5	)	
 	
Less: Net loss attributable to noncontrolling interest	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1	)	 	 	—	 	 	 	N/A	 	
 	
Net income attributable to NRG Energy, Inc.	 	$ 	278	 	 	$ 	778	 	 	 	(64	)	 	$ 	909	 	 	$ 	954	 	 	 	(5	)	
 	
Business Metrics	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	
Average natural gas price - Henry Hub ($/MMBtu)	 	 	3.15	 	 	 	9.11	 	 	 	(65	)%	 	 	3.80	 	 	 	9.67	 	 	 	(61	)%	

N/A	— 	Not Applicable	
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Management’s discussion of the results of operations for the three months ended September 30, 2009, and 2008:
     For the benefit of the following discussions, the table below represents the results of NRG excluding the impact of Reliant Energy during the three months ended September 30, 2009:
 	 	 	 	 	 	 	 	 	 	 	 	 	      	 	 	 	 	 	 	 	
 	 	Three months ended September 30,	
 	 	 	 	 	 	2009	 	 	 	 	 	2008	 	 	
 	 	 	 	 	 	 	 	 	 	Total excluding	 	 	 	 	
(In millions)	 	Consolidated	 	Reliant Energy	 	Reliant Energy	 	Consolidated	 	Change %	
 	 	 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Energy revenue	 	$ 	771	 	 	$ 	—	 	 	$ 	771	 	 	$ 	1,373	 	 	 	(44	)%	
Capacity revenue	 	 	278	 	 	 	—	 	 	 	278	 	 	 	356	 	 	 	(22	)	
Retail revenue	 	 	1,876	 	 	 	1,876	 	 	 	—	 	 	 	—	 	 	 	—	 	
Risk management activities	 	 	6	 	 	 	(1	)	 	 	7	 	 	 	744	 	 	 	(99	)	
Contract amortization	 	 	(60	)	 	 	(85	)	 	 	25	 	 	 	76	 	 	 	(67	)	
Thermal revenue	 	 	22	 	 	 	—	 	 	 	22	 	 	 	26	 	 	 	(15	)	
Other revenues	 	 	23	 	 	 	—	 	 	 	23	 	 	 	37	 	 	 	(38	)	
 	 	 	
Total operating revenues	 	 	2,916	 	 	 	1,790	 	 	 	1,126	 	 	 	2,612	 	 	 	(57	)	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	 	1,628	 	 	 	1,203	 	 	 	425	 	 	 	780	 	 	 	(46	)	
Risk management activities	 	 	(16	)	 	 	—	 	 	 	(16	)	 	 	—	 	 	 	N/A	 	
Other operating costs	 	 	281	 	 	 	60	 	 	 	221	 	 	 	217	 	 	 	2	 	
 	 	 	
Total cost of operations	 	 	1,893	 	 	 	1,263	 	 	 	630	 	 	 	997	 	 	 	(37	)	
Depreciation and amortization	 	 	212	 	 	 	42	 	 	 	170	 	 	 	156	 	 	 	9	 	
Selling, general and administrative	 	 	182	 	 	 	76	 	 	 	106	 	 	 	75	 	 	 	41	 	
Acquisition-related transaction and integration costs	 	 	6	 	 	 	—	 	 	 	6	 	 	 	—	 	 	 	N/A	 	
Development costs	 	 	12	 	 	 	—	 	 	 	12	 	 	 	13	 	 	 	(8	)	
 	 	 	
Total operating costs and expenses	 	 	2,305	 	 	 	1,381	 	 	 	924	 	 	 	1,241	 	 	 	(26	)	
 	 	 	
Operating Income	 	$ 	611	 	 	$ 	409	 	 	$ 	202	 	 	$ 	1,371	 	 	 	(85	)%	
 	    	 	
Operating Revenues
     Operating revenues, excluding risk management activities, increased by $1.0 billion during the three months ended September 30, 2009, compared to the same period in 2008.
 	•	 	Retail revenue — the acquisition of Reliant Energy contributed $1.9 billion of retail revenue during the three months ended September 30, 2009. Retail revenue includes mass revenues of $1.2 billion, C&I revenues of $620 million, and supply management revenues of $99 million.	
 	 	 	 	
 	•	 	Energy revenue — decreased $602 million during the three months ended September 30, 2009, compared to the same period in 2008:	

 	o	 	Texas — energy revenue decreased by $201 million, with $177 million of the decrease driven by lower energy prices and $24 million of the decrease driven by a reduction in generation. The average realized energy price decreased by 21%, driven by a 53% decrease in merchant prices offset by a 21% increase in contract prices. Generation decreased by 3% driven by an 11% decrease in coal plant generation and an 8% decrease in nuclear plant generation, offset by a 47% increase in gas plant generation, as well as generation from the recently constructed Cedar Bayou 4 gas plant and Elbow Creek wind farm, which was not in operation in 2008. Coal plant generation was adversely affected by lower energy prices driven by a 64% decrease in average natural gas prices.	
 	 	 	 	
 	o	 	Northeast — energy revenue decreased by $201 million, with $120 million driven by lower energy prices and $99 million attributable to a reduction in generation offset by an $18 million increase from higher net contract revenue. Average merchant energy prices were lower by 52%. The lower energy prices reduced the Company’s net cost incurred to meet obligations under load serving contracts in the PJM market. Generation decreased by 30% with a 34% decrease in coal generation and a 9% decrease in oil and gas generation. Weakened demand for power combined with lower gas prices resulting in reduced merchant energy prices. Lower merchant energy prices combined with higher costs of production from the introduction of RGGI resulting in increased hours where the coal plants were uneconomical to dispatch.	
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 	o	 	South Central — energy revenue decreased by $55 million due to a $24 million decline in contract revenue coupled with a decrease of $31 million in merchant energy revenues. The decline in contract energy price was driven by a $7 million decrease in fuel cost pass through from the cooperatives and a $17 million decrease due to the expiration of a contract with a regional utility. Total MWh sales to the region’s contract customers were down 7% while the average realized price on contract energy sales was $22.83 per MWh in 2009 compared to $29.19 per MWh in 2008. The expiration of the contract allowed more energy to be sold into the merchant market, but at lower average prices resulting in a $31 million decline in revenue. Megawatt hours sold to the merchant market increased by 18% as increased use of the region’s tolled facility provided additional energy to the merchant market while prices fell by 61%.	

 	o	 	Intercompany energy revenue — intercompany sales of $144 million by the Company’s Texas region to Reliant Energy were eliminated in consolidation.	

 	•	 	Capacity revenue — decreased $78 million during the three months ended September 30, 2009, compared to the same period in 2008:	

 	o	 	Texas — capacity revenue decreased by $79 million due to a lower proportion of baseload contracts which contained a capacity component.	
 	 	 	 	
 	o	 	South Central — capacity revenue increased by a $12 million primarily resulting from a new capacity agreement.	
 	 	 	 	
 	o	 	Intercompany capacity revenue — intercompany sales of $18 million by the Company’s Texas region to Reliant Energy were eliminated in consolidation.	

 	•	 	Contract amortization revenue — decreased by $136 million in the three months ended September 30, 2009, as compared to the same period in 2008. The decrease includes $85 million in amortization expense of net in-market C&I contracts related to the Reliant Energy acquisition in 2009 and a reduction of $52 million in revenue from the Texas Genco acquisition due to the lower volume of contracted energy.	
 	 	 	 	
 	•	 	Other revenues — decreased by $14 million driven by $15 million in lower ancillary revenue and $13 million in lower emissions revenues. These decreases were offset by a $12 million increase in fuels trading.	
Cost of Operations
     Cost of operations, excluding risk management activities, increased $912 million during the three months ended September 30, 2009, compared to the same period in 2008.
 	•	 	Cost of sales — increased $848 million during the three months ended September 30, 2009, compared to the same period in 2008 due to:	

 	o	 	Retail — Reliant Energy incurred $1.2 billion of cost of energy during the three months ended September 30, 2009. Supply costs were $837 million which included $162 million of intercompany supply costs. Transmission and distribution charges totaled $392 million for the period. These costs were offset by $11 million of contract amortization for net out-of-market supply contracts.	
 	 	 	 	
 	o	 	Texas — cost of energy decreased $81 million due to lower natural gas and coal costs. Natural gas costs decreased $84 million, reflecting a 64% decline in average natural gas per MMBtu prices offset by a 47% increase in gas-fired generation. Coal costs decreased $7 million due to 11% lower generation. In addition, a $19 million decrease in ancillary service costs was offset by a $13 million increase in purchased energy and other fuel costs.	
 	 	 	 	
 	o	 	Northeast — cost of energy decreased $86 million due to a $53 million reduction in natural gas and oil costs and a $39 million reduction in coal costs. Natural gas and oil costs decreased due to 67% lower average natural gas prices and 9% lower generation. Coal costs decreased by $33 million due to 34% lower coal generation and by $6 million due to lower prices. These decreases were offset by a $6 million increase in costs related to RGGI which became effective in 2009.	
 	 	 	 	
 	o	 	South Central — cost of energy decreased $52 million primarily due to a $35 million decrease in purchased energy reflecting lower fuel costs associated with energy from the region’s tolled facility and a $14 million decrease in natural gas costs reflecting 88% lower generation and 61% lower average gas prices.	
 	 	 	 	
 	o	 	Intercompany cost of sales — intercompany purchases of $162 million by Reliant Energy from the Company’s Texas region is eliminated in consolidation.	

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 	•	 	Other cost of operations — increased $64 million during the three months ended September 30, 2009, compared to the same period in 2008. Reliant Energy incurred $37 million related to customer service operations and $24 million in gross receipt tax on revenue.	
Risk Management Activities
     Risk management activities include economic hedges that did not qualify for cash flow hedge accounting, ineffectiveness on cash flow hedges, and trading activities. Total derivative gains decreased by $722 million during the three months ended September 30, 2009, compared to the same period in 2008. The breakdown of changes by region follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30, 2009	
 	 	Reliant	 	 	 	 	 	 	 	 	 	South	 	 	 	 	 	 	 	 	
(In millions)	 	Energy	 	Texas	 	Northeast	 	Central	 	West	 	Thermal	 	Elimination	 	Total	
 	
Net gains/(losses) on settled positions, or financial income in revenues	 	$ 	—	 	 	$ 	116	 	 	$ 	118	 	 	$ 	(2	)	 	$ 	(3	)	 	$ 	2	 	 	$ 	(8	)	 	$ 	223	 	
 	
Mark-to-market results in revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reversal of previously recognized unrealized (gains)/losses on settled positions related to economic hedges	 	 	—	 	 	 	(4	)	 	 	(27	)	 	 	—	 	 	 	1	 	 	 	—	 	 	 	—	 	 	 	(30	)	
Reversal of gain positions acquired as part of the Reliant Energy acquisition as of May 1, 2009	 	 	(1	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1	)	
Reversal of previously recognized unrealized gains on settled positions related to trading activity	 	 	—	 	 	 	(8	)	 	 	(4	)	 	 	(9	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(21	)	
Net unrealized gains/(losses) on open positions related to economic hedges	 	 	—	 	 	 	(95	)	 	 	(70	)	 	 	—	 	 	 	(7	)	 	 	1	 	 	 	15	 	 	 	(156	)	
Net unrealized gains/(losses) on open positions related to trading activity	 	 	—	 	 	 	5	 	 	 	2	 	 	 	(16	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(9	)	
 	
Subtotal mark-to-market results	 	 	(1	)	 	 	(102	)	 	 	(99	)	 	 	(25	)	 	 	(6	)	 	 	1	 	 	 	15	 	 	 	(217	)	
 	
Total derivative gain/(loss) included in revenues	 	$ 	(1	)	 	$ 	14	 	 	$ 	19	 	 	$ 	(27	)	 	$ 	(9	)	 	$ 	3	 	 	$ 	7	 	 	$ 	6	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30, 2009	
 	 	Reliant	 	 	 	 	 	 	 	 	 	South	 	 	 	 	
(In millions)	 	Energy	 	Texas	 	Northeast	 	Central	 	Elimination	 	Total	
 	
Net gains/(losses) on settled positions, or financial expense in cost of operations	 	$ 	(202	)	 	$ 	(4	)	 	$ 	(1	)	 	$ 	(1	)	 	$ 	21	 	 	$ 	(187	)	
 	
Mark-to-market results in cost of operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reversal of previously recognized unrealized losses on settled positions related to economic hedges	 	 	—	 	 	 	11	 	 	 	20	 	 	 	—	 	 	 	—	 	 	 	31	 	
Reversal of loss positions acquired as part of the Reliant Energy acquisition as of May 1, 2009	 	 	239	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	239	 	
Net unrealized gains/(losses) on open positions related to economic hedges	 	 	(21	)	 	 	(18	)	 	 	3	 	 	 	(16	)	 	 	(15	)	 	 	(67	)	
 	
Subtotal mark-to-market results	 	 	218	 	 	 	(7	)	 	 	23	 	 	 	(16	)	 	 	(15	)	 	 	203	 	
 	
Total derivative gain/(loss) included in cost of operations	 	$ 	16	 	 	$ 	(11	)	 	$ 	22	 	 	$ 	(17	)	 	$ 	6	 	 	$ 	16	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30, 2008	
 	 	 	 	 	 	 	 	 	 	South	 	 	
(In millions)	 	Texas	 	Northeast	 	Central	 	Total	
 	
Net losses on settled positions, or financial income	 	$ 	(44	)	 	$ 	(43	)	 	$ 	(4	)	 	$ 	(91	)	
 	
Mark-to-market results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reversal of previously recognized unrealized gains on settled positions related to economic hedges	 	 	(5	)	 	 	(2	)	 	 	—	 	 	 	(7	)	
Reversal of previously recognized unrealized gains on settled positions related to trading activity	 	 	—	 	 	 	(6	)	 	 	(3	)	 	 	(9	)	
Net unrealized gains on open positions related to economic hedges	 	 	590	 	 	 	201	 	 	 	—	 	 	 	791	 	
Net unrealized gains on open positions related to trading activity	 	 	11	 	 	 	18	 	 	 	31	 	 	 	60	 	
 	
Subtotal mark-to-market results	 	 	596	 	 	 	211	 	 	 	28	 	 	 	835	 	
 	
Total derivative gain included in revenue	 	 	552	 	 	 	168	 	 	 	24	 	 	 	744	 	
 	
Total derivative gain included in cost of operations	 	$ 	—	 	 	$ 	—	 	 	$ 	—	 	 	$ 	—	 	
 	
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     NRG’s third quarter 2009 net gain of $22 million was comprised of $14 million of mark-to-market losses and $36 million in settled gains. Of the $14 million of mark-to-market losses, there was a loss of $217 million in revenue and a gain of $203 million in expense. The $217 million loss in revenue included a $51 million loss from the reversal of mark-to-market gains recognized during 2008 and loss of $165 million due to the decrease in value of forward purchases and sales of electricity and fuel due to higher forward power and gas prices. The $203 million of mark-to-market gains in expense included a gain of $31 million from the reversal of mark-to-market losses recognized during 2008, a $67 million loss due to the decrease in value of forward purchases and sales of electricity and fuel due to higher forward power and gas prices, and a $239 million from the roll-off of Reliant Energy loss positions. The Reliant Energy loss positions were acquired as of May 1, 2009 and valued using forward prices on that date. The $239 million roll-off amounts were offset by realized losses at settled prices and are reflected in the cost of operations during the same period.
     NRG’s third quarter 2008 net gain of $744 million was comprised of mark-to-market gains of $835 million and $91 million in settled losses, or financial income. The realized losses were primarily driven by increases in settled power and gas prices. The mark-to-market gains were primarily driven by decreases in forward power and gas prices, and gains from a reduction in hedge accounting ineffectiveness.
     Since these hedging activities are intended to mitigate the risk of commodity price movements on revenues and cost of operations, the changes in such results should not be viewed in isolation, but rather should be taken together with the effects of pricing and cost changes on energy revenue and costs. During and prior to 2009, NRG hedged a portion of the Company’s 2008 and 2009 generation. During the third quarter 2009, the settled prices of electricity and natural gas decreased resulting in the recognition of realized gains while the forward prices of electricity and natural gas increased resulting in the recognition of unrealized mark-to-market losses. During the third quarter 2008, the settled prices for power and gas increased resulting in the recognition of realized losses while decreasing forward prices of electricity and natural gas resulted in recognition of unrealized mark-to-market gains.
     The following table represents the results of the Company’s financial and physical trading of energy commodities for the three months ended September 30, 2009 and 2008. The realized financial trading results and unrealized financial and physical trading results are included in the risk management activities above, while the realized physical trading results are included in energy revenue.
 	 	 	 	 	 	 	 	 	
 	 	Three months ended	 	
 	 	September 30,	 	
(In millions)	 	2009	 	 	2008	 	
 	
Trading gains/(losses)	 	 	 	 	 	 	 	 	
Realized	 	$	27	 	 	$	13	 	
Unrealized	 	 	(30	)	 	 	52	 	
 	
Total trading gains/(losses)	 	 	(3	)	 	 	65	 	
 	
Depreciation and Amortization
     NRG’s depreciation and amortization expense increased by $56 million for the three months ended September 30, 2009, compared to the same period in 2008. Reliant Energy’s depreciation and amortization expense for the three month period was $42 million principally for amortization of customer relationships. The balance of the increase was due to depreciation on the baghouse projects in western New York and the Elbow Creek project which came online in late 2008, and the Cedar Bayou 4 project which came online in the second quarter 2009.
Selling, General and Administrative Expenses
     Selling, general and administrative expenses increased by $107 million for the three months ended September 30, 2009, compared to the same period in 2008. The increase was due to:
 	•	 	Retail selling, general and administrative expense — totaled $76 million, including $28 million of bad debt expense incurred during the three months ended September 30, 2009.	
 	 	 	 	
 	•	 	Consultant costs — increased $18 million consisting of non-recurring costs related to Exelon’s exchange offer and proxy contest efforts of $21 million offset by a decrease in other consulting costs of $3 million.	
 	 	 	 	
 	•	 	Wage and benefits expense — increased $13 million.	
Acquisition-Related Transaction and Integration Costs
     NRG incurred Reliant Energy acquisition-related transaction costs of $2 million and integration costs of $4 million for the three months ended September 30, 2009.
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Equity in Earnings of Unconsolidated Affiliates
     NRG’s equity earnings from unconsolidated affiliates decreased by $52 million for the three months ended September 30, 2009, compared to the same period in 2008. During the three months ended September 30, 2009, there was no equity earnings from the Sherbino I Wind Farm LLC, or Sherbino, investment. In the three months ended September 30, 2008, Sherbino recognized a $40 million mark-to-market gain on a natural gas swap executed to hedge its future power generation. Additionally, in 2009, the Company’s share in its former MIBRAG investments and Gladstone Power Station decreased $10 million and $4 million, respectively, while the Company’s share in NRG Saguaro LLC earnings increased by $2 million.
Other Income/(Loss), Net
     NRG’s other income/(loss), net increased $12 million for the three months ended September 30, 2009, compared to the same period in 2008. The 2009 interest income was lower compared to 2008 due to reduced interest rates. The effect of lower interest income in 2009 was offset by the effect of $19 million impairment charge in 2008 to restructure distressed investments in commercial paper.
Interest Expense
     NRG’s interest expense increased by $36 million for the three months ended September 30, 2009, compared to the same period in 2008. This increase was primarily due to a $15 million increase in fees incurred on the CSRA facility which began in May 2009, a $15 million increase in interest expense as a result of the 2019 Senior Notes issued in June 2009, a $4 million increase related to ineffective portion of the interest rate cash flow hedge on the Company’s Term Loan Facility and a $5 million increase in the amortization of deferred financing costs. These increases were offset by a $7 million decrease in interest expense on the Company’s Term Loan Facility due to a decrease in the outstanding notional amount and lower interest rates related to the unhedged portion of the Term Loan and fair value portion of the Senior Notes.
Income Tax Expense
     NRG’s income tax expense decreased by $336 million for the three months ended September 30, 2009, compared to the same period in 2008. The decrease in income tax expense was primarily due to a decrease in income. The effective tax rate was 37.4% and 39.2% for the three months ended September 30, 2009, and 2008, respectively.
     For the three months ended September 30, 2009, NRG’s overall effective tax rate on continuing operations was different than the statutory rate of 35% primarily due to the U.S. taxation of foreign earnings offset by a reduction in the valuation allowance. For the three months ended September 30, 2008, NRG’s effective tax rate was increased primarily due to the impact of state and local income taxes.
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Management’s discussion of the results of operations for the nine months ended September 30, 2009, and 2008:
     For the benefit of the following discussions, the table below represents the results of NRG excluding the impact of Reliant Energy during the nine months ended September 30, 2009:
 	 	 	 	 	 	 	 	 	 	 	 	 	      	 	 	 	 	 	 	 	
 	 	Nine months ended September 30,	
 	 	 	 	 	 	2009	 	 	 	 	 	2008	 	 	
 	 	 	 	 	 	 	 	 	 	Total excluding	 	 	 	 	
(In millions)	 	Consolidated	 	Reliant Energy	 	Reliant Energy	 	Consolidated	 	Change %	
 	 	 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Energy revenue	 	$  	2,383	 	 	$  	—	 	 	$  	2,383	 	 	$  	3,671	 	 	 	(35	)%	
Capacity revenue	 	 	791	 	 	 	—	 	 	 	791	 	 	 	1,037	 	 	 	(24	)	
Retail revenue	 	 	3,126	 	 	 	3,126	 	 	 	—	 	 	 	—	 	 	 	—	 	
Risk management activities	 	 	431	 	 	 	(1	)	 	 	432	 	 	 	27	 	 	 	N/A	 	
Contract amortization	 	 	(92	)	 	 	(160	)	 	 	68	 	 	 	233	 	 	 	(71	)	
Thermal revenue	 	 	77	 	 	 	—	 	 	 	77	 	 	 	85	 	 	 	(9	)	
Other revenues	 	 	95	 	 	 	—	 	 	 	95	 	 	 	177	 	 	 	(46	)	
 	 	 	
Total operating revenues	 	 	6,811	 	 	 	2,965	 	 	 	3,846	 	 	 	5,230	 	 	 	(26	)	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	 	3,256	 	 	 	2,022	 	 	 	1,234	 	 	 	2,133	 	 	 	(42	)	
Risk management activities	 	 	(152	)	 	 	(205	)	 	 	53	 	 	 	—	 	 	 	N/A	 	
Other operating costs	 	 	797	 	 	 	101	 	 	 	696	 	 	 	679	 	 	 	3	 	
 	 	 	
Total cost of operations	 	 	3,901	 	 	 	1,918	 	 	 	1,983	 	 	 	2,812	 	 	 	(29	)	
Depreciation and amortization	 	 	594	 	 	 	85	 	 	 	509	 	 	 	478	 	 	 	6	 	
Selling, general and administrative	 	 	396	 	 	 	125	 	 	 	271	 	 	 	233	 	 	 	16	 	
Acquisition-related transaction and integration costs	 	 	41	 	 	 	—	 	 	 	41	 	 	 	—	 	 	 	N/A	 	
Development costs	 	 	34	 	 	 	—	 	 	 	34	 	 	 	29	 	 	 	17	 	
 	 	 	
Total operating costs and expenses	 	 	4,966	 	 	 	2,128	 	 	 	2,838	 	 	 	3,552	 	 	 	(20	)	
 	 	 	
Operating Income	 	$  	1,845	 	 	$  	837	 	 	$  	1,008	 	 	$  	1,678	 	 	 	(40	)%	
 	 	 	
Operating Revenues
     Operating revenues, excluding risk management activities, increased $1.2 billion during the nine months ended September 30, 2009, compared to the same period in 2008.
 	•	 	Retail revenue — the acquisition of Reliant Energy contributed $3.1 billion of retail revenue during the five months ended September 30, 2009. Retail revenue includes mass revenues of $1.9 billion, C&I revenues of $1.1 billion, and supply management revenues of $151 million.	
 	 	 	 	
 	•	 	Energy revenue — decreased $1.3 billion during the nine months ended September 30, 2009, compared to the same period in 2008:	

 	o	 	Texas — energy revenue decreased by $478 million, with $373 million driven by lower average realized energy prices and a $105 million decrease driven by a reduction in generation. The average realized energy price decreased by 17%, driven by a 52% decrease in merchant prices, offset by a 23% increase in contract prices. Lower merchant prices were driven by the combination of lower gas prices in 2009 and unusually high pricing events that occurred in 2008 that did not repeat in 2009. Generation decreased by 5% driven by a 9% decrease in coal plant generation offset by a 6% increase in gas plant generation, and generation from the recently constructed Cedar Bayou 4 gas plant and Elbow Creek wind farm, which was not in operation in 2008. Coal plant generation was adversely affected by lower energy prices driven by a 66% decrease in average natural gas prices in combination with increased wind generation which shifted the coal unit’s position in the bid stack, negatively affecting coal plant generation.	
 	 	 	 	
 	o	 	Northeast — energy revenue decreased by $490 million, with $231 million driven by lower energy prices and $312 million attributable to a reduction in generation offset by a $53 million increase from higher net contract revenue. Merchant energy prices were lower by an average of 40%. The lower energy prices reduced the Company’s net cost incurred to meet obligations under load serving contracts in the PJM market. Generation decreased by 35%, with a 36% decrease in coal generation and a 28% decrease in oil and gas generation. Weakened demand for power combined with lower gas prices resulted in reduced merchant energy prices. Lower merchant energy prices combined with higher costs of production from the introduction of RGGI resulted in increased hours where the coal plants were uneconomical to dispatch. The decline in oil and gas generation is attributable to fewer reliability run hours at the Connecticut plants.	
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 	o	 	South Central — decreased by $108 million due to a $66 million decline in contract revenue coupled with a $42 million decrease in merchant energy revenues. Contract customer sales volumes were down 10%. The decline in contract energy price was driven by a $12 million decrease in fuel cost pass through to the cooperatives. Also contributing to the decline in contract revenue was $48 million due to the expiration of a contract with a regional utility. Average realized price on contract energy sales was $23.04 per MWh in 2009 compared to $28.89 per MWh in 2008. The expiration of the contract allowed more energy to be sold into the merchant market, but at lower average prices resulting in a $42 million decline in revenue. Megawatt hours sold to the merchant market increased by 41%, while prices fell by 50%. Increased use of the region’s tolled facility provided additional energy to the merchant market.	
 	 	 	 	
 	o	 	Intercompany energy revenue — intercompany sales of $199 million by the Company’s Texas region to Reliant Energy were eliminated in consolidation.	

 	•	 	Capacity revenue — decreased $246 million during the nine months ended September 30, 2009, compared to the same period in 2008:	

 	o	 	Texas — capacity revenue decreased by $222 million due to a lower proportion of baseload contracts which contained a capacity component.	
 	 	 	 	
 	o	 	Northeast — capacity revenue decreased by $12 million due to lower capacity prices in the NYISO.	
 	 	 	 	
 	o	 	South Central — capacity revenue increased by $30 million resulting primarily from a new capacity agreement.	
 	 	 	 	
 	o	 	Intercompany capacity revenue — intercompany sales of $29 million by the Company’s Texas region to Reliant Energy were eliminated in consolidation.	

 	•	 	Contract amortization revenue — decreased by $325 million in the nine months ended September 30, 2009, as compared to the same period in 2008. The decrease includes a reduction of $166 million in revenue from the Texas Genco acquisition due to the lower volume of contracted energy and $160 million in amortization expense of net in-market C&I contracts related to the Reliant Energy acquisition in 2009.	
 	 	 	 	
 	•	 	Other revenues — decreased by $82 million driven by $45 million in lower ancillary revenue, $46 million in lower emissions revenue, and a $26 million decrease in fuels trading. These decreases were offset by the recognition of a $31 million non-cash gain related to settlement of a pre-existing in-the-money contract with Reliant Energy.	
Cost of Operations
     Cost of operations, excluding risk management activities, increased $1.2 billion during the nine months ended September 30, 2009, compared to the same period in 2008.
 	•	 	Cost of sales — increased $1.1 billion during the nine months ended September 30, 2009, compared to the same period in 2008 due to:	

 	o	 	Retail — Reliant Energy incurred $1.8 billion of cost of energy during the five months ended September 30, 2009, which included $228 million of intercompany supply costs.	
 	 	 	 	
 	o	 	Texas — cost of energy decreased $331 million due to lower natural gas, coal, purchased energy and ancillary services costs. Natural gas costs decreased $281 million, reflecting a 66% decline in average natural gas per MMBtu prices offset by a 6% increase in gas-fired generation. Coal costs decreased $17 million as the 2008 expense included a $15 million loss reserve related to a coal contract dispute and $6 million resulting from reduced generation. Ancillary service costs decreased by $41 million due to a decrease in purchased ancillary services costs incurred to meet contract obligations.	
 	 	 	 	
 	o	 	Northeast — cost of energy decreased $254 million due to a $160 million reduction in natural gas and oil costs and a $108 million reduction in coal costs. Natural gas and oil costs decreased due to 28% lower generation and 60% lower average natural gas prices. Coal costs decreased due to 36% lower coal generation. These decreases were offset by a $15 million increase in costs related to RGGI which became effective in 2009.	
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 	o	 	South Central — cost of energy decreased $71 million due to a $52 million decrease in purchased energy reflecting lower fuel costs associated with the region’s tolled facility and lower market energy prices, a $13 million decrease in natural gas cost, a $4 million decrease in coal costs and a $5 million decrease in transmission expense due to transmission line outages. The decrease in natural gas cost is attributable to a 32% decrease in gas generation and a 58% decrease in natural gas prices. The coal cost decreased due to a 7% decrease in generation offset by a 5% increase in price.	
 	 	 	 	
 	o	 	West — cost of energy decreased $8 million due to a 43% decline in average natural gas per MMBtu prices offset by a 7% increase in natural gas consumption and a $2 million increase in fuel oil expense resulting from a write-down to market of fuel oil inventory no longer used in the production of energy.	
 	 	 	 	
 	o	 	Intercompany cost of energy — intercompany purchases of $228 million by Reliant Energy from the Company’s Texas region were eliminated in consolidation.	

 	•	 	Other cost of operations — increased $118 million during the nine months ended September 30, 2009, compared to the same period in 2008. Reliant Energy incurred $101 million which includes $62 million for customers service operations and $39 million for gross receipt tax on revenue. Further, operating and maintenance expenses increased by $6 million and property taxes increased by $11 million.	
Risk Management Activities
     Risk management activities include economic hedges that did not qualify for cash flow hedge accounting, ineffectiveness on cash flow hedges, and trading activities. Total derivative gains increased by $556 million during the nine months ended September 30, 2009, compared to the same period in 2008. The breakdown of changes by region follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Nine months ended September 30, 2009	 	
 	 	Reliant	 	 	 	 	 	 	 	 	 	 	South	 	 	 	 	 	 	 	 	 	 	 	 	 	
(In millions)	 	Energy	 	 	Texas	 	 	Northeast	 	 	Central	 	 	West	 	 	Thermal	 	 	Elimination	 	 	Total	 	
 	
Net gains/(losses) on settled positions, or financial income in revenues	 	$	—	 	 	$	259	 	 	$	274	 	 	$	9	 	 	$	(6	)	 	$	4	 	 	$	(9	)	 	$	531	 	
 	
Mark-to-market results in revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reversal of previously recognized unrealized (gains)/losses on settled positions related to economic hedges	 	 	—	 	 	 	(41	)	 	 	(90	)	 	 	—	 	 	 	1	 	 	 	(2	)	 	 	—	 	 	 	(132	)	
Reversal of gain positions acquired as part of the Reliant Energy acquisition as of May 1, 2009	 	 	(1	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1	)	
Reversal of previously recognized unrealized gains on settled positions related to trading activity	 	 	—	 	 	 	(51	)	 	 	(27	)	 	 	(47	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(125	)	
Net unrealized gains/(losses) on open positions related to economic hedges	 	 	—	 	 	 	59	 	 	 	89	 	 	 	(4	)	 	 	(1	)	 	 	2	 	 	 	14	 	 	 	159	 	
Net unrealized gains/(losses) on open positions related to trading activity	 	 	—	 	 	 	(3	)	 	 	6	 	 	 	(4	)	 	 	—	 	 	 	—	 	 	 	—	 	 	 	(1	)	
 	
Subtotal mark-to-market results	 	 	(1	)	 	 	(36	)	 	 	(22	)	 	 	(55	)	 	 	—	 	 	 	—	 	 	 	14	 	 	 	(100	)	
 	
Total derivative gain/(loss) included in revenues	 	$	(1	)	 	$	223	 	 	$	252	 	 	$	(46	)	 	$	(6	)	 	$	4	 	 	$	5	 	 	$	431	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Nine months ended September 30, 2009	 	
 	 	Reliant	 	 	 	 	 	 	 	 	 	 	South	 	 	 	 	 	 	 	
(In millions)	 	Energy	 	 	Texas	 	 	Northeast	 	 	Central	 	 	Elimination	 	 	Total	 	
 	
Net gains/(losses) on settled positions, or financial expense in cost of operations	 	$	(316	)	 	$	(17	)	 	$	(6	)	 	$	(7	)	 	$	22	 	 	$	(324	)	
 	
Mark-to-market results in cost of operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reversal of previously recognized unrealized losses on settled positions related to economic hedges	 	 	—	 	 	 	36	 	 	 	63	 	 	 	—	 	 	 	—	 	 	 	99	 	
Reversal of loss positions acquired as part of the Reliant Energy acquisition as of May 1, 2009	 	 	449	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	449	 	
Net unrealized gains/(losses) on open positions related to economic hedges	 	 	72	 	 	 	(84	)	 	 	(20	)	 	 	(26	)	 	 	(14	)	 	 	(72	)	
 	
Subtotal mark-to-market results	 	 	521	 	 	 	(48	)	 	 	43	 	 	 	(26	)	 	 	(14	)	 	 	476	 	
 	
Total derivative gain/(loss) included in cost of operations	 	$	205	 	 	$	(65	)	 	$	37	 	 	$	(33	)	 	$	8	 	 	$	152	 	
 	
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 	 	Nine months ended September 30, 2008	 	
 	 	 	 	 	 	 	 	 	 	South	 	 	 	 	
(In millions)	 	Texas	 	 	Northeast	 	 	Central	 	 	Total	 	
 	
Net losses on settled positions, or financial income	 	$	(94	)	 	   $	(67	)	 	$	(4	)	 	$	(165	)	
 	
Mark-to-market results	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reversal of previously recognized unrealized gains on settled positions related to economic hedges	 	 	(21	)	 	 	(11	)	 	 	—	 	 	 	(32	)	
Reversal of previously recognized unrealized (gains)/losses on settled positions related to trading activity	 	 	1	 	 	 	(7	)	 	 	(14	)	 	 	(20	)	
Net unrealized gains on open positions related to economic hedges	 	 	95	 	 	 	58	 	 	 	—	 	 	 	153	 	
Net unrealized gains on open positions related to trading activity	 	 	48	 	 	 	11	 	 	 	32	 	 	 	91	 	
 	
Subtotal mark-to-market results	 	 	123	 	 	 	51	 	 	 	18	 	 	 	192	 	
 	
Total derivative gain/(loss)	 	$	29	 	 	   $	(16	)	 	$	14	 	 	$	27	 	
 	
Total derivative gain/(loss) included in revenues	 	 	29	 	 	 	(16	)	 	 	14	 	 	 	27	 	
Total derivative gain included in cost of operations	 	$	—	 	 	   $	—	 	 	$	—	 	 	$	—	 	
 	
     NRG’s 2009 gain of $583 million during the nine months ended September 30, 2009, was comprised of $376 million of mark-to-market gains and $207 million in settled gains. Of the $376 million of mark-to-market gains there was a $476 million gain in expense and a $100 million loss in revenue. The $100 million loss in revenue consisted of a loss of $257 million from the reversal of mark-to-market gains recognized during 2008 offset by $158 million due to the increase in value of the forward purchases and sales of electricity and fuel. The $158 million gain consists of a $217 million gain recognized in earnings from previously deferred amounts in OCI as the Company discontinued cash flow hedge accounting in the first quarter for certain 2009 transactions in Texas and New York due to lower expected generation, offset by a $59 million decrease in value in forward sales of electricity and fuel due to lower forward power and gas prices. The Company recognized a derivative loss of $29 million resulting from discontinued NPNS designated coal purchases due to expected lower coal consumption and accordingly the Company could not assert taking physical delivery of coal purchase transactions under NPNS designation. This amount was included in the Company’s cost of operations during the nine months ended September 30, 2009. The gain of $476 million in expense consists of $449 million of the Reliant Energy roll-off of loss positions, $99 million from the reversal of mark-to-market losses recognized during 2008 and a $72 million loss from the decrease in value of forward purchases of electricity and fuel.
     Reliant Energy’s loss positions were acquired as of May 1, 2009, and valued using forward prices on that date. The $448 million roll-off amounts were offset by realized losses at the settled prices and are reflected in the cost of operations during the same period.
     Since these hedging activities are intended to mitigate the risk of commodity price movements on revenues and cost of energy, the changes in such results should not be viewed in isolation, but rather should be taken together with the effects of pricing and cost changes on energy revenue and costs. During and prior to 2009, NRG hedged a portion of the Company’s 2008 and 2009 generation. During the nine months ended September 30, 2009, the settled prices of electricity and natural gas decreased resulting in the recognition of realized gains while forward power and gas prices decreased resulting in the recognition of unrealized mark-to-market gains. During the nine months of 2008, decreasing forward prices of electricity and natural gas resulted in recognition of unrealized mark-to-market gains while the settled prices for power and gas increased resulting in the recognition of realized losses.
     The following table represents the results of the Company’s financial and physical trading of energy commodities for the nine months ended September 30, 2009 and 2008. The realized financial trading results and unrealized financial and physical trading results are included in the risk management activities above, while the realized physical trading results are included in energy revenue.
 	 	 	 	 	 	 	 	 	
 	 	Nine months ended	 	
 	 	September 30,	 	
(In millions)	 	2009	 	 	2008	 	
 	
Trading gains/(losses)	 	 	 	 	 	 	 	 	
Realized	 	$	100	 	 	$	58	 	
Unrealized	 	 	(126	)	 	 	72	 	
 	
Total trading gains/(losses)	 	 	(26	)	 	 	130	 	
 	
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Depreciation and Amortization
     NRG’s depreciation and amortization expense increased by $116 million for the nine months ended September 30, 2009, compared to the same period in 2008. Reliant Energy’s depreciation and amortization expense for the five month period was $85 million principally for amortization of customer relationships. The balance of the increase was due to depreciation on the baghouse projects in western New York and the Elbow Creek project which came online in late 2008, and the Cedar Bayou 4 plant which came online in the second quarter 2009.
Selling, General and Administrative Expenses
     Selling, general and administrative expenses increased by $163 million for the nine months ended September 30, 2009, compared to the same period in 2008. The increase was due to:
 	•	 	Reliant Energy’s selling, general and administrative expense — totaled $125 million, including $37 million of bad debt expense incurred during the five months ended September 30, 2009.	
 	 	 	 	
 	•	 	Wage and benefits expense — increased $18 million.	
 	 	 	 	
 	•	 	Consultant costs — increased $23 million consisting of non-recurring costs related to Exelon’s exchange offer and proxy contest efforts of $31 million offset by a decrease in other consulting costs of $8 million.	
     These increases were offset by:
 	•	 	Other expenses — decreased by $2 million. This decrease is attributable to a bad debt write-off in 2008.	
Acquisition-Related Transaction and Integration Costs
     NRG incurred Reliant Energy acquisition-related transaction costs of $29 million and integration costs of $12 million for the nine months ended September 30, 2009.
Equity in Earnings of Unconsolidated Affiliates
     NRG’s equity earnings from unconsolidated affiliates decreased by $2 million for the nine months ended September 30, 2009, compared to the same period in 2008. During 2009, the Company’s share in Gladstone Power Station and MIBRAG decreased by $7 million and $11 million, respectively. These decreases were offset by the Company’s share of NRG Saguaro, LLC earnings increasing $9 million in 2009. In addition, there was a $7 million decrease in Sherbino I Wind Farm, LLC’s mark-to-market unrealized loss as compared to 2008 as a result of a natural gas swap executed to hedge to future power generation.
Gain on Sale of Equity Method Investments and Other Income/(Loss), Net
     NRG’s gain on sale of equity method investments increased by $128 million for the nine months ended September 30, 2009, compared to the same period in 2008 and other (loss)/income, net decreased by $23 million for the nine months ended September 30, 2009, compared to the same period in 2008. The 2009 amounts include a $128 million gain on the sale of NRG’s 50% ownership interest in MIBRAG and a $24 million mark-to-market unrealized loss on a forward contract for foreign currency executed to hedge the sale proceeds from the MIBRAG sale. In addition, the 2009 interest income was lower compared to 2008 due to lower interest rates. Further in 2008, a $19 million impairment charge was incurred to restructure distressed investments in commercial paper.
Interest Expense
     NRG’s interest expense increased by $33 million for the nine months ended September 30, 2009, compared to the same period in 2008. This increase was primarily due to a $28 million increase in fees incurred during the months of May through September of 2009 on the CSRA facility, a $19 million increase in interest expense as a result of the 2019 Senior Notes issued in June 2009, a $4 million increase related to ineffective portion of the interest rate cash flow hedges on the Company’s Term Loan Facility and a $8 million increase in the amortization of deferred financing costs. These increases were offset by a $25 million decrease in interest expense on the Company’s Term Loan Facility due to a decrease in the outstanding notional amount and lower interest rates related to the unhedged portion of Term Loan and fair value portion of Senior Notes.
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Income Tax Expense
     NRG’s income tax expense increased by $111 million for the nine months ended September 30, 2009, compared to the same period in 2008. The increase in income tax expense was primarily due to an increase in income coupled with the U.S. taxation of foreign earnings. The effective tax rate was 40.3% and 39.1% for the nine months ended September 30, 2009, and 2008, respectively.
     For the nine months ended September 30, 2009, NRG’s overall effective tax rate on continuing operations was different than the statutory rate of 35% primarily due to an increase in the valuation allowance as a result of capital losses generated during the nine months for which there are no projected capital gains or available tax planning strategies. For the nine months ended September 30, 2008, NRG’s overall effective tax rate was increased primarily due to the impact of state and local income taxes.
Income from Discontinued Operations, Net of Income Tax Expense
     For the nine months ended September 30, 2008, NRG recorded income from discontinued operations, net of income tax expense, of $172 million. NRG closed the sale of ITISA during the second quarter 2008.
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Results of Operations for Reliant Energy
     Reliant Energy
     The following is a detailed discussion of the results of operations of NRG’s retail business segment since the date of acquisition.
Operating Strategy
     Reliant Energy’s business is to earn a margin by selling electricity to end use customers, providing innovative and value-enhancing services to such customers, and acquiring supply for the estimated demand. As a retail energy provider, Reliant Energy arranges for the transmission and delivery of electricity to customers, bills customers, collects payment for electricity sold, develops innovative energy solutions, engages in energy efficiency initiatives and maintains call centers to provide customer service. Although NRG has begun the process of becoming the primary provider of Reliant Energy’s supply requirements, Reliant Energy presently purchases a substantial portion of its supply requirements from third parties such as generation companies and power marketers. Transmission and distribution services are purchased from entities regulated by the PUCT and subject to ERCOT protocols.
     The energy usage of Reliant Energy’s retail customers varies by season, with generally higher usage during the summer period. As a result, Reliant Energy’s net working capital requirements generally increase during summer months along with the higher revenues, and then decline during off-peak months.
     As of September 30, 2009, Reliant Energy had 1,161 employees, none of whom are covered by a bargaining agreement.
Customer Segments
     The following is a description of Reliant Energy’s significant customer segments in Texas.
 	•	 	Mass — Reliant Energy’s Mass customer base is made up of approximately 1.6 million residential and small business customers in the ERCOT market with more than half located in the Houston area. Reliant Energy also serves customers in other competitive markets in ERCOT including the Dallas, Fort Worth, and Corpus Christi areas.	
 	 	 	 	
 	•	 	C&I — Reliant Energy markets electricity and energy services to approximately 0.1 million C&I customers in Texas. These customers include refineries, chemical plants, manufacturing facilities, hospitals, universities, commercial real estate, government agencies, restaurants, and other commercial facilities.	
Market Framework
     Reliant Energy operates within the same ERCOT market as the Company’s Texas region. For further discussion of the Texas market framework, see pages 25-26 of NRG Energy Inc.’s 2008 Annual Report on Form 10-K.
     For further discussion of the Company’s Reliant Energy operations, see Item I, Note 4, Business Acquisition, to this Form 10-Q .
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     Selected Income Statement Data
 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Period Ended	
(In millions except otherwise noted)	 	September 30, 2009	 	September 30, 2009 (a)	
 	
Operating Revenues	 	 	 	 	 	 	 	 	
Mass revenues	 	$    	1,157	 	 	$    	1,918	 	
Commercial and industrial revenues	 	 	620	 	 	 	1,057	 	
Supply management revenues	 	 	99	 	 	 	151	 	
Risk management activities	 	 	(1	)	 	 	(1	)	
Contract amortization	 	 	(85	)	 	 	(160	)	
 	
Total operating revenues	 	 	1,790	 	 	 	2,965	 	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	
Cost of energy (including risk management activities)	 	 	1,203	 	 	 	1,817	 	
Other operating expenses	 	 	136	 	 	 	226	 	
Depreciation and amortization	 	 	42	 	 	 	85	 	
 	
Operating Income	 	$    	409	 	 	$    	837	 	
Electricity sales volume — GWh (in thousands):	 	 	 	 	 	 	 	 	
Mass	 	 	7,776	 	 	 	12,627	 	
Commercial and Industrial (b)	 	 	8,199	 	 	 	13,780	 	
Business Metrics	 	 	 	 	 	 	 	 	
Weighted average retail customers count (in thousands, metered locations)	 	 	 	 	 	 	 	 	
Mass	 	 	1,569	 	 	 	1,582	 	
Commercial and Industrial (b)	 	 	68	 	 	 	69	 	
Retail customers count (in thousands, metered locations)	 	 	 	 	 	 	 	 	
Mass	 	 	1,552	 	 	 	1,552	 	
Commercial and Industrial (b)	 	 	66	 	 	 	66	 	
Cooling Degree Days, or CDDs (c)	 	 	1,760	 	 	 	2,731	 	
CDD’s 30 year average	 	 	1,611	 	 	 	2,430	 	
Heating Degree Days, or HDDs (c)	 	 	1	 	 	 	2	 	
HDD’s 30 year average	 	 	2	 	 	 	7	 	

 	 	 	
(a)	 	For the period May 1, 2009, to September 30, 2009.	
(b)	 	Includes customers of the Texas General Land Office for whom the Company provides services.	
(c)	 	National Oceanic and Atmospheric Administration-Climate Prediction Center - A CDD represents the number of degrees that the mean temperature for a particular day is above 65 degrees Fahrenheit in each region. An 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. The CDDs/HDDs amounts are representative of the Coast and North Central Zones within the ERCOT market in which Reliant Energy serves its customer base.	
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Quarterly results
Operating Income
     Operating income for the three months ended September 30, 2009, was $409 million, which consisted of the following:
 	 	 	 	 	
 	 	Three Months Ended	
(In millions except otherwise noted)	 	September 30, 2009	
 	
Reliant Energy Operating Income:	 	 	 	 	
Mass revenues	 	$    	1,157	 	
Commercial and industrial revenues	 	 	620	 	
Supply management revenues	 	 	99	 	
 	
Total retail operating revenues(a)	 	 	1,876	 	
 	
Retail cost of sales (a)	 	 	1,433	 	
 	
Total retail gross margin	 	 	443	 	
Unrealized gains on energy supply derivatives	 	 	217	 	
Contract amortization, net	 	 	(73	)	
Other operating expenses	 	 	(136	)	
Depreciation and amortization	 	 	(42	)	
 	
Operating Income	 	$    	409	 	

 	 	 	
(a)	 	Amounts exclude unrealized gains/(losses) on energy supply derivatives and contract amortization.	

 	•	 	Gross margin — Reliant Energy’s gross margin totaled $443 million for the quarter, which was driven by strong margins in the mass customer segment and expanding margins in the commercial and industrial segment. Volumes were higher due to greater customer usage as a result of warmer weather as compared to the 30 year CDD average, which was partially offset by a decrease in the number of customers during the three months ended September 30, 2009. Reliant Energy announced and enacted price reductions effective June 1 and July 1, 2009, that cumulatively, lowered prices up to 20% for certain Mass customers. These lower prices, relative to lower short term supply costs, delivered strong margins. Competition, price reductions, and supply costs based on forward market prices, will likely drive lower margins in the future.	
 	 	 	 	
 	 	 	Relative to first half of 2009, competitive retail prices have decreased due to lower supply costs driven by a decline in natural gas prices. If supply costs continue to remain low, the Company expects competitive retail prices to continue to decline and place pressure on unit margins. Additionally, the Company’s customer counts have declined approximately 2% during the quarter.	
 	 	 	 	
 	•	 	Risk management activities — Unrealized gains of $217 million on economic hedges relates to supply contracts that were recognized for the three months ended September 2009 including $239 million of gains representing a roll-off of loss positions acquired at May 1, 2009, valued at forward prices and $21 million of losses that represents mark-to-market changes in forward value of purchased electricity and gas. The $239 million gain from roll-off of loss positions is offset by realized losses at the settled prices and reflected in the cost of operations.	
Operating Revenues
     Total operating revenues for the three months ended September 30, 2009, were $1.8 billion and consisted of the following:
 	•	 	Mass revenues — totaled $1,157 million for the quarter from retail electric sales to approximately 1.6 million end use customers in the Texas market. The current quarter revenue rates reflect the price reductions of up to 20% for certain Mass customer classes that were announced and enacted effective June 1 and July 1, 2009. Also, warmer weather, as compared to the 30 year CDD average, caused an increase in customer usage. The higher prices, along with higher usage, were accompanied by a 2% decrease in the number of customers during the quarter.	
 	 	 	 	
 	•	 	Commercial and industrial revenue — As of May 1, 2009, Reliant Energy re-launched its C&I segment. C&I revenues for the three months ended September 30, 2009, totaled $620 million for the quarter on volume sales of approximately 8,199 GWh. Variable rate contracts tied to the market price of natural gas accounted for approximately 69% of the contracted volumes as of September 30, 2009 .	
 	 	 	 	
 	•	 	Contract amortization — reduced operating revenues by $85 million resulting from net in-market C&I contracts, which will continue to amortize over the term of the contracts acquired in the Reliant Energy acquisition.	
 	 	 	 	
 	•	 	Supply management revenues — totaled $99 million for the quarter from the sale of excess supply into various markets in Texas.	
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Cost of Energy
     Cost of energy for the three months ended September 30, 2009, was $1,203 million and consisted of the following:
 	•	 	Supply costs — totaled $837 million for the quarter. The market cost of energy was relatively low during the quarter. This was driven by the lowest natural gas prices in the last three years for the same time period. Also, warmer weather for the period, as compared to the 30 year CDD average, caused an increase in purchased supply volumes at a relatively low cost.	
 	 	 	 	
 	•	 	Risk management activities — Unrealized gains of $218 million on economic hedges relate to supply contracts that were recognized for the three months ended September 30, 2009, including $239 million of gains which represent a roll-off of loss positions acquired at May 1, 2009, valued at forward prices and $21 million of losses that represent mark-to-market changes in forward value of purchased electricity and gas. The $239 million gain from roll-off positions is offset by realized losses at the settled prices and reflected in cost of operations.	
 	 	 	 	
 	•	 	Transmission and distribution charges — totaled $392 million for the quarter for the cost to transport the power from the generation sources to the end use customers.	
 	 	 	 	
 	•	 	Financial settlements — totaled $202 million of losses for the quarter resulting from financial settlement of energy related derivatives.	
 	 	 	 	
 	•	 	Contract amortization — reduced the cost of energy by $11 million, resulting from the net out-of-market supply contracts established at the acquisition date. These contracts will be amortized over the life of the contracts.	
Other Operating Expenses
     Other operating expenses for the three months ended September 30, 2009, were $136 million, or 8% of the region’s total operating revenues. Other operating expenses consisted of the following:
 	•	 	Operations and maintenance expenses — totaled $37 million for the quarter, primarily consisted of the labor and external costs associated with customer activities, including the call center, billing, remittance processing, and credit and collections, as well as the information technology costs associated with those activities.	
 	 	 	 	
 	•	 	Selling, general and administrative expenses — totaled $48 million for the quarter, primarily consisted of the costs of labor and external costs associated with advertising and other marketing activities, as well as human resources, community activities, legal, procurement, regulatory, accounting, internal audit, and management, as well as facilities leases and other office expenses.	
 	 	 	 	
 	•	 	Gross receipts tax — totaled $24 million for the quarter or 1.3% of Mass and C&I revenues.	
 	 	 	 	
 	•	 	Bad debt expense — totaled $28 million for the quarter or 1.6% of Mass and C&I revenues which was driven by higher summer bills due to warmer weather and economic factors including unemployment in Dallas and Houston, which approximated national averages.	
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Year to date results
Operating Income
     Operating income for the period ended September 30, 2009, was $837 million, which consisted of the following:
 	 	 	 	 	
 	 	Period Ended	
(In millions except otherwise noted)	 	September 30, 2009	
 	
Reliant Energy Operating Income:	 	 	 	 	
Mass revenues	 	$    	1,918	 	
Commercial and industrial revenues	 	 	1,057	 	
Supply management revenues	 	 	151	 	
 	
Total retail operating revenues(a)	 	 	3,126	 	
 	
Retail cost of sales (a)	 	 	2,363	 	
 	
Total retail gross margin	 	 	763	 	
Unrealized gains on energy supply derivatives	 	 	520	 	
Contract amortization, net	 	 	(135	)	
Other operating expenses	 	 	(226	)	
Depreciation and amortization	 	 	(85	)	
 	
Operating Income	 	$    	837	 	

 	 	 	
(a)	 	Amounts exclude unrealized gains/(losses) on energy supply derivatives and contract amortization.	

 	•	 	Gross margin — Reliant Energy’s gross margin totaled $763 million, which was driven by strong margins in the mass customer segment and expanding margins in the commercial and industrial segment. Volumes were higher due to greater customer usage as a result of warmer weather as compared to the 30 year CDD average, although partially offset by a decrease in number of customers during the five months ended September 30, 2009. The Company acquired Reliant Energy customers on prices more consistent with 2008 costs of natural gas. Reliant Energy announced and enacted price reductions effective June 1 and July 1, 2009, that cumulatively lowered prices up to 20% for certain Mass customers. These lower prices, relative to lower short term supply costs, delivered strong margins. Competition, price reductions, and supply costs based on forward market prices, will likely drive lower margins in the future.	
 	 	 	 	
 	 	 	With the decline in natural gas prices, and the corresponding decline in the cost of energy supply, competitive retail prices have decreased relative to 2008. If supply costs continue to remain low, the Company expects competitive retail prices to continue to decline and place pressure on unit margins. Additionally, the Company’s customer counts have declined approximately 4% since May 1, 2009.	
 	 	 	 	
 	•	 	Risk management activities — Unrealized gains of $520 million on economic hedges relates to supply contracts that were recognized for the period ended September 2009 including $448 million of gains representing a roll-off of loss positions acquired at May 1, 2009, valued at forward prices and $72 million of gains that represents mark-to-market changes in forward value of purchased electricity and gas. The $448 million gain from roll-off of loss positions is offset by realized losses at the settled prices and reflected in the cost of operations. In August 2009, Reliant Energy entered into two contracts to mitigate a portion of Reliant Energy’s exposure to lost revenue as a result of a hurricane during the 2009 season. The contracts premiums of $5.7 million provided coverage for a $50 million loss.	
Operating Revenues
     Total operating revenues for the period ended September 30, 2009, were $3.0 billion and consisted of the following:
 	•	 	Mass revenues — totaled $1,918 million from retail electric sales to approximately 1.6 million end use customers in the Texas market. Revenue rates for acquired Reliant Energy customers were not consistent with current costs of natural gas. These acquired revenue rates were reduced by Reliant Energy’s announced and enacted price reductions effective June 1 and July 1, 2009 of up to 20% for certain Mass customers classes. Also, warmer weather, as compared to the 30 year CDD average, caused an increase in customer usage. The higher prices, along with higher usage, were accompanied by a 4% decrease in the number of customers since May 1, 2009.	
 	 	 	 	
 	•	 	Commercial and industrial revenue — As of May 1, 2009, Reliant Energy re-launched its C&I segment. C&I revenues for the period ended September 30, 2009, totaled $1,057 million on volume sales of roughly 13,780 GWh. Variable rate contracts tied to the market price of natural gas accounted for approximately 71% of the contracted volumes as of September 30, 2009.	
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 	•	 	Contract amortization — reduced operating revenues by $160 million resulting from net in-market C&I contracts, which will continue to amortize over the term of the contracts acquired in the Reliant Energy acquisition.	
 	 	 	 	
 	•	 	Supply management revenues — totaled $151 million from the sale of excess supply into various markets in Texas.	
Cost of Energy
     Cost of energy for the period ended September 30, 2009, was $1,817 million and consisted of the following:
 	•	 	Supply costs — totaled $1,387 million. The market cost of energy is significantly down for the period. Natural gas prices have declined 69% since the same period last year. Also, warmer weather for the period, as compared to the 30 year CDD average, caused an increase in purchased supply volumes at a relatively low cost.	
 	 	 	 	
 	•	 	Risk management activities — Unrealized gains of $521 million on economic hedges relate to supply contracts that were recognized for the period ended September 30, 2009, including $449 million of gains which represent a roll-off of loss positions acquired at May 1, 2009, valued at forward prices and $72 million of gains that represent mark-to-market changes in forward value of purchased electricity and gas. The $449 million gain from roll-off of loss positions is offset by realized losses at the settled prices and reflected in cost of operations.	
 	 	 	 	
 	•	 	Transmission and distribution charges — totaled $659 million for the cost to transport the power from the generation sources to the end use customers.	
 	 	 	 	
 	•	 	Financial settlements — totaled $316 million resulting from financial settlement of energy related derivatives.	
 	 	 	 	
 	•	 	Contract amortization — reduced the cost of energy by $24 million, resulting from the net out-of-market supply contracts established at the acquisition date. These contracts will be amortized over the life of the contracts.	
Other Operating Expenses
     Other operating expenses for the period ended September 30, 2009, were $226 million, or 8% of the region’s total operating revenues. Other operating expenses consisted of the following:
 	•	 	Operations and maintenance expenses — totaled $62 million, primarily consisted of the labor and external costs associated with customer activities, including the call center, billing, remittance processing, and credit and collections, as well as the information technology costs associated with those activities.	
 	 	 	 	
 	•	 	Selling, general and administrative expenses — totaled $88 million, primarily consisted of the costs of labor and external costs associated with advertising and other marketing activities, as well as human resources, community activities, legal, procurement, regulatory, accounting, internal audit, and management, as well as facilities leases and other office expenses.	
 	 	 	 	
 	•	 	Gross receipts tax — totaled $39 million or 1.3% of Mass and C&I revenues.	
 	 	 	 	
 	•	 	Bad debt expense — totaled $37 million or 1.2% of Mass and C&I revenues which was driven by higher summer bills due to warmer weather and economic factors including unemployment in Dallas and Houston which approximated national averages.	
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Results of Operations for Wholesale Power Generation Regions
     The following is a detailed discussion of the results of operations of NRG’s major wholesale power generation business segments.
     Texas
     For a discussion of the business profile of the Company’s Texas operations, see pages 23-26 of NRG Energy, Inc.’s 2008 Annual Report on Form 10-K.
Selected Income Statement Data
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30,	 	Nine months ended September 30,	
(In millions except otherwise noted)	 	2009	 	2008	 	Change %	 	2009	 	2008	 	Change %	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Energy revenue	 	$  	672	 	 	$  	873	 	 	 	(23	)%	 	$  	1,866	 	 	$  	2,344	 	 	 	(20	)%	
Capacity revenue	 	 	50	 	 	 	129	 	 	 	(61	)	 	 	144	 	 	 	366	 	 	 	(61	)	
Risk management activities	 	 	14	 	 	 	552	 	 	 	(97	)	 	 	223	 	 	 	29	 	 	 	N/A	 	
Contract amortization	 	 	17	 	 	 	69	 	 	 	(75	)	 	 	49	 	 	 	215	 	 	 	(77	)	
Other revenues	 	 	7	 	 	 	14	 	 	 	(50	)	 	 	22	 	 	 	83	 	 	 	(73	)	
 	
Total operating revenues	 	 	760	 	 	 	1,637	 	 	 	(54	)	 	 	2,304	 	 	 	3,037	 	 	 	(24	)	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of energy (including risk management activities)	 	 	296	 	 	 	366	 	 	 	(19	)	 	 	770	 	 	 	1,037	 	 	 	(26	)	
Other operating expenses	 	 	164	 	 	 	154	 	 	 	6	 	 	 	486	 	 	 	468	 	 	 	4	 	
Depreciation and amortization	 	 	119	 	 	 	108	 	 	 	10	 	 	 	353	 	 	 	334	 	 	 	6	 	
 	
Operating Income	 	$  	181	 	 	$  	1,009	 	 	 	(82	)	 	$  	695	 	 	$  	1,198	 	 	 	(42	)	
MWh sold (in thousands)	 	 	13,979	 	 	 	13,111	 	 	 	7	 	 	 	36,485	 	 	 	36,817	 	 	 	(1	)	
MWh generated (in thousands)	 	 	12,534	 	 	 	12,891	 	 	 	(3	)	 	 	34,527	 	 	 	36,147	 	 	 	(4	)	
Business Metrics	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average on-peak market power prices ($/MWh)	 	 	33.68	 	 	 	102.82	 	 	 	(67	)	 	 	37.51	 	 	 	112.80	 	 	 	(67	)	
Cooling Degree Days, or CDDs (a)	 	 	1,601	 	 	 	1,417	 	 	 	13	 	 	 	2,709	 	 	 	2,509	 	 	 	8	 	
CDD’s 30 year average	 	 	1,485	 	 	 	1,485	 	 	 	—	 	 	 	2,433	 	 	 	2,434	 	 	 	—	 	
Heating Degree Days, or HDDs (a)	 	 	5	 	 	 	6	 	 	 	(17	)%	 	 	1,008	 	 	 	1,163	 	 	 	(13	)	
HDD’s 30 year average	 	 	5	 	 	 	5	 	 	 	—	 	 	 	1,210	 	 	 	1,221	 	 	 	(1	)%	

 	 	 	
(a)	 	National Oceanic and Atmospheric Administration-Climate Prediction Center - A CDD represents the number of degrees that the mean temperature for a particular day is above 65 degrees Fahrenheit in each region. An 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.	
Quarterly Results
Operating Income
     Operating income decreased by $828 million for the three months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Operating revenues — decreased by $877 million due to a reduced impact from risk management activities, in addition to lower energy revenues due to lower average energy prices and lower sales volume.	
 	 	 	 	
 	•	 	Cost of energy — decreased by $70 million resulting from lower natural gas costs.	
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Operating Revenues
     Total operating revenues decreased by $877 million during the three months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Risk management activities — decreased by $538 million due to the difference between gains of $14 million for the three months ending September 30, 2009, compared to gains of $552 million during the same period in 2008. The $14 million gain included $102 million of unrealized mark-to-market losses and $116 million in gains on settled transactions, or financial income, compared to $596 million in unrealized mark-to-market gains and $44 million in financial losses during the same period in 2008. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
 	 	 	 	
 	•	 	Energy revenues — decreased $201 million due to:	

 	o	 	Energy prices — decreased by $177 million as the prices continue to remain lower in the third quarter 2009 compared to the same period 2008. The average realized energy price decreased by 21%, driven by a 53% decrease in merchant prices offset by a 21% increase in contract prices.	
 	 	 	 	
 	o	 	Generation — decreased by 3% resulting in a $24 million decrease in sales volume. This decrease was driven by an 11% decrease in coal plant generation and an 8% decrease in nuclear plant generation. Coal plant generation was adversely affected by lower energy prices driven by a 64% decrease in average natural gas prices. This was offset by a 47% increase in gas plant generation due to very warm temperatures in the third quarter 2009 compared to the same period 2008, as well as generation from the recently constructed Cedar Bayou 4 gas plant and Elbow Creek wind farm which began commercial operations in June 2009 and December of 2008, respectively.	

 	•	 	Capacity revenue — decreased by $79 million due to a lower proportion of baseload contracts which contain a capacity component.	
 	 	 	 	
 	•	 	Contract amortization revenue — resulting from the Texas Genco acquisition decreased by $52 million due to the reduced volume of contracted energy in 2009 as compared to 2008.	
 	 	 	 	
 	•	 	Other revenue — decreased by $7 million primarily due to lower ancillary services revenue of $16 million. This decrease was offset by $6 million higher physical sales of natural gas and coal and $1 million higher emissions credit revenue.	
Cost of Energy
     Cost of energy decreased by $70 million during the three months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Natural gas costs — decreased by $84 million due to a 64% decline in average natural gas prices offset by a 47% increase in gas-fired generation.	
 	 	 	 	
 	•	 	Ancillary services costs — decreased by $19 million due to a decrease in purchased ancillary services costs incurred to meet obligations.	
 	 	 	 	
 	•	 	Coal and nuclear fuel costs — decreased by $7 million due to lower generation, offset by an $8 million increase in nuclear fuel due to the reversal of amortization of nuclear fuel inventory established under Texas Genco accounting.	
     These decreases were offset by:
 	•	 	Purchased energy — increased $13 million due to baseload units either unavailable or uneconomic to provide power for contract commitments.	
 	 	 	 	
 	•	 	Cost contract amortization – increased $10 million driven primarily by the reduction in amortization credit for out-of-the money coal contracts assumed in the acquisition of Texas Genco as coal is delivered under that contract.	
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 	•	 	Fuel risk management activities — losses of $11 million were recorded for the three months ending September 30, 2009. In the first quarter 2009, all NPNS coal contracts were discontinued and reclassified into mark-to-market accounting. The $11 million loss included $7 million of unrealized mark-to-market losses, largely associated with forward coal positions and $4 million in losses on settled transactions, or financial cost of energy. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
Other Operating Expenses
     Other operating expenses increased by $10 million during the three months ended September 30, 2009, compared to the same period in 2008, driven by an increase of $9 million in general and administrative expenses due to higher corporate allocations as a result of the change in method in allocating corporate costs as described in Note 12,  Segment Reporting,  in combination with a $3 million increase in operations and maintenance expense as a result of maintenance outages at the region’s baseload plants.
Depreciation and Amortization
     Depreciation and amortization expense increased by $11 million for the three months ended September 30, 2009, compared to the same period in 2008. This increase is the result of Cedar Bayou 4 and Elbow Creek reaching commercial operations in June 2009 and December 2008, respectively.
Year to date results
Operating Income
     Operating income decreased by $503 million for the nine months ended September 30, 2009, compared to the same period in 2008, primarily due to:
 	•	 	Operating revenues — decreased by $733 million due to unfavorable energy and capacity revenues offset by favorable impact of risk management activities.	
 	 	 	 	
 	•	 	Cost of energy — decreased by $267 million reflecting lower natural gas costs and a decrease in coal generation.	
Operating Revenues
     Total operating revenues decreased by $733 million during the nine months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Energy revenues — decreased $478 million due to:	

 	o	 	Energy prices — decreased by $373 million as the average realized merchant price was lower in 2009 due to the combination of lower gas prices and unusually high pricing events that occurred in 2008 but did not repeat in 2009. Higher MWh sold under merchant market was offset by lower merchant prices. The average realized energy price decreased by 17%, driven by a 52% decrease in merchant prices offset by a 23% increase in contract prices.	
 	 	 	 	
 	o	 	Generation — decreased by 5% resulting in a $105 million decrease in sales volume. This decrease was driven by a 9% decrease in coal plant generation. This was offset by a 6% increase in gas plant generation, and generation from the recently constructed Cedar Bayou 4 gas plant and Elbow Creek wind farm which began commercial operation in June 2009 and December 2008, respectively. Coal plant generation was adversely affected by lower energy prices driven by a 66% decrease in average natural gas prices in combination with increased wind generation in the region.	

 	•	 	Capacity revenue — decreased by $222 million due to a lower proportion of baseload contracts which contain a capacity component.	
 	 	 	 	
 	•	 	Risk management activities — increased by $194 million due to the difference between gains of $223 million recorded for the nine months ending September 30, 2009, compared to gains of $29 million during the same period in 2008. The $223 million gain included $36 million of unrealized mark-to-market losses and $259 million in gains on settled transactions, or financial income, compared to $123 million in unrealized mark-to-market gains and $94 million in financial losses during the same period in 2008. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
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 	•	 	Contract amortization revenue — resulting from the Texas Genco acquisition decreased by $166 million due to the reduced volume of contracted energy in 2009 as compared to 2008.	
 	 	 	 	
 	•	 	Other revenue — decreased by $61 million primarily due to lower ancillary services revenue of $41 million provided to the market, lower emissions credit revenue of $13 million and reduced physical sales of natural gas and coal of $7 million.	
Cost of Energy
     Cost of energy decreased by $267 million during the nine months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Natural gas costs — decreased by $281 million due to a 66% decline in average natural gas prices offset by a 6% increase in gas-fired generation.	
 	 	 	 	
 	•	 	Ancillary service costs — decreased by $41 million due to a decrease in purchased ancillary services costs incurred to meet contract obligations.	
 	 	 	 	
 	•	 	Coal costs — decreased by $17 million as the first three months of 2008 included a $15 million loss reserve related to a coal contract dispute in addition to a decrease of $6 million due to lower generation. These decreases were offset by higher transportation costs of $9 million.	
     These decreases were offset by:
 	•	 	Fuel risk management activities — losses of $65 million were recorded for the nine months ending September 30, 2009. In the first quarter 2009, all NPNS coal contracts were discontinued and reclassified into mark-to-market accounting. The $65 million loss included $48 million of unrealized mark-to-market losses, largely associated with forward coal positions and $17 million in losses on settled transactions, or financial cost of energy. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
Other Operating Expenses
     Other operating expenses increased by $18 million during the nine months ended September 30, 2009, compared to the same period in 2008, driven by an increase of $14 million in general and administrative expense due to higher corporate allocations as a result of the change in method in allocating corporate costs as described in Note 12,  Segment Reporting,  to this Form 10-Q. In addition there was an increase of $4 million for development expense as prior year results included a one time credit due to the reimbursement by the Company’s nuclear development partner of previously expensed development costs on STP units 3 and 4 of $8 million.
Depreciation and Amortization
     Depreciation and amortization expense increased by $19 million for the nine months ended September 30, 2009, compared to the same period in 2008. This increase was the result of Cedar Bayou 4 and Elbow Creek reaching commercial operations in June 2009 and December 2008, respectively.
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     Northeast Region
     For a discussion of the business profile of the Northeast region, see pages 27-29 of NRG Energy, Inc.’s 2008 Annual Report on Form 10-K.
Selected Income Statement Data
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30,	 	Nine months ended September 30,	
(In millions except otherwise noted)	 	2009	 	2008	 	Change %	 	2009	 	2008	 	Change %	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Energy revenue	 	$  	123	 	 	$  	324	 	 	 	(62	)%	 	$  	383	 	 	$  	873	 	 	 	(56	)%	
Capacity revenue	 	 	120	 	 	 	117	 	 	 	3	 	 	 	316	 	 	 	328	 	 	 	(4	)	
Risk management activities	 	 	19	 	 	 	168	 	 	 	(89	)	 	 	252	 	 	 	(16	)	 	 	N/A	 	
Other revenues	 	 	8	 	 	 	13	 	 	 	(38	)	 	 	20	 	 	 	62	 	 	 	(68	)	
 	
Total operating revenues	 	 	270	 	 	 	622	 	 	 	(57	)	 	 	971	 	 	 	1,247	 	 	 	(22	)	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of energy (including risk management activities)	 	 	90	 	 	 	198	 	 	 	(55	)	 	 	265	 	 	 	557	 	 	 	(52	)	
Other operating expenses	 	 	88	 	 	 	89	 	 	 	(1	)	 	 	276	 	 	 	273	 	 	 	1	 	
Depreciation and amortization	 	 	29	 	 	 	26	 	 	 	12	 	 	 	88	 	 	 	77	 	 	 	14	 	
 	
Operating Income	 	$  	63	 	 	$  	309	 	 	 	(80	)	 	$  	342	 	 	$  	340	 	 	 	1	 	
MWh sold (in thousands)	 	 	2,508	 	 	 	3,588	 	 	 	(30	)	 	 	6,779	 	 	 	10,424	 	 	 	(35	)	
MWh generated (in thousands)	 	 	2,508	 	 	 	3,588	 	 	 	(30	)	 	 	6,779	 	 	 	10,424	 	 	 	(35	)	
Business Metrics	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average on-peak market power prices ($/MWh)  (b)	 	 	40.42	 	 	 	108.44	 	 	 	(63	)	 	 	46.13	 	 	 	100.66	 	 	 	(54	)	
Cooling Degree Days, or CDDs (a)	 	 	419	 	 	 	446	 	 	 	(6	)	 	 	496	 	 	 	611	 	 	 	(19	)	
CDD’s 30 year average	 	 	429	 	 	 	430	 	 	 	—	 	 	 	534	 	 	 	534	 	 	 	—	 	
Heating Degree Days, or HDDs (a)	 	 	129	 	 	 	135	 	 	 	(4	)	 	 	4,126	 	 	 	3,866	 	 	 	7	 	
HDD’s 30 year average	 	 	158	 	 	 	159	 	 	 	(1	)%	 	 	4,093	 	 	 	4,126	 	 	 	(1	)%	

 	 	 	
(a)	 	National Oceanic and Atmospheric Administration-Climate Prediction Center - A CDD represents the number of degrees that the mean temperature for a particular day is above 65 degrees Fahrenheit in each region. An 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)	 	MWh sold are shown net of MWh purchased to satisfy certain load contracts in the region.	
Quarterly Results
Operating Income
     Operating income decreased by $246 million for the three months ended September 30, 2009, compared to the same period in 2008 due to:
 	•	 	Operating revenues — decreased by $352 million due to unfavorable energy revenues and an unfavorable impact from risk management activities.	
 	 	 	 	
 	•	 	Cost of energy — decreased by $108 million due to lower generation and fuel costs.	
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Operating Revenues
     Operating revenues decreased by $352 million for the three months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Energy revenues — decreased by $201 million due to:	

 	o	 	Energy prices — decreased by $120 million reflecting an average 52% decline in merchant energy prices. This decrease was partially offset by higher net contract revenues of $18 million driven by lower net costs incurred in meeting obligations under load serving contracts in the PJM market.	
 	 	 	 	
 	o	 	Generation — decreased by $99 million due to a 30% decrease in generation in 2009 compared to 2008, with a 34% decrease in coal generation and a 9% decrease in oil and gas generation. Coal generation in western New York declined 33%, or 568,247 MWhs, due to weak power prices that made the plants uneconomic to dispatch. Coal generation at the Indian River plant declined 35%, or 305,203 MWhs, due to a combination of weakened demand for power, low gas prices and higher cost of production from compliance with RGGI resulting in increased hours where the units were uneconomic to dispatch. The Somerset plant experienced similar weakened demand and low gas prices, with generation down 82%, or 111,819 MWh.	
     These decreases were offset by:
 	•	 	Risk management activities — gains of $19 million were recorded for the three months ending September 30, 2009, compared to gains of $168 million during the same period in 2008. The $19 million gain included $99 million of unrealized mark-to-market losses and $118 million in gains on settled transactions, or financial income, compared to $211 million in unrealized mark-to-market gains and $43 million in financial losses during the same period in 2008. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
Cost of Energy
 	•	 	Cost of energy decreased by $108 million for the three months ended September 30, 2009, compared to the same period in 2008, due to:	

 	o	 	Natural gas and oil costs — decreased by $53 million, or 57%, due to 9% lower generation and 67% lower average natural gas prices.	
 	 	 	 	
 	o	 	Coal costs — decreased by $39 million, or 38%, due to lower coal generation of 34% accounting for $33 million and lower prices accounting for $6 million.	
 	 	 	 	
 	o	 	Fuel risk management activities — gains of $22 million were recorded for the three months ending September 30, 2009. In the first quarter 2009, all NPNS coal contracts were discontinued and reclassified into mark-to-market accounting. The $22 million gain included $23 million of mark-to-market gains, largely associated with forward coal positions and $1 million in losses on settled transactions, or financial cost of energy. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
     These decreases were offset by:
 	•	 	Carbon emission expense — increased by $6 million due to the January 1, 2009, implementation of RGGI and the recognition of carbon compliance cost under this program.	
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Year-to-Date Results
Operating Income
     Operating income increased by $2 million for the nine months ended September 30, 2009, compared to the same period in 2008 due to:
 	•	 	Cost of energy — decreased by $292 million due to lower generation and fuel costs.	
     This decrease was offset by:
 	•	 	Operating revenues — decreased by $276 million due to unfavorable energy revenues, other revenues and capacity revenues partially offset by a favorable impact from risk management activities.	
 	 	 	 	
 	•	 	Depreciation and amortization — increased by $11 million primarily due to depreciation from the 2009 baghouse projects at our Western New York coal plants and additional depreciation recognized in 2009 compared to 2008 from the June 2008 Cos Cob repowering project.	
Operating Revenues
     Operating revenues decreased by $276 million for the nine months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Energy revenues — decreased by $490 million due to:	

 	o	 	Energy prices — decreased by $231 million reflecting an average 40% decline in merchant energy prices. This decrease was partially offset by higher net contract revenues of $53 million driven by lower net costs incurred in meeting obligations under load serving contracts in the PJM market.	
 	 	 	 	
 	o	 	Generation — decreased by $312 million due to a 35% decrease in generation in 2009 compared to 2008, driven by a 36% decrease in coal generation and a 28% decrease in oil and gas generation. Coal generation in western New York declined 31% or 1,480,454 MWhs due to weak power prices that made the plants uneconomic to dispatch. Coal generation at the Indian River plant declined 44% or 1,257,936 MWhs due to a combination of weakened demand for power, low gas prices and higher cost of production from the introduction of RGGI resulting in increased hours where the units were uneconomic to dispatch. The Somerset plant experienced similar weakened demand and low gas prices, with generation down 79% or 408,435 MWh. The decline in oil and gas generation is attributable to fewer reliability run hours at the Norwalk plant and a higher maintenance work at the Arthur Kill plant in 2009.	

 	•	 	Other revenues — decreased by $42 million due to $22 million from decreased activity in the trading of emission allowances and $17 million lower allocations of net physical gas sales.	
 	 	 	 	
 	•	 	Capacity revenues — decreased by $12 million due to lower capacity cash flow revenue in New York in 2009.	
     These decreases were offset by:
 	•	 	Risk management activities — gains of $252 million were recorded for the nine months ending September 30, 2009, compared to losses of $16 million during the same period in 2008. The $252 million gain included $22 million of unrealized mark-to-market losses and $274 million in gains on settled transactions, or financial income, compared to $51 million in unrealized mark-to-market gains and $67 million in financial losses during the same period in 2008. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
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Cost of Energy
 	•	 	Cost of energy decreased by $292 million for the nine months ended September 30, 2009, compared to the same period in 2008, due to:	

 	o	 	Natural gas and oil costs — decreased by $160 million, or 61%, due to 28% lower generation and 60% lower average natural gas prices.	
 	 	 	 	
 	o	 	Coal costs — decreased by $108 million, or 38%, due to lower coal generation of 36% accounting for $106 million and lower prices accounting for $2 million.	
 	 	 	 	
 	o	 	Fuel risk management activities — gains of $37 million were recorded for the nine months ended September 30, 2009. In the first quarter 2009, all NPNS coal contracts were discontinued and reclassified to mark-to-market accounting. The $37 million gain included $43 million of unrealized mark-to-market gains, largely associated with forward coal positions and $6 million in losses on settled transactions, or financial cost of energy. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
     These decreases were offset by:
 	o	 	Carbon emission expense — increased by $15 million due to the January 1, 2009, implementation of RGGI and the recognition of carbon compliance cost under this program.	
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     South Central Region
     For a discussion of the business profile of the South Central region, see pages 29-31 of NRG Energy, Inc.’s 2008 Annual Report on Form 10-K.
Selected Income Statement Data
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30,	 	Nine months ended September 30,	
(In millions except otherwise noted)	 	2009	 	2008	 	Change%	 	2009	 	2008	 	Change%	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Energy revenue	 	$  	90	 	 	$  	145	 	 	 	(38	)%	 	$  	267	 	 	$  	375	 	 	 	(29	)%	
Capacity revenue	 	 	71	 	 	 	59	 	 	 	20	 	 	 	204	 	 	 	174	 	 	 	17	 	
Risk management activities	 	 	(27	)	 	 	24	 	 	 	N/A	 	 	 	(46	)	 	 	14	 	 	 	N/A	 	
Contract amortization	 	 	8	 	 	 	7	 	 	 	14	 	 	 	19	 	 	 	18	 	 	 	6	 	
Other revenues	 	 	1	 	 	 	(1	)	 	 	N/A	 	 	 	—	 	 	 	4	 	 	 	N/A	 	
 	
Total operating revenues	 	 	143	 	 	 	234	 	 	 	(39	)	 	 	444	 	 	 	585	 	 	 	(24	)	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of energy (including risk management activities)	 	 	122	 	 	 	156	 	 	 	(22	)	 	 	324	 	 	 	360	 	 	 	(10	)	
Other operating expenses	 	 	27	 	 	 	25	 	 	 	8	 	 	 	76	 	 	 	80	 	 	 	(5	)	
Depreciation and amortization	 	 	16	 	 	 	16	 	 	 	—	 	 	 	50	 	 	 	50	 	 	 	—	 	
 	
Operating (Loss)/Income	 	$	(22	)	 	$  	37	 	 	 	(159	)	 	$	(6	)	 	$  	95	 	 	 	(106	)	
MWh sold (in thousands)	 	 	3,243	 	 	 	3,383	 	 	 	(4	)	 	 	9,204	 	 	 	9,448	 	 	 	(3	)	
MWh generated (in thousands)	 	 	2,727	 	 	 	2,828	 	 	 	(4	)	 	 	7,819	 	 	 	8,469	 	 	 	(8	)	
Business Metrics	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average on-peak market power prices ($/MWh)	 	 	29.50	 	 	 	84.88	 	 	 	(65	)	 	 	33.00	 	 	 	79.14	 	 	 	(58	)	
Cooling Degree Days, or CDDs (a)	 	 	952	 	 	 	1,027	 	 	 	(7	)	 	 	1,540	 	 	 	1,577	 	 	 	(2	)	
CDD’s 30 year average	 	 	997	 	 	 	997	 	 	 	—	 	 	 	1,486	 	 	 	1,487	 	 	 	—	 	
Heating Degree Days, or HDDs (a)	 	 	14	 	 	 	16	 	 	 	(13	)%	 	 	2,108	 	 	 	2,239	 	 	 	(6	)	
HDD’ 30 year average	 	 	33	 	 	 	33	 	 	 	—	 	 	 	2,227	 	 	 	2,246	 	 	 	(1	)%	

 	 	 	
(a)	 	National Oceanic and Atmospheric Administration-Climate Prediction Center - A CDD represents the number of degrees that the mean temperature for a particular day is above 65 degrees Fahrenheit in each region. An 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.	
Quarterly Results
     Operating income decreased by $59 million for the three months ended September 30, 2009, compared to the same period in 2008, primarily due to:
 	•	 	Operating revenues — decreased by $91 million due to decreases in energy revenue and risk management activities offset by increased capacity revenue.	
 	 	 	 	
 	•	 	Cost of energy — decreased by $34 million due to lower purchased energy, fuel and transmission costs, offset by higher fuel risk management activities.	
 	 	 	 	
 	•	 	Other operating expenses — increased by $2 million due to higher maintenance expense offset by lower general and administrative costs.	
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Operating Revenues
     Operating revenues decreased by $91 million for the three months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Energy revenues — decreased by $55 million due to a $24 million decline in contract revenue coupled with a decrease of $31 million in merchant energy revenues. Total MWh sales to the region’s contract customers were down 7% while the average realized price on contract energy sales was $22.83 per MWh in 2009 compared to $29.19 per MWh in 2008. The decline in contract energy price was driven by a $7 million decrease in fuel cost pass through from the cooperatives. Also contributing to the decline in contract revenue was $17 million due to the expiration of a contract with a regional utility. The expiration of the contract allowed more energy to be sold into the merchant market, but at lower average prices resulting in a $31 million decline in revenue. Megawatt hours sold to the merchant market increased by 18% as increased use of the region’s tolled facility provided additional energy to the merchant market while prices fell by 61% to $54.52/MWh.	
 	 	 	 	
 	•	 	Risk management activities — losses of $27 million were recorded for the three months ending September 30, 2009, compared to gains of $24 million during the same period in 2008. The $27 million loss included $25 million of unrealized mark-to-market losses and $2 million in losses on settled transactions, or financial income, compared to $28 million in unrealized mark-to-market gains and $4 million in financial losses during the same period in 2008. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
 	 	 	 	
 	•	 	Capacity revenues — capacity revenue increased by $12 million due to an $11 million increase from a new capacity agreement and a $1 million increase in capacity revenue from the region’s Rockford plants which dispatch into the PJM market.	
Cost of Energy
     Cost of energy decreased by $34 million for the three months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Purchased energy — Total purchased energy and capacity decreased by $35 million. Purchased energy costs decreased by $35 million reflecting a 2% decrease in MWhs purchased and a 65% decrease in price reflecting lower fuel costs associated with energy from the region’s tolled facility and lower costs of market purchases.	
 	 	 	 	
 	•	 	Natural gas expense — decreased by $14 million reflecting an 88% decrease in gas generation and a 61% decrease in gas prices. The region’s gas facilities ran extensively to support transmission system stability following hurricane Gustav in September 2008.	
 	 	 	 	
 	•	 	Coal expense — decreased $2 million as cost per ton was $31.94 compared to $32.46 for the same period last year reflecting lower fuel transportation surcharges partially offset by increased transportation contract rates.	
     These decreases were offset by:
 	•	 	Fuel risk management activities — losses of $17 million were recorded for the three months ending September 30, 2009. In the first quarter 2009, all NPNS coal contracts were discontinued and reclassified into mark-to-market accounting. The $17 million loss included $16 million of unrealized mark-to-market losses, largely associated with forward coal positions and $1 million in losses on settled transactions, or financial cost of energy. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
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Other Operating Expenses
     Other operating expense increased by $2 million for the three months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Operations and maintenance expense — increased by $4 million because of work done on river docking facility used for barge unloading and expenditures in preparation for fall outages.	
 	 	 	 	
 	•	 	General and administrative expense — declined by $2 million due to lower corporate allocations as such costs are spread over a wider base following the Reliant Energy acquisition.	
Year-to-Date Results
     Operating income decreased by $101 million for the nine months ended September 30, 2009, compared to the same period in 2008, primarily due to:
 	•	 	Operating revenues — decreased by $141 million due to decreases in energy revenue, risk management activities, and other revenue. These decreases were offset by an increase in capacity revenue.	
 	 	 	 	
 	•	 	Cost of energy — decreased by $36 million due to lower purchased energy, fuel and transmission costs, offset by higher fuel risk management activities.	
 	 	 	 	
 	•	 	Other operating expenses — decreased by $4 million because of lower general and administrative costs.	
Operating Revenues
     Operating revenues decreased by $141 million for the nine months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Energy revenues — decreased by $108 million due to a $66 million decline in contract revenue coupled with a $42 million decrease in merchant energy revenues. Contract customer sales volumes were down 10% while the average realized price on contract energy sales was $23.04 per MWh in 2009 compared to $28.89 per MWh in 2008. The decline in contract energy price was driven by a $12 million decrease in fuel cost pass through to the cooperatives. Also contributing to the decline in contract revenue was $48 million due to the expiration of a contract with a regional utility. The expiration of the contract allowed more energy to be sold into the merchant market, but at lower average prices resulting in a $42 million decline in revenue. Megawatt hours sold to the merchant market increased by 41%, while prices fell by 50% to $52.10/MWh. Increased use of the region’s tolled facility provided additional energy to the merchant market.	
 	 	 	 	
 	•	 	Risk management activities — losses of $46 million were recorded for the nine months ending September 30, 2009, compared to gains of $14 million during the same period in 2008. The $46 million loss included $55 million of unrealized mark-to-market losses offset by $9 million in gains on settled transactions, or financial income, compared to $18 million in unrealized mark-to-market gains offset by $4 million in financial losses during the same period in 2008. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities	
 	 	 	 	
 	•	 	Other revenue — declined by $4 million due to $1 million in lower physical coal and natural gas sales and $3 million reduction in emission sales.	
     These decreases were offset by:
 	•	 	Capacity revenues — increased by $30 million due to a $30 million increase from new capacity agreements with regional utilities and a $5 million increase in capacity revenue from the region’s Rockford plants which dispatch into the PJM market, offset by lower contract capacity revenue of $5 million.	
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Cost of Energy
     Cost of energy decreased by $36 million for the nine months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Purchased energy — decreased by $52 million while purchased capacity increased by $3 million. The lower purchased energy reflects lower fuel costs associated with the region’s tolled facility and lower market energy prices. The energy declines were offset by higher capacity payments of $3 million on tolled facilities.	
 	 	 	 	
 	•	 	Natural gas expense – decreased by $13 million reflecting a 32% decrease in gas generation and a 58% decrease in gas prices. The region’s gas facilities ran extensively to support transmission system stability following hurricane Gustav in September 2008.	
 	 	 	 	
 	•	 	Transmission expense — decreased by $5 million due to certain transmission line outages between electrical power regions which limited merchant energy volumes that would attract transmission costs as well as lower network interchange transmission costs associated with reduced contract customer energy volumes.	
 	 	 	 	
 	•	 	Coal expense — decreased $4 million as coal generation was down 7%, offset by a 5% increase in cost per ton.	
     These decreases were offset by:
 	•	 	Fuel risk management activities — losses of $33 million were recorded for the nine months ending September 30, 2009. In the first quarter 2009, all NPNS coal contracts were discontinued and reclassified into mark-to-market accounting. The $33 million loss included $26 million of unrealized mark-to-market losses largely associated with forward coal positions and $7 million in losses on settled transactions, or financial cost of energy. Please refer to the consolidated Management’s Discussion and Analysis for a more complete description of movements in risk management activities.	
Other Operating Expenses
     Other operating expense decreased by $4 million for the nine months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	General and administrative expense — declined by $4 million due to lower corporate allocations as such costs are spread over a wider base following the Reliant Energy acquisition.	
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     West Region
     For a discussion of the business profile of the West region, see pages 31-33 of NRG Energy, Inc.’s 2008 Annual Report on Form 10-K.
Selected Income Statement Data
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three months ended September 30,	 	Nine months ended September 30,	
(In millions except otherwise noted)	 	2009	 	2008	 	Change%	 	2009	 	2008	 	Change%	
 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Energy revenue	 	$  	15	 	 	$  	12	 	 	 	25	%	 	$  	22	 	 	$  	25	 	 	 	(12	)%	
Capacity revenue	 	 	33	 	 	 	28	 	 	 	18	 	 	 	93	 	 	 	97	 	 	 	(4	)	
Risk management activities	 	 	(9	)	 	 	—	 	 	 	N/A	 	 	 	(6	)	 	 	—	 	 	 	N/A	 	
Other revenues	 	 	1	 	 	 	—	 	 	 	N/A	 	 	 	1	 	 	 	5	 	 	 	(80	)	
 	
Total operating revenues	 	 	40	 	 	 	40	 	 	 	—	 	 	 	110	 	 	 	127	 	 	 	(13	)	
Operating Costs and Expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of energy (including risk management activities)	 	 	10	 	 	 	11	 	 	 	(9	)	 	 	17	 	 	 	25	 	 	 	(32	)	
Other operating expenses	 	 	15	 	 	 	14	 	 	 	7	 	 	 	61	 	 	 	52	 	 	 	17	 	
Depreciation and amortization	 	 	2	 	 	 	2	 	 	 	—	 	 	 	6	 	 	 	6	 	 	 	—	 	
 	
Operating Income	 	$  	13	 	 	$  	13	 	 	 	—	 	 	$  	26	 	 	$  	44	 	 	 	(41	)	
MWh sold (in thousands)	 	 	569	 	 	 	534	 	 	 	7	 	 	 	921	 	 	 	1,002	 	 	 	(8	)	
MWh generated (in thousands)	 	 	569	 	 	 	534	 	 	 	7	 	 	 	921	 	 	 	1,002	 	 	 	(8	)	
Business Metrics	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average on-peak market power prices ($/MWh)	 	 	38.78	 	 	 	96.72	 	 	 	(60	)	 	 	37.46	 	 	 	91.52	 	 	 	(59	)	
Cooling Degree Days, or CDDs (a)	 	 	741	 	 	 	687	 	 	 	8	 	 	 	885	 	 	 	893	 	 	 	(1	)	
CDD’s 30 year average	 	 	506	 	 	 	506	 	 	 	—	 	 	 	663	 	 	 	663	 	 	 	—	 	
Heating Degree Days, or HDDs (a)	 	 	43	 	 	 	61	 	 	 	(30	)%	 	 	1,923	 	 	 	2,157	 	 	 	(11	)	
HDD’s 30 year average	 	 	108	 	 	 	108	 	 	 	—	 	 	 	2,083	 	 	 	2,098	 	 	 	(1	)%	

 	 	 	
(a)	 	National Oceanic and Atmospheric Administration-Climate Prediction Center - A CDD represents the number of degrees that the mean temperature for a particular day is above 65 degrees Fahrenheit in each region. An 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.	
Quarterly Results
Operating Income
     Operating income was unchanged at $13 million for the three months ended September 30, 2009, compared to the same period in 2008.
Operating Revenues
     Operating revenues of $40 million for the three months ended September 30, 2009, were unchanged compared to the same period in 2008, due to:
 	•	 	Energy revenues — increased by $3 million primarily due to a 23% increase in generation in 2009 compared to 2008 offset by a 7% decrease in merchant energy prices.	
 	 	 	 	
 	•	 	Capacity revenues — increased by $5 million primarily due to additional resource adequacy contract sales at El Segundo in 2009 compared to 2008.	
 	 	 	 	
 	•	 	Other revenues — increased by $1 million due to an increase in ancillary services revenue.	
 	 	 	 	
 	•	 	Risk management activities — losses of $9 million were recorded during the quarter including $6 million of unrealized mark-to-market losses and $3 million in realized losses on settled transactions. There was no risk management activity in 2008. For further discussion of the Company’s risk management activities, see Consolidated Results of Operations.	
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Year-to-Date Results
     Operating income decreased by $18 million for the nine months ended September 30, 2009, compared to the same period in 2008, due to decreases in capacity revenue, energy revenue, risk management activity revenue and other revenues.
Operating Revenues
     Operating revenues decreased by $17 million for the nine months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Capacity revenues — decreased by $4 million primarily due to expiration of a two year tolling agreement at the El Segundo facility in April 2008, which was replaced by resource adequacy and capacity contracts at lower prices.	
 	 	 	 	
 	•	 	Energy revenues — decreased by $3 million primarily due to a 19% decrease in merchant prices in 2009 compared to 2008; offset by a 6% increase in merchant generation in 2009 compared to 2008.	
 	 	 	 	
 	•	 	Other revenue — decreased by $4 million primarily due to lower emission allowance sales partially offset by an increase in ancillary services revenue.	
 	 	 	 	
 	•	 	Risk management activities — realized losses of $6 million on settled transactions were recognized during the period. There was no risk management activity in 2008. For further discussion of the Company’s risk management activities, see Consolidated Results of Operations.	
Cost of Energy and Other Operating Expenses
     Cost of energy and other operating expenses increased by $1 million for the nine months ended September 30, 2009, compared to the same period in 2008, due to:
 	•	 	Cost of energy — decreased by $8 million due to a 43% decline in average natural gas prices per MMBtu. This decrease was partially offset by a 7% increase in natural gas consumption and a $2 million increase in fuel oil expense.	
 	 	 	 	
 	•	 	Other operating expenses — increased by $9 million due to higher maintenance expense associated with a major overhaul at El Segundo and higher maintenance at Long Beach.	
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Liquidity and Capital Resources
Liquidity Position
     As of September 30, 2009, and December 31, 2008, NRG’s liquidity, excluding collateral received, was approximately $3.9 billion and $3.4 billion, respectively, and comprised of the following:
 	 	 	 	 	 	 	 	 	
 	 	September 30,	 	December 31,	
(In millions)	 	2009	 	2008	
 	
Cash and cash equivalents	 	$  	2,250	 	 	$  	1,494	 	
Funds deposited by counterparties	 	 	293	 	 	 	754	 	
Restricted cash	 	 	26	 	 	 	16	 	
 	
Total cash	 	 	2,569	 	 	 	2,264	 	
Synthetic Letter of Credit Facility availability	 	 	756	 	 	 	860	 	
Revolver Credit Facility availability	 	 	904	 	 	 	1,000	 	
 	
Total liquidity	 	 	4,229	 	 	 	4,124	 	
Less: Funds deposited as collateral by hedge counterparties	 	 	(293	)	 	 	(760	)	
 	
Total liquidity, excluding collateral received	 	$  	3,936	 	 	$  	3,364	 	
 	
     For the nine months ended September 30, 2009, total liquidity, excluding collateral received, increased by $572 million due to a higher cash balance of $756 million, partially offset by decreased availability of the Synthetic Letter of Credit Facility and the Revolving Credit Facility of $104 million and $96 million, respectively. Changes in cash balances are further discussed below under the heading  Cash Flow Discussion . Cash and cash equivalents and funds deposited by counterparties at September 30, 2009, were predominantly held in money market funds invested in treasury securities, treasury repurchase agreements or government agency debt.
     The line item “Funds deposited by counterparties” represents the amounts that are held by NRG as a result of collateral posting obligations from our counterparties due to positions in our hedging program. These amounts are segregated into separate accounts that are not contractually restricted but, based on the Company’s intention, are not available for the payment of NRG’s general corporate obligations. Depending on market fluctuation and the settlement of the underlying contracts, the Company will refund this collateral to the counterparties pursuant to the terms and conditions of the underlying trades. Since collateral requirements fluctuate daily and the Company cannot predict if any collateral will be held for more than twelve months, the funds deposited by counterparties are classified as a current asset on the Company’s balance sheet, with an offsetting liability for this cash collateral received within current liabilities. The decrease in these amounts from December 31, 2008 was due to cash collateral moved from NRG to Merrill Lynch in connection with novations under the CSRA (see Note 4,  Business Acquisition,  to this Form 10-Q), offset by an increase of in-the-money positions as a result of decreasing forward prices.
     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 to NRG’s preferred shareholders and other liquidity commitments. Management continues to regularly monitor the Company’s ability to finance the needs of its operating, financing and investing activity in a manner consistent with its intention to maintain a net debt to capital ratio in the range of 45-60%.
SOURCES OF FUNDS
     The principal sources of liquidity for NRG’s future operating and capital expenditures are expected to be derived from new and existing financing arrangements, asset sales, existing cash on hand and cash flows from operations.
Financing Arrangements
Senior Credit Facility
     As of September 30, 2009, NRG had a Senior Credit Facility which is comprised of a senior first priority secured term loan, or the Term Loan Facility, a $1.0 billion senior first priority secured revolving credit facility, or the Revolving Credit Facility, and a $1.3 billion senior first priority secured synthetic letter of credit facility, or the Synthetic Letter of Credit Facility. The Senior Credit Facility was last amended on June 8, 2007. On July 23, 2009, Moody’s upgraded the Senior Credit Facility to Baa3 due to the underlying value that the capital structure provides to secured creditors. As of September 30, 2009, NRG had issued $544 million of letters of credit under the Synthetic Letter of Credit Facility, leaving $756 million available for future issuances. Under the Revolving Credit Facility, as of September 30, 2009, NRG had issued a letter of credit of $96 million of which $59 million supports the tax exempt bonds issued by Dunkirk Power LLC as described in Note 8,  Long-Term Debt,  to this Form 10-Q.
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2019 Senior Notes
     On June 5, 2009, NRG completed the issuance of $700 million aggregate principal amount of 8.5% Senior Notes due 2019, or 2019 Senior Notes as described in Note 8,  Long-Term Debt,  to this Form 10-Q. The Company used a portion of the net proceeds of $678 million to facilitate the early termination of NRG’s obligations pursuant to the CSRA Amendment, which became effective October 5, 2009. Net proceeds in excess of this amount are available for general corporate purposes. See further discussion of the CSRA Amendment in Note 20,  Subsequent Event,  to this Form 10-Q.
Merrill Lynch Credit Sleeve Facility
      As of September 30, 2009, Merrill Lynch, through the CSRA with NRG, provided the Company with $163 million in credit support (includes cash collateral posted by counterparties and Reliant Energy as an offset to exposure) that significantly reduced the liquidity requirements and substantially eliminated collateral postings for Reliant Energy. See discussion in Note 4,  Business Acquisition,  to this Form 10-Q, regarding the CSRA as a result of the acquisition of Reliant Energy on May 1, 2009. Effective October 5, 2009, the Company executed the CSRA Amendment. In connection with this transaction, the Company posted $366 million of cash collateral to Merrill Lynch and other counterparties, returned $53 million of counterparty collateral, issued $206 million of letters of credit, and received $45 million of counterparty collateral. In addition, Merrill Lynch returned $250 million of previously posted cash collateral, and released liens on $322 million of unrestricted cash held by Reliant Energy. See further discussion of the CSRA Amendment in Note 20,  Subsequent Event,  to this Form 10-Q.
TANE Facility
     On February 24, 2009, NINA executed an EPC agreement with TANE, which specifies the terms under which STP Units 3 and 4 will be constructed. Concurrent with the execution of the EPC agreement, NINA and TANE entered into the TANE Facility wherein TANE has committed up to $500 million to finance purchases of long-lead materials and equipment for the construction of STP Units 3 and 4. The TANE Facility matures on February 24, 2012, subject to two renewal periods, and provides for customary events of default, which include, among others: nonpayment of principal or interest; default under other indebtedness; the rendering of judgments; and certain events of bankruptcy or insolvency. Outstanding borrowings will accrue interest at LIBOR plus 3%, subject to a ratings grid, and are secured by substantially all of the assets of and membership interests in NINA and its subsidiaries. As of September 30, 2009, no amounts had been borrowed under the TANE Facility.
Dunkirk Power LLC Tax-Exempt Bonds
     On April 15, 2009, NRG executed a $59 million tax-exempt bond financing through its wholly-owned subsidiary, Dunkirk Power LLC. The bonds were issued by the County of Chautauqua Industrial Development Agency and will be used for construction of emission control equipment on the Dunkirk Generating Station in Dunkirk, NY. The bonds initially bear weekly interest based on the Securities Industry and Financial Markets Association, or SIFMA, rate, have a maturity date of April 1, 2042, and are enhanced by a letter of credit under the Company’s Revolving Credit Facility covering amounts drawn on the facility. The proceeds received through September 30, 2009, were $38 million with the remaining balance being released over time as construction costs are paid.
GenConn Energy LLC related financings
     In April 2009, a wholly-owned subsidiary of NRG executed an equity bridge loan facility, or EBL, in the amount of $121.5 million from a syndicate of banks. The purpose of the EBL is to fund the Company’s proportionate share of the project construction costs required to be contributed into GenConn Energy LLC, or GenConn, a 50% equity method investment of the Company. The EBL, which is fully collateralized with a letter of credit issued under the Company’s Synthetic Letter of Credit Facility covering amounts drawn on the facility, will bear interest at a rate of LIBOR plus 2% on drawn amounts. The EBL will mature on the earlier of the commercial operations date of the Middletown project or July 26, 2011. The EBL also requires mandatory prepayment of the portion of the loan utilized to pay costs of the Devon project, of approximately $56 million, on the earlier of Devon’s commercial operations date or January 27, 2011. The proceeds of the EBL received through September 30, 2009, were $88 million and the remaining amounts will be drawn as necessary to fund construction costs.
     In April 2009, GenConn secured financing for 50% of the Devon and Middletown project construction costs through a 7-year term loan facility, and also entered into a 5-year revolving working capital loan and letter of credit facility, which collectively with the term loan is referred to as the GenConn Facility. The aggregate credit amount secured under the GenConn Facility, which is non-recourse to NRG, is $291 million, including $48 million for the revolving facility. In August 2009, GenConn began to draw under the GenConn Facility to cover costs related to the Devon project and as of September 30, 2009, has drawn $19 million.
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First and Second Lien Structure
     NRG has granted first and second liens to certain counterparties on substantially all of the Company’s assets. NRG uses the first and second lien structure 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-money hedge agreements for forward sales of power or MWh equivalents. To the extent that the underlying hedge positions for a counterparty are in-the-money to NRG, the counterparty would have no claim under the lien program. The lien program limits the volume that can be hedged, not the value of underlying out-of-money positions. The first lien program does not require NRG to post collateral above any threshold amount of exposure. Within the first and second lien structure, the Company can hedge up to 80% of its baseload capacity and 10% of its non-baseload assets with these counterparties for the first 60 months and then declining thereafter. Net exposure to a counterparty on all trades must be positively correlated to the price of the relevant commodity for the first lien to be available to that counterparty. The first and second lien structure is not subject to unwind or termination upon a ratings downgrade of a counterparty or NRG and has no stated maturity date.
     The Company’s lien counterparties may have a claim on its assets to the extent market prices exceed the hedged price. As of September 30, 2009, and October 22, 2009, all hedges under the first and second liens were in-the-money on a counterparty aggregate basis.
     The following table summarizes the amount of MWs hedged against the Company’s baseload assets and as a percentage relative to the Company’s forecasted baseload capacity under the first and second lien structure as of October 22, 2009:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equivalent Net Sales Secured by First and Second Lien Structure (a)	 	2009	 	 	2010	 	 	2011	 	 	2012	 	 	2013	 	
 	
In MW (b)	 	 	3,617	 	 	 	3,963	 	 	 	3,060	 	 	 	1,610	 	 	 	793	 	
As a percentage of total forecasted baseload capacity (c)	 	 	52%	 	 	 	58%	 	 	 	45%	 	 	 	24%	 	 	 	12%	 	

 	 	 	
(a)	 	Equivalent Net Sales include natural gas swaps converted using a weighted average heat rate by region.	
(b)	 	2009 MW value consists of November through December positions only.	
(c)	 	Forecasted baseload capacity under the first and second lien structure represents 80% of the Company’s total baseload assets.	
Asset Sales — Disposition of MIBRAG Investment
     MIBRAG — On June 10, 2009, NRG completed the sale of its 50% ownership interest in Mibrag B.V. to a consortium of Severoćeské doly Chomutov, a member of the CEZ Group, and J&T Group. Mibrag B.V.’s principal holding is MIBRAG, which is jointly owned by NRG and URS Corporation. As part of the transaction, URS Corporation also entered into an agreement to sell its 50% stake in MIBRAG.
     For its share, NRG received EUR 203 million ($284 million at an exchange rate of 1.40 U.S.$/EUR), net of transaction costs. During the nine months ended September 30, 2009, NRG recognized a pre-tax gain of $128 million. Prior to completion of the sale, NRG continued to record its share of MIBRAG’s operations to “Equity in earnings of unconsolidated affiliates.”
     In connection with the transaction, NRG entered into a foreign currency forward contract to hedge the impact of exchange rate fluctuations on the sale proceeds. The foreign currency forward contract had a fixed exchange rate of 1.277 and required NRG to deliver EUR 200 million in exchange for $255 million on June 15, 2009. For the nine months ended September 30, 2009, NRG recorded an exchange loss of $24 million on the contract within “Other (loss)/income, net.”
USES OF FUNDS
     The Company’s requirements for liquidity and capital resources, other than for operating its facilities, can generally be categorized by the following: (i) commercial operations activities; (ii) debt service obligations; (iii) capital expenditures including Repowering NRG and environmental; and (iv) corporate financial transactions including return of capital to shareholders.
Commercial Operations
     NRG’s commercial 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) initial collateral required to establish trading relationships; (iii) timing of disbursements and receipts (i.e., buying fuel before receiving energy revenues); and (iv) initial collateral for large structured transactions. As of September 30, 2009, commercial operations had total cash collateral outstanding of $222 million, and $345 million outstanding in letters of credit to third parties primarily to support its economic hedging activities. As of September 30, 2009, total collateral held from counterparties was $293 million and $19 million of letters of credit. These collateral amounts do not include collateral postings by Merrill Lynch under the CSRA.
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     Upon execution of the CSRA Amendment, effective October 5, 2009, the Company is required to post collateral for any net liability derivatives, and other static margin associated with supply for Reliant Energy.
Debt Service Obligations
     NRG must annually offer a portion of its excess cash flow (as defined in the Senior Credit Facility) to its first lien lenders under the Term Loan Facility. The percentage of excess cash flow offered to these lenders is dependent upon the Company’s consolidated leverage ratio (as defined in the Senior Credit Facility) at the end of the preceding year. Of the amount offered, the first lien lenders must accept 50% while the remaining 50% may either be accepted or rejected at the lenders’ option. In March 2009, NRG made and the lenders accepted a repayment of approximately $197 million for the mandatory annual offer relating to 2008.
     As of September 30, 2009, NRG had issued approximately $5.4 billion in aggregate principal amount of unsecured high yield notes, or Senior Notes, had approximately $2.4 billion in principal amount outstanding under the Term Loan Facility, and had issued $544 million of letters of credit under the Company’s $1.3 billion Synthetic Letter of Credit Facility and $96 million of letters of credit under the Company’s Revolving Credit Facility. The Revolving Credit Facility matures on February 2, 2011, and the Synthetic Letter of Credit Facility matures on February 1, 2013.
     As of September 30, 2009, the Company’s CSF I and CSF II subsidiaries had outstanding notes and preferred interests classified as debt that matured in two tranches: $143 million for CSF II in October 2009, plus accrued interest and the balance of $190 million for CSF I in June 2010, plus accrued interest. On October 9, 2009, NRG commenced the process of unwinding the CSF II Debt, making a $181.4 million capital contribution to a CSF II cash account, effectively restricting the cash for the benefit of CS. On October 13, 2009, CS began the process of unwinding their hedges in connection with the CSF II structure, which they are required to complete by November 24, 2009. Once complete, CS is scheduled to return 5,400,000 shares of NRG common stock borrowed under the Share Lending Agreements, and release 9,528,930 common shares held as collateral for the CSF II Debt, and the Company will remit payment to CS of the $181.4 million outstanding principal and interest. The CSF II Debt contains an embedded derivative feature, or CFS II CAGR, which requires NRG to pay CS at maturity, either in cash or stock at NRG’s option, the excess of NRG’s then current stock price over a Threshold Price of $40.80 per share. On November 24, 2009, the CSF II CAGR will also be evaluated to determine whether any payment is due to CS, at which point the CSF II CAGR will expire.
Capital Expenditures
     For the nine months ended September 30, 2009, the Company’s capital expenditures, including accruals, were approximately $556 million, of which $272 million was related to  Repowering NRG projects. The following table summarizes the Company’s capital expenditures for the nine months ended September 30, 2009, and the estimated capital expenditure and repowering investments forecast for the remainder of 2009.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(In millions)	 	Maintenance	 	Environmental	 	Repowering	 	Total	
 	
Northeast	 	$  	22	 	 	$  	119	 	 	$  	5	 	 	$  	146	 	
Texas	 	 	112	 	 	 	—	 	 	 	134	 	 	 	246	 	
South Central	 	 	3	 	 	 	—	 	 	 	—	 	 	 	3	 	
West	 	 	3	 	 	 	—	 	 	 	2	 	 	 	5	 	
Reliant Energy	 	 	14	 	 	 	—	 	 	 	—	 	 	 	14	 	
Nuclear development	 	 	—	 	 	 	—	 	 	 	130	 	 	 	130	 	
Other	 	 	11	 	 	 	—	 	 	 	1	 	 	 	12	 	
 	
Total	 	$  	165	 	 	$  	119	 	 	$  	272	 	 	$  	556	 	
 	
Estimated capital expenditures for the remainder of 2009	 	$  	117	 	 	$  	76	 	 	$  	73	 	 	$  	266	 	
 	
     RepoweringNRG capital expenditures and investments — RepoweringNRG project capital expenditures consisted of approximately $104 million related to the Company’s Langford wind farm project which is currently under construction. In addition, the Company’s  Repowering NRG capital expenditures included $29 million for the construction of Cedar Bayou Unit 4 in Texas and $130 million for the development of STP Units 3 and 4 in Texas.
     The Company’s estimated repowering capital expenditures for the remainder of 2009 are expected to be approximately $73 million. Of this amount, $58 million is estimated for STP Units 3 and 4 without giving effect to any partner contributions or potential equity sell down and approximately $10 million to complete the construction of the Langford wind farm.
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     Major maintenance and environmental capital expenditures — The Company’s baghouse projects at western New York facilities resulted in environmental capital expenditures of $104 million for the nine months ended September 30, 2009. In addition, the Company’s maintenance capital expenditures were $165 million, of which $112 million was primarily related to the Texas region’s assets which included approximately $38 million in nuclear fuel expenditures related STP units 1 and 2.
     NRG anticipates funding its maintenance capital projects primarily with funds generated from operating activities. In addition, on April 15, 2009, the Company executed a $59 million tax-exempt bond financing through its wholly-owned subsidiary, Dunkirk Power LLC, with the bonds issued by the County of Chautauqua Industrial Development Agency. These funds are expected to fund environmental capital expenditures at the Dunkirk Generating facility.
     Loans to affiliates — The Company had funded approximately $48 million in interest bearing loans to GenConn Energy LLC, a 50/50 joint venture vehicle of NRG and the United Illuminating Company as part of the Devon and Middletown plant repowering projects prior to the closing of the EBL and GenConn Facility. As of September 30, 2009, these loans were repaid with proceeds from the EBL financing. Subsequent to the financing, the equity portion of construction costs for GenConn are funded through the EBLs of NRG Connecticut Peaking and United Illuminating. These funds are made available to GenConn through convertible interest bearing promissory notes that convert to equity upon repayment of the EBL loans by NRG Connecticut Peaking and United Illuminating. As of September 30, 2009, there was $88 million was outstanding under the loan from NRG Connecticut Peaking.
Environmental Capital Expenditures
     Based on current rules, technology and plans, NRG has estimated that environmental capital expenditures from 2010 through 2013 to meet NRG’s environmental commitments will be approximately $900 million and are primarily associated with controls on the Company’s Big Cajun and Indian River facilities. These capital expenditures, in general, are related to installation of particulate, SO 2 , NO x , and mercury controls to comply with federal and state air quality rules and consent orders, as well as installation of “Best Technology Available” under the Phase II 316(b) Rule. NRG continues to explore cost effective alternatives that can achieve desired results. This estimate reflects anticipated schedules and controls related to CAIR, MACT for mercury, and the Phase II 316(b) rule which are under remand to the U.S. EPA and, as such, the full impact on the scope and timing of environmental retrofits from any new or revised regulations cannot be determined at this time.
Capital Allocation
     In addition to the aforementioned planned investments in maintenance and environmental capital expenditures and Repowering NRG in 2009, and the 2009 repayment of Term Loan Facility debt to the first lien lenders, the Company’s Capital Allocation Plan includes the completion of the 2008 Capital Allocation Plan with the planned purchase of $30 million of common stock as well as the purchase of an additional $300 million in common stock under the previously announced 2009 Capital Allocation Plan. In July 2009, as part of the Company’s 2009 Capital Allocation Program, the Board of Directors approved an increase to the Company’s previously authorized common share repurchases under its capital allocation plan from the existing $330 million to $500 million. The Company’s repurchases during the period ended September 30, 2009, were approximately $250 million. NRG intends to complete its $500 million of share repurchases by the end of 2009, subject to market prices, financial restrictions under the Company’s debt facilities, and as permitted by securities laws.
Preferred Stock Dividend Payments
     For the nine months ended September 30, 2009, NRG paid approximately $6 million, $13 million, and $8 million in dividend payments to holders of the Company’s 5.75%, 4%, and 3.625% Preferred Stock, respectively. On March 16, 2009, the outstanding shares of the 5.75% Preferred Stock converted into common stock and, as a result, there will be no further dividends paid with respect to this series of preferred stock.
Benefit Plans Obligations
     As of September 30, 2009, NRG contributed $22 million towards its three defined benefit pension plans to meet the Company’s 2009 benefit obligation. The Company’s expected contribution to the plans is $5 million during the remainder of 2009. The total 2009 planned contribution of $27 million is a decrease of $33 million from the expected contributions as disclosed in Part II, Item 7 -  Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources , in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. This decrease in the 2009 expected contributions is due to the adoption by the Company in March 2009 of the new funding method options now available. The new methods were made allowable under new IRS guidance on the application of recent Congressional legislation on funding requirements.
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Reliant Energy Customer Deposits
     Changes in the Texas law will require customer deposits and advance payments to be held in a segregated cash account on or before May 21, 2010. The amount of deposits subject to segregation at September 30, 2009, was approximately $56 million.
Cash Flow Discussion
     The following table reflects the changes in cash flows for the comparative years; all cash flow categories include the cash flows from both continuing operations and discontinued operations:
 	 	 	 	 	 	 	 	 	 	 	 	 	
(In millions)	 	 	 	 	 	 	
Nine months ended September 30,	 	2009	 	2008	 	Change	
 	
Net cash provided by operating activities	 	$	1,280	 	 	$	1,086	 	 	$	194	 	
Net cash used by investing activities	 	 	(727	)	 	 	(332	)	 	 	(395	)	
Net cash provided by/(used by) financing activities	 	 	200	 	 	 	(446	)	 	 	646	 	
 	
Net Cash Provided By Operating Activities
     For the nine months ended September 30, 2009, net cash provided by operating activities increased by $194 million compared to the same period in 2008, due to:
 	•	 	Cash generated by Reliant Energy — Reliant Energy contributed approximately $370 million to the Company’s consolidated cash flow from operations in 2009, primarily reflecting $807 million in pre-tax income since the May 1, 2009, acquisition date. This contribution from pre-tax income was offset by $250 million in collateral postings to satisfy obligations under the CSRA. In addition, a seasonal increase in accounts receivable of $174 million and a $68 million decrease in accrued expenses and other current liabilities also negatively impacted Reliant Energy’s cash flow from operations.	
 	 	 	 	
 	•	 	Lower cash flows from Wholesale Power Generation — The Company’s cash flow from operation excluding Reliant Energy was lower by approximately $176 million in 2009 compared to 2008, as drops in generation and power prices impacted results from operation. In addition, $15 million more cash was used for working capital in 2009 compared to 2008, as higher coal inventory balances were partially offset by $35 million lower pension contributions. The reductions to cash flows were partially offset by the return of collateral deposits from the settlement of gas options during the first quarter of 2009 which resulted in a $97 million net inflow of cash.	
Net Cash Used By Investing Activities
     For the nine months ended September 30, 2009, net cash used in investing activities increased by $395 million compared to the same period in 2008, due to:
 	•	 	Acquisition of Reliant Energy — During the nine months ended September 30, 2009, the Company paid $356 million, net of cash acquired of $6 million, towards its acquisition of Reliant Energy. This amount was comprised of approximately $288 million paid at closing, as well as $63 million paid on June 11, 2009, and $11 million paid on July 24, 2009, as initial remittances of the acquired working capital to RRI.	
 	 	 	 	
 	•	 	Trading of emission allowances — Net purchases and sales of emission allowances resulted in a decrease in cash of $117 million for 2009 as compared to 2008.	
 	 	 	 	
 	•	 	Proceeds from sale of equity method investment and discontinued operations — Net proceeds from investing activities increased by $43 million in 2009 as compared to 2008 due to the sale of MIBRAG in June 2009 for net proceeds of $284 and the sale of ITISA for proceeds, net of divested cash, of $241 million in the first half of 2008.	
 	 	 	 	
 	•	 	Capital expenditures and loans to affiliates — NRG’s capital expenditures decreased by $89 million due to decreased spending on  Repowering NRG projects. Loans to affiliates increased by $37 million in 2009 as compared to 2008.	
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Net Cash Provided By/Used By Financing Activities
     For the nine months ended September 30, 2009, net cash provided by financing activities increased by $646 million compared to 2008, due to:
 	•	 	Issuance of debt — During 2009, the Company received $25 million from the draw under the Reliant Energy working capital facility with Merrill Lynch, $38 million from the Dunkirk bonds, $88 million in GenConn financings and $688 million in gross proceeds from the 2019 Senior Notes. During 2008, the Company received $20 million in proceeds from borrowings.	
 	 	 	 	
 	•	 	Deferred financing costs — During 2009, the Company paid deferred financing costs of $15 million related to the Reliant Energy CSRA, $10 million related to the 2019 Senior Notes, and $2 million related to the Dunkirk bonds and the Reliant Energy working capital facility.	
 	 	 	 	
 	•	 	Term Loan Facility debt payment — In 2009, the Company paid down $221 million of its Term Loan Facility, including the payment of excess cash flow, as discussed above under  Debt Service Obligations . The Company paid down $166 million of its Term Loan Facility during 2008 which resulted in a net cash decrease of $55 million.	
 	 	 	 	
 	•	 	Share repurchase — During 2009, the Company repurchased common stock of $250 million as compared to $185 million in 2008, which resulted in a net cash decrease of $65 million.	
 	 	 	 	
 	•	 	Net payments to settle acquired derivatives that include financing elements— In 2009, the Company paid a net of $140 million for the settlement of gas swaps related to Reliant Energy and Texas Genco compared to a payment of $49 million for 2008 related to Texas Genco for a net decrease in cash of $91 million.	
 	 	 	 	
 	•	 	Payment for CSF I CAGR settlement — In August 2008, the Company paid $45 million to CS for the benefit of CSF I to early settle the embedded derivative in the Company’s CSF I notes and preferred interests.	
 	 	 	 	
 	•	 	Exercise of stock options — During 2009, the Company received proceeds of $1 million from the exercise of stock options as compared to $8 million for 2008.	
 	 	 	 	
 	•	 	Preferred dividends — During the nine months ended September 30, 2009, dividends payments on preferred stock decreased by $14 million as compared to the same period in 2008 due to the conversion of the 5.75% preferred stock in the fourth quarter of 2008 and for the period ended September 30, 2009.	
NOLs, Deferred Tax Assets and Uncertain Tax Position Implications, under ASC-740, Income Taxes, or ASC 740
     As of September 30, 2009, the Company had generated total domestic pre-tax book income of $1,371 million and foreign continuing pre-tax book income of $151 million. The Company has net operating losses for tax return purposes that have been classified as capital loss carryforwards for financial statement purposes and for which a full valuation allowance has been established. In addition, NRG has cumulative foreign NOL carryforwards of $290 million, of which $83 million will expire starting in 2011 through 2018 and of which $207 million do not have an expiration date. As a result of the Company’s tax position, and based on current forecasts, the Company anticipates income tax payments of up to $75 million during 2009.
     However, as the position remains uncertain, the Company has recorded a non-current tax liability of $688 million. The $688 million non-current tax liability for unrecognized tax benefits is due to taxable earnings for which there are no NOLs available to offset for financial statement purposes.
     The Company continues to be under examination by the Internal Revenue Service.
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New and On-going Company Initiatives
FORNRG Update
     Beginning in January 2009, the Company transitioned to FORNRG 2.0 to target an incremental 100 basis point improvement to the Company’s ROIC by 2012. The initial targets for  FOR NRG 2.0 were based upon improvements in the Company’s ROIC as measured by increased cash flow. The economic goals of  FOR NRG 2.0 will focus on: (i) revenue enhancement; (ii) cost savings; and (iii) asset optimization, including reducing excess working capital and other assets. The FOR NRG 2.0 program will measure its progress towards the  FOR NRG 2.0 goals by using the Company’s 2008 financial results as a baseline, while plant performance calculations will be based upon the appropriate historic baselines.
     The 2009 FORNRG goal is a 20 basis point improvement in ROIC which corresponds to approximately $30 million in cash flow. As of September 30, 2009, the Company has exceeded its 2009 goal with a 29.5 basis point improvement in ROIC, which is equivalent to approximately $44 million in cash flows. The performance of the plants coupled with strategic projects undertaken by corporate functions is evidenced in the overall corporate performance.
Nuclear Innovation North America
     NINA is an NRG subsidiary focused on marketing, siting, developing, financing and investing in new advanced design nuclear projects in select markets across North America, including the planned STP Units 3 and 4 that NRG is developing on a 50/50 basis with City of San Antonio’s agent City Public Service Board of San Antonio, or CPS Energy, at the STP nuclear power station site. TANE, a wholly-owned subsidiary of Toshiba Corporation, owns a non-controlling interest in NINA. On May 1, 2009, TANE made the second of its scheduled $50 million contributions to NINA.
     The Department of Energy, or DOE, has confirmed that STP Units 3 and 4 is one of four projects selected for further due diligence and negotiation leading to a conditional commitment under the DOE loan guarantee program. NINA will now begin discussions with the DOE on the specific terms and amount to be loaned for the project. NRG believes DOE loan guarantee support is critical to new nuclear development projects. In addition to U.S. loan guarantees, NINA is seeking to diversify financing by actively pursuing additional loan guarantees through the Japanese government. Due diligence by Japanese financing agencies is in progress and represents an important step in Japanese loan support.
     On February 24, 2009, NINA executed an EPC agreement with TANE to build the STP expansion. The EPC agreement is structured so as to assure that the new plant is constructed on time, on budget and to exacting standards. In accordance with the EPC agreement, TANE will provide engineering and development services prior to Full Notice to Proceed, or FNTP, on a time and materials basis. Upon the NSR approval of the STP Units 3 and 4 combined license and the owners decision to issue the FNTP, the EPC converts to a lump-sum turnkey contract with customary warranties, performance and schedule guarantees, and liquidated damage provisions. TANE’s obligations are backed by a guaranty from its ultimate parent, the Toshiba Corporation. Concurrent with the execution of the EPC agreement, NINA entered into a $500 million credit facility with TANE to finance the cost of material and equipment commitments prior to FNTP for STP Units 3 and 4.
     In light of the progress made by the project in terms of regulatory schedule, DOE loan guarantee process, and the conclusion of the EPC agreement, NINA has initiated a partial sell down process in the STP expansion. NINA has Memorandums of Understanding with a mix of investment grade rated load serving entities and industrial customers for all offtake from NINA’s anticipated 40% ownership interest in STP Units 3 and 4’s generation. Currently, NINA and CPS Energy each own 50% of the 2,700 megawatt planned expansion of the South Texas Project nuclear facility. After the sell down, it is expected that each would own 40% and a new owner(s) would have a 20% equity interest although other ownership outcomes may arise. The ownership interests of STP Units 1 and 2 (NRG 44%, CPS Energy 40% and Austin Energy 16%) are not affected by this proposed sale.
     A request to intervene in the Combined License, or COL, proceeding was submitted by several individuals and public interest groups on April 21, 2009. An Atomic Licensing and Safety Board, or Licensing Board, heard oral arguments on the Petitioner’s request for a hearing on June 23, 2009, and June 24, 2009, in Bay City, Texas. On August 27, 2009, and September 29, 2009, the Licensing Board of the United States Nuclear Regulatory Commission, or NRC, issued its decision on the petition to intervene in the COL proceeding for STP Units 3 and 4. Of the 28 contentions submitted by the Petitioner’s, the Licensing Board rejected 23 and admitted a portion of five contentions. The Licensing Board’s decision to admit a contention represents a procedural ruling only. The ruling does not reflect any decision on the merits of any admitted contention by the Licensing Board. NINA will continue to defend its position against the admitted contentions in future hearings.
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     On October 22, 2009, NINA amended its revolving credit agreement with the Royal Bank of Scotland PLC, or RBS. The amended agreement allows for NINA to have borrowings outstanding on both its RBS facility and its TANE facility. Under the new agreement NINA will be required to repay all outstanding balances on the RBS facility by March 31, 2010.
Agreement with eSolar
     On June 1, 2009, NRG completed an agreement with eSolar, a leading provider of modular, scalable solar thermal power technology, to acquire the development rights for solar thermal power plants at sites in California and the Southwest. The agreement currently contemplates up to 465 MW of solar thermal development. The first plant is anticipated to begin producing electricity as early as 2011, subject to certain technology demonstration milestones being pursued by eSolar and successful financial closing in 2010.  At the closing with eSolar, NRG invested approximately $5 million for an equity interest in eSolar and $5 million for deposits and land purchase options associated with development rights for three projects on sites in south central California and the Southwest U.S. as well as a portfolio of PPAs to develop, build, own and operate up to 10 eSolar modular solar generating units at these sites.  These development assets will use eSolar’s concentrating solar power, or CSP, technology to sell renewable electricity under contracted PPAs with local utilities.
     NRG has three projects in various stages of development: NRG New Mexico SunTower, Alpine SunTower and Desert View SunTower.  While each of these projects has an anticipated commercial operation date, the development of these projects are subject to certain conditions and milestones which may effect the Company’s decision to pursue further development of these projects.
RepoweringNRG Update
     Currently, NRG has several projects in varying stages of development that include the following: a solar project with the City of Houston, a biomass project at the Montville Generating Station, a new generating unit at the Limestone power station and the repowering of Big Cajun I, Encina and El Segundo sites. The following is a summary of repowering projects that are under construction. In addition, NRG continues to participate in active bids in response to requests for proposals in markets in which it operates.
Plants Completed and Operating
     Cedar Bayou Generating Station — On June 24, 2009, NRG and Optim Energy, LLC, or Optim Energy, completed construction and began commercial operation of a new natural gas-fueled combined cycle generating plant at NRG’s Cedar Bayou Generating Station in Chambers County, Texas. NRG and Optim Energy have a 50/50 undivided interest basis in the 550 MW generating plant. NRG is the operator of the plant and Optim Energy is acting as energy manager for Cedar Bayou unit 4. Cedar Bayou unit 4 is providing the Company a net capacity of 275 MW given NRG’s 50% ownership.
Plants under Construction
     GenConn Energy LLC — In a procurement process conducted by the Department of Public Utility Control, or DPUC, and finalized in 2008, GenConn Energy, a 50/50 joint venture of NRG and The United Illuminating Company, secured contracts in 2008 with Connecticut Light & Power, or CL&P, for the construction and operation of two 200 MW peaking facilities, at NRG’s Devon and Middletown sites in Connecticut. The contracts, which are structured as contracts for differences for the operation of the new power plants, have a 30-year term and call for commercial operation of the Devon project by June 1, 2010, and the Middletown project by June 1, 2011. GenConn has secured all state permits required for the projects and has entered into contracts for engineering, construction and procurement of the eight GE LM6000 combustion turbines required for the projects. Construction has begun at the Devon facility while site demolition has begun at the Middletown location.
     On April 27, 2009, GenConn Energy closed on $534 million of project financing related to these projects. The project financing includes a seven-year project backed term loan and a five year working capital facility which together total $291 million. In addition, NRG and United Illuminating have each closed an equity bridge loan of $121.5 million, which together total $243 million. NRG is funding its share of costs related to these projects via year to date draw downs on the equity bridge loan of $88 million as of September 30, 2009. In August 2009, GenConn began to draw on the project financing facility to cover costs related to the Devon project.
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      Langford Wind Project — On March 16, 2009, NRG, through its wholly-owned subsidiary, Padoma Wind Power LLC, began construction on a 150 MW wind farm located in Tom Green, Irion, and Schleicher Counties, Texas. The Langford Wind Project will utilize 100 General Electric 1.5 MW wind turbines. The project is scheduled to reach commercial operation by the end of 2009 and is expected to be eligible to qualify for a cash grant from the Department of Treasury.
Off-Balance Sheet Arrangements
     Obligations under Certain Guarantee Contracts
     NRG and certain of its subsidiaries enter into guarantee arrangements in the normal course of business to facilitate commercial transactions with third parties. These arrangements include financial and performance guarantees, stand-by letters of credit, debt guarantees, surety bonds and indemnifications. See Note 18,  Guarantees,  to this Form 10-Q for additional discussion.
     See discussion in Note 4, Business Acquisition, to this Form 10-Q, regarding the CSRA as a result of the acquisition of Reliant Energy on May 1, 2009.
     Retained or Contingent Interests
     NRG does not have any material retained or contingent interests in assets transferred to an unconsolidated entity.
     Derivative Instrument Obligations
     The Company’s 3.625% Preferred Stock includes a feature which is considered an embedded derivative per ASC 815. Although it is considered an embedded derivative, it is exempt from derivative accounting as it is excluded from the scope pursuant to ASC 815. As of September 30, 2009, based on the Company’s stock price, the embedded derivative was out-of-the-money and had no redemption value.
     The Company’s unrestricted wholly-owned subsidiary, CSF II, has outstanding notes and preferred interests that contain a feature considered an embedded derivative as defined in ASC 815. Although it is considered a derivative, it is exempt from derivative accounting as it is excluded from the scope of ASC 815. As of September 30, 2009, based on the Company’s stock price, the CSF II embedded derivative was out-of-the-money and had no redemption value.
Obligations Arising Out of a Variable Interest in an Unconsolidated Entity
     Variable Interest in Equity Investments — As of September 30, 2009, NRG has several investments with an ownership interest percentage of 50% or less in energy and energy-related entities that are accounted for under the equity method of accounting. One of these investments, GenConn, is a variable interest entity for which NRG is not the primary beneficiary.
     NRG’s pro-rata share of non-recourse debt held by unconsolidated affiliates was approximately $77 million as of September 30, 2009. This indebtedness may restrict the ability of these subsidiaries to issue dividends or distributions to NRG.
     Letter of Credit Facilities — The Company’s $1.3 billion Synthetic Letter of Credit Facility is unfunded by NRG and is secured by a $1.3 billion cash deposit at Deutsche Bank AG, New York Branch that was funded using proceeds from the Term Loan Facility investors who participated in the facility syndication. Under the Synthetic Letter of Credit Facility, NRG is allowed to issue letters of credit for general corporate purposes including posting collateral to support the Company’s commercial operations activities.
Contractual Obligations and Commercial Commitments
     NRG has a variety of contractual obligations and other commercial commitments that represent prospective cash requirements in addition to the Company’s capital expenditure programs, as disclosed in the Company’s Form 10-K. Also see Note 15,  Commitments and Contingencies , to the condensed consolidated financial statements of this Form 10-Q for a discussion of new commitments and contingencies that also include contractual obligations and commercial commitments that occurred during the nine months ended September 30, 2009.
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Critical Accounting Policies and Estimates
     NRG’s discussion and analysis of the financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements and related disclosures in compliance with generally accepted accounting principles, or 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 these policies necessarily involves judgments regarding future events, including the likelihood of success of particular projects and legal and regulatory challenges. 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 have not changed.
     On an ongoing basis, NRG evaluates these estimates, 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. 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 facts that give rise to the revision become known.
     Critical accounting policies and estimates are the accounting policies that are most important to the portrayal of NRG’s financial condition and results of operations and require management’s most difficult, subjective or complex judgment. NRG’s critical accounting policies include revenue recognition and derivative accounting, income taxes and valuation allowance for deferred taxes, evaluation of assets for impairment and other than temporary decline in value, goodwill and other intangible assets, and contingencies.
     In connection with the Reliant Energy acquisition, the Company will record additional intangible assets. See Note 4, Business Acquisition , to this Form 10-Q. In addition, accrued unbilled revenues related to the Reliant Energy segment are critical accounting estimates as volumes are not precisely known at the end of each reporting period and the revenue amounts are material. Accrued unbilled revenues were $321 million as of September 30, 2009, which represents 5% of the Company’s consolidated revenues for the nine months ended September 30, 2009, and 11% of Reliant Energy’s revenues for the period ended September 30, 2009. Accrued unbilled revenues are based on Reliant Energy’s estimates of customer usage since the date of the last meter reading provided by the independent system operators or electric distribution companies. Volume estimates are based on daily forecasted volumes and estimated customer usage by class. Unbilled revenues are calculated by multiplying these volume estimates by the applicable rate by customer class. Estimated amounts are adjusted when actual usage is known and billed.
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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 merchant power generation or with an existing or forecasted financial or commodity transaction. The types of market risks the Company is exposed to are commodity price risk, interest rate risk, liquidity risk, credit risk, and currency exchange risk. In order to manage these risks, the Company uses various fixed-price forward purchase and sales contracts, futures and option contracts traded on the New York Mercantile Exchange, and swaps and options traded in the over-the-counter financial markets to:
 	•	 	Manage and hedge fixed-price purchase and sales commitments;	
 	 	 	 	
 	•	 	Manage and hedge exposure to variable rate debt obligations;	
 	 	 	 	
 	•	 	Reduce exposure to the volatility of cash market prices; and	
 	 	 	 	
 	•	 	Hedge fuel requirements for the Company’s generating facilities.	
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. A number of factors influence the level and volatility of prices for energy commodities and related derivative products. These factors include:
 	•	 	Seasonal, daily and hourly changes in demand;	
 	 	 	 	
 	•	 	Extreme peak demands due to weather conditions;	
 	 	 	 	
 	•	 	Available supply resources;	
 	 	 	 	
 	•	 	Transportation availability and reliability within and between regions; and	
 	 	 	 	
 	•	 	Changes in the nature and extent of federal and state regulations.	
     As a result of the acquisition of Reliant Energy, NRG’s portfolio consists of generation assets and full requirement load serving obligations. NRG manages the commodity price risk of the Company’s merchant generation operations and load serving obligations by entering into various derivative or non-derivative instruments to hedge the variability in future cash flows from forecasted sales and purchases of electricity and fuel. These instruments include forwards, futures, swaps, and option contracts traded on various exchanges, such as New York Mercantile Exchange, or NYMEX, Intercontinental Exchange, or ICE, and Chicago Climate Exchange, or CCX, as well as over-the-counter financial markets. The portion of forecasted transactions hedged may vary based upon management’s assessment of market, weather, operations and other factors.
     While some of the contracts the Company uses to manage risk represent commodities or instruments for which prices are available from external sources, other commodities and certain contracts are not actively traded and are valued using other pricing sources and modeling techniques to determine expected future market prices, contract quantities, or both. NRG uses the Company’s best estimates to determine the fair value of commodity and derivative contracts held and sold. These estimates consider various factors, including closing exchange and over-the-counter price quotations, time value, volatility factors and credit exposure. However, it is likely that future market prices could vary from those used in recording mark-to-market derivative instrument valuation, and such variations could be material.
     NRG measures the risk of the Company’s portfolio using several analytical methods, including sensitivity tests, scenario tests, stress tests, position reports, and Value at Risk, or VaR. VaR is a statistical concept that defines risk of loss, at a certain confidence level, over a designated horizon due to changes in market prices over that horizon. Currently, the company estimates VaR using a Monte Carlo simulation of prices. NRG’s total portfolio includes mark-to-market and non-mark-to-market energy assets and liabilities.
     NRG uses a diversified VaR model to calculate an estimate of the potential loss in the fair value of the Company’s energy assets and liabilities, which includes generation assets, load obligations, and bilateral physical and financial transactions. The key assumptions for the Company’s diversified model include: (i) a lognormal distribution of prices; (ii) a one-day holding period; (iii) a 95% confidence interval; (iv) a rolling 36-month forward looking period; and (v) market implied volatilities and historical price correlations.
     As of September 30, 2009, the VaR for NRG’s commodity portfolio, including generation assets, load obligations and bilateral physical and financial transactions calculated using the diversified VaR model was $53 million. The inclusion of the Reliant Energy retail portfolio, comprised of contracted load and related supply, did not materially affect the VaR measure as the portfolio is currently hedged.
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     The following table summarizes average, maximum and minimum VaR for NRG for the three and nine months ended September 30, 2009, and 2008:
 	 	 	 	 	 	 	 	 	
(In millions)	 	 	 	 	 	 	
VAR	 	2009	 	 	2008	 	
 	
Three months ended September 30:	 	$	53	 	 	$	51	 	
Average	 	 	49	 	 	 	48	 	
Maximum	 	 	55	 	 	 	62	 	
Minimum	 	 	42	 	 	 	35	 	
 	
Nine months ended September 30:	 	$	53	 	 	$	51	 	
Average	 	 	42	 	 	 	50	 	
Maximum	 	 	55	 	 	 	65	 	
Minimum	 	 	28	 	 	 	35	 	
 	
     Due to the inherent limitations of statistical measures such as VaR, the evolving nature of the competitive markets for electricity and related derivatives, and the seasonality of changes in market prices, the VaR calculation may not capture the full extent of commodity price exposure. As a result, actual changes in the fair value of mark-to-market energy assets and liabilities could differ from the calculated VaR, and such changes could have a material impact on the Company’s financial results.
     In order to provide additional information for comparative purposes to NRG’s peers, 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 as of September 30, 2009, for the entire term of these instruments entered into for both asset management and trading, was approximately $26 million primarily driven by asset-backed transactions.
Interest Rate Risk
     NRG is exposed to fluctuations in interest rates through the Company’s issuance of fixed rate and 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 combination of the variable rate debt and the interest rate derivative instrument. NRG’s risk management policies allow the Company to reduce interest rate exposure from variable rate debt obligations.
     In May 2009, NRG entered into a series of forward-starting interest rate swaps. These interest rate swaps become effective on April 1, 2011, and are intended to hedge the risks associated with floating interest rates. For each of the interest rate swaps, the Company will pay its counterparty the equivalent of a fixed interest payment on a predetermined notional value, and NRG receives the monthly equivalent of a floating interest payment based on a 1-month LIBOR calculated on the same notional value. All interest rate swap payments by NRG and its counterparties are made monthly and the LIBOR is determined in advance of each interest period. The total notional amount of these swaps is $900 million. The swaps mature on February 1, 2013.
     As of September 30, 2009, the Company had various interest rate swap agreements with notional amounts totaling approximately $3.3 billion. If the swaps had been discontinued on September 30, 2009, the Company would have owed the counterparties approximately $124 million. Based on the investment grade rating of the counterparties, NRG believes its exposure to credit risk due to nonperformance by counterparties to its hedge contracts to be insignificant.
     NRG has both long and short-term debt instruments that subject the Company to the risk of loss associated with movements in market interest rates. As of September 30, 2009, a 1% change in interest rates would result in a $11 million change in interest expense on a rolling twelve month basis.
     As of September 30, 2009, the Company’s long-term debt fair value was $8.4 billion and the carrying amount was $8.6 billion. NRG estimates that a 1% decrease in market interest rates would have increased the fair value of the Company’s long-term debt by $435 million.
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Liquidity Risk
     Liquidity risk arises from the general funding needs of NRG’s activities and in the management of the Company’s assets and liabilities. NRG’s liquidity management framework is intended to maximize liquidity access and minimize funding costs. Through active liquidity management, the Company seeks to preserve stable, reliable and cost-effective sources of funding. This enables the Company to replace maturing obligations when due and fund assets at appropriate maturities and rates. To accomplish this task, management uses a variety of liquidity risk measures that take into consideration market conditions, prevailing interest rates, liquidity needs, and the desired maturity profile of liabilities.
     Based on a sensitivity analysis for power and gas positions under marginable contracts excluding all non-affiliate third party positions under the CSRA, a $1 per MMBtu change in natural gas prices across the term of the marginable contracts would cause a change in margin collateral posted of approximately $73 million as of September 30, 2009, and a 0.25 MMBtu/MWh change in heat rates for heat rate positions would result in a change in margin collateral posted of approximately $53 million as of September 30, 2009. This analysis uses simplified assumptions and is calculated based on portfolio composition and margin-related contract provisions as of September 30, 2009.
     With the CSRA Amendment, effective October 5, 2009, based on a sensitivity analysis for power and gas positions under marginable contracts, a $1 per MMBtu change in natural gas prices across the term of the marginable contracts would cause a change in margin collateral posted of approximately $164 million, and a $0.25 MMBtu/MWh change in heat rate positions would result in a change in margin collateral posted of approximately $69 million. This analysis uses simplified assumptions and is calculated based on portfolio composition and margin-related contract provisions as of October 5, 2009.
     Under the second lien, NRG is required to post certain letters of credit as credit support for changes in commodity prices. As of September 30, 2009, no letters of credit are outstanding to second lien counterparties. With changes in commodity prices, the letters of credit could grow to $87 million, the cap under the agreements.
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. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) a daily monitoring of counterparties’ credit limits; (iii) the use of credit mitigation measures such as margin, collateral, credit derivatives or prepayment arrangements; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty risk with a diversified portfolio of counterparties, including ten participants under its first and second lien structure. The Company also has credit protection within various agreements to call on additional collateral support if and when necessary. Cash margin is collected and held at NRG to cover the credit risk of the counterparty until positions settle.
     Since the credit crisis began in late 2008, the Company has taken several additional steps to mitigate credit risk including the use of netting arrangements, entering contracts with collateral thresholds, setting volumetric limits with certain counterparties and restricting trading relationships with counterparties where exposure was high or where credit quality of the counterparty had deteriorated. NRG avoids concentration of counterparties whenever possible and applies credit policies that include an evaluation of counterparties’ financial condition, collateral requirements and the use of standard agreements that allow for netting and other security.
     As of September 30, 2009, total credit exposure to substantially all counterparties was $1.8 billion and NRG held collateral (cash and letters of credit) against those positions of $280 million resulting in a net exposure of $1.5 billion. Total credit exposure is discounted at the risk free rate.
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     The following table highlights the credit quality and the net counterparty credit exposure by industry sector. 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, includes amounts net of receivables or payables and excludes non-affiliate third party exposure under the CSRA.
 	 	 	 	 	
 	 	Net Exposure (a) (b)	
 	 	as of September 30, 2009	
Category	 	(% of Total)	
 	
Financial institutions	 	 	81	%	
Utilities, energy, merchants, marketers and other	 	 	13	 	
Coal suppliers	 	 	3	 	
ISOs	 	 	3	 	
 	
Total	 	 	100	%	

 	 	Net Exposure (a) (b)	
 	 	as of September 30, 2009	
Category	 	(% of Total)	
 	
Investment grade	 	 	93	%	
Non-Investment grade	 	 	2	 	
Non-rated	 	 	5	 	
 	
Total	 	 	100	%	

 	 	 	
(a)	 	Credit exposure excludes California tolling, uranium, coal transportation, New England Reliability Must-Run, cooperative load contracts, and Texas Westmoreland coal contracts. The aforementioned exposures were excluded for various reasons including regulatory support or liens held against the contracts which serve to reduce the risk of loss, or credit risks for certain contracts are not readily measurable due to a lack of market reference prices.	
 	 	 	
(b)	 	The exposure amounts presented in the above table do not include non-affiliate third party exposure under the CSRA. The gross credit exposure to third parties under the CSRA is $385 million, and the cash collateral held by Merrill Lynch against this exposure is $304 million.	
     NRG has credit risk exposure to certain counterparties representing more than 10% of total net exposure and the aggregate of such counterparties was $704 million. Approximately 72% of NRG’s positions relating to credit risk roll-off by the end of 2011. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, NRG does not anticipate a material impact on the Company’s financial results from nonperformance by a counterparty.
     NRG is exposed to retail credit risk through its competitive electricity supply business, which serves commercial and industrial customers and the mass market in Texas. Retail credit risk results when a customer fails to pay for services rendered. The losses could be incurred from nonpayment of customer accounts receivable and any in-the-money forward value. NRG manages retail credit risk through the use of established credit policies that include monitoring of the portfolio, and the use of credit mitigation measures such as deposits or prepayment arrangement. Retail credit risk is dependent on the overall economy, but is minimized due to the fact that NRG’s portfolio of retail customers is largely diversified, with no significant single name concentration.
Fair Value of Derivative Instruments
     NRG may enter into long-term 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, to hedge fuel requirements at generation facilities, hedge supplies for retail operations and protect fuel inventories. In addition, in order to mitigate interest rate risk associated with the issuance of the Company’s variable rate and fixed rate debt, NRG enters into interest rate swap agreements.
     NRG’s trading activities include contracts to profit from market price changes as opposed to hedging an exposure, and 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. These trading activities are a complement to NRG’s energy marketing portfolio.
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     The tables below disclose the activities that include both exchange and non-exchange traded contracts accounted for at fair value in accordance with ASC 820. Specifically, these tables disaggregate realized and unrealized changes in fair value; identify changes in fair value attributable to changes in valuation techniques; disaggregate estimated fair values at September 30, 2009, based on their level within the fair value hiearchy defined in ASC 820; and indicate the maturities of contracts at September 30, 2009. Also, in connection with the Company’s acquisition of Reliant Energy, NRG acquired retail load and supply contracts. The table below also includes the fair value of supply contracts under mark-to-market accounting treatment as of May 1, 2009.
 	 	 	 	 	
Derivative Activity Gains/(Losses)	 	(In millions	) 	
 	
Fair value of contracts as of December 31, 2008	 	$	996	 	
Contracts realized or otherwise settled during the period	 	 	(375	)	
Contracts acquired in conjunction with Reliant Energy	 	 	(1,054	)	
Changes in fair value	 	 	795	 	
 	
Fair value of contracts as of September 30, 2009	 	$	362	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Fair Value of Contracts as of September 30, 2009	
 	 	Maturity	 	 	 	 	 	 	 	 	 	Maturity	 	 	
(In millions)	 	Less Than	 	Maturity	 	Maturity	 	in Excess	 	  Total Fair	 	
Fair value hiearchy gains/(losses)	 	1 Year	 	1-3 Years	 	4-5 Years	 	4-5 Years	 	  Value	 	
 	
Level 1	 	$	5	 	 	$	4	 	 	$	(1	)	 	$	—	 	 	$	8	 	
Level 2	 	 	204	 	 	 	131	 	 	 	120	 	 	 	(31	)	 	 	424	 	
Level 3	 	 	(27	)	 	 	(43	)	 	 	—	 	 	 	—	 	 	 	(70	)	
 	
Total	 	$	182	 	 	$	92	 	 	$	119	 	 	$	(31	)	 	$	362	 	
 	
     A small portion of NRG’s contracts are exchange-traded contracts with readily available quoted market prices. The majority of NRG’s contracts are non-exchange-traded contracts valued using prices provided by external sources, primarily price quotations available through brokers or over-the-counter and on-line exchanges. For the majority of NRG markets, the Company receives quotes from multiple sources. To the extent that NRG receives multiple quotes, the Company’s prices reflect the average of the bid-ask mid-point prices obtained from all sources that NRG believes provide the most liquid market for the commodity. If the Company receives one quote, then the mid-point of the bid-ask spread for that quote is used. The terms for which such price information is available vary by commodity, region and product. A significant portion of the fair value of the Company’s derivative portfolio is based on price quotes from brokers in active markets who regularly facilitate our transactions and we believe such price quotes are executable. We do not use third party sources that derive price based on proprietary models or market surveys. The remainder of the assets and liabilities represents contracts for which external sources or observable market quotes are not available. These contracts are valued based on various valuation 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. Contracts valued with prices provided by models and other valuation techniques make up 19% of the total fair value of all derivative contracts. The fair value of each contract is discounted using a risk free interest rate. In addition, the Company applies a credit reserve to reflect credit risk which is calculated based on published default probabilities. To the extent that NRG’s net exposure under a specific master agreement is an asset, the Company uses the counterparty’s default swap rate. If the exposure under a specific master agreement is a liability, the Company uses NRG’s default swap rate. The credit reserve is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume NRG’s liabilities or that a market participant would be willing to pay for NRG’s assets. As of September 30, 2009, the credit reserve resulted in a $18 million increase in fair value which is composed of a $4 million gain in OCI and a $14 million gain in derivative revenue and cost of operations.
     The fair values in each category reflect the level of forward prices and volatility factors as of September 30, 2009, and may change as a result of changes in these factors. Management uses its best estimates to determine the fair value of commodity and derivative contracts NRG holds and sells. These estimates consider various factors including closing exchange and over-the-counter price quotations, time value, volatility factors and credit exposure. It is possible, however, that future market prices could vary from those used in recording assets and liabilities from energy marketing and trading activities and such variations could be material.
     The Company has elected to disclose derivative activity on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. 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 7A  — Commodity Price Risk  in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 ,  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 assets and liability position is a better indicator of NRG’s hedging activity. As of September 30, 2009, NRG’s net derivative asset was $362 million, a decrease to total fair value of $634 million as compared to December 31, 2008. This decrease was primarily driven by the acquisition of Reliant Energy’s retail portfolio offset by increase in fair value due to the decreases in gas and power prices and the roll-off of trades that settled during the period.
     Based on a sensitivity analysis, the impact of a $1 per MMBtu increase or decrease in natural gas prices across the term of the derivative contracts would cause a change of approximately $574 million in the value of derivatives as of September 30, 2009.
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     Currency Exchange Risk
     NRG may be subject to foreign currency exchange risk as a result of the Company entering into purchase commitments with foreign vendors for the purchase of major equipment associated with  Repowering NRG initiatives. To reduce the risks to such foreign currency exposure, the Company may enter into transactions to hedge its foreign currency exposure using currency options and forward contracts. As of September 30, 2009, there were no foreign currency options or forward contracts outstanding for purchase commitments.
     In connection with the MIBRAG sale transaction, NRG entered into a foreign currency forward contract to hedge the impact of exchange rate fluctuations on the sale proceeds. The foreign currency forward contract had a fixed exchange rate of 1.277 and required NRG to deliver EUR 200 million in exchange for $255 million on June 15, 2009. For the nine months ended September 30, 2009, NRG recorded an exchange loss of $24 million on the contract within “Other income/(expense).”
     As a result of the Company’s limited foreign currency exposure to date, the effect of foreign currency fluctuations has not been material to the Company’s results of operations, financial position and cash flows as of and for the three and nine months ended September 30, 2009.
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) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or 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 report on Form 10-Q.
     Changes in Internal Control over Financial Reporting
     There were no changes in the Company’s internal controls over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred in the third quarter 2009 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
     Inherent Limitations over Internal Controls
     NRG’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. However, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
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PART II — OTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGS
     For a discussion of material legal proceedings in which NRG was involved through September 30, 2009, see Note 15, Commitments and Contingencies , to the condensed consolidated financial statements of this Form 10-Q.
ITEM 1A — RISK FACTORS
     Information regarding risk factors appears in Part I, Item 1A, Risk Factors in NRG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and Part II, Item 1A,  Risk Factors  in NRG’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009.
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	Dollar value of	
 	 	 	 	 	 	 	 	 	 	Total number of shares	 	shares that may be	
 	 	 	 	 	 	 	 	 	 	purchased as part of	 	purchased under the	
 	 	Total number of	 	Average price	 	publicly announced	 	2009 Capital Allocation 	
For the period ended September 30, 2009	 	shares purchased	 	paid per share	 	plans or programs	 	Plan	
 	
First quarter 2009	 	 	—	 	 	$	—	 	 	 	—	 	 	$	330,000,000	 	
Second quarter 2009	 	 	—	 	 	 	—	 	 	 	—	 	 	 	330,000,000	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
July 1 – July 31	 	 	—	 	 	 	—	 	 	 	—	 	 	 	500,000,000	 	
August 1 – August 31	 	 	8,477,000	 	 	 	28.09	 	 	 	8,477,000	 	 	 	261,753,846	 	
September 1 – September 30	 	 	442,100	 	 	 	26.57	 	 	 	442,100	 	 	 	250,002,565	 	
 	
Third quarter 2009 Total	 	 	8,919,100	 	 	 	28.01	 	 	 	8,919,100	 	 	 	250,002,565	 	
 	
Year-to-date	 	 	8,919,100	 	 	$	28.01	 	 	 	8,919,100	 	 	$	250,002,565	 	
 	
     In July 2009, as part of the Company’s 2009 Capital Allocation Program, NRG’s Board of Directors approved an increase to the Company’s previously authorized common share repurchases under its capital allocation plan from the existing $330 million to $500 million. The Company’s repurchases during the period ended September 30, 2009, were approximately $250 million. NRG intends to complete its $500 million of share repurchases by the end of 2009, subject to market prices, financial restrictions under the Company’s debt facilities, and as permitted by securities laws.
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES
     None.
ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     The stockholders of NRG Energy, Inc. voted on nine items at the Annual Meeting of Stockholders held on July 21, 2009:
 	1.	 	The election of Class III Directors to a three-year term;	
 	 	 	 	
 	2.	 	The proposal to adopt the NRG Energy, Inc. Amended and Restated Long-Term Incentive Plan;	
 	 	 	 	
 	3.	 	The proposal to adopt the NRG Energy, Inc. Amended and Restated Annual Incentive Plan for Designated Corporate Officers;	
 	 	 	 	
 	4.	 	The proposal to approve the amendment to Article Six of the Amended and Restated Certificate of Incorporation;	
 	 	 	 	
 	5.	 	The proposal to ratify the appointment of KPMG LLP as NRG’s independent registered public accounting firm;	
 	 	 	 	
 	6.	 	The stockholder proposal to prepare a report on the Carbon Principles;	
 	 	 	 	
 	7.	 	Exelon Corporation’s proposal to approve an amendment to the NRG Bylaws to increase the size of the NRG Board to 19 members;	
 	 	 	 	
 	8.	 	If proposal 7 was approved, Exelon’s proposal to elect five Exelon nominees to serve as a director of NRG Board; and	
 	 	 	 	
 	9.	 	Exelon’s proposal to repeal any Bylaw amendments adopted by the NRG Board without stockholder approval after February 26, 2008 and prior to the effectiveness of the resolution effecting such repeal.	
     There were 265,646,655 shares of common and preferred stock entitled to vote at the meeting and a total of 234,133,623 shares (approximately 88%) were represented at the meeting.
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     The four NRG nominees named below were elected to serve a three-year term as Class III Directors expiring at the annual meeting of stockholders in 2012, while the four Exelon nominees named below were defeated:
 	 	 	 	 	 	 	 	 	
NRG Nominee	Votes For	 	Votes Withheld	
 	
John F. Chlebowski	 	 	175,973,764	 	 	 	691,844	 	
Howard E. Cosgrove	 	 	176,009,097	 	 	 	656,511	 	
William E. Hantke	 	 	176,018,113	 	 	 	647,495	 	
Anne C. Schaumburg	 	 	176,019,858	 	 	 	645,750	 	

Exelon Nominee	Votes For	 	Votes Withheld	
 	
Betsy S. Atkins	 	 	57,258,080	 	 	 	209,935	 	
Ralph E. Faison	 	 	57,256,776	 	 	 	211,239	 	
Coleman Peterson	 	 	57,256,676	 	 	 	211,339	 	
Thomas C. Wajnert	 	 	57,256,726	 	 	 	211,289	 	
 	
     The names of the directors whose terms as directors continued after the meeting are as follows:
 	•	 	Class I: Kirbyjon H. Caldwell, David Crane, Stephen L. Cropper, Kathleen A. McGinty, Thomas W. Weidemeyer	
 	 	 	 	
 	•	 	Class II: Lawrence S. Coben, Paul W. Hobby, Gerald Luterman, Herbert H. Tate, Walter R. Young	
     The proposal to adopt the NRG Energy, Inc. Amended and Restated Long-Term Incentive Plan was approved with 225,514,895 shares voting for, 4,790,467 shares voting against, and 3,828,260 shares abstaining.
     The proposal to adopt the NRG Energy, Inc. Amended and Restated Annual Incentive Plan for Designated Corporate Officers was approved with 228,716,330 shares voting for, 1,578,602 shares voting against, and 3,838,682 shares abstaining.
     The proposal to approve the amendment to Article Six of the Amended and Restated Certificate of Incorporation was approved with 227,053,518 shares voting for, 3,098,376 shares voting against, and 3,981,728 shares abstaining.
     The proposal to ratify the appointment of KPMG LLP as independent registered public accounting firm was ratified with 229,676,224 shares voting for, 653,217 shares voting against, 3,804,181 shares abstaining.
     The stockholder proposal to prepare a report on the Carbon Principles was defeated with 189,432,665 shares voting against, 2,553,249 voting for, and 42,147,708 abstaining.
     Exelon Corporation’s proposal to approve an amendment to the NRG Bylaws to increase the size of the NRG Board to 19 members was defeated with 179,032,706 shares voting against, 54,982,954 shares voting for, and 117,963 abstaining. As a result of the defeat of this proposal, Exelon’s proposal to elect five additional Exelon nominees to serve as a director of the NRG Board was rendered moot.
     Exelon’s proposal to repeal any Bylaw amendments adopted by the NRG Board without stockholder approval after February 26, 2008 and prior to the effectiveness of the resolution effecting such repeal was defeated with 195,842,708 shares voting against, 38,084,601 shares voting for, and 206,313 abstaining. Regardless of the vote outcome, NRG did not initiate any amendments to the Bylaws during the reference period.
ITEM 5 — OTHER INFORMATION
     None.
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ITEM 6 — EXHIBITS
 	 	 	
Exhibits	 	 	
 	 	 	
4.1	 	Twenty-Third Supplemental Indenture, dated July 14, 2009, among NRG Energy, Inc., the guarantors named therein and Law Debenture Trust Company of New York.  (1)	
 	 	 	
4.2	 	Twenty-Fourth Supplemental Indenture, dated October 5, 2009, among NRG Energy, Inc., the existing guarantors named therein, the guaranteeing subsidiaries named therein and Law Debenture Trust Company of New York.  (2)	
 	 	 	
4.3	 	Twenty-Fifth Supplemental Indenture, dated October 5, 2009, among NRG Energy, Inc., the existing guarantors named therein, the guaranteeing subsidiaries named therein and Law Debenture Trust Company of New York.  (2)	
 	 	 	
4.4	 	Twenty-Sixth Supplemental Indenture, dated October 5, 2009, among NRG Energy, Inc., the existing guarantors named therein, the guaranteeing subsidiaries named therein and Law Debenture Trust Company of New York.  (2)	
 	 	 	
4.5	 	Twenty-Seventh Supplemental Indenture, dated October 5, 2009, among NRG Energy, Inc., the existing guarantors named therein, the guaranteeing subsidiaries named therein and Law Debenture Trust Company of New York.  (2)	
 	 	 	
10.1A	 	Amended and Restated Credit Sleeve and Reimbursement Agreement, dated September 30, 2009 (effective October 5, 2009), among Reliant Energy Power Supply, LLC, RERH Holdings, LLC, Reliant Retail Holdings, LLC, Reliant Energy Retail Services, LLC, RE Retail Renewables, LLC, Merrill Lynch Commodities, Inc. and Merrill Lynch & Co., Inc.	
 	 	 	
10.1B	 	Schedules and Exhibits to the Amended and Restated Credit Sleeve and Reimbursement Agreement, dated September 30, 2009 (effective October 5, 2009) (Portions of this Exhibit have been omitted pursuant to a request for confidential treatment).	
 	 	 	
31.1	 	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.	
 	 	 	
31.2	 	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.	
 	 	 	
31.3	 	Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.	
 	 	 	
32	 	Certification of Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, filed herewith.	
 	 	 	
101.INS	 	XBRL Instance Document	
 	 	 	
101.SCH	 	XBRL Taxonomy Extension Schema	
 	 	 	
101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase	
 	 	 	
101.DEF	 	XBRL Taxonomy Extension Definition Linkbase	
 	 	 	
101.LAB	 	XBRL Taxonomy Extension Label Linkbase	
 	 	 	
101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase	

(1)	 	Incorporated herein by reference to NRG Energy, Inc.’s current report on Form 8-K filed on July 15, 2009.	
 	 	 	
(2)	 	Incorporated herein by reference to NRG Energy, Inc.’s current report on Form 8-K filed on October 6, 2009.	
118

Table of Contents
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)  	 	
By:  	 	 	 	
 	 	/s/ DAVID W. CRANE  	 	
 	 	David W. Crane 	 	
 	 	Chief Executive Officer
(Principal Executive Officer)  	 	
 	
 	 	/s/ ROBERT C. FLEXON  	 	
 	 	Robert C. Flexon 	 	
 	 	Chief Financial Officer
(Principal Financial Officer)  	 	
 	
 	 	/s/ JAMES J. INGOLDSBY  	 	
 	 	James J. Ingoldsby 	 	
Date: November 2, 2009 	 	Chief Accounting Officer
(Principal Accounting Officer)  	 	
 	
119

Table of Contents
EXHIBIT INDEX
 	 	 	
Exhibits	 	 	
 	 	 	
4.1	 	Twenty-Third Supplemental Indenture, dated July 14, 2009, among NRG Energy, Inc., the guarantors named therein and Law Debenture Trust Company of New York.  (1)	
 	 	 	
4.2	 	Twenty-Fourth Supplemental Indenture, dated October 5, 2009, among NRG Energy, Inc., the existing guarantors named therein, the guaranteeing subsidiaries named therein and Law Debenture Trust Company of New York.  (2)	
 	 	 	
4.3	 	Twenty-Fifth Supplemental Indenture, dated October 5, 2009, among NRG Energy, Inc., the existing guarantors named therein, the guaranteeing subsidiaries named therein and Law Debenture Trust Company of New York.  (2)	
 	 	 	
4.4	 	Twenty-Sixth Supplemental Indenture, dated October 5, 2009, among NRG Energy, Inc., the existing guarantors named therein, the guaranteeing subsidiaries named therein and Law Debenture Trust Company of New York.  (2)	
 	 	 	
4.5	 	Twenty-Seventh Supplemental Indenture, dated October 5, 2009, among NRG Energy, Inc., the existing guarantors named therein, the guaranteeing subsidiaries named therein and Law Debenture Trust Company of New York.  (2)	
 	 	 	
10.1A	 	Amended and Restated Credit Sleeve and Reimbursement Agreement, dated September 30, 2009, among Reliant Energy Power Supply, LLC, RERH Holdings, LLC, Reliant Retail Holdings, LLC, Reliant Energy Retail Services, LLC, RE Retail Renewables, LLC, Merrill Lynch Commodities, Inc. and Merrill Lynch & Co., Inc.	
 	 	 	
10.1B	 	Schedules and Exhibits to the Amended and Restated Credit Sleeve and Reimbursement Agreement, dated September 30, 2009 (effective October 5, 2009) (Portions of this Exhibit have been omitted pursuant to a request for confidential treatment).	
 	 	 	
31.1	 	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.	
 	 	 	
31.2	 	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.	
 	 	 	
31.3	 	Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.	
 	 	 	
32	 	Certification of Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, filed herewith.	
 	 	 	
101.INS	 	XBRL Instance Document	
 	 	 	
101.SCH	 	XBRL Taxonomy Extension Schema	
 	 	 	
101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase	
 	 	 	
101.DEF	 	XBRL Taxonomy Extension Definition Linkbase	
 	 	 	
101.LAB	 	XBRL Taxonomy Extension Label Linkbase	
 	 	 	
101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase	

(1)	 	Incorporated herein by reference to NRG Energy, Inc.’s current report on Form 8-K filed on July 15, 2009.	
 	 	 	
(2)	 	Incorporated herein by reference to NRG Energy, Inc.’s current report on Form 8-K filed on October 6, 2009.	
120

Exhibit 10.1A
Execution
 
AMENDED AND RESTATED CREDIT SLEEVE
AND REIMBURSEMENT AGREEMENT
Originally dated as of
September 24, 2006
among
NRG ENERGY, INC.,
(from and after the Unwind Start Date)
The Other Sleeve Obligors referred to herein,
as Reimbursement Guarantors,
MERRILL LYNCH COMMODITIES, INC.,
as Sleeve Provider,
and
MERRILL LYNCH & CO., INC.,
as ML Guarantee Provider,
dated as of September 30, 2009 and
effective as of October 5, 2009

 
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience of reference only.
 	 	 	 	 	
 	 	 	Page	 	
 	 	 	 	 	
Section 1. Definitions and Accounting Matters	 	 	1	 	
1.01. Certain Defined Terms	 	 	1	 	
1.02. Terms Generally	 	 	22	 	
1.03. Accounting Terms and Determinations	 	 	22	 	
 	 	 	 	 	
Section 2. Credit Sleeve for Post-Unwind Start Date Obligations	 	 	23	 	
2.01. Credit Sleeve	 	 	23	 	
2.02. Power and Hedging Contracts; Obligations of Compliance Parties	 	 	24	 	
 	 	 	 	 	
Section 3. Payments, Fees and Records	 	 	26	 	
3.01. Notice of Payment on ML Guarantee or Collateral Foreclosure	 	 	26	 	
3.02. Repayment of Draw Reimbursement Obligations	 	 	26	 	
3.03. Interest	 	 	27	 	
3.04. Monthly Sleeve Fee	 	 	28	 	
3.05. Make-Whole Payment	 	 	28	 	
3.06. Payments Generally	 	 	28	 	
3.07. Records; Prima Facie Evidence	 	 	29	 	
 	 	 	 	 	
Section 4. Conditions	 	 	29	 	
 	 	 	 	 	
Section 5. Representations and Warranties	 	 	29	 	
5.01. Existence, Qualification and Power; Compliance with Laws	 	 	29	 	
5.02. Authorization; No Contravention	 	 	30	 	
5.03. Governmental Authorization; Other Consents	 	 	30	 	
5.04. Binding Effect	 	 	30	 	
5.05. Financial Statements; No Material Adverse Effect	 	 	30	 	
5.06. Litigation	 	 	31	 	
5.07. No Default	 	 	31	 	
5.08. [Intentionally Deleted]	 	 	31	 	
5.09. [Intentionally Deleted]	 	 	31	 	
5.10. [Intentionally Deleted]	 	 	31	 	
5.11. ERISA Compliance	 	 	31	 	
5.12. [Intentionally Deleted]	 	 	32	 	
5.13. Margin Regulations; Investment Company Act; Public Utility Holding Company Act	 	 	32	 	
5.14. Disclosure	 	 	32	 	
5.15. Compliance with Laws	 	 	33	 	
5.16. Security Interest in Posted Collateral	 	 	33	 	

 
 	 	 	 	 	
 	 	Page	
 	 	 	 	 	
5.17. Solvency	 	 	33	 	
 	 	 	 	 	
Section 6. Affirmative Covenants	 	 	33	 	
6.01. Financial Statements	 	 	33	 	
6.02. Certificates; Other Information	 	 	34	 	
6.03. Notices	 	 	35	 	
6.04. Payment of Obligations	 	 	35	 	
6.05. Preservation of Existence, Etc	 	 	35	 	
6.06. [Intentionally Deleted]	 	 	35	 	
6.07. [Intentionally Deleted]	 	 	35	 	
6.08. Compliance with Laws	 	 	35	 	
6.09. Books and Records	 	 	36	 	
6.10. Inspection Rights	 	 	36	 	
6.11. Further Assurances	 	 	36	 	
6.12. Obligation to Post Collateral	 	 	36	 	
6.13. Obligation to Cause Partial Credit Sleeve Termination Date and Credit Sleeve Termination Date	 	 	36	 	
6.14. Return of TDSP Postings	 	 	37	 	
 	 	 	 	 	
Section 7. Negative Covenants	 	 	37	 	
7.01. Fundamental Changes	 	 	37	 	
7.02. Other Covenants	 	 	37	 	
 	 	 	 	 	
Section 8. Events of Default	 	 	38	 	
8.01. Reliant Events of Default	 	 	38	 	
8.02. Sleeve Provider Events of Default	 	 	40	 	
 	 	 	 	 	
Section 9. Remedies and Termination	 	 	41	 	
9.01. Remedies of Sleeve Provider	 	 	41	 	
9.02. Remedies of NRG	 	 	42	 	
9.03. [Intentionally Deleted]	 	 	43	 	
9.04. Certain Limitations on Remedies	 	 	43	 	
 	 	 	 	 	
Section 10. Posted Collateral	 	 	43	 	
 	 	 	 	 	
Section 11. Reimbursement Guaranty by Other Reliant Retail Parties	 	 	49	 	
11.01 Reimbursement Guaranty of the Obligations	 	 	49	 	
11.02 Payment by Guarantors	 	 	49	 	
11.03 Liability of Reimbursement Guarantors Absolute	 	 	49	 	
11.04 Waivers by Reimbursement Guarantors	 	 	51	 	
11.05 [Intentionally Deleted]	 	 	51	 	
11.06 [Intentionally Deleted]	 	 	52	 	
11.07 Continuing Reimbursement Guaranty	 	 	52	 	
11.08 Authority of Reimbursement Guarantors or NRG	 	 	52	 	
11.09 Financial Condition of NRG	 	 	52	 	
-ii-

 
 	 	 	 	 	
 	 	Page	
 	 	 	 	 	
11.10 Bankruptcy, etc.	 	 	52	 	
 	 	 	 	 	
Section 12. Miscellaneous	 	 	53	 	
12.01 Notices	 	 	53	 	
12.02 Confidentiality; Limitation on Use of Information	 	 	54	 	
12.03 Reliant Employees	 	 	54	 	
12.04 [Intentionally Deleted]	 	 	54	 	
12.05 Waiver	 	 	55	 	
12.06 Amendments, Etc.	 	 	55	 	
12.07 Expenses, Etc.	 	 	55	 	
12.08 Successors and Assigns	 	 	56	 	
12.09 Assignments	 	 	56	 	
12.10 Survival	 	 	56	 	
12.11 Counterparts	 	 	56	 	
12.12 Governing Law; Jurisdiction; Etc.	 	 	56	 	
12.13 Certain Dispute Resolution Procedures	 	 	57	 	
12.14 Captions	 	 	58	 	
12.15 Limitation on Interest	 	 	58	 	
12.16 Integration	 	 	58	 	
12.17 Conditions to Amendment and Restatement	 	 	58	 	
12.18 Additional Unwind Start Date Actions	 	 	60	 	
12.19 Existing CSRA Provisions	 	 	61	 	
12.20 Public Disclosures	 	 	61	 	
 -iii-

 
Schedules
Schedules
 	 	 	 	 	
SCHEDULE 1.01(a)	 	-	 	Post-Unwind Start Date Obligations	
SCHEDULE 1.01(c)	 	-	 	Data and Reporting Requirement	
SCHEDULE 3.06(a)	 	-	 	Merrill Account	
SCHEDULE 5.06	 	-	 	Litigation	
SCHEDULE 5.15	 	-	 	Compliance With Laws	
SCHEDULE 12.13	 	-	 	Calculation Agents	
SCHEDULE 12.17(a)	 	-	 	Releases of Merrill Collateral	
SCHEDULE 12.18(b)	 	-	 	Terminated Agreements	
 	 	 	 	 	
EXHIBIT A	 	-	 	Form of Acceptable Letter of Credit	
EXHIBIT B	 	-	 	Form of BAC Guarantee	
 -iv

 
          AMENDED AND RESTATED CREDIT SLEEVE AND REIMBURSEMENT AGREEMENT (this “ Agreement ”) originally dated as of September 24, 2006, as amended and restated as of September 30, 2009 (the “ Signing Date ”) and effective October 5, 2009 (the “ Unwind Start Date ”), among NRG ENERGY, INC. (“ NRG ”) (but only as of and after the Unwind Start Date), RELIANT ENERGY POWER SUPPLY, LLC, a Delaware limited liability company (“ REPS ”), RERH Holdings, LLC, a Delaware limited liability company (“ RERH Holdings ”), Reliant Energy Retail Holdings, LLC, a Delaware limited liability company (“ RERH ”), Reliant Energy Retail Services, LLC, a Delaware limited liability company (“ RERS ”) and RE Retail Receivables, LLC, a Delaware limited liability company (“ RERR ”, and together with NRG (but only on and after the Unwind Start Date), REPS, RERH Holdings, RERH, RERS and RERR, the “ Sleeve Obligors ”), MERRILL LYNCH COMMODITIES, INC., a Delaware corporation, as sleeve provider (the “ Sleeve Provider ”), and MERRILL LYNCH & CO., INC., a Delaware corporation, as guarantee provider (the “ ML Guarantee Provider ”, together with the Sleeve Provider, the “ Merrill Parties ”, and together with the Sleeve Obligors, the “ Parties ”, and each a “ Party ”).
          The Sleeve Obligors (other than NRG), the Sleeve Provider and the ML Guarantee Provider are parties to the existing Credit Sleeve and Reimbursement Agreement dated as of September 24, 2006, as previously amended and restated as of December 1, 2006, and as further amended and restated as of August 1, 2007 and May 1, 2009 (as so previously amended and restated the “ Existing CSRA ”), pursuant to which such Sleeve Obligors have requested that the Sleeve Provider, and the Sleeve Provider has agreed to, arrange for the provision of certain guarantees of the ML Guarantee Provider and the posting of required collateral in connection therewith, in each case, in connection with the trading and related activities of the Sleeve Obligors.
          The Sleeve Obligors have arranged for the return of all Merrill Collateral on the Unwind Start Date, including all ML Guarantees, and the release on the Unwind Start Date of the Merrill Parties from all other obligations under the Existing CSRA, in each case, except for the Merrill Parties’ obligations in respect of the Post-Unwind Start Date Obligations (as defined below).
          In connection with the Unwind Start Date, the Parties desire to amend and restate the Existing CSRA.
          Accordingly, subject to Section 12.17, the Parties agree that the Existing CSRA shall be amended and restated in its entirety as follows:
          Section 1. Definitions and Accounting Matters.
          1.01. Certain Defined Terms. As used herein, the following terms shall have the following respective meanings:
          “Acceptable Collateral Agent” means (a) any of BNYMellon N.A., Wells Fargo Bank, N.A., Deutsche Bank, N.A. or JPMorgan Chase, N.A., in each case, so long as such person has a short-term credit rating of at least A-1 by S&P and P-2 by Moody’s, a long-term debt rating

 
of at least A by S&P and A-1 by Moody’s, and assets of at least $10,000,000,000, or (b) other major U.S. commercial bank or a foreign bank with a U.S. branch office as may be agreed by the Parties.
          “Acceptable Letter of Credit” means an irrevocable, non-transferable, standby letter of credit, expiring in not less than 20 Business Days (or, if earlier, the date on which the obligations secured by such Acceptable Letter of Credit are satisfied), issued by Deutsche Bank, BNP Paribas, Bank of America, N.A. or Royal Bank of Scotland, in each case, so long as such issuer possesses a Credit Rating of at least A by S&P and A2 by Moody’s, in the form attached hereto as  Exhibit A or such other form that is reasonably acceptable to the Merrill Parties and is maintained in accordance with the provisions of Section 10 of this Agreement. All costs relating to any such Acceptable Letter of Credit shall be for the account of the Sleeve Obligors.
          “Affiliate” of any specified Person means any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person;  provided  that a Person will be deemed to be an Affiliate of NRG if NRG has knowledge that such Person beneficially owns 10% or more of the Voting Stock of NRG;  provided ,  further , that NRG shall only be deemed to have knowledge of any Person beneficially owning 10% or more of NRG’s Voting Stock if such Person has filed a statement of beneficial ownership pursuant to Sections 13(d) or 13(g) of the Exchange Act or has provided written notice thereof to NRG.
          “Aggregate Merrill Threshold” means, at any time, the sum of the “Thresholds” applicable at such time to REPS (and MLCI as its credit support provider) to the extent actually utilized at such time to cover Current Exposure under Power and Hedging Contracts for which any Post-Unwind Start Date Transaction remains outstanding.
          “Agreement” has the meaning ascribed thereto in the preamble to this Agreement.
          “Asset Sale” shall have the meaning set forth in the NRG Credit Agreement as in effect on the date hereof.
          “Attributable Debt” means, on any date, (a) in respect of a sale and leaseback transaction, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended (such present value to be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP;  provided , that if such sale and leaseback transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of “Capital Lease Obligation”) and (b) in respect of any Synthetic Lease Obligation or financing lease, the amount of the remaining lease payments under the relevant lease that would as of such date be required to be capitalized on a balance sheet in accordance with GAAP if such lease were accounted for as a Capital Lease Obligation.
          “Audited Financial Statements” means the audited consolidated balance sheet of NRG and its consolidated Subsidiaries for the Fiscal Year ended December 31, 2008, and the
-2-

 
related consolidated statements of income or operations, stockholders’ equity, comprehensive income (loss) and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures as of the end of, and for, the previous Fiscal Year, all in reasonable detail.
          “BAC Guarantee” means the guarantee of the ML Parent Guarantor in the form of Exhibit B hereto.
          “Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, as codified at 11 U.S.C. Section 101 et seq.
          “Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate in effect for such day plus 1/2 of 1% and (b) the Prime Rate in effect for such day. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively.
          “BCFe” means, (a) with respect to any Post-Unwind Start Date Transaction, the contracted volume of the Sleeve Obligors power and gas positions for such transaction expressed as a billion cubic feet equivalent, (b) in the case of options, by using the delta volumes instead of the contracted volume, and (c) in the case of power, by converting fixed price power to Henry Hub gas using a market heat rate, as calculated by the Sleeve Provider in a manner consistent with Section VII of the Sleeve Obligors’ retail risk management policy in effect on the Unwind Start Date.
          “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, Houston, Texas or New York City.
          “Calculation Agent” has the meaning ascribed thereto in Section 12.13.
          “Capital Lease Obligation” means, as applied to any Person, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet of such Person in accordance with GAAP in the reasonable judgment of such Person, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty.
          “Capital Outlay Date” has the meaning ascribed thereto in Section 3.01.
          “Capital Stock” means:
     (a) in the case of a corporation, corporate stock;
     (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
-3-

 
     (c) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and
     (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.
          “Change of Control” means the occurrence of any of the following:
     (a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of NRG and its Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d) of the Exchange Act, but excluding any employee benefit plan of NRG or any of its Subsidiaries, and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of such plan);
     (b) the adoption of a plan relating to the liquidation or dissolution of NRG;
     (c) the consummation of any transaction (including any merger or consolidation) the result of which is that any “person” (as defined above) becomes the beneficial owner, directly or indirectly, of more than 40% of the Voting Stock of NRG, measured by voting power rather than number of shares;
     (d) NRG consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, NRG, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of NRG or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of NRG outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance); and
     (e) any Other Sleeve Obligor ceases to be a Wholly Owned Subsidiary of NRG (other than RERS or RERR).
     It shall not be deemed a “Change of Control” pursuant to clauses (a), (c) or (d) above, if NRG or the surviving entity, as the case may be, has the same or higher Credit Rating from each of S&P and Moody’s immediately following such transfer, sale, disposition, merger, consolidation or other transaction as NRG did immediately prior to such transfer, sale, disposition, merger, consolidation or other transaction.
          “C&I Guarantees” means each of the ML Guarantees identified as C&I Guarantees on Schedule 1.01(a).
-4-

 
          “Code” means the Internal Revenue Code of 1986, as amended from time to time.
          “Collateral Foreclosure” means any setoff, application or foreclosure taken by an applicable secured party with respect to any Merrill Collateral or any failure of any applicable Counterparty or other beneficiary of Merrill Collateral hereunder to return Merrill Collateral to the applicable Merrill Party within one Business Day of the date required by the terms of the applicable Counterparty Documents or other applicable agreement.
          “Collateral Trustee” has the meaning ascribed thereto in the Existing Security Documents.
          “Compliance Information” means, with respect to any Compliance Party, the information customarily requested from similarly situated trading counterparties by the Sleeve Provider or the ML Guarantee Provider in the ordinary course of their respective businesses (i) to comply with applicable Laws (including the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))) and (ii) to comply with other internal compliance requirements, in each case to the extent the same are of general application to, and established by the Sleeve Provider or the ML Guarantee Provider in the ordinary course of their respective businesses for, similarly situated trading counterparties.
          “Compliance Party” means each Person entitled to benefit from (i) an ML Guarantee, or (ii) the posting of cash collateral by, or any agreement to post or provide cash collateral by, the Sleeve Provider, under any Post-Unwind Start Date Transaction.
          “Compliance Requirements” means, with respect to any Compliance Party, the receipt by the Sleeve Provider or the ML Guarantee Provider, as applicable, from such Compliance Party of applicable Compliance Information that satisfies the compliance requirements generally established by the Sleeve Provider or the ML Guarantee Provider for similarly situated trading counterparties in the ordinary course of their respective businesses.
          “Contingent Adjustment Amount” has the meaning ascribed thereto in Section 10.
          “Contingent Cash Collateral” means, for any day, all cash posted by or on behalf of the Sleeve Obligors to the Merrill Parties pursuant to  clauses (a)(i)(2)  or  (a)(ii)(B)  of  Section 10 , which as of such day has not theretofore been applied or used by the Merrill Parties to satisfy any Credit Sleeve Obligation or otherwise returned to NRG.
          “Contingent Collateral” means, for any day, the aggregate amount of all Acceptable Letters of Credit, together with all Contingent Cash Collateral, posted by or on behalf of the Sleeve Obligors to the Merrill Parties pursuant to clauses (a)(i)(2)  or  (a)(ii)(B)  of  Section 10 , which as of such day has not theretofore been applied or used by the Merrill Parties to satisfy any Credit Sleeve Obligation or otherwise returned to NRG.
          “Contingent Exposure” means, with respect to any Post-Unwind Start Date Transaction, the aggregate Dollar amount of all potential liability of the Merrill Parties in respect of such transaction, as reasonably determined by the Merrill Parties to a 99.0% (2.32-sigma) confidence level. The determination of Contingent Exposure in respect of any Post-Unwind
-5-

 
Start Date Transaction shall be made on a contract by contract basis and shall exclude any amounts included in the calculation of Current Exposure.
          “Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
          “Control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; and the terms “controlling,” “controlled by” and “under common control with” have correlative meanings.
          “Core Collateral Subsidiary” shall have the meaning set forth in the NRG Credit Agreement as in effect on the date hereof, it being understood and agreed that any and all provisions in effect on the date hereof under the NRG Credit Agreement permitting any Person to designate and re-designate any Core Collateral Subsidiary, any assets thereof or any equity issued by it as a Subsidiary or asset that is not Core Collateral (as defined in the NRG Credit Agreement) shall apply hereunder, and upon any Core Collateral Subsidiary or any assets or equity thereof being so designated, such Subsidiary shall cease to be a Core Collateral Subsidiary hereunder.
          “Counterparty” means each “counterparty” in respect of a Post-Unwind Start Date Transaction identified on  Schedule 1.01(a)  hereto.
          “Counterparty Document” means, with respect to each Counterparty, the Power and Hedging Contract, Credit Support Agreement and ML Guarantee and any related certificates, documents and agreements, as applicable, relating to such Counterparty.
          “CPT” means the prevailing time in Houston, Texas.
          “Credit Rating” means at any time:
     (a) with respect to any Counterparty or any issuer of an Acceptable Letter of Credit, if Moody’s or S&P has issued a credit rating for long-term senior unsecured, and non-credit enhanced, Dollar-denominated debt of such Person, or, if such credit rating is not available, the issuer rating of such Person, issued by each of Moody’s and S&P, as applicable, as in effect at such time in respect of such Person (in the event of a split rating the lower rating shall apply);
     (b) with respect to any Counterparty or any issuer of an Acceptable Letter of Credit, if (i) clause (a) above does not apply at such time, (ii) the obligations of such Person are guaranteed by any Person, (iii) the Sleeve Provider has approved in its reasonable discretion the form of such guarantee and (iv) Moody’s or S&P has issued a credit rating for long-term senior unsecured, and non-credit enhanced debt of such guarantor, such credit rating issued by each of Moody’s and S&P, as applicable, as in effect at such time in respect of the guarantor (in the event of a split rating the lower rating shall apply);
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     (c) with respect to any Counterparty, if neither clause (a) nor clause (b) above shall apply at such time, the credit rating, if any, for such Person designated in writing by the Sleeve Provider and in effect at such time for purposes of this Agreement (which the Sleeve Provider may designate or withhold in its reasonable discretion after consultation with, and review of any relevant credit information provided by, the Sleeve Obligors); or
     (d) with respect to the ML Guarantee Provider, if Moody’s or S&P has issued a credit rating for long-term senior unsecured, and non-credit enhanced, Dollar-denominated debt of the ML Guarantee Provider, such credit rating, or, if such credit rating in not available, the issuer rating of the ML Guarantee Provider, issued by Moody’s or S&P, as applicable, as in effect at such time in respect of the ML Guarantee Provider.
          “Credit Sleeve Obligations” mean the Obligations of the Sleeve Obligors under this Agreement, including the Reimbursement Obligations and the Obligations in respect of the payment of all Monthly Sleeve Fees, Make-whole Payment and any other amounts required to be paid by the Sleeve Obligors hereunder.
          “Credit Sleeve Termination Date” means the earliest date on which the Credit Sleeve Obligations have been terminated and satisfied in full and all Merrill Collateral, including all C&I Guarantees, posted by the Merrill Parties has been returned to the Merrill Parties or reimbursement has been made therefore and on which all other obligations owed to the Merrill Parties hereunder and under the other Transaction Documents have been paid and satisfied in full (in each case, other than indemnities and any similar obligations of NRG and the Other Sleeve Obligors not then due and payable that expressly survive termination of this Agreement and the other Transaction Documents).
          “Credit Support Agreement” means a credit support agreement among a Counterparty, REPS and the Sleeve Provider, in each case, in the form in effect as of the Unwind Start Date.
          “Current Adjustment Amount” has the meaning ascribed thereto in Section 10.
          “Current Collateral” means, for any day, all cash and Acceptable Letters of Credit posted by or on behalf of the Sleeve Obligors to the Merrill Parties pursuant to  clauses (a)(i)(1)  or  (a)(ii)(A)  of  Section 10  of this Agreement, which as of such day has not theretofore been applied or used by the Merrill Parties to satisfy any Credit Sleeve Obligation or otherwise returned to NRG.
          “Current Draw Reimbursement Obligations” means Draw Reimbursement Obligations other than any portion thereof that becomes a Deferred Reimbursement Obligation.
          “Current Exposure” means, as of any Business Day, (a) the sum, without duplication, of (i) the Current Mark-to-Market of all Post-Unwind Start Date Transactions, (ii) all cash, letters of credit, surety bonds and any cash equivalents posted by the Merrill Parties under this Agreement, (iii) the aggregate amount of all outstanding ML Guarantees (other than any ML Guarantee of a Post-Unwind Start Date Transaction) and (iv) Current Payables, in each case, as determined by the Merrill Parties as of such Business Day and set forth in the related Exposure Report;  provided  that for purposes of the foregoing (1) Current Mark-to-Market shall
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exclude the effect of the True Forward Hedge Positions solely to the extent such positions are in-the-money to the Sleeve Obligors and exceed Current Payables and (2) the amount of any ML Guarantee shall be deemed equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such ML Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by ML Guarantee Provider in good faith. Without limiting any challenge rights of the Sleeve Obligors provided in Part I of  Schedule 1.01(c) , the determination of Current Exposure shall be conclusive and binding on all of the Parties hereto absent manifest error. As used in this definition, “True Forward Hedge Positions” means all Forward Hedge Positions (as defined in Schedule 1.01(c) ).
          “Current Mark-to-Market” has the meaning ascribed thereto in Schedule 1.01(c).
          “Current Payables” means, for any day, the aggregate accounts payable balance for such day of the Sleeve Obligors under all Power and Hedging Contracts in respect of which any Post-Unwind Start Date Transaction remains outstanding, as reflected in the books and records of the Sleeve Obligors.
          “Custody Date” means the date on which a definitive standby custody agreement with an Acceptable Collateral Agent has been executed and delivered by each of NRG, MLCI and such Acceptable Collateral Agent.
          “Default” means an Event of Default or an event that with notice or lapse of time or both would, unless cured or waived, become an Event of Default.
          “Deferred Cure Reimbursement Obligations” has the meaning ascribed thereto in Section 12.07(b).
          “Deferred Draw Reimbursement Obligations” has the meaning ascribed thereto in Section 3.02.
          “Deferred Reimbursement Obligations” means the Deferred Draw Reimbursement Obligations and Deferred Cure Reimbursement Obligations.
          “Dollars” and “$” means lawful money of the United States of America.
          “Draw Reimbursement Obligations” has the meaning ascribed thereto in Section 3.02.
          “Environmental Laws” means any and all Federal, state, local, regional and foreign statutes, laws, rules of common law, constitutional provisions, regulations, ordinances, rules judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or Hazardous Materials, including, those relating to the use analysis, generation, manufacture, storage, discharge, emission, release, disposal, transportation treatment, investigation, removal, or remediation of Hazardous Materials. Environmental Laws include those acts commonly referred to as: the Comprehensive Environmental Response, Compensation and Liability Act of 1980; the Superfund Amendments and Reauthorization Act; the National Environmental Policy
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Act; the Hazardous Materials Transportation Act; the Resource Conservation and Recovery Act, the Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, and the Occupational Safety and Health Act, and their state counterparts.
          “ERCOT” means the Electric Reliability Council of Texas, or any successor thereto.
          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.
          “ERISA Affiliate” means any trade or business (whether or not incorporated) which is a member of the controlled group of RERH Holdings or under common control with RERH Holdings within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code) or Section 4001(a)(14) of ERISA.
          “ERISA Event” means (a) a reportable event (within the meaning of Section 4043 of ERISA) with respect to a Pension Plan; (b) a withdrawal by RERH Holdings or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal (within the meaning of Sections 4203 or 4205 of ERISA) by RERH Holdings or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon RERH Holdings or any ERISA Affiliate.
          “Event of Default” means a Sleeve Provider Event of Default or a Reliant Event of Default.
          “Exchange Act” means the Securities Exchange Act of 1934, as amended.
          “Exchange Traded Contract” has the meaning ascribed thereto in the Existing CSRA.
          “Excluded Subsidiaries” means collectively, the “Excluded Subsidiaries” from time to time as defined in the NRG Credit Agreement and the “Excluded Subsidiaries” from time to time as defined in the Senior Note Documents as the NRG Credit Agreement and such Senior Note Documents are in effect on the Unwind Start Date, it being understood and agreed that any provisions in effect on the date hereof under the NRG Credit Agreement permitting any Person to designate and re-designate a Subsidiary as an Excluded Subsidiary shall apply hereunder and upon any such designation under the NRG Credit Agreement, the relevant Subsidiary shall be an Excluded Subsidiary hereunder.
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          “Exclusivity and Fee Letter” means that certain letter agreement, dated February 22, 2009, from NRG and accepted and agreed to by the Merrill Parties.
          “Exempt Subsidiaries” means the “Exempt Subsidiaries” from time to time as defined in the NRG Credit Agreement as such agreement is in effect on the Unwind Start Date.
          “Existing CSRA” has the meaning ascribed thereto in the introductory paragraphs to this Agreement.
          “Existing Security Documents” shall mean the “Security Documents” (as defined in the Existing CSRA).
          “Exposure Report” has the meaning ascribed thereto in Schedule 1.01(c).
          “Fair Market Value” means the value that would be paid by a willing buyer to a willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the chief financial officer or the treasurer of NRG or Board of Directors of NRG or the selling entity.
          “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day;  provided , that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America, N.A. on such day on such transactions as determined by the Sleeve Provider.
          “Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.
          “First Execution Date” means September 24, 2006.
          “Fiscal Quarter” means each three month period of a Fiscal Year ending on March 31, June 30, September 30, and December 31.
          “Fiscal Year” means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year ( e.g. , the “ 2006 Fiscal Year ”) refer to the Fiscal Year ending on December 31 of such calendar year.
          “GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as
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have been approved by a significant segment of the accounting profession, which are in effect from time to time.
          “Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state, county, or local, and any agency, authority, instrumentality, regulatory body, court, central bank, independent system operator, transmission organization or other entity to the extent exercising executive, legislative, judicial, taxing, monetary, regulatory, supervisory or administrative powers or functions of or pertaining to government or the regulation of the business of the Sleeve Obligors.
          “Governmental Contract” means a contract for the purchase or sale of any retail electric products or services between any Sleeve Obligor and a Governmental Customer.
          “Governmental Customer” means (a) any agency, authority, instrumentality, central bank, independent system operator, transmission organization or other entity owned or controlled by any Governmental Authority or (b) any Person that is or could be a Governmental Authority; in either case, to the extent acting in a commercial capacity under a Governmental Contract.
          “Guarantee” means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise; provided, that standard contractual indemnities that do not relate to Indebtedness shall not be considered a Guarantee). The term “Guarantee” as a defined verb has a corresponding meaning.
          “Guaranteed Obligations” has the meaning ascribed thereto in Section 11.01.
          “Hazardous Materials” means all explosive, flammable, corrosive or radioactive substances or wastes and all hazardous, carcinogenic, mutagenic or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes, toxic mold and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
          “ICE” means the IntercontinentalExchange, Inc. or its successor.
          “Indebtedness” means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses or trade payables), whether or not contingent (without duplication):
     (a) in respect of borrowed money;
     (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit or reimbursement agreements in respect thereof;
     (c) in respect of banker’s acceptances;
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     (d) representing Capital Lease Obligations or Attributable Debt in respect of sale and leaseback transactions, Synthetic Lease Obligations or financing leases;
     (e) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed;
     (f) representing any Interest Hedging Obligations; or
     (g) consisting of Disqualified Stock;
whether or not any of the preceding items appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term “Indebtedness” includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date will be:
     (i) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount;
     (ii) the principal amount of and premium (if any) on the Indebtedness, in the case of any other Indebtedness;
     (iii) in respect of Indebtedness of other Persons secured by a Lien on the assets of the specified Person, the lesser of:
     (A) the Fair Market Value of such asset at such date of determination, and
     (B) the amount of such Indebtedness of such other Persons; and
     (iv) in respect of any Guarantee, an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.
          “Interest Hedging Obligations” means, with respect to any specified Person, the net obligations of such Person under:
     (a) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements;
     (b) other agreements or arrangements designed to manage interest rate risk; and
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     (c) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates.
          “Law” means, as to any Person, any law, rule, regulation, ordinance or treaty, or any determination, ruling or other directive by or from a court, arbitrator or other Governmental Authority, including ERCOT, in each case applicable to or binding on such Person or any of its property or assets or to which such Person or any of its property or assets is subject.
          “Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement and any lease that constitutes a security interest.
          “Loans” means the loans made by the Working Capital Facility Provider to REPS under, and in accordance with, the Working Capital Facility.
          “Make-whole Payment” has the meaning ascribed thereto in Section 3.05.
          “Margin Stock” means “margin stock” within the meaning of Regulations T, U and X of the Federal Reserve Board.
          “Market Information” means market information such as price curves, volatilities, interest rates and similar information for which quotes are customarily available from reference market makers.
          “Material Adverse Effect” means a material adverse effect upon (a) the business, operations, property or financial condition of NRG and its Subsidiaries taken as a whole; or (b) the validity or enforceability against any of NRG or any Other Sleeve Obligor of any Transaction Document to which it is a party or the material rights and remedies of the Sleeve Provider thereunder.
          “Merrill Collateral” or “ML Collateral” has the meaning ascribed thereto in Section 3.01.
          “Merrill Parties” means the Sleeve Provider and the ML Guarantee Provider.
          “Minimum Transfer Amount” means $100,000.
          “Mirror OTC Contract” has the meaning ascribed thereto in the Existing CSRA.
          “ML Credit Event” means the any of the following:
     (a) the ML Guarantee Provider (i) shall default (after giving effect to all applicable grace periods) in the payment of any Indebtedness or Guarantee having an aggregate principal amount (including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $100,000,000 and (ii) either (A) at the time of such default (after giving effect to all applicable grace periods), the final scheduled maturity of such Indebtedness shall have
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occurred or (B) the final scheduled maturity of such Indebtedness shall have been accelerated; or
     (b) any senior unsecured, non-credit enhanced debt of the ML Guarantee Provider shall fail to maintain a Credit Rating of at least BBB by S&P or Baa by Moody’s; or
     (c) the ML Guarantee Provider institutes or consents to the institution of any proceeding under any insolvency, bankruptcy, reorganization, receivership, liquidation, winding-up or other debtor relief law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of their respective property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of the ML Guarantee Provider and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any insolvency, bankruptcy, reorganization, receivership, liquidation, winding-up or other debtor relief law relating to the ML Guarantee Provider or to all or any material part of their respective property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or
     (d) the ML Guarantee Provider becomes unable or admits in writing its inability or fails generally to pay its debts as they become due; or
     (e) the entry into any definitive agreement for the sale, merger or consolidation, or other transaction or disposition of or by either of the Merrill Parties, if the resulting successor to or assignee of either of the Merrill Parties would not be a direct or indirect 100% owned subsidiary of the ML Parent Guarantor, or would otherwise result in the termination of the BAC Guarantee.
          “ML Guarantee” means each guarantee listed on Schedule 1.01(a) and any guarantee by the ML Guarantee Provider in respect of any Post-Unwind Start Date Transaction.
          “ML Guarantee Provider” means ML&Co.
          “ML&Co.” means Merrill Lynch & Co., Inc., a Delaware corporation.
          “MLCI” means Merrill Lynch Commodities, Inc., a Delaware corporation.
          “ML Parent Guarantor” means Bank of America Corporation, a Delaware corporation.
          “Monthly Determination Date” means, with respect to any calendar month, the last Business Day of the immediately preceding month.
          “Monthly Payment Date” means, in respect of any month, the date two Business Days after the first day of such month.
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          “Monthly Sleeve Fee” means, in respect of any calendar month for which the Credit Sleeve Termination Date has not occurred or prior to the Monthly Determination Date for such month, (a) if the Merrill Parties remain obligated in respect of any Post-Unwind Start Date Transactions with Current Exposure that is equal to or greater than 50 BCFe (as determined as of the Monthly Determination Date for such month), $1,000,000, (b) if the Merrill Parties remain obligated in respect of any Post-Unwind Start Date Transactions with Current Exposure that is equal to or greater than 30 BCFe but less than 50 BCFe (as determined as of the Monthly Determination Date for such month), $750,000, and (c) if the Merrill Parties remain obligated in respect of any Post-Unwind Start Date Transactions with Current Exposure that is less than 30 BCFe (as determined as of the Monthly Determination Date for such month) or if the Credit Sleeve Termination Date has not occurred on or prior to such Monthly Determination Date, $500,000;  provided  that for any month following January 2010 in which the Credit Sleeve Termination Date has not occurred on or prior to the Monthly Determination Date for such month, the Monthly Sleeve Fee that would otherwise be payable for such month shall be increased by 100%.
          “Moody’s” shall mean Moody’s Investors Service, Inc. or if such company shall cease to issue ratings, another nationally recognized rating company selected in good faith by mutual agreement of the Sleeve Provider and NRG.
          “Multiemployer Plan” means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been made, or have been required to be made, by RERH Holdings or any ERISA Affiliate and that is covered by Title IV of ERISA.
          “Notice Date” has the meaning ascribed thereto in Section 3.02.
          “NRG” has the meaning ascribed thereto in the preamble to this Agreement.
          “NRG Credit Agreement” means the Second Amended and Restated Credit Agreement dated as of June 8, 2007 between NRG, Citicorp North America Inc., as Administrative Agent, and the lenders and other Persons party thereto, as amended, restated, refinanced and otherwise modified from time to time.
          “NYMEX” means the New York Mercantile Exchange or its successor.
          “Obligations” means any amounts, principal, interest, premium, fees, indemnifications, reimbursements, expenses, damages and other liabilities payable under the applicable documentation.
          “Obligee Guarantor” has the meaning ascribed thereto in Section 11.06.
          “Other Sleeve Obligors” means each of REPS, RERH Holdings, RERH, RERS, RERR and any other Subsidiaries of RERH Holdings and, in each case, their respective successors and assigns.
          “Partial Credit Sleeve Termination Date” means the earliest date on which all of the Merrill Parties’ obligations in respect of the Post-Unwind Start Date Transactions have been terminated and satisfied in full and all Merrill Collateral (other than any C&I Guarantee in
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respect of which NRG has satisfied the requirements of Section 10(a)(iii)) posted by the Merrill Parties has been returned to the Merrill Parties or reimbursement has been made therefor.
          “Party” has the meaning ascribed thereto in the preamble to this Agreement.
          “PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
          “Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by RERH Holdings or any ERISA Affiliate or to which RERH Holdings or any ERISA Affiliate contributes or has an obligation to contribute or with respect to which RERH Holdings or any ERISA Affiliate has any direct or contingent liability, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.
          “Person” means any individual, corporation, firm, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.
          “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by RERH Holdings or its Subsidiaries or with respect to which RERH Holdings or its Subsidiaries could have any direct or contingent liability or, with respect to any such plan that is subject to Section 412 of the Code, or Title IV of ERISA, any such plan established by an ERISA Affiliate.
          “Post-Default Rate” means a per annum rate equal to the Base Rate (as in effect from time to time) plus 11.00%.
          “Post-Unwind Start Date Obligations” means, collectively, the Post-Unwind Start Date Transactions, the outstanding cash postings to TDSPs described on  Schedule 1.01(a)  hereto and the ML Guarantees.
          “Post-Unwind Start Date Transaction” means a trade entered prior to the Unwind Start Date in accordance with this Agreement under which the final delivery date, payment date, or settlement date is scheduled to occur after the Unwind Start Date, and in each case, is identified on  Schedule 1.01(a)  hereto.
          “Posted Collateral” means, for any day, all cash and letters of credit posted by the Sleeve Obligors to the Merrill Parties under this Agreement, including all Current Collateral and Contingent Collateral posted in accordance with Section 10 , which as of such day has not theretofore been applied or used by the Merrill Parties to satisfy any Credit Sleeve Obligation or otherwise returned to NRG.
          “Power and Hedging Contract” means each over-the-counter master agreement between REPS and a Counterparty providing for transactions regarding Accepted Products (as such term is defined in the Existing CSRA), and including as part thereof the associated Credit Support Agreement, in each case, existing on the Unwind Start Date.
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          “Preferred Equity” means, collectively, each of (i) the Certificate of Designations of NRG, adopted December 14, 2004, with respect to 4.0% Convertible Perpetual Preferred Stock and (ii) the Certificate of Designations of NRG, adopted August 5, 2005, with respect to 3.625% Convertible Perpetual Preferred Stock.
          “Prime Rate” means a fluctuating rate of interest equal to the rate of interest most recently announced by the Wall Street Journal as the prime rate for Dollar-denominated loans.
          “Reimbursement Guarantors” means each of the Other Sleeve Obligors and their respective successors and assigns.
          “Reimbursement Guaranty” means the guarantee of the Reimbursement Guarantors to repay the Guaranteed Obligations in accordance with  Section 11 .
          “Reimbursement Obligations” means the Draw Reimbursement Obligations and the Deferred Reimbursement Obligations.
          “Reliant Default” means any Default with respect to a Reliant Event of Default.
          “Reliant Event of Default” has the meaning ascribed thereto in Section 8.01.
          “Remaining C&I Exposure” means an amount equal to 115% of the sum of all exposure and all other liabilities and potential liabilities of the Merrill Parties under each C&I Guarantee, as reasonably determined by the Merrill Parties (in each case, calculated by the Merrill Parties in a manner consistent with the calculation of Current Exposure and Contingent Exposure hereunder).
          “REPS” has the meaning ascribed thereto in the preamble of this Agreement.
          “RERH” has the meaning ascribed thereto in the preamble to this Agreement.
          “RERH Holdings” has the meaning ascribed thereto in the preamble to this Agreement.
          “RERR” has the meaning ascribed thereto in the preamble to this Agreement.
          “RERS” has the meaning ascribed thereto in the preamble to this Agreement.
          “Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of a Party and, in addition with respect to the Other Sleeve Obligors, any officer thereof that is also a vice president or more senior officer of NRG (excluding vice presidents in marketing). Any document delivered hereunder that is signed by a Responsible Officer of a Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Party.
          “Restricted Subsidiary” shall have the meaning set forth in the NRG Credit Agreement as in effect on the date hereof, it being understood and agreed that any and all
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provisions in effect on the date hereof under the NRG Credit Agreement permitting any Person to designate and re-designate any Restricted Subsidiary or any other type of Subsidiary shall apply hereunder; provided that, for purposes of this Agreement, each Other Sleeve Obligor shall be deemed to be a Restricted Subsidiary at all times.
          “S&P” means Standard & Poor’s Ratings Group (presently a division of The McGraw-Hill Companies, Inc.), together with its successors, or, if such company shall cease to issue ratings, another nationally recognized rating company selected in good faith by mutual agreement of the Sleeve Provider and NRG.
          “Scheduled Term” means the period from the First Execution Date through January 29, 2010.
          “SEC” means the Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions.
          “Senior Note Documents” means any or all of the following:
     (a) The Base Indenture, dated as of February 2, 2006 (as amended, restated, refinanced, modified or otherwise in effect from time to time) (the “ Base Indenture ”), by and between NRG and Law Debenture Trust Company of New York, as trustee (the “ Trustee ”);
     (b) First Supplemental Indenture, dated as of February 2, 2006, by and among NRG, the subsidiaries of the Company set forth on Schedule I attached thereto and the Trustee, providing for the issuance of 7.250% Senior Notes due 2014;
     (c) Second Supplemental Indenture, dated as of February 2, 2006, by and among NRG, the subsidiaries of the Company set forth on Schedule I attached thereto and the Trustee, providing for the issuance of 7.375% Senior Notes due 2016;
     (d) Third Supplemental Indenture, dated as of March 14, 2006, by and among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (e) Fourth Supplemental Indenture, dated as of March 14, 2006, by and among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (f) Fifth Supplemental Indenture, dated as of April 28, 2006, by and among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (g) Sixth Supplemental Indenture, dated as of April 28, 2006, among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (h) Seventh Supplemental Indenture, dated November 13, 2006 among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (i) Eighth Supplemental Indenture, dated November 13, 2006 among NRG, the guarantors listed on the signature page thereto and the Trustee;
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     (j) Ninth Supplemental Indenture, dated as of November 21, 2006, by and among NRG, the subsidiaries of NRG set forth on Schedule I attached thereto and the Trustee, providing for the issuance of 7.375% Senior Notes due 2017;
     (k) Tenth Supplemental Indenture, dated July 19, 2007 among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (l) Eleventh Supplemental Indenture, dated July 19, 2007 by and among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (m) Twelfth Supplemental Indenture, dated as of July 19, 2007 among NRG, the subsidiaries of the Company set forth on Schedule I attached thereto and the Trustee;
     (n) Thirteenth Supplemental Indenture, dated as of August 28, 2007 among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (o) Fourteenth Supplemental Indenture, dated as of August 28, 2007, by and among NRG, the guarantors listed on the signature page thereto and the Trustee;
     (p) Fifteenth Supplemental Indenture, dated as of August 28, 2007, by and among NRG, the subsidiaries of the Company set forth on Schedule I attached thereto and the Trustee;
     (q) Sixteenth Supplemental Indenture, dated as of April 28, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (r) Seventeenth Supplemental Indenture, dated as of April 28, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (s) Eighteenth Supplemental Indenture, dated as of April 28, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (t) Nineteenth Supplemental Indenture, dated as of May 8, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (u) Twentieth Supplemental Indenture, dated as of May 8, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (v) Twenty-first Supplemental Indenture, dated as of May 8, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (w) Twenty-second Supplemental Indenture, dated as of June 5, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (x) Twenty-third Supplemental Indenture, dated as of July 14, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
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     (y) Twenty-fourth Supplemental Indenture, dated as of October 5, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (z) Twenty-fifth Supplemental Indenture, dated as of October 5, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (aa) Twenty-sixth Supplemental Indenture, dated as of October 5, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee;
     (bb) Twenty-seventh Supplemental Indenture, dated as of October 5, 2009, by and among NRG, the subsidiaries of NRG party thereto and the Trustee; and
     (cc) Any other supplemental indenture issued pursuant to the Base Indenture.
          “Senior Notes” shall mean each note issued pursuant to the Senior Note Documents.
          “Significant Subsidiary” shall mean any Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date hereof and shall in any event include the Core Collateral Subsidiaries.
          “Sleeve Obligors” has the meaning ascribed thereto in the preamble to this Agreement.
          “Sleeve Provider” has the meaning ascribed thereto in the preamble to this Agreement.
          “Sleeve Provider Event of Default” has the meaning ascribed thereto in Section 8.02.
          “Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (iv) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability;  provided  that if the context in which “Solvent” or “Solvency” is used refers to a Person together with its Subsidiaries, Person as used above shall be deemed to be a reference to such Person together with its Subsidiaries.
          “Specified Transaction” means, with respect to any Person (i) any prepaid forward sale of energy, oil, gas or minerals by such Person that is intended primarily as a borrowing of
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funds, excluding volumetric production payments, and (ii) any interest rate, currency, commodity or other swap, collar, cap, option or other derivative that is intended primarily as a borrowing of funds, or any combination of any of the foregoing, with the amount of the obligations of such Person thereunder being the net obligations of such Person thereunder.
          “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.
          “Synthetic Lease Obligation” means the monetary obligation of a Person under a so-called synthetic, off-balance sheet or tax retention lease.
          “TDSP” means a transmission or distribution service provider.
          “Terminated Agreements” has the meaning ascribed thereto in Section 12.18(b).
          “Third A&R Date” means May 1, 2009.
          “Transaction Documents” means this Agreement and any other contract or agreement (including ISDA Master Agreements, but excluding any Credit Support Agreements and any Terminated Agreements) between any Merrill Party or its Affiliates, on one hand, and any Sleeve Obligor or its Affiliates, on the other hand, relating to the transactions contemplated hereby.
          “Unaudited Financial Statements” means the unaudited consolidated balance sheet of NRG and its consolidated Subsidiaries as at the end of the Fiscal Quarter ended June 30, 2009, and the related unaudited consolidated statements of income or operations for such Fiscal Quarter and cash flows for the Fiscal Quarter then ended, including normal year-end adjustments and without comparisons to prior periods.
          “Unfunded Pension Liability” means the failure of a Pension Plan to satisfy the minimum funding standard applicable to such Pension Plan for any plan year, as determined in accordance with Section 412 of the Code.
          “Unrestricted Subsidiary” shall have the meaning set forth in the NRG Credit Agreement.
          “Unwind Start Date” has the meaning ascribed thereto in the preamble to this Agreement.
          “Valuation Date” means, (a) when used with respect to the determination of the Current Adjustment Amount, each Business Day, and (b) when used with respect to the determination of the Contingent Adjustment Amount, each Monthly Determination Date.
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          “Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.
          “Wholly Owned Subsidiary” of any specified Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) is owned by such Person or by one or more other Wholly Owned Subsidiaries of such Person.
          “Working Capital Facility” means the Working Capital Facility dated as of September 1, 2006, as amended and restated as of the Third A&R Date, among Working Capital Facility Provider, as Lender, REPS, as Borrower, and the Other Sleeve Obligors, as Guarantors.
          “Working Capital Facility Provider” means Merrill Lynch Capital Corporation, a Delaware corporation.
          1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified, renewed or replaced (subject to any restrictions on such amendments, restatements, supplements or modifications, renewals or replacements set forth therein or herein), (b) references to any law, constitution, statute, treaty, regulation, rule or ordinance, including any section or other part thereof (each, for purposes of this  Section 1.02 , a “ law ”) shall refer to that law as amended from time to time and shall include any successor law, (c) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (e) all references herein to Sections, Exhibits and Schedules shall be construed to refer to Sections of, and Exhibits and Schedules to, this Agreement.
          1.03. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Sleeve Provider hereunder shall be prepared in accordance with GAAP, applied on a basis consistent with that used in the financial statements referred to in  Section 5.05 .
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          Section 2. Credit Sleeve for Post-Unwind Start Date Obligations.
          2.01. Credit Sleeve.
          (a) From and after the Unwind Start Date, and otherwise subject to and in accordance with the terms and conditions of this Agreement, the Merrill Parties shall:
     (i) until the earlier of the Credit Sleeve Termination Date and January 29, 2010, cause the ML Guarantee Provider to perform under ML Guarantees in respect of REPS’ obligations under the Post-Unwind Start Date Transactions, and prevent any events of default or termination events relating solely to the ML Guarantee Provider as a credit support provider under such Post-Unwind Start Date Transactions, including the related Credit Support Agreements;
     (ii) until the earlier of the Credit Sleeve Termination Date and January 29, 2010, cause the Sleeve Provider to perform under Credit Support Agreements providing credit support for the obligations in respect of the Post-Unwind Start Date Transactions, and prevent any events of default or termination events relating solely to the Sleeve Provider as a credit support provider under the Credit Support Agreements related to the Post-Unwind Start Date Transactions;
     (iii) until the earlier of the Credit Sleeve Termination Date and April 30, 2010, cause the ML Guarantee Provider to perform under the C&I Guarantees; and
     (iv) execute and deliver such further certificates, documents and agreements, and take such further actions, as NRG may reasonably request to fully implement the intent of the foregoing;
provided, however, that from and after the Unwind Start Date, the foregoing obligations of the Merrill Parties are subject to the following: (A) all obligations of the Merrill Parties to perform in respect of any ML Guarantee or to post or provide any collateral or other credit support under this Agreement shall be limited to the Post-Unwind Start Date Obligations; (B) all commitments of the Merrill Parties with respect to entering into any Mirror OTC Contract or Exchange Traded Contract shall be terminated; (C) all commitments of the Merrill Parties with respect to providing ML Guarantees or the posting or provision of collateral to Governmental Authorities that are not Governmental Customers shall be terminated, including, without limitations, all obligations to post or provide collateral to any TDSP or ERCOT; and (D) the Sleeve Obligors, in consultation with the Merrill Parties, shall have the right to deliver to all applicable Persons notices that all such commitments as provided in the foregoing clauses (A), (B) and (C) have terminated and the right to the return of any collateral theretofore posted under such commitments.
          (b) From and after the Unwind Start Date, each of the Other Sleeve Obligors shall have the right to conduct any power, gas and other commodity purchases or sales and hedging transactions;  provided  that (i) such transactions do not impose setoff rights against any Post-Unwind Start Date Obligations and (ii) the Other Sleeve Obligors may not enter into any
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transaction under any Power and Hedging Contract so long as any Post-Unwind Start Date Transaction remains outstanding thereunder and so long as the Merrill Parties have not been fully released and legally discharged from all obligations under such Power and Hedging Contract (other than any indemnities and/or other contingent obligations not then due and payable, if any).
          2.02. Power and Hedging Contracts; Obligations of Compliance Parties.
          (a) Power and Hedging Contracts. In connection with the obligations of the Merrill Parties under Section 2.01(a):
     (i) Modifications to any Power and Hedging Contract, Credit Support Agreement or ML Guarantee, in each case, in respect of any Post-Unwind Start Date Obligation shall require the consent of the Merrill Parties, not to be unreasonably withheld or delayed.
     (ii) Following receipt of notice from any Counterparty or Governmental Customer in respect of which any Post-Unwind Start Date Obligation is outstanding, that REPS (or the Sleeve Provider on its behalf) is required to post or return collateral in connection with any collateral posting obligation that the Sleeve Provider has undertaken in accordance with this Agreement, REPS shall promptly (and in no event later than, for collateral to be posted on the same day, 11:00 a.m. CPT on such day of receipt, and for collateral to be posted on the next day, 2:00 p.m. CPT on such day of receipt) provide such notice to the Sleeve Provider. On each day in which REPS is permitted to value exposure or make any other determination in respect of collateral to be posted by or to the Sleeve Provider in connection with any posting obligation that the Sleeve Provider has agreed to undertake in connection with this Agreement, REPS shall make such valuation or determination in good faith and in a commercially reasonable manner. To the extent applicable, following any valuation or determination made pursuant to the prior sentence, REPS shall make demand to the applicable Person for the posting of collateral by or the return of collateral to the Sleeve Provider and to the extent the Sleeve Provider receives such a demand from REPS, the Sleeve Provider shall, subject to the terms and conditions of this Agreement, including, without limitation, the provisions of  Section 4 , and the related Credit Support Agreement, make such posting of collateral as demanded, whether or not the Sleeve Provider disputes the valuation, determination or demand (but subject to the Sleeve Provider’s rights to cause the adjustment thereof below). Each valuation, determination and demand of REPS specified in this  clause (ii)  shall be made by REPS without consultation with the Sleeve Provider unless such consultation is sought by REPS, except that:
     (1) if the Sleeve Provider disputes any such valuation, determination or demand, prior to any action taken under paragraphs (2)  or  (3)  below, and prior to the commencement of any further remedial action, REPS shall negotiate with the Sleeve Provider in good faith for one Business Day to resolve any such dispute and upon resolution of such dispute, the applicable valuation, determination or demand shall be adjusted accordingly, with corresponding adjustments to the subsequent requests to the Persons to whom such valuations, determinations or demands apply;
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     (2) if the Sleeve Provider disputes any such valuation based on Market Information, prior to any action taken under paragraph (3)  below, the Market Information and resulting calculation shall be determined in accordance with  Section 12.13 and upon such determination, the applicable valuation shall be adjusted accordingly, with corresponding adjustments to the subsequent requests to the Persons to whom such valuations apply;  provided  that, until such determination in accordance with  Section 12.13 , the valuation determined by REPS shall apply;
     (3) to the extent applicable, if after the application of paragraphs (1) and (2) above, the Sleeve Provider in its reasonable discretion determines that (x) more than $15,000,000 in outstanding value of Merrill Collateral remains at any time posted or is requested to be posted in excess of the amount that is required to be posted as determined by REPS (determined, in each case, on aggregate basis across all Persons to whom the Sleeve Provider has such excess posted or has requested posting of Merrill Collateral in an outstanding value of $2,000,000 or more in connection with this Agreement), or (y) more than $5,000,000 in outstanding value of Merrill Collateral remains at any time posted or is requested to be posted to any single Person in excess of the amount that is required to be posted as determined by REPS, then, in either case, if REPS disputes such determination, such determination shall be referred by the parties to the Calculation Agent within three Business Days for resolution, and upon resolution of such dispute the applicable valuation shall apply and REPS shall use its reasonable best efforts to negotiate with, and to the extent applicable, dispute valuations of, or provide updated valuations to each such Person holding excess Merrill Collateral that the Sleeve Provider may direct in accordance with the resolution; provided  that in lieu thereof REPS may instead authorize the Sleeve Provider to do so; and  provided further  that, until resolution of this dispute by the Calculation Agent, the valuation determined by REPS shall apply; and
     (4) to the extent applicable, if after application of paragraphs (1) and (2) above the Sleeve Provider in its reasonable discretion determines that the outstanding value of any single Counterparty’s cash collateral posted or requested to be posted to any Sleeve Obligor as determined by REPS is more than $5,000,000 in deficiency of the amount that is required to be posted as determined by Sleeve Provider, then, if REPS disputes such determination, such determination shall be referred by the parties to the Calculation Agent for within three Business Days, and upon resolution of such dispute the applicable valuation shall apply and REPS shall use its reasonable best efforts to negotiate with, and to the extent applicable, dispute valuations of, or provide updated valuations to each such Counterparty that the Sleeve Provider may direct in accordance with the resolution;  provided  that in lieu thereof REPS may instead authorize the Sleeve Provider to do so; and  provided further  that, until resolution of this dispute by the Calculation Agent, the valuation determined by REPS shall apply .
          (b) Compliance Requirements. Each Compliance Party shall be subject to the Compliance Requirements.
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          Section 3. Payments, Fees and Records.
          3.01. Notice of Payment on ML Guarantee or Collateral Foreclosure. The Sleeve Provider shall notify NRG, promptly upon receipt from any beneficiary or recipient of an ML Guarantee or any secured party to which the Sleeve Provider has provided collateral pursuant to  Section 2  (whether an ML Guarantee, posted cash collateral, surety bond, letter of credit or other collateral or credit support, “ Merrill Collateral ” or “ ML Collateral ”) of any demand for payment under such ML Collateral or any Collateral Foreclosure thereon or of any notice of default. The Sleeve Provider shall notify NRG of the Dollar amount paid by the Merrill Parties as a result of such demand or the Dollar amount of Merrill Collateral relating to such Collateral Foreclosure, as applicable, and the date on which payment was made by a Merrill Party in respect of such demand or the date on which such Collateral Foreclosure occurred, as applicable (any such date, a “ Capital Outlay Date ”).
          3.02. Repayment of Draw Reimbursement Obligations. NRG hereby unconditionally and irrevocably promises to pay to the Sleeve Provider, on behalf of the applicable Merrill Party, the entire outstanding Dollar amount of each payment on behalf of the Sleeve Obligors by the ML Guarantee Provider or the Sleeve Provider arising from each demand for payment under Merrill Collateral or payment on behalf of the Sleeve Obligors by the Sleeve Provider arising from each Collateral Foreclosure of ML Collateral and the entire outstanding Dollar amount of any ML Collateral that is not returned by any person to the Merrill Parties for any reason (including, any bankruptcy or insolvency of the applicable counterparty) within one Business Day of the time required by the terms of the applicable Counterparty Document or other applicable arrangement pursuant to which such Merrill Collateral was posted to such person (each, a “ Draw Reimbursement Obligation ”), notwithstanding the identity of the beneficiary or recipient of any Merrill Collateral, and without presentment, demand, protest or other formalities of any kind. Each such Draw Reimbursement Obligation shall mature on the Business Day following the date the Sleeve Provider delivers notice to NRG of the related Capital Outlay Date as provided in  Section 3.01  (the “ Notice Date ”);  provided  that, in the event that, on or prior to the Business Day following the Notice Date, NRG delivers to the Sleeve Provider in good faith a written notice referred to in  Section 8.02(b) or (c)  predicated upon (i) failure to pay under any ML Guarantee after demand by the beneficiary complying with the terms and conditions of the ML Guarantee or (ii) the breach of a Merrill Party of its obligations under  Section 2.01  or any Credit Support Agreement, such Draw Reimbursement Obligation shall mature and be payable on the earliest of (A) the date that the notice to the Sleeve Provider is withdrawn, (B) the date the underlying failure related to the Draw Reimbursement Obligation is cured, (C) the date that the remedies under  Section 9.02  with respect to such failure have been resolved, mutually concluded, or finally determined by a court of competent jurisdiction, or (D) January 29, 2010 (any Reimbursement Obligation subject to the foregoing proviso, a “ Deferred Draw Reimbursement Obligation ”).
          Notwithstanding any payment of a Draw Reimbursement Obligation NRG makes as required in this Section 3.02, NRG does not by making such payment waive any rights under  Sections 8.02  and  9.02  against a Merrill Party related to the applicable Draw Reimbursement Obligation, subject to the limitations in  Section 9.04 .
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          3.03. Interest.
          (a) (i) NRG hereby unconditionally promises to pay to the Sleeve Provider, when due and payable in accordance with Section 3.03(d) :
     (A) interest accruing at a rate per annum equal to the Base Rate (as in effect from time to time) plus 5.875% on the unreimbursed Dollar amount of each Current Draw Reimbursement Obligation for the period from and including the Business Day following the related Notice Date to but excluding the date the Dollar amount of such Current Draw Reimbursement Obligation shall be paid in full; and
     (B) interest accruing at a rate per annum equal to the LIBO Rate (as defined in the Working Capital Facility and incorporated by reference in accordance with  Section 3.03(a)(ii) ) plus 5.875% on the unpaid Dollar amount of each Deferred Reimbursement Obligation for the period from and including the Business Day following the related Notice Date to but excluding the date the Dollar amount of such Deferred Reimbursement Obligation shall be paid in full.
     (ii) NRG agrees, for the benefit of the Sleeve Provider, to perform, comply with and be bound by each of its covenants, agreements and obligations contained in Sections 2.10, 2.13, and 2.14 of the Working Capital Facility with respect to Deferred Reimbursement Obligations, as modified and supplemented and in effect from time to time, or as last in effect in the event the Working Capital Facility shall be terminated.
Without limiting the generality of the foregoing, the above-mentioned provisions of the Working Capital Facility, together with related definitions (including the definition of “LIBO Rate” and “Interest Payment Date”) and ancillary provisions, are hereby incorporated herein by reference, as if set forth herein in full,  mutatis mutandis , notwithstanding that the Working Capital Facility is being terminated concurrently with the Unwind Start Date.
          (b) Notwithstanding Section 3.03(a), NRG hereby unconditionally promises to pay to the Sleeve Provider, when due and payable in accordance with  Section 3.03(d) , interest accruing at a rate per annum equal to the Post-Default Rate (as in effect from time to time) on (i) the Dollar amount of each Reimbursement Obligation that is not paid in full within one Business Day after becoming due and (ii) any other overdue amount payable by NRG or any Other Sleeve Obligor under any Transaction Documents with any Merrill Party, in each case for the period from and including the due date thereof to but excluding the date the same is paid in full.
          (c) Interest on any amount, including interest on Reimbursement Obligations, shall be computed on the basis of actual days elapsed (including the first day but excluding the last day) occurring during the period such interest accrues and a year of 365 or 366 days, as applicable (if computed by reference to the Prime Rate) or 360 days (if computed by reference to the Federal Funds Rate or the LIBO Rate).
          (d) (i) Subject to clause (iii) below, accrued interest on each Current Draw Reimbursement Obligation shall be payable monthly on the last Business Day of each month and
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on the date that such Current Draw Reimbursement Obligation shall be paid in full; (ii) subject to clause (iii) below, accrued interest on each Deferred Reimbursement Obligation shall be payable on each Interest Payment Date (as defined in the Working Capital Facility and incorporated by reference in accordance with  Section 3.03(a)(ii) ) for such Deferred Reimbursement Obligation and on the date that such Deferred Reimbursement Obligation shall be paid in full; and (iii) accrued interest on any amount (including Current Draw Reimbursement Obligations and Deferred Reimbursement Obligations) payable in accordance with  Section 3.03(b)  shall be payable on demand from time to time, on the last Business Day of each month and on the date that such amount is paid in full.
          3.04. Monthly Sleeve Fee. NRG hereby unconditionally promises to pay to the Sleeve Provider, with respect to each month, the Monthly Sleeve Fee for such month, payable in advance on the Monthly Payment Date for such month. The Monthly Sleeve Fee or any portion thereof shall not be refundable under any circumstances. In addition, NRG hereby unconditionally promises to pay to the Sleeve Provider from time to time on demand interest accruing at a rate per annum equal to the Post-Default Rate (as in effect from time to time) on the aggregate amount of any Monthly Sleeve Fee and on any other amount payable hereunder that is not paid in full when due.
          3.05. Make-Whole Payment. In lieu of any amounts that would otherwise become due and payable under the Exclusivity and Fee Letter, NRG shall pay to the Sleeve Provider on the Unwind Start Date a make-whole payment in an amount equal to $5,000,000, and on January 4, 2010 a further make-whole payment in an amount equal to $5,000,000 (collectively, the “ Make-whole Payment ”). The Make-whole Payment shall discharge the obligations of the Sleeve Obligors under Section 3(iii) of the Exclusivity and Fee Letter. The Make-whole Payment or any portion thereof shall not be refundable under any circumstances.
          3.06. Payments Generally.
          (a) Payments by Sleeve Obligors. Except to the extent otherwise provided herein, all payments in respect of Reimbursement Obligations, interest, Monthly Sleeve Fees, the Make-whole Payment and other amounts to be made by the Sleeve Obligors under this Agreement, and, except to the extent otherwise provided therein, all payments to be made by the Sleeve Obligors under any other Transaction Document, shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim to the Sleeve Provider at the account designated on  Schedule 3.06(a)  or any other account designated in writing by the Sleeve Provider to NRG not less than five Business Days before any payment is made, not later than 3:00 p.m., New York City time, on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day).
          (b) Extensions to Next Business Day. If the due date of any payment under this Agreement would otherwise fall on a day that is not a Business Day, such date shall be extended to the immediately succeeding Business Day and interest shall be payable for any amount so extended for the period of such extension (except in the case of the Monthly Sleeve Fee).
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          3.07. Records; Prima Facie Evidence.
          (a) Maintenance of Records by the Sleeve Provider. The Sleeve Provider shall maintain records in which it shall record (i) each ML Guarantee issued hereunder or other Merrill Collateral provided hereunder, (ii) the amount of each Reimbursement Obligation, (iii) interest due and payable or to become due and payable from NRG to the Sleeve Provider hereunder and (iv) the amount of any sum received by the Sleeve Provider hereunder.
          (b) Effect of Entries. The entries made in the records maintained pursuant to paragraph (a) above shall be primafacie evidence of the existence and amounts of the obligations recorded therein;  provided  that the failure of the Sleeve Provider to maintain such records or any error therein shall not in any manner affect the obligation of NRG to repay the Reimbursement Obligations in accordance with the terms of this Agreement.
          Section 4. Conditions.
     The obligation of the Merrill Parties to post or provide any Merrill Collateral, including to post or provide any additional cash collateral or to otherwise make any payment or perform under any ML Guarantee, in respect of any Post-Unwind Start Date Obligation is subject to the following conditions precedent that, both immediately prior to and after giving effect thereto and to the intended use thereof:
     (a) (i) Each of the representations and warranties of the Sleeve Obligors made in Section 5 and in the other Transaction Documents, if any, which is qualified by materiality shall be true and correct and (ii) each of the other representations and warranties of the Sleeve Obligors made in  Section 5  and in the other Transaction Documents shall be true and correct in all material respects, in each case of clause (i) and (ii) on and as of the date of request provision of such Merrill Collateral, with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date);
     (b) The Sleeve Obligors shall be in compliance with all obligations to post Current Collateral and Contingent Collateral in accordance with  Section 10 ; and
     (c) no Reliant Default or Reliant Event of Default shall have occurred and be continuing.
Each request by NRG or any Other Sleeve Obligor for provision of Merrill Collateral shall constitute a certification to the effect that the above conditions have been satisfied.
          Section 5. Representations and Warranties. NRG and each of the Other Sleeve Obligors hereby represents and warrants as follows:
          5.01. Existence, Qualification and Power; Compliance with Laws. Such Person (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and
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all requisite governmental licenses, authorizations, consents and approvals to (i) own its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Transaction Documents to which it is a party, (c) is duly qualified and is licensed and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license, and (d) is in compliance with all Laws; except in each case referred to in  clause (b)(i) ,  (c)  or  (d) , to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
          5.02. Authorization; No Contravention. The execution, delivery and performance by such Person of each Transaction Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s organizational documents; (b) conflict with or result in any breach or contravention of, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries, except in each case as could not reasonably be expected to have a Material Adverse Effect, or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject that could reasonably be expected to have a Material Adverse Effect; or (c) violate any Law that could reasonably be expected to have a Material Adverse Effect. The Sleeve Obligors are in compliance with all Contractual Obligations referred to in  clause (b)(i) , except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
          5.03. Governmental Authorization; Other Consents. Except as to (i) those which have been duly obtained, taken, given or made and are in full force and effect and (ii) those third party (including Governmental Customers) consents and agreements necessary to obtain the release and discharge of any Merrill Collateral, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by any Sleeve Obligors of this Agreement or any other Transaction Document; provided  that any failure of the Sleeve Obligors to obtain any consents and agreements described in  clause (ii)  shall not relieve the Sleeve Obligors of their obligation to cause the Partial Credit Sleeve Termination Date and Credit Sleeve Termination Date each to occur as provided herein.
          5.04. Binding Effect. This Agreement has been, and each other Transaction Document, when executed and delivered hereunder, will have been, duly executed and delivered by each Sleeve Obligor that is party thereto. This Agreement constitutes, and each other Transaction Document when so executed and delivered will constitute, a legal, valid and binding obligation of each Sleeve Obligor, enforceable against each Sleeve Obligor that is party thereto in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by general principles of equity, whether such enforceability is considered in a proceeding at law or in equity.
          5.05. Financial Statements; No Material Adverse Effect.
          (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly
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noted therein and (ii) fairly present in all material respects the consolidated financial condition of NRG and its consolidated Subsidiaries as of the date thereof and their results of operations and cash flows for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein.
          (b) The Unaudited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein and (ii) fairly present in all material respects the consolidated financial condition of NRG and its consolidated Subsidiaries as of the date thereof and their results of operations and cash flows for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, subject, in the case of  clauses (i)  and  (ii) , to the absence of footnotes and to normal year-end audit adjustments.
          (c) From the date of the Audited Financial Statements through the Unwind Start Date, except as disclosed in public filings or in writing to the Sleeve Provider on or before five Business Days before the Unwind Start Date, there has been no event or circumstance, either individually or in the aggregate that has had or could reasonably be expected to have a Material Adverse Effect.
          5.06. Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of each Sleeve Obligor, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Sleeve Obligors or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Transaction Document, or any of the transactions contemplated hereby or (b) except as disclosed to the Sleeve Provider on Schedule 5.06  or as disclosed in public filings, exist on or prior to the Unwind Start Date and either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.
          5.07. No Default. Immediately prior to the Unwind Start Date, and before giving effect to the amendment and restatement of this Agreement described in  Section 12.17 , no Reliant Default had occurred and was continuing. On the Unwind Start Date, and after giving effect to the amendment and restatement of this Agreement described in  Section 12.17 , no Reliant Default has occurred and is continuing or would result from the consummation of the amendment and restatement described in  Section 12.17 or the resulting transactions contemplated by this Agreement or any other Transaction Document.
          5.08. [Intentionally Deleted].
          5.09. [Intentionally Deleted].
          5.10. [Intentionally Deleted].
          5.11. ERISA Compliance.
          (a) Except as could not reasonably be expected to result in a Material Adverse Effect, (i) each Plan has been established, operated and administered in compliance in all
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material respects with its terms and the applicable provisions of ERISA, the Code and other Federal or state Laws, (ii) each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Sleeve Obligors, nothing has occurred which would prevent, or cause the loss of, such qualification, and (iii) NRG and each ERISA Affiliate have made all required contributions (both quarterly and annually) to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.
          (b) There are no pending or, to the best knowledge of the Sleeve Obligors, threatened claims, actions or lawsuits or investigations, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.
          (c) (i) No ERISA Event has occurred or is reasonably expected to occur that could reasonably be expected to have a Material Adverse Effect; (ii) no Pension Plan has any Unfunded Pension Liability, whether or not waived, that could reasonably be expected to have a Material Adverse Effect, and no application for a waiver of the minimum funding standard has been filed or is expected to be filed with respect to any Pension Plan; (iii) none of the Sleeve Obligors and any of their ERISA Affiliates has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan that could reasonably be expected to have a Material Adverse Effect; and (iv) none of the Sleeve Obligors and any of their ERISA Affiliates has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.
          5.12. [Intentionally Deleted].
          5.13. Margin Regulations; Investment Company Act; Public Utility Holding Company Act.
          (a) None of the Sleeve Obligors is engaged principally or as one of its material activities, in the business of extending credit for the purpose of buying or carrying Margin Stock.
          (b) None of the Sleeve Obligors or any Person Controlling the Sleeve Obligors (i) is in violation of any regulation under the Public Utility Holding Company Act of 2005, the Federal Power Act or any foreign, federal or local statute or any other Law of the United States of America or any other jurisdiction, except in each case as could not reasonably be expected to have a Material Adverse Effect, or (ii) is or is required to be registered as an “investment company” under the Investment Company Act of 1940.
          5.14. Disclosure. The Sleeve Obligors have disclosed to the Sleeve Provider all agreements, instruments and corporate or other restrictions to which the Sleeve
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Obligors are subject, and all other matters known to it (other than general industry, political, and economic conditions or matters disclosed in public filings), that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Sleeve Obligor to the Sleeve Provider in connection with the transactions contemplated or delivered to the Sleeve Provider hereunder or under any other Transaction Document (in each case, as modified or supplemented by other information so furnished), at the time furnished or delivered, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in the light of the circumstances under which they were made, not misleading;  provided  that with respect to projected financial information, the Sleeve Obligors represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time made; it being understood that estimates are by their nature inherently uncertain and no assurances are being given that such results will be achieved; and  provided further , that the Sleeve Obligors make no representation or warranty, express or implied, with respect to the Compliance Information delivered to Sleeve Provider in accordance with  Section 2.02(b) .
          5.15. Compliance with Laws. Except as set forth on Schedule 5.15 or as disclosed in public filings, each of the Sleeve Obligors is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
          5.16. Security Interest in Posted Collateral. Section 10 creates for the benefit of the Merrill Parties, a valid, first priority perfected security interest in the Posted Collateral, subject to no other Lien other than inchoate Liens on account of taxes, assessments or governmental charges not yet delinquent or that are being contested in good faith by appropriate proceedings.
          5.17. Solvency. NRG and the Other Sleeve Obligors are, on a consolidated basis, Solvent.
          Section 6. Affirmative Covenants. From the Unwind Start Date until the Credit Sleeve Termination Date, NRG shall, and shall cause each of the Other Sleeve Obligors, to:
          6.01. Financial Statements. Deliver to the Sleeve Provider, in form and detail reasonably satisfactory to the Sleeve Provider:
          (a) as soon as available, but in any event within 90 days after the end of each Fiscal Year of NRG ending after the Unwind Start Date, an audited consolidated balance sheet of NRG and its consolidated Subsidiaries as at the end of such Fiscal Year, and the related consolidated statements of income or operations, stockholders’ equity, comprehensive income (loss) and cash flows for such Fiscal Year, setting forth in each case, the figures as of the end of,
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and for, the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with the standards of the Public Company Accounting Oversight Board or its successor and shall not be subject to any “going concern” or like qualification or exception; and
          (b) as soon as available, but in any event within 50 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of NRG ending after the Unwind Start Date, an unaudited consolidated balance sheet of NRG and its consolidated Subsidiaries as at the end of such Fiscal Quarter, and the related unaudited consolidated statements of income or operations for such Fiscal Quarter and for the portion of NRG’s Fiscal Year to date then ended and cash flows for the portion of NRG’s Fiscal Year to date then ended, setting forth in each case (beginning with Fiscal Quarter ending September 2009) in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, all in reasonable detail, certified by a Responsible Officer of NRG as fairly presenting in all material respects the financial condition, results of operations and cash flows of NRG and its consolidated Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes.
          6.02. Certificates; Other Information. Deliver to the Sleeve Provider, in form and detail reasonably satisfactory to the Sleeve Provider:
          (a) promptly after any request by the Sleeve Provider, copies of any detailed audit reports, management letters or written recommendations submitted to the board of directors (or the audit committee of the board of directors) of NRG by independent accountants in connection with the accounts or books of NRG or any of the Other Sleeve Obligors or any audit of any of them;
          (b) promptly after the furnishing or receiving thereof, copies of any written notice of default furnished to, or received from, any holder of debt securities of NRG or any of the Other Sleeve Obligors pursuant to the terms of any indenture, guarantee or credit or similar agreement reflecting material indebtedness for borrowed money and not otherwise required to be furnished to the Sleeve Provider pursuant to  Section 6.01  or any other clause of this Section;
          (c) at the applicable times required by Schedule 1.01(c), the data, reports and other information set forth therein; and
          (d) promptly, such additional information regarding the business, financial or corporate affairs of NRG or any of the Other Sleeve Obligors, or compliance with the terms of the Transaction Documents, as the Sleeve Provider may from time to time reasonably request.
          Documents required to be delivered pursuant to Section 6.01(a) or (b) (to the extent any such documents are included in materials otherwise filed with the SEC) shall be delivered electronically and when so delivered, shall be deemed to have been delivered on the date on which NRG provides such documents electronically, including by email or electronic posting;  provided that: (i) NRG shall at the request of the Sleeve Provider deliver paper copies of
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such documents to the Sleeve Provider and (ii) if documents are electronically posted, NRG shall notify the Sleeve Provider (by telecopier or electronic mail) of the posting. The Sleeve Provider shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by NRG with any such request for delivery.
          6.03. Notices. Promptly notify the Sleeve Provider:
     (a) after any Responsible Officer’s obtaining knowledge of the occurrence of any Default with respect to a Reliant Event of Default and the intended actions of the Sleeve Obligors with respect thereto;
     (b)   of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect; and
     (c)   after any Responsible Officer’s obtaining knowledge of the occurrence of any ERISA Event or of any actual or reasonably likely contribution failure under Code Section 412, or ERISA Section 302 with respect to any Pension Plan or the filing of an application seeking waiver of any potential contribution failure that either individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the applicable Sleeve Obligor setting forth details of the occurrence referred to therein and stating what action the applicable Sleeve Obligor has taken and proposes to take with respect thereto. Each notice pursuant to  Section 6.03(a)  shall describe with particularity any and all provisions of this Agreement and any other Transaction Document that have been breached.
          6.04. Payment of Obligations. Pay and discharge as the same shall become due and payable (a) all material tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by each Sleeve Obligor; and (b) all lawful claims which, if unpaid, could reasonably be expected to result in a Material Adverse Effect.
          6.05. Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by  Section 7.01 ; and (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.
          6.06. [Intentionally Deleted].
          6.07. [Intentionally Deleted].
          6.08. Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its
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business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
          6.09. Books and Records. (a) Maintain proper books of record and account, in which entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Sleeve Obligors and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Sleeve Obligors.
          6.10. Inspection Rights.  Permit representatives and independent contractors of the Sleeve Provider to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its officers, and independent public accountants at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to NRG, all at the expense of the Sleeve Obligors, and the Sleeve Obligors will pay up to $50,000 during any contract year to the extent of the third party expenses of the Sleeve Provider incurred in connection therewith (but the Sleeve Obligors shall pay no further expenses in connection therewith);  provided  that when a Reliant Event of Default exists the Sleeve Provider (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Sleeve Obligors, to the extent reasonable under the circumstances, without being subject to the expense limit described above, and at any time during normal business hours and without advance notice.
          6.11. Further Assurances. Promptly upon request by the Sleeve Provider, (a) correct any material defect or error that may be discovered in any Transaction Document or in the execution, acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Sleeve Provider may reasonably require from time to time in order to (i) carry out more effectively the purposes of the Transaction Documents, (ii) perfect and maintain the validity and effectiveness of any of the Transaction Documents and (iii) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Merrill Parties the rights granted or now or hereafter intended to be granted to the Merrill Parties under any Transaction Document or under any other instrument executed in connection with any Transaction Document to which NRG or any of its Subsidiaries is or is to be a party.
          6.12. Obligation to Post Collateral. At the times required by Section 10, NRG shall post and maintain such cash or Acceptable Letters of Credit, as applicable, as provided in such Section to the Merrill Parties.
          6.13. Obligation to Cause Partial Credit Sleeve Termination Date and Credit Sleeve Termination Date. NRG and the Other Sleeve Obligors shall cause the Partial Credit Sleeve Termination Date to occur on or prior to January 29, 2010, and shall cause the
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Credit Sleeve Termination Date to occur on or prior to April 30, 2010. Notwithstanding anything herein to the contrary, the “Credit Sleeve Termination Date” shall not occur until the date on which all Merrill Collateral, including all C&I Guarantees, posted by the Merrill Parties have been returned to the Merrill Parties and the Merrill Parties have been legally discharged from all obligations in respect of the transactions contemplated hereby and all ML Guarantees have been terminated, and on which all other obligations owed to the Merrill Parties hereunder and under the other Transaction Documents have been paid and satisfied in full (other than indemnities and any similar obligations of the Sleeve Obligors not then due and payable and that expressly survive termination of this Agreement and the other Transaction Documents).
          6.14. Return of TDSP Postings. The Sleeve Obligors agree to use all commercially reasonable efforts to effect the release and discharge of all ML Collateral held by any TDSP as soon as practicable following the Unwind Start Date;  provided  that nothing herein shall limit the Sleeve Obligors’ obligations to cause the Partial Credit Sleeve Termination Date and Credit Sleeve Termination Date each to occur in accordance with  Section 6.13 .
          Section 7. Negative Covenants. From the Unwind Start Date until the Credit Sleeve Termination Date, NRG shall not, and shall cause its Restricted Subsidiaries not to:
          7.01. Fundamental Changes. (a) Merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve;  provided  that, if at the time thereof and immediately after giving effect thereto no Reliant Default or Reliant Event of Default shall have occurred and be continuing, (i) any Person may merge into NRG in a transaction in which NRG is the surviving corporation, (ii) any Person may merge into any Restricted Subsidiary in a transaction in which the surviving entity is a Restricted Subsidiary, (iii) any Restricted Subsidiary (other than REPS) may liquidate or dissolve if NRG determines in good faith that such liquidation or dissolution is in the best interests of NRG and is not materially disadvantageous to the Merrill Parties, and (iv) any merger, consolidation, liquidation or dissolution otherwise prohibited by this Section 7.01(a)  may be consummated in reliance of the General Disposition Basket (as defined below), or (b) consummate any Asset Sale (except to the extent any transaction permitted by Section 7.01(a) constitutes an Asset Sale, which transaction shall be permitted pursuant to the terms of Section 7.01(a));  provided  that, (i) NRG and/or any Restricted Subsidiary may sell, transfer, lease or otherwise dispose of its assets to NRG or to Restricted Subsidiary (as applicable), and (ii) if at the time thereof and immediately after giving effect thereto no Reliant Default or Reliant Event of Default shall have occurred and be continuing, NRG or any Subsidiary may sell, transfer, lease or otherwise dispose of (A) any of its assets (or otherwise undertake any transaction otherwise prohibited by  Section 7.01(a) )  provided  that the aggregate fair market value (as determined by NRG in good faith) of all property disposed of in reliance on this  clause 7.01(b)(ii)(A)  (sub-clauses (A) and (B), the “ General Disposition Basket ”) from and after the date hereof shall not exceed $750,000,000, and (B) any of the assets or capital stock of Nuclear Innovation North America LLC, NRG Texas Power LLC, Elbow Creek Wind Project LLC and West Coast Power LLC and Subsidiaries of each of the foregoing.
          7.02. Other Covenants. The provisions of Sections 6.01, 6.02 and Sections 6.05 through 6.15 of the NRG Credit Agreement, together with all underlying
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definitions (the “Specified Covenants”), all as in effect from time to time, are hereby incorporated herein by reference mutatis mutandis and shall be deemed to continue in effect (with any amendments, modifications or waivers thereof (whether or not effected in connection with a replacement, refinancing or restatement of the NRG Credit Agreement)) for the benefit of MLCI;  provided  that if the NRG Credit Agreement is no longer in effect or at any time the aggregate outstanding principal amount of Indebtedness outstanding and/or available to be drawn thereunder is less than $100 million then the foregoing clause shall be deemed to apply to such Specified Covenants as the same were in effect immediately before the NRG Credit Agreement ceased to be in effect or immediately before the aggregate outstanding principal amount and/or amount available to be drawn thereunder was reduced to less than $100 million, as the case may be, and without giving effect to any amendments or waivers entered into immediately prior to or otherwise in connection with the termination of such agreement or such reduction in principal amount;  provided further , that so long as the NRG Credit Agreement has not been terminated and the aggregate outstanding principal amount of Indebtedness outstanding and/or available to be drawn thereunder is at least $100 million, the Sleeve Obligors shall not be required to provide to the Merrill Parties hereunder copies of any notices required to be given to the lenders under the terms of the Specified Covenants.
          Notwithstanding anything to the contrary in this Agreement, (x) NRG shall have at all times the right (and the Merrill Parties shall have no right or claim in respect of any such action) to amend, restate, supplement, replace, refinance, obtain waivers or consents, or otherwise modify any and all terms and conditions of the NRG Credit Agreement (including the Specified Covenants) in accordance with the terms thereof ( provided  that after the date when the aggregate outstanding principal amount of Indebtedness outstanding and/or available to be drawn thereunder was reduced to less than $100 million, no such amendment, restatement, supplement, replacement, waiver or modification shall affect the Specified Covenants hereunder), and (y) (except following the date when the aggregate outstanding principal amount of Indebtedness outstanding and/or available to be drawn under the NRG Credit Agreement was reduced to less than $100 million) a waiver of any breach of, or consent obtained under, any term or condition of the NRG Credit Agreement (including with respect to the Specified Covenants) obtained in accordance with the terms and conditions thereof shall operate, automatically and without further action, as a waiver or consent in respect of the same terms and conditions under this Agreement and any other Transaction Document as relevant to the Specified Covenants.
          Section 8. Events of Default.
          8.01. Reliant Events of Default. Each of the following shall constitute a “Reliant Event of Default”:
     (a) Non-Payment. Any Sleeve Obligor fails to pay within three Business Days after the same becomes due, any amount payable to any Merrill Party hereunder or under any other Transaction Document; or
     (b) Specific Covenants. Any Sleeve Obligor fails to perform or observe any term, covenant or agreement contained in Section 10 ; or
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     (c) Other Defaults. Any Sleeve Obligor fails to perform or observe any other material covenant or agreement (not specified in  clause (a)  or  (b)  above or not addressed by  clause (j)  below) contained in any Transaction Document on its part to be performed or observed and such failure continues for 30 days after the earlier to occur of (i) such Sleeve Obligor’s receiving notice thereof from Sleeve Provider, or (ii) a Responsible Officer or other executive officer of such Sleeve Obligor obtains knowledge of such occurrence; or
     (d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Sleeve Obligor herein, in any other Transaction Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or
     (e) Insolvency Proceedings, Etc. Any Sleeve Obligor institutes or consents to the institution of any proceeding under any insolvency, bankruptcy, reorganization, receivership or other debtor relief law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of their respective property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any insolvency, bankruptcy, reorganization, receivership or other debtor relief law relating to any such Person or to all or any material part of their respective property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or
     (f) Inability to Pay Debts; Attachment. Any Sleeve Obligor becomes unable or admits in writing its inability or fails generally to pay its debts as they become due; or
     (g) Invalidity of Documents or Security Interest in Posted Collateral. (i) This Agreement shall for any reason (other than pursuant to the terms hereof) cease to create a valid and perfected first priority Lien on and security interest in the Posted Collateral purported to be covered by  Section 10  hereof; or (ii) any Sleeve Obligor shall so assert such invalidity or lack of perfection or priority; or (iii) at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Credit Sleeve Obligations, this Agreement ceases to be in full force and effect; or (iv) any Sleeve Obligor or any other Person contests in any manner the validity or enforceability of any provision of this Agreement; or (v) any Sleeve Obligor denies that it has any further liability or obligation under any Transaction Document (other than pursuant to the terms hereof or thereof), or purports to revoke, terminate or rescind any provision of any Transaction Document; or
     (h) Cross-Default. NRG or any of its Significant Subsidiaries or any group of Significant Subsidiaries (other than, in each case, the Exempt Subsidiaries, Excluded Subsidiaries and Unrestricted Subsidiaries, in all cases, other than any Other Sleeve
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Obligor) (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (or Guarantee) or under any Specified Transaction (in each case, except with respect to payments described in  paragraph (a)  above) having an aggregate amount (including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $75,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to permit such Indebtedness or amounts owing under such Specified Transaction to be demanded as a result of such failure or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded as a result of such failure, and such failure or occurrence is not waived by the creditors within three Business Days of such failure or occurrence; or
     (i) [Intentionally Deleted];
     (j) Credit Sleeve Termination Date. The Partial Credit Sleeve Termination Date shall not have occurred at or prior to January 29, 2010 or the Credit Sleeve Termination Date shall not have occurred at or prior to April 30, 2010; or
     (k) Change of Control. The occurrence of any Change of Control.
          8.02. Sleeve Provider Events of Default. Any of the following shall constitute a “Sleeve Provider Event of Default ”:
     (a) Non-Payment. (i) Any Merrill Party fails to pay within three Business Days after the same becomes due, any amount payable to a Sleeve Obligor hereunder or under any other Transaction Document, or (ii) at any time after the Custody Date, the Merrill Parties shall fail to transfer any Posted Collateral to the applicable Acceptable Collateral Agent when required by Section 10(d)(i) , or (iii) the ML Parent Guarantor fails to pay within three Business Days after the same becomes due, any amount payable to a Sleeve Obligor under the BAC Guarantee; or
     (b) Willful Defaults. Any Merrill Party fails to perform or observe any covenant or agreement set forth in Section 2.01 and such failure continues for ten Business Days after such Merrill Party receiving written notice thereof from any Sleeve Obligor, which notice makes specific reference to this  Section 8.02(b)  and provides reasonably detailed information regarding the facts constituting such failure;  provided  that any such failure shall not fall within the provisions of this  Section 8.02(b)  in the event that both: (i) the covenant or agreement the Merrill Party failed to perform or observe is a covenant or agreement that necessarily involves a consent, determination or judgment required to be made by any Merrill Party or Sleeve Obligor in a “reasonable” or “commercially reasonable” manner, or in “good faith” or with “reasonable discretion” or without unreasonably withholding any such consent (each, a “Decision”); and (ii) there is a good faith dispute among the parties as to such Decision;  provided further , however, that the foregoing proviso shall not apply at any time that (1) any Merrill Party is in
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breach of its obligations to maintain ML Guarantees or Credit Support Agreements with two or more Counterparties when required by this Agreement, or (2) any Merrill Party is in breach of its obligations to post collateral to any two or more Counterparties when required by the applicable Credit Support Agreement; or
     (c) Other Defaults. Any Merrill Party fails to perform or observe any other covenant or agreement (excluding those specified in  clause (a)  above) contained in any Transaction Document on its part to be performed or observed and such failure continues for 30 days after the earlier to occur of (i) the Sleeve Provider receiving notice thereof from any Sleeve Obligor or (ii) a Responsible Officer or other executive officer of Sleeve Provider obtains knowledge of such occurrence; or
     (d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of any Merrill Party herein, in any other Transaction Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or
     (e) Insolvency. Either Merrill Party institutes or consents to the institution of any proceeding under any insolvency, bankruptcy, reorganization, receivership, liquidation, winding-up or other debtor relief law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of their respective property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under any insolvency, bankruptcy, reorganization, receivership, liquidation, winding-up or other debtor relief law relating to such Person or to all or any material part of their respective property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or
     (f) Failure to Pay Debts. Either Merrill Party becomes unable or admits in writing its inability or fails generally to pay its debts as they become due.
          Section 9. Remedies and Termination.
          9.01. Remedies of Sleeve Provider. If any Reliant Event of Default shall have occurred and be continuing, the Sleeve Provider shall have each of the following rights and remedies:
     (a) the right to cure or cure the effects of such Reliant Event of Default and the right to exercise all contractual rights and remedies of REPS under any Power and Hedging Contract in respect of which any Post-Unwind Start Date Transaction remains outstanding;
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     (b) (i) the right to declare, by written notice to the Sleeve Obligors, an amount equal to 115% of the sum of all Current Exposure and all other liabilities and potential liabilities of the Merrill Parties to any Counterparty or other beneficiary under this Agreement, as reasonably determined by the Merrill Parties to a 99.0% (2.32-sigma) confidence level (such amount, the “ Required Collateralization Amount ”), to be, and the Required Collateralization Amount shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Sleeve Obligors, which amount shall be posted to the Sleeve Provider, and may be applied by the Sleeve Provider from time to time to satisfy any Draw Reimbursement Obligation or any other Credit Sleeve Obligation, or at the option of the Sleeve Provider, posted from time to time to any Counterparty or other beneficiary in such amounts as may be agreed between the Sleeve Provider and such Counterparty or other beneficiary in exchange for a release or return of Merrill Collateral, following which the Merrill Parties shall have no liability to the Sleeve Obligors with respect to such portion of the Required Collateralization Amount so applied or posted to any Counterparty or other beneficiary and (ii) the right from time to time to require the Sleeve Obligors to post such additional amounts to the extent that the Merrill Parties determine that the amount of cash then posted is insufficient to exceed 115% of all Current Exposure and other potential liabilities as of such time, all of which may be applied by the Merrill Parties as provided in  clause (i) ;
     (c) the right to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by any Merrill Party or any of their Affiliates to or for the credit or the account of the Sleeve Obligors, against any amounts owed by any Sleeve Obligor, including Credit Sleeve Obligations, whether such obligations are direct or indirect, absolute or contingent, or matured or unmatured;
     (d) the right of specific performance and injunctive relief to give effect to the terms and conditions of the Transaction Documents, to the extent permitted by applicable law, and in connection therewith the Parties acknowledge that the monetary remedies provided to the Merrill Parties under the Transaction Documents are insufficient to cover all damages that could be incurred by the Merrill Parties in connection with such a Reliant Event of Default; and
     (e) any other rights and remedies available at law or in equity with respect to breach of contract, subject to the provisions of  Section 9.04 .
          9.02. Remedies of NRG. If any Sleeve Provider Event of Default shall have occurred and be continuing, NRG shall have each of the following rights and remedies:
          (a) the right to cure or cure the effects of such Sleeve Provider Event of Default; and
          (b) any other rights and remedies available at law or in equity with respect to breach of contract, subject to the provisions of  Section 9.04 .
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          9.03. [Intentionally Deleted].
          9.04. Certain Limitations on Remedies. FOR BREACH OF ANY PROVISION OF THIS AGREEMENT FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NO PARTY SHALL BE LIABLE UNDER THIS AGREEMENT FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, INCLUDING CONSEQUENTIAL LOST PROFITS OR OTHER CONSEQUENTIAL BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT, AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.
          Section 10. Posted Collateral.
          (a) Obligation to Post and Maintain Collateral.
     (i) NRG shall on the Unwind Start Date (1) post (and shall maintain to the extent required by clause (ii) below) cash and/or Acceptable Letters of Credit in an aggregate amount at least equal to the Current Exposure;  provided  that at no time shall the aggregate value of Acceptable Letters of Credit posted in respect of Current Exposure exceed the Aggregate Merrill Threshold applicable at such time, and (2) post (and shall maintain to the extent required by  clause (ii)  below) cash or provide one or more Acceptable Letters of Credit having an aggregate value at least equal to the Contingent Exposure; and  provided ,  further , that on the Unwind Start Date NRG may, at its election, post cash in satisfaction of its obligations under this Section 10(a)(i) by applying to that effect any or all cash collateral already held by the Sleeve Provider pursuant to the terms of the Existing CSRA (including Section 6.11(c) thereof).
     (ii) In addition, from time to time after the Unwind Start Date, upon demand by the Sleeve Provider or NRG, as applicable, on or promptly following any Valuation Date,
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(A) if the Current Adjustment Amount for such Valuation Date is positive and equals or exceeds the Minimum Transfer Amount, then NRG shall within one Business Day of such demand post to the Merrill Parties additional cash and/or Acceptable Letters of Credit in an aggregate amount at least equal to the Current Adjustment Amount (rounded to the nearest $10,000);  provided  that if the Current Adjustment Amount for such Valuation Date is negative and the absolute value equals or exceeds the Minimum Transfer Amount, then, so long as no Reliant Default or Reliant Event of Default has occurred and is continuing, the Merrill Parties shall within one Business Day of such demand return to NRG in cash an amount of Current Collateral equal to the absolute value of the Current Adjustment Amount (rounded to the nearest $10,000);  provided, further,  that at no time shall the aggregate value of Acceptable Letters of Credit posted in respect of Current Exposure exceed the Aggregate Merrill Threshold applicable at such time. For purposes hereof, the “ Current Adjustment Amount ” for any Valuation Date will equal:
     (1) the Current Exposure for such Valuation Date
     minus
(2) the aggregate amount of Current Collateral then held by (or on behalf of) the Merrill Parties as of such Valuation Date; and
(B) if the Contingent Adjustment Amount for such Valuation Date is positive and equals or exceeds the Minimum Transfer Amount, then NRG shall within one Business Day of such demand post to the Merrill Parties additional cash and/or additional Acceptable Letters of Credit having an aggregate value at least equal to the Contingent Adjustment Amount; provided  that if the Contingent Adjustment Amount for such Valuation Date is negative and the absolute value equals or exceeds the Minimum Transfer Amount, then, so long as no Reliant Default or Event of Default has occurred and is continuing, the Merrill Parties shall within one Business Day of such demand return in cash to NRG Contingent Cash Collateral in an amount equal to the absolute value of the Current Adjustment Amount (rounded to the nearest $100,000); provided  that to the extent Contingent Cash Collateral is not available, NRG may request, and the Merrill Parties hereby consent, to the reduction of the available face amount of one or more Acceptable Letters of Credit by the value of the Current Adjustment Amount.
For purposes hereof, the “Contingent Adjustment Amount” for any Valuation Date will equal:
(1) the Contingent Exposure for such Valuation Date
minus
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(2) the aggregate value of Contingent Collateral then held by (or on behalf of) the Merrill Parties as of such Valuation Date.
          (iii) On or prior to January 29, 2010, to the extent the ML Guarantee Provider has not been released and fully discharged from all liability under any C&I Guarantee on such date, NRG shall post cash or provide one or more Acceptable Letters of Credit having an aggregate value at least equal to the Remaining C&I Exposure at such time.
          (b) Grant of Security Interest. Each of NRG and the Other Sleeve Obligors, as the pledgor, hereby pledges to the Merrill Parties, as the secured party, as security for the Credit Sleeve Obligations, and grants to the Merrill Parties a first priority continuing security interest in, Lien on and right of set-off against all Posted Collateral transferred to or received by (or on behalf of) the Merrill Parties hereunder.
          (c) Representations Regarding Posted Collateral. NRG and each Other Sleeve Obligor, as applicable, represents to the Merrill Parties (which representations will be deemed to be repeated as of each date on which it provides to the Merrill Parties any Posted Collateral) that:
     (i) it has the power to grant a security interest in and Lien on such Posted Collateral and has taken all necessary actions to authorize the granting of that Lien;
     (ii) it is the sole owner of or otherwise has the right to transfer to the Merrill Parties all Posted Collateral hereunder, free and clear of any Lien, encumbrance or other restrictions other than the security interest and Lien granted under  clause (b) above and the Lien described in  Section 5.16 ;
     (iii) upon the transfer of any Posted Collateral to (or on behalf of) the Merrill Parties under the terms of this Section 10, the Merrill Parties will have a valid and perfected first priority Lien therein (subject to the Lien described in Section 5.16); and
     (iv) the performance by it of its obligations under this Section 10 will not result in the creation of any Lien on any Posted Collateral other than the security interest and Lien granted under  clause (b)  above.
          (d) Eligibility to Hold Posted Collateral.
     (i) The Merrill Parties will be entitled to hold Posted Collateral; provided, that at anytime upon the occurrence and during the continuance of an ML Credit Event and/or a sleeve Provider Event of Default, then upon a demand made by NRG, the Merrill Parties shall transfer within three Business Days of such demand all Posted Collateral (free and clear of any and all Liens except for the Liens of the Merrill Parties) held by them to an Acceptable Collateral Agent;  provided further  that in all cases, the Merrill Parties shall have the right to withdraw deposits held by any such collateral agent to apply or offset such amounts against any Merrill Collateral required to be posted to any Counterparty or other beneficiary of Merrill Collateral. The Merrill Parties will cooperate in good faith with NRG and use commercially reasonably efforts to promptly
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enter into a standby custody agreement and such other customary documentation as may be necessary to establish a custody account with an Acceptable Collateral Agent as contemplated by this clause (i).
     (ii) Except as provided in clause (i) above, the Merrill Parties will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the right to (A) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Posted Collateral it holds, free from any claim or right of any nature whatsoever of the Sleeve Obligors, including any equity or right of redemption by the Sleeve Obligors and (B) register any Posted Collateral in the name of either Merrill Party, a custodian or a nominee for either.
          (e) Merrill Parties’ Rights and Remedies. Following any Reliant Event of Default and during the continuance thereof, the Merrill Parties may exercise one or more of the following rights and remedies in respect of the Posted Collateral:
     (i) all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Merrill Parties;
     (ii) any other rights and remedies available to the Merrill Parties under the terms of any Counterparty Document;
     (iii) the right to liquidate any Posted Collateral through one or more public or private sales or other dispositions with such notice, if any, as may be required under applicable law, free from any claim or right of any nature whatsoever of NRG or any of its Subsidiaries, including any equity or right of redemption by NRG and to apply the proceeds (or the cash equivalent thereof) from the liquidation of the Posted Collateral to any amounts payable by the Sleeve Obligors with respect to any Credit Sleeve Obligations, whether or not contingent, in that order as the Merrill Parties may elect; or
     (iv) any other applicable right or remedy in respect of a Reliant Event of Default provided in Section 9.01 hereof.
          (f) Further Assurances. Promptly following a demand made by any Party, the other parties will execute, deliver, file and record any financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security interest or lien granted under clause (b)  above, to enable such Party to exercise or enforce its rights under this Agreement with respect to Posted Collateral or to effect or document a release of a security interest on Posted Collateral, as applicable.
          (g) Further Protection. NRG will promptly give notice to the Merrill Parties of, and defend against, any suit, action, proceeding or Lien that involves Posted Collateral or that would reasonably be expected to materially and adversely affect the Lien granted by it under  clause (b)  above.
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          (h) Interest on Posted Collateral. The Sleeve Provider hereby unconditionally promises to pay to NRG, with respect to any Posted Collateral which is cash, interest accruing at a rate per annum equal to the Federal Funds Rate, for each day, on the Dollar amount of such collateral posted as cash held by the Sleeve Provider on such day (which has not been theretofore applied or used by the Merrill Parties to satisfy any Draw Reimbursement Obligation or any other Credit Sleeve Obligation or otherwise returned to NRG). Such interest shall be payable monthly in arrears within two Business Days following the last day of each month and on the Credit Sleeve Termination Date.
          (i) Return of Posted Collateral on Credit Sleeve Termination Date. Promptly following the occurrence of the Credit Sleeve Termination Date (or concurrently therewith to the extent that the Sleeve Obligors have made arrangements satisfactory to the Merrill Parties to cause the occurrence of the Credit Sleeve Termination Date in accordance with  Section 6.13  below) and the date on which all other Credit Sleeve Obligations have been paid or satisfied in full (other than indemnities and any similar obligations of the Sleeve Obligors not then due and payable and that expressly survive termination of this Agreement and the other Transaction Documents), the Merrill Parties shall return all Posted Collateral, together with any accrued interest, to NRG which has not been theretofore applied and will not be concurrently applied by the Merrill Parties to satisfy any Draw Reimbursement Obligation or any other Credit Sleeve Obligation or otherwise returned to NRG.
          (j) Acceptable Letters of Credit. Any Acceptable Letter of Credit shall be subject to the following provisions:
     (i) Any Acceptable Letter of Credit shall be delivered by the Sleeve Obligors to such address as the Merrill Parties shall specify and shall be maintained for the benefit of the Merrill Parties or their designees. The Sleeve Obligors or the issuer of the Acceptable Letter of Credit shall (1) renew or cause the renewal of each outstanding Acceptable Letter of Credit on a timely basis as provided in the relevant Acceptable Letter of Credit, (2) if the bank that issued an outstanding Acceptable Letter of Credit has indicated its intent not to renew such Acceptable Letter of Credit, provide a substitute Acceptable Letter of Credit at least twenty Business Days prior to the expiration of the outstanding Acceptable Letter of Credit, and (3) if a bank issuing an Acceptable Letter of Credit shall fail to honor the Merrill Parties’ properly documented request to draw on an outstanding Acceptable Letter of Credit, provide for the benefit of the Merrill Parties a substitute Acceptable Letter of Credit that is issued by a bank acceptable to the Merrill Parties within 3 Business Days after such refusal.
     (ii) Upon the occurrence of a Letter of Credit Default, the Sleeve Obligors agree to deliver to the Merrill Parties a substitute Acceptable Letter of Credit on or before the second Business Day after the occurrence thereof (or on or before the fifth Business Day after the occurrence thereof if only clause (1) under the definition of Letter of Credit Default applies). “ Letter of Credit Default ” shall mean with respect to an outstanding Acceptable Letter of Credit, the occurrence of any of the following events: (1) the issuer of such Acceptable Letter of Credit shall fail to maintain a Credit Rating of at least A by S&P and A2 by Moody’s; (2) the issuer of the Acceptable Letter of Credit shall fail to
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comply with or perform its obligations under such Acceptable Letter of Credit if such failure shall be continuing after the lapse of any applicable grace period; (3) the issuer of such Acceptable Letter of Credit shall disaffirm, disclaim, repudiate or reject, in whole or in part, or challenge the validity of such Acceptable Letter of Credit; (4) such Acceptable Letter of Credit shall expire or terminate, or shall fail or cease to be in full force and effect at any time during the term of this Agreement; or (5) the issuer of such Acceptable Letter of Credit institutes or consents to the institution of any proceeding under any insolvency, bankruptcy, reorganization, receivership, liquidation, winding-up or other debtor relief law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its respective property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of the issuer of such Acceptable Letter of Credit and the appointment continues undischarged or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding;  provided , however, that no Letter of Credit Default shall occur in any event with respect to an Acceptable Letter of Credit after the time such Acceptable Letter of Credit is required to be cancelled or returned to the Sleeve Obligors in accordance with the terms of this Agreement.
     (iii) An Acceptable Letter of Credit shall provide that the Merrill Parties may draw upon the Acceptable Letter of Credit in an amount that is equal to all amounts that are due and owing from the Sleeve Obligors but have not been paid to the Merrill Parties within the time allowed for such payments under this Agreement. An Acceptable Letter of Credit shall provide that a drawing may be made on the Acceptable Letter of Credit upon submission to the bank issuing the Acceptable Letter of Credit of one or more certificates of the Merrill Parties in accordance with the specific requirements of the Acceptable Letter of Credit. Upon or at any time after the occurrence of a Reliant Event of Default, the Merrill Parties may draw on the entire, undrawn portion of any outstanding Acceptable Letter of Credit upon submission to the bank issuing such Acceptable Letter of Credit of one or more certificates in accordance with the specific requirements of the Acceptable Letter of Credit. Cash proceeds received from drawing upon the Acceptable Letter of Credit shall be deemed Posted Collateral and shall be applied against all amounts that are due and owing from the Sleeve Obligors but have not been paid to the Merrill Parties within the time allowed for such payments under this Agreement. Notwithstanding the Merrill Parties’ receipt of cash under the Acceptable Letter of Credit, the Sleeve Obligors shall remain liable to the Merrill Parties for any failure to transfer sufficient Posted Collateral to the Merrill Parties in accordance with the terms of this Agreement. In addition, the Sleeve Obligors shall remain liable for any amounts owing to the Merrill Parties and remaining unpaid after the application of the amounts so drawn by the Merrill Parties.
     (k) BAC Guarantee. On the Unwind Start Date, the Merrill Parties shall cause the ML Parent Guarantor to issue the BAC Guarantee in respect of the obligations of the Merrill Parties to return Posted Collateral in accordance with the terms of this Section 10 .
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          Section 11. Reimbursement Guaranty by Other Reliant Retail Parties
          11.01. Reimbursement Guaranty of the Obligations. Subject to the provisions of Section 11.02, the Reimbursement Guarantors jointly and severally hereby irrevocably and unconditionally guaranty to the Merrill Parties (i) the due and punctual payment in full of all Reimbursement Obligations and all other amounts payable by NRG to the Merrill Parties under the Transaction Documents when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) and (ii) the performance of all other obligations of NRG hereunder (collectively, the “ Guaranteed Obligations ”).
          11.02. Payment by Guarantors. The Reimbursement Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which any Merrill Party may have at law or in equity against any Reimbursement Guarantor by virtue hereof, that upon the failure of NRG to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), the Reimbursement Guarantors will upon demand pay, or cause to be paid, in accordance with the terms of this Agreement, to the Merrill Parties, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for NRG’s becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against NRG for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to the Merrill Parties as aforesaid.
          11.03. Liability of Reimbursement Guarantors Absolute. Each Reimbursement Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Reimbursement Guarantor agrees as follows:
     (a)  this Reimbursement Guaranty is a guaranty of payment when due and not of collectability. This Reimbursement Guaranty is a primary obligation of each Reimbursement Guarantor and not merely a contract of surety;
     (b)  the obligations of each Reimbursement Guarantor hereunder are independent of the obligations of NRG and the obligations of any other guarantor (including any other Reimbursement Guarantor) of the obligations of NRG, and a separate action or actions may be brought and prosecuted against such Reimbursement Guarantor whether or not any action is brought against NRG or any of such other guarantors and whether or not NRG is joined in any such action or actions;
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     (c)  payment by any Reimbursement Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Reimbursement Guarantor’s liability for any portion of the Guaranteed Obligations which has not been paid; and without limiting the generality of the foregoing, if the Merrill Parties is awarded a judgment in any suit brought to enforce any Reimbursement Guarantor’s covenant to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such Reimbursement Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit, and such judgment shall not, except to the extent satisfied by such Reimbursement Guarantor, limit, affect, modify or abridge any other Reimbursement Guarantor’s liability hereunder in respect of the Guaranteed Obligations;
     (d)  any Merrill Party, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Reimbursement Guarantor’s liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Reimbursement Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of such Merrill Party in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that such Merrill Party may have against any such security, in each case as such Merrill Party in its discretion may determine consistent herewith or any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Reimbursement Guarantor against NRG or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Transaction Documents; and
     (e)  this Reimbursement Guaranty and the obligations of the Reimbursement Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Reimbursement Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right,
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power or remedy (whether arising under the Transaction Documents, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any of the other Transaction Documents or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Transaction Document or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) any Merrill Party’s consent to the change, reorganization or termination of the corporate structure or existence of NRG or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (v) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; and (vi) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Reimbursement Guarantor as an obligor in respect of the Guaranteed Obligations.
          11.04. Waivers by Reimbursement Guarantors. Each Reimbursement Guarantor hereby waives, for the benefit of the Merrill Parties: (a) any right to require any Merrill Party, as a condition of payment or performance by such Reimbursement Guarantor, to (i) proceed against NRG, any other guarantor (including any other Reimbursement Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from NRG, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any Posted Collateral or credit on the books of any Merrill Party in favor of NRG or any other Person, or (iv) pursue any other remedy in the power of any Merrill Party whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability of NRG or any other Reimbursement Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof, to the extent the same may be waived, (ii) the benefit of any statute of limitations affecting such Reimbursement Guarantor’s liability hereunder or the enforcement hereof, and (iii) promptness, diligence and any requirement that any Merrill Party protect, secure, perfect or insure any security interest or lien or any property subject thereto; (e) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder or under any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to NRG and notices of any of the matters referred to in  Section 11.04 ; and (f) any other defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.
          11.05. [Intentionally Deleted].
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          11.06. [Intentionally Deleted].
          11.07. Continuing Reimbursement Guaranty. This Reimbursement Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full (subject to reinstatement as provided in Section 11.10(b)  below). Each Reimbursement Guarantor hereby irrevocably waives any right to revoke this Reimbursement Guaranty as to future transactions giving rise to any Guaranteed Obligations.
          11.08. Authority of Reimbursement Guarantors or NRG. It is not necessary for any Merrill Party to inquire into the capacity or powers of any Reimbursement Guarantor or NRG or the officers, directors or any agents acting or purporting to act on behalf of any of them.
          11.09. Financial Condition of NRG. Any Reimbursement Guaranty may be made to NRG or continued from time to time, without notice to or authorization from any Reimbursement Guarantor regardless of the financial or other condition of NRG at the time of any such grant or continuation. No Merrill Party shall have any obligation to disclose or discuss with any Reimbursement Guarantor its assessment, or any Reimbursement Guarantor’s assessment, of the financial condition of NRG. Each Reimbursement Guarantor has adequate means to obtain information from NRG on a continuing basis concerning the financial condition of NRG and its ability to perform its obligations under the Transaction Documents, and each Reimbursement Guarantor assumes the responsibility for being and keeping informed of the financial condition of NRG and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Reimbursement Guarantor hereby waives and relinquishes any duty on the part of any Merrill Party to disclose any matter, fact or thing relating to the business, operations or conditions of NRG now known or hereafter known by any Merrill Party.
          11.10. Bankruptcy, etc.
          (a) Each Reimbursement Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any bankruptcy, reorganization or insolvency case or proceeding (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Reimbursement Guarantors and Merrill Parties that the Guaranteed Obligations which are guaranteed by Reimbursement Guarantors pursuant hereto should be determined without regard to any rule of law or order which may relieve NRG of any portion of such Guaranteed Obligations. Reimbursement Guarantors will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay the Merrill Parties, or allow the claim of the Merrill Parties in respect of, any such interest accruing after the date on which such case or proceeding is commenced.
          (b) In the event that all or any portion of the Guaranteed Obligations are paid by NRG or a Reimbursement Guarantor, the obligations of Reimbursement Guarantors hereunder
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shall continue and remain full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from any Merrill Party as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder.
          Section 12. Miscellaneous.
          12.01. Notices. All notices and other communications provided for herein shall be in writing, including telecopy and electronic mail, and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy or other means of electronic transmission approved in advance by the recipient party, as follows:
(a) if to NRG or any Other Sleeve Obligor:
NRG ENERGY, INC.
211 Carnegie Center
Princeton, New Jersey 08540
Attention: Treasurer, Chief Financial Officer and General Counsel
Telecopy No.: (609) 524-4501
(b) if to the Sleeve Provider:
MERRILL LYNCH COMMODITIES, INC.
20 East Greenway Plaza
Suite 700
Houston, Texas 77046
Attention: Legal Department
Telephone No.: (713) 544-5263
Telecopy No.: (713) 544-5551
E-Mail: reliantsleeve_notices@ml.com
(c) if to the ML Guarantee Provider:
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc.
4 World Financial Center, 22nd Floor
New York, NY 10281
Attention: Treasurer
Fax: (212) 449-2766
E-Mail:  reliantsleeve_notices@ml.com
With a copy (which shall not constitute notice) to:
Merrill Lynch & Co., Inc.
222 Broadway, 17th Floor
New York, NY 10038
Attention: Corporate Secretary
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Any Party hereto may change its address, telecopy number or e-mail address for notices and other communications hereunder by notice to the other Party hereto. All notices and other communications given to any Party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
          12.02. Confidentiality; Limitation on Use of Information. (a) Any information made available by the Sleeve Obligors, any Subsidiary of any of the foregoing, any Merrill Party or any Affiliate thereof with respect to this Agreement is confidential and shall not be discussed with or disclosed to any third party, except for such information (i) as may become generally available to the public other than as a result of a violation of this Agreement, (ii) as may be required or appropriate in response to any summons, subpoena, or otherwise in connection with any litigation or to comply with any applicable law, order, regulation, or ruling or to the extent requested by any regulatory authority, (iii) which becomes available to the Sleeve Obligors, any Subsidiary of any of the foregoing, any Merrill Party or any Affiliate thereof on a non-confidential basis from a source other than the other Party, (iv) as may be furnished to any person or entity (including that Person’s auditors, attorneys, advisors, or financial institutions) with which such Person has a written agreement or which are otherwise required to keep the information that is disclosed in confidence, or (v) relating to the U.S. Federal income tax treatment and tax structure of the transactions contemplated by this Agreement, including all relevant materials relating to such tax treatment and tax structure (except where confidentiality is reasonably necessary to comply with the securities laws). Notwithstanding the foregoing, the existence and terms of the ML Guarantees shall not be considered confidential information.
          (b) In connection with the foregoing provisions of this Section 12.02, (A) the Parties recognize that the Parties are both engaged in wholesale trading activities in the gas and electricity markets that may from time to time be adverse, (B) the possession by the Merrill Parties of the confidential information of the Sleeve Obligors, or the possession by the Sleeve Obligors of the confidential information of the Merrill Parties, in compliance with the foregoing does not constitute a reason for one Party to limit the ability of the other Party to engage in such adverse trading activities, and (C) the Parties may in compliance with the foregoing and for the purposes of the Transaction Documents discuss the confidential information of the other Parties internally.
          12.03. Reliant Employees. During the Scheduled Term, the Merrill Parties shall not solicit or otherwise induce any director, officer or key employee of the Sleeve Obligors, or any officer or key employee of NRG or its Subsidiaries that is actively involved in the negotiation or administration of this Agreement to leave the employ of the Sleeve Obligors, NRG or its Subsidiaries;  provided  that this prohibition shall not apply to (i) directors, officers or key employees of the Sleeve Obligors or officers or key employees of NRG or its Subsidiaries who are not full time employees or who are not actively involved with the Merrill Parties in negotiating on or administering this Agreement or (ii) officers, directors or key employees of the Sleeve Obligors, NRG or its Subsidiaries who respond to general solicitations or who otherwise independently seek employment without inducement by any Merrill Party.
          12.04. [Intentionally Deleted].
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          12.05. Waiver. No failure on the part of any Party to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.
          12.06. Amendments, Etc. Except as otherwise expressly provided in this Agreement, any provision of this Agreement or in any other Transaction Document between or among any of the Merrill Parties, on one hand, and any of the Sleeve Obligors, on the other hand, may be modified or supplemented only by an instrument in writing signed by the applicable Parties thereto.
          12.07. Expenses, Etc.
          (a) REPS (and, from and after the Unwind Start Date, NRG) agrees to pay or reimburse the Sleeve Provider for:  (A) all reasonable and documented out-of-pocket costs and expenses of the Sleeve Provider (including the reasonable fees and expenses of legal counsel and of any other third-party advisors or consultants) in connection with the execution or delivery of this Agreement or any other Transaction Document or any agreement or instrument contemplated hereby or thereby, the performance by the Parties hereto and thereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby, including, any such costs and expenses incurred in connection with (1) any waiver, modification or amendment of this Agreement or any other Transaction Document, whether or not consummated, (2) any Default by the Sleeve Obligors and any enforcement or collection proceedings resulting therefrom, including all manner of participation in or other involvement with (i) bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation proceedings, (ii) judicial or regulatory proceedings and (iii) workout, restructuring or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated) and (3) the enforcement of this  Section 12.07 ; and (B) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any of the other Transaction Documents or any other document referred to herein or therein and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by this Agreement or any other document referred to herein.
          (b) REPS (and, from and after the Unwind Start Date, NRG) agrees to reimburse the Merrill Parties for any amounts paid by the Merrill Parties to cure defaults by NRG or any Other Sleeve Obligor under any Transaction Document or any other document, contract or agreement to which NRG or such Other Sleeve Obligor is a party (the amounts referred to in this  clause (b)  being herein collectively referred to as the “ Deferred Cure Reimbursement Obligations ”). Deferred Cure Reimbursement Obligations may be prepaid but shall mature and be payable on January 29, 2010.
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          (c) REPS (and, from and after the Unwind Start Date, NRG) shall indemnify each Merrill Party and each related Party of the Merrill Parties (each such Person being called an “ Indemnitee ”) against, and hold each Indemnitee harmless from, any and all actual losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of any of the transactions contemplated hereby, (ii) the provision of any ML Guarantee or other Merrill Collateral or use thereof, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by NRG or any of its Subsidiaries, or any liability under any Environmental Law related in any way to NRG or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto;  provided  that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from (A) the gross negligence or willful misconduct of such Indemnitee, (B) any breach by such Indemnitee of its obligations hereunder, or (C) claims by one Indemnitee against another Indemnitee not relating to a breach of this Agreement by any Sleeve Obligor.
          12.08. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns. There shall be no third party beneficiaries of this Agreement
          12.09. Assignments. Neither the Sleeve Obligors nor the Merrill Parties may assign any of their rights or obligations hereunder without the prior written consent of the other Parties hereto.
          12.10. Survival. The obligations of NRG under Section 3.05, Section 11.07, Section 12.07 and any other provision that expressly provides for survival after termination shall survive the Credit Sleeve Termination Date.
          12.11. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the Parties hereto may execute this Agreement by signing any such counterpart.
          12.12. Governing Law; Jurisdiction; Etc.
          (a) Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York.
          (b) Submission to Jurisdiction. The Parties hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of the Supreme Court of the State of New York sitting in New York County (including its Appellate Division), and of any other appellate court in the State of New York (the “New York Courts”),
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for the purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Notwithstanding the nonexclusive submission above:
          (A) With respect to any proceeding initiated by or on behalf of any Sleeve Obligor arising out of or relating to this Agreement or the transactions contemplated hereby, the Sleeve Obligors agree to bring such proceeding exclusively in the United States District Court for the Southern District of New York or if such court does not have subject matter jurisdiction in any of the other New York Courts located in New York, New York, and in such case EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUCH LEGAL PROCEEDING;
          (B) With respect to any proceeding initiated by or on behalf of any Merrill Party arising out of or relating to this Agreement or the transactions contemplated hereby, which the Merrill Parties elect to bring in the United States District Court for the Southern District of New York or if such court does not have subject matter jurisdiction in any of the other New York Courts located in New York, New York, EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY SUCH LEGAL PROCEEDING; and
          (C) With respect to any proceeding initiated by or on behalf of any Merrill Party arising out of or relating to this Agreement or the transactions contemplated hereby, which the Merrill Parties elect to bring in the United States District Court for the Southern District of Texas (Houston Division) or if such court does not have subject matter jurisdiction in any of the other Texas Courts located in Houston, Texas, the Sleeve Obligors expressly reserve their rights to trial by jury.
          (c) Waiver of Venue. Each Party hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.
          (d) Service of Process. Each Party to this Agreement irrevocably consents to service of process in the manner provided for notices in  Section 12.01 . Nothing in this Agreement will affect the right of any Party to this Agreement to serve process in any other manner permitted by law.
          12.13. Certain Dispute Resolution Procedures. If a Party (a “Disputing Party”) disputes any Market Information forming a component used in a calculation under  Sections 2.02 , then (i) the Disputing Party will notify the other Party not later than the close of business on the Business Day following the date that Disputing Party received the other Party’s calculation and such Disputing Party will also provide its calculation of such amount and the applicable Market Information used to make such calculation, (ii) the Parties will in good faith consult with each other in an attempt to resolve the dispute and (iii) if the Parties fail to resolve the dispute by the third (3 rd ) Business Day following the date the notice of dispute was delivered, then the Calculation Agent will recalculate the applicable calculation by: (A) utilizing any
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Market Information that the Parties have agreed are not in dispute; and (B) calculating the component that is in dispute by seeking four actual quotations at mid market from reference market makers, and taking the arithmetic average of those obtained; provided  that if such number of quotations are not available for a particular component, then fewer than such number of quotations may be used for such component; and if no quotations are available for a particular component, then the Calculation Agent shall use its own calculations for that component. Following a recalculation pursuant to this Section, the Calculation Agent will notify the Parties of the recalculation of such amount not later than 12:00 noon CPT on the fifth Business Day following the date of the notice of dispute was delivered, and the same shall be binding for the purposes of this Agreement. The “ Calculation Agent ” shall be a third party agreed to by both NRG and the Sleeve Provider from the list of third parties in  Schedule 12.13 ;  provided  that if the Parties are unable to promptly agree on such third party, then the next third party listed on such Schedule who has not yet served as Calculation Agent shall be the Calculation Agent for such dispute.
          12.14. Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.
          12.15. Limitation on Interest. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Reimbursement Obligation, together with all fees, charges and other amounts which are treated as interest on such Reimbursement Obligation under applicable law (collectively the “ Charges ”), shall exceed the maximum lawful rate (the “ Maximum Rate ”) which may be contracted for, charged, taken, received or reserved by the Sleeve Provider in accordance with applicable law, the rate of interest payable in respect of such Reimbursement Obligations hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Reimbursement Obligation but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to the Sleeve Provider in respect of other Reimbursement Obligations or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by the Sleeve Provider.
          12.16. Integration. This Agreement and the other Transaction Documents constitute the entire contract among the Parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
          12.17. Conditions to Amendment and Restatement. The Existing CSRA shall be amended and restated hereby as of the Unwind Start Date;  provided  that each of the following conditions has been satisfied or waived by the Merrill Parties on or prior to October 5, 2009 (which may occur concurrently with the effectiveness of such amendment and restatement):
     (a) All Merrill Collateral shall have been returned to the Merrill Parties, including all ML Guarantees, and the Merrill Parties shall have been legally discharged,
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in each case, in a manner reasonably satisfactory to the Merrill Parties, from all other obligations under the Existing CSRA (including all obligations to post any collateral or provide credit support to any Governmental Authority or under any Power and Hedging Contract or any other agreement for the benefit of the Sleeve Obligors, but excluding indemnities and other contingent obligations not then due and payable), except for the Merrill Parties’ obligations in respect of the Post-Unwind Start Date Obligations. Without limiting the generality of the foregoing, each of the actions set forth in Section 12.18(a)  and on  Schedule 12.17(a)  shall have been duly taken on the Unwind Start Date.
     (b) The Sleeve Obligors shall have, no later than one Business Day prior to the Unwind Start Date, formally notified each TDSP that is the beneficiary of any ML Collateral that the Sleeve Obligors desire for such TDSP to release all ML Collateral, and to discharge all future obligations of the Merrill Parties to provide or post any future collateral or ML Guarantee, in exchange for alternate collateral or other arrangements to be negotiated between the Sleeve Obligors and such TDSP.
     (c) Since May 1, 2009, there shall have not have occurred any event or circumstance, either individually or in the aggregate that has had or could reasonably be expected to have a Material Adverse Effect.
     (d) The Merrill Parties shall have received a favorable written opinion of Kirkland & Ellis LLP, counsel for NRG and the Other Sleeve Obligors (or from such other counsel, which may be in-house counsel, as is reasonably acceptable to the Merrill Parties), as to the enforceability of this Agreement effective as of the Unwind Start Date, the validity and perfection of the liens created by  Section 10 , the absence of any violation of federal and New York law and absence of conflict with the organization documents and any material Contractual Obligations of the Sleeve Obligors (provided that, other than with respect to the NRG Credit Agreement, the Senior Note Documents and the Preferred Equity, or any refinancing in effect at the relevant time, such opinion as to absence of conflicts with other Contractual Obligations may be from in-house counsel to NRG), in each case, in connection with the execution, delivery and performance by the Sleeve Obligors of this Agreement, and covering such other matters relating to the Sleeve Obligors, this Agreement or the transactions contemplated hereby as the Merrill Parties or their counsel shall reasonably request.
     (e) The Loans and all other Obligations under Working Capital Facility shall be repaid and satisfied in full and the Working Capital Facility shall be terminated (other than indemnities and any similar obligations of the Sleeve Obligors not then due and payable and that expressly survive termination of this Agreement and the other Transaction Documents).
     (f) The Merrill Parties shall have received all reasonable fees and expenses that are due hereunder, including payment of the following: (i) the invoice of the Merrill Parties dated as of September 30, 2009 and (ii) the invoice of Milbank, Tweed, Hadley & McCloy LLP dated September 30, 2009.
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     (g) The Merrill Parties shall have received a certificate, dated the Unwind Start Date, of a Responsible Officer of NRG, to the effect that:
     (1) the representations and warranties of the Sleeve Obligors made in this Agreement are true and correct in all material respects on and as of the Unwind Start Date, and
     (2) no Reliant Default or Reliant Event of Default has occurred and is continuing as of the Unwind Start Date.
          12.18. Additional Unwind Start Date Actions.
          (a) ICE Block of Exchange Traded Contracts. With respect to each Exchange Traded Contract and each corresponding Mirror OTC Contract that is held by the Sleeve Obligors and the Merrill Parties on the Unwind Start Date, the Sleeve Obligors will, or will cause an Affiliate to, (i) enter into a transaction on ICE or NYMEX, as applicable, to transfer the Sleeve Provider’s position in such Exchange Traded Contract to such Sleeve Obligor or such Affiliate and (ii) close-out each related Mirror OTC Contract (which may be through novation of the Sleeve Provider’s position under such Mirror OTC Contract to such Affiliate), in each case, at no cost or expense to the Merrill Parties. Concurrently with the completion of the foregoing transfers and novations, the Merrill Parties shall be legally discharged from all obligations under such transactions, the Merrill Parties shall have received the return of all variation margin and all other ML Collateral posted in connection therewith, and all related ML Guarantees shall be terminated.
          (b) Terminated Agreements. Effective upon the satisfaction of each of the conditions precedent set forth in Section 12.17(a) , each of the Parties that is a party thereto hereby terminates, and each other Party hereby consents to the termination of, each agreement listed on  Schedule 12.18(b)  (the “ Terminated Agreements ”), provided that (i) each Party shall remain liable for its obligations incurred under each Terminated Agreement relating to any period prior to the Unwind Start Date that have not been discharged and (ii) all provisions which by their express terms survive expiration or termination of any Terminated Agreement shall continue in full force and effect.
          (c) Release of Collateral Under Existing Security Documents. The Merrill Parties hereby agree that, effective upon each of the conditions precedent set forth in  Section 12.17(a) , the Merrill Parties shall and/or shall direct the Collateral Trustee to release all of the Collateral (as defined in the Existing Security Documents), in each case, other than any Posted Collateral to be retained by the Merrill Parties hereunder, and the Sleeve Provider shall release all Class B limited liability company interests in RERH Holdings held by the Sleeve Provider. In connection with the foregoing, the Merrill Parties shall timely execute and deliver, provide, return or otherwise make available or direct the execution and delivery, provision, return or otherwise making available of all filings, recordings, notices, and other related documents and agreements, including releases and notices, directions and other communications to the Collateral Trustee, reasonably required to implement the foregoing in accordance with the terms of the foregoing.
-60-

 
          12.19. Existing CSRA Provisions. Until the Unwind Start Date, the Parties agree that the Existing CSRA and all rights and remedies of the Parties thereunder shall remain in full force and effect;  provided , that the Parties agree that from the Signing Date until the Unwind Start Date, notwithstanding any contrary provision in the Existing CSRA or this Agreement:
     (a) the transactions contemplated by that certain Framework Agreement dated as of the date hereof between REPS and MLCI (the “ Framework Agreement ”) and by any other agreement listed on  Schedule 12.17(a)  may be consummated;
     (b) the Merrill Parties will not be required to report Exposure and Risk Limits on October 1, 2009;
     (c) any transactions entered into after the Signing Date between REPS and NRG shall be entered into under the Energy Management Services Agreement, dated October 1, 2009, between REPS and NRG Power Marketing LLC;
     (d) the Sleeve Obligors will not be required to transfer data to the Merrill Parties pursuant to Schedule 1.01(c) of the Existing CSRA (but instead will transfer information required by new  Schedule 1.01(c)  of this Agreement; and
     (e) the Sleeve Obligors will not be required to remain in compliance with Section 2.02(b) (or Exhibit B) of the Existing CSRA relating to limitations with respect to Accepted Counterparties (as defined in the Existing CSRA) or  Section 7.17  of the Existing CSRA.
          12.20. Public Disclosures. NRG agrees that neither it nor its Affiliates will at any time issue any press release or other public disclosure, including any prospectus, proxy statement or other materials filed with any Governmental Authority using the name of the Sleeve Provider, the ML Guarantee Provider or any of their Affiliates or referring to this Agreement, the transactions or any of the agreements contained herein or contemplated hereby or any discussions relating to any of the foregoing, without at least one full Business Day (or such shorter period as may be practicable in the circumstances) prior notice to the Merrill Parties and the prior written consent of the Sleeve Provider (such consent not to be unreasonably withheld, delayed or conditioned).
[signatures follow]
-61-

 
          IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
 	 	 	 	 	
 	NRG ENERGY, INC.
 	 	
 	By:  	/s/ Christopher S. Sotos  	 	
 	 	Name:  	Christopher S. Sotos 	 	
 	 	Title:  	Vice President and Treasurer 	 	
 	
Signature Page to Credit Sleeve and Reimbursement Agreement

 
 	 	 	 	 	
 	MERRILL PARTIES

MERRILL LYNCH COMMODITIES, INC.,
      as Sleeve Provider
 	 	
 	By:  	/s/ Dennis Albrecht  	 	
 	 	Name:  	Dennis Albrecht 	 	
 	 	Title:  	Managing Director 	 	
 	
 	MERRILL LYNCH & CO., INC.,
      as ML Guarantee Provider
 	 	
 	By:  	/s/ Marlene Debel  	 	
 	 	Name:  	Marlene Debel 	 	
 	 	Title:  	Assistant Treasurer 	 	
 	
 	Accepted and agreed, for the purposes of Section 12.17 .

MERRILL LYNCH CAPITAL CORPORATION,
      as Working Capital Facility Provider
 	 	
 	By:  	/s/ Barry Price  	 	
 	 	Name:  	Barry Price 	 	
 	 	Title:  	Vice President 	 	
 	
Signature Page to Credit Sleeve and Reimbursement Agreement

 
 	 	 	 	 	
 	OTHER SLEEVE OBLIGORS

RELIANT ENERGY POWER SUPPLY, LLC
 	 	
 	By:  	/s/ Christopher S. Sotos  	 	
 	 	Name:  	Christopher S. Sotos 	 	
 	 	Title:  	Vice President and Treasurer 	 	
 	
 	RERH HOLDINGS, LLC
 	 	
 	By:  	/s/ Christopher S. Sotos  	 	
 	 	Name:  	Christopher S. Sotos 	 	
 	 	Title:  	Vice President 	 	
 	
 	RELIANT ENERGY RETAIL HOLDINGS, LLC
 	 	
 	By:  	/s/ Christopher S. Sotos  	 	
 	 	Name:  	Christopher S. Sotos 	 	
 	 	Title:  	Vice President 	 	
 	
 	RELIANT ENERGY RETAIL SERVICES, LLC
 	 	
 	By:  	/s/ Christopher S. Sotos  	 	
 	 	Name:  	Christopher S. Sotos 	 	
 	 	Title:  	Vice President 	 	
 	
 	RE RETAIL RECEIVABLES, LLC
 	 	
 	By:  	/s/ Christopher S. Sotos  	 	
 	 	Name:  	Christopher S. Sotos 	 	
 	 	Title:  	Vice President 	 	
 	
Signature Page to Credit Sleeve and Reimbursement Agreement

Exhibit 10.1B
Schedule 1.01(a)
To Amended and Restated Credit Sleeve and Reimbursement Agreement
Post-Unwind Start Date Obligations
I.	 	Post-Unwind Start Date Obligations by Counterparty	
 	 	 	
 	 	Shell Energy North America (US) LP	
 	 	 	
 	 	Fortis Energy Marketing & Trading GP	
 	 	 	
 	 	J.P. Morgan Ventures Energy Corporation	
 	 	 	
 	 	NextEra Energy Power Marketing, L.L.C.	
 	 	 	
 	 	ANP Funding I, LLC
Endure Energy, LLC	
 	 	 	
 	 	Integrys Energy Services, Inc.	
 	 	 	
 	 	Keystone Energy Partners, LP	
 	 	 	
 	 	Lehman Brothers Commodity Services Inc.	
 	 	 	
 	 	Lower Colorado River Authority, Texas	
 	 	 	
 	 	Rainbow Energy Marketing Corporation	
 	 	 	
 	 	Tenaska Power Services Co.	
 	 	 	
II.	 	C&I Guarantees by Counterparty	
 	 	 	
 	 	[*****]	
 	 	 	
III.	 	TDSP Postings	
 	 	 	
 	 	Centerpoint Energy Houston Electric	
 	 	 	
 	 	AEP Texas Central Company	
 	 	 	
 	 	Oncor Electric Delivery Company (Previously TXU Electric Delivery Company)	
 	 	 	
IV.	 	Other ML Guarantees	
 	 	 	
 	 	Electric Reliability Council of Texas
NRG Texas LP
Public Utility Commission of the State of Texas	

 
Schedule 1.01(c) to CSRA
Schedule 1.01(c) To Amended and Restated Credit Sleeve and Reimbursement Agreement
Data and Reporting Requirements
I. General Provisions — Certain Defined Terms
This Schedule 1.01(c) shall constitute a part of the Credit Sleeve Reimbursement Agreement (“CSRA”). Capitalized Terms used herein shall either (a) have the meaning specified in the CSRA or (b) the meaning defined in this  Schedule 1.01(c) . References to  Schedule 1.01(c)  shall be to the entirety of this  Schedule 1.01(c)  and all sub-parts unless an individual sub-part is specified.
Current Exposure and Contingent Exposure shall be calculated on the basis of data REPS provided to the Sleeve Provider prior to the Unwind Start Date in accordance with the Existing CSRA. 1  After the Unwind Start Date and before the Credit Sleeve Termination Date, the Sleeve Provider shall adjust the data provided by REPS prior to the Unwind Start Date to reflect the natural roll-off of the Post-Unwind Start Date Transactions and the return of ML Guarantees to the Merrill Parties. The Sleeve Provider’s computation of Current Exposure shall be performed consistent with the methodology that the Sleeve Provider uses to mark its own positions to market on a daily basis.
“Current Mark-to-Market” for any day, shall be expressed in Dollars and shall be equal to the Mark-to-Market value of all Post-Unwind Start Date Transactions.
The “Mark-to-Market” value of a transaction, which may be a positive or a negative number, shall be determined by valuing each transaction (volumes, contract prices, and delivery dates) as of the Unwind Start Date using the Merrill Market Forward Pricing Curve, Merrill Volatility Curve and Merrill Correlation Curve, each as determined on the Unwind Start Date, that corresponds to the pricing terms of such transaction. The “ Merrill Market Forward Pricing Curves ,” “ Merrill Volatility Curves ,” and “ Merrill Correlation Curves ” are defined as the curves used by the Sleeve Provider in its U.S. energy and related forwards, futures and options trading operations to mark its positions to market; and in those situations where discounting is applicable it will perform such discounting using the “ Merrill LIBOR Curve ”.
If at any time, with respect to any Post-Unwind Start Date Transaction, REPS’ calculation of Contingent Exposure differs in an amount greater than $50,000,000 from the Sleeve Provider’s calculation of Contingent Exposure, REPS may challenge the Sleeve Provider’s calculation of Contingent Exposure with respect to such transaction. If the parties cannot reach agreement on the calculation of Contingent Exposure with respect to such Post-Unwind Start Date Transaction within ten days after such challenge, then REPS may require that a third party expert be used to choose between the Sleeve Provider’s methodology for calculating the Contingent Exposure and a specific alternative methodology proposed by REPS for use in calculating the Contingent

1	 	On or after September 30, 2009, the Sleeve Obligors will not enter into or obtain any new Accepted Trades supported by the Merrill Parties under the Existing CSRA.	
1

 
Exposure with respect to such Post-Unwind Start Date Transaction. The third party expert will be designated by REPS from a list of at least three qualified and impartial experts which list shall promptly (and in no event more than five Business Days following request therefor), be provided by the Sleeve Provider to REPS. Such expert shall be required to choose between the calculation of Contingent Exposure used by the Sleeve Provider and those calculations proposed by REPS and to identify which it determines is more accurate, and the calculations used to determine Contingent Exposure thereafter shall be formulated by the Sleeve Provider in a manner consistent with the calculations so selected and thereafter such Contingent Exposure as so formulated will be the Contingent Exposure for all purposes hereunder. The expenses of the expert will be paid by the Party whose calculations are not selected by the expert.
REPS may challenge the Sleeve Provider’s calculation of Current Exposure. The parties will consult with each other in an attempt to resolve the dispute and if they fail to resolve the dispute within five days after such challenge, then the Sleeve Provider will recalculate the Current Exposure by (A) utilizing any calculations of Current Exposure that the parties have agreed are not in dispute and (B) calculating the Current Exposure in dispute by seeking four actual quotations at mid-market from reference market makers for purposes of calculating Current Exposure, and taking the arithmetic average of those obtained; provided  that if four quotations are not available for a particular calculation, then fewer than four quotations may be used for that calculation; and if no quotations are available for a particular calculation, then the Sleeve Provider’s original calculations will be used for that calculation of Current Exposure. Following a recalculation pursuant to this paragraph, the Sleeve Provider will notify REPS of such calculation.
2

 
Schedule 1.01(c).24
Credit Exposure
REPS shall provide the data specified in this Schedule 1.01(c).24 for each Business Day by no later than 12:00 p.m. Central time on the next succeeding Business Day.
 	 	 	 	 	 	 	 	 	
Counterparty	 	Breakdown	 	Gross Exposure	 	Gross Obligation	
Counterparty A	 	Time All	 	 	 	 	 	 	
Counterparty A	 	Current Month Delivered All	 	 	 	 	 	 	
Counterparty A	 	Current Month MTM All	 	 	 	 	 	 	
Counterparty A	 	Forward MTM All	 	 	 	 	 	 	
Counterparty A	 	Prior Month All	 	 	 	 	 	 	
Counterparty B	 	Time All	 	 	 	 	 	 	
Counterparty B	 	Current Month Delivered All	 	 	 	 	 	 	
Counterparty B	 	Current Month MTM All	 	 	 	 	 	 	
Counterparty B	 	Forward MTM All	 	 	 	 	 	 	
Counterparty B	 	Prior Month All	 	 	 	 	 	 	
With respect to any Counterparty that is party to more than one Power and Hedging Contract, REPS shall separately provide the above data for each such contract.
3

 
Schedule 3.06(a)
To Amended and Restated Credit Sleeve and Reimbursement Agreement
Merrill Account
JP Morgan Chase ABA
021000021
Account Number 066657474
Schedule 3.06(a) to CSRA

 
Schedule 5.06
To Amended and Restated Credit Sleeve and Reimbursement Agreement
Litigation
I.	 	PENDING LITIGATION	

 	a.	 	Homestead Commercial Group, LLC v. Reliant Energy Retail Services, LLC, Arched Bridge Co. Inc., et al.; Cause No: 2007-65389; 281st Judicial District, Harris County, Texas.	
 	 	 	 	
 	b.	 	In re: Movie Gallery/Hollywood Video Bankruptcy.	
 	 	 	 	
 	c.	 	534 Las Americas/Hispanic Housing (Bankruptcy); Case No. 07-33778; US Bankruptcy Court, Southern District of Texas, Houston Division.	
 	 	 	 	
 	d.	 	In re: Arctic Cold Storage (Bankruptcy); Case No. 07-60254; US Bankruptcy Court, Eastern District of Texas, Tyler Division.	
 	 	 	 	
 	e.	 	Houston Council for Health and Education vs. Public Utility Commission of Texas, CenterPoint Energy, Houston Electric, LLC, Reliant Energy Retail Services, LLC and Texas Genco, LP; Cause No. GN500160; 3rd Court of Appeals, Travis County, Texas, pending with Supreme Court of Texas, Case No. 08-0421.	
 	 	 	 	
 	f.	 	Sharon Taylor, et al. vs. Freeman Publishers, Inc., et al. (Reliant Energy, Inc. a/k/a Reliant Resources); Cause No. 02-07-cv-410; USDC, Western District of Louisiana.

 	g.	 	In re: Miracle Candle; Cause No. 07-50227; United States District Court, Southern District of Texas, Laredo Division.	
 	 	 	 	
 	h.	 	Ray Madrigal v. Reliant Energy, Inc. and AEP Energy Services, Inc.; Cause No. 08-60392- 1; In the County Court at Law No. 1, Nueces County, Texas.	
 	 	 	 	
 	i.	 	Jan Andel, Diana Clarkson, a/n/f of Anthony Douglas Andel, A Minor, Wanda Andel and Bruno Andel vs. Atlantic Service & Supply, LLC, et al.; Cause No. 2008-17202; In the 164th Judicial District Court, Harris County, Texas.	
 	 	 	 	
 	j.	 	Constellation Energy Commodities Group, Inc. vs. Public Utility Commission of Texas; Cause No. D-1-GN-08-001213; in the 98th Judicial District Court, Travis County, Texas.	
 	 	 	 	
 	k.	 	In re: Calpine Corporation et al., debtors, Ch 11 Case 05-6022; Calpine Energy Services, L.P. vs. Reliant Energy Electric Solutions, LLC, Adversary Proceeding No.08-1-01251; in the United States Bankruptcy Court for the Southern District of New York.	
 	 	 	 	
 	l.	 	In re: Introgen Therapeutics, et al., debtor, Ch.11 Case 08-12442; Introgen Therapeutics, Inc. vs. Reliant Energy Retail Services, LLC; Adversary Proceeding No. 09-01071, in the U.S. Bankruptcy Court for the Western District of Texas	
Schedule 5.06 to CSRA
-1-

 
II.	 	THREATENED LITIGATION	

 	a.	 	Letter dated January 2, 2009 to Reliant Energy Retail Services, LLC from Cokinos, Bosien & Young	
Schedule 5.06 to CSRA
-2-

 
Schedule 5.15
To Amended and Restated Credit Sleeve and Reimbursement Agreement
Compliance with Laws
1.	 	[*****]	
 	 	 	
2.	 	[*****]	
1

 
Schedule 12.13
To Amended and Restated Credit Sleeve and Reimbursement Agreement
List of Calculation Agents
Accenture LTD
Contact: Marina Kotovich
Phone: 312-693-8016 or 713-837-1500 or 1-877-889-9009
Address: 2929 Allen Parkway, Suite 2000; Houston, TX 77019
Web: www.accenture.com
Ernst & Young, LLP
Contact: Marcela Donadio
Phone: 713-750-1276 or 713-750-1500
Address: 5 Houston Center, Suite 1200; 1401 McKinney St.; Houston, TX 77010
Web: www.ey.com/global/content.nsf/US/Home
PricewaterhouseCoopers, LLP
Contact: Mark Allen Smith
Phone: 713-356-4233 or 713-356-4000
Address: 1201 Louisiana, Suite 2900; Houston, TX 77002-5678
Web: www.pwc.com
Sirius Solutions, LLP
Contact: Brent Price
Phone: 713-888-7116 or 713-888-0488 or 1-800-234-8054
Address: 3700 Buffalo Speedway, 11 th  Floor; Houston, TX 77098
Web: www.sirsol.com
Schedule 12.13 to CSRA

 
Schedule 12.17(a)
To Amended and Restated Credit Sleeve and Reimbursement Agreement
Releases of Merrill Collateral
Documents evidencing return of Merrill Collateral to the Merrill Parties, including MLGuarantees, and legal discharge of the Merrill Parties from obligations under the Existing CSRA on the Unwind Start Date:
 	1.	 	Framework Agreement dated as of September 30, 2009, among the Sleeve Provider, REPS and NRG Power Marketing LLC (“PMI”)	
 	 	 	 	
 	2.	 	MLCI Prop Trade Novation Agreement dated as of September 30, 2009, among the Sleeve Provider, REPS and PMI	
 	 	 	 	
 	3.	 	First Novation Agreement dated as of October 5, 2009, among REPS, the Sleeve Provider and PMI	
 	 	 	 	
 	4.	 	Release and Termination Agreement dated as of October 5, 2009, between the Sleeve Provider and RERH	
 	 	 	 	
 	5.	 	Release and Termination Agreement dated as of October 5, 2009, between the ML Guarantee Provider and REPS	
 	 	 	 	
 	6.	 	Second Novation Agreement dated as of October 5, 2009, among REPS, PMI and the Sleeve Provider	
 	 	 	 	
 	7.	 	Release and Termination Agreement dated as of October 5, 2009, between the ML Guarantee Provider and PMI	
 	 	 	 	
 	8.	 	REPS/NRG Standard ISDA Master Agreement Amendment and Release Agreement dated as of October 5, 2009, among REPS, PMI and the Sleeve Provider	
 	 	 	 	
 	9.	 	Release and Termination Agreement dated as of October 5, 2009, between PMI and the ML Guarantee Provider	
 	 	 	 	
 	10.	 	Termination and Release Agreement dated as of October 1, 2009, among the Sleeve Provider, Barclays Bank PLC and REPS	
 	 	 	 	
 	11.	 	Release and Termination Agreement dated as of October 1, 2009, between Barclays Bank PLC and the ML Guarantee Provider	
 	 	 	 	
 	12.	 	Novation Agreement dated as of September 29, 2009, among Morgan Stanley Capital Group Inc., REPS, the Sleeve Provider and NRG	
 	 	 	 	
 	13.	 	Amendment to ISDA Master Agreement dated as of October 5, 2009, among J. Aron & Company, REPS and the Sleeve Provider	

 

 	14.	 	Release and Termination Agreement dated as of October 5, 2009, between the ML Guarantee Provider and J. Aron & Company	
 	 	 	 	
 	15.	 	Novation Agreement dated as of September 30, 2009, among RRI Energy Services, Inc., REPS, the Sleeve Provider and PMI	
 	 	 	 	
 	16.	 	Novation Agreement dated as of September 25, 2009, among BP Energy Company, REPS, PMI and the Sleeve Provider	
 	 	 	 	
 	17.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and BP Energy Company	
 	 	 	 	
 	18.	 	Novation Agreement dated as of September 25, 2009, among BP Corporation North America Inc., REPS, PMI and the Sleeve Provider	
 	 	 	 	
 	19.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and BP Corporation North America Inc.	
 	 	 	 	
 	20.	 	Novation Agreement dated as of September 28, 2009, among Calpine Energy Services, L.P., REPS, PMI and the Sleeve Provider	
 	 	 	 	
 	21.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and Calpine Energy Services, L.P.	
 	 	 	 	
 	22.	 	Novation Agreement dated as of September 25, 2009, among Citigroup Energy Inc., REPS, PMI and the Sleeve Provider	
 	 	 	 	
 	23.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and Citigroup Energy Inc.	
 	 	 	 	
 	24.	 	Novation Agreement dated as of September 30, 2009, among Constellation Energy Commodities Group, Inc., REPS, PMI and the Sleeve Provider	
 	 	 	 	
 	25.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and Constellation Energy Commodities Group, Inc.	
 	 	 	 	
 	26.	 	Novation Agreement dated as of September 25, 2009, among Credit Suisse Energy LLC, REPS, PMI and the Sleeve Provider	
 	 	 	 	
 	27.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and Credit Suisse Energy LLC	
 	 	 	 	
 	28.	 	Novation Agreement dated as of September 25, 2009, among Deutsche Bank AG, REPS, PMI, DB Energy Trading LLC and the Sleeve Provider	

 
29.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and Deutsche Bank AG	
 	 	 	
30.	 	Novation Agreement dated as of September 25, 2009, among DB Energy Trading LLC, REPS, PMI and the Sleeve Provider	
 	 	 	
31.	 	Release and Termination Agreement dated as of October 1, 2009, among the ML Guarantee Provider and DB Energy Trading LLC	
 	 	 	
32.	 	Novation Agreement dated as of September 17, 2009, among Eagle Energy Partners I L.P., REPS, PMI and the Sleeve Provider	
 	 	 	
33.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and Eagle Energy Partners I L.P.	
 	 	 	
34.	 	Novation Agreement dated as of September 24, 2009, among Exelon Generation Company, LLC, REPS, PMI and the Sleeve Provider	
 	 	 	
35.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and Exelon Generation Company, LLC	
 	 	 	
36.	 	Novation Agreement dated as of September 22, 2009, among Luminant Energy Company LLC, REPS, PMI and the Sleeve Provider	
 	 	 	
37.	 	Release and Termination Agreement dated as of October 1, 2009, between the ML Guarantee Provider and Luminant Energy Company LLC	
 	 	 	
38.	 	Novation Agreement dated as of September 28, 2009, among Sempra Energy Trading LLC, REPS, PMI and the Sleeve Provider	
 	 	 	
39.	 	Release and Termination Agreement, dated as of October 1, 2009, between the ML Guarantee Provider and Sempra Energy Trading LLC	

 
Schedule 12.18(b)
To Amended and Restated Credit Sleeve and Reimbursement Agreement
Terminated Agreements
1.	 	Second Amended and Restated Working Capital Facility, originally dated as of September 1, 2006, as amended and restated as of December 1, 2006, and as amended and restated as of May 1, 2009, among Merrill Lynch Capital Corporation (“ MLCC ”) and RERH Holdings, LLC (“ RERH Holdings ”), Reliant Energy Retail Holdings, LLC (“ RERH ”), Reliant Energy Power Supply, LLC (“ REPS ”), Reliant Energy Retail Services, LLC (“ RERS ”) and RE Retail Receivables, LLC (“ RERR ” and together with RERH Holdings, RERH, REPS and RERS, the “ Reliant Retail Obligors ”).	
 	 	 	
2.	 	Irrevocable Transferable Standby Letter of Credit No. 839BGC0900378, dated as of May 1, 2009, issued by Deutsche Bank AG in favor of MLCC for the account of NRG Energy, Inc. (“NRG”) on behalf of RERH.	
 	 	 	
3.	 	Contingent Contribution Agreement, dated as of May 1, 2009, by and among NRG, NRG Retail LLC, RERH Holdings, RERH and Merrill Lynch Commodities, Inc. (“ MLCI ”).	
 	 	 	
4.	 	NRG Retail LLC Side Letter Agreement, dated May 1, 2009, from NRG Retail LLC and accepted and agreed to by MLCC.	
 	 	 	
5.	 	Master Services Agreement, dated as of May 1, 2009, by and among NRG and the Reliant Retail Obligors.	
 	 	 	
6.	 	Supplement No. 1 to Master Services Agreement, dated as of May 1, 2009, by and among NRG, Reliant Energy Services Texas, LLC, Reliant Energy Texas Retail, LLC and the Reliant Retail Obligors.	
 	 	 	
7.	 	Parent Consent and Agreement, dated as of May 1, 2009, by NRG for the benefit of U.S. Bank National Association (the “ Collateral Trustee ”) and MLCC, MLCI and Merrill Lynch & Co., Inc. (“ ML&Co. ” and together with MLCC and MLCI, the “ Secured Counterparties ”) and acknowledged by the Reliant Retail Obligors.	
 	 	 	
8.	 	Consent and Agreement, dated as of May 1, 2009, of Reliant Energy, Inc. (“REI”) for the benefit of the Collateral Trustee and the Secured Counterparties with respect to the Transition Services Agreement.	
 	 	 	
9.	 	Tax Subordination Agreement, dated as of May 1, 2009, by NRG and the Reliant Retail Obligors for the benefit of the Secured Counterparties.	
 	 	 	
10.	 	Second Amended and Restated Intercompany Cash Management Agreement, dated as of August 1, 2007, by and among RERH, REPS, RERS and RERR.	
 	 	 	
11.	 	Subleasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of May 1, 2009, by RERR to Stanley Keeton, as trustee, for the	
Schedule 12.18(b) to CSRA
-1-

 
 	 	benefit of the Collateral Trustee.	
 	 	 	
12.	 	Collateral Trust Agreement, dated as of December 1, 2006, among the Collateral Trustee and the Reliant Retail Obligors.	
 	 	 	
13.	 	Security Agreement, dated as of December 1, 2006, among the Collateral Trustee and the Reliant Retail Obligors.	
 	 	 	
14.	 	Amendment and Reaffirmation Agreement, dated as of May 1, 2009, among the Reliant Retail Obligors and the Collateral Trustee.	
 	 	 	
15.	 	Trademark Security Agreement Supplement, dated as of December 1, 2006, by RERH.	
 	 	 	
16.	 	Trademark Security Agreement Supplement, dated as of May 1, 2009, by RERH.	
 	 	 	
17.	 	Trademark Security Agreement Supplement, dated as of May 1, 2009, by RERS.	
 	 	 	
18.	 	Blocked Account Agreement, dated as of December 1, 2006, among Wells Fargo Bank, N.A., the Collateral Trustee and RERS.	
 	 	 	
19.	 	Blocked Account Agreement, dated as of August 1, 2007, among Mellon Bank, N.A., the Collateral Trustee and the Reliant Retail Obligors.	
 	 	 	
20.	 	Blocked Account Agreement, dated as of May 1, 2009, among The Bank of New York Mellon, the Collateral Trustee and the Reliant Retail Obligors.	
 	 	 	
21.	 	Securities Account Control Agreement, dated as of December 1, 2006, among Mellon Financial Markets, LLC, the Collateral Trustee and RERH.	
 	 	 	
22.	 	Priority Lien ISDA Master Agreement, dated as of May 1, 2009, between REPS and NRG Power Marketing LLC; Schedule to the 1992 ISDA Master Agreement, dated as of May 1, 2009, between REPS and NRG Power Marketing LLC; Paragraph 13 to the Credit Support Annex to the 1992 ISDA Master Agreement, dated as of May 1, 2009, between REPS, NRG Power Marketing LLC and MLCI; Confirmations, dated as of May 1, 2009, between REPS and NRG Power Marketing LLC.	
Schedule 12.18(b) to CSRA
-2-

 
Exhibit A
To Amended and Restated Credit Sleeve and Reimbursement Agreement
Form of Acceptable Letter of Credit
IRREVOCABLE STANDBY LETTER OF CREDIT
 	 	 	
Issuing Bank:	 	DEUTSCHE BANK AG	
 	 	 	
Date and Place of Issue:	 	                                        	
 	 	Deutsche Bank AG	
 	 	New York Branch	
 	 	60 Wall Street, 25th Floor	
 	 	New York, New York 10005	
 	 	Trade Risk & Services Department	
 	 	 	
Letter of Credit No.:	 	                    	
 	 	 	
Stated Amount:	 	US $                      (AMOUNT IN WORDS United	
 	 	States Dollars)	
 	 	 	
Expiration Date:	 	__________, 2001	
 	 	 	
Beneficiary’s Name and Address:	 	[Merrill Lynch Commodities, Inc.]	
 	 	                                        	
 	 	(“Beneficiary”)	
 	 	 	
Borrower’s Name and Address:	 	NRG Energy Inc. on behalf of NRG SUB	
 	 	211 Carnegie Center	
 	 	Princeton, NJ 08540	
 	 	(“Borrower”)	
 	 	 	
To Beneficiary:	 	 	
We hereby issue this irrevocable letter of credit no.                      (“Letter of Credit”) in your favor for the account of the Borrower for up to the aggregate amount stated above (“ Stated Amount ”). Drawing(s) made in accordance with the terms and conditions of this Letter of Credit will be duly honored. This Letter of Credit is effective immediately.
Funds under this Letter of Credit, in an amount not to exceed the Stated Amount, will be made available to you upon your presentation of a statement (“ Beneficiary Statement ”) purportedly signed by an authorized officer of Beneficiary stating:
     “Beneficiary hereby demands payment of $[amount] under Letter of Credit no. ___.”
Special Conditions
 	1.	 	Payment under this Letter of Credit will be effected per your instructions against a Beneficiary Statement presented at Deutsche Bank AG, New York Branch, 60 Wall Street, 25 Floor, New York, Trade Services Department, New York 10005 (“ Place of	

1	 	Not less than 20 Business Days (or, if earlier, the date on which the obligations secured by such Letter of Credit are satisfied)	
1

 
 	 	 	Presentation”). Such presentation may be made (i) in person, (ii) by first class certified and registered U.S. mail, or (iii) by overnight mail.	
 	 	 	 	
 	2.	 	Partial and/or Multiple drawings are permitted. Such partial drawings shall reduce the amount thereafter available for drawing under this Letter of Credit.	
 	 	 	 	
 	3.	 	This Letter of Credit shall be deemed automatically extended without amendment for an additional period of twelve (12) months from the then-current Expiration Date, unless Issuing Bank notifies Beneficiary in writing that Issuing Bank elects not to extend the Letter of Credit for an additional period at least one hundred and twenty (120) days prior to such Expiration Date. In the event such notice is timely delivered by Issuing Bank to Beneficiary, Beneficiary may draw the full Stated Amount under the Letter of Credit at any time on or prior to the Expiration Date.	
 	 	 	 	
 	4.	 	This Letter of Credit will terminate at 5:00 PM New York time on the earlier of (i) the Expiration Date (other than with respect to any outstanding drawing requests made on or prior to such date), (ii) the date of surrender by you of this Letter of Credit for cancellation, and (iii) the date of our honoring of drawing(s) under this Letter of Credit that, in the aggregate, equal the Stated Amount.	
 	 	 	 	
 	5.	 	All Issuing Bank charges are for the account of Borrower.	
 	 	 	 	
 	6.	 	This Letter of Credit shall not be amended except with the written concurrence of Beneficiary, Borrower, and Issuing Bank.	
 	 	 	 	
 	7.	 	Any communications to us with respect to this Letter of Credit shall be addressed to the Place of Presentation and refer to “Letter of Credit No.                       .	
 	 	 	 	
 	8.	 	Unless otherwise expressly stated herein, this Letter of Credit is governed by the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600 (“ UCP ”). As to matters not governed by the UCP, this Letter of Credit is governed by the laws of the State of New York.	
 	 	 	 	
 	9.	 	The following Articles under UCP are modified as follows:	

 	(i)	 	Article 14(b) is modified such that five banking days is changed to be three (3) banking days following the day of receipt of documents; and	
 	 	 	 	
 	(ii)	 	Article 36 is amended such that if the Letter of Credit expires while the Place for Presentation is closed due to events described in said Article, then the Expiration Date of this letter of credit shall be automatically extended without amendment to a date thirty (30) calendar days after the Place for Presentation reopens for business.	
Very truly yours,
DEUTSCHE BANK AG
New York Branch
2

 
EXHIBIT B
GUARANTY OF BANK OF AMERICA CORPORATION
For value received, the receipt of which is hereby acknowledged, Bank of America Corporation, a corporation duly organized and existing under the laws of the State of Delaware (“ Bank of America ”), hereby unconditionally guarantees to NRG Energy, Inc. (the “ Company ”) the prompt payment of any and all obligations and liabilities of each of Merrill Lynch Commodities, Inc. and Merrill Lynch & Co., Inc. (the “ Merrill Parties ”), along with any successors and permitted assigns, to the extent such successors or permitted assigns are direct or indirect wholly-owned subsidiaries of Bank of America, to return Posted Collateral to the Company or transfer Posted Collateral to an Acceptable Collateral Agent, in each case, as required by the terms of Section 10 of the Amended and Restated Credit Sleeve and Reimbursement Agreement dated as of September 30, 2009, (the " Agreement ”) among, inter alia, Merrill Lynch Commodities, Inc., Merrill Lynch & Co., Inc., the Company and certain of the Company’s affiliates (as such Section may be amended, supplemented or otherwise modified from time to time, the “ Specified Section ”), at all times, in accordance with the terms of the Specified Section. In the event that the Merrill Parties fail to return or transfer Posted Collateral under the Specified Section when required after giving effect to any applicable notice requirement and grace period, Bank of America hereby agrees to cause any such return or transfer to be made, promptly upon receipt of written demand from the Company to Bank of America; provided, however, that delay by the Company in giving such demand shall in no event affect Bank of America’s obligations under this Guaranty. This Guaranty shall remain in full force and effect or shall be reinstated (as the case may be) if at any time the return of any amount of Posted Collateral guaranteed hereunder, in whole or in part, is rescinded or must otherwise be returned by the Company upon the insolvency, bankruptcy or reorganization of any Merrill Party or otherwise, all as though such return or transfer had not been made. Capitalized terms used and not defined herein have the meanings assigned thereto in the Agreement.
This Guaranty shall be one of payment and not of collection and shall be irrevocable in respect of any payment obligations incurred by the Merrill Parties under the Specified Section (and, for all purposes of this Guaranty, “payment obligation” will include any obligation of the Merrill Parties to return or transfer Posted Collateral in accordance with the Specified Section). Bank of America hereby agrees that its obligations hereunder shall be unconditional, irrespective of (i) the validity, regularity or enforceability (except as may result from any applicable statute of limitations) of the Agreement or the Specified Section, (ii) the absence of any action to enforce the same, (iii) any waiver or consent by the Company concerning any provisions thereof, (iv) the rendering of any judgment against the Merrill Parties or any action to enforce the same or (v) any other circumstances that might otherwise constitute a legal or equitable discharge of a guarantor or a defense of a guarantor, other than defense of payment. Bank of America covenants that this Guaranty shall not be discharged except by complete return or transfer, as applicable, of all Posted Collateral in accordance with the Specified Section. This

 
Guaranty shall continue to be effective if any Merrill Party merges or consolidates with or into another entity, loses its separate legal identity or ceases to exist.
Bank of America hereby waives diligence, presentment, protest, notice of protest, acceleration, and dishonor, filing of claims with any court in the event of insolvency or bankruptcy of a Merrill Party, all demands whatsoever, except as noted in the first paragraph hereof, and any right to require a proceeding first against the Merrill Parties. Neither Bank of America nor the Company may assign its rights, interests or obligations hereunder to any other person (except by operation of law) without the prior written consent of the other party.
Bank of America shall not exercise any right that it may acquire by way of subrogation under this Guaranty, by payment made hereunder or otherwise, until all Posted Collateral is returned to the Company or transferred to an Acceptable Collateral Agent, in each case, in accordance with the Specified Section. Subject to the foregoing, upon performance of all such obligations of the Merrill Parties, Bank of America shall be subrogated to the rights of the Company against the Merrill Parties, and the Company agrees to take at Bank of America’s expense such steps as Bank of America may reasonably request to implement such subrogation.
Bank of America shall reimburse the Company for any reasonable fees and expenses incurred by the Company in the enforcement of the Company’s rights under this Guaranty (including the reasonable fees and expenses of outside counsel) if Bank of America shall be found liable for any non-payment hereunder in a final, non-appealable judicial determination of a court of competent jurisdiction. Bank of America shall not be required to pay, or otherwise be liable to, the Company for any consequential, indirect or punitive damages (including, but not limited to, opportunity costs or lost profits).
Bank of America hereby represents and warrants that this Guaranty constitutes the valid and binding obligation of Bank of America and does not violate or conflict with any applicable law.
This Guaranty shall automatically terminate upon the termination of the Agreement and the discharge of all of the Merrill Parties’ obligations to return to the Company all Posted Collateral in accordance with the Specified Section.
For the avoidance of doubt, the agreements made by Bank of America under this Guaranty will have no force and effect, unless this Guaranty is executed and delivered by the Company to Bank of America as contemplated below.
This Guaranty may be executed in multiple counterparts and by each party hereto in separate counterparts, all of which, taken together, will constitute an original. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier or e-mail will be effective as delivery of a manually executed counterpart thereof.

 
This Guaranty shall be governed by and construed in accordance with the internal laws of the State of New York as applicable to contracts or instruments made and to be performed therein.
[The remainder of this page is left intentionally blank.]

 
IN WITNESS WHEREOF, BANK OF AMERICA has caused this Guaranty to be executed in its corporate name by its duly authorized representative.
BANK OF AMERICA CORPORATION
By:                                         
Name:
Title:

EXHIBIT 31.1
CERTIFICATION
I, David W. Crane, certify that:
1.	 	I have reviewed this quarterly report on Form 10-Q of NRG Energy, Inc.;	
 	 	 	
2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 	 	 	
3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 	 	 	
4.	 	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	(a)	 	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	 	 	
 	(b)	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	 	
 	(c)	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	 	 	
 	(d)	 	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	 	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	(a)	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	 	
 	(b)	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	 	/s/ DAVID W. CRANE	 	 	
 	 	  David W. Crane	 	 	
Date: November 2, 2009	 	Chief Executive Officer
(Principal Executive Officer)	 	 	

EXHIBIT 31.2
CERTIFICATION
I, Robert C. Flexon, certify that:
1.	 	I have reviewed this quarterly report on Form 10-Q of NRG Energy, Inc.;	

2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	 	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	(a)	 	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	 	 	
 	(b)	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	 	
 	(c)	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	 	 	
 	(d)	 	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	 	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	(a)	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	 	
 	(b)	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	 	/s/ ROBERT C. FLEXON	 	 	
 	 	  Robert C. Flexon	 	 	
Date: November 2, 2009	 	Chief Financial Officer
(Principal Financial Officer)	 	 	

EXHIBIT 31.3
CERTIFICATION
I, James J. Ingoldsby, certify that:
1.	 	I have reviewed this quarterly report on Form 10-Q of NRG Energy, Inc.;	

2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	 	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

 	(a)	 	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 	 	 	 	
 	(b)	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	 	
 	(c)	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 	 	 	 	
 	(d)	 	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	 	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	(a)	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	 	
 	(b)	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

 	 	/s/ JAMES J. INGOLDSBY	 	 	
 	 	  James J. Ingoldsby	 	 	
Date: November 2, 2009	 	Chief Accounting Officer
(Principal Accounting Officer)	 	 	

EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
     In connection with the Quarterly Report of NRG Energy, Inc. on Form 10-Q for the quarter ended September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:
     (1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Form 10-Q.
Date: November 2, 2009
 	 	 	 	 	
 	/s/ DAVID W. CRANE  	 	
 	David W. Crane, 	 	
 	Chief Executive Officer
(Principal Executive Officer)  	 	
 	 	 	
 	/s/ ROBERT C. FLEXON  	 	
 	Robert C. Flexon, 	 	
 	Chief Financial Officer
(Principal Financial Officer)  	 	
 	 	 	
 	/s/ JAMES J. INGOLDSBY  	 	
 	James J. Ingoldsby, 	 	
 	Chief Accounting Officer
(Principal Accounting Officer ) 	 	
     The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.
     A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to NRG Energy, Inc. and will be retained by NRG Energy, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.